459 B.R. 527
Bankr. D.P.R.2011Background
- Debtor M.E.H.S. entered a lease with the Municipality of Mayagüez to operate Mayagüez Medical Center, with SISSO as sublessee and guarantor; the Mayor signed the lease on behalf of the Municipality.
- Plaintiff alleges the Municipality, under the Mayor, interfered with hospital operations and breached contractual duties, including misrepresenting the hospital's condition and altering ward designations.
- SISSO encountered financial trouble; 45% of its stock was transferred to Marini to avert a cash crisis, and Plaintiff temporarily relinquished some control to SISSO to aid rent payments.
- Municipality allegedly granted rent moratoria to SISSO and later moved to terminate the Lease for nonpayment, while Plaintiff contends termination violated the Lease’s dispute-resolution provisions.
- Plaintiff filed a bankruptcy petition in June 2010 and a related adversary complaint alleging §1983 due process violations and RICO claims, along with several state-law claims; Defendants moved to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Section 1983 due process against Mayor | Mayor violated due process by terminating the Lease without proper notice | Plaintiff failed to plead personal involvement and color of state law | Mayor claims survive; dismissal denied against Mayor |
| Section 1983 against Gonzalez and conjugal partnership | Gonzalez and conjugal partnership liable for Mayor's actions | They are not state actors; no color of law | Claims against Gonzalez and conjugal partnership dismissed |
| RICO claims against Defendants | Defendants engaged in a pattern of mail and wire fraud | Lack of enterprise and pattern; insufficient specificity | RICO claims dismissed; conspiracy claim also dismissed |
| Jurisdiction over state-law claims; core vs non-core | State-law claims relate to estate administration | Only related-to; may be core/non-core distinctions | State-law claims deemed non-core related; jurisdiction retained; final judgments to be by Article III judge per Stern v. Marshall |
| Impact of Stern v. Marshall on bankruptcy judgments | Bankruptcy court may enter final judgment on state-law claims | Stern limits final adjudication by non-Article III courts | Bankruptcy court may submit findings of fact and conclusions of law; final judgment by Article III judge |
Key Cases Cited
- Hafer v. Melo, 502 U.S. 21 (1991) (personal capacity §1983 liability requires involvement and color of state law)
- Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (1985) (due process rights before deprivation of property)
- Parratt v. Taylor, 451 U.S. 527 (1981) (constitutional due process; deprivation requires process)
- Monell v. Dept. of Soc. Servs., 436 U.S. 658 (1978) (municipal liability under §1983 requires policy or custom)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (applies plausibility standard to pleadings)
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (test for related-to jurisdiction in bankruptcy)
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (non-Article III bankruptcy judges cannot enter final state-law judgment)
- In re Arnold Print Works, Inc., 815 F.2d 167 (1st Cir. 1987) ( Marathon-type non-core proceeding; core vs non-core distinction)
- In re Mec Steel Bldgs., Inc., 136 B.R. 606 (Bankr. D.P.R. 1992) (non-core state-law matters related to bankruptcy)