Negron-Gaztambide v. Rodriguez

• Court: Court of Appeals for the First Circuit
• Decided: May 28, 1998
• Docket: 97-1858
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 97-1858



                    OLGA G. NEGRON GAZTAMBIDE,



                       Plaintiff, Appellee,



                                v.



                 ZAIDA HERNANDEZ TORRES, ET AL.,



                      Defendants, Appellees.


HON. CHARLIE RODRIGUEZ, ETC., ET AL.,

                                

                          Appellants.

                      ____________________

                                

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                                

                FOR THE DISTRICT OF PUERTO RICO

                                

       [Hon. Juan M. Perez-Gimenez, U.S. District Judge]


Before

                                

                      Selya, Circuit Judge,

                Campbell, Senior Circuit Judge,

                   and Stahl, Circuit Judge.


Pablo Landrau Pirazzi, with whom Aldarondo & Lopez Bras,

Claudio Aliff Ortiz, were on brief for appellant Rodriguez and

Manuel J. Perez Garcia, was on brief, for appellant Misla and

Figueroa.

     Carlos Del Valle Cruz with whom Ricardo L. Torres Munoz was on

brief, for appellees.    


May 28, 1998


Per Curiam.  Defendants-appellants Edison Misla Aldarondo

("Misla"), President of the House of Representatives of Puerto

Rico; Jose Figueroa ("Figueroa"), Director of the Legislative

Service Office; and Charlie Rodriguez ("Rodriguez"), President of

the Senate, each of whom has been sued solely in his capacity as an

officeholder of the Commonwealth of Puerto Rico, appeal from an

order of the district court enforcing a $300,000 settlement

agreement between plaintiff-appellee Olga G. Negron Gaztambide

("Negron") and the Commonwealth.  Because we find that the

attorneys who entered into the putative settlement agreement did

not have the actual authority to do so on behalf of the

Commonwealth, we vacate and remand.  

                              I.  

                          Background 

     In late January or early February 1993, Negron was

discharged from her position as a librarian in the Legislative

Library, which is managed by the Legislative Service Office of the

Commonwealth of Puerto Rico.  She was informed of her discharge in

a letter signed by Nelida Jimenez Velazquez ("Jimenez"), then the

Director of the Legislative Service Office.  At the time, Zaida

Hernandez Torres ("Hernandez") was the Speaker of the House of

Representatives, and Roberto Rexach Benitez ("Rexach") was the

President of the Senate.  

     On June 22, 1993, Negron brought this section 1983 action

alleging, inter alia, that Jimenez, Hernandez, and Rexach had

terminated her employment because of her political affiliation with

Puerto Rico's Popular Democratic Party in violation of the First

Amendment.  Negron sued the three defendants in both their personaland official capacities, seeking monetary damages and

reinstatement.  The district court dismissed Negron's claims on the

ground that the defendants were entitled to legislative immunity. 

We reversed, holding that the challenged actions were

administrative and thus not subject to an absolute immunity

defense.  See Negron-Gaztambide v. Hernandez, 35 F.3d 25 (1st Cir.

1994). 

     After remand, the case was eventually scheduled for trial

on November 25, 1996.  Pursuant to a defense and indemnification

statute commonly referred to as "Law 9," see P.R. Laws Ann. tit.32,

 3085, the Commonwealth's Department of Justice ("DOJ") provided

the defendants with legal representation.  Attorney Antonio

Montalvo ("Montalvo") represented defendants Hernandez and Jimenez,

and counsel Miguel Pagan ("Pagan") represented Rexach.  On the day

the trial was to commence, the attorneys held settlement

negotiations in the chambers of the district court.  In order to

obtain Law 9 funds to indemnify the defendants for the costs of the

settlement, the attorneys made several calls to the DOJ during the

course of the negotiations.  DOJ procedures require that

settlements be submitted to a Settlement Committee, which then

makes a recommendation regarding approval to the Commonwealth's

Attorney General ("AG"), prior to the allocation of Law 9 funds. 

By the conclusion of the negotiations, approval from the AG had not

yet been obtained.  Nonetheless, the parties informed the district

court that an agreement had been reached and that they were in the

process of obtaining the required approval. 

     With the settlement conference concluded, the district

court questioned counsel on the record regarding the terms of the

oral agreement the parties had reached.  Attorney Pagan began by

stating that "the agreement that the attorneys have reached is

pending approval by the Commonwealth of Puerto Rico Department of

Justice."  Pagan then described the settlement, stating that the

defendants (without specifying whether in their official or

personal capacities) had agreed to provide monetary damages in the

amount of $300,000, that the district court record in this case

would be sealed, and that Negron would be reinstated to her job

with certain retirement benefits after the AG accepted the

settlement.  As for the source of the funds, Pagan made the

following opaque statement:

     The Senate of Puerto Rico and its President,

     Roberto Rexach Benitez will pay by stipulation

     the amount of $150,000.  The House of

     Representatives and defendant Zaida Hernandez

     Torres, now the Superior Judge of Puerto Rico,

     Honorable Nelida Jimenez will pay also the

     amount of $150,000. 



     The district court specifically asked both defense

attorneys, Pagan and Montalvo, whether they had authorization from

their clients to propose the settlement, and both replied

affirmatively.  The district court then stated, "[B]oth counsel are

working under my orders to get the settlement committee to approve

this as soon as possible, at least to consider it as soon as

possible with your recommendations."  

     In January 1997, new leadership took power in the Puerto

Rico legislature.  Rodriguez was sworn in as the new President of

the Senate; Misla, as Speaker of the House of Representatives; and

Figueroa, as Director of the Legislative Service Office.  Pursuant

to Fed. R. Civ. P. 25(d)(1), Rodriguez, Misla and Figueroa were

automatically substituted as defendants in their official

capacities to the official capacity claims Negron had brought

against Hernandez, Jimenez and Rexach.  At that point, therefore,

there were two sets of defendants: the official capacity defendants

(Rodriguez, Figueroa, and Misla) and the personal capacity

defendants (Hernandez, Jimenez and Rexach).  

     The change in legislative leadership may have prompted a

change in heart about the settlement.  On March 13, 1997, the

district court required representatives from the DOJ to attend a

status conference on the settlement agreement.  An attorney

representing the AG explained that monies to satisfy the settlement

would come from Law 9 funds, but took the position that the

defendants had not followed the proper procedure to obtain the

statutory funds.  The attorney explained that a petition for the

funds had to go to the Settlement Committee at the DOJ first, and

then to the AG for his approval.  The district court then granted

the AG until March 26, 1997, to decide if the settlement would go

forward as planned; otherwise, a jury trial would commence on May

12, 1997. 

     On March 25, 1997, the AG filed an informational

submission stating that Hernandez, still a defendant in her

personal capacity, had contacted the AG and claimed that she had

not been aware of the details of the settlement and would not

approve it until all the details were made known to her.  The AG

informed the court that, as a result, he would not make a decision

concerning payment of the settlement from Law 9 funds until all

parties were in agreement, and until a proper settlement request

had been prepared and submitted to the DOJ.

     On March 31, 1997, plaintiff filed a motion requesting

the district court to enter judgment in accordance with the

stipulation entered by Attorneys Montalvo and Negron.  The motion

requested (1) entry of judgment consistent with the November 25,

1996, settlement agreement; (2) additional back pay; (3) a default

judgment against Hernandez plus sanctions; (4) $25,000 in

attorney's fees; (5) a contempt order against appellants in their

official capacities; and (6) any other remedies that the court

deemed proper.  The official capacity defendants opposed this

motion, arguing that the settlement was contingent upon AG

approval. 

     On June 16, 1997, the district court granted the

plaintiff's motion in part.  The district court found that, as far

as the court was concerned, "a valid and enforceable settlement

agreement was reached on November 25[, 1996] and that there is no

issue as to the parties' consent."  The court described how it

understood the oral agreement that had been reached between the

parties: 

     It is the Court's recollection that the only

     snag in the settlement negotiations was

     whether the sum agreed upon as damages would

     be paid out of the General Fund pursuant to

     Law 9 (for which the DOJ approval process was

     necessary) or by the Legislature.  During the

     settlement discussions that took place on

     November 25, the Court stated to the parties

     that the source of the funds was not the

     Court's concern.  Based on . . .

     representations made during these discussions,

     which included telephone calls made from the

     [district court's chambers] to the DOJ, the

     Court assumed that the settlement would be

     paid from the General Fund. . . .  The Court's

     understanding . . . was not that the

     settlement was contingent on approval by the

     DOJ in the sense that the agreement would be

     off were the DOJ not to grant approval. 

     Rather, the court's understanding was that if

     the DOJ did not accept the settlement, the

     Legislature would assume the payment. 



The district court thus directed the Commonwealth's Attorney

General to "make a determination with respect to the settlement,"

and then ordered that if the AG declined to pay, the legislature

would fulfill the defendants' end of the settlement.   The district

court granted plaintiff's motion for entry of judgment, but denied

the request to find defendants in contempt and for sanctions.  The

Commonwealth now appeals this order.  Two defendants in their

personal capacities (Rexach and Jimenez) have supported the

plaintiff's appeal with affidavits claiming that they had consented

to the settlement agreement.

                              II. 

                           Discussion

A.  Preliminary Issues

     As always, we have a duty to question our jurisdiction to

hear this appeal.  On September 10, 1997, the district court

entered judgment pursuant to its June 16, 1997 order, stating:

     The court having entered an order granting

     plaintiff's "Motion for Entry of Judgment,"

     judgment is hereby entered enforcing the

     settlement agreement reached by the parties

     and read in open court on November 25, 1996.  

The official capacity defendants, however, had already filed a

joint notice of appeal from the court's June 16, 1997 order on June

23, 1997, two and a half months earlier.  Obviously, the notice of

appeal was premature as no judgment had yet been entered when the

notice of appeal was filed.   This error need not detain us; a

"notice of appeal filed after the court announces a decision or

order but before the entry of judgment is treated as filed on the

date of and after the entry."  Fed. R. App. 4(a)(2); see First Tier

Mortgage Co., v. Investors Mortgage Ins. Co., 498 U.S. 269, 274-75,

277 (1991) (interpreting Rule 4(a)(2)); Clausen v. Sea-3, Inc., 21

F.3d 1181, 1186-87 (1st Cir. 1994) (similar).  The official

capacity defendants' premature notice of appeal relates forward to

the date of entry of the final judgment.  

     There is some question, however, regarding whether the

judgment below constitutes a "final decision" within the meaning of

29 U.S.C.  1291.  "A final decision under  1291 is one that 'ends

the litigation on the merits and leaves nothing more for the court

to do but execute the judgment.'"  State St. Bank & Trust Co. v.

Brockrim, Inc., 87 F.3d 1487, 1490 (1st Cir. 1996)(quoting Digital

Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 867 (1994)). 

The district court's June 16, 1997 order, while deciding that the

settlement agreement was enforceable, left some subsidiary matters

undecided (e.g., additional back pay and attorneys fees), pending

a future conference with the court.  From what we can tell, no

future conference is now contemplated by any party.  We thus have

no reason to think that the order and concomitant judgment have

left any substantial matters in abeyance that require further

proceedings in the district court.  See Wang Lab. v. Applied

Computer Sciences, Inc., 926 F.2d 92, 95-96 (1st Cir. 1991).  

     In addition, Negron claims that Rodriguez, Misla and

Figueroa do not have standing to challenge the settlement agreement

because they were not in office at the time and thus did not

participate in the negotiations.  This claim is devoid of merit. 

When the official capacity defendants entered office, they were

substituted automatically as representatives of the Commonwealth,

which is the real party in interest in the official capacity suits.

As the current officeholders, their lack of participation in events

prior to their ascendency to office does not alter their

substantive rights.  See Fed. R. Civ. P. 25(d)(1); Legault v.

Zambarano, 105 F.3d 24, 26 (1st Cir. 1997).  Moreover, the personal

knowledge of both sets of officeholders is irrelevant in this case. 

We now turn to the agreement. 

B.  The Settlement Agreement

     As described above, Law 9 authorizes the AG to indemnify

public officials when judgments are obtained against them in their

personal capacities.  The district court did not order the payment

of Law 9 funds in the absence of the AG's approval, but rather

ordered the legislature to assume the obligation if approval was

not obtained.  This contingency has come to pass.  The question

thus reduces to whether the district court was correct in

concluding that the legislature, as an institution, is bound by the

settlement agreement allegedly entered into by attorneys Montalvo

and Pagan on November 25, 1996. 

     The parties have asserted that the contract law of the

Commonwealth of Puerto Rico governs this question.  Although

disputes regarding settlement agreements are generally resolved

according to state contract law, see Data Gen. Corp. v. Grumman

Sys. Support Corp., 36 F.3d 1147, 1166 (1st Cir. 1994), the oral

agreement at issue here purported to settle a claim brought

pursuant to a federal statute on the eve of trial, based on a

stipulation placed on the record in federal court.  In such

circumstances, federal interests are generally sufficient to make

federal law the guidepost by which a court should decide whether

the parties have entered into an enforceable settlement of that

claim.  See Town of Newton v. Rumery, 480 U.S. 386, 392 (1986);

Gamewell Mfg., Inc. v. HVAC Supply, Inc., 715 F.2d 112, 115 (4th

Cir. 1983).

     We will accept, for the sake of argument, the district

court's factual findings: attorneys Pagan and Montalvo "represented

unequivocally . . . that they were authorized by their clients . .

. to enter into the settlement"; the attorneys indicated that they

had settled plaintiff's case for $300,000; and that the attorneys

informed the court that, if the AG did not pay, the legislature

would fulfill the terms of the settlement.  The official capacity

defendants now assert that attorneys Pagan and Montalvo, who

represented the prior officeholders, despite their assertions to

the contrary, lacked the authority to bind the Commonwealth in the

manner contemplated by the district court's order.  We agree.

     The district court's order only contemplates that the

settlement will be fulfilled by the Commonwealth (either via Law 9

or by the legislature) and not from the assets of the personal

capacity defendants; the judge did not distinguish in any way

between the personal capacity claims and the official capacity

claims.  The stipulation reflecting the alleged agreement,

moreover, is silent as to whether the parties intended to settle

the personal capacity claims, the official capacity claims, or

both.  Yet the Supreme Court has explained that there is a

fundamental distinction between such claims:

     Personal-capacity suits seek to impose

     personal liability upon a government official

     for actions he takes under color of state law. 

     Official-capacity suits, in contrast,

     "generally represent only another way of

     pleading an action against an entity of which

     an officer is an agent." . . . [A]n

     official-capacity suit is, in all respects

     other than name, to be treated as a suit

     against the entity.  



Kentucky v. Graham, 473 U.S. 159, 165 (1985) (citations omitted).

Recognizing this distinction, we see two possible ways to

conceptualize the disputed agreement as binding on the legislature:

as an agreement to indemnify the personal capacity defendants or as

a settlement of the official capacity suits.  And we suppose that

a settlement of a claim by the Commonwealth that would be

enforceable against the Commonwealth in federal court would require

a waiver, in some form, of the Commonwealth's Eleventh Amendment

immunity. 

     It turns out, however, that regardless of how we

conceptualize the agreement, this agreement cannot be enforced

against the Commonwealth or its legislative body.  We think it

elementary that a party who seeks to enforce a settlement agreement

against a state in federal court must demonstrate that the agent of

the state who allegedly entered into the agreement had the power to

bind the sovereign.  Cf. Hachikian v. F.D.I.C., 96 F.3d 502, 505

(1st Cir. 1996) (holding that a party seeking to enforce a

settlement agreement against the federal government must

demonstrate that the agent who purported to bind the government had

actual authority to do so); Moore v. Beaufort County, 936 F.3d 159,

163 (4th Cir. 1991) (enforcing settlement in light of a factual

finding that an attorney for an election board had actual authority

under state law to bind the board).  In order to bind the

Commonwealth, the three public officials who were sued in their

personal and official capacities (Hernandez, Rexach, and Jimenez)

must have been vested with the requisite authority to do so when

the agreement was consummated.  

     Whether we conceive of the necessary authority as the

power to waive the Commonwealth's Eleventh Amendment immunity and

consent to suit in federal court, see Ford Motor Co. v. Department

of Treasury, 323 U.S. 459 (1945); Paul N. Howard Co. v. P.R.A.S.

A., 744 F.2d 880 (1st Cir. 1984), to enter into a binding

settlement that includes the reinstatement of an employee, seeMorgan v. South Bend Community School, Inc., 797 F.2d 471, 479 (7th

Cir. 1986), and/or to order the indemnification of public officials

sued in their personal capacities, we see no basis in the record or

in the laws of the Commonwealth, see P.R. Laws Ann. tit. 32, 

3075-3086 (establishing procedures for actions against the

Commonwealth), for the assertion that Hernandez, Rexach, and

Jimenez, acting through attorneys Montalvo and Pagan, were vested

with such legal authority.   Enforcing this agreement would obviate

the explicit statutory scheme established by Law 9 to settle

personal capacity claims against public officials.    In addition,

the plaintiff has failed to alert us to any statute or regulation

authorizing these particular public officials to waive the

Commonwealth's Eleventh Amendment immunity or to commit legislative

funds to settle litigation.  As a result, the district court cannot

order the enforcement of the alleged agreement against the

legislature.

     Vacated and Remanded.  No costs.