Trans Am. Recovery Serv. v. PR Maritime Shipping

• Decision Date: 21 April 1993
• Docket Number: Civ. No. 92-1733 (JP).
• Citation: 820 F. Supp. 38
• Parties: TRANS AMERICA RECOVERY SERVICES, INC., Plaintiff, v. PUERTO RICO MARITIME SHIPPING AUTHORITY, Defendant.
• Court: U.S. District Court — District of Puerto Rico

820 F. Supp. 38

TRANS AMERICA RECOVERY SERVICES, INC., Plaintiff, v. PUERTO RICO MARITIME SHIPPING AUTHORITY, Defendant.

Civ. No. 92-1733 (JP).

United States District Court, D. Puerto Rico.

April 21, 1993.

Ramonita Pérez de Gotay, Feldstein, Gelpi, Hernández & Gotay, Old San Juan, P.R., for plaintiff.

Juan A. Moldes Rodriguez, Saldaña, Rey & Alvarado, Santurce, P.R., for defendant.

OPINION AND ORDER

PIERAS, District Judge.

This is an action for breach of contract filed by Trans America Recovery Services, Inc. against Puerto Rico Maritime Shipping Authority (hereinafter "PRMSA") to recover damages suffered as the result of PRMSA's alleged unjustified cancellation of a contract (hereinafter the "contract") which appointed plaintiff as PRMSA's demurrage billing and collection contractor.¹ The Court has before it defendant's Motion to Dismiss on Eleventh Amendment grounds (docket No. 4) filed on July 15, 1992. On August 24, 1992, plaintiff filed an Opposition to defendant's Motion to Dismiss (docket No. 7). A document titled Supplemental Authorities to Opposition to Motion to Dismiss (docket No. 10) was filed by the plaintiff on September 11, 1992. For the reasons set forth below, the Motion to Dismiss is hereby GRANTED.

I. Background

PRMSA, which is also known as "Autoridad de las Navieras", is a government agency created by the Puerto Rico legislature on June 10, 1974. 23 L.P.R.A. § 3051. It was created as a nonstock corporation by the legislature of the Commonwealth of Puerto Rico (hereinafter the "Commonwealth") to insure "that the citizens of the Commonwealth" have an adequate and inexpensive supply of basic commodities, and to foster the development and expansion of trade and industry." 23 L.P.R.A. § 3054. PRMSA was created "... for the benefit of the people of the Commonwealth and for the protection of their health and welfare." PRMSA operates as a maritime transportation system for cargo and passengers between Puerto Rico and abroad and is run by a seven-member governing board. 23 L.P.R.A. § 3054. All board members are appointed by the Governor of the Commonwealth and serve four year terms. Id. The governing board appoints an executive director, a secretary and such officers as it deems necessary. Id. PRSMA's powers include, but are not limited, to the following: (1) PRMSA may sue and be sued, (2) PRMSA has complete control and supervision of all undertakings acquired or constructed by PRMSA, or by any company in which the PRMSA may acquire stock,² (3) PRMSA may enter into contracts and other arrangements with any natural or legal person, who is a citizen of the United States, for the management of operations of any or all the undertakings subject to the control of PRMSA or for consulting or advisory services related to the operation of such undertakings, (4) PRMSA has the power to determine, fix, impose, charge, alter and collect reasonable rates, fees and charges and other service terms and conditions for the use of any undertakings or the services rendered thereby,³ (5) PRMSA has the power to acquire any property or interest therein in any lawful manner including, but without limitation, the acquisition by purchase, whether by agreement or by exercising the power of eminent domain, (6) PRMSA may borrow money for any of its corporate purposes and to issue bonds in evidence of such indebtedness, and to secure the payment of such bonds and the interest thereon by pledge of, or other lien on any or all of its undertakings and the revenues derived therefrom, (7) PRMSA has the power to issue bonds for the purposes of finance, refinance, purchase, or to redeem any of its outstanding bonds, (8) PRMSA has the power to enter into lands, bodies of water or premises, after notice to the owners of occupants thereof, in order to make examinations, soundings or surveys. 23 L.P.R.A. § 3055.

PRMSA has no authority to pledge the credit of the Commonwealth; however, the Commonwealth guarantees the payment of the principal of and interest on bonds issued by PRMSA, in an aggregate principal amount not exceeding sixty million dollars ($60,000,000).⁴ 23 L.P.R.A. § 3068. On July 21, 1988, the Puerto Rico legislature enacted a Joint Resolution allocating sixty million dollars ($60,000,000) to PRMSA for the fiscal years of 1988-1989 through 1993-1994 "to continue the due capitalization of PRMSA this public instrumentality in order to guarantee the functional and economic stability in its operations ..." S.J.R. 156 of July 21, 1988. Another Joint Resolution enacted on the same day recognized and expressed concern for the agency's millionaire deficit⁵ and authorized the Secretary of the Treasury to convert a fifteen million dollar ($15,000,000) loan, advanced by the Secretary of the Treasury to PRMSA in 1980, into a capital contribution. S.J.R. 161 of July 21, 1988.

PRMSA is required to submit to the legislature and to the Governor of Puerto Rico, prior to the end of each calendar year, a financial statement and complete report of its business for the preceding fiscal year. 23 L.P.R.A. § 3073. At the close of its fiscal year, PRMSA is required to pay over to the Commonwealth Treasury its total net income, if any, after establishing adequate reserves for the uninterrupted modernization and improvement of service achieved during such fiscal year. 23 L.P.R.A. § 3072.

The parties entered into the contract for the billing and collection of demurrage charges and inspection of equipment pools on October 24, 1991.⁶ Plaintiff filed the present action on May 29, 1992. On July 15, 1992, the defendant filed its motion to dismiss on the grounds that PRMSA is entitled to immunity from suit in federal court pursuant to the Eleventh Amendment to the United States Constitution and, in addition, that plaintiff is precluded by a clause in the contract from filing any action arising out of the contract in controversy in federal court.⁷ Plaintiff opposes the motion alleging that PRMSA is not entitled to immunity.

II. Discussion

A. Eleventh Amendment Immunity

The Eleventh Amendment acts as a jurisdictional bar, and defense, to all suits claiming money damages brought in a federal court against a state, including Puerto Rico, without its consent. Metcalf & Eddy v. Puerto Rico Aqueduct & Sewer, 945 F.2d 10, 11 (1st Cir.1991); Accord In re San Juan Dupont Plaza Hotel Fire Litigation, 888 F.2d 940, 942 (1st Cir.1989); ("The Commonwealth of Puerto Rico is treated as a state for Eleventh Amendment purposes."); see Ramírez v. Puerto Rico Fire Service, 715 F.2d 694, 697 (1st Cir.1983); Fernández v. Chardón, 681 F.2d 42, 59 n. 13 (1st Cir.1982), aff'd, 462 U.S. 650, 103 S.Ct. 2611, 77 L.Ed.2d 74 (1983).⁸

The Eleventh Amendment may also apply in cases involving diverse governmental entities, including cities, counties, state agencies, multi-state agencies, governors, officers and schools. 13 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3524 (Civil 2d ed.) (1984).

In order for the Eleventh Amendment to apply as a jurisdictional bar in an action against a state agency or entity, the Court must determine whether the entity is to be treated as "`an arm or alter ego of the State partaking of the State's Eleventh Amendment immunity or is instead to be treated as a municipal corporation or other political subdivision to which the Eleventh Amendment does not extend.'" Rodríguez-García v. Dávila, 904 F.2d 90, 98-99 (1st Cir.1990); Ainsworth Aristocrat Int'l Party, Ltd. v. Tourism Co. of Puerto Rico, 818 F.2d 1034, 1036 (1st Cir.1987) (quoting Mount. Healthy City School Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 572, 50 L.Ed.2d 471 (1977)). The Court in Rodríguez-García held that in determining whether the agency is entitled to the immunity, the Court should review and decide:

`whether the entity performs a governmental function, whether it functions with substantial autonomy, to what extent it is financed independently of the state treasury, and if a judgment sought to be entered against the entity will be satisfied out of the state treasury.' Culebras Enterprises Corp. v. Rivera Ríos, 813 F.2d 506, 517 (1st Cir.1987). Other factors relevant to the Eleventh Amendment inquiry include whether the entity `has been incorporated; ... whether it has the power to sue and be sued and to enter into contracts; whether its property is immune from state taxation, and whether the sovereign has immunized itself from responsibility for the entity's operations'.

Rodríguez-García v. Dávila, 904 F.2d 90, 98 and 99 (1st Cir.1990). Ainsworth added that still another factor to be considered is `local law and decisions defining the status and nature of the agency involved in its relation to the sovereign'. Ainsworth Aristocrat Int'l Party, Ltd. v. Tourism Co. of Puerto Rico, 818 F.2d 1034, 1037 (1st Cir.1987). These factors should not be applied mechanically but should instead be used to assist the Court in assessing whether the defendant "acted more like a private company, or more like the Commonwealth's government, in conducting the activities relevant to this ... suit." Royal Caribbean Corp. and Caribbean Cruise Line, Ltd. v. Puerto Rico Ports Authority, 973 F.2d 8, 10 (1st Cir.1992) (citing Puerto Rico Ports Auth. v. M/V MANHATTAN PRINCE, 897 F.2d 1, 10 (1st Cir. 1990); Jacintoport v. Greater Baton Rouge Port Commission, 762 F.2d 435, 442 (5th Cir.1985), cert. denied, 474 U.S. 1057, 106 S.Ct. 797, 88 L.Ed.2d 774 (1986)).

The Courts of this District have on many occasions held that the protections of the Eleventh Amendment extend to various agencies or instrumentalities of the Commonwealth that act as arms of the Commonwealth.⁹ On other occasions we have held that its protections do not extend to various agencies and instrumentalities of the Commonwealth.¹⁰ We have not had the opportunity in this district to consider whether the protections of the Eleventh Amendment extend to PRMSA. In Zapata Gulf...