Prisma Zona Exploratoria v. Calderon

• Decision Date: 17 September 2001
• Docket Number: CIV. No. 01-1836(PG).
• Citation: 162 F.Supp.2d 1
• Parties: PRISMA ZONA EXPLORATORIA DE PUERTO RICO, INC., Plaintiff, v. Sila M. CALDERON, et al., Defendant
• Court: U.S. District Court — District of Puerto Rico

Page 1

162 F.Supp.2d 1

PRISMA ZONA EXPLORATORIA DE PUERTO RICO, INC., Plaintiff, v. Sila M. CALDERON, et al., Defendant

CIV. No. 01-1836(PG).

United States District Court, D. Puerto Rico.

September 17, 2001.

COPYRIGHT MATERIAL OMITTED

Jane A. Becker-Whitaker, Law Offices of Jane Becker, Whitaker, PSC, Luis G. Rullan-Marin, Zoraida Buxo-Santiago, Rullan & Buxo, P.S.C., San Juan, PR, for Prisma Zona Exploratoria De Puerto Rico, Inc., plaintiffs.

Salvador J. Antonetti-Stutts, Director, Department of Justice of PR, Federal Litigation Division, Carlos Del-Valle-Cruz, Department of Justice of P.R., Federal Litigation Division, Rafael Escalera-Rodriguez, Nestor J. Navas-D'Acosta, Reichard & Escalera, San Juan, PR, for Sila Maria Calderon, Hon. Juan Agosto-Alicea, Jorge Pesquera, Jose V. Pagan, The Children's Trust Fund, Government Development Bank for Puerto Rico, John Doe, George Doe 01CV1836 and Jane Doe, defendants.

OPINION & ORDER

PEREZ-GIMENEZ, District Judge.

The Court is faced with the task of ruling on defendants' motion to dismiss which presents a myriad of complex legal issues. Having received plaintiff's opposition, the court will analyze and resolve the issues presented by defendants in their motion and during oral arguments. As the court is cognizant of the facts of the case, it opts to discuss them only as they are necessary for a thorough understanding of today's ruling.

STANDARD OF REVIEW

When ruling on a 12(b)(6) motion a court must accept all well-pled factual averments as true and must draw all reasonable inferences in the plaintiffs' favor. Berezin v. Regency Savings Bank, 234 F.3d 68, 70 (1st Cir.2000); Negron-Gaztambide v. Hernandez-Torres, 35 F.3d 25, 27 (1st Cir. 1994). A Court should not dismiss a complaint for failure to state a claim unless it is clear that plaintiff will be unable to recover under any viable theory. Garita Hotel Ltd. Partnership v. Ponce Fed. Bank, 958 F.2d 15, 17 (1st Cir.1992). Plaintiff, however, may not rest merely on "unsupported conclusions or interpretations of law". Washington Legal Foundation v. Massachusetts Bar Foundation., 993 F.2d 962, 971 (1st Cir.1993). "Subjective characterizations or conclusory descriptions of a general scenario which could be dominated by unpleaded facts will not defeat a motion to dismiss." Coyne v. City of Somerville, 972 F.2d 440, 444 (1st Cir.1992). "A complaint must set forth a factual allegation either directly or inferential respecting each material element necessary to sustain recovery under some actionable legal theory." Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir.1997). See also Roth v. United States, 952 F.2d 611, 613 (1st Cir.1991) (Stating that a plaintiff is obliged to allege facts regarding each essential element necessary to entitle him to recovery). "When a complaint omits facts that, if they existed, clearly would dominate the case, it is fair to assume that those facts do not exist." O'Brien v. DiGrazia, 544 F.2d 543 (1st Cir.1976).

1. PLAINTIFF DID NOT COMPLY WITH THE ELIGIBILITY REQUIREMENTS

On July 30, 1999 the Governor of Puerto Rico, Hon. Pedro Rosello, signed a law that created The Children's Trust Fund ("the Fund"). See 24 LPRA §§ 3121 et seq. The Fund, a non-for profit entity, was created in order to channel the funds that Puerto Rico received as a result of the Smokeless Tobacco Settlement Agreement. The Fund's main objective is to finance programs aimed at the promotion of the welfare of Puerto Rico's youth.

PRISMA, plaintiff of record, is one of the programs that sought funding from the Children's Trust Fund. PRISMA, a private non-profit corporation, was created in order to develop, manage, promote and sponsor a children's museum or interactive center known as "PRISMA zona exploratoria". When the Fund withheld PRISMA's financing after a change in government, PRISMA brought a § 1983 suit claiming political discrimination.

The law that created the Fund ("the trust law") specifically states that an entity cannot receive financial assistance unless it complies with the trust law and the internal regulations subsequently passed by the board of the Trust. See Amended Complaint at p. 11 and 24 L.P.R.A. § 3121(e). All beneficiary entities must comply with all operational, administrative, budgetary and other requirements imposed on it by the Trust as a condition for financial assistance.

On September 29, 1999, the board of directors of the Trust approved an internal regulation (the regulation) to establish, among other things, eligibility requirements for beneficiary entities. Said regulation was filed with the Department of State under Num. 6099 on February 22, 2000¹. Importantly, Article 12 of the regulations provides that all beneficiary entities must enter into an assistance service contract with the Trust before receiving financial assistance. Specifically, Article 12 states, in its pertinent part, that:

"... Any financial assistance provided by the Fund is a privilege since the board of directors has exclusive discretion to determine the entities that will receive funding. A financial service contract will be entered into between the fund and the beneficiary entity. The same should have specific clauses delineating the responsibilities of the parties as well as the obligations that the beneficiary entity has as to the use of the funding, the presentation of the necessary reports required by law or regulation and any other that is deemed necessary. The concession of benefits is a privilege and is left to the prerogative of the Fund through its board of directors. Additionally, the contract will contain any other clauses that the board of directors deems necessary."

Defendants claim that plaintiff's failure to enter into a service contract with the Trust makes plaintiff ineligible to receive funding. Because the complaint seeks the disbursement of allegedly due funds and plaintiff is not a beneficiary entity, defendants argue that the complaint fails to state a claim upon which relief can be granted. Defendants' position is a strong one. Any entity that desires to receive funds from the Trust must become a beneficiary entity. To become a beneficiary entity the Trust's own regulation requires a valid service contract. Plaintiff has not entered into one. As a consequence, it wasn't even legal for defendants to issue financial assistance to plaintiff.

Plaintiff in opposition makes two arguments. First, it cites Perry v. Sindermann, 408 U.S. 593, 597, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972) and Cuban Museum of Arts and Culture, Inc., v. City of Miami, 766 F.Supp. 1121 (S.D.Fla.1991) for the proposition that the lack of an established right to a benefit does not permit the state to deny a benefit on unconstitutional grounds. According to plaintiff, a contract is not needed in order to bring a valid discrimination case. Second, Plaintiff argues that even if there is no valid written contract, there was an oral contract between the parties. The existence of this oral contract is evidenced by the fact that the parties had written out the content of the service agreements but had failed to sign them. Thus, the parties had reached an understanding as to the material elements of the contract. Plaintiff insists that the existence of an oral contract should be enough to shroud any deficiency of form.

The Court is unconvinced by plaintiff's arguments as they fail to effectively answer why plaintiff didn't follow the procedure mandated by the trust law and the regulation. The regulation couldn't be clearer: "A financial service contract will be entered between the Trust and the beneficiary entity". Failure to enter into this financial service contract deprives any entity of funding as "any financial assistance provided by the Fund is a privilege". Entities must comply with the exigencies provided in the regulation prior to any disbursement of funds. Providing financial assistance to any entity without a service agreement, which is basically what the complaint asks this court to do, would not only be unreasonable, but it would be illegal. Perry, 408 U.S. 593, 92 S.Ct. 2694 and Cuban Museum, 766 F.Supp. 1121 do not change this situation. Neither do citations to Puerto Rican law which validate oral contracts. Oral contracts may be valid in Puerto Rico, but plaintiff must still comply with the regulation in order to be granted financial assistance. Plaintiff failed to do so.

Although this is probably enough to grant defendants' motion to dismiss, defendants' motion presents other points that strengthen today's decision.

2. PLAINTIFF HAS SUED THE WRONG PARTIES²

The complaint as it relates to some of the defendants must be dismissed because these defendants do not have the power to release the funds sought by plaintiff. The law of the Trust and Regulation # 6099 make clear that the disbursement of funds is the sole prerogative of the Board of Directors of the Trust. As such the complaint must be dismissed as to Jorge Pesquera, the ex-executive Director of the Tourism Company; Milton Segarra Pancorbo, the Executive Director of the Tourism Company; Jose V. Pagan Executive Vice President of the Government Development Bank and The Government Development Bank. None of these entities or persons have any authority to release the funds.

3. PLAINTIFF'S FIRST AMENDMENT CLAIM FAILS

It is well established that political discrimination restrains freedom of belief and association, core activities protected by the First Amendment. See Elrod v. Burns, 427 U.S. 347, 354, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976); Padilla-Garcia v. Guillermo Rodriguez, 212 F.3d 69, 74 (1st Cir.2000). In their motion, defendants contend that plaintiff's First Amendment claim should be dismissed because 1) the Supreme Court has refused to recognize a First Amendment protection claim for those who have no prior contractual obligation with the government³ and 2) defendants have shown that they have a valid reason to withhold funding in compliance with...