Royal Carbbean Corp. v. Puerto Rico Ports Et

• Court: Court of Appeals for the First Circuit
• Decided: August 19, 1992
• Docket: 92-1079
• Status: Published

Opinion

USCA1 Opinion

August 19, 1992

                            UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT

                                 ____________________

No. 92-1079

ROYAL CARIBBEAN CORP. AND CARIBBEAN CRUISE LINE, LTD.,

                               Plaintiffs, Appellants,

                                          v.

                         PUERTO RICO PORTS AUTHORITY, ET AL.,

                                Defendants, Appellees.

____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF PUERTO RICO

                     [Hon. Carmen C. Cerezo, U.S. District Judge]
                                             ___________________
                                 ____________________

                                        Before

                                 Breyer, Chief Judge,
                                         ___________
                             Lay,* Senior Circuit Judge,
                                   ____________________
                          and O'Scannlain,** Circuit Judge.
                                             _____________

                                 ____________________

            Francisco G. Bruno  with whom  Marisa Rivera Barrera and  Sweeting
            __________________             _____________________      ________
        Gonzalez Cestero & Bruno were on brief for appellants.
        ________________________
            Jose Juan  Torres-Escalera with  whom Jiminez,  Graffam &  Lausell
            __________________________            ____________________________
        was on brief for appellees.
                                 ____________________

                                 ____________________

        _____________________

        *  Of the Eighth Circuit, sitting by designation.
        ** Of the Ninth Circuit, sitting by designation.

                                         -1-

BREYER, Chief  Judge.    This  appeal  raises  the
                               ____________

             question  whether  the  Puerto Rico  Ports  Authority enjoys

             Eleventh Amendment immunity from a tort action claiming that

             it negligently maintained Pier No. 6 in San Juan Harbor.  We

             hold that  the Authority,  in operating and  maintaining the

             San  Juan  docks,  is  not  an  "arm"  of  the  Commonwealth

             government.   Hence,  it does  not enjoy  Eleventh Amendment

             immunity.   We  reverse a  district  court judgment  to  the

             contrary.

                                          I

                                      Background
                                      __________

                       On  November 15,  1988, the  M/S Sovereign  of the

             Seas,  a Norwegian passenger ship, was docking at Pier No. 6

             in San  Juan harbor.  Suddenly,  a steel post at  the end of

             the  pier broke,  setting loose  three mooring  lines, which

             whipped  across the  ship,  seriously  injuring  a  crewman.

             Then,  another line, attached  to another steel  post on the

             pier,  snapped  and  struck   a  second  crewman,  seriously

             injuring him.  Caribbean Cruise Line,  the ship's owner, and

             Royal   Caribbean   Corporation,   the    ship's   operator,

             compensated the  crewmen.  The crewmen  assigned their legal

             rights and claims against the Puerto Rico Ports Authority to

             Royal Caribbean Corporation and Caribbean Cruise Line, which

then brought  this tort action against  the Ports Authority.

             The Ports  Authority  claimed Eleventh  Amendment  immunity.

             The  district   court  granted   summary  judgment   in  the

             Authority's  favor.   Royal Caribbean  and Caribbean  Cruise

             Line appeal.

                                          II

                                     The Standard
                                     ____________

                       The Eleventh Amendment  bars a federal  court suit

             against a state without its consent.  U.S. Const. amend. XI.

             The question before us is whether the defendant in this case

             is  "'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.'"   Ainsworth Aristocrat International Pty., Ltd. v.
                         _____________________________________________

             Tourism  Co. of Puerto Rico,  818 F.2d 1034,  1036 (1st Cir.
             ___________________________

             1987) (quoting Mt. Healthy City School Dist. Bd. of Educ. v.
                            __________________________________________

             Doyle, 429  U.S. 274,  280 (1977))  [hereinafter Ainsworth].
             _____                                            _________

             We must answer  this question in  respect to the  particular

             "type of activity" by the Ports Authority that is the object

             of the plaintiffs' claim, Puerto Rico Ports Authority v. M/V
                                       ___________________________    ___

             Manhattan  Prince, 897 F.2d 1,  10 (1st Cir.  1990), in this
             _________________

             case the operation and upkeep of the piers and various other

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                                          3

facilities in San  Juan harbor.   In doing  so, we  consider

             such matters as:

                       local  law  and  decisions defining  the
                       nature of the  agency involved;  whether
                       payment of any judgment will come out of
                       the state treasury;  whether the  agency
                       is   performing    a   governmental   or
                       proprietary   function;   the   agency's
                       degree  of autonomy;  the  power of  the
                       agency to sue and be sued and enter into
                       contracts; whether the agency's property
                       is  immune  from   state  taxation   and
                       whether the state  has insulated  itself
                       from  responsibility  for  the  agency's
                       operations.

             M/V  Manhattan Prince, 897 F.2d at 9 (1st Cir. 1990) (citing
             _____________________

             Ainsworth, 818 F.2d at 1037); see also Lake Country Estates,
             _________                     ________ _____________________

             Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 400-02
             ____    ______________________________

             (1979); Durning v. Citibank, N.A., 950 F.2d 1419, 1423  (9th
                     _______    ______________

             Cir.  1991); Figueroa-Rodriguez  v.  Aquino, 863  F.2d 1037,
                          __________________      ______

             1044  (1st Cir.  1988).   While  not providing  a mechanical

             "test" for entitlement to Eleventh Amendment immunity, these

             factors help us assess whether the Ports Authority has acted

             more like a private company, or more like the Commonwealth's

             government, in conducting  the activities  relevant to  this

             simple tort suit.  See M/V  Manhattan Prince, 897 F.2d at 10
                                ___ _____________________

             (immunity  depends  in  part  on  "nature  of  [plaintiff's]

             claim"); Jacintoport v. Greater Baton Rouge Port Commission,
                      ___________    ___________________________________

             762 F.2d  435, 442 (5th  Cir. 1985) (indicating  reasons for

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immunity are stronger where claim implicates "public policy"

             or "public affairs"), cert. denied, 474 U.S. 1057 (1986).
                                   ____________

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                                          5

III  

                                 The Standard Applied
                                 ____________________

                       Several  critical factors  suggest that  the Ports

             Authority,  in running  and  maintaining the  docks, is  not
                                                                      ___

             entitled to Eleventh Amendment immunity.  First, Puerto Rico

             law  gives the  Authority the  specific tasks  of "own[ing],

             operat[ing],   and   manag[ing]   .   .   .   transportation

             facilities,"  P.R. Laws Ann.  tit. 23,    336, including the

             "public property docks," id.   2202, where Royal Caribbean's
                                      ___

             ship docked and the crewmen were injured.  It authorizes the

             Authority to  charge users of those  docks fees "sufficient,

             at least, to . . . cover the expenses incurred . . . for the

             preservation,  development, improvement,  extension, repair,

             conservation  and   operation"  of  those   docks,  to  "pay

             principal  and interest on . . . the Authority's bonds," id.
                                                                      ___

               336(l)(1), and to "acquire, . . . produce, sell, . . . and

             otherwise  dispose  of .  . .  services,  goods, and  .  . .

             property  . . .  in connection with its  activities,"  id.  
                                                                    ___

             336(i); see also  id.     336(q),(s),(u), 2505.   The  Ports
                     ________  ___

             Authority  does charge fees,  which, its  Executive Director

             says, "cover"  its operating expenses.   (Indeed, its annual

             financial statements show that  its "net income" from fiscal

             years  1987 through  1989  averaged more  than $5  million.)

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                                          6

Taken   together,   these  factors   suggest  dock-operating

             activities  that are  not "governmental"  but "proprietary,"

             rather  like those  of  a private  company  that manages  an

             office building and charges tenants for its services.   Cf.,
                                                                     ___

             e.g.,  Ainsworth,  818 F.2d  at  1038  (Puerto Rico  Tourism
             ____   _________

             Company's "activities  as a  purchaser and supplier  of slot

             machines are not  alien to a proprietary function"); Paul N.
                                                                  _______

             Howard Co. v. Puerto Rico Aqueduct Sewer Authority, 744 F.2d
             __________    ____________________________________

             880,   886   (1st   Cir.   1984)   (government   corporation

             "established to provide drinking water and sewage facilities

             . . .  not normally  immune"), cert. denied,  469 U.S.  1191
                                            ____________

             (1985);  City of  Long  Beach v.  American President  Lines,
                      ____________________     __________________________

             Ltd.,  223  F.2d  853,  856  (9th  Cir.  1955)  (proprietary
             ____

             activity where government maintained harbor and charged fees

             to users).

                       Second,   the  record  indicates  that  the  Ports

             Authority, not  the Commonwealth treasury, would  likely pay

             any  eventual judgment  in  plaintiffs' favor  (even if  the

             judgment  is for  the full  $531,812, plus  interest, costs,

             fees  and  future  payments  to the  injured  crewmen,  that

             plaintiffs seek).   The Ports  Authority says that  its fees

             and  other  charges are  "barely  sufficient"  to cover  its

             expenses.    But,  those "expenses,"  the  Ports Authority's

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                                          7

Executive Director says  in his affidavit,  "include payment

             of  judgments  entered against  it."    And the  Authority's

             public  financial statements  tell the  same story,  showing

             that  the  Authority  deducted,  from  its  annual  revenues

             (before "net income")  $1.2 million  for "litigation  claims

             and settlements" in 1988, and $76,000 in 1989.

                       Moreover, the  Ports Authority does  not depend on

             Commonwealth   financing  for  its  income.    Although  the

             Authority points to nearly $2,000,000 in construction grants

             it received from  the Commonwealth in  the late 1960's,  the

             record  and the  public financial  statements show  that the

             Authority, normally  and in  recent years, has  not received

             substantial Commonwealth  financing.   To  the contrary,  it

             must  pay the  Commonwealth  $400,000 per  year  in lieu  of

             taxes.   P.R. Laws Ann.  tit. 23,    354.  The  same statute

             permits  the  Authority  to  reduce its  annual  payment  of

             $400,000 if its "net income is not sufficient" in any fiscal

             year  (a circumstance  which,  as  far  as  the  record  and

             statutes reveal, would include shortfalls due to payments of

             court judgments).   Id.;  see also Canadian  Transp. Co.  v.
                                 ___   ________ _____________________

             Puerto  Rico Ports  Authority,  333 F.  Supp. 1295,  1297-98
             _____________________________

             (D.P.R. 1971).

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                                          8

Further,  the Ports Authority has insurance, which

             would insulate the Commonwealth treasury from the effects of

             an adverse judgment.

                       Finally,  Puerto  Rico statutes  provide  that the

             Authority's debts are not "those of the Commonwealth."  P.R.

             Laws Ann. tit. 23,   333(b).

                       These  facts  weigh   heavily  against   immunity.

             Compare Feeney  v. Port  Authority  Trans-Hudson Corp.,  873
             _______ ______     ___________________________________

             F.2d  628, 631  (2d Cir.  1989), aff'd  495 U.S.  299 (1990)
                                              _____

             (where "liability  will place  the state treasury  at risk,"

             that  is   "the  single  most  important   factor"  favoring

             immunity);  In   re  San   Juan  Dupont  Plaza   Hotel  Fire
                         ________________________________________________

             Litigation,  888 F.2d  940, 943-44  (1st Cir.  1989) (Puerto
             __________

             Rico Tourism Company immune where Commonwealth supplied  70-

             75% of  Company's  funds)  [hereinafter  San  Juan  Dupont];
                                                      _________________

             Culebras Enterprises Corp. v. Rivera Rios, 813 F.2d 506, 517
             __________________________    ___________

             (1st Cir. 1987) (similar); Morris v. Washington Metropolitan
                                        ______    _______________________

             Area Transit  Authority, 781 F.2d  218, 225 (D.C.  Cir 1986)
             _______________________

             (immunity  where "the practical result  of a judgment  . . .

             would  be payment  from [state]  treasuries"), with  Paul N.
                                                            ____  _______

             Howard Co., 744 F.2d  at 886 (that Sewer Authority  did "not
             __________

             seriously  dispute" plaintiff's claim that judgment could be

             paid  out  of  Authority's  funds  supports  finding  of  no

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immunity); Jacintoport, 762 F.2d at 441 (similar, concerning
                        ___________

             government port  authority); Fitchik  v. New Jersey  Transit
                                          _______     ___________________

             Rail  Operations,  Inc.,  873  F.2d 655,  660-61  (3d  Cir.)
             _______________________

             (Transit  Authority's dependence  on state  for only  30% of

             funds,  and authorization to  "purchase liability insurance"

             strongly supported no immunity),  cert. denied, 493 U.S. 850
                                               ____________

             (1989);  see  also Durning,  950  F.2d at  1424  n.2 ("legal
                      _________ _______

             liability"  of  state  treasury,  not   agency's  "practical

             ability" to  pay is "applicable standard"); but cf. San Juan
                                                         _______ ________

             Dupont,   888  F.2d   at  943   (statutory  provision   that
             ______

             Commonwealth   not  liable   for  Tourism   Company's  debts

             insufficient to outweigh other factors favoring immunity).

                       Third,  the  Ports   Authority  operates  with   a

             considerable degree  of autonomy.  Its  statute, which calls

             it  a "public corporation," gives it  a "legal existence and

             personality   separate   and   apart  form   those   of  the

             Government."   P.R. Laws  Ann. tit.  23,    333(b).  It  has

             "complete  control   and  supervision  of   any  undertaking

             constructed  or  acquired  by  it, including  the  power  to

             determine  the  character  of  and  necessity  for  all  its

             expenditures."   Id.   336(d).   It can sue and  be sued and
                              ___

             makes its own contracts.  Id.   336(e),(f).  It may acquire,
                                       ___

             use  and dispose  of  property as  it  deems "necessary"  or

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                                          10

"convenient" in carrying out  its lawful activities.   Id.  
                                                                    ___

             336(i),(j).   It may "borrow money" and "issue bonds" as its

             activities require.  Id.    336(n),(o).  It has considerable
                                  ___

             discretion in setting fees.  Id.   336(l)(1).  Its funds are
                                          ___

             kept in accounts separate from  the Commonwealth's treasury.

             Id.    338.  The  Ports Authority, not  the Commonwealth, is
             ___

             liable  for payment of principal  and interest on its bonds.

             Id.    336(u).    And, as  we  have said,  its  "debts"  and
             ___

             "obligations . . . shall be deemed to be those of" the Ports

             Authority,  and not to be those  of the Commonwealth.  Id.  
                                                                    ___

             333(b).

We recognize that other  factors argue in favor of

             Eleventh  Amendment  immunity.    The  Authority's operating

             autonomy  is tempered  by the  fact that  several government

             officials and one citizen appointed by the Governor comprise

             its board of directors, that this board selects an Executive

             Director,  id.    334, who  communicates regularly  with the
                        ___

             executive branch, and  that this  arrangement (according  to

             the  Executive Director's affidavit)  permits the Governor's

             office to  "exercise significant control  over the  planning

             and administration  of its  policies" (but not  to "exercise

             control  over  the  day-to-day internal  operations"  of the

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                                          11

Authority).  See also Port Authority Police Benevolent Ass'n
                          ________ ______________________________________

             v. Port Authority of New York and New Jersey, 819  F.2d 413,
                _________________________________________

             417   (3d  Cir.)   (Governors'  roles   in  appointment   of

             commissioners   and  veto   over  their   actions  indicates

             Authoritynot "independent"),cert. denied,484 U.S.953 (1987).
                                         ____________

                       In  addition, the  Authority  must submit  various

             reports to the  Governor and the Legislature; it must follow

             other Treasury-prescribed accounting rules; it must keep its

             funds in Commonwealth-approved depositories.  P.R. Laws Ann.

             tit. 23,     345, 338.   Further, the Authority  can (like a

             sovereign)  exercise the  power of  eminent  domain.   Id.  
                                                                    ___

             336(h); see also  id.    339, 339a.  And,  it is immune from
                     ________  ___

             Commonwealth taxes (although it must, as we have noted,  pay

             an annual $400,000 fee in lieu of taxes).  Id.    348, 354.
                                                        ___

                       Finally,  as the  district  court found,  relevant

             statutes and their legislative histories stress the "public"

             objectives  of  the  Authority, including  its  mandates  to

             promote "the general welfare,"  to "increase . . .  commerce

             and  prosperity," id.     348(a), and  "to facilitat[e]  and
                               ___

             motivat[e] the  development  of the  economic  sectors  that

             drive  the present  Puerto  Rican economy,"  Legislature  of

             Puerto  Rico,  1989  Act No.  65,  at  300  (Aug. 17,  1989)

             (Statement of Motives for S. Bill  269, H. Bill 446).  These

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                                          12

express   statutory  and   legislative  purposes   make  the

             Authority's activities  seem  more "governmental"  and  less

             "proprietary."  Nonetheless, these provisions are consistent

             with "proprietary"  activities and findings of  no immunity.

             See Durning, 950 F.2d at  1421 (Development Authority is not
             ___ _______

             immune despite  a  statutory purpose  to  redress  "critical

             shortage  of  adequate  housing"  and  "to  promote economic

             welfare"); Ainsworth, 818 F.2d  at 1038 (Puerto Rico Tourism
                        _________

             Company not necessarily immune  despite a statute  declaring

             it an  "instrumentality of the Government"  with the purpose

             of   "promot[ing]   tourism  and   overs[eeing]  gambling");

             Riefkohl v.  Alvarado, 749 F.  Supp. 374, 375  (D.P.R. 1990)
             ________     ________

             (Puerto  Rico Electric Power  Authority not  immune, despite

             statute  declaring it a  "governmental instrumentality" with

             the  purpose  of   "promot[ing]  the  general   welfare  and

             increas[ing]  commerce  and  prosperity").    After  all,  a

             private entity might operate a hotel or  restaurant, in part

             with the  object of  helping to promote  economic prosperity

             and development.  

Overall, the factors  militating against  immunity

             predominate.   They indicate that the Ports  Authority is an

             entity that  enjoys a considerable degree  of autonomy, that

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                                          13

provides   a  service  (maintaining  and  operating  docking

             facilities) that it,  in effect, "sells" to users,  and that

             it  here  faces a  lawsuit in  which  the plaintiffs  seek a

             judgment likely  to be paid from the  Authority's funds, not

             from the  Commonwealth's Treasury.   Numerous cases  find no

             immunity  on facts very similar to those present here.  See,
                                                                     ___

             e.g., Feeney, 873  F.2d 628; Jacintoport, 762 F.2d 435; City
             ____  ______                 ___________                ____

             of  Long Beach, 223 F.2d  853; see also  Paul N. Howard Co.,
             ______________                 ________  __________________

             744 F.2d 880; Durning, 950 F.2d 1419.
                           _______

                       We  recognize that,  in M/V  Manhattan Prince,  we
                                               _____________________

             found that this same Ports Authority enjoyed immunity from a

             tort suit claiming negligence by  a Ports Authority-licensed

             harbor pilot.  In that case, however, the Ports  Authority's

             relevant   "type  of   activity,"  897   F.2d  at   10,  was

             fundamentally different.  The Authority did not "sell" pilot

             services.   It did  not "train pilots"  or "derive[]  . .  .

             revenue from the . . . pilot  system."  Id. at 12.   Rather,
                                                     ___

             the shipowners, required to  use the pilot service, paid  "a

             fee  directly to  the  pilot and  also  into a  trust  fund,

             created by [the Ports  Authority], for the pilots' pension."

             Id.  at 10 (quoting district court opinion, 669 F. Supp. 34,
             ___

             37  (D.P.R.  1987)).   The  Authority lacked  the  "power to

             control the  actions of  the pilot  while he"  performed his

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duties.  Id.   The Authority's role was not  that of selling
                      ___                                         _______

             pilot  services, but,  rather,  was that  of regulating  the
                                                          __________

             licensing  of   pilots  (and   regulating  pilot   fees  and

             retirement benefits).   Such  regulation is  traditionally a

             governmental, not  a proprietary,  function.  Id.  at 10-11.
                                                           ___

             The difference between the primarily "governmental function"

             at  issue  in  M/V   Manhattan  Prince,  and  the  basically
                            _______________________

             "proprietary function" here at issue explains the difference

             in result.

For  these reasons,  the summary  judgment in  the

             Port Authority's favor is

                       Reversed.
                       ________

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