De Choudens v. Government Development Bank of Puerto Rico, 86-1059

• Citation: 801 F.2d 5
• Decision Date: 19 September 1986
• Docket Number: No. 86-1059,86-1059
• Parties: Zaida Lydia De CHOUDENS, et al., Plaintiffs, Appellees, v. The GOVERNMENT DEVELOPMENT BANK OF PUERTO RICO, et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 5

801 F.2d 5

Zaida Lydia De CHOUDENS, et al., Plaintiffs, Appellees, v. The GOVERNMENT DEVELOPMENT BANK OF PUERTO RICO, et al.,

Defendants, Appellants.

No. 86-1059.

United States Court of Appeals, First Circuit.

Sept. 19, 1986.

As Amended Sept. 24, 1986.

Jose Angel Rey, Santurce, Puerto Rico, for defendants, appellants, with whom Saldana, Rey, Moran & Alvarado, Hon. Hector Rivera Cruz, Secretary of Justice, and Rafael Ortiz Carrion, Sol. Gen., were on brief.

Harvey B. Nachman, Santurce, Puerto Rico, for plaintiffs, appellees, with whom Law Offices of Nachman & Fernandez-Sein was on brief.

Before CAMPBELL, Chief Judge, COFFIN, BOWNES, BREYER and TORRUELLA, Circuit Judges.

COFFIN, Circuit Judge.

Plaintiff-appellee Zaida Lydia De Choudens claims she was demoted from her government position on the basis of her political affiliation in violation of her first amendment rights. See Branti v. Finkel, 445 U.S. 507, 100 S.Ct. 1287, 63 L.E.2d 574 (1980); Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976). In this companion case to Jimenez Fuentes v. Torres Gaztambide, 803 F.2d 1. (1st Cir. 1986), we decide whether political affiliation was an appropriate requirement for plaintiff's position.

In both cases, federal district judges in the District of Puerto Rico had granted preliminary injunctions, requiring the reinstatement of the plaintiffs to their governmental positions. ¹ The plaintiffs, members of the Partido Nuevo Progresista (PNP), had been removed from their positions by officials from the Partido Popular Democratico (PPD), which won the November 1985 general election. In Jimenez Fuentes, we reversed the issuance of an injunction, concluding that the position at issue (regional director of a housing agency) resembled one where, because it involved policymaking, confidential, and spokesperson functions in an area responsive to a party's governmental goals, political affiliation was an appropriate requirement. In this case, we affirm the district court's grant of a preliminary injunction because, although the position at issue involves policymaking, the reposing of confidence, and communicating, we presently conclude that such functions are so remote from advancing or thwarting the agency's partisan-responsive goals that political affiliation would not be considered an appropriate requirement.

I.

Plaintiff served in the Puerto Rico Government Development Bank (Bank) for over twenty years. She rose from the position of accountant through eight career-level positions to Senior Vice President of the Finance Area. She was one of the three vice presidents, serving under the President and Executive Vice President. After the new administration assumed power in January 1985, defendant-appellant Jose Ramon Oyola ² was appointed president of the Bank. In April 1985, Oyola notified plaintiff that she was being "separated" from her position of trust and reinstated to a career position.

II.

Defendants claim that the district court abused its discretion in finding that plaintiff had shown a likelihood of success on the merits. Although they do not concede that plaintiff was transferred for political reasons, they do not challenge that finding. They do challenge the district court's findings that the plaintiff would not have been transferred but for her political affiliation, and that her position was not one for which political affiliation was appropriate. We address these asserted errors in turn.

As in Jimenez Fuentes, we preface our discussion by noting that our standard of review is whether the issuance of the injunction constituted an abuse of discretion, id. at 3, and that our conclusions at this juncture are to be understood as statements as to probable outcomes, id. at 4.

A.

The first issue is whether the district court abused its discretion in ruling, pursuant to Mt. Healthy City School District Board of Education v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1974), that defendants failed to show that they would have demoted plaintiff notwithstanding her political affiliation. See Rosaly v. Ignacio, 593 F.2d 145, 149 (1st Cir.1979). Defendants on appeal face an uphill task because their sole witness was Oyola, the new PPD president of the Bank. Although they introduced much documentary evidence, their Mt. Healthy defense rested upon Oyola's credibility.

Oyola stated that he demoted plaintiff because he deemed her incompetent, providing four reasons for his conclusion. First, she had "very bad" relations with the personnel she supervised, based on comments made by union officials. But Oyola spoke of these comments in conclusory terms, and did not know the eventual outcome of the complaints against her. In fact, the few grievances carried to a conclusion largely, if not completely, vindicated plaintiff and the Bank. A union resolution censoring plaintiff may well have arisen from an institutional position taken by the Bank in its labor negotiations.

A second proferred reason was inadequate internal controls in the food stamp division, which made possible a substantial theft of food stamps by several employees who were later convicted. While some audit reports were critical of various Bank procedures, commendations later followed, and it was plaintiff herself who apparently instituted the lengthy investigation that lead to the apprehension of those responsible. Moreover, the district court might well have been skeptical of this reason in light of the fact that the official (a PPD member) in direct charge of the food stamp operation at the time of the thefts was assigned plaintiff's duties after her removal.

A third ground was plaintiff's alleged delinquence in failing to supply enough accounting personnel to service a high-risk private loan program. But evidence showed that plaintiff recognized the problem and obtained temporary outside help. Oyola's fourth and final reason for demoting plaintiff was that she had failed to put into operation a computerized loan-administration system. Although the needed software had been acquired but was not in use, the court found that employees in a division outside the plaintiff's area had not yet developed the files or technique to use it.

In addition to considering the conflicting evidence and inferences relating to the four proffered reasons for demoting plaintiff, the district court was entitled to take into account the following circumstances. Shortly after Oyola took office, the new Secretary of Justice asked to see all files of employees in positions of confidence, including plaintiff's. ³ Subsequently, the Secretary reported his belief that all were indeed positions of confidence, removable at will. Notwithstanding this report, Oyola stated that he removed the three Senior Vice Presidents because of their incompetence. He professed not to know that they were PNP members. Moreover, at no time during the two months preceding plaintiff's demotion did Oyola talk with her or her supervisors about her work or its shortcomings.

In short, we cannot fault the court for finding Oyola not credible. And the various documents are not so clear and compelling as independently to make the case against plaintiff. We therefore find that the district court did not abuse its discretion in finding that plaintiff would not have been demoted "but for" her political affiliation.

B.

Defendants' remaining basis for prevailing on this appeal is their argument that the district court abused its discretion in holding that defendants failed to meet their burden, under Elrod and Branti, of showing that political affiliation is an appropriate requirement for the position at issue. Rather than recite again our observations as to the relevant authorities and our resulting guidelines of analysis, we rely on our opinion in the companion case, Jimenez Fuentes. We do find, however, one proposition worth repeating:

"A threshold inquiry, which derives from Branti v. Finkle, 445 U.S. 507, 100 S.Ct. 1287, 63 L.Ed.2d 574 (1980), involves examining whether the position at issue, no matter how policy-influencing or confidential it may be, relates to 'partisan political interests.... [or] concerns.' 445 U.S. at 519, 100 S.Ct. at 1295. That is, does the position involve government decisionmaking on issues where there is room for political disagreement on goals or their implementation. Otherwise stated, do party goals or programs affect the direction, pace, or quality of governance."

Jimenez Fuentes, 803 F.2d at 6.

We begin by scrutinizing the Bank itself. Although the district court focused primarily on plaintiff's position in the Bank, it did note the Bank's role as advisor and fiscal agent of the government of Puerto Rico. The court commented on the Bank's need for continuity of organization (fostered by the directors' staggered four-year terms), as well as its need for financial stability and strength. It stated that "to subject this financial institution to the influence peddling and cronyism that patronage brings will erode its very foundation." This was dictum, unnecessary to the court's determination that political affiliation was an inappropriate requirement for plaintiff's position, and we think probably overbroad as applied to the other, more politically-sensitive positions at the Bank.

As of 1984, the Bank had nearly four billion dollars of assets, and some three hundred employees. Its three primary functions are: fiscal agent and financial advisor to the Commonwealth and its Governor, its agencies, municipalities, and public corporations; lender to government and private industry; and depository of Commonwealth funds. The Bank's Annual Report spoke of its "Group," including its subsidiaries and affiliates, as providing "leadership in promoting renewed economic growth"; a "multifaceted, yet coordinated approach to development, which, during fiscal 1984, emphasized...