Redondo Constr. Corp. v. Izquierdo, 13–1834.

• Decision Date: 19 March 2014
• Docket Number: No. 13–1834.,13–1834.
• Parties: REDONDO CONSTRUCTION CORPORATION, Plaintiff, Appellant, v. José IZQUIERDO, in his official capacity as Secretary of the Department of Transportation and Public Works; Puerto Rico Highway and Transportation Authority; Puerto Rico Public Buildings Authority; The Governor of the Commonwealth of Puerto Rico, in his official capacity; Fernando Fagundo; Conjugal Partnership Fagundo–Doe; José Lluch–García; Conjugal Partnership Lluch–Doe; Conjugal Partnership Izquierdo–Doe, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

746 F.3d 21

REDONDO CONSTRUCTION CORPORATION, Plaintiff, Appellant,

v.José IZQUIERDO, in his official capacity as Secretary of the Department of Transportation and Public Works; Puerto Rico Highway and Transportation Authority; Puerto Rico Public Buildings Authority; The Governor of the Commonwealth of Puerto Rico, in his official capacity; Fernando Fagundo; Conjugal Partnership Fagundo–Doe; José Lluch–García; Conjugal Partnership Lluch–Doe; Conjugal Partnership Izquierdo–Doe, Defendants, Appellees.

No. 13–1834.

United States Court of Appeals,First Circuit.

March 19, 2014.

Yolanda Benítez de Alegría, with whom Luis Cotto–Román was on brief, for appellant.

Raúl Castellanos–Malavé, with whom Development & Construction Law Group, LLC was on brief, for appellee Puerto Rico Highway and Transportation Authority.

Susana I. Peñagaricano–Brown, Assistant Solicitor General, with whom Margarita L. Mercado Echegaray, Solicitor General, was on brief, for appellees José Izquierdo, Fernando Fagundo, José Lluch–García, and the Governor of Puerto Rico.

Luis F. del Valle–Emmanuelli for appellee Puerto Rico Public Buildings Authority.

Before LYNCH, Chief Judge, SELYA and HOWARD, Circuit Judges.

LYNCH, Chief Judge.

Plaintiff Redondo Construction Corporation has been in litigation against the defendants—the Puerto Rico Highway and Transportation Authority (PRHTA), the Puerto Rico Public Buildings Authority (PBA), and several officials at both agencies (the individual defendants)—for over a decade. Redondo alleges that the defendants were in breach of certain settlement agreements with Redondo, that this caused Redondo's bankruptcy, and that the defendants are liable in damages. The district court granted the PRHTA's and the individual defendants' motions for summary judgment on the grounds that the record contained insufficient evidence to prove damages. See Redondo Constr. Co. v. Izquierdo, 929 F.Supp.2d 14, 24 (D.P.R.2013). It also dismissed Redondo's claims against the PBA sua sponte. See id. We affirm the district court's entry of summary judgment as to the PRHTA and the individual defendants but vacate the dismissal of the claim against the PBA and remand for further proceedings.

I.

A. Guilty Plea and Initial Contract Cancellations

The events leading to this case began on April 15, 1999, when Redondo entered into a plea agreement with federal prosecutors. Under the agreement, Redondo pled guilty to aiding and abetting the making of false statements to the U.S. Department of Transportation and to Banco Santander de Puerto Rico in the course of its work on a federal highway project. See18 U.S.C. §§ 2, 1014, 1020. The next day, the PRHTA informed Redondo that, in light of the guilty plea, it was revoking the bids it had awarded Redondo before the plea and was suspending Redondo from bidding on new contracts for 30 days, with an extension likely to be announced in the future. In May 1999, the PBA did the same.

Redondo challenged both decisions, initiating two administrative proceedings. The proceeding against the PBA ended with a settlement agreement allowing Redondo to resume bidding for PBA contracts on April 16, 2000. The proceeding against the PRHTA ended with a settlement agreement allowing Redondo to resume bidding for PRHTA contracts on December 11, 2000, subject to the oversight of a monitoring service for approximately a year and a half.

B. Enactment of Law 458

Redondo's eligibility to bid for Puerto Rico contracts shortly came into question again, this time under a new Puerto Rico statute. On December 29, 2000, Puerto Rico passed Law 458. SeeP.R. Laws Ann. tit. 3, §§ 928–928i. Law 458 prohibits Puerto Rico agencies from awarding contracts to any person or corporation convicted of fraud, embezzlement, or other similar offenses involving public funds, for a period of 20 years after a felony conviction and 8 years after a misdemeanor. Id. §§ 928, 928b, 928d. Law 458 included a provision explaining that it “shall not apply retroactively nor shall [it] ... interfere with contracts in effect.” Id. § 928h. The law was effective as of the date of its passage.

As to the PBA, between April 16 and December 29, 2000, Redondo had placed fourteen bids for PBA projects and had been awarded one contract. After Law 458 became effective, the PBA cancelled ten of Redondo's fourteen bids, as well as the contract which it had already executed with Redondo. At the time, the PBA stated that it lacked sufficient funds to proceed with the projects.

As to the PRHTA, between December 11 and December 29, 2000, Redondo did not place any bids for PRHTA contracts. Shortly after Law 458 became effective, however, on February 14, 2001, the PRHTA informed Redondo that it was withdrawing from the settlement it had reached with Redondo, citing Redondo's failure to comply with a settlement term requiring it to deposit $25,000 into escrow to fund the monitoring service. Later deposition evidence tended to show that the PRHTA was motivated by the policy of Law 458 regardless of the Law's non-retroactivity provision. Redondo deposited the funds into escrow. The PRHTA then sought to reopen administrative proceedings against Redondo to determine the length of Redondo's suspension. As described later, the PRHTA eventually prevailed at the administrative level, and Redondo later sought judicial review of the administrative decision in the Puerto Rico courts.

C. Procedural History

While the Puerto Rico administrative proceedings between Redondo and the PRHTA were pending, in December 2001, Redondo filed a complaint in federal court, alleging that the PRHTA, the PBA, and the individual defendants had unlawfully applied Law 458 to Redondo, putting the agencies in breach of their respective settlement agreements. Redondo's complaint alleged that the application of Law 458 violated various provisions of the U.S. Constitution, including its Due Process and Ex Post Facto Clauses. The complaint also stated supplemental claims under Puerto Rico law for damages arising out of the alleged breach of contract. Shortly after filing the complaint, Redondo filed for bankruptcy.

The defendants in the federal action filed a motion to dismiss. In response, in October 2002, the district court held that Redondo had failed to state a federal claim with respect to the Ex Post Facto, Double Jeopardy, and Due Process clauses. See Redondo Constr. Corp. v. Izquierdo ( Redondo I ), No. 01–2690, slip op. at 6–23 (D.P.R. Oct. 30, 2002). In reaching that conclusion, the district court explicitly considered Redondo's argument that Law 458 “runs afoul of the presumption against retroactivity inherent in the common law tradition.” Id. at 27. The district court explained that although the law takes into account past behavior in the form of past convictions, it operates only prospectively: “In essence, no bid or public contract after December 2000 shall be awarded to anyone convicted of the crimes listed in the debarment statute.” Id. at 23.

While providing that construction of the statute, the district court did not dismiss the case outright. Instead, it held that some of Redondo's claims could be “re-characterized” as a Contracts Clause challenge, which could survive the motion to dismiss. Id. Thus, the remaining claims after Redondo I were the Contracts Clause claim and the supplemental claims under Puerto Rico law.

Following the ruling on the motion to dismiss, the federal proceedings were stayed on the PRHTA's motion until the Puerto Rico administrative proceedings concluded.

Redondo's administrative hearing occurred in 2003. The hearing examiner concluded that the PRHTA could not withdraw from the settlement based on Redondo's failure to place the funds into escrow promptly, concluding that this failure was not a material breach of the settlement agreement. The Secretary of the Department of Transportation and Public Works initially adopted the examiner's report but, on the PRHTA's motion, later reversed his decision and ruled in favor of the PRHTA in October 2004. Redondo sought judicial review of the agency decision in the Puerto Rico Court of Appeals. On May 31, 2005, the Puerto Rico Court of Appeals ruled that, even if Redondo was in breach of the settlement agreement, the breach was not sufficient to excuse the PRHTA from its obligations. The court held that the PRHTA had to comply with the settlement agreement and ordered specific performance. See App. 863 (certified translation of Redondo Constr. Corp. v. P.R. Hwy. & Transp. Auth. ( Redondo II ), No. KLRA0400982, 2005 WL 1475931 (P.R.Cir. May 31, 2005)). The Puerto Rico Supreme Court denied the PRHTA's petition for certiorari and its two motions for reconsideration. The Puerto Rico Court of Appeals did not discuss the impact of Law 458, which was not briefed or argued before it.

The federal proceedings resumed after Redondo II, but no significant action occurred for over a year and a half as the case was transferred to three successive judges. Eventually, the district court set a deadline of April 30, 2007 for all dispositive motions. On that date, the PRHTA and the PBA each moved for summary judgment on the Contracts Clause claim and argued that, after summary judgment was granted on that claim, the district court should decline to exercise supplemental jurisdiction over the remaining Puerto Rico law claims. Over the next few months, several other pretrial motions were filed, and trial was set for February 11, 2008.

On February 7, 2008, about nine months after the summary judgment motions were filed and just four days before the scheduled trial date, the district court granted summary judgment in favor of the defendants and dismissed the supplemental Puerto Rico law claims without prejudice in accordance with the defendants' motions. Redondo Constr. Corp. v. Izquierdo ( Redondo III ), 550 F.Supp.2d 257, 268 (D.P.R.2008).

Redondo appealed. On appeal, this court upheld the district court's ruling on the Contracts Clause...