Cruz-Arce v. Mgmt. Admin. Services Corp.

19 F.4th 538

• Court: Court of Appeals for the First Circuit
• Decided: December 6, 2021
• Docket: 20-1509P
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 20-1509

CHIANY CRUZ-ARCE, on her own behalf and as legal representative of minor child H.V.C.,

Plaintiff, Appellant,

v.

MANAGEMENT ADMINISTRATION SERVICES CORPORATION and LEANETTE VÉLEZ,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Silvia L. Carreño-Coll, U.S. District Judge]

Before

Howard, Chief Judge, Selya and Barron, Circuit Judges.

Javier A Rivera-Vaquer and Rivera Mercado & Rivera Cordero on brief for appellant. Luis N. Blanco-Matos on brief for appellees.

December 6, 2021 SELYA, Circuit Judge. Plaintiff-appellant Chiany Cruz-

Arce, suing in her own right and on behalf of her minor child

(H.V.C.), seeks to hold private parties liable as state actors

under 42 U.S.C. § 1983. The plaintiff's federal claims hinge on

her allegation that the defendants were performing a function

traditionally and exclusively reserved to the state.1 Because the

amended complaint fails to allege sufficient facts to ground a

plausible conclusion that the function performed by the defendants

is, by tradition, an exclusive prerogative of the state, we affirm

the district court's order of dismissal.

I. BACKGROUND

Because this appeal arises out of a dismissal for failure

to state a claim upon which relief could be granted, see Fed. R.

Civ. P. 12(b)(6), we accept as true all well-pleaded facts

adumbrated in the plaintiff's amended complaint, see Haley v. City

of Boston, 657 F.3d 39, 46 (1st Cir. 2011); SEC v. Tambone, 597

F.3d 436, 438 (1st Cir. 2010) (en banc). We rehearse the

background of the case in that light and then trace its travel.

In 2015, the plaintiff was a tenant in the Manuel A.

Pérez low-income housing project (the Project) in San Juan, Puerto

For purposes of section 1983, Puerto Rico is the functional 1

equivalent of a state. See Santiago v. Puerto Rico, 655 F.3d 61, 69 (1st Cir. 2011); see also 42 U.S.C. § 1983 (providing for liability for violations of federal rights "under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory").

- 2 - Rico. The Project is owned by the Puerto Rico Department of

Housing (the Housing Department) and is administered through the

Puerto Rico Public Housing Administration (the PRPHA). The Housing

Department or the PRPHA, in turn, contracted with a private party,

defendant-appellee Management Administration Services Corporation

(MAS), to manage the Project.2

The plaintiff alleges that, following a change in her

employment situation, she contacted MAS and sought to modify her

monthly rent (as permitted by pertinent regulations). These

negotiations began in the spring of 2015. During the next two

years, the plaintiff and MAS wrangled over rent adjustments,

retroactivity issues, and ostensible rent arrearages. On July 19,

2017, MAS initiated eviction proceedings against the plaintiff in

a local Puerto Rico court. The plaintiff contested MAS's claims.

The plaintiff further alleges that — while the contested

eviction proceedings were pending — MAS gratuitously placed her

apartment on a list of vacant units given to the Puerto Rico Police

Department pursuant to a "policy and agreement." The purpose of

such a list was to help the police in identifying possible illegal

arms- and drug-trafficking activities conducted in vacant

2 In the amended complaint, the plaintiff refers to the Housing Department as the contracting party. Her brief, however, refers to the PRPHA as the contracting party. For present purposes, this is a distinction without a difference. We therefore assume — for ease in exposition — that the PRPHA engaged MAS.

- 3 - apartments. After receiving this listing, the police raided the

plaintiff's apartment, forcing the locks and ransacking the

interior. The plaintiff asserts that the officers' actions

incident to the search caused her and her autistic child "severe

emotional distress," requiring medical attention.

Based on the communication breakdowns and what she

deemed to be an illegal search, the plaintiff invoked section 1983

and brought this suit against MAS and its then-administrator,

Leanette Vélez, in the federal district court. The parties agreed

to proceed before a magistrate judge. See 28 U.S.C. § 636(c);

Fed. R. Civ. P. 73(b).3 In due course, the plaintiff served an

amended complaint containing three counts: count 1 alleged

violations of the Fourth and Fourteenth Amendments related to the

search; count 2 alleged denials of due process related to the

plaintiff's travails regarding the rent-adjustment negotiations

and eviction proceedings; and count 3 alleged pendant claims for

emotional distress under Article 1802 of the Puerto Rico Civil

Code.

As pleaded, the two counts of the amended complaint that

invoked section 1983 (counts 1 and 2) hinged on the question of

whether the defendants were "acting under color of state law" and,

3 While the case was pending, the magistrate judge was appointed to the district court. In that capacity, she retained jurisdiction over the case.

- 4 - thus, could be held liable as state actors. The operative

allegations of the amended complaint that bore on this question

were sparse. First, the plaintiff alleged that "[b]y law, the

Government of Puerto Rico[,] through the Housing Department, is in

charge of the operations and administration of the residential

community of Manuel A Perez." Second, she alleged that the Housing

Department, "instead of administrating the residential community,

entered into a services contract with [MAS] to supply the same in

[its] stead." The plaintiff made no other allegations concerning

the relationship between MAS and the government of Puerto Rico,

nor did her amended complaint contain any facts bearing on the

issue of whether MAS was carrying out a traditional and exclusive

state function.

The defendants moved to dismiss the amended complaint

for failure to state a claim upon which relief could be granted.

See Fed. R. Civ. P. 12(b)(6). The plaintiff opposed the motion.

She contended, in conclusory fashion, that MAS was exercising an

exclusive public function and could therefore be considered a state

actor. Surveying the plaintiff's allegations and contentions, the

district court found her federal claims wanting and granted the

defendants' motion to dismiss. The court determined that the

amended complaint failed to state any actionable federal claims

because it did not contain sufficient facts to ground a conclusion

that MAS was performing an exclusive public function. See, e.g.,

- 5 - Santiago v. Puerto Rico, 655 F.3d 61, 68-69 (1st Cir. 2011). It

then dismissed the remaining state-law claims without prejudice.

This timely appeal followed.

II. ANALYSIS

We review a dismissal for failure to state a claim de

novo. See Haley, 657 F.3d at 46; Tambone, 597 F.3d at 441. In

conducting this tamisage, we accept all well-pleaded, non-

conclusory facts set forth in the complaint as true and draw all

reasonable inferences therefrom to the pleader's behoof. See

Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009); Haley, 657 F.3d at

46. As relevant here, we may augment those facts and inferences

with facts that are matters of public record or otherwise

susceptible to judicial notice. See Haley, 657 F.3d at 46.

It is by now common ground that a complaint must contain

only a "short and plain statement of the claim showing that the

pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Although

this is a low bar, it still requires more than a cascade of

conclusory allegations: at a minimum, the complaint must "contain

sufficient factual matter . . . to 'state a claim to relief that

is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). As we have

explained, "[i]f the factual allegations in the complaint are too

meager, vague, or conclusory to remove the possibility of relief

from the realm of mere conjecture, the complaint is open to

- 6 - dismissal." Tambone, 597 F.3d at 442 (citing Twombly, 550 U.S. at

555). It is against this backdrop that we scrutinize the

plaintiff's amended complaint.

We begin with bedrock. Section 1983 furnishes a private

right of action against any person who, while acting under color

of state law, deprives another (or causes another to be deprived)

of rights secured either by the Constitution or by federal law.

See 42 U.S.C. § 1983; see also Santiago, 655 F.3d at 68. To make

out a section 1983 claim, a plaintiff must allege facts sufficient

to show that the defendants acted under color of state law and

caused the deprivation of federal rights. See Santiago, 655 F.3d

at 68. This "under color of state law" requirement lies at the

epicenter of the appeal that is before us.

Section 1983's "under color of state law" requirement

has long been regarded as functionally equivalent to the "state

action" requirement of the Fourteenth Amendment. See United States

v. Price, 383 U.S. 787, 794 n.7 (1966); Perkins v. Londonderry

Basketball Club, 196 F.3d 13, 17 n.1 (1st Cir. 1999). If the

challenged conduct cannot be classified as state action, a section

1983 claim necessarily fails. See Santiago, 655 F.3d at 68.

In the mine-run of cases, state action will derive from

the conduct of government actors, that is, government officials or

employees. See, e.g., Lugar v. Edmondson Oil Co., 457 U.S. 922,

936-39 (1982). Even so, when the conduct of a private party can

- 7 - be "fairly attributable to the State," that conduct may constitute

state action and, as such, engage the gears of section 1983. Id.

at 937. Determining whether a private party's conduct amounts to

state action demands a fact-intensive and context-specific

inquiry. See Burton v. Wilmington Parking Auth., 365 U.S. 715,

722 (1961) (observing that "[o]nly by sifting facts and weighing

circumstances can the nonobvious involvement of the State in

private conduct be attributed its true significance").

Because some constitutionally assured rights (such as

the right to due process) may be manifested in a nearly infinite

variety of applications, courts have resisted attempts to define

with granular precision the universe of circumstances in which a

private party may be considered to be acting under color of state

law. See id. Notwithstanding this need for individualized

consideration, we have noted three general ways in which a private

party may become a state actor within the purview of section 1983.

See Santiago, 655 F.3d at 68. First, a private party may be

considered a state actor if it assumes a public function which, by

tradition, is exclusively reserved to the state (the public

function test). See id. Second, a private party may be considered

a state actor if its conduct is coerced or significantly encouraged

by the state (the state compulsion test). See id. Third, a

private party may be considered a state actor if it and the state

have entered into so symbiotic a relationship that they have become

- 8 - joint participants in the challenged conduct (the nexus/joint

action test). See id.

To defeat a motion to dismiss predicated on the "under

color of state law" requirement, a plaintiff need not specifically

allege which of these three tests applies in her particular case.

Cf. Bennett v. Schmidt, 153 F.3d 516, 518 (7th Cir. 1998)

(explaining that "[c]omplaints need not plead law or match facts

to every element of a legal theory"). Nor must the plaintiff

intone some catechism of magic words to describe the relationship

between the private party and the state. In the last analysis,

the allegations in the complaint, supplemented with reasonable

inferences therefrom and matters susceptible to judicial notice,

must comprise a factual predicate sufficient to render it plausible

that one of these tests can be satisfied. See Mead v. Indep.

Ass'n, 684 F.3d 226, 232 (1st Cir. 2012).

Here, the plaintiff stakes her section 1983 claims

solely on the public function test.4 But even when we take as true

all well-pleaded facts set forth in the amended complaint and draw

4The plaintiff did not argue below, and does not argue in this court, that either the state compulsion test or the nexus/joint action test applies to her case. Because no such arguments have been made, we deem them waived. See Teamsters Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992); United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990); see also Mead, 684 F.3d at 231-32 (analyzing claims under state compulsion test alone because plaintiff only made arguments under that test).

- 9 - all reasonable inferences therefrom in the plaintiff's favor, the

function that the plaintiff has attributed to the defendants is

not plausibly a public function that, by tradition, is exclusively

reserved to the state. We explain briefly.

The public function test "is designed to flush out a

State's attempt to evade its responsibilities by delegating them

to private entities." Perkins, 196 F.3d at 18-19. This test

prevents a state from shirking its traditional and exclusive

sovereign responsibilities by the simple expedient of recruiting

a private party to act in its stead. See Ponce v. Basketball Fed'n

of P.R., 760 F.2d 375, 379 (1st Cir. 1985). So, too, it prevents

a state from turning a blind eye to unconstitutional conduct

committed by a private party carrying out traditionally exclusive

sovereign responsibilities under a contract with the state. See

id.

Importantly, the public function test does not turn

solely on whether a private party is performing some public

function (that is, a public purpose being executed on behalf of

the state). It turns instead on whether the public function is

one that has been "traditionally exclusively reserved to the

State." Jackson v. Metro. Edison Co., 419 U.S. 345, 352 (1974);

see Santiago, 655 F.3d at 69 (explaining that "[e]xclusivity is an

important qualifier, and its presence severely limits the range of

eligible activities"). The Supreme Court has found this aspect of

- 10 - the test to be satisfied only in narrowly circumscribed contexts

— contexts in which a particular function rests at the core of a

state's sovereign responsibilities. These contexts include the

administration of elections, see Nixon v. Condon, 286 U.S. 73, 89

(1932); the management of a town in which the private party serves

almost all the functions of government, see Marsh v. Alabama, 326

U.S. 501, 509 (1946); the administration and provision of health

care in prisons, see West v. Atkins, 487 U.S. 42, 54 (1988); and

— in special circumstances — the operation of a municipal park,

see Evans v. Newton, 382 U.S. 296, 301 (1966).

Cases in which courts have rejected claims that the

public function test has been satisfied are equally illuminating.

Many of those cases involve services rendered by private parties

in areas that are highly regulated, proximate to social welfare

programs, or both. For example, courts have held that the public

function test has not been satisfied when a private party has

assumed responsibility for the bonded warehousing of guns

confiscated by state police, see Jarvis v. Village Gun Shop, Inc.,

805 F.3d 1, 11-12 (1st Cir. 2015); the involuntary commitment of

the mentally ill, see Estades-Negroni v. CPC Hosp. San Juan

Capestrano, 412 F.3d 1, 8-9 (1st Cir. 2005); the education of

disadvantaged high school students, see Rendell-Baker v. Kohn, 457

U.S. 830, 842 (1982); and the transportation of students to and

from public schools, see Santiago, 655 F.3d at 69-70.

- 11 - These authorities guide our inquiry. The plaintiff

argues, in effect, that low-income public housing, by definition,

is the exclusive responsibility of the state. But placing the

adjective "public" as a descriptor of any service would operate to

place that service exclusively in the public domain. We reject so

facile a use of a self-fulfilling prophecy. It would defeat the

purpose of the public function test if qualifying functions could

be defined tautologically by plaintiffs.

The short of it is that the outcome of the public

function test does not depend on creative labeling. It is the

historical facts that matter most. See, e.g., id. at 70 (noting

history of school buses in public function test analysis); Rockwell

v. Cape Cod Hosp., 26 F.3d 254, 258-60 (1st Cir. 1994) (surveying

history of involuntary commitment of mentally ill persons when

deciding whether public function test has been satisfied).

Although we do not gainsay that the state is the exclusive provider

of state-owned low-income housing, it is not — and has not been —

the exclusive provider of low-income housing writ large.

The crux of the matter is that the provision of low-

income housing has never been exclusive to the government, either

in Puerto Rico or elsewhere in the United States. The plaintiff's

amended complaint contains no facts that support a contrary

conclusion. Nor does the historical record counsel in favor of

such a conclusion: over time, much low-income housing has been

- 12 - provided by private landlords, operating in a wide variety of

guises. See, e.g., AMTAX Holdings 227, LLC v. Tenants' Dev. II

Corp., 15 F.4th 551, 553 (1st Cir. 2021) (describing tax credit

incentivizing private development of low-income housing); One &

Ken Valley Hous. Grp. v. Maine State Hous. Auth., 716 F.3d 218,

220-21 (1st Cir. 2013) (discussing rental subsidies to private

landlords for low-income housing).

In an effort to change the trajectory of the debate, the

plaintiff relies heavily on the purposes and functions of the PRPHA

under Puerto Rico law. In particular, she cites a statute that

created the PRPHA. See P.R. Laws Ann. tit. 17, § 1002. That

statute, she notes, ascribes to the PRPHA the "purpose and function

of achieving a highly efficient administration of public

residential projects." Id. And as the plaintiff points out, that

statute also declares that the PRPHA "shall have the responsibility

of making decisions and executing the programs, systems, methods

and procedures to . . . [p]lan, organize, direct and coordinate

all ordinary and extraordinary administrative activities." Id.

§ 1002(a).

We do not quarrel with the plaintiff's description of

what Puerto Rico law provides. But nothing in the statutory scheme

suggests — let alone requires — that the administration and

provision of low-income housing in Puerto Rico is the exclusive

prerogative of the state. By the same token, the other housing

- 13 - regulations (federal and state) mentioned by the plaintiff, see,

e.g., Admission to, and Occupancy of, Public Housing, 24 C.F.R.

§§ 960.101-960.707; P.R. Regs. Vivienda Reg. 6391, repealed by

Reg. 8624, show little more than that the field of low-income

housing is subject to significant regulation. They do not indicate

that the asserted public function — providing low-income housing

— is an exclusive function of the state.

To withstand a Rule 12(b)(6) motion, a plaintiff must

plead "sufficient factual matter . . . to 'state a claim to relief

that is plausible on its face.'" Haley, 657 F.3d at 46 (quoting

Iqbal, 556 U.S. at 678). In this instance, the plaintiff has

failed to marshal facts sufficient to render plausible her claim

that the defendants were exercising powers "traditionally

exclusively reserved to the State." Jackson, 419 U.S. at 352. It

follows inexorably that the district court did not err in

determining that the plaintiff's amended complaint failed to state

a claim under section 1983. Consequently, the district court did

not err in granting the defendants' motion to dismiss.5

Once the district court concluded that the plaintiff had 5

failed to plead a plausible claim under section 1983, it appropriately declined to exercise supplemental jurisdiction over the plaintiff's state-law claims (count 3). See 28 U.S.C. § 1367(c)(3); see also Rivera-Díaz v. Humana Ins. of P.R., Inc., 748 F.3d 387, 392 (1st Cir. 2014).

- 14 - III. CONCLUSION

We need go no further. For the reasons elucidated above,

the judgment of the district court is

Affirmed.

- 15 -