
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                                         -3-                                          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                                         -4-                                          4             immunity are stronger where claim implicates "public policy"             or "public affairs"), cert. denied, 474 U.S. 1057 (1986).                                   ____________                                         -5-                                          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.)                                         -6-                                          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                                         -7-                                          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).                                         -8-                                          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                                         -9-                                          9             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                                         -10-                                          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                                         -11-                                          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                                         -12-                                          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                                         -13-                                          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                                         -14-                                          14             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.                       ________                                         -15-                                          15
