Maysonet-Robles v. Cabrero

• Decision Date: 14 March 2003
• Docket Number: No. 02-1010.,02-1010.
• Parties: Norma I. MAYSONET-ROBLES; Angel Ramon Martinez-Dominguez; Carmen M. Robles-Collazo; Lydia Hernandez-De-Leon; Camilo Ginez-Perez; Jesus Ocasio-De-La-Rosa; for themselves and on behalf of a class of similarly situated individuals, Plaintiffs-Appellants, v. Antonio J. CABRERO, as Trustee for Urban Renewal and Housing Corporation, Puerto Rico, Defendant-Appellee.
• Court: U.S. Court of Appeals — First Circuit

323 F.3d 43

Norma I. MAYSONET-ROBLES; Angel Ramon Martinez-Dominguez; Carmen M. Robles-Collazo; Lydia Hernandez-De-Leon; Camilo Ginez-Perez; Jesus Ocasio-De-La-Rosa; for themselves and on behalf of a class of similarly situated individuals, Plaintiffs-Appellants, v. Antonio J. CABRERO, as Trustee for Urban Renewal and Housing Corporation, Puerto Rico, Defendant-Appellee.

No. 02-1010.

United States Court of Appeals, First Circuit.

Heard November 7, 2002.

Decided March 14, 2003.

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Robert N. Hill, for appellants.

Eugenia I. Orsini Herencia, for appellee.

Before BOUDIN, Chief Circuit Judge, HOWARD, Circuit Judge, and SHADUR,^* Senior District Judge.

SHADUR, Senior District Judge.

In January 1997 this action was brought on behalf of a putative class comprising homeowners and tenants of a low income housing complex in Manati, Puerto Rico, who sued Antonio Cabrero as Trustee for the Urban Renewal Housing Corporation Accounts Liquidation Office of Puerto Rico (the "Office"), an entity created in 1991 to liquidate the proceeds of the extinct Puerto Rico Urban Renewal and Housing Corporation ("CRUV")(Act 55, August 9, 1991, 17 P.R. Laws Ann. §§ 27-27t). Plaintiffs sued under 42 U.S.C. §§ 1983 and 1985 and added, under the auspices of 28 U.S.C. § 1367(a), a number of state law claims alleging that CRUV used, and failed to disclose to them the presence of asbestos and lead within, the units.

After two earlier motions to dismiss had been denied, the Office filed a third motion to dismiss — this time informing the district court and Plaintiffs that in the interim the Puerto Rico Legislature had passed Act 106, which had dissolved the Office and transferred CRUV's assets to the Department of Housing of the Commonwealth of Puerto Rico ("Department") effective June 30, 1998 (17 P.R. Laws Ann. §§ 27aa-27jj). Because the Office said that Department was now the real party in interest, it urged that as such Department was immune from suit under the Eleventh Amendment. Later the Office amended its motion to assert that the Commonwealth of Puerto Rico ("the Commonwealth" or "Puerto Rico") was the Office's true successor, coupling that amendment with a reassertion of Eleventh Amendment immunity.

After reviewing the parties' submissions, the district court¹ issued an October 26, 2001 opinion and order stating that Department should be substituted for the Office as a successor in interest pursuant to Fed.R.Civ.P. ("Rule") 25(c). In substantive terms that opinion went on to hold the action barred by the Eleventh Amendment because Department, as an arm of the state, enjoyed immunity from suit — and that despite its interjection into the pending litigation as a successor to a party that had not been entitled to immunity under the Eleventh Amendment. Accordingly the district court granted the Office's amended motion to dismiss, and Plaintiffs now appeal. We affirm the district court's dismissal of the action on such immunity grounds.

Standard of Review

Whether the district court correctly held that Department enjoyed immunity under the Eleventh Amendment — or more precisely, under the limitation that the States' sovereign immunity imposes on the federal judicial power established in Article III (see, e.g., Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 98-99, 116-17, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984))² — is a question of law. We therefore review the lower court's ruling de novo (see Arecibo Cmty. Health Care, Inc. v. Puerto Rico, 270 F.3d 17, 22 (1st Cir. 2001)).

Background

Because this appeal presents a pure jurisdictional question, it is unnecessary to recite the facts as they pertain to the merits of Plaintiffs' allegations. Instead we will review the bidding as to the relevant agency history and the procedural path of this litigation, then turn to the law.

CRUV was created by the Puerto Rico legislature as a public corporation in 1957 to administer and develop low-cost private housing construction in the Commonwealth. In 1991 the legislature dissolved CRUV (by Act 55 of August 9, 1991, 17 P.R. Laws Ann. §§ 27-27t), instead creating the Office and charging it with overseeing the liquidation of CRUV's accounts and the transfer of records and documents to Department. Among other provisions, the Office was granted the authority to sue and be sued, with the understanding that it would exist only so long as necessary for CRUV's liquidation (17 P.R. Laws Ann. § 27r).

Plaintiffs' 1997 Complaint asserted a number of claims against the Office that stemmed from CRUV's use of asbestos and lead in its public housing units and its failure to disclose that use to Plaintiffs. Plaintiffs then amended their Complaint to clarify that the suit was brought against the Office for its own acts of alleged misconduct as well as in its capacity as the successor to CRUV.

After a first motion to dismiss on grounds unrelated to immunity was denied, the Office filed a second motion to dismiss in August 1997 on the predicate that it was immune from suit under the Eleventh Amendment. While that motion was pending, Plaintiffs sought a preliminary injunction to prevent the Office from reducing its legal claims reserve and transferring its assets to the Commonwealth's treasury.

On September 3, 1998 the district court ruled on those motions. First it denied the motion to dismiss, ruling that the Office was not an arm of the state entitled to immunity under the Eleventh Amendment. Then it denied Plaintiffs' motion for preliminary injunction, but it ordered the Office to ensure that CRUV's assets would remain available should they be necessary to satisfy a judgment in this case.

It turned out that two months before the issuance of those rulings Act 106 had dissolved the Office and had effectively transferred CRUV's millions of dollars in surplus funds, including the millions that had been set up as a reserve fund for its legal liabilities, to Department. Based on that legislation, the Office filed a third motion to dismiss on September 15, 1998 — this time asserting that Department, now the real party in interest, was entitled to Eleventh Amendment immunity. Responding to that motion, Plaintiffs requested that the district court substitute Department for the defunct Office under Rule 25(d)(1) and urged that such substitution did not oust the court of federal jurisdiction or permit Department to reassert Eleventh Amendment immunity. Then the Office amended its motion to assert that the Commonwealth, rather than Department, was the proper defendant under Act 106 and that it was immune from the suit regardless of its successor status.

As stated earlier, the district court bought into the Office's Eleventh Amendment immunity argument as to Department without having to take that last step of treating the Commonwealth as the proper party defendant. Because the district court concluded that Department had not waived or otherwise forfeited that immunity by its having succeeded the properly sued Office, the court granted the motion to dismiss.

Although Plaintiffs now appeal that involuntary dismissal, certain aspects of the district court's ruling are not challenged before us. Neither party has appealed the district court's application of Rule 25(c) to substitute Department for the Office as a successor in interest. Neither do they dispute the conclusion that Department, an executive department of the government of Puerto Rico lacking an independent juridical personality (see Fred Reyes v. Estado Liber de Puerto Rico, 2000 TSPR 49, 2000 WL 337669 (P.R.2000)), is generally sheltered by Puerto Rico's immunity from federal suit. Instead the issue on appeal is whether Department, interjected into the ongoing litigation by way of a Puerto Rican statute, may successfully assert such immunity when it could not have been invoked by its predecessor in interest, the Office. We now turn to that question.

Eleventh Amendment

Under the Eleventh Amendment the "Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." Long interpreted as an affirmation of state³ sovereign immunity as a limit on Article III's grant of federal jurisdiction, the principles that Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890) drew from that amendment (despite its literal text) also bar a citizen from bringing a federal court action against his or her own State. Sovereign immunity for suits "against one of the United States" also extends to bar suits against state agents and instrumentalities when the action is in essence one for the recovery of money from the State (Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 429, 117 S.Ct. 900, 137 L.Ed.2d 55 (1997)).

There are, however, two general exceptions to the thus-extended reach of the Eleventh Amendment (College Savs. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 670, 119 S.Ct. 2219, 144 L.Ed.2d 605 (1999)). First, Congress may abrogate a State's immunity by expressly authorizing such a suit pursuant to a valid exercise of power (id.). Second, a State may waive its sovereign immunity by consenting to be sued in federal court (id.). At issue here is the second of those two potential exceptions: whether Puerto Rico waived its immunity so as to permit this federal court litigation.

Before we turn to Plaintiffs' waiver argument, we will first address Plaintiffs' separate contention that Department should not be entitled to raise the shield of immunity because it entered the case midstream as a successor to the Office, an entity that was itself outside the scope of that immunity. Plaintiffs assert that because federal jurisdiction was properly established over the Office when the suit was initiated, it is not subject to ouster by subsequent events. Relatedly Plaintiffs...