          United States Court of Appeals
                     For the First Circuit


No. 02-1763

     FRESENIUS MEDICAL CARE CARDIOVASCULAR RESOURCES, INC.,
                       Plaintiff, Appellee,
                                v.
   PUERTO RICO AND THE CARIBBEAN CARDIOVASCULAR CENTER CORP.,
                      Defendant, Appellant.



          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF PUERTO RICO
        [Hon. Juan M. Pérez-Giménez, U.S. District Judge]



                             Before
                    Lynch, Circuit Judge, and
          Coffin and Campbell, Senior Circuit Judges.



          Manuel R. Suarez Jiménez for appellant.
          Robert P. Mallory, with whom Jennifer J. Waldner,
McDermott, Will & Emery, Néstor M. Méndez Gómez, Oreste R. Ramos,
and Pietrantoni Méndez & Alvarez LLP were on brief for appellee.



                         March 6, 2003
           LYNCH, Circuit Judge.           This case raises the issue of

whether   the   defendant   public    corporation      is       an   arm   of   the

Commonwealth of Puerto Rico and so entitled to assert immunity

under the Eleventh Amendment.             It causes us to reshape this

circuit's arm-of-the-state test in light of intervening Supreme

Court precedent.

           Our analysis under the reshaped test leads us to affirm

the district court's conclusion that the defendant, Puerto Rico and

the Carribean Cardiovascular Center Corp. (PRCCCC), is not an arm

of the Commonwealth and so is not entitled to immunity.                    We also

uphold the district court's finding that PRCCCC was adequately

served with process.    The underlying lawsuit involves a claim by

Fresenius Medical Care Cardiovascular Resources, Inc. (FMC) against

PRCCCC for breach of contract, the details of which are not germane

to the issues on appeal.

                                     I.

           On   September   28,   2001,      FMC   filed    a    federal     court

complaint against PRCCCC, asserting diversity jurisdiction under 28

U.S.C. § 1332(a)(1), (d) (2000).            It sought over $7,000,000 in

damages for breach of contract and of the implied covenant of good

faith and fair dealing. It also sought an order requiring specific

performance of the contract by PRCCCC and a declaratory judgment

that FMC was not in material breach of the agreement.



                                     -2-
            PRCCCC moved to dismiss the complaint on November 13,

2001.    It moved to dismiss on the grounds that PRCCCC is an arm of

the state entitled to Eleventh Amendment immunity; that PRCCCC is

not a citizen of Puerto Rico for diversity purposes since it is an

arm of the state; that FMC lacked standing; and that there was

defective service of process.           PRCCCC attached to its motion an

unauthenticated chart listing the hospital's total revenues and

legislative appropriations as well as a statement under penalty of

perjury by José Soler Zapata, Acting Medical Director of PRCCCC and

former Secretary of Health of the Commonwealth of Puerto Rico.

FMC, in its opposition, submitted a statement under penalty of

perjury by Bill Watson, its executive responsible for dealing with

PRCCCC,    and   objected   to   the   Zapata   statement   on    evidentiary

grounds.    After receiving two extensions, PRCCCC eventually filed

an untimely reply.

            The district court denied PRCCCC's motion in an opinion

and order dated March 18, 2002. The court applied the multi-factor

arm-of-the-state test set forth in Metcalf & Eddy, Inc. v. Puerto

Rico Aqueduct & Sewer Authority, 991 F.2d 935, 939-40 (1st Cir.

1993).     Noting that the most important factor is the entity's

relationship to the public fisc, the district court held that this

factor     weighed   against     a   finding    of   immunity    because   the

Commonwealth would not be obligated to pay a judgment against

PRCCCC and because PRCCCC receives a relatively small share of its


                                       -3-
funds from the Commonwealth. It also rejected PRCCCC's argument of

inadequate service of process.

          PRCCCC filed two motions for reconsideration of the

district court's March 18 decision.     PRCCCC produced new evidence

in support of its second motion for reconsideration: statements by

Luisa Rivera Lúgaro, the former Executive Director of PRCCCC, and

Miguel Bustelo, the Chief Financial Officer of PRCCCC.     Bustelo's

affidavit attached a new income statement identifying sources of

government     funding   apart   from   legislative   appropriations.

Plaintiff again objected to consideration of the evidence.        The

district court, without providing plaintiff the opportunity to

produce more evidence, considered this late-filed information but

denied the motion in a six page opinion and order dated May 7,

2002.1

             On May 21, 2002, PRCCCC filed an interlocutory appeal.

See P.R. Acqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S.

139, 147 (1993) (entities claiming to be arms of the state may

immediately appeal a district court order denying a claim of

Eleventh Amendment immunity under the collateral order doctrine).

It also filed a motion in the district court to stay proceedings

while its appeal was pending.     The district court denied the stay


     1
       In its opinion and order denying the second motion for
reconsideration, the district court also correctly found that FMC
did not, as defendant charges, provide misleading adjusted budget
percentages about PRCCCC's operations.

                                  -4-
request on June 4, 2002 and denied a motion for reconsideration of

that order on July 1, 2002.2

            PRCCCC finally sought a stay from this court on October

15, 2002, more than four months after the district court denied its

stay request.   On November 6, 2002, this court denied the request.3

     2
       At the same time, PRCCCC failed to meet its obligations to
move forward either its appeal or the trial court proceedings. In
its appeal of the district court's March 18 and May 7 rulings,
PRCCCC missed the deadlines to file counsel's appearance form, its
docketing statement, and its brief, after those deadlines were
extended. In the district court, it disregarded a September 23,
2002 court order requiring PRCCCC to comply with discovery requests
that had been pending for over six months.
     In its appeal of the district court's Eleventh Amendment
finding, PRCCCC again failed to meet its obligations when it
submitted its reply brief to this court. The reply brief was late
and longer than our rules permit. In addition, the reply brief
repeatedly made new and unsupported factual allegations. See Fed.
R. App. P. 28(a)(7). Plaintiff opposed the filing of the reply
brief on the grounds that it was untimely, oversized, and made
irrelevant factual accusations. We strike the statement of facts
and new factual references in the reply brief but have considered
the legal arguments made.
     3
         This court's order denying the stay said:

         A request for a stay essentially invokes the equitable
   powers of this court.       Here, the conduct of [PRCCCC]
   evidences a pattern of causing delay in this litigation, both
   in this court and the district court, including missing
   filing deadlines after those deadlines were extended.
   Accordingly, we think the Hospital is in a poor position to
   claim that it will suffer injury if the stay is not granted.
   We therefore deny the motion for a stay.
        We will, however, expedite this appeal. . . . Should
   the trial date in the district court arrive before this court
   has decided the appeal, then the Hospital may reapply for a
   stay.

     A month later, PRCCCC filed an "urgent motion for
reconsideration" of this court's denial of the stay request,
claiming that the trial date had in fact arrived before this court

                                 -5-
                                     II.

A.    Standards for Arm-of-the-State Analysis

           We review de novo the conclusion that PRCCCC is not

entitled to Eleventh Amendment immunity.              Arecibo Cmty. Health

Care, Inc. v. Puerto Rico, 270 F.3d 17, 22 (1st Cir. 2001).

           The   question    of   whether    PRCCCC    is   an   arm   of   the

Commonwealth and entitled to share its Eleventh Amendment immunity

is a question of federal law.       Regents of the Univ. of Cal. v. Doe,

519 U.S. 425, 429 n.5 (1997).        The Commonwealth of Puerto Rico is

treated as a state for Eleventh Amendment purposes.               P.R. Ports

Auth. v. M/V Manhattan Prince, 897 F.2d 1, 9 (1st Cir. 1990).               Here

the Commonwealth itself is not a party nor has it sought to express

its views in this litigation as a party or amicus; PRCCCC is the

party and is attempting to cloak itself in the Commonwealth's

Eleventh Amendment immunity under the theory that it is an arm of

the   state.     PRCCCC,    the   entity   asserting   Eleventh    Amendment

immunity, bears the burden of showing it is an arm of the state.




had decided the appeal.       PRCCCC's claim was false.      PRCCCC
suggested that the parties would engage in arbitration at the
district court's behest, before the appeal was decided, and that
this was the equivalent of a trial date. In fact, no steps had
been taken by either side to initiate arbitration. No date for
arbitration had been set, and an arbitrator had not been contacted.
Because nothing had changed since the issuance of the November 6
order, this court denied the motion for reconsideration on December
19, 2002.

                                     -6-
Wojcik v. Mass. State Lottery Comm'n, 300 F.3d 92, 99 (1st Cir.

2002).

             The arm-of-the-state doctrine arises in connection with

at least three types of entities.4               The first is a political

subdivision of the state, such as a city or county.                    Political

subdivisions are not entitled to Eleventh Amendment immunity. See,

e.g., Bd. of Trustees of Univ. of Ala. v. Garrett, 531 U.S. 356,

369 (2001) (citing Lincoln County v. Luning, 133 U.S. 529, 530-31

(1890)); see also Moor v. County of Alameda, 411 U.S. 693, 717-721

(1973) (political subdivision not arm of the state for diversity

jurisdiction purposes).           The second entity is established by two

(or more) states by compact and approved by Congress.              The third,

the   type    at    issue    here,    involves   a    special-purpose    public

corporation established at the behest of a state.                 Multi-state

compact      entities       and    special-purpose      public   corporations

established    by    a   state    sometimes   share    the   state's    Eleventh

Amendment immunity.         The arm of the state analytical doctrine has

moved     freely   amongst    these   three   categories,     applying   common

principles.




      4
       PRCCCC does not argue that it is simply acting as an
agent of the state, such as a private corporation acting under
contract as a fiscal intermediary for a health insurance
program for state employees.     See Shards Teaching Hosp. &
Clinics, Inc. v. Beech St. Corp., 208 F.3d 1308 (11th Cir.
2000). Nor would the record support any such argument.

                                        -7-
          The Supreme Court's modern arm-of-the-state jurisprudence

starts with Mt. Healthy City School District Board of Education v.

Doyle, 429 U.S. 274 (1977), which rejected the school board's claim

that it was an arm of the state and not a political subdivision.

In Mt. Healthy, the Supreme Court looked in part to state law to

consider the "nature of the entity created by law."    Id. at 280.

It concluded that state law rendered the board more like a county

or city, and thus not an arm of the state.   The court considered a

balance of factors: The board obtained guidance and extensive

monies from the state, but that was offset by the board's revenue-

raising power, including its power to issue bonds and levy taxes.

Id.   It was unclear whether "the Court was using state law as an

indication of the state's intention with respect to school bonds or

as a structural feature that the Court would look to regardless of

the state's intention." Morris v. Wash. Metro. Area Transit Auth.,

781 F.2d 218, 223 (D.C. Cir. 1986).      This court, as discussed

below, has chosen to ask the question in terms of how the state

structured its relationship to the entity.

          The Mt. Healthy decision was followed by Lake Country

Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391

(1979), which, by contrast, involved a bi-state agency, and thus

raised different concerns, including the interests of the federal

government under the Compact Clause.   There the court held:




                               -8-
          [S]ome agencies exercising state power have been
          permitted to invoke the Amendment in order to protect the
          state treasury from liability that would have had
          essentially the same practical consequences as a judgment
          against the State itself.

Id. at 400-01.    Lake Country also considered several facts as

pertinent to the analysis.5

          That was the state of the doctrine in 1993, when this

court decided Metcalf & Eddy, 991 F.2d at 939-40.     For the past

decade the courts of this circuit, under Metcalf & Eddy, have

assessed an entity's arm-of-the-state status by focusing on whether


     5
       The Court in Lake Country identified the following facts as
germane to the arm-of-the-state status of the Tahoe Regional
Planning Agency (TRPA):
          1. the designation in the interstate compact of the TRPA
          as a "separate legal entity" and a "political
          subdivision";
          2. the power that resided in counties to appoint six of
          the ten governing members of the TRPA whereas the states
          appointed only four members;
          3. the funding of the TRPA exclusively by the counties;
          4. the express pronouncement in the compact that
          obligations of the TRPA were not binding on either state;
          5. the function of the TRPA, which was to regulate land
          use; and
          6. the failure of the states to preserve veto power over
          rules promulgated by the TRPA.
See 440 U.S. at 401-02. Thus, the analysis considered (a) how the
entity is characterized under state law; (b) the level of control
exercised by the state; (c) the entity's relationship to the public
treasury (both the relative size of its government appropriation
and whether the government is legally liable for the entity's
debts); and (d) whether the entity performs a state function. See
generally A.E. Rogers, Note, Clothing State Governmental
Entities With Sovereign Immunity:       Disarray in the Eleventh
Amendment Arm-of-the-State Doctrine, 92 Colum. L. Rev. 1243
(1992) (criticizing the Court's continuing use of a multi-
factor approach).

                               -9-
the structure established by the state reveals that the agency is

an arm of the state; if the structure does not resolve the

question, then the primary focus is on whether the action is in

essence one for recovery from the state.           Because answers are not

always clear, we have encouraged the use of a non-exclusive list of

factors, and identified at least seven areas of inquiry.6              These

multi-factor tests, as we noted in Neo Gen Screening, Inc. v. New

England Newborn Screening Program, 187 F.3d 24, 27 (1st Cir. 1999),

"are not easy to apply."              Still, Metcalf & Eddy presciently

predicted the ways in which the Supreme Court would view the issue.

                 In the intervening decade since Metcalf & Eddy there have

been       two   Supreme   Court   decisions   addressing   arm-of-the-state

issues: Hess v. Port Authority Trans-Hudson Corp., 513 U.S. 30, 33

(1994), involving a bi-state entity, which updated and clarified

       6
       "These areas, each of which can be mined for information
that might clarify the institution's structure and function,
include:
          (1) whether the agency has the funding power to enable it
          to satisfy judgments without direct state participation
          or guarantees;
          (2) whether the agency's function is governmental or
          proprietary;
          (3) whether the agency is separately incorporated;
          (4) whether the state exerts control over the agency, and
          if so, to what extent;
          (5) whether the agency has the power to sue, be sued, and
          enter contracts in its own name and right;
          (6) whether the agency's property is subject to state
          taxation; and
          (7) whether the state has immunized itself from
          responsibility for the agency's acts or omissions."

Id. at 939-940.

                                       -10-
the arm-of-the-state doctrine; and Auer v. Robbins, 519 U.S. 452,

456 n.1 (1997), which briefly applied Hess to an intra-state

entity.   Additionally, in that time, a number of important Supreme

Court decisions have reshaped Eleventh Amendment doctrine.                      The

question is raised then as to whether those opinions cause us to

reshape the Metcalf & Eddy test.

            We start with the larger Eleventh Amendment doctrine.

Several points, at least, are informative to our analysis.                      The

first is that the Supreme Court has said that it is not just the

state's interest in its public treasury which is at stake in the

assertion of Eleventh Amendment immunity.               The state also has a

"dignity" interest as a sovereign in not being haled into federal

court.    Fed. Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743,

122 S. Ct. 1864, 1874-75 (2002).            These twin goals of the Eleventh

Amendment    --    protection    of   the    state's    treasury     and   of   its

dignitary interests        --   explicitly     govern   the   arm-of-the-state

analysis.    Hess, 513 U.S. at 39-41.

            The changes in Eleventh Amendment doctrine have created

different consequences for a finding that an entity partakes of

Eleventh Amendment immunity as an arm of the state.                The Eleventh

Amendment has always acted to restrict the jurisdiction of the

federal courts to entertain claims against the state when the

underlying        source   of    federal      jurisdiction      is     diversity

jurisdiction.       See Univ. of R.I. v. A.W. Chesterton Co., 2 F.3d

                                      -11-
1200, 1202-03 (1st Cir. 1993).          The Amendment also restricts the

jurisdiction of the federal courts to hear private claims based on

federal causes of action created by the Congress, see Edelman v.

Jordan, 415 U.S. 651, 662-64 (1974), subject to the Ex Parte Young

exception for injunctions against state officers, Ex Parte Young,

209 U.S. 123, 159 (1908). Importantly, the Court has recently held

that the Amendment's inherent notions of state sovereign immunity

impose restrictions on the power of Congress, acting under certain

Article I powers, to create privately enforced federal causes of

action against the states.      Seminole Tribe v. Florida, 517 U.S. 44

(1996).    Where the Eleventh Amendment bars jurisdiction over a

claim in   federal   court,     the   states    may   decline    on       sovereign

immunity grounds to entertain such an action.              Alden v. Maine, 527

U.S. 706, 731-32 (1999).

           While this case is a diversity action for breach of

contract, the criteria for rules about what is an arm of the

state have not varied with whether the basis for federal

jurisdiction is diversity or federal question.                  Accordingly,

any arm-of-the-state conclusion here has implications for the

enforceability of federal laws enacted under Article I in

suits by private persons against PRCCCC.

           Thus,   where   an    entity      claims   to    share     a    state's

sovereignty and the state has not clearly demarcated the entity as


                                      -12-
sharing its sovereignty, there is great reason for caution.            It

would be every bit as much an affront to the state's dignity and

fiscal interests were a federal court to find erroneously that an

entity was an arm of the state, when the state did not structure

the entity to share its sovereignty.         The consequences of an arm-

of-the-state finding are considerable.        For example, where a state

consents to suit in its own courts, such an arm-of-the-state

finding may pose a threat to the state treasury, even if the state

has not structured the entity so as to put its treasury at risk.

In an era when many states face budget crises and impose cutbacks

on recognized state agencies, yet another claimant on the treasury

may not be welcomed.

             Not all entities created by states are meant to share

state sovereignty.       Some entities may be part of an effort at

privatization, representing an assessment by the state that the

private sector may perform a function better than the state.           Cf.

Richardson v. McKnight, 521 U.S. 399, 405-07 (1997) (discussing

advantages    of    private   sector   entities   performing   government

functions     and     role    of   private    contractors      in   prison

administration).       Some entities may be meant to be commercial

enterprises, viable and competitive in the marketplace in which

they operate.       Such enterprises may need incentives to encourage

others to contract with them, such as the incentives of application

of usual legal standards between private contracting parties.          The


                                   -13-
dollar cap on recovery found in many state sovereign immunity

statutes would be a powerful disincentive to a private party to

contract with an entity, unless the private party first obtained a

waiver of immunity from the entity.                     See generally Defendini

Collazo v. Commonwealth of P.R., 134 D.P.R. 28 (1993), available at

1993 WL 839857 (discussing limited waivers of sovereign immunity

under Puerto Rico law).            In Puerto Rico, a breach of contract

action against the Commonwealth is capped at $75,000. 32 P.R. Laws

Ann. § 3077(c) (2001).

              A conclusion that the entity is beyond the control of

privately enforced Article I legislation enacted by the Congress

may also be undesirable to a state.            A state may not have intended,

for   example,    that    the   employees      of   the      entity    be   unable   to

privately enforce the Fair Labor Standards Act, 29 U.S.C. §§ 201-

219 (2000), see Alden, 527 U.S. at 712 (dismissing FLSA lawsuit by

state employees on grounds that Congress, acting pursuant to its

Article I powers, could not abrogate the sovereign immunity of

states   in    state     court);   or   Title       I   of    the     Americans   with

Disabilities Act, 42 U.S.C. §§ 12111-12117 (2000), see Garrett, 531

U.S. at 360 (holding that suits by state employees to recover money

damages for a state's failure to comply with the provisions of

Title I of the ADA are barred by the Eleventh Amendment); or the

Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634, see

Kimel v. Fla. Bd. of Regents, 528 U.S. 62, 82-83 (2000) (holding


                                        -14-
that ADEA's purported abrogation of the states' sovereign immunity

is invalid because ADEA is not "appropriate legislation" under

section five of the Fourteenth Amendment); or provisions of the

Family and Medical Leave Act, 29 U.S.C. §§ 2601-2654, see Laro v.

New Hampshire, 259 F.3d 1, 4 (1st Cir. 2001) (invalidating on

Eleventh Amendment grounds a private cause of action for money

damages   against   the    state   under   the   personal   medical   leave

provision of the FMLA).      A state could adjudge that those effects

may be unwanted disincentives to people who might otherwise seek

employment with the entity, or that it is unwise to differentiate

the entity's employees from those in the private sector.           In sum,

states set up entities for many reasons.         An erroneous arm-of-the-

state decision may frustrate, not advance, a state's dignity and

its interests.

           Against that context of the serious consequences on both

sides of this issue, it is the developments in the arm-of-the-state

case law from the Supreme Court which bind us here.               The most

recent full discussion of the doctrine is in Hess.          Hess, like Lake

Country before it, involves an entity created by two states under

the Compact Clause of the Constitution. A closely divided court in

Hess held that the Port Authority Trans-Hudson Corporation was not

an arm of the state.      As noted above, the Hess analysis explicitly

recognizes the Eleventh Amendment's twin interests: protection of

the fisc and the dignity of the states.          513 U.S. at 39-40, 47.


                                   -15-
                  As to bi-state Compact Clause entities, the Hess court

continued the general approach taken in Lake Country:

                  We would presume the Compact Clause agency does not
                  qualify for Eleventh Amendment immunity "unless there is
                  good reason to believe that the States structured the new
                  agency to enable it to enjoy the special constitutional
                  protection of the states themselves and that Congress
                  concurred in that purpose."

Id. at 43-44 (quoting Lake Country, 440 U.S. at 401).                     Putting

aside       the    question    of    presumption,   Hess   requires   a   two-step

analysis.          Accord Harter v. Vernon, 101 F.3d 334, 337 (4th Cir.

1996).       The first step of the analysis concerns how the state has

structured the entity.              This step, we think, pays deference to the

state's dignitary interest in extending or withholding Eleventh

Amendment immunity from an entity.               After all, a state may easily

make clear by statute its view that an entity is to share the

state's immunity.          Where the state has not made a clear statement,

its dignity interests are nonetheless protected by an examination

of the structure the state has chosen to establish.               In evaluating

whether the state had structured an agency to be an arm of the

state, Hess looked at "various indicators of immunity or the

absence thereof."7            513 U.S. at 44.


        7
       Among the indicators Hess considered were:
     1. extent of state control including through the appointment
of board members and the state's power to veto board actions or
enlarge the entity's responsibilities;
     2. how the enabling and implementing legislation characterized
the entity and how the state courts have viewed the entity;
     3. whether the entity's functions are readily classifiable as
state functions or local or non-governmental functions; and

                                          -16-
          If   the   structural    indicators   point    in   different

directions, then the second stage of analysis comes into play.       At

this stage, the vulnerability of the state's purse is the most

salient factor in the Eleventh Amendment determination.8       Where it

is clear that the state treasury is not at risk, then the control

exercised by the state over the entity does not entitle the entity

to Eleventh Amendment immunity.     See id. at 47-49.9



     4. whether the state bore legal liability for the entity's
debts. See 513 U.S. at 44-46.
     8
       This Hess vulnerability inquiry includes examination of
these, among other, factors: whether the state laws impose an
obligation on the state to be responsible for payment of judgments
against the entity (on this point federal courts are not free to
assume that a state will voluntarily assume the payment of the
entity's debts if the entity is in need); other sources of revenue
for the entity; and whether the agency is so structured that, as a
practical matter, the state anticipated budget shortfalls that
would render the entity constantly dependent on the state. Id. at
49-50.
     9
        Although the dissent in Hess would reach a different
conclusion on the facts there, it agrees that the key initial
question is whether "the State has structured the entity in the
expectation that immunity will inhere." Id. at 58 (O'Connor, J.,
dissenting).    The dissent also agrees that if the entity's
liabilities are funded by the taxpayers' dollars, then there is
Eleventh Amendment immunity. Id. at 60-61. The Hess dissent did
not agree that the converse was true: that if the state treasury
was not directly implicated, then there would be no immunity. The
dissent would then ask whether the state "possesses sufficient
control over an entity performing governmental functions that the
entity may properly be called an extension of the State itself."
Id. at 61. If "the lines of oversight are clear and substantial --
for example, if the state appoints and removes an entity's
governing personnel and retains veto or approval power over an
entity's undertakings" -- then, on the dissent's reasoning, the
entity should be deemed an arm of the state for Eleventh Amendment
purposes. Id.

                                  -17-
           In the aftermath of Hess, the circuits almost uniformly

find that, when there is an ambiguity about the direction in which

the structural analysis points, the potential payment from the

state treasury is the most critical factor in determining whether

an entity is operating as an arm of the state.   See 17A J.W. Moore

et al., Moore's Federal Practice § 123.23(4)(b), at 123-60 & n.51

(3d ed. 2000) [hereinafter Moore's] (collecting cases).

           The question for the lower federal courts becomes what

parts of Hess govern the analysis of an intra-state entity such as

PRCCCC.   Compact Clause entities by their nature involve different

federalism concerns than intra-state entities.   Several objections

might be made to applying Hess here.   The presumption announced in

Hess may be limited to multi-state entities.      It might also be

thought that the two-step Hess analysis applies only to multi-state

Compact Clause entities, and so not to a public corporation formed

by the Commonwealth alone. Or it might be thought, more generally,

that Hess is inconsistent with later Eleventh Amendment case law,

and so should not be taken as establishing doctrine controlling

now.

           Hess itself noted there was reason to treat Compact

Clause entities somewhat differently.    513 U.S. at 42 ("There is

good reason not to amalgamate Compact Clause entities with agencies

of one of the United States for Eleventh Amendment purposes.")

(internal quotation omitted); accord Hadley v. N. Ark. Cmty.

                                -18-
Technical Coll., 76 F.3d 1437, 1439 (8th Cir. 1996) (interpreting

Hess).      "As    part    of    the   federal   plan     prescribed   by   the

Constitution, the States agreed to the power sharing, coordination,

and unified action that typify Compact Clause creations. . . .

[T]he    federal   tribunal      cannot   be   regarded   as   alien   in   this

cooperative, tri-governmental arrangement."             Hess, 513 U.S. at 41-

42.     Here, by contrast, the federal government is not a party to

the arrangement.     As a result, we think the presumption announced

in Hess -- a presumption against an entity being an arm of the

state -- applies only to Compact Clause entities, and the logic of

it does not extend to the two other categories of cases.

            We conclude, however, that the two-step analysis of Hess

is not limited to Compact Clause entities. Several reasons support

this conclusion.          First, Hess is founded on the twin reasons

underlying the Eleventh Amendment, reasons common to all categories

of cases.    Further, the Hess court cited Metcalf & Eddy, which did

not involve a multi-state Compact Clause entity, among cases

supporting the point that "the vulnerability of the State's purse

[is] the most salient factor in Eleventh Amendment determinations."

Hess, 513 U.S. at 48.            Hess also cited cases from four other

circuits adhering to that principle when the entities involved

included intra-state authorities, as well as political subdivisions

and bi-state entities.          Id. at 48-49.    There is no indication the

court intended to differentiate in the application of its major


                                       -19-
tests depending on the nature of the entity.   Thus, Metcalf & Eddy

foreshadowed Hess's determination that when there is ambiguity from

the structure about whether an entity is an arm of the state, the

primary focus is on the risk to the state treasury.

          Next, the circuits have also viewed Hess as applying to

political subdivision and intra-state corporation cases.   Mancuso

v. N.Y. State Thruway Auth., 86 F.3d 289, 293 (2d Cir. 1996)

("Although Hess involved a bi-state entity, we nevertheless believe

that it is the proper starting place for our Eleventh Amendment

inquiry in this case," involving an intra-state entity); see, e.g.,

Harter, 101 F.3d at 337-40 (applying Hess to determine whether an

entity should be characterized as a political subdivision or a

state agency).

          Finally, Auer v. Robbins, a case involving an intra-state

entity, the Board of Police Commissioners, supports our reading

that the two-step analysis applies beyond Compact Clause entities.

In a footnote, the Court held the Board was not an arm of the state

because the state was not responsible for the Board's financial

liabilities and the only form of state control was the governor's

power to appoint four of five Board members.   519 U.S. at 456 n.1.

The Court did not cite to its earlier precedent, such as Mt.




                               -20-
Healthy, but rather to its bi-state compact cases, Hess and Lake

Country.10

             As to the more general concern, some have questioned

Hess's viability in light of Seminole and its aftermath. See Thiel

v. State Bar, 94 F.3d 399, 401-03 (7th Cir. 1996) (viewing Hess as

implicitly limited by Seminole).     Hess's emphasis on protection of

the state fisc as a primary component of an arm-of-the-state

analysis has been criticized as not entirely consistent with the

broader Eleventh Amendment interests established by other and later

cases.       See   C.M.   Vazquez,   What   Is   Eleventh   Amendment

Immunity?, 106 Yale L.J. 1683, 1731-32 (1997); see also Thiel,

94 F.3d at 401-02.

             One response would be that Hess was concerned with an

entirely different problem. Seminole and its progeny are addressed

to what protection is given the state by the Eleventh Amendment.

Hess is concerned with who is entitled to share that protection.

When the state has not made it clear through structure that an

entity is to share its immunity, there is reason not to reach a



     10
       In Regents of the University of California v. Doe, the Court
said generally:

     Of course, the question of whether a money judgment against a
     state instrumentality or official would be enforceable against
     the State is of considerable importance to any evaluation of
     the relationship between the State and the entity being sued.

519 U.S. at 430.

                                 -21-
result inconsistent with what the state has apparently hoped to

effectuate (that is, an independent entity) unless there is a risk

to the state fisc.

           Another response would be that Seminole and its progeny

affirm the longstanding view, operationalized in Hess, that the

Eleventh   Amendment   exists   to    protect   the   fiscal   and   dignity

interests of the state.   Seminole, 517 U.S. at 58.       The first prong

of Hess pays considerable deference to the dignity interests of the

state, focusing on both explicit and implicit indications that the

state sought to cloak an entity in its Eleventh Amendment immunity.

           Finally, even were the criticism to have force, Hess

binds us and has not been overruled.        To the contrary, it has been

consistently cited by the Court.11          We must follow it until the

Supreme Court decides otherwise.        State Oil Co. v. Khan, 522 U.S.

3, 20 (1997) ("[I]t is this Court's prerogative alone to overrule

one of its precedents."); Rodriguez de Quijas v. Shearson/Am.

Express, Inc., 490 U.S. 477, 484 (1989).

           Accordingly, in the aftermath of Hess, Auer and Regents

of the University of California, we think the Hess analysis governs

and has refined the Metcalf & Eddy analysis, which is consistent




     11
       E.g., Solid Waste Agency v. U.S. Army Corps of Eng'rs,
531 U.S. 159, 174 (2001); Alden, 527 U.S. at 746; Seminole,
517 U.S. at 58.

                                     -22-
with Hess.      We view Hess as involving two key questions, with many

factors instructive on each:

               1.   Has the state clearly structured the entity to share

its sovereignty?        This evaluation is undertaken12 in light of the

different factors described in Hess, Lake Country and Metcalf &

Eddy.

               2.   If the factors assessed in analyzing the structure

point     in   different   directions,   then   the   dispositive   question

concerns the risk that the damages will be paid from the public

treasury.      This is the rule of Metcalf & Eddy, valid today as well.




     12
        Lest our focus on the structure created by the state be
misunderstood, whether an entity is entitled to partake of a
state's Eleventh Amendment immunity is a question of federal law,
not state law:

               Ultimately, of course, the question whether a particular
               state agency has the same kind of independent status as
               a county or is instead an arm of the State, and therefore
               "one of the United States" within the meaning of the
               Eleventh Amendment, is a question of federal law. But
               that federal question can be answered only after
               considering the provisions of state law that define the
               agency's character.

Regents of the Univ. of Cal., 519 U.S. at 429 n.5. The Supreme
Court has adverted to state law, but has not defined what role it
is to play. See, e.g., Mt. Healthy, 429 U.S. at 280. In Hess
itself the majority declined to adopt the state court's
characterization of the agency. See 513 U.S. at 45 (holding that
the Port Authority does not enjoy Eleventh Amendment immunity
despite the fact that "[s]tate courts . . . repeatedly have typed
the Port Authority an agency of the States rather than a municipal
unit or local district").


                                    -23-
This    analysis   focuses   on   whether   the   state   has   legally   or

practically obligated itself to pay the entity's indebtedness.

              The control asserted by the state is an important guide

to the initial inquiry.      But where the evidence is that the state

did not structure the entity to put the state treasury at risk of

paying the judgment, then the fact that the state appoints the

majority of the governing board of the agency does not itself lead

to the conclusion that the entity is an arm of the state.

B.     Application of Standards

             We now apply these standards to the facts of this case.

There are no factual findings of disputed facts by the district

court, as the issue was decided under Rules 56 and 12(b)(6).13

PRCCCC does not claim that there were disputed facts requiring

resolution by the trial court.         The parties do draw different

conclusions from the undisputed financial records of PRCCCC.

We consider the facts from admissible evidence that are germane to

Eleventh Amendment immunity in the light most favorable to the non-

moving party, drawing all reasonable inferences in that party's

favor.      Wojcik, 300 F.3d at 96.




       13
        We treat the Fed. R. Civ. P. 12(b)(6) motion               raising
PRCCCC's Eleventh Amendment defense as a motion for                summary
judgment, since both parties presented and the court              did not
exclude evidence outside the pleadings. Fed. R. Civ. P.           12(b).

                                   -24-
1.   Structuring of PRCCCC

a.   The Enabling Act

             The enabling act that created PRCCCC, 24 P.R. Laws Ann.

§§ 343-343k (2000), does not by its terms structure PRCCCC to be an

arm of the state.          In fact, it suggests exactly the opposite.          The

act creates an "entity which is independent and separate from any

other      agency    or    instrumentality     of   the    Government   of     the

Commonwealth of Puerto Rico."              Id. § 343a.     Moreover, PRCCCC is

explicitly empowered to enter into contracts with the state,

specifically        the     Commonwealth's    Department     of    Health,     the

University      of        Puerto   Rico,     and    "any   other    bodies      or

instrumentalities of the Commonwealth of Puerto Rico."14                     Id. §

434b(n).     Further, the act provides that PRCCCC may "borrow" money

from the Commonwealth, id. § 343b(g), and that the Commonwealth

will charge it rent for use of its building, which "shall help to

amortize the debt for a period of thirty (30) years," id. § 343g.

The Board is authorized to create a budget, which it must submit to

the legislature, but the budget is required to stay "within the

limits of [PRCCCC's] estimated income so as to keep from incurring



      14
        In PRCCCC's favor is that it has been exempted from all
taxes and fees collected by the government of Puerto Rico and its
political subdivisions.    Id. § 343e.   By like token, that very
language indicates it is not a political subdivision. In reference
to PRCCCC's tax exempt status, FMC executive Watson observes that
many of the private hospitals he has dealt with are also exempt
from local taxes and duties.

                                       -25-
shortfalls."     Id. § 343h.   Importantly, the act does not say the

treasury of the Commonwealth will pay for those shortfalls.15

           Nonetheless, in PRCCCC's favor, the act does not contain

language declaring that the Commonwealth is not responsible for

PRCCCC's debt, as was true of the statutory schemes in Metcalf &

Eddy, see 991 F.2d at 940, and Royal Caribbean Corp. v. Puerto Rico

Ports Authority, 973 F. 2d 8, 11 (1st Cir. 1992).     In that sense,

this is a closer case.

b.   Other State Statutes

          PRCCCC relies on statutes outside its own enabling act to

argue that it is an arm of the state.    It points to the definition

of public funds set forth in 33 P.R. Laws Ann. § 3022(11), (14),

which provide:

          (11) Commonwealth of Puerto Rico -- Comprises its
          municipalities, agencies, public corporations, political
          subdivisions and other dependencies or instrumentalities.

           (14) Public funds or public treasury -- Means all bonds
           or liabilities and evidences of indebtedness and all
           moneys belonging to the Government of the Commonwealth of
           Puerto Rico, the municipalities, agencies, public,
           municipal and state corporations, political subdivisions


     15
       Interestingly, PRCCCC's own evidence showed that one of
the purposes of creating the public corporation was that
public funds allocated to the hospital "could be insulated
from the budgetary constraints the [Commonwealth's] Health
Department always had."    Another purpose was to serve as
"justification to 'privatize' the health system." These are
also indicia that the Commonwealth wanted PRCCCC to be at
arm's length, not to be an arm of the state.

                                 -26-
            and other dependencies, and all moneys, securities, bonds
            and evidences of indebtedness received and kept by
            officials or employees of the aforementioned entities, in
            their official character.

We reject for four reasons the contention that this definition of

public    funds   is   a   statement   that   all   "public   corporations"

established by Puerto Rico are arms of the state.               First, the

definitions are explicitly limited to the subtitle in which they

appear, a part of the Penal Code of Puerto Rico.          See id. § 3022.

Second, when Puerto Rico has chosen to make an entity an arm of the

state, it has used other language.             For example, the Medical

Services Administration (MSA), another health care entity created

by the Commonwealth,16 was "created as an instrumentality of the

Government of the Commonwealth of Puerto Rico, attached to the

Commonwealth Department of Health . . . under the direction and

supervision of the Secretary of Health."        24 P.R. Laws Ann. § 342b;

see Rodriguez Diaz v. Sierra Martinez, 717 F. Supp. 27, 29-31

(D.P.R. 1989). Third, it is a maxim of statutory construction that

the more specific statute, here PRCCCC's enabling act, governs over

the more general, such as the definitions in § 3022.             See In re


     16
       PRCCCC witness Zapata asserts claims that the structure of
the PRCCCC is "similar, if not identical" to that of the public
medical center known (in English) as the Medical Services
Administration (MSA).     This is untrue, as discussed above.
Furthermore, unlike the PRCCCC enabling legislation, see 24 P.R.
Laws Ann. §§ 343-343k, the MSA enabling legislation provides that
civil litigants against the MSA are subject to the cap on recovery
established under the Commonwealth's state sovereign immunity, 24
P.R. Laws Ann. § 343g.

                                   -27-
Weinstein, 272 F.3d 39, 43 (1st Cir. 2001).           Fourth, such a

construction would be inconsistent with a number of our cases

finding various public authorities and corporations created by

Puerto Rico not to be arms of the state.      See, e.g., Metcalf &

Eddy, 991 F.2d 935; Royal Carribean Corp., 973 F.2d 8 (Breyer,

C.J.).

c.   State Court Decisions

           Apart from the statutory schemes, we consider how the

state courts have treated PRCCCC.      The Supreme Court has found

state court decisions a useful resource.   See Hess, 513 U.S. at 45;

Moor, 411 U.S. at 720-721.     PRCCCC has not provided us with a

single opinion from a court of Puerto Rico holding that PRCCCC is

part of the government of Puerto Rico, or, for that matter, that

the Commonwealth will stand behind PRCCCC's debt.17    It is PRCCCC's

burden to do so.   See Wojcik, 300 F.3d at 99; Gragg v. Ky. Cabinet

for Workforce Dev., 289 F.3d 958, 963 (6th Cir. 2002); Skelton v.

Camp, 234 F.3d 292, 297 (5th Cir. 2000).

           PRCCCC points to the Penal Code, stating that PRCCCC

employees are considered public employees under the Penal Code of

Puerto Rico.   The Penal Code's definition of a public employee,

which is expressly limited to the subtitle in which it appears, see



      17
        PRCCCC refers to a 1987 opinion by the Attorney
General; we do not read that opinion as supporting PRCCCC even
assuming, dubitante, that it has some authoritative value.

                                -28-
33 P.R. Laws Ann. § 3022, includes persons working for municipal

and local government bodies and other entities that do not enjoy

Eleventh Amendment immunity, see id. § 3022(16).              Meanwhile, other

statutory definitions of public employee seem to exclude PRCCCC

employees.        See, e.g., 3 P.R. Laws Ann. § 729c(b) (chapter on

compensation and benefits of government personnel adopts definition

of employee that specifically excludes "the officials and employees

of the public corporations and of the University of Puerto Rico").

d.   Functions of PRCCCC

            PRCCCC       contends   that   its   functions    are    those   of   a

government.       If true, that would assist its structural argument.

PRCCCC points to no judicial authority to support its proposition.

Instead, it offers three arguments.

            First,       Zapata   contends    that   PRCCCC   is    an   essential

component    of    the    Commonwealth's      strategy   to   comply     with   its

obligation, under the Constitution of Puerto Rico, Article II,

Section 20, to provide health care to indigent residents.                         It

appears Section 20 is not binding. The Constitution of Puerto Rico

had to be approved by the U.S. Congress before going into effect.

Figueroa v. People of P.R., 232 F.2d 615, 620 (1st Cir. 1956).

Congress conditioned its approval of the Puerto Rico Constitution

partly on deletion of Article II, Section 20.             See Pub. L. No. 82-

447, 66 Stat. 327, 327 (1952). Furthermore, Article II, Section 20

appears to have been intended as an aspirational statement, modeled

                                       -29-
on language in the Universal Declaration of Human Rights, rather

than as a basis for legal obligations.            The Section enumerates a

list of human rights including the right to work, the right to an

adequate standard of living, and the right to medical care; it then

states, "The rights set forth in this section . . . require, for

their full effectiveness, sufficient resources and an agricultural

and industrial development not yet attained by the Puerto Rican

community."    (emphasis added).

           Second, PRCCCC's enabling legislation says that it will

be responsible for public policy relating to the provision of

cardiovascular services in Puerto Rico.           24 P.R. Laws Ann. § 343b.

PRCCCC presents no evidence indicating that it has helped set

policies applicable     to   other      facilities      in   Puerto   Rico.    It

acknowledges, moreover, that since the Commonwealth carried out a

major health reform in 1993, PRCCCC has competed with private

hospitals for legislative appropriations and other pubic funds

allocated for cardiovascular surgery.18              This reform presumably

diminished any policymaking function of PRCCCC.

           Third, Zapata observes that PRCCCC's mission includes

training   medical    students,      interns,     and    residents     from   the

University    of   Puerto   Rico   (a    public   university).         But    many

hospitals unaffiliated with state governments (or the Commonwealth)


     18
       Further, Watson notes that PRCCCC functions with respect to
its vendors like a private, rather than a government, hospital.

                                     -30-
employ   (and   train)   interns    and    residents   from   state   medical

schools.

           The provision of medical care, in our economy, is not

primarily a state function.        Even medical care for the poor is a

responsibility often imposed on private hospitals, through free

care pools,     Medicaid,   and    other    devices.    The   difficulty    of

containing costs for these services may be exactly why Puerto Rico

has chosen in PRCCCC's enabling act not to make its treasury

accountable for PRCCCC's debts.            That PRCCCC receives Medicaid

funding does not distinguish it from a private sector hospital,

either not-for-profit or for-profit. A mosaic of medical providers

serves the poor and the uninsured, and nothing about PRCCCC marks

it as serving a uniquely governmental function.

e.   Control by the State

           PRCCCC also argues that it is subject to a fair degree of

control by the Commonwealth.       Under the enabling act, the Board is

composed of seven members, three of whom are ex officio members and

are high-ranking state officials.          33 P.R. Laws Ann. § 343(c).     The

governor appoints the remaining four members to four-year terms.

The Secretary of Health of Puerto Rico is chairman of the Board.

The votes of four members are needed for action; thus the ex

officio members presumably vote.




                                    -31-
               The governor's appointment power over the board is not

enough in itself to establish that PRCCCC is an arm of the state.

See Auer, 519 U.S. at 456 n.1.              The statute itself does not give

the governor power to remove Board members, and it is unclear where

such power resides.19 Nor does the statute give the Commonwealth

veto power over the decisions of the Board, a key element of

control.

               In   her    statement,   Lúgaro   asserts     that   the   governor

intervenes periodically in PRCCCC management and personnel issues.

She asserts that the Commonwealth's Comptroller audits PRCCCC. She

also    says    that      the   Executive   Director   and   other   key    PRCCCC

personnel have to file annual reports with the Government Ethics

Office.     These are indicia of control, but hardly determinative in

view of the statutory structure.20




       19
       PRCCCC, which bears the burden of proof, offers only
inadmissible hearsay evidence on this point. See Vazquez v.
Lopez-Rosario, 134 F.3d 28, 33 (1st Cir. 1998) ("Evidence that
is inadmissible at trial, such as inadmissible hearsay, may
not be considered on summary judgment.").
       20
        Even the view of the dissent in Hess on the importance of
control does not assist PRCCCC.     Though it does not propose a
bright-line rule demarcating the level of control necessary to
warrant a finding that an entity is an arm of the state, the Hess
dissent does observe that such a finding is warranted "if the State
appoints and removes an entity's governing personnel and retains
veto or approval power over an entity's undertakings." Hess, 513
U.S. at 61 (O'Connor, J., dissenting); see Brotherton v. Cleveland,
173 F.3d 552, 561 n.5 (6th Cir. 1999). Key elements of control,
such as veto power, are absent here.

                                        -32-
          We cannot say the indicia all point in the direction of

PRCCCC being an arm of the state and so reach the second stage of

the analysis.

2.   Would the Commonwealth's Treasury Be Obligated to Pay a
Judgment Against PRCCCC?

          Our next inquiry is whether any judgment in this action

would be paid by the Commonwealth's treasury.     As Hess explained,

"If the expenditures of the enterprise exceed receipts, is the

State in fact obligated to bear and pay the resulting indebtedness

of the enterprise?    When the answer is 'No' -- both legally and

practically -- then the Eleventh Amendment's core concern is not

implicated."    513 U.S. at 51.   Thus we examine two areas:   what is

said by state law on the topic21 and what in fact has happened.

          The enabling act does not, as we have said, make the

Commonwealth liable for the debts of PRCCCC.      Still, it could be

that the Commonwealth has assumed that obligation in fact, either

directly or indirectly, by providing virtually all the funds needed

for the operation of PRCCCC. The facts, discussed below, show that

the Commonwealth has not done that.      Rather, the Commonwealth has



     21
        Zapata states that the team of experts which advised the
legislature on the creation of PRCCCC concluded that sixty percent
of the hospital's revenues would need to come from legislative
appropriations.    If that is so, then the fact that PRCCCC's
enabling legislation does not require the legislature to provide a
fixed percentage (or other level) of support for PRCCCC is telling.


                                  -33-
left itself free to provide or not provide funds to PRCCCC as it

sees fit, and it has not come close to obligating itself to assume

the burden of paying PRCCCC's debt.     The Commonwealth has provided

for PRCCCC to have independent sources of revenue and, indeed, the

majority of PRCCCC's funding now comes from sources other than the

Commonwealth's treasury.

            We start with the statutory scheme and consider two

factors:    the provisions as to funding of debts and any provisions

for raising revenues.      There are no provisions for funding of

PRCCCC's debts, just an admonition in the enabling act that PRCCCC

must live within its means.     The legislative intent seems to be

that PRCCCC not incur debts that it cannot pay from budgeted sums.

As to revenue, the statutory scheme contemplates a number of

sources of income.    The statute provides that PRCCCC may

            1.     borrow money from any funding source, 24 P.R.
                   Laws Ann. § 343b(g);
            2.     sell its services to private entities, id. §
                   343b(k);
            3.     sell materials to private entities, id. §
                   343b(m);
            4.     request and accept federal, state, or other funds
                   and grants, § 343b(o); and
            5.     enter    with   others   into   a    corporation,
                   partnership, joint venture, or association, id. §
                   343b(r).

In addition, the statute provides that PRCCCC may issue bonds, id.

§ 343k.    It is noteworthy that the Commonwealth is not a guarantor

on the bonds.

                                 -34-
           PRCCCC replies that the capacity to issue bonds and raise

revenues is a "dead letter."    That is because private lenders will

not provide financing "unless the Commonwealth funds are pledged as

warranty of payment through the Office of Management and Budget.

With an operating deficit that exceeds an [annual] average of $7

million . . . PRCCCC does not have the credit that will enable it

to borrow money and obtain loans, much less issue bonds."               Though

relevant, this evidence does not show that PRCCCC's debts would

become the Commonwealth's.

           PRCCCC   also   points    to    the   language    of   the     1986

appropriations act, which provided PRCCCC with $500,000 in initial

working capital.    Act of June 30, 1986, No. 51, at p. 170, § 13,

quoted in 24 P.R. Laws Ann. § 343, history.         The bill also said:

           The funds needed in subsequent years to carry out the
           purposes of this act [chapter] shall be consigned in the
           General Expense Budget of the Government of Puerto Rico.

Id.   There are three responses to the argument.            First, this is

language in an appropriations act for a particular year. Such acts

normally expire within the year, and PRCCCC has not presented any

argument that the language must be read to extend to all future

years.    See Minis v. United States, 40 U.S. (15 Pet.) 423, 445

(1841).    Second, this language was not put into the codified law

enacted in 1986, nor has it been added since then.                Third, in




                                    -35-
practice the legislature did not consider itself bound by that

language in years after 1986.

                 PRCCCC's other argument is that it is required to submit

an   operating       expenses     and   capital    investments     budget    to   the

legislature.         24 P.R. Laws Ann. § 343h.          That alone does not show

that PRCCCC's debts will be paid by the Commonwealth; it is better

read    as   imposing       discipline    meant    to    discourage    PRCCCC     from

building up unpaid debts.           There is, moreover, no evidence in the

record (and the burden is on PRCCCC) that PRCCCC took any steps to

comply with this requirement before February 25, 2002, more than

three months after it formally asserted an Eleventh Amendment

defense to FMC's lawsuit.22

                 We turn to what in practice has happened.            "If the state

substantially funds the entity, those funds would be a probable

source      to    satisfy   any   judgment      against   the    entity.     On    the

contrary, if the entity has taxing powers and can issue bonds,

state funds might not be at risk in litigation against the entity."

Moore's, supra, § 123.23[4][b], at 123-57 to 123-58.

                 PRCCCC   witness   Bustelo     states    that    PRCCCC    receives

several types of financial support from government entities: (a)

legislative        appropriations;       (b)   reimbursements      from    insurance



       22
        On February 25, 2002, Lúgaro requested a legislative
appropriation to pay the rent during FY 2001 and FY 2002 and cover
the rest of PRCCCC's deficit.

                                         -36-
companies linked to the Department of Health; (c) payments from the

City    of   San   Juan;   and    (d)   "indirect   subsidies,"     which   are

effectively short-term loans, from public utilities and other

public corporations.           Because of PRCCCC's relationship to the

state, Bustelo contends, public corporations such as PRCCCC's

landlord have not initiated eviction proceedings or otherwise

denied services when PRCCCC's payments were late.

             We start with the most recent history.            In FY 2001,

PRCCCC received over $50 million in revenues.           It received nothing

in legislative appropriations, although it was running a $12

million deficit.        In FY 2002, it again received no legislative

appropriation. Most of PRCCCC's revenues are from fees for patient

services     received   from     private   insurance   companies,   patients,

Medicare, Medicaid, or the Commonwealth's public health system,23

just as revenues come in to private hospitals in Puerto Rico.

Looking back further, PRCCCC's legislative appropriations amounted

to less than 14 percent of its total revenues from fiscal years

1993 to 2001.




       23
        Although the Commonwealth participates in Medicare and
Medicaid, it also has a separate public health system. Medicare is
a federally funded program overseen by part of the federal
government; Medicaid is a jointly funded federal-state program
overseen by federal and state entities but usually administered at
the county level.    By contrast, the Commonwealth's own public
health system receives no federal funding.

                                        -37-
           In   its   role   as   an    insurer,    the    Commonwealth      also

reimbursed PRCCCC for particular medical procedures. Even counting

these reimbursements, the share of PRCCCC revenues coming from the

Puerto Rico government between FY 1993 and 2001 was about 41

percent.    These reimbursements were presumably made under the

Commonwealth's public health system and the Medicaid program.

Since private, for-profit hospitals receive these reimbursements as

a matter of course, it is doubtful whether they should be counted

for Eleventh Amendment purposes.          We do not count payments made by

the municipality of San Juan as revenue from the state treasury.

           Overall, the share of funding provided by the legislature

and by the Commonwealth as a whole has diminished sharply over

time.   In FY 1993 and 1994, the first two years for which figures

are available, the legislature provided approximately 21 percent of

PRCCCC's   revenues     by    appropriation.              Counting   insurance

reimbursements as well as appropriations, the Commonwealth provided

over 64 percent of PRCCCC's revenues during that period.                    In FY

2000 and 2001, the last two years for which complete figures are

available, the legislature provided approximately 8 percent and the

Commonwealth in toto provided approximately 26 percent of its

revenue. As noted above, the legislature provided no appropriation

whatsoever during FY 2001 or FY 2002.               The elimination of any

legislative     appropriations    presumably       reflects    the   fact    that

PRCCCC's operational revenues -- that is, its fees from providing


                                       -38-
cardiovascular       medical     care      to     patients    --    increased    by

approximately 400 percent between FY 1993 and FY 2001.

            PRCCCC    argues    that    this      accounting      understates   the

Commonwealth's       actual    contribution        to    PRCCCC    because   public

utilities    and     other     allegedly         government-controlled       public

corporations have allowed PRCCCC to receive services without paying

for them.    The record refutes this argument.                Like virtually all

businesses, PRCCCC has accounts payable: bills from suppliers for

goods and services purchased on credit.                 There is every indication

that, as a general practice, PRCCCC pays its accounts to public

utilities and other public corporations.                   For example, Bustelo

stated that the legislative appropriation has been used mainly to

pay PRCCCC's largest account payable: its debt to the Public

Housing Administration (PHA), the state agency that owns its

physical plant.      PRCCCC has not shown that it has failed to pay any

debt, apart from its FY 2001 debt to the PHA, in a timely fashion.

Moreover, the FY 2001 PHA debt was only unpaid as of March 2002,

and accounts payable are typically due within 12 months.

            Between    FY     1993   and    FY    2001,    PRCCCC's    operational

expenses exceeded its total revenues by approximately $18 million.

The income statement does not provide any detail on the hospital's

debt structure; nevertheless, there is no evidence distinguishing

this level of debt for an institution whose operational revenues

now exceed $50 million per year from private sector debt. PRCCCC's

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operational revenues have grown at a substantially steeper rate

than its operational expenses between FY 1993 and FY 2001.

            The     fact    that    PRCCCC     receives    significant,      but

diminishing, state funding (now less than thirty percent counting

all sources, including insurance) is simply not enough to enable it

to claim Eleventh Amendment immunity.             Mt. Healthy, 429 U.S. at

280. In the end, PRCCCC's argument is simply that a judgment would

deplete its operating funds, that the Commonwealth might choose to

rescue it,    and    that   this    would    indirectly   deplete   the   state

treasury.    We rejected this very argument in Metcalf & Eddy, 991

F.2d at 941, and do so here.

C.   Insufficiency of Service of Process

            The district court made factual findings regarding the

Rule 12(b)(2) and the associated Rule 12(b)(5) claims. See Rivera-

Flores v. P.R. Tel. Co., 64 F.3d 742, 748 (1st Cir.                       1995).

Findings of fact by the district court may not be set aside unless

they are clearly erroneous.          Fed. R. Civ. P. 52(a); Anderson v.

City of Bessemer, 470 U.S. 564, 573 (1985).             There was no error.

            Rule     4(h)(1)       governs    service     of   process      upon

corporations.      Proper service under Puerto Rico law satisfies Rule

4(h)(1). See Sea-Land Serv., Inc. v. Ceramica Europa II, Inc., 160

F.3d 849, 853 (1st Cir. 1998).         Under Puerto Rico law, process can

be served by "leaving [a copy of the summons and complaint] at the



                                      -40-
registered office or other place of business of the corporation in

the Commonwealth."   14 P.R. Laws Ann. § 3126 (2000).   Plaintiff

unquestionably met this requirement.

                              III.

          We affirm the district court's decisions that PRCCCC is

not an arm of the state and so is not entitled to Eleventh

Amendment immunity and that there was adequate service of process.

Costs are awarded to plaintiff.




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