United States Court of Appeals For the First Circuit
No. 21-1739
JANET VAZQUEZ-VELAZQUEZ; RAMON A. DEL VALLE-LOPEZ; CONJUGAL PARTNERSHIP DEL VALLE-VAZQUEZ; CARLOS R. CESPEDES-GOMEZ; JOCELYN CALO-BIRRIEL; CONJUGAL PARTNERSHIP CESPEDES-CALO; SAUL O. ALMEDA-CRUZ; JUDITH NIEVES-RIVERA; CONJUGAL PARTNERSHIP ALMEDA- NIEVES; FRANCISCO M. ALVARADO-BARRIOS; MARILYN ALVAREZ-RIVERA; CONJUGAL PARTNERSHIP ALVARADO-ALVAREZ; JUAN C. ARROYO-RAMIREZ; DAMARIS VELEZ-RIOS; CONJUGAL PARTNERSHIP ARROYO-VELEZ; JOAN ARROYO-TORRES; JOSE R. HUERTAS-DIAZ; MARIA I. AYALA-RIVERA; CONJUGAL PARTNERSHIP HUERTAS-AYALA; JUAN O. BADILLO-VELEZ; AUDREY CHICO-GARCIA; CONJUGAL PARTNERSHIP BADILLO-CHICO; JULIO BAEZ-ROMERO; ISRAEL CANCEL-HIDALGO; YAMELIA M. QUINTANA-LATORRE; CONJUGAL PARTNERSHIP CANCEL-QUINTANA;ANGEL L. CARABALLO- IRIZARRY; ALEIDA OQUENDO-HERNANDEZ; CONJUGAL PARTNERSHIP CARABALLO-OQUENDO; AXEL CARRASQUILLO-CUEVAS; ANGEL L. CORA-DE- JESUS; EILEEN LARRACUENTE-ROSARIO; CONJUGAL PARTNERSHIP CORA- LARRACUENTE; SAMUEL CORCHADO-RODRIGUEZ; WANDA L. FIGUEROA- BARRETO; CONJUGAL PARTNERSHIP CORCHADO-FIGUEROA; YARITZA CORDERO-BONILLA; JOEL BONET-TORRES; CONJUGAL PARTNERSHIP BONET- CORDERO; LUIS F. CRUZ-ROSA; YARELIS ESTALA-OLIVERAS; CONJUGAL PARTNERSHIP CRUZ-ESTALA; EDUARDO W. DA SILVA-OLIVEROS; CLAUDIA L. ANTUNEZ-DE MAYOLO LOJAS; CONJUGAL PARTNERSHIP DA-SILVA- ANTUNEZ; VIVIAN L. DE JESUS-RIVERA; EDIBERTO RODRIGUEZ-NEGRON; CONJUGAL PARTNERSHIP RODRIGUEZ-DE-JESUS; MORAIMA FIGUEROA- MORALES; EDDIE W. PACHECO-SANTIAGO; CONJUGAL PARTNERSHIP PACHECO-FIGUEROA; JOSE A. GARCIA-MARRERO; JOSE B. GONZALEZ- VELEZ; LOURDES SOTO-SANTIAGO; CONJUGAL PARTNERSHIP GONZALEZ- SOTO; ENRIQUE M. GONZALEZ-VIRUET; KEILA Y. PELLOT-DIAZ; CONJUGAL PARTNERSHIP GONZALEZ-PELLOT; GILBERTO HERNANDEZ-CAJIGAS; YAZMIN MUNOZ-GALLOZA; CONJUGAL PARTNERSHIP HERNANDEZ-MUNOZ; DARYMAR HERNANDEZ-GINES; JISELA JIRAU-ADAMES; WILTHER A. AVILES-LOPEZ; CONJUGAL PARTNERSHIP AVILES-JIRAU; JESSIE JUSINO-LUGO; MARIBEL CLASS-DELGADO; CONJUGAL PARTNERSHIP JUSINO-CLASS; SANDRA LISBOA- GONZALEZ; DENNISSE LUCIANO-COLLAZO; RICHARD CABAN-RUIZ; NELLY MALDONADO-RIVERA; CONJUGAL PARTNERSHIP CABAN-LUCIANO; VICTOR M. MEDINA-BADILLO; CORINA NASTASACHE; CONJUGAL PARTNERSHIP MEDINA- NASTASACHE; ANIBAL MIRANDA-PEREZ; GLADYS MOJICA-ORTIZ; CARLOS E. LUGO-QUINONES; CONJUGAL PARTNERSHIP LUGO-MOJICA; NURYS A. MOLINA-PEREZ; RAFAEL J. MORALES-DE JESUS; JULIA V. ALBELO- RIVERA; CONJUGAL PARTNERSHIP MORALES-ALBELO; REGINO NAVARRO- RODRIGUEZ; ADA I. MEDINA-SANCHEZ; CONJUGAL PARTNERSHIP NAVARRO- MEDINA; AMILCAR NIEVES-SANTIAGO; CRISTINE S. HEREDIA-PEREZ; CONJUGAL PARTNERSHIP NIEVES-HEREDIA; JOSE L. NOVOA-GARCIA; LUZ N. BRACERO-LUGO; CONJUGAL PARTNERSHIP NOVOA-BRACERO; ORLANDO ORTIZ-BURGOS; CARMEN D. DEL RIO-SOTO; CONJUGAL PARTNERSHIP ORTIZ-DEL RIO; PAMELA ORTIZ-OLMO; ILEANA OTERO-PADILLA; SHEILA PACHECO-SANCHEZ; ASTRID PAGAN-FLORES; LUIS R. PASTOR-REYES; LOURDES I. PEREZ-CARRION; NELSON MORALES-SANTANA; CONJUGAL PARTNERSHIP MORALES-PEREZ; IVELISSE PEREZ-MARQUEZ; DAYNA D. PEREZ-ZAPATA; TOMAS MONTALVO-TORRES; CONJUGAL PARTNERSHIP MONTALVO-PEREZ; IGNACIO RIOS-RIVAS; LESLIE E. CABALLERO-BELTRAN; CONJUGAL PARTNERSHIP RIOS-CABALLERO; JOSE M. RIVERA-COLON; IVETTE M. PEREZ-NIEVES; CONJUGAL PARTNERSHIP RIVERA-PEREZ; IVONNE RIVERA-ORSINI; DANIEL O. VALENTIN-ARROYO; CONJUGAL PARTNERSHIP VALENTIN-RIVERA; MARILYN RODRIGUEZ-DIAZ; LEONARDO RODRIGUEZ-DIEPPA; IDALISE LAZU-LAZU; CONJUGAL PARTNERSHIP RODRIGUEZ-LAZU; CARLOS J. RODRIGUEZ-HERNANDEZ; BRENDA I. COLON- ORTIZ; CONJUGAL PARTNERSHIP RODRIGUEZ-COLON; MARIA D. RODRIGUEZ- TOLEDO; LUIS A. TORRES-VAZQUEZ; CONJUGAL PARTNERSHIP TORRES- RODRIGUEZ; GABRIEL ROSADO-DE JESUS; MARGARITA VAZQUEZ-CEDENO; CONJUGAL PARTNERSHIP ROSADO-VAZQUEZ; ONIX ROSARIO-MORALES; ANGELA M. GARCIA-MUNOZ; CONJUGAL PARTNERSHIP ROSARIO-GARCIA; MIGUEL J. ROSARIO-RIVERA; AMARYLLIS L. RIVERA-REYES; CONJUGAL PARTNERSHIP ROSARIO-RIVERA; JOSE M. ROSARIO; EDUARDO RUIZ-VELEZ; SAUL J. SANDOVAL-MELENDEZ; AMBAR ROSARIO-LUGARO; CONJUGAL PARTNERSHIP SANDOVAL-ROSARIO; CARLOS M. SANTANA-VAZQUEZ; MARIBEL CRUZ-RIVERA; CONJUGAL PARTNERSHIP SANTANA-CRUZ; ANGEL L. SANTIAGO-GALARZA; DAMARI M. SANTIAGO-TORRES; EDGAR H. RODRIGUEZ- ORENGO; CONJUGAL PARTNERSHIP RODRIGUEZ-SANTIAGO; DAMARIS E. SEBASTIAN-LOPEZ; MARVIN SOSA-GONZALEZ; NIDIA I. BETANCOURT- RIVERA; CONJUGAL PARTNERSHIP SOSA-BETANCOURT; CELIA I. TAMARIZ- VARGAS; ALEXIS DELGADO-ACOSTA; CONJUGAL PARTNERSHIP DELGADO- TAMARIZ; JOSE O. TORO-MARTINEZ; JESSICA APONTE-APONTE; CONJUGAL PARTNERSHIP TORO-APONTE; GERARDO TORRES-ORTIZ; NEREIDA TORRES- RODRIGUEZ; CONJUGAL PARTNERSHIP TORRES-TORRES; DIXON VARGAS- MONTALVO; JOSE A. VELEZ-ZAYAS; ROSA M. VIROLA-FIGUEROA; CONJUGAL PARTNERSHIP VELEZ-VIROLA,
Plaintiffs, Appellants,
v.
PUERTO RICO HIGHWAYS AND TRANSPORTATION AUTHORITY; FRANCISCO RODRIGUEZ-DOSAL, in his official capacity as Executive Director,
Defendants, Appellees.
- 2 - APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
[Hon. Marco E. López, U.S. Magistrate Judge]
Before
Kayatta, Lynch, and Thompson, Circuit Judges.
John E. Mudd, with whom Law Offices of John E. Mudd was on brief, for appellants. Emanuel Rier Soto for appellees.
July 12, 2023
- 3 - LYNCH, Circuit Judge. Appellants are sixty-nine current
and former employees ("Appellant Employees") of the Puerto Rico
Highways and Transportation Authority ("PRHTA") and their spouses
and conjugal partners (collectively "Appellants"). They appeal
from the district court's entry of judgment in favor of Appellees
PRHTA and its executive director. Appellants allege that the
PRHTA's decision to no longer give effect to its Regulation 02-017,
which provided Appellant Employees with additional compensation,
was based on a misreading of and contrary to P.R. Act No. 66-2014
and this gave rise to violations of the Contracts Clause and Due
Process Clause of the U.S. Constitution and Article 1802 of the
Puerto Rico Civil Code. The district court granted summary
judgment for the PRHTA on Appellant Employees' federal
constitutional claims, dismissing those claims with prejudice, and
declined to exercise supplemental jurisdiction over Appellants'
claims under Puerto Rico law, dismissing those claims without
prejudice. Vázquez-Velázquez v. P.R. Highway & Transp. Auth.,
2021 WL 3501380, at *15 (D.P.R. Aug. 9, 2021).
We find that the district court correctly concluded that
Appellant Employees cannot establish their federal constitutional
claims and the court acted within its discretion in declining to
exercise jurisdiction over Appellants' remaining Puerto Rico law
claims. We affirm.
- 4 - I.
Appellant Employees served as either PRHTA project
administrators or project supervisors on top of their regular
duties as engineers in training, engineers I-IV, or chiefs of
brigade. Project administrators serve as the direct link between
the PRHTA and the private contractors that build PRHTA projects,
and they must inspect construction projects to ensure that private
contractors build them according to plans and specifications in
the construction contract. Project supervisors may supervise
multiple project administrators. Appellant Employees received a
regular salary for their work, and, since 2000, they also received
additional compensation for their roles as project administrators
or supervisors. This additional compensation was most recently
provided for in PRHTA Regulation 02-017, "Program for Construction
Project Management Compensation," which the PRHTA adopted on
November 28, 2011, based on the applicable provisions of the Puerto
Rico Highway and Transportation Authority Act, P.R. Act No. 74
(June 23, 1965). Article I of Regulation 02-017 provides that
"[t]he Construction Project Management Compensation Program . . .
recognizes the difference in tasks, duties, and responsibilities
that exist between the officials assigned to the management of the
construction projects and other employees with the same
classification who do not work in these types of projects."
Article I further emphasizes that, in the fulfillment of these
- 5 - responsibilities, "these officials are obligated to make
extraordinary efforts to ensure that the contractors carry out the
projects effectively and efficiently, as agreed in the contract,"
which can "cause[] an adverse effect on their family relationships,
risking their safety and health." Regulation 02-017 calculates
additional compensation based on a PRHTA official's classification
and the level of complexity of the project, subject to "the result
of the performance and execution evaluation of the participants."
Additional compensation was paid quarterly after the evaluation
was completed. Compensation amounts could fluctuate based on
evaluation, and the PRHTA maintained the power to remove any
employee from the compensation program if they failed to meet the
minimum evaluation requirements.
In June 2014, the Puerto Rico Legislature enacted P.R.
Act No. 66-2014, the "Government of the Commonwealth of Puerto
Rico Special Fiscal and Operational Sustainability Act," which
applies to the PRHTA as a public corporation of Puerto Rico's
Executive Branch. On October 2, 2014, the PRHTA issued Informative
Bulletin 2015-007, "Expense Reduction Measures in Compliance with
Sections 9, 10, 11, and 17 of Law 66-2014, Special Fiscal
Sustainability and Operations of the Government of the
Commonwealth of Puerto Rico Act," which stated that the PRHTA would
no longer give effect to Regulation 02-017 "during the validity of
Law 66-2014" effective retroactively on July 1, 2014, but left
- 6 - untouched the Appellant Employees' regular salaries. The PRHTA
thus did not pay Appellant Employees additional compensation
retroactively for the period of July 1-October 1, 2014 and
prospectively after the Bulletin was issued on October 2.
On August 18, 2015, Appellants filed an amended
complaint pursuant to 42 U.S.C. § 1983 alleging that in no longer
giving effect to Regulation 02-017, Appellees violated Appellants’
procedural and substantive due process rights under the Fourteenth
Amendment, as well as their rights under the Takings Clause of the
Fifth Amendment, Equal Protection Clause of the Fourteenth
Amendment, and the Contracts Clause in Article 1, Section 10,
Clause 1 of the U.S. Constitution. Appellants also alleged certain
Puerto Rico law claims. Appellees moved to dismiss the complaint
on September 10, 2015. The district court granted that motion in
part and denied it in part on January 14, 2016, leaving only
Appellant Employees' procedural due process and Contracts Clause
claims, and Appellants' commonwealth law claims under Puerto Rico
Laws 100 and 180, and Article 1802 of the Puerto Rico Civil Code.
In January and February 2021, the district court dismissed
Appellants' claims pursuant to Puerto Rico Laws 100 and 180,
respectively, after they voluntarily desisted any claims under
these laws and consented to dismissal with prejudice. After
holding a pretrial and settlement videoconference on February 25,
- 7 - 2021, the district court ordered the parties to file cross motions
for summary judgment on Appellant Employees' remaining claims.
On August 9, 2021, the district court dismissed
Appellant Employees' remaining federal claims with prejudice. See
Vázquez-Velázquez, 2021 WL 3501380, at *15. As to Appellant
Employees' procedural due process claim, the district court held
that they did not have a constitutionally protected property
interest in the additional compensation under Regulation 02-017
because they were not terminated, the additional compensation was
contingent on evaluation, and nothing in the regulation guaranteed
the additional compensation. As to Appellant Employees' Contracts
Clause claim, the district court held that "no reasonable fact
finder could infer that Informative Bulletin 2015-007 constituted
legislative action that infringed upon [Appellant] Employees'
alleged contractual rights." Thus, Appellant Employees challenge
"how the law was applied as opposed to the creation of the law
itself." Because the district court dismissed all federal law
claims, it declined to exercise supplemental jurisdiction over
Appellants' claims under Puerto Rico law and dismissed them without
prejudice.
Appellants timely appealed.
II.
We review de novo a district court's grant of summary
judgment. See Minturn v. Monrad, 64 F.4th 9, 13 (1st Cir. 2023).
- 8 - Summary judgment is appropriate "if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).
The court must examine the record in the light most favorable to
the nonmoving party and must make all reasonable inferences in
that party's favor. See Viscito v. Nat'l Planning Corp., 34 F.4th
78, 83 (1st Cir. 2022). Where the parties cross-move for summary
judgment, "the court must [examine] each motion separately,
drawing inferences against each movant in turn." Id. (alteration
in original) (internal quotation marks omitted) (quoting
Lawless v. Steward Health Care Sys., LLC, 894 F.3d 9, 21 (1st Cir.
2018)); see also Perea v. Ed. Cultural, Inc., 13 F.4th 43, 50 (1st
Cir. 2021) (noting that cross motions for summary judgment do not
change the standard of review).
We review for abuse of discretion a district court's
refusal to exercise supplemental jurisdiction over state or
commonwealth law claims once all federal claims are dismissed.
See Redondo Constr. Corp. v. Izquierdo, 662 F.3d 42, 48-50 (1st
Cir. 2011).
III.
Appellants argue that the district court erred in
dismissing their claims under the Contracts Clause and Due Process
Clause of the U.S. Constitution and under Puerto Rico state law.
We analyze each provision in turn.
- 9 - a. Contracts Clause
Appellant Employees argue that PRHTA Informative
Bulletin 2015-007 was based on a flawed reading of P.R. Law 66-2014
and not required by that law. They allege this misreading impaired
the contractual relationship that Regulation 02-017 created and
thus violates the Contracts Clause of the U.S. Constitution.
Specifically, Appellant Employees argue that the "Informative
Bulletin was not a reasonable, appropriate or necessary way for
[the] PRHTA to implement Law 66-2014" because the Law "did not
require the [PR]HTA to eliminate the 'fair and reasonable
compensation' that the Regulation and years of practice
established" for Appellant Employees.
The Contracts Clause of the U.S. Constitution provides
that "[n]o State shall . . . pass any . . . Law impairing the
Obligation of Contracts." U.S. Const. art. 1, § 10, cl. 1. The
Contracts Clause "is aimed at the legislative power of the State,
and not at the decisions of its courts, or the acts of
administrative or executive boards or officers, or the doings of
corporations or individuals." New Orleans Waterworks Co. v. La.
Sugar Refin. Co., 125 U.S. 18, 30 (1888). Courts analyze Contracts
Clause claims under a two-prong test, assessing first whether the
state law has operated to substantially impair a contractual
relationship, and then if so, whether the impairment was reasonable
and necessary to serve an important government interest. See
- 10 - United Auto., Aerospace, Agr. Implement Workers of Am. Int'l
Union v. Fortuño, 633 F.3d 37, 41 (1st Cir. 2011). Before reaching
the two-prong test, however, a party must first allege a contract
and a state law that impairs it. Assuming arguendo that Regulation
02-017 created a contract between Appellant Employees and the
PRHTA, Appellant Employees have failed to pinpoint a state law
that impairs this contract.
First, Informative Bulletin 2015-007 is not a "law"
within the meaning of the Contracts Clause. The Bulletin simply
announces the PRHTA's alleged breach; it is not a legislative act.
See St. Paul Gas Light Co. v. St. Paul, 181 U.S. 142, 148-49 (1901)
(holding that a city ordinance requiring that no further interest
be paid to the plaintiff "was but a denial by the city of its
obligation to pay" and that "[t]his denial, whilst embodied in an
ordinance, was no more efficacious than if it had been expressed
in any other form").
Second, Appellant Employees have waived any argument
that Law 66-2014, which is a "law" within the meaning of the
Contracts Clause, impairs their contract because they argue the
exact opposite: that Law 66-2014 did "not require" the PRHTA to no
longer give effect to Regulation 02-017. Assuming without deciding
that Appellant Employees' interpretation of Law 66-2014 is
correct, there is no legislative act that impairs any contract.
See Izquierdo, 662 F.3d at 48 (holding that the PRHTA's alleged
- 11 - breach of a settlement agreement "did not violate the Contracts
Clause, even if committed in an attempt to unlawfully enforce" a
Puerto Rico law, because "nothing in [that law] prevent[ed] [the
plaintiff] from obtaining a remedy for a demonstrated breach of
the settlement agreement[]"). Appellant Employees thus do not
have a constitutional claim under the Contracts Clause, but a
garden-variety breach of contract claim. See id. ("If a state
breaches a contract but does not impair the counterparty's right
to recover damages for the breach, the state has not impaired the
obligation of the contract.").
This reasoning applies both to Appellant Employees'
claims for retroactive compensation from July-October 2014 and
claims for compensation for future work because in either case --
assuming that Appellant Employees had a contractual right -- the
PRHTA merely breached that contract, providing Appellant Employees
a commonwealth law remedy for breach of contract, not a
constitutional Contracts Clause claim.
b. Due Process Clause
Appellant Employees argue that the PRHTA violated their
procedural due process rights because "custom created or could
create a constitutionally protected property interest" in the
additional compensation, and they should have been afforded a
process to challenge the Bulletin's "clearly erroneous
- 12 - interpretation of Law 66-2014." The district court dismissed these
claims.
We need not decide whether Appellant Employees had a
constitutionally protected property interest because the requisite
process was provided. The suspension of the program was generally
applicable and not based on facts specific to any particular
employee, so no pretermination hearing was required. Cf., e.g.,
Rodriguez-Sanchez v. Mun. of Santa Isabel, 658 F.3d 125, 130 (1st
Cir. 2011) ("We have held that pre-termination hearings are not
required by due process where a bona fide government reorganization
plan bases dismissals on factors unrelated to personal
performance. . . . Because such a plan is aimed at positions of
employment rather than at individual employees, a pre-termination
hearing would be a futile exercise." (citations omitted)).
c. Claims Under Puerto Rico Law
Finally, we hold that the district court properly
exercised its informed discretion in declining to exercise
jurisdiction over Appellants' remaining Puerto Rico law claims
under Article 1802 of the Puerto Rico Civil Code, which states
that "[a] person who by an act or omission causes damage to another
through fault or negligence shall be obliged to repair the damage
so done."
The district court dismissed Appellants' Article 1802
claim, reasoning that it "retains the discretion . . . to decline
- 13 - to exercise supplemental jurisdiction where [it] has dismissed all
claims over which it had original jurisdiction."
Vázquez-Velázquez, 2021 WL 3501380, at *14 (omission in original)
(quoting Marrero–Gutierrez v. Molina, 491 F.3d 1, 7 (1st Cir.
2007)). Though the district court is not required to dismiss state
or commonwealth law claims where all federal claims are dismissed
before trial, see Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343,
350 n.7 (1988), a district court must exercise its "informed
discretion" when deciding whether to assert supplemental
jurisdiction, Izquierdo, 662 F.3d at 49 (quoting Roche v. John
Hancock Mut. Life Ins. Co., 81 F.3d 249, 257 (1st Cir. 1996)).
This analysis requires the district court to "weigh concerns of
comity, judicial economy, convenience, and fairness." Id. It is
"the usual case [that where] all federal-law claims are eliminated
before trial, the balance of factors . . . will point toward
declining to exercise jurisdiction over the remaining state-law
claims." Id. (omission in original) (quoting Carnegie-Mellon
Univ., 484 U.S. at 350 n.7).
Appellants argue that this is the unusual case where the
district court should have exercised supplemental jurisdiction
because the case was "in summary judgment, after pretrial, filing
of jury instructions, voir dire, and jury verdict form" and "[a]ll
that was missing was trial." Appellants emphasize that "[b]y
dismissing the [Puerto Rico] law claims, the [d]istrict [c]ourt
- 14 - forces Appellants to trudge again to Judge Swain to seek lifting
of the stay, then proceeding in the [c]ommonwealth
[c]ourts[, which] is not the best handling of limited resources."
We find that the district court acted within its informed
discretion in dismissing Appellants' commonwealth law claims
without prejudice. This case is the usual one where a district
court may decline to exercise supplemental jurisdiction after
dismissing all federal claims, and it is distinguishable from
instances where this court has found that unusual circumstances
justify the exercise of supplemental jurisdiction. See, e.g.,
Izquierdo, 662 F.3d at 47, 49 (dealing with an "unusual" case where
"[i]nterests in judicial economy, convenience, and fairness
weighed overwhelmingly in favor of the court's exercising its
jurisdiction"). The gravamen of this case turns on an
interpretation of Puerto Rico law better suited to be resolved by
the Commonwealth's courts, and as such, there is no continuing
federal interest here. This case was not on the eve of trial, and
further any assertions of obligations owed by the Commonwealth are
within the dischargeability parameters of the PROMESA statute as
we describe in the companion case issued today.
IV.
For the foregoing reasons, we affirm the dismissal of
Appellant Employees' claims under the Contracts Clause and the Due
- 15 - Process Clause and Appellants' claims under Article 1802 of the
Puerto Rico Civil Code.
- 16 -