Adams v. Vandemark

855 F.2d 312, 1988 WL 86796

• Court: Court of Appeals for the Sixth Circuit
• Decided: August 24, 1988
• Docket: Nos. 87-1096, 86-2034
• Status: Published

Opinions

KENNEDY, Circuit Judge.

Plaintiff-appellant Clyde Adams (“Adams”) appeals from the judgment of the District Court granting the motion of defendants-appellees Mary Ann Vande-mark and the Human Development Corporation (“HDC”) for summary judgment in his civil rights action. Plaintiff-appellant Mark Panknin (“Panknin”) appeals from the judgment of the District Court granting the motion of defendants-appellees for a directed verdict in his civil rights action. These cases present the question of whether the defendants acted under color of state law when they discharged the plaintiffs.

Defendant HDC, a Michigan non-profit corporation, conducts business in Caro, Michigan. Defendant Vandemark is the executive director of HDC. HDC employed Adams as a specifications writer from April 25, 1980 until December 7, 1981, when Vandemark fired him. He sued pursuant to 42 U.S.C. § 19831, alleging that he had been discharged in retaliation for exercising his first amendment rights. After a jury trial Adams was awarded $40,000 damages against Vandemark, and $85,000 against HDC. Another panel of this Court reversed the judgments and remanded for a new trial², holding that the District Court had incorrectly instructed the jury as to the element of “color of law.” On remand, the District Court granted the defendants summary judgment on the issue of whether they had acted under color of state law.

HDC employed Panknin as a crew coordinator for a federally-funded weatherization program from March, 1980 through September, 1982, when Vandemark fired him. He, too, brought an action pursuant to section 1983, alleging that Vandemark fired him in retaliation for his exercise of his first amendment rights. At the close of Panknin’s case the District Court granted the defendants’ motion for a directed verdict. Panknin J.A. at 63.

“The ultimate issue in determining whether a person is subject to suit under § 1983 is the same question posed in cases arising under the Fourteenth Amendment: is the alleged infringement of federal rights ‘fairly attributable to the State?’ ” Rendell-Baker v. Kohn, 457 U.S. 830, 838, 102 S.Ct. 2764, 2770, 73 L.Ed.2d 418 (1982) (citation omitted).³ Phrased another way, “a State normally can be held responsible for a private decision only when it has exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be deemed to be that of the State.” Blum v. Yaretsky, 457 U.S. 991, 1004, 102 S.Ct. 2777, 2786, 73 L.Ed.2d 534 (1982).

The Supreme Court has used several theories, or tests, to determine whether an action was taken under color of state law or amounted to state action. The test most relevant to this case is the “symbiotic relationship” test⁴, which the Supreme Court established in Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961). In Burton a restaurant that was located in a municipally-owned parking garage refused to serve a black man. The man sued, alleging that the restaurant’s actions violated the fourteenth amendment. The Court found that the parking garage, and therefore the city, profited from the discrimination, and that the profits were “indispensable elements in ... the financial success of a government agency.” Id. at 724, 81 S.Ct. at 861. Consequently, the Court held, “[t]he State has so far insinuated itself into a position of interdependence with [the restaurant] that it must be recognized as a joint participant in the challenged activity,” and thus the restaurant’s discrimination was state action. Id. at 725, 81 S.Ct. at 862.

Rendell-Baker v. Kohn, a more recent case discussing the symbiotic relationship test, presented the issue of whether a private school, whose income is derived primarily from public sources and which is regulated by public authorities, acted under color of state law when it discharged certain employees. The school was a nonprofit institution for maladjusted teenagers. The students were referred to the school by city schools or by the state department of mental health. Public funds accounted for between 90% and 99% of the school’s budget. The cities regulated the school; however, aside from general requirements such as equal employment opportunity, the regulations did not cover personnel policies.⁵ The plaintiffs had been employed at the school, and alleged that they had been discharged in retaliation for their exercise of first amendment rights.

The Court held that the school’s receipt of public funds did not make the discharge decisions acts of the state: “Acts of such private contractors do not become acts of the government by reason of their significant or even total engagement in performing public contracts.” Id., 457 U.S. at 841, 102 S.Ct. at 2771. Furthermore, the Court held that the extensive regulation of the school did not establish a basis for finding state action since the decisions to discharge the plaintiffs were not compelled or even influenced by any state regulation. Id. Although the Committee on Criminal Justice had the power to approve those hired as vocational counselors, the position of one of the plaintiffs, the Court held that the power was insufficient to make the discharge state action. Id. at 841-42, 102 S.Ct. at 2771-72.⁶

In Crowder v. Conlan, 740 F.2d 447 (6th Cir.1984) this Court applied Rendell-Baker and Blum in the context of whether a private hospital’s board acted under color of state law when it restricted a physician’s staff privileges. Although the hospital received considerable government funding, was subject to extensive state regulation, had two public officials on its board, and leased its facility from the county, we held that “the connections between the State and the [hospital] are insufficiently linked to the challenged actions of the defendants to warrant a finding of state action in the hospital’s decision to restrict Dr. Crowder’s staff privileges. Therefore, Dr. Crowder has not stated a claim for relief under 42 U.S.C. § 1983.” Id. at 453.

Each plaintiff enumerates facts that he alleges demonstrate that HDC has a symbiotic relationship with the state of Michigan. It is undisputed that HDC was established as a non-profit Michigan corporation in order to participate in the receipt of grants to local community action programs initiated by the Director of the Office of Economic Opportunity in accordance with the Federal Economic Opportunity Act of 1964, Pub.L. No. 88-452, § 204. HDC was incorporated as a Michigan not-for-profit corporation in 1965 under the name of the Thumb Area Economic Opportunity Commission. The organization adopted its present name in 1973. By virtue of the Michigan Economic & Social Opportunity Act of 1981, Mich. Comp.Laws Ann. § 400.1101 et seq., HDC became a Community Action Agency. Mich.Comp.Laws Ann. § 400.1108; Pank-nin J.A. at 66-67. MCLA § 400.1109 describes the function of a community action agency as “serving as a primary advocate for the reduction of the causes, conditions, and effects of poverty and [providing] social and economic opportunities that foster self-sufficiency for low-income persons.” As such an agency, HDC administers federal, state, and local funds for various social programs that are established by state law. Adams J.A. at 259-62. Federal, state, and local funds constitute between 90% and 99% of HDC’s budget. Panknin J.A. at 77.

Plaintiff Panknin was associated with HDC’s weatherization program. The program’s purpose is to repair the homes of lower-income people in Caro so that the homes may better withstand the winter weather. The program is handled by the United States Department of Energy, and the funds were funneled to HDC through the Michigan Department of Labor, Bureau of Community Services. The program is closely regulated by both state and federal law. HDC also worked with Caro to administer a block grant from the federal government to improve housing in Caro. Plaintiff Adams’ job as a specifications writer was to evaluate the buildings for which applications for funds had been made and to write specifications so that contractors could bid on the job.

State law requires that one-third of HDC’s board of directors be composed of public officials. Mich.Comp.Laws Ann. § 400.1111. HDC conducts its business in a building owned by Caro, which leased space to HDC for thirty years at the rent of one dollar per year. Adams J.A. at 41.

The plaintiffs allege four links between HDC and the state: public funding, government regulation, public facilities, and public officials on HDC’s board. These links, the plaintiffs assert, demonstrate a symbiotic relationship between HDC and the state. All of these links have been addressed by previous cases.

Public Funding and Regulation

Like the school in Rendell-Baker, HDC is funded almost entirely by public sources, and is subject to regulation. Under the reasoning of Rendell-Baker, though, neither of these factors, without more, is sufficient to make a private entity’s decision to discharge an employee attributable to the state, 457 U.S. at 840-42, 102 S.Ct. at 2770-72. There is no basis for finding that state regulation “compelled or even influenced” defendant Yandemark’s decision to discharge the plaintiffs. Furthermore, “[t]hat programs undertaken by the State result in substantial funding of the activities of a private entity is no more persuasive than the fact of regulation of such an entity in demonstrating that the State was responsible for decisions made by the entity in the course of its business.” Blum, 457 U.S. at 1011, 102 S.Ct. at 2789.

Public Facilities

HDC has leased office space from Caro for a term of thirty years at the rent of one dollar per year. Furthermore, HDC received money from a Community Development Block Grant to renovate the office building, which also houses the administrative program offices of Caro. The plaintiffs assert that the lease and funding of renovation demonstrate an intertwining of Caro’s and HDC’s operations.

In Crowder, this Court discussed the effect of a city’s leasing of space to a private corporation on the element of color of law. In that case the plaintiff, a doctor, alleged that a hospital and its staff violated his civil rights by restricting his staff privileges at the hospital. In support of his claim that the hospital took this action under color of state law he pointed out that in addition to receiving a significant amount of money from government sources and being subject to extensive state regulation, the hospital leased space in a building the county bought, pursuant to a financial arrangement authorized by statute. After concluding that public funding and state regulation were not enough to establish that the hospital had acted under color of state law, we stated with respect to the lease that:

[Although Christian County is the owner and lessor of the hospital’s physical plant and assisted in the financing of some of the hospital’s construction cost, the fact remains that the County is not involved in the day-to-day operation of the hospital. More importantly, [the plaintiff] has not demonstrated a nexus between the challenged action, the hospital’s restriction of his staff privileges, and the limited governmental involvement alleged to provide the basis for a finding of state action, i.e. the County’s leasing of the hospital facility to the hospital’s Board of Trustees.

Id. at 453. The Court affirmed the dismissal of the plaintiff’s section 1983 action.

Under this analysis, the mere fact that HDC leases, at a nominal rent, office space from Caro, is insufficient to establish that HDC acted under color of state law when it discharged him. Similarly, Caro’s funding of the building’s renovation is not in itself a basis for finding a link between the state and the plaintiffs’ discharge. Rather, the plaintiffs must show that the lease or the funding affected the challenged acts, their discharges. They have not shown any such relationship.

We distinguish Burton. The Supreme Court’s finding of state action in Burton was based in part upon the fact that the city leased the restaurant the space for its business, and construction, repairs, and maintenance of the property were made from public funds. 365 U.S. at 713-14, 81 S.Ct. at 898. The Court found that by virtue of the lease the “profits earned by discrimination not only contribute to, but are indispensable elements in, the financial success of a governmental agency,” Id. at , 81 S.Ct. at 861. Neither of the plaintiffs in the case at bar has alleged that Caro has benefited from their discharges through the leasing of office space to HDC.⁷

Public Officials as Members of the Board

Perhaps the strongest indication of a symbiotic relationship between HDC and Caro is that state law requires one-third of HDC’s board of directors to be public officials. Mich.Comp.Laws Ann. § 400.1111. The board adopted the personnel policy pursuant to which defendant Vandemark discharged the plaintiffs. Panknin J.A. at 190-99.

In Crowder two public officials, the may- or and the county judge/executive, served on the hospital’s thirteen-member Board of Trustees by virtue of their offices. The Board of Trustees adopted a committee’s recommendation to limit the plaintiff’s staff privileges. In evaluating this factor the Sixth Circuit said that “[t]he fact that [two public officials] serve as ex officio members of the hospital’s Board of Trustees ... although an important factor in establishing state action, is insufficiently linked to the challenged actions of the defendants in this case, and therefore, does not warrant a finding of state action.” Id. at 451 (citation omitted). In support of its holding the court noted that the board adopted the recommendation to restrict the plaintiff's privileges only after four reviewing committees had determined that such an action should be taken. Thus, reasoned the court, the action was not the board’s own independent decision, but instead the acceptance of the medical judgments of staff physicians.⁸ Id.

In Anderson v. National R.R. Passenger Corp. (Amtrak), 754 F.2d 202 (7th Cir.1984) the court addressed the issue of whether government membership on Amtrak’s board established government action for the purposes of the fifth amendment. Six members of the nine-member board represented the federal government, and those six controlled the appointment of a seventh member. Nonetheless, the court found that, absent any allegation that the government was involved with Amtrak’s personnel policies or decisions, the composition of the board did not warrant a finding of government action. Id. at 204.

In the case before this Court, the HDC’s board’s only link to the challenged actions, the discharges, is the board’s adoption of the personnel policies pursuant to which defendant Vandemark discharged Adams. Unlike the board in Crowder, there is no evidence that the board approved of the discharge. Given the holding of Crowder that public representation on the board, even when taken with public funding, government regulation, and facilities leased from a public entity, did not establish the requisite relationship necessary to find col- or of state law, we find that the facts of this case likewise do not support such a finding. Consequently, we hold that the plaintiffs failed to state a claim under section 1983 and that the District Court properly dismissed the suits.

Accordingly, we AFFIRM the judgment of the District Court.

1 . 42 U.S.C. § 1983 provides in pertinent part:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or any other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law....

2 . The Sixth Circuit initially affirmed, but reversed and remanded on reconsideration. Joint Appendix at 13-31.

3 . The Supreme Court stressed in Lugar v. Edmondson Oil Co., 457 U.S. 922, 928, 102 S.Ct. 2744, 2749, 73 L.Ed.2d 482 (1982) that the "color of law” requirement of § 1983 matches the "state action" requirement of the fourteenth amendment.

4 . The plaintiffs do not appear to argue that either of two other tests, the "public function” test, Flagg Bros. v. Brooks, 436 U.S. 149, 157, 98 S.Ct. 1729, 1734, 56 L.Ed.2d 185 (1978) or the "state compulsion" test, Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970), applies to this case.

5 . One plaintiff was a vocational counselor hired under a grant from the federal Law Enforcement Assistance Administration, whose funds were distributed in the state by the state Commission on Criminal Justice. As a condition of the grant, the Commission had to approve of the school’s initial hire for the position. 457 U.S. at 833, 102 S.Ct. at 2767.

6 . The Court rejected the plaintiffs' claim that the school performed a public function and that therefore its actions were actions of the state, stating that

our holdings have made clear that the relevant question is not simply whether a private group is serving a "public function.” We have held that the question is whether the function performed has been "traditionally the exclusive prerogative of the State." ... That a private entity performs a function which serves the public does not make its acts state action.

457 U.S. at 842, 102 S.Ct. at 2772 (citations omitted).

7 . The more recent Supreme Court cases in this area appear to have limited the broad realm of state action Burton suggested.

8 . The court went on to say that they recognized that the Sixth Circuit had found state action in previous cases with similar circumstances, but that the legal reasoning of those cases was no longer valid in light of the recent Supreme Court cases in the area. Crowder, 740 F.2d at 452.