Patricia J. Chalfant v. The Wilmington Institute, a Corporation of the State of Delaware, Jack W. Bryant and Edward B. Dupont ( 1978 )

OPINION OF THE COURT

GIBBONS, Circuit Judge.

This appeal grows out of a dispute following the discharge of an employee by the public library system of the City of Wilmington and County of New Castle, Delaware. After a bench trial, the district court dismissed the complaint on the ground that the termination did not involve state action within the reach of the fourteenth amendment. The court also declined to adjudicate pendent state law liberty and defamation claims.¹ We reverse the district court’s state action holding. Since that reversal will require findings of fact on the merits of the wrongful discharge claim, which, according to the appellant, is closely related to the pendent state law claims, we vacate the dismissal of those claims so that the district court may reconsider whether those claims should be adjudicated with the discharge claim.

I.

It is not surprising that in a constitutional democracy such as ours one of the functions which was first recognized as the responsibility of government was that of assuring an informed citizenry through the maintenance of public libraries. In some states this recognition antedated the emergence both, of free public schools and of municipal police departments.² Governmental assumption of the responsibility for providing public library services occurred earlier in some states than in Delaware. Nevertheless, the public library system of New Castle County and of the City of Wilmington, which is located in that county, eventually emerged. That system is described in the Introduction to Exhibit PX 35, the Staff Handbook of the Wilmington Institute and New Castle County Libraries, as follows:

The Wilmington Institute Free Library and the New Castle County Free Library are two arms of a single public library system serving all of the people of New Castle County. The two libraries are governed by a single Board of Managers and administered by a single Director of Libraries. For Staff Members, as for the public who use the libraries, the only distinction between the two is the geographic location of the service agency in which a staff member performs his or her duties. All policies are the same for the entire system. Except as limited by the physical facilities and operating needs of each agency or department, practices and procedures are uniform.

The New Castle County Free Library is supported largely by appropriation by the New Castle County Council and provides all services outside the City of Wilmington. This library was established in 1927 by a gift from Miss Alice P. Smyth as' a Memorial to Miss Mary H. Askew-Mather. From its early beginnings as a service to rural communities it has developed into a major series of library agencies, with two branches, two mobile branches and numerous special and institutional services.

The Wilmington Institute Free Library receives the bulk of its support from the City Council of Wilmington and, in addition to the services of the Central Library, operates two branches and special and institutional services. This library traces its beginnings to a private subscription library founded in 1788 which subsequently joined with other organizations and became The Wilmington Institute in 1859. It remained a privately supported library until 1893 when, through the generosity of William P. Bancroft, it became the Free Library for the city of Wilmington.

The Board of Managers of The Wilmington Institute functions as the governing body of the libraries. It consists of ten members who are self-perpetuating and eight members who serve ex officio because of other positions they hold. These are the Mayor of Wilmington, the President of the Wilmington City Council, three members of the Finance Committee, the President of the Wilmington Board of Education, the Wilmington Superintendent of Schools and the County Executive of New Castle County.

This Board establishes all libraries policies and appoints the Director of Libraries who is responsible for the execution of policies established by the Board and for the administration of the libraries. Staff members are appointed by the Director with the concurrence of the Board.

The members of the Board of Managers dónate their time and energies to the library as a community service. The Director and all staff members are paid public .servants.

(emphasis supplied).

One of those public servants, Chalfant, the appellant herein, was initially employed by the Wilmington Institute in September, 1968, as a library trainee. Two years later she had advanced through a number of intermediate grades to the position of Chief of the Book Processing Department of the Institute. On February 16, 1972, she was discharged. Subsequently, she brought this suit against the Wilmington Institute and two of its officers, Jack W. Bryant and Edward B. duPont.

In her amended and supplemental complaint Chalfant contended that her discharge violated her substantive and procedural rights guaranteed by the fourteenth amendment and thus violated 42 U.S.C. § 1983. Specifically, she alleged: (1) that she had been deprived of a property right (her employment) without due process of law; (2) that she had been discharged because of her sex in violation of the equal protection clause; and (3) that certain letters written by the defendants had damaged her reputation and thereby had deprived her of liberty and property in violation of due process. Chalfant also contended that the termination of her employment was maliciously motivated and that the letters previously mentioned, which were circulated to New Castle officials and to the American Library Association, defamed her as a matter of state tort law. On July 22, 1975, the district court entered a pre-trial order which established certain admitted facts.³ On July 30,1975, trial of this action commenced. At the end of the plaintiff’s case, the defendants moved to dismiss the action pursuant to Rule 41(b) of the Federal Rules of Civil Procedure. Since it found no evidence of sex discrimination, the district court granted this motion with respect to that part of plaintiff’s complaint alleging sex discrimination.⁴ The court reserved decision on this motion with regard to the remaining allegations in Chalfant’s complaint. At the close of the entire case, following post-trial briefing, the court concluded that Chalfant’s termination did not involve the requisite state action for a § 1983 claim and thus it dismissed the complaint. Most of the historical or narrative facts upon which the court predicated its legal conclusion that state action was lacking are not disputed in any material respect. Consequently, without repeating them here, we incorporate by reference those findings as they appear in the district court’s reported opinion.⁵

There is additional, undisputed evidence in the record which is relevant to the governmental status of the Wilmington Institute, but which the district court, in its opinion below, did not specifically mention. For example, Docket Item 31⁶ contains plaintiff’s Interrogatory No. 4 and defendants’ answer thereto:

4. State whether the “Wilmington Institute and New Castle County Free Libraries” referred to [in] paragraph 5 of the Answer in this action is a corporate entity and, if so, identify its date and place of incorporation, the date and place of filing of the Certificate of Incorporation or Charter and identify the public record of its filing by the appropriate index or dopket references.

ANSWER: The “Wilmington Institute and New Castle County Free Library” is not a corporate entity. It is a management title under which City and County libraries are operated.

Also in evidence are Exhibits PX 36 and PX 37, which are agreements between New Castle County and Wilmington Institute providing for the administration by the Institute of federal funds received by the county pursuant to Title I of the State and Local Fiscal Assistance Act of 1972, Pub.L. No. 92-512, codified in 31 U.S.C. §§ 1221 et seq. Two clauses of these agreements, which are quoted in the margin,⁷ provide in detail for the fulfillment of the county’s fourteenth amendment obligations. Under this federal revenue-sharing statute, the federal government provides to state and local governments specified portions of federal individual income tax collections to be used by such governments for governmental purposes. In the fiscal year ending June 30, 1974, the Wilmington Institute received $481,581.00 in such federal revenue-sharing funds. In the following year the federal government’s support from income tax revenues rose to $514,000.00. The agreements require a monthly report to the county of expenditures, of persons served, and of the nature of the services rendered. The Institute’s records are subject to audit by the county as well as by the auditors of the United States Treasury Department. Although, because federal funds only became available in 1973, Exhibits PX 36 and PX 37 were not in effect when Chalfant was discharged, they do show the nature of the relationship between the county government and the public library, a relationship which antedated federal funding. The county government’s interest in the personnel policies of the Institute is demonstrated in PX 19, a letter from William J. Conner, County Executive and exofficio board member, dealing with Chalfant’s discharge:

March 8, 1972

Mr. Jack Bryant

Director of Libraries

Wilmington Institute Free Library

Tenth and Market Streets

Wilmington, Delaware

Dear Mr. Bryant:

I understand that the Board of Wilmington Free Institute is conducting a hearing this morning to consider a complaint by Mrs. Trivits with respect to her discharge.

I would like you to convey to the members of the Board the fact that this matter has come to the attention of two members of County Council who have indicated to me their serious concern with possible inequities in this matter. They have asked me to keep them advised as to how the matter develops. I thought the Board would wish to know that this matter is of serious concern to the County government. I would appreciate being kept advised of the outcome.

Respectfully yours,

William J. Conner

County Executive

WJC/smc

In concluding that the Wilmington Institute was not engaging in state action when it terminated Chalfant’s employment, the district court placed primary emphasis on two factors. First, the court noted that under applicable Delaware statutes the Institute’s Board of Managers was, except for ex officio officials of the City of Wilmington and New Castle County, self-perpetuating. Next, the court observed that the actions which resulted in Chalfant’s termination were taken not by the ex officio public members of the Board of Managers, but by two of the self-perpetuating and, from the district court’s perspective, private members. See 417 F.Supp. at 164-66. The court stated that in order to find state action for purposes of the fourteenth amendment, the Supreme Court’s decision in Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 447 (1972), requires a nexus between the governmental involvement and the challenged activity. Since the members of the Board of Managers who acted in discharging Chalfant were, according to the court, private, the court concluded that no such nexus existed.

There are several difficulties with this analysis. First, the district court’s analysis assumed that Jackson v. Metropolitan Edison Co. has substituted for the former state-action tests, which varied according to the context in which the issue arose, a unitary nexus test for all purposes. In Hollenbaugh v. Carnegie Free Library, 545 F.2d 382, 383 (3d Cir. 1976), in a context indistinguishable from the present, we expressly rejected that interpretation of Jackson. Writing for the panel, Judge Aldisert said:

As we observed in Magill [v. Avon-worth Baseball Conference, 516 F.2d 1328 (3d Cir. 1975)], the Supreme Court has not fashioned “any definitive state action formula”; rather, the Court “admits to extreme difficulty in articulating an all-inclusive test and seems to emphasize that, within the confines of certain guidelines, the presence or absence of state action must be determined on a ease-by-case basis.” 516 F.2d at 1332 (footnotes omitted).

In Braden v. University of Pittsburgh, 552 F.2d 948, 957 (3d Cir. 1977) (en banc), we reiterated the Hollenbaugh holding that Jackson had not substituted a single nexus test for an ad hoc analysis of the facts and circumstances of each case as it arises. Braden also recognized explicitly that Jackson did not overrule Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961). In dealing with Burton, Judge Adams, writing for this court in Braden, observed:

Speaking for a unanimous panel [in Hol-lenbaugh v. Carnegie Free Library], Judge Aldisert declared: “The state’s extensive participation in the comprehensive program may obviate a need to show involvement in the specific activity challenged [as] is illustrated by Burton

552 F.2d at 958 n. 45.⁸ Thus, the law in this circuit is clear. The Jackson nexus test, whatever it means in the context of the activities of what the Supreme Court considers to be private enterprises, cannot be applied mechanically in other contexts. We have expressly rejected the application of the Jackson test, which was enunciated within the context of a private enterprise electric utility, to the analysis of state action in a public library, a university, or any other public educational institution. Hol-lenbaugh and Braden hold that the status of the individual actor is irrelevant if the institution on whose behalf he acted is found, upon an examination of all the relevant factors, to be an instrumentality of a state or local government.⁹

Compared to Hollenbaugh, this is an a fortiori case. As in Hollenbaugh, Chalfant’s public library employer derives over 90 per cent of its revenues from tax sources. As in Hollenbaugh, the local governments which furnish revenue from tax sources are represented on the library’s governing board by ex officio members holding public offices. As in Hollenbaugh, the library enjoys tax exempt status. As in Hollenbaugh, contracts designate the employer as an agent of the government in furnishing public library services to the public. The only relevant factual distinction between this case and Hollenbaugh is the absence of a specific tax earmarked for support of the library. But in place of a specific tax, the state legislature has by legislation decided the level of appropriations from general tax revenues for library services. Thus, both here and in Hollenbaugh, state law defines the level of library services. Moreover, the record here discloses much greater public involvement. Even the structure, organization, and management of the Board of Managers is mandated by state legislation. 19 Del.Laws chs. 734 and 983. And unlike Hollenbaugh, the main library of the Wilmington Institute is situated on city-owned property under a rent-free lease. That lease is perpetual, provided that the library continues to furnish library services. All of these facts and circumstances convince us that the Wilmington Institute is an instrumentality of state and local government.

Moreover, the Institute’s tenancy in a city-owned building under a rent-free lease brings this case squarely within even the narrowest reading of Burton v. Wilmington Parking Authority, supra. The landlord here is the same City of Wilmington which leased the restaurant space in Burton. Burton involved an ordinary commercial lease. It was not contended there that the city had any interest, other than in revenue, in providing restaurant services. Nevertheless, the Supreme Court held that under the circumstances there the city could not permit its tenant to violate the dictates of the fourteenth amendment. Here the city’s interest in the function being performed is far greater. Concededly, the city has no interest in the tenant’s revenues. Indeed, the city itself provides nearly half of those revenues; the city and county together provide over 90 per cent. The city’s interest lies in the governmental function of educating the public by providing, on premises it owns and with funds which it raises by taxation, a public library. Since the city and county are principals in that enterprise, the activities of the enterprise themselves are governmental. Moreover, since this case meets the state involvement test of Burton, Hollenbaugh, and Braden, the district court erred in looking for a Jackson-type nexus between the challenged activity and the state involvement. Only if no state involvement is found under Burton should the district court then search for state action under the Jackson test.

Another difficulty with district court’s analysis is that, even disregarding Burton, Hollenbaugh, and Braden, the court misapplied the Supreme Court’s holding in Jackson. Jackson involved- a private enterprise public utility company. Starting from the premise that the creation and maintenance of an energy distribution network is a function for private business rather than for government, Justice Rehnquist’s opinion for the Court stated that, in order to determine whether the activities of the agents of that private business constitute state action, a court must examine “whether there is a sufficiently close nexus between the State and the challenged action of the regulated entity so that the action of the latter may be fairly treated as that of the State itself.” 419 U.S. at 351, 95 S.Ct. at 453. But the district court in the instant case omitted any meaningful inquiry into the existence of the premise which would justify the application of the Jackson nexus standard. Instead of determining, first, whether the employer was governmental or private and, if private, then applying the nexus test to determine if nonetheless its agents were engaged in state action, the district court applied the nexus test to answer the first question. The chief ground on which the district court relied in holding that state action was absent was that Chalfant’s employment termination was accomplished by those- members of the Board of Governors who are self-perpetuating under the applicable Delaware legislation. Thus, the court looked at the status of the agent to determine the nature of the principal. But the Supreme Court never intended the nexus test to be put to such a use. If that were the test, then any state could avoid the reach of the fourteenth amendment over any governmental function merely by turning over the administration of that function to a self-perpetuating board. The self-perpetuating method of selecting some members of boards of managers of public libraries, public schools, public universities, or even police departments cannot serve to make the board members’ actions any less governmental than if under applicable statutes they had been elected. Otherwise, the door would be open, particularly in education, for the wholesale evasion of fourteenth amendment substantive requirements, including the requirement of school desegregation. See Griffin v. County School Bd., 377 U.S. 218, 84 S.Ct. 1226, 12 L.Ed.2d 256 (1964).

Nor can evasions of state governmental responsibilities be permitted to turn on the fact that the instrumentality to whom the responsibility has been delegated once operated, in the dim and distant past, as a private institution. See Commonwealth of Pennsylvania v. Brown, 392 F.2d 120 (3d Cir.), cert. denied, 391 U.S. 921, 88 S.Ct. 1811, 20 L.Ed.2d 657 (1968); Kerr v. Enoch Pratt Free Library, 149 F.2d 212 (4th Cir.), cert. denied, 326 U.S. 721, 66 S.Ct. 26, 90 L.Ed. 427 (1945). In Enoch Pratt Free Library, the Fourth Circuit, dealing with a public library whose history was not dissimilar to that of the Wilmington Institute, stated the issue nicely:

It would be conceded that if the state legislature should now set up and maintain a public library and should entrust its operation to a self perpetuating board of trustees and authorize it to exclude Negroes from its benefits, the act would be unconstitutional. How then can the well known policy of the Library, so long continued and now formally expressed in the resolution of the Board, be justified as solely the act of a private organization when the state, through the municipality, continues to supply it with the means of existence.

149 F.2d at 219. The Enoch Pratt Free Public Library case was decided in 1945. The result would not be any different today. The Wilmington Public Library is a state instrumentality. It and its agents were engaged in state action when they terminated Chalfant’s employment. Therefore the judgment dismissing Chalfant’s § 1983 claim must be reversed.

II.

Chalfant’s pendent state law claims are based upon two incidents of alleged defamation. The first of these incidents is appellee Bryant’s reply to William Conner’s inquiry concerning Chalfant’s discharge. That reply enclosed a copy of a letter from appellee duPont outlining the reasons why two members of the Board of Managers, acting as a special committee, upheld the dismissal. The second incident is a letter written by duPont to the American Libraries Association in response to that association’s report on an investigation by its Staff Committee on Mediation, Arbitration, and Inquiry into the reasons for Chalfant’s dismissal. The district court, while speculating that the state law claims were so unrelated to the § 1983 claims as to be outside the reach of pendent federal jurisdiction, exercised its discretionary power to decline to hear the pendent state law claims. In doing so, it relied primarily on Chalfant’s perceived inability to establish a federal claim. Since that inability arose from the court’s erroneous decision on the state-action issue, the court should be free to reconsider the exercise of its discretion to hear the pendent state law claims in light of the necessity for a decision on the merits of the § 1983 cause of action. Nothing in our decision in Philadelphia Anti-Poverty Action Comm’n (PAAC) v. Rizzo, 502 F.2d 306 (3d Cir. 1974), cert. denied, 419 U.S. 1108, 95 S.Ct. 780, 42 L.Ed.2d 804 (1975), precludes the exercise of pendent jurisdiction over the state law claims asserted here if the district court should choose to exercise such discretionary jurisdiction.

III.

The judgment dismissing the appellant’s § 1983 claim for lack of state action will be reversed and the case remanded for a decision on the merits of that claim. The judgment dismissing the pendent state law claims will be vacated and the case remanded for reconsideration of the exercise of pendent jurisdiction.

1 . Trivits v. Wilmington Inst., 417 F.Supp. 160 (D.Del.1976). During the trial stages of this litigation, plaintiffs name appeared as Patricia J. Chalfant Trivits. She is referred to in the papers on appeal, and herein, as Chalfant.

2 . Public libraries were recognized as governmental responsibilities as early as 1810. See J. Shera, Foundation of the Public Library 158-99 (1949). See also C. Joeckel, The Government of the American Public Library 1-31 (1935). American cities were accepting gifts for the founding of public libraries in the seventeenth and eighteenth centuries. See A. Schlesinger, Birth of a Nation 113, 169 (1969). The development of organized municipal police forces did not begin on a large scale until the 1840’s, See J, Richardson, Urban Police in the United States 22-28 (1974), The movement toward universal free public education is usually measured from the enactment in 1827 in Massachusetts of a statute under which Horace Mann became Secretary of a State Board of Education, although prior to 1827 states did provide education for paupers. See H, Good, A History of American Education 159-62 (2d ed. 1962).

3 . 3. ADMITTED FACTS:

3-1. The Wilmington Institute, hereinafter called the “Institute”, is a Delaware corporation which owns and operates a free library, called the- “City Library” in the city of Wilmington and administers a library system in New Castle County known as the “New Castle County Free Library”.

3-2. The Institute enjoys a legislative- exemption from county and municipal real estate taxes under 9 Del.C. § 8105.

3-3. New Castle County has made appropriations pursuant to 9 Del.C. § 1562 for the support of the New Castle County Free Library operated by the Institute.

3-4. The Institute is governed by a self-perpetuating Board of Managers which includes non-voting members as ex officio representatives of Wilmington and New Castle County.

3-5. Defendant Jack W. Bryant was, at all relevant times, the Director of Libraries for the Institute and, as such, was the chief executive officer of the Institute and was also Secretary of the Board of Managers.

3-6. Defendant Edward B. duPont is President of the Board of Managers.

3-7. Plaintiff was employed on September 30, 1968 by the Institute as library trainee. She became a “beginning librarian” on December 11, 1968; a Librarian II on August 1, 1969; a Librarian III, in which rank she was acting chief of technical processing on January 21, 1970; and on September 8, 1970, chief of technical processing.

3-8. Plaintiff requested and received a hearing before a special committee of the Board of Managers.

3-9. Plaintiff was hired at a salary of $5,966.00 effective September 30, 1968 and reached a salary level of $10,675.00 on November 15, 1971, which was her final salary level. (Defendants’ answers to interrogatories, 12.)

4 . Chalfant’s original complaint had also alleged that she had been discriminated against on the basis of her sex in violation of Title VII of the Equal Employment Opportunity Act, 42 U.S.C. § 2000e-2(a)(l). The district court dismissed this claim prior to trial on the ground that Chalfant had failed to seek administrative remedies prior to filing the civil suit. Trivits v. Wilmington Inst., 383 F.Supp. 457, 460 (D.Del. 1974).

5 . 417 F.Supp. at 163-65.

6 . Docket Item No. 31 was relied upon by the district court in making its findings of fact. Although this docket item was not marked in evidence, neither the appellant nor the appel-lees have contended that it should not have been considered.

7 . 7. Speciñc Discriminatory Actions Prohibited — The Agency will not, on the grounds of race, color, national origin or sex:

a. Deny any service or other benefit provided under the program or activity.-

b. Provide any service or other benefit which is different, or is provided in a different form from that provided to others under the program or activity.

c. Subject to segregated or separate treatment in any facility in, or in any matter or process related to receipt of any service or benefit under the program or activity.

d. Restrict in any way the enjoyment of any advantage or privilege enjoyed by others receiving any service or benefit under the program or activity.

e. Treat an individual differently from others in determining whether he satisfies any admission, enrollment, eligibility, membership, or other requirement or condition which individuals must meet in order to be provided any service or other benefit provided under the program or activity.

f. Deny an opportunity to participate in a program or activity as an employee.

g. Utilize criteria or methods of administration which have the effect of subjecting individuals to discrimination on the basis of race, color, national origin or sex, or have the effect of defeating or substantially impairing accomplishment of the objectives of the program or activity with respect to individuals of a particular race, color, national origin or sex.

8. Other Discriminatory Actions — The Agency, in determining the site or location of facilities, will not make selections of such site or location which have the effect of excluding individuals from, denying them the benefits of, or subjecting them to discrimination on the grounds of race, color, national origin, or sex, from the benefits of an activity or program; or which have the purpose or effect of defeating or substantially impairing the accomplishment of the objectives of the State and Local Fiscal Assistance Act of 1972.

8 . The court’s opinion in Braden also drew support from then District Judge Higginbotham’s decision in Isaacs v. Board of Trustees of Temple University, 385 F.Supp. 473 (E.D.Pa.1974). 552 F.2d at 962-63. Although Isaacs was decided before the Supreme Court’s decision in Jackson, the Braden court observed that the reasoning employed in Isaacs was still valid.

9 . In Parks v. “Mr. Ford”, 556 F.2d 132, 151-57 (3d Cir. 1977) (Gibbons, J., concurring), I attempted to convince my colleagues that a different analysis is required when the state acts in a variety of roles — as a principal in an enterprise, as a delegator of functions, as a coercer, as a sanctioner, as a facilitator of private transactions, and as a law giver. Chief Judge Seitz and Judge Aldisert joined in that part of my opinion, 556 F.2d at 165, and Judge Adams, writing separately, expressed substantial agreement, id. at 143-44. Although I still adhere to those views, my efforts to categorize the varying aspects of state action did not commend itself to a majority of this court, perhaps because no all-inclusive system of classification will be a completely satisfactory solution of the multifaceted state-action problem.