Prisma Zona Exploratoria v. Calderon

• Decision Date: 16 October 2002
• Docket Number: No. 01-2612.,01-2612.
• Citation: 310 F.3d 1
• Parties: PRISMA ZONA EXPLORATORIA DE PUERTO RICO, INC., Plaintiff, Appellant, v. Hon. Sila Maria CALDERON, personally and in her official capacity as Governor of Puerto Rico and as President of the Children's Trust Fund; Juan Agosto-Alicea, personally and in his official capacity as President of the Government Development Bank of Puerto Rico and as Vice-President of the Children's Trust Fund; Jorge Pesquera, personally; Milton Segarra-Pancorbo, personally and in his official capacity as Executive Director of the Puerto Rico Tourism Company; Jose V. Pagan, personally and in his official capacity as Executive Director of the Children's Trust Fund; The Children's Trust Fund; Government Development Bank for Puerto Rico; John Doe; George Doe 01CV1836; Jane Doe, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 1

310 F.3d 1

PRISMA ZONA EXPLORATORIA DE PUERTO RICO, INC., Plaintiff, Appellant, v. Hon. Sila Maria CALDERON, personally and in her official capacity as Governor of Puerto Rico and as President of the Children's Trust Fund; Juan Agosto-Alicea, personally and in his official capacity as President of the Government Development Bank of Puerto Rico and as Vice-President of the Children's Trust Fund; Jorge Pesquera, personally; Milton Segarra-Pancorbo, personally and in his official capacity as Executive Director of the Puerto Rico Tourism Company; Jose V. Pagan, personally and in his official capacity as Executive Director of the Children's Trust Fund; The Children's Trust Fund; Government Development Bank for Puerto Rico; John Doe; George Doe 01CV1836; Jane Doe, Defendants, Appellees.

No. 01-2612.

United States Court of Appeals, First Circuit.

Heard May 9, 2002.

Decided October 16, 2002.

Luis G. Rullan-Marin with whom Zoraida Buxo-Santiago, Rullan & Buxo, PSC, Jane Becker-Whitaker and Law Offices of Jane Becker Whitaker, PSC were on brief for appellant.

Rafael Escalera-Rodriguez with whom Nestor J. Navas and Reichard & Escalera were on brief for institutional defendants.

Camella Fernandez-Romeu, Assistant Solicitor General, with whom Roberto J. Sanchez-Ramos, Solicitor General, and Vanessa Lugo Flores, Deputy Solicitor General, were on brief for individual defendants.

Before BOUDIN, Chief Judge, BOWNES, Senior Circuit Judge, and SELYA, Circuit Judge.

BOUDIN, Chief Judge.

Plaintiff Prisma Zona Exploratoria de Puerto Rico, Inc. ("Prisma Zona") sued the Children's Trust Fund of Puerto Rico (the "Trust Fund") and others (including several high officials in the Puerto Rican government) under 42 U.S.C. § 1983 (2000). Prisma Zona claims that the defendants discriminated against it because of its affiliation with a rival political party, in violation of its rights under the First Amendment and to due process and equal protection. The district court dismissed the suit under Rule 12(b)(6) for failure to state a claim. Prisma Zona Exploratoria de P.R., Inc. v. Calderón, 162 F.Supp.2d 1, 9-10 (D.P.R.2001). This appeal followed.

The background facts are largely uncontested. For present purposes, we assume the truth of the allegations in the complaint and draw inferences in favor of the non-moving party, here Prisma Zona. Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir. 1996). However, we also draw where necessary upon undisputed documents that are in substance cross-referenced in the complaint. Watterson v. Page, 987 F.2d 1, 3-4 (1st Cir.1993); accord Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 16-17 (1st Cir.1998). At oral argument, both sides said that the case could be treated as one for summary judgment.

In January 1999, then Governor Pedro Rosselló of Puerto Rico, a member of the New Progressive Party ("NPP"), announced a plan to create a children's museum in Puerto Rico. The museum, modeled on similar initiatives in Boston and elsewhere, was to include interactive exhibits, a theater and other attractions. It was to be built and operated using a portion of Puerto Rico's share of the master tobacco settlement of November 1998.

In April 1999, the Tourism Company, a state agency, created a public corporation, Prisma El Exploratorio, Inc. ("Exploratorio"), to develop the preliminary phase of the children's museum. Prisma Zona says the plan was eventually to turn over ownership and control of the museum to a private non-profit entity to free it from "political partisanship." The following month Exploratorio secured a $20 million line of credit with the Government Development Bank (the "Bank") — another state entity — to help pay for the design and construction of the museum facilities; the line of credit was to be repaid using the tobacco settlement proceeds. Ground breaking for the museum was held on October 7, 1999.

On July 30, 1999, Puerto Rico created the Children's Trust Fund, a public corporation, and assigned to it Puerto Rico's share of the tobacco settlement. Act No 173 of July 30, 1999 (codified at 24 LPRA § 3121 et seq. (2002)). The statute created a board of directors for the Trust Fund, consisting of four ex officio members (the Governor, the Secretary of Justice, the President of the Bank, and the Director of the Office of Management and Budget) and three private persons appointed by the Governor, and gave it broad authority to allocate trust funds to improve the welfare of Puerto Rico's children. Id. §§ 4-5. The Bank provides all of the Trust Fund's staffing, conducts its day-to-day management, and serves as its disbursement agent and financial advisor. Id. §§ 12, 14.

On September 29, 1999, the Trust Fund board adopted regulations, pursuant to its statutory authority, establishing requirements for the receipt and use of trust funds. In addition, the board approved Exploratorio's request for up to $60 million to cover museum expenses. Prisma Zona says the board also resolved to transfer the grant to the private entity that would eventually succeed to the project.

Earlier in that same month, several private citizens formed Prisma Zona Exploratoria de Puerto Rico, Inc. ("Prisma Zona"), the plaintiff in this action, to take over the construction, ownership, and operation of the children's museum. The company's founders and management had close ties to the NPP and its board of directors was selected by Governor Rosselló. The present case revolves around this new entity's effort to secure control over the children's museum and its funds and the rebuff of those efforts by a new administration under a different party.

In May 2000, Prisma Zona began negotiations with the Tourism Company and its subsidiary Exploratorio to acquire the museum assets and to assume the responsibility for its development. On June 16, 2000, it requested $60 million from the Trust Fund to pay for the museum assets and to complete its construction and an additional $17.5 million to operate it for three years. The Trust Fund board approved Prisma Zona's requests on August 30, 2000. That day, Governor Rosselló (as president of the Trust Fund board) sent Prisma Zona a letter informing it of the board's approval but noting additional required steps, including review of Prisma Zona's budget and finalization of a contract containing "details on the procedures for the disbursement of funds."

On November 15, 2000, the Trust Fund issued $400 million in bonds to fund its projects and transferred nearly $10 million to the Bank to cancel Exploratorio's outstanding line of credit. Both the Trust Fund and the Bank (which managed the bond sale) represented in various documents (including a prospectus, tax certificate, and bond contract) that a portion of the bond sale proceeds would be used for the "acquisition, construction, and equipping of a children's museum ... in Isla Grande, Santurce, Puerto Rico, to be owned and operated by [Prisma Zona]."

On November 29, 2000, Prisma Zona reached an understanding with the Tourism Company and Exploratorio to acquire the museum project (the "Transfer Agreement"). The following month Prisma Zona began negotiating a service contract with the Trust Fund. The Trust Fund prepared two form contracts (one each for the capital and operational grants) and sent them to Prisma Zona for its review on December 28, 2000. Prisma Zona says it made only "minor" changes to these documents before faxing them back to the Trust Fund the same day. The Trust Fund never responded. Nonetheless, Prisma Zona alleges that at this time "the parties had agreed to the terms of the [service contracts] and the only action needed was the non-discretionary ministerial act of signing the agreement."

As these events were unfolding, Puerto Rico was holding its 2000 elections. During the campaign for Governor, Sila Calderón, the Popular Democratic Party ("PDP") candidate, promised to investigate a number of Rosselló administration projects, including the children's museum, for corruption and misuse of public monies. Calderón defeated the NPP candidate at the polls on November 7, 2000, and took office on January 2, 2001.

In its subsequent complaint Prisma Zona alleged that from the outset the new PDP administration attempted to undermine Prisma Zona's role in the museum project because of its ties to NPP and former Governor Rosselló. In particular, Prisma Zona said the Bank (as the Trust Fund's disbursement agent) has refused to pay museum invoices that Prisma Zona has submitted since January 2001 and that the Bank subjected it to a sham audit. Prisma Zona also alleged that in May 2001, the Tourism Company filed a "frivolous" suit in commonwealth court, seeking to invalidate the Transfer Agreement. (Thereafter the Puerto Rico Superior Court declared the Transfer Agreement void under Puerto Rico law. Compañía de Turismo de Puerto Rico v. Prisma Zona Exploratoria de PR Inc., KAC2001-3380 (506) (April 4, 2002).)

Prisma Zona filed this civil rights action in district court on June 22, 2001, naming as defendants the Trust Fund, the Bank and various individuals in the Calderón administration.¹ Prisma Zona says defendants' refusal to carry through with the transfer of assets and funding was motivated by Prisma Zona's political ties and violated its First Amendment, due process, and equal protection rights. For relief, Prisma Zona seeks imposition of a constructive trust, disbursement of the trust funds, a generally phrased injunction against the alleged harassment, and punitive damages. After limited discovery, the district court dismissed the suit under Rule 12(b)(6). Prisma Zona, 162 F.Supp.2d at 9-10.

The district court ruled that Prisma Zona did not have a binding contract with the Trust Fund obligating it to fund Prisma Zona. Prisma Zona, 162 F.Supp.2d at 4. The court further held that absent such a contract or its effective equivalent (e.g., an ongoing commercial relationship), the Trust Fund was free not to contract with...