Gorenc v. Salt River Project Agr. Imp. and Power Dist.

• Decision Date: 12 December 1988
• Docket Number: No. 87-2902,87-2902
• Parties: Louis GORENC, Plaintiff-Appellant, v. SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 503

869 F.2d 503

Louis GORENC, Plaintiff-Appellant, v. SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, Defendant-Appellee.

No. 87-2902.

United States Court of Appeals Ninth Circuit.

Submitted Dec. 12, 1988. ^*

Decided March 8, 1989.

Louis Gorenc, Apache Junction, Ariz., pro se.

Charles E. Jones and Margaret H. Downie, Jennings, Strous & Salmon, Phoenix, Ariz., for defendant-appellee.

Appeal from the United States District Court for the District of arizona.

Before ALDISERT ^**, BRUNETTI and LEAVY, Circuit Judges.

BRUNETTI, Circuit Judge:

Plaintiff-appellant, Louis Gorenc ("Gorenc"), filed a pro se complaint in U.S. District Court against the defendant-appellee, Salt River Project Agricultural Improvement and Power District ("Salt River"). Gorenc alleged Salt River violated his right to procedural due process under the Fifth and Fourteenth Amendments and asserted a claim under 42 U.S.C. Sec. 1983. He alleged that Salt River had terminated his employment under "color of state law" without notice and an opportunity to respond to the reasons for his discharge.

The district court granted Salt River's motion to dismiss for failure to state a claim upon which relief could be granted on the grounds that the discharge of Gorenc did not constitute state action sufficient to allege a constitutional deprivation. We hold that Salt River is a governmental entity only for a limited purpose and the termination of Gorenc was a proprietary function, and purely private action and affirm the district court.

I. BACKGROUND

The history of Salt River began in the late 1860's, as farmers combined efforts to irrigate the arid lands of the Salt River Valley. Ball v. James, 451 U.S. 355, 357, 101 S.Ct. 1811, 1814, 68 L.Ed.2d 150 (1981). Today, Salt River is an Agricultural Improvement District organized under Title 48, Chapter 17 of the Arizona Revised Statutes. A.R.S. Sec. 48-2301 et seq. (West, 1986). The Salt River directors are elected by its owners, with voting rights apportioned according to the number of acres owned. Ball, 451 U.S. at 357, 101 S.Ct. at 1814. Salt River stores and delivers untreated water to these landowners in the Salt River area, comprising 236,000 acres in Central Arizona. Id. Salt River subsidizes its water operations by generating and selling hydroelectric power to hundreds of thousands of people in an area which includes part of metropolitan Phoenix. Id. Salt River is privately funded, servicing its general obligation bonds and capital improvement bonds entirely out of its electricity revenues. Id. at 361-62, 101 S.Ct. at 1816.

Salt River is designated as a political subdivision of the State by Article XIII, Sec. 7 of the Arizona Constitution. Niedner v. Salt River Project Agricultural Improvement and Power Dist., 121 Ariz. 331, 332, 590 P.2d 447, 448 (1979). Unlike public entities, Salt River is only immune from taxation on those activities that are its primary government purpose. Salt River Project v. City of Phoenix, 129 Ariz. 398, 400, 631 P.2d 553, 555 (1981). Salt River's governmental powers are "limited to the purposes justifying its political existence," Niedner, 590 P.2d at 448 (quoting City of Mesa v. Salt River Project Agricultural Improvement and Power Dist., 92 Ariz. 91, 97, 373 P.2d 722, 726 (1962)), such as the power to levy taxes on real property located within the district, to sell tax-exempt bonds and to exercise eminent domain, Ball, 451 U.S. at 360, 101 S.Ct. at 1815, but it has no power to impose ad valorem property taxes or sales taxes, or to enact general laws. Id. at 366, 101 S.Ct. at 1818.

Salt River employed Gorenc as an auto mechanic for five years. Gorenc was injured on the job May 6, 1985 and took medical leave from May 7 until June 26, 1985. Gorenc returned to work June 26, 1985, to face an investigatory meeting about the date he should have returned to work. Gorenc was suspended from his employment at that meeting. Salt River notified Gorenc on July 3, 1985, that his employment had terminated effective June 26th (the day of the meeting). He had no

opportunity to discuss this termination with Salt River. He then filed his complaint and the district court granted Salt River's motion to dismiss.

II. DISCUSSION

A. State action is a matter of federal law.

The prohibitions of the Fourteenth Amendment are directed only at the states, hence it can be violated only by conduct that is characterized as "state action." Lugar v. Edmondson Oil Co., Inc., 457 U.S. 922, 924, 102 S.Ct. 2744, 2747, 73 L.Ed.2d 482 (1982). Title 42 U.S.C. Sec. 1983 provides remedies for deprivations of rights under the Constitution and laws of the United States when the deprivation takes place "under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory." Id.; 42 U.S.C. Sec. 1983.

The district court held that Salt River's termination practices did not constitute state action--thus precluding Gorenc's claims. The district court cited Arizona law for the fact that although Salt River is a political subdivision under the law, in employment matters it acts in a proprietary function and not in a governmental function. See Niedner, 590 P.2d at 448. The district court noted that the United States Supreme Court appeared to support this conclusion in its discussion of the voting procedures of Salt River in Ball, 451 U.S. at 368, 101 S.Ct. at 1819. The district court did not discuss the state action requirement under federal law. While Ball did discuss the nature of Salt River, it is not dispositive of the issue here. In that case, the United States Supreme Court decided that Salt River's voting system, which limited voting eligibility to landowners and apportioned voting power according to the amount of land a voter owns, was constitutional. Ball at 370, 101 S.Ct. at 1820-21. The Court found the peculiarly narrow function of Salt River and its special relationship of one class of citizens (the landowners) to that body "releases it from the strict demands of the one-person, one-vote principle of the Equal Protection Clause of the Fourteenth Amendment." Id. at 357, 101 S.Ct. at 1814. The case did not decide whether Salt River's role as an employer was state action. The Arizona cases, while persuasive, are also not dispositive.

Whether certain conduct is "under color of state law" or "state action" is a question of federal, not state law. Mildfelt v. Circuit Court, 827 F.2d 343, 345-46 (8th Cir.1987); Marshall v. Sawyer, 301 F.2d 639, 646 & n. 5 (9th Cir.1962). See also Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961) (United States Supreme Court overruled state supreme court's determination of no state action). Otherwise, the states acting through their legislatures or courts would have the power to immunize their agencies and officials from liability under the Civil Rights Act. Marshall, 301 F.2d at 646. We need to make an independent inquiry as to the presence or absence of state action under federal law.

However, we note that the Arizona courts have dealt directly with the issue here, see Niedner, 590 P.2d at 449, and we accept their authority as persuasive to our holding. Data Disc, Inc. v. Systems Tech. Assoc., Inc., 557 F.2d 1280, 1286-87 n. 3 (9th Cir.1977) (federal law rather than state law is controlling on issues of due process although state cases may be persuasive authority). See also Hicks on Behalf of Feiock v. Feiock, 485 U.S. 624, 108 S.Ct. 1423, 1429, 99 L.Ed.2d 721 (1988) (state law not determinative in proper applicability of federal constitutional protections but provides "strong guidance"); Seymour v. Summa Vista Cinema, Inc., 809 F.2d 1385, 1389 n. 4 (9th Cir.1987) (court considered California authority persuasive on an issue as to which it was unclear whether federal or state law controlled).

B. State action under federal law.

Gorenc asserts two claims, one under the Fourteenth Amendment and a second under 42 U.S.C. Sec. 1983. A claim upon which relief may be granted against Salt River under Sec. 1983 must meet two criteria: 1) Gorenc must show he has been deprived [L]iability attaches only to those wrongdoers "who carry a badge of authority of a State and represent it in some capacity, whether they act in accordance with their authority or misuse it."

of a right "secured by the Constitution and the laws" of the United States, and 2) Gorenc must show that Salt River deprived him of this right while acting under color of state law. Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 156, 98 S.Ct. 1729, 1733, 56 L.Ed.2d 185 (1978). Gorenc alleges he was entitled to procedural due process, notice and an opportunity to be heard, before being terminated. Before we inquire as to whether Gorenc was deprived of this right, we must first determine if Salt River was a state or private actor when it terminated him.

National Collegiate Athletic Assn. v. Tarkanian, --- U.S. ----, 109 S.Ct. 454, 461, 102 L.Ed.2d 469 (1988) (quoting Monroe v. Pape, 365 U.S. 167, 172, 81 S.Ct. 473, 476, 5 L.Ed.2d 492 (1961)). The inquiry is whether the State was sufficiently involved in causing the harm to the plaintiff, to treat the conduct of the private actor as "under color of state law."

The "state action" requirement of the Fourteenth Amendment is a matter of substantive constitutional law which recognizes that "most rights secured by the Constitution are protected only against infringement by governments." Lugar, 457 U.S. at 936, 102 S.Ct. at 2753 (quoting Flagg Bros., 436 U.S. at 156, 98 S.Ct. at 1733). "Careful adherence to the 'state action' requirement preserves an area of individual freedom by limiting the reach of federal law and federal judicial power." Lugar, 457 U.S. at 936, 102 S.Ct. at 2753. To claim a violation under the Fourteenth Amendment Gorenc must show first, the deprivation was caused by the "exercise of some right or privilege created by the State or by a rule of conduct imposed by the State...."...