Municipality of San Juan v. Human Resources Occup., Civil No. 04-2123(SEC).

• Decision Date: 20 May 2005
• Docket Number: Civil No. 04-2123(SEC).
• Parties: MUNICIPALITY OF SAN JUAN, et al., Plaintiffs v. HUMAN RESOURCES OCCUPATIONAL DEVELOPMENT COUNCIL, et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

371 F.Supp.2d 52

MUNICIPALITY OF SAN JUAN, et al., Plaintiffs v. HUMAN RESOURCES OCCUPATIONAL DEVELOPMENT COUNCIL, et al., Defendants.

Civil No. 04-2123(SEC).

United States District Court, D. Puerto Rico.

May 20, 2005.

Eric R. Ronda-Del-Toro, Johanny Martinez, Juan B. Soto-Balbas, Ricardo Pascual-Villaronga, Mercado & Soto, San Juan, PR, for Plaintiffs.

Luis E. Vazquez-Rodriguez, Cruz Niemiec & Vazquez, San Juan, PR, for Defendants.

OPINION AND ORDER

CASELLAS, District Judge.

Pending before the Court is Defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6) (Dockets 11 & 15). Plaintiffs timely opposed Defendants' motion (Docket # 17) and Defendants replied (Docket # 22). After carefully reviewing the parties' filings and the applicable law, for the reasons set forth herein, we find that Defendants' motion must be GRANTED.

Procedural Background

Plaintiffs, the Municipality of San Juan and its Mayor, Jorge A. Santini-Padilla, filed the instant suit in the Commonwealth's courts requesting injunctive relief against Defendants, the Human Resources Occupational Development Council ("HRODC"), the Department of Labor and Human Resources ("DOL"), Roman Velasco-Gonzalez, Secretary of the DOL, and the Commonwealth of Puerto Rico.¹ Per Plaintiffs' allegations, this action arose out of the HRODC's decision to audit the San Juan Puerto Rico International Fashion Center pursuant to the provisions of the Federal Workforce Investment Act ("WIA"), 29 U.S.C. §§ 2801 et seq. Plaintiffs contend that Defendants' monitoring and audit procedures of the Municipality of San Juan as a designated Local Area for the participation and allocation of funds under the WIA have denied them of due process of law and have been discriminatory on the basis of political affiliation in violation their constitutional rights secured by the United States' and Commonwealth of Puerto Rico's constitutions. Plaintiffs request that the Court order: (1) Defendants to provide due process of law to Plaintiffs prior to issuing any determination affecting their proprietary interest in the WIA funds they presently receive and those that may be assigned in the future; (2) that all proceedings before the HRODC be stayed until Defendants agree to afford Plaintiffs due process of law²; (3) Defendants to abstain from divulging confidential information and to cease and desist from disclosing conclusions that have not been analyzed pursuant to the process of law due to Plaintiffs; (4) that the assignment of funds to the Training and Employment Program of the Municipality of San Juan continues to be the same as the present assignment³; (5) Defendants to cease and desist from making determinations, recommendations, and statements motivated by political discrimination against Plaintiffs; and (6) any other relief applicable under the law.

Subsequently, Defendants sought removal of this matter claiming that the Court has original jurisdiction since it arises under a federal law, the WIA, and necessarily involves the interpretation of its provisions and applicable regulation (Docket # 1). Defendants then moved to dismiss Plaintiffs' action for failure to exhaust administrative remedies (Docket # 11). Plaintiffs opposed averring that the case involves exceptions to said doctrine (Docket # 17) and Defendants replied (Docket # 22).

Standard of Review

In general terms, a defendant may move to dismiss an action for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). In this type of jurisdictional challenge, "the standard applied to a 12(b)(1) motion is similar to the standard applied to a 12(b)(6) motion, namely, the court must take all of plaintiff's allegations as true and must view them, along with all reasonable inferences therefrom, in the light most favorable to plaintiff." Pejepscot Indus. Park v. Maine Cent. R.R., 215 F.3d 195, 197 (1st Cir.2000); Freiburger v. Emery Air Charter, Inc., 795 F.Supp. 253, 257 (N.D.Ill., 1992). See also Hart v. Mazur, 903 F.Supp. 277 (D.R.I.1995) ("Motions under Rule 12(b)(1) and Rule 12(b)(6) are subject to the same standard of review.") However, once the jurisdictional challenge has been raised, the plaintiff carries the burden of demonstrating the existence of the Court's jurisdiction. P.R. Tel. v. Telecom. Regulatory Bd., 189 F.3d 1, 7 (1st Cir.1999).

In assessing whether dismissal is appropriate, "the trial court, must accept as true the well-pleaded factual allegations of the complaint, draw all reasonable inferences therefrom in the plaintiff's favor, and determine whether the complaint, so read, limns facts sufficient to justify recovery on any cognizable theory." LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 508 (1st Cir.1998) (citations omitted). But "[a]lthough this standard is diaphanous, it is not a virtual mirage." Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir.1997) citing Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir.1988). In order to survive a motion to dismiss, "a complaint must set forth `factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.' "Id. In judging the sufficiency of a complaint, courts must "differentiate between well-pleaded facts, on the one hand, and `bald assertions, unsupportable conclusions, periphrastic circumlocution, and the like,' on the other hand; the former must be credited, but the latter can safely be ignored." LaChapelle, 142 F.3d at 508 (quoting Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996)). See also Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.1999). Courts, moreover, "will not accept a complainant's unsupported conclusions or interpretations of law." Wash. Legal Found. v. Mass. Bar Found., 993 F.2d 962, 971 (1st Cir.1993).

Applicable Law and Analysis

In their motion to dismiss, Defendants assert that Plaintiffs' claims must be dismissed for lack of subject matter jurisdiction in as much as Plaintiffs have failed to exhaust the administrative remedies provided by the WIA Regulation, Subpart F, Grievance Procedures, 20 C.F.R. § 667.600. Said proceedings have commenced and have not concluded. Thus, Defendants aver that there is no final determination to be reviewed by the Court. Moreover, in the event of a final determination, said determination would be reviewable by the Court of Appeals and not the District Court as set forth by the WIA and its regulations. 29 U.S.C. § 2937(a)(1); 20 C.F.R. § 667.850.

The doctrine of exhaustion of administrative remedies is well established in federal and local jurisprudence. It "provides that `no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.'" Ezratty v. Commonwealth of Puerto Rico, 648 F.2d 770, 774 (1st Cir.1981)(quoting Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 82 L.Ed. 638 (1938)). This is so because exhaustion "serves the twin purposes of protecting administrative agency authority and promoting judicial efficiency." McCarthy v. Madigan, 503 U.S. 140, 146, 112 S.Ct. 1081, 117 L.Ed.2d 291 (1992).

In Ezratty, the First Circuit stressed the important interests that exhaustion serves as noted by the Supreme Court in McKart v. United States, 395 U.S. 185, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969).

It allows the agency to develop a factual record, to apply its expertise to a problem, to exercise its discretion, and to correct its own mistakes, all before a court will intervene. Insofar as specialized administrative understanding is important, the doctrine thereby promotes accurate results, not only at the agency level, but also by allowing more informed judicial review. By limiting judicial interruption of agency proceedings, the doctrine can encourage expeditious decision making. Insofar as Congress has provided that an agency will decide a matter in the first instance, to apply the doctrine normally furthers specific Congressional intent. And, as a general matter, the doctrine promotes a sensible division of tasks between the agency and the court: litigants are discouraged from weakening the position of the agency by flouting its processes, while court resources are reserved for dealing primarily with those matters which could not be resolved administratively. Thus, the doctrine serves interests of accuracy, efficiency, agency autonomy and judicial economy.

Ezratty, 648 F.2d at 774. Moreover, "[t]he interest in avoiding judicial involvement is heightened [in cases such as this one] where the plaintiffs raise a constitutional challenge to agency action .... where a controversy may be resolved on some independent nonconstitutional ground...." Ticor Title, Inc. v. F.T.C., 814 F.2d 731 (D.C.Cir.1987).

Congressional intent is of paramount importance to the application of the doctrine. McCarthy, 503 U.S. at 145, 112 S.Ct. 1081. Consequently, courts have differentiated between permissive and mandatory administrative remedies, stating that "[w]hen Congress explicitly requires that administrative remedies must be pursued before seeking judicial relief, litigants must obviously follow that mandate" but "`where Congress has not clearly required exhaustion, sound judicial discretion governs.'" Trafalgar Capital Assocs., Inc. v. Cuomo, 159 F.3d 21, 36 (1st Cir.1998) (quoting McCarthy, 503 U.S. at 145, 112 S.Ct. 1081). However, when exhaustion is not explicitly required, courts must give the "appropriate deference to Congress' power to prescribe the basic procedural scheme under which a claim may be heard." McCarthy, 503 U.S. at 145, 112 S.Ct. 1081. Therefore, exhaustion principles must be fashioned "in a manner consistent with congressional intent and any applicable statutory scheme." Id. at 144.

The WIA and its regulation establish a comprehensive administrative scheme for monitoring and audit processes as well as for the resolution of grievances and claims resulting from audit...