845 F.3d 461 (1st Cir. 2017), 16-1319, Masso-Torrellas v. Municipality of Toa Alta

Docket Nº:16-1319
Citation:845 F.3d 461
Opinion Judge:DYK, Circuit Judge.
Party Name:FRANCISCO JOSÉ MASSÓ -TORRELLAS; CONJUGAL PARTNERSHIP MASSÓ -ESTÉ VEZ; JOSÉ FRANCISCO MASSÓ -TORRELLAS; CONJUGAL PARTNERSHIP MASSÓ -MALDONADO; OSSAM CONSTRUCTION, INC., Plaintiffs, Appellants, v. MUNICIPALITY OF TOA ALTA; CLEMENTE AGOSTO-LUGARDO, in his official capacity as Mayor of the Municipality of Toa Alta and in his individual capacity; Y...
Attorney:Roberto Busó-Aboy, for appellants. Eduardo A. Vera Ramí rez, with whom Landrón Vera, LLC., Eileen Landron Guardiola, and Luis A. Rodríguez Muñoz were on brief for appellees Municipality of Toa Alta and Clemente Agosto-Lugardo, in his official capacity as Mayor. Margarita Mercado-Echegaray, Solici...
Judge Panel:Before Howard, Chief Judge, Torruella and Dyk,[*] Circuit Judges.
Case Date:January 09, 2017
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

Page 461

845 F.3d 461 (1st Cir. 2017)

FRANCISCO JOSÉ MASSÓ -TORRELLAS; CONJUGAL PARTNERSHIP MASSÓ -ESTÉ VEZ; JOSÉ FRANCISCO MASSÓ -TORRELLAS; CONJUGAL PARTNERSHIP MASSÓ -MALDONADO; OSSAM CONSTRUCTION, INC., Plaintiffs, Appellants,

v.

MUNICIPALITY OF TOA ALTA; CLEMENTE AGOSTO-LUGARDO, in his official capacity as Mayor of the Municipality of Toa Alta and in his individual capacity; YARITZA ROSARIO-SOTO; CONJUGAL PARTNERSHIP AGOSTO-ROSARIO, Defendants, Appellees,

INDETERMINED NUMBER OF UNNAMED MUNICIPAL POLICE OFFICERS; INDETERMINED NUMBER OF JANE DOES; CONJUGAL PARTNERSHIP; RICHARD DOE; JOHN DOE; ABC INSURANCE COMPANY, Defendants

No. 16-1319

United States Court of Appeals, First Circuit

January 9, 2017

Page 462

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO. Hon. Pedro A. Delgado-Herná ndez, U.S. District Judge.

Roberto Busó-Aboy, for appellants.

Eduardo A. Vera Ramí rez, with whom Landrón Vera, LLC., Eileen Landron Guardiola, and Luis A. Rodríguez Muñoz were on brief for appellees Municipality of Toa Alta and Clemente Agosto-Lugardo, in his official capacity as Mayor.

Margarita Mercado-Echegaray, Solicitor General, with whom Susana I. Peñagarícano-Brown, Assistant Solicitor General, was on brief for appellee Clemente Agosto-Lugardo, in his individual capacity.

Before Howard, Chief Judge, Torruella and Dyk,[*] Circuit Judges.

OPINION

Page 463

DYK, Circuit Judge.

Plaintiffs appeal from a district court order dismissing their 42 U.S.C. § 1983 claim for lack of subject matter jurisdiction, and declining to exercise supplemental jurisdiction over related state law claims. We affirm the district court's dismissal. The district court found that it lacked subject matter jurisdiction because

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the parties had failed to comply with the mediation/arbitration clause in their contract. Although we conclude that the district court erred by holding that the mediation/arbitration clause applied to the § 1983 claim, we conclude that the § 1983 claim should be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Accordingly, there is also no supplemental jurisdiction over the state law claims.

I.

This dispute relates to contracts for the construction of a municipal transportation terminal. On May 7, 2010, defendant, the Municipality of Toa Alta (" Municipality" ), awarded a construction project to plaintiff, OSSAM Construction Inc. (" OSSAM" ), to build the terminal on land owned by the Municipality. The parties contemplated that the construction project would be undertaken in two phases, with two separately executed contracts. The Phase I contract was executed on September 10, 2010, and the work was apparently completed without incident within the 120 days provided in the contract. The Phase II contract was executed on September 4, 2012. From September of 2014 and continuing through December of 2014, disputes arose regarding payments for the work performed in connection with the Phase II contract. On January 20, 2015, OSSAM issued a notice of default against the Municipality due to its alleged nonpayment for the completed construction work. On February 4, 2015, the Municipality notified OSSAM by letter that the contract between OSSAM and the Municipality was being terminated effective immediately " [d]ue to reasons of public policy in connection with the sound administration of [municipal] funds." JA 122. This letter was signed by Mayor Clemente Agosto-Lugardo (" Agosto" ) on behalf of the Municipality. On the same day, municipal officials and police officers took control of the construction site, which was on municipal property.

After taking control of the site, the Municipality initially barred OSSAM from removing any property from the construction site. The Municipality alleges that this was necessary to fully inventory the on-site property and determine the correct ownership pursuant to the contract. On February 5th and 14th, OSSAM was permitted to retrieve some of its property from the site. And on February 18th, OSSAM was finally permitted access to the site to retrieve " most" of its property. Appellants allege that at the time of filing the Complaint, the Municipality still retained security barriers and fences belonging to OSSAM.

On May 4, 2015, OSSAM, its president José Francisco Massó-Torrellas and his wife Sarina Maldonado-Alfandari, and OSSAM's vice-president Francisco José Massó-Torrellas and his wife Rosa Julia Esté vez-Datiz, filed a complaint in the District Court of Puerto Rico, against the Municipality, Agosto in his official capacity as mayor, Agosto and his wife Yaritza Rosario-Soto in their personal capacities, an indeterminate number of unnamed Municipality police officers and officials in their official and personal capacities, along with their spouses, and any " insurance compan[ies] that may be responsible to [the] Plaintiffs." JA 12. The plaintiffs claimed that the defendants violated 42 U.S.C. § 1983 when the defendants acted under color of law to interfere with the plaintiffs' Fourth, Fifth, and Fourteenth Amendment rights during the construction site takeover in February of 2014. The plaintiffs also claimed that these actions constituted a breach of contract and " a violation of the Constitution and laws of the Commonwealth of Puerto Rico." JA 23.

Page 465

The defendants moved to dismiss the § 1983 claim for failure to state a claim, and also argued that " OSSAM has not complied with the mandatory arbitration clause in the contract." JA 41.

The Phase II construction contract between OSSAM and the Municipality included clause 35, which we refer to as the mediation/arbitration clause. It provided that [i]n the event that any controversy arises from the interpretation or of any other class among the parties with respect to any matter related to this contract, it shall be previously be [sic] required that before resorting to a judicial forum for the adjudication of their rights, that the parties exhaust a mediation procedure. The Municipality and [OSSAM] will at all times attempt to resolve their claims and disputes among themselves in [good] faith and if unable to arrive at an agreement[,] they bind themselves to resolving the controversy or dispute through mediation.

JA 117-18 (emphases added). The Phase I contract included the same clause with an additional final sentence stating that " [t]he mediator's decision will be final and firm." Add. 2. This sentence was not included in the Phase II contract.1

The usual meaning of arbitration is that the dispute resolution is binding and final. See Fit Tech, Inc. v. Bally Total Fitness Holding Corp., 374 F.3d 1, 7 (1st Cir. 2004). Conversely, the usual meaning of mediation is that the dispute resolution is non-binding. See In re Atlantic Pipe Corp., 304 F.3d 135, 141 (1st Cir. 2002). For purposes of resolving this case, we need not decide whether clause 35 provides for non-binding mediation or binding arbitration.

Interpreting clause 35 as an arbitration clause, the district court held that " the parties must comply with the obligation to mediate their claims before pursuing claims in a judicial forum," and " dismissed for lack of subject matter jurisdiction." Add. 4, 6.

The plaintiffs appeal. We have jurisdiction under 28 U.S.C. § 1291. We review the district court's dismissal for lack of subject matter jurisdiction de novo. Viqueira v. First Bank, 140 F.3d 12, 16 (1st Cir. 1998). We review the district court's decision not to exercise supplemental jurisdiction over state law claims for abuse of discretion. González-De Blasini v. Family Dep't, 377 F.3d 81, 89 (1st Cir. 2004).

II.

We first address whether the district court erred by holding that the plaintiffs' § 1983 claims must be mediated or arbitrated before pursuing judicial action.

Here, the parties agree that the district court erred in concluding that the mediation/arbitration clause covers constitutional claims. This agreement is consistent with the plain text of the clause, which does not bring constitutional or § 1983 claims within its scope. Quite the opposite, the mediation/arbitration clause only encompasses " matter[s] related to this contract." JA 117. " [A] court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute." Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 297, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (emphasis in original). Here,

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there is no agreement between the parties to arbitrate/mediate the § 1983 claim. Therefore, the district court erred by holding that clause 35 of the construction contract applied to the appellants' § 1983 claim.2

III.

Even though the district court erred in dismissing for lack of jurisdiction because of the mediation/arbitration clause, " [w]e are not bound by the lower court's rationale, but may [instead] affirm the grant of dismissal on any ground supported by the record." González-Cancel v. Partido Nuevo Progresista, 696 F.3d 115, 118-19 (1st Cir. 2012). We conclude that the § 1983 claim is without merit and should have been dismissed for failure to state a claim.

On appeal, the plaintiffs argue several different constitutional claims, alleging violations of the First, Fourth, Fifth, and Fourteenth Amendments. In none of these respects have the plaintiffs stated a viable claim.

First, there was no First Amendment claim pleaded in the Complaint. See JA 21. " Appellants cannot raise an argument on appeal that was not squarely and timely raised in the trial court. [L]itigants must spell out their legal theories face-up and squarely in the trial court . . . . [Otherwise,] that claim ordinarily is deemed unpreserved for purposes of appellate review."...

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