GERSHWAIN SPRAUVE, Appellant v. THE WEST INDIAN COMPANY LIMITED; JOSEPH BOSCHULTE; BOARD OF DIRECTORS OF THE WEST INDIAN COMPANY LIMITED; ANDREA V. SMITH, Appellant v. THE WEST INDIAN COMPANY LIMITED; JOSEPH BOSCHULTE, in his personal capacity; THE BOARD OF DIRECTORS OF THE WEST INDIAN COMPANY LIMITED; JOSEPH BOSCHULTE, as President and Chief Executive Officer of the West Indian Company Limited
No. 13-4371, No. 14-1151
United States Court of Appeals for the Third Circuit
August 25, 2015
1032
whether Edwards is entitled to a downward departure for a mitigating role, the District Court should consider the factors we outlined in United States v. Headley, 923 F.2d 1079, 1084 (3d Cir. 1991) (citing United States v. Garcia, 920 F.2d 153 (2d Cir. 1990)), in exercising its “broad discretion.” United States v. Isaza-Zapata, 148 F.3d 236, 238-39 (3d Cir. 1998).
KARIN A. BENTZ, ESQ., JULITA K. DE LEON, ESQ., The Law Offices of Karin A. Bentz, P.C., St. Thomas, USVI, Attorneys for Appellants Gershwain Sprauve and Andrea Smith.
MICOL L. MORGAN, ESQ., BAILEY A. CALHOUN, ESQ., Ogletree, Deakins, Nash, Smoak & Stewart, LLC, St. Thomas, USVI, Attorneys for Appellee Joseph Boschulte in his individual capacity.
MARK D. HODGE, ESQ., Hodge & Hodge, St. Thomas, USVI; ADRIANE J. DUDLEY, ESQ., Dudley Rich Davis LLP, St. Thomas, USVI, Attorneys for Appellees The West Indian Company Limited; Board of Directors of the West Indian Company Limited; and Joseph Boschulte, as President and Chief Executive Officer of the West Indian Company.
CHAGARES, JORDAN and SHWARTZ, Circuit Judges.
OPINION
(August 25, 2015)
CHAGARES, Circuit Judge.
Gershwain Sprauve and Andrea Smith appeal the District Court‘s dismissal of
I.
We take most of the following facts from the plaintiffs’ complaints, which we assume to be true for the purposes of a motion to dismiss. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). WICO was founded in 1912, prior to the United States’ acquisition of the Virgin Islands from Denmark in 1917. WICO began as a coal bunkering business and later grew to serve as the “Port Agent” for the cruise lines that visit the port of Charlotte Amalie in St. Thomas. Joint Appendix (“J.A.“) 3, 33. WICO also manages the Havensight Mall at that port. Id. In 1986, WICO began dredging activities in the St. Thomas harbor. Sprauve & Smith Br. 4. This led to public opposition and litigation regarding the scope of these activities. Id.
In 1993, the Government of the Virgin Islands purchased 100% of the shares of WICO through a Stock Purchase Agreement. The purchase was approved by the Legislature of the Virgin Islands in a special session in Act No. 5826 (the “Act“). J.A. 421. The Act explains that “the Government of the Virgin Islands ... has been engaged for a number of years in proceedings, including litigation, regarding those certain rights of [WICO]” and that “acquisition of ownership of the Company by the Government would permit the final conclusion of all such proceedings and related disputes, and ensure that the development rights of the Company conferred by ... agreements and treaties would be subject in all respects to the control of the Government.” Id. The Act further explains that acquisition of WICO would “transfer to public ownership and control substantial real estate, including certain areas that may be suitable for development for public use.” Id. Section 8(b) of the Act provides:
Upon acquisition of the Facilities and all of the issued and outstanding shares of common stock of the Company by the Government, the Company is hereby granted the status and authority of a public cor-poration and governmental instrumentality of the Government of the Virgin Islands of the United States and shall be deemed to be a public entity operating on behalf of the Government, rather than a private corporation....
J.A. 424.
Following this acquisition, it is undisputed that 100% of WICO shares were transferred to the Virgin Islands Public Finance Authority (“PFA“), a public corporation and governmental instrumentality created by the Government of the Virgin Islands. J.A. 229-30. The PFA is run by a board of directors appointed by the Governor of the Virgin Islands, with the advice and consent of the Virgin Islands Legislature. J.A. 33. WICO is run by its own board of directors, appointed by the PFA. Id.
Plaintiff Gershwain Sprauve began working at WICO in 1997 as the Manager of Mall Operations. In 2009, WICO President and Chief Executive Officer (“CEO“) Edward Thomas indicated to the WICO
Sprauve alleges that Boschulte was hostile toward him and falsely accused him of making various mistakes in the workplace. Sprauve eventually wrote a letter to the Board complaining about Boschulte‘s behavior. The Board launched an investigation. Shortly after this investigation, Boschulte terminated Sprauve, alleging he failed to attend a hearing before the Legislature‘s Finance Committee to discuss WICO‘s budget. Sprauve asserts that this allegation was pretext.
Plaintiff Andrea Smith began working at WICO in 1981, before the company was purchased by the Virgin Islands. In 2012, she was promoted to Chief Financial Officer. When Edward Thomas retired, she served as the Interim President and CEO of WICO until Boschulte was hired. Smith alleges that Boschulte knew that she had been interviewed by the Board as part of its investigation into Sprauve‘s claim and that Boschulte became angry with her. She alleges that he then took various retaliatory actions against her. On January 11, 2013, Boschulte terminated Smith for what he called “failure to execute.” J.A. 38.
On January 28, 2013, Sprauve filed a complaint against WICO and Boschulte in the District Court of the Virgin Islands. He alleged violations of his First and Fourteenth Amendment rights under the United States Constitution, a claim under
Smith filed her own complaint against WICO and Boschulte alleging violations of the First and Fourteenth Amendments, a claim under
...
The District Court conducted the same analysis in granting both WICO‘s and Boschulte‘s motions to dismiss. It explained that “[t]he first and central issue raised ... is whether WICO is a public corporation with public employees versus a private entity with private employees.” J.A. 405; S.A. 9. To make this determination, the District Court first looked to decisions of the Virgin Islands Public Employees Relations Board (“PERB“), which found that WICO employees are not public employees. J.A. 405-07; S.A. 9-10. Next, the District Court examined the language of the Act. J.A. 407; S.A. 10-11. The District Court ultimately concluded that “WICO cannot be considered a purely public entity,” that its employees are not public employees, and that it is not a public corporation. J.A. 407-08; S.A. 11-12. The District Court then found that because WICO is not a public entity, its alleged conduct could not be considered to have been “under color of state law” for
Both Sprauve and Smith timely appealed.1
II.
The District Court had jurisdiction under
III.
Sprauve and Smith bring claims under the First and Fourteenth Amendments and under
The Supreme Court has acknowledged that “[i]t is fair to say that ‘our cases deciding when private action might be deemed that of the state have not been a model of consistency.’ ” Lebron, 513 U.S. at 378 (quoting Edmonson v. Leesville Concrete Co., 500 U.S. 614, 632, 111 S. Ct. 2077, 114 L. Ed. 2d 660 (1991) (O‘Connor, J., dissenting)). Armed with that body of law, we have endeavored to determine whether state action exists in circumstances including where an activity is significantly encouraged by the state, where the state acts as a joint participant, and where an actor “performs a function designated by the state, or is entwined with government policies or management.” Leshko, 423 F.3d at 340. We have described this process as “labyrinthine,” id. at 338, “murky,” Fitzgerald v. Mountain Laurel Racing, Inc., 607 F.2d 589, 591 (3d Cir. 1979), and a “protean concept,” Magill v. Avonworth Baseball Conference, 516 F.2d 1328, 1331 (3d Cir. 1975) (quotation marks omitted).
However, we may avoid this determination of whether private party conduct constitutes state action when the actor is the government. See Lebron, 513 U.S. at 378 (noting that “[i]t may be
A.
In Lebron, the petitioner filed a lawsuit against the National Railroad Passenger Corporation (also known as Amtrak) claiming that it had violated his First and Fifth Amendment rights. Id. at 377. Amtrak was established in 1970 by Congress, inter alia, “in order to avert the threatened extinction of passenger trains in the United States,” id. at 383, and was to operate, to the extent consistent with federal law, subject to the District of Columbia Business Corporation Act, see
To give some context to its analysis, the Lebron Court first engaged in a detailed recitation of “the long history of corporations created and participated in by the United States” with a particular focus on level of control by the Government. Lebron, 513 U.S. at 386. The first such corporation was the Bank of the United States, created in 1791, but the Government‘s participation in that corporation was limited to holding twenty percent of the Bank‘s stock. Id. at 386-87. The Government first participated in a corporation in which it appointed a majority of the corporation‘s directors — thus controlling the corporation — in 1902. Id. at 387. Congress that year authorized the President to acquire the assets of the New Panama Canal Company of France, including its holdings in the Panama Railroad Company — much like Act No. 5826 authorized the Government of the Virgin Islands to acquire WICO. See id. The purpose of the purchase was “to facilitate construction of the Panama Canal.” Id. The Government “became the sole shareholder of the Panama Railroad, and continued to operate it under its original charter, with the Secretary of War, as the holder of the stock, electing the Railroad‘s 13 directors.” Id. By the end of World War II, the number of Government corporations had grown to fifty-eight, and immediately after that war, many of those corporations were dissolved because of Congress‘s perception that “Government-created and -controlled corporations had gotten out of hand in both their number and their lack of accountability.” Id. at 389. A new wave of Government corporations began again in the 1960s and, starting in 1962, these corporations were largely designated not to be Government agencies. Id. at 390. Congress intended that these new Government corporations (such as the Communications Satellite Corporation (Comsat)) would compete in the private sector, “unhindered by the restraints of bureaucracy and politics.” Id. at 391. Despite being labeled as not Government entities, governance structures varied in these new Government corporations. While Comsat‘s board was controlled by twelve privately-appointed directors (and three appointed by the President), other Government corporations such as the Corporation for Public Broadcasting, the Legal Services Corporation, and Amtrak, gave voting control to Government appointees. Id.
Amtrak‘s first argument to the Court in Lebron was that Congress‘s disclaimer of Amtrak‘s Government agency status was dispositive of Lebron‘s constitutional claims. The Court acknowledged that this disclaimer of status was controlling for matters within Congress‘s control. Id. at 392. The Court noted that such matters include waivers of sovereign immunity and whether statutes such as the Administrative Procedure Act and laws regarding Government procurement apply to the entity. However, the Court held that Congress could not determine whether Amtrak was a Government entity for purposes of constitutional claims. Id. The Court reasoned that “[i]f Amtrak is, by its very nature, what the Constitution regards as the Government, congressional pronouncement that it is not such can no more relieve it of its First Amendment restrictions than a similar pronouncement could exempt the Federal Bureau of Investigation from the Fourth Amendment.” Id. As a result, the Court rejected Amtrak‘s first argument.4
The Lebron Court acknowledged that the question of whether Amtrak could be considered a Government agency or instrumentality for the purpose of constitutional claims against it was not answered by a statute or by prior caselaw. Id. at 394. So, the Court analyzed two factors to answer this question. First, the Court noted that Amtrak was established by a special statute for the purpose of furthering governmental goals. Id. at 397. Second, consistent with other parts of the opinion, the Court focused heavily on control of the corporation. Id. at 397-98. An important measure of control to the Court was whether a majority of the governing body of the corporation was appointed by the federal or state government. Id. For instance, the Court noted that in Pennsylvania v. Board of Directors of City Trusts of Philadelphia, 353 U.S. 230, 77 S. Ct. 806, 1 L. Ed. 2d 792 (1957) (per curiam):
we held that Girard College, which has been built and maintained pursuant to a privately erected trust, was nevertheless a governmental actor for constitutional purposes because it was operated and controlled by a board of state appointees, which was itself a state agency. Amtrak seems to us an a fortiori case.
Lebron, 513 U.S. at 397 (citation omitted). Another measure of
B.
1.
Applying the Lebron decision to the facts of this case, we note first that WICO was established as “a public corporation and governmental instrumentality of the Government of the Virgin Islands of the United States,”5 J.A. 61, in a special session of the Twentieth Legislature of the Virgin Islands in 1993. J.A. 58-63 (Act No. 5826).6 The government of the Virgin Islands took this action to further several government objectives. See Horvath v. Westport Library Ass‘n, 362 F.3d 147, 153 (2d Cir. 2004) (determining that “the Library was created by a special act of the Connecticut State legislature and there is no doubt that the provision of library services is a legitimate statutory objective” and
holding that “the Lebron standard has been satisfied.“); Hack v. President & Fellows of Yale Coll., 237 F.3d 81, 84 (2d Cir. 2000) (holding that the first part of Lebron was “easily satisfied [because] the State of Connecticut created the corporate entity by special law, and higher education is a governmental objective (although not the exclusive province of government)“), abrogated on other grounds, Swierkiewicz v. Sorema N.A., 534 U.S. 506, 122 S. Ct. 992, 152 L. Ed. 2d 1 (2002). See generally Clark v. Cnty. of Placer, 923 F. Supp. 1278, 1284 (E.D. Cal. 1996) (“[A]ll that is required for the purpose of § 1983 liability under Lebron is that the corporation have a ‘public statutory mission.’ “) (citation omitted).7
Second, the Virgin Islands government clearly has permanent8 and complete control over WICO as a result of the Act. Specifically, the Board is composed of nine directors. West Indian Co. Ltd. Fiscal Year 2015 Budget Hearings Post Audit Div., Comm. on Fin., 30th Legis. 2 (2014) (Report of Jose L. George, Post Auditor). The parties do not dispute that all of these directors are appointed by the PFA. See id. (noting that the Act directed the Governor of the Virgin Islands to transfer all of the WICO‘s stock to the PFA); J.A. 60 (same). See generally Hack, 237 F.3d at 84 (holding that the Lebron control factor was not met and noting “[t]wo of nineteen board members is ... a long way from control“); Hall v. Am. Nat‘l Red Cross, 86 F.3d 919, 921-22 (9th Cir. 1996) (applying Lebron and holding that the Government did not control the Red Cross because the Government appoints only eight of fifty-three on the governing board); Barrios-Velazquez v. Asociacion de Empleados del Estado Libre Asociado de P.R., 84 F.3d 487, 492 (1st Cir. 1996) (determining that Lebron control factor not met because “the government of Puerto Rico does not retain the power to appoint any of [the corporation‘s] directors“); Am. Bankers Mortg. Corp. v. Fed. Home Loan Mortg. Corp., 75 F.3d 1401, 1407 (9th Cir. 1996) (applying Lebron and holding that the Government‘s control over Freddie Mac was missing because the “government is entitled to appoint fewer than one-third of Freddie Mac‘s directors“); Wilkinson v. Legal Servs. Corp., 27 F. Supp. 2d 32, 45 (D.D.C. 1998) (holding that Lebron control factor was met because “LSC‘s Board is composed entirely of political appointees“).9
Accordingly, the factors set forth in Lebron are met and, therefore, WICO is an agency or instrumentality of the Virgin Islands and subject to the constraints of the Constitution.
2.
The defendants argue that WICO should not be considered a government entity because WICO employees, unlike other government employees, “are not beneficiaries of the Government Employees’ Retirement System, are not covered by the Personnel Merit System, are not subject to the jurisdiction of the Public Employees Relations Board, and are not hired through the Division of Personnel.” WICO Br. 17. We are not persuaded by this argument. The Lebron decision counsels that while statutes may be dispositive of matters within government control, “such as the Administrative Procedure Act ... and the laws governing Government procurement,” 513 U.S. at 392, reliance on such statutes to determine the constitutional rights of citizens is “misplaced.” Id.10 Indeed, a comparison of the facts of Lebron with the present case shows why the appellees’ argument must be rejected. While the appellees here ask us to assume the Virgin Islands intended that WICO be considered a private entity because WICO employees are treated differently than other government employees in several respects and ask us essentially to ignore the clear language of the Act providing that WICO is “a public corporation and governmental instrumentality of the Government of the Virgin Islands of the United States,” Congress explicitly provided that Amtrak was not a government entity. Despite Congress‘s clear direction, the Court in Lebron held that Amtrak was to be considered a Government
trustees are appointed by the Town ... [t]he additional fact that [almost nine tenths] of the Library‘s funding comes from ... the Town convinces us that the Town maintains sufficient control over the Library“); Becker, 66 F. Supp. 2d at 21 n.6 (holding that the composition of the governing board was not the “sole factor” determining government control).
entity for purposes of claims under the Constitution. Id. at 400. See Wilkinson, 27 F. Supp. 2d at 44, 45 (holding that where Congress provided that the Legal Services Corporation in all but several respects “should be treated as a private, non-profit corporation,” it is outside Congress‘s authority “to make the final determination of LSC‘s status as a government entity for purposes of determining the constitutional rights of citizens affected by its actions.“) (citing Lebron, 513 U.S. at 392). WICO is similarly a government entity for purposes of plaintiffs’ constitutional claims.
****
Because WICO was established as a government corporation pursuant to a special Act of the Virgin Islands Legislature to further government objectives, and WICO is permanently and completely controlled by government appointees, it is part of the government for purposes of the constitutional claims and section 1983 claims brought by Sprauve and Smith.11
IV.
For the foregoing reasons, we will affirm the District Court‘s orders in part, reverse in part, vacate in part, and remand
We express no opinion as to the merits of the remaining claims in this case, except as to the appellants’ direct constitutional claims against Boschulte in his personal capacity. These claims are duplicative of their section 1983 claims against him. They arise from the same basic events — Sprauve‘s and Smith‘s respective terminations — and raise substantially the same allegations. See, e.g., J.A. 40, 45 (Smith alleging in Count VII, under section 1983, that her due process rights were violated when her employment was terminated by Boschulte “without affording [her] notice or opportunity to be heard” and Count II, alleging that under the Fourteenth Amendment that WICO, the Board, and Boschulte, in both his personal and professional capacities “engaged in a continuing course of conduct” that deprived her of her due process rights “by not affording [her] [notice] and opportunity to be heard before terminating her employment.“) As we held in Capogrosso v. Supreme Court of New Jersey, 588 F.3d 180, 185 (3d Cir. 2009), “[i]nasmuch as § 1983 affords a remedy for infringement of one‘s constitutional rights, identical claims raised under the Fourteenth Amendment are redundant, rendering the outcome of the § 1983 claims dispositive of the independent constitutional claims.“; see also Rogin v. Bensalem Twp., 616 F.2d 680, 686 (3d Cir. 1980) (in the context of the Fourteenth Amendment, “it would be a redundant and wasteful use of judicial resources to permit the adjudication of both direct constitutional and § 1983 claims where the latter wholly subsume the former.“). Because section 1983 affords the appellants a remedy against Boschulte in his personal capacity for the due process and equal protection claims they have brought under the Fourteenth Amendment, we will affirm the dismissal of these direct constitutional claims against him as redundant. Applying the same reasoning, because section 1983 similarly affords the appellants a remedy against him in his personal capacity for the free speech and free association claims they brought under the First Amendment, we will also affirm the dismissal of these direct constitutional claims against Boschulte.