Masso-Torrellas, et al v. Municipality of Toa Alta, et al
Filing
OPINION issued by Jeffrey R. Howard, Chief Appellate Judge; Juan R. Torruella, Appellate Judge and Timothy Belcher Dyk,* Appellate Judge. Published. *Of the Federal Circuit, sitting by designation. [16-1319]
Case: 16-1319
Document: 00117102207
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Date Filed: 01/09/2017
Entry ID: 6060368
United States Court of Appeals
For the First Circuit
No. 16-1319
FRANCISCO JOSÉ MASSÓ-TORRELLAS; CONJUGAL PARTNERSHIP MASSÓESTÉVEZ; JOSÉ FRANCISCO MASSÓ-TORRELLAS; CONJUGAL PARTNERSHIP
MASSÓ-MALDONADO; OSSAM CONSTRUCTION, INC.,
Plaintiffs, Appellants,
v.
MUNICIPALITY OF TOA ALTA; CLEMENTE AGOSTO-LUGARDO, in his
official capacity as Mayor of the Municipality of Toa Alta and
in his individual capacity; YARITZA ROSARIO-SOTO; CONJUGAL
PARTNERSHIP AGOSTO-ROSARIO,
Defendants, Appellees,
INDETERMINED NUMBER OF UNNAMED MUNICIPAL POLICE OFFICERS;
INDETERMINED NUMBER OF JANE DOES; CONJUGAL PARTNERSHIP; RICHARD
DOE; JOHN DOE; ABC INSURANCE COMPANY,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Pedro A. Delgado-Hernández, U.S. District Judge]
Before
Howard, Chief Judge,
Torruella and Dyk,* Circuit Judges.
Roberto Busó-Aboy, for appellants.
*
Of the Federal Circuit, sitting by designation.
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Eduardo A. Vera Ramírez, with whom Landrón Vera, LLC.,
Eileen Landron Guardiola, and Luis A. Rodríguez Muñoz were on
brief for appellees Municipality of Toa Alta and Clemente
Agosto-Lugardo, in his official capacity as Mayor.
Margarita Mercado-Echegaray, Solicitor General, with
whom Susana I. Peñagarícano-Brown, Assistant Solicitor General,
was on brief for appellee Clemente Agosto-Lugardo, in his
individual capacity.
January 9, 2017
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DYK, Circuit Judge. Plaintiffs appeal from a district
court order dismissing their 42 U.S.C. § 1983 claim for lack of
subject
matter
supplemental
jurisdiction,
jurisdiction
and
over
declining
related
state
to
law
exercise
claims.
We
affirm the district court’s dismissal. The district court found
that it lacked subject matter jurisdiction because the parties
had failed to comply with the mediation/arbitration clause in
their contract. Although we conclude that the district court
erred by holding that the mediation/arbitration clause applied
to the § 1983 claim, we conclude that the § 1983 claim should be
dismissed pursuant to Fed. R. Civ. P. 12(b)(6) for failure to
state
a
claim.
Accordingly,
there
is
also
no
supplemental
jurisdiction over the state law claims.
I.
This dispute relates to contracts for the construction
of
a
municipal
defendant,
the
transportation
Municipality
terminal.
of
Toa
On
Alta
May
7,
2010,
(“Municipality”),
awarded a construction project to plaintiff, OSSAM Construction
Inc.
(“OSSAM”),
Municipality.
to
The
build
parties
the
terminal
contemplated
on
land
that
the
owned
by
the
construction
project would be undertaken in two phases, with two separately
executed
September
contracts.
10,
2010,
The
and
Phase
I
the
work
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contract
was
was
executed
apparently
on
completed
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without incident within the 120 days provided in the contract.
The Phase II contract was executed on September 4, 2012. From
September
of
2014
disputes
arose
and
continuing
regarding
payments
through
December
for
work
the
of
2014,
performed
in
connection with the Phase II contract. On January 20, 2015,
OSSAM issued a notice of default against the Municipality due to
its alleged nonpayment for the completed construction work. On
February 4, 2015, the Municipality notified OSSAM by letter that
the
contract
terminated
policy
between
effective
in
OSSAM
and
immediately
connection
with
the
Municipality
“[d]ue
the
to
sound
was
reasons
of
being
public
administration
of
[municipal] funds.” JA 122. This letter was signed by Mayor
Clemente
Agosto-Lugardo
(“Agosto”)
on
behalf
of
the
Municipality. On the same day, municipal officials and police
officers took control of the construction site, which was on
municipal property.
After
initially
taking
barred
construction
OSSAM
site.
The
control
from
of
the
removing
Municipality
site,
any
the
Municipality
property
alleges
that
from
the
this
was
necessary to fully inventory the on-site property and determine
the correct ownership pursuant to the contract. On February 5th
and 14th, OSSAM was permitted to retrieve some of its property
from the site. And on February 18th, OSSAM was finally permitted
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access
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to
the
site
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to
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retrieve
“most”
of
its
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property.
Appellants allege that at the time of filing the Complaint, the
Municipality
still
retained
security
barriers
and
fences
belonging to OSSAM.
On May 4, 2015, OSSAM, its president José Francisco
Massó-Torrellas
and
his
wife
Sarina
Maldonado-Alfandari,
and
OSSAM’s vice-president Francisco José Massó-Torrellas and his
wife Rosa Julia Estévez-Datiz, filed a complaint in the District
Court of Puerto Rico, against the Municipality, Agosto in his
official capacity as mayor, Agosto and his wife Yaritza RosarioSoto in their personal capacities, an indeterminate number of
unnamed
Municipality
police
officers
and
officials
in
their
official and personal capacities, along with their spouses, and
any
“insurance
compan[ies]
that
may
be
responsible
to
[the]
Plaintiffs.” JA 12. The plaintiffs claimed that the defendants
violated 42 U.S.C. § 1983 when the defendants acted under color
of law to interfere with the plaintiffs’ Fourth, Fifth, and
Fourteenth
Amendment
rights
during
the
construction
site
takeover in February of 2014. The plaintiffs also claimed that
these actions constituted a breach of contract and “a violation
of
the
Constitution
and
laws
of
Rico.” JA 23.
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the
Commonwealth
of
Puerto
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The defendants moved to dismiss the § 1983 claim for
failure to state a claim, and also argued that “OSSAM has not
complied with the mandatory arbitration clause in the contract.”
JA 41.
The Phase II construction contract between OSSAM and
the Municipality included clause 35, which we refer to as the
mediation/arbitration clause. It provided that
[i]n the event that any controversy arises from the
interpretation or of any other class among the parties
with respect to any matter related to this contract,
it shall be previously be [sic] required that before
resorting to a judicial forum for the adjudication of
their rights, that the parties exhaust a mediation
procedure. The Municipality and [OSSAM] will at all
times attempt to resolve their claims and disputes
among themselves in [good] faith and if unable to
arrive at an agreement[,] they bind themselves to
resolving
the
controversy
or
dispute
through
mediation.
JA 117-18 (emphases added). The Phase I contract included the
same
clause
with
an
additional
final
sentence
stating
that
“[t]he mediator’s decision will be final and firm.” Add. 2. This
sentence was not included in the Phase II contract.1
The usual meaning of arbitration is that the dispute
resolution is binding and final. See Fit Tech, Inc. v. Bally
1
Although this final sentence was omitted in the original
Spanish language contract, the certified translation of the
Phase II contract erroneously contained this sentence, see JA
103, 118, when in fact, only the Phase I contract contains this
sentence in the original Spanish version, see JA 55, 73. The
district court correctly noted this error. Add. 2 n.4.
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Total Fitness Holding Corp., 374 F.3d 1, 7 (1st Cir. 2004).
Conversely, the usual meaning of mediation is that the dispute
resolution is non-binding. See In re Atlantic Pipe Corp., 304
F.3d 135, 141 (1st Cir. 2002). For purposes of resolving this
case, we need not decide whether clause 35 provides for nonbinding mediation or binding arbitration.
Interpreting clause 35 as an arbitration clause, the
district
court
held
that
“the
parties
must
comply
with
the
obligation to mediate their claims before pursuing claims in a
judicial
forum,”
and
“dismissed
for
lack
of
subject
matter
jurisdiction.” Add. 4, 6.
The plaintiffs appeal. We have jurisdiction under 28
U.S.C. § 1291. We review the district court’s dismissal for lack
of subject matter jurisdiction de novo. Viqueira v. First Bank,
140 F.3d 12, 16 (1st Cir. 1998). We review the district court’s
decision not to exercise supplemental jurisdiction over state
law
claims
for
abuse
of
discretion.
González-De-Blasini
v.
Family Dept., 377 F.3d 81, 89 (1st Cir. 2004).
II.
We first address whether the district court erred by
holding that the plaintiffs’ § 1983 claims must be mediated or
arbitrated before pursuing judicial action.
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Here, the parties agree that the district court erred
in
concluding
constitutional
that
the
claims.
mediation/arbitration
This
agreement
is
clause
consistent
covers
with
the
plain text of the clause, which does not bring constitutional or
§ 1983
claims
within
its
scope.
Quite
the
opposite,
the
mediation/arbitration clause only encompasses “matter[s] related
to this contract.” JA 117. “[A] court may order arbitration of a
particular dispute only where the court is satisfied that the
parties agreed to arbitrate that dispute.” Granite Rock Co. v.
Int’l Bhd. of Teamsters, 561 U.S. 287, 297 (2010) (emphasis in
original). Here, there is no agreement between the parties to
arbitrate/mediate
court
erred
by
the
§ 1983
holding
claim.
Therefore,
clause
35
that
of
the
the
district
construction
contract applied to the appellants’ § 1983 claim.2
III.
Even though the district court erred in dismissing for
lack
of
jurisdiction
because
of
the
mediation/arbitration
clause, “[w]e are not bound by the lower court’s rationale, but
may
[instead]
supported
by
affirm
the
the
record.”
grant
of
dismissal
Gonzalez-Cancel
2
v.
on
any
Partido
ground
Nuevo
We need not decide in this case whether a contractual agreement
to arbitrate § 1983 claims would be enforceable. See generally,
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 35 (1991);
McDonald v. City of West Branch, Mich., 466 U.S. 284, 290
(1984).
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Progresista, 696 F.3d 115, 118-19 (1st Cir. 2012). We conclude
that the § 1983 claim is without merit and should have been
dismissed for failure to state a claim.
On
appeal,
the
plaintiffs
argue
several
different
constitutional claims, alleging violations of the First, Fourth,
Fifth, and Fourteenth Amendments. In none of these respects have
the plaintiffs stated a viable claim.
First, there was no First Amendment claim pleaded in
the Complaint. See JA 21. “Appellants cannot raise an argument
on appeal that was not squarely and timely raised in the trial
court. [L]itigants must spell out their legal theories face-up
and squarely in the trial court . . . . [Otherwise,] that claim
ordinarily
is
deemed
unpreserved
for
purposes
of
appellate
review.” Thomas v. Rhode Island, 542 F.3d 944, 949 (1st Cir.
2008) (internal citations and quotation marks omitted).
Second, there is no plausible constitutional claim for
Fourth
Amendment,
Fifth
Amendment,3
and
Fourteenth
Amendment
seizure and takings with respect to the individual plaintiffs.
The property allegedly seized or taken belonged to OSSAM, and
not
the
individual
plaintiffs.
3
In
their
Complaint
to
the
In determining the appellants’ claims here, we need not decide
whether Puerto Rico is a state under the Fourteenth Amendment or
a federal territory under the Fifth Amendment. See Examining
Board of Eng’r, Architects & Surveyors v. Flores de Otero, 426
U.S. 572, 600–01 (1976).
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district
court,
the
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appellants
Date Filed: 01/09/2017
alleged
throughout
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that
they
“encountered a seizure of . . . OSSAM’s property, equipment and
materials,” that the Municipality “ordered that OSSAM could not
take any of its property, equipment or materials from” the site,
that Municipality officers prevented access to “OSSAM’s property
and equipment,” and that they were told “removal of OSSAM’s
equipment and property was forbidden.” JA 15-16.
On appeal, the appellants repeat these allegations,
claiming
that
“they
encountered
a
police
seizure
of
. . .
Ossam’s property, equipment and materials,” that “Municipality
officials, under color of law and pursuant to official authority
prevented
Ossam
personnel
to
remove
most
of
its
property,
equipment and materials,” and that a sub-contractor’s equipment
was permitted to be removed “but not Ossam’s property, equipment
and materials.” Appellant Br. 9, 11.
Therefore, with respect to the individual plaintiffs,
there is no plausible Fourth Amendment, Fifth Amendment, and
Fourteenth
Amendment
claim
because
no
individual
plaintiff’s
property was alleged to have been taken.4
4
In their brief, the plaintiffs also appear to complain that the
defendants engaged in “illegal detention of Plaintiffs and their
employees.” Appellant Br. 1, 4. However, the Complaint itself
contains no allegations that the plaintiffs were actually
detained. See JA 15.
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Third, with respect to OSSAM’s Fourth Amendment, Fifth
Amendment, and Fourteenth Amendment property seizure and takings
claims, we find that there is no plausible allegation in the
complaint that the Municipality engaged in action which would
implicate § 1983.
Insofar as OSSAM alleges a taking or seizure of its
contract, or alleges that its contractual rights were violated
by
the
termination
of
the
contract
or
the
detention
of
its
property, these allegations do not state a constitutional claim.
In Redondo-Borges v. U.S. Dep’t of Housing, Urban Dev., 421 F.3d
1 (1st Cir. 2005), this court noted that as a general matter,
“[w]e have held with a regularity bordering on the echolalic
that
a
simple
unconstitutional
breach
of
deprivation
contract
of
does
property.
not
.
amount
.
.
to
To
an
hold
otherwise would run the risk of transmogrifying virtually every
dispute involving an alleged breach of contract by a state or a
state
agency
into
a
constitutional
case.”
Id.
at
10.
This
principle is well-established in other circuits as well.5 These
5
B & B Trucking, Inc. v. U.S. Postal Serv., 406 F.3d 766, 769
(6th Cir. 2005) (en banc) (holding that if the USPS abridged the
plaintiffs’ contract rights, “the proper recourse would be a
breach-of-contract claim, not a takings claim”); Hughes Commc’ns
Galaxy, Inc. v. United States, 271 F.3d 1060, 1070 (Fed. Cir.
2001) (holding that “[t]aking claims rarely arise under
government contracts because the Government acts in its
commercial or proprietary capacity in entering contracts, rather
than in its sovereign capacity. Accordingly, remedies arise from
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cases appear to rest on either of two distinct propositions. In
the first category, some cases have held that not all contract
rights constitute property protected by the Constitution. See,
e.g., Linan-Faye Constr. Co. v. Hous. Auth. of Camden, 49 F.3d
915, 931–32 (3d Cir. 1995); Unger, 928 F.2d at 1399; Yatvin, 840
F.2d at 417. Other cases recognize that contract rights can be
property for constitutional purposes, and are protected against
government actions taken in the government’s sovereign capacity,
for
example,
by
a
statute
eliminating
certain
contractual
the contracts themselves, rather than from the constitutional
protection of private property rights.”); Unger v. Nat’l
Residents Matching Program, 928 F.2d 1392, 1398 (3d Cir. 1991)
(holding that “[i]t is neither workable nor within the intent of
section 1983 to convert every breach of contract claim against a
state into a federal claim.” (quoting San Bernardino Physician’s
Serv. Med. Grp. v. County of San Bernardino, 825 F.2d 1404, 1408
(9th Cir. 1987))); Yatvin v. Madison Metrop. Sch. Dist., 840
F.2d 412, 416 (7th Cir. 1988) (holding that “the Fifth and
Fourteenth Amendments do not entitle a person to a federal
remedy for every breach of contract by a state . . . . Thus,
unless every breach of every public contract is to be actionable
as a violation of constitutional rights, it is necessary to
distinguish between mere contract rights” and constitutional
property
rights
(internal
citations
and
quotation
marks
omitted)); Monolith Portland Midwest Co. v. Reconstruction Fin.
Corp., 282 F.2d 439, 447 (9th Cir. 1960) (holding that
“[t]ermination of the [government] contract . . . frustrated
[appellant] in obtaining anticipated profits and advantages
therefrom. But, . . . [f]rustration and appropriation are
essentially different things. There was here no taking of
[appellant’s] property which entitled the company to just
compensation under the Fifth Amendment” (citation omitted));
Brasier v. United States, 223 F.2d 762, 766 (8th Cir. 1955)
(holding that a termination of a government contract does not
constitute “a taking of the plaintiff’s property without just
compensation or without due process of law”).
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rights. See, e.g., Cienega Gardens v. United States, 331 F.3d
1319,
1353
(Fed.
Cir.
2003)
(holding
that
the
enactment
of
ELIHPA and LIHPRHA, which eliminated some contractual rights, in
the
circumstances
of
that
case
“effect[ed]
a
compensable
taking”).
A
private
second
party’s
category
contract
of
cases
rights
holds
that
constitute
even
if
property,
a
the
exercise of contractual rights by a governmental contractingparty does not give rise to a constitutional claim. See, e.g., B
& B Trucking, 406 F.3d at 769; Hughes Commc’ns, 271 F.3d at
1070.
Indeed, the Supreme Court has repeatedly recognized
that governments act in different capacities—as sovereigns and
as contracting parties—and that “[t]he two characters which the
government possesses as a contractor and as a sovereign cannot
be
. . .
fused;
nor
can
the
[government]
while
sued
in
one
character be made liable in damages for [its] acts done in the
other.”6 Horowitz v. United States, 267 U.S. 458, 461 (1925)
(quoting Jones v. United States, 1 Ct. Cl. 383, 384 (Ct. Cl.
1865)).
See
also
Perry
v.
United
6
States,
294
U.S.
330,
352
The enactment of a statute may, of course, sometimes lead to
governmental liability for breach of contract. See United States
v. Winstar Corp., 518 U.S. 839, 897 (1996) (holding that the
enactment of FIRREA breached certain government contracts).
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(1935) (“When the [government] . . . makes contracts, it has
rights
and
individuals
incurs
who
responsibilities
are
parties
to
similar
such
to
those
instruments.”);
of
United
States v. Bostwick, 94 U.S. 53, 66 (1876) (“The United States,
when they contract with their citizens, are controlled by the
same laws that govern the citizen in that behalf.”).
Here,
we
need
not
resolve
the
exact
scope
of
constitutionally-protected contractual property rights, but may
instead
assume
property.
But
that
when
OSSAM’s
a
contract
municipality
rights
acts
in
could
a
constitute
contractual
or
proprietary capacity, actions such as contract termination or
detention of property under the contract that would constitute a
simple
breach
of
contract
when
a
non-governmental
entity
is
involved do not become a constitutional violation simply because
the contracting party is a municipality.7
7
We do not suggest here that a municipality in enforcing a
contract may not act under color of state law. For example, it
is well-established that a municipality may be liable for
employment discrimination under § 1983. See, e.g., Rodriguez v.
Municipality of San Juan, 659 F.3d 168, 181 (1st Cir. 2011)
(holding that discrimination against a municipal employee could
“trigger[] municipal liability under § 1983” through official
policy or custom). However, in such instances, the municipal
government is motivated by something other than contractual
rights. We note that OSSAM alleges that the Municipality
terminated the Phase II contract in retaliation for OSSAM’s
issuing a notice of default, but this is not an allegation of
extra-contractual motivation.
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In Monell v. Dep’t of Social Services, 436 U.S. 658,
690 (1978), the Supreme Court taught that a “[l]ocal governing
bod[y] . . . can be sued directly under § 1983 . . . [when it]
unconstitutional[ly] implements or executes a policy statement,
ordinance,
regulation,
or
decision
officially
adopted
and
promulgated by that body’s officers.” However, the Court went on
to hold that
the language of § 1983, read against the background of
the . . . legislative history, compels the conclusion
that Congress did not intend municipalities to be held
liable unless action pursuant to official municipal
policy of some nature caused a constitutional tort.
. . . [I]t is when execution of a government’s policy
or custom, whether made by its lawmakers or by those
whose edicts or acts may fairly be said to represent
official
policy,
inflicts
the
injury
that
the
government as an entity is responsible under § 1983.
Id.
at
contain
acting
691–94
any
in
(emphasis
plausible
a
added).
Here,
allegations
sovereign
capacity
the
record
does
not
that
the
Municipality
was
pursuant
to
any
statute,
ordinance, regulation, or custom when it terminated the contract
and took over the construction site and temporarily detained
OSSAM’s property.
There
Municipality
regulation.
is
acted
The
no
allegation
pursuant
complaint
in
the
a
statute,
state
that
to
did
Complaint
that
the
ordinance,
or
the
Municipality
implemented “customs and policies” which caused the plaintiffs’
injuries. JA 21. There was no further development of this bare
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assertion in the Complaint regarding any specific Municipality
actions
undertaken
pursuant
to
its
customs
and
policies.
In
Rosaura Building Corp. v. Municipality of Mayaguez, 778 F.3d 55
(1st
Cir.
dismissal
2015),
of
this
“claims
court
against
affirmed
the
the
municipal
district
court’s
government
under
Monell, after it found that Rosaura failed to plead a scintilla
of
facts
against
that
government
entity
. . .
[about
the]
execution of a government’s policy or custom.” Id. at 61-62, 69
(citation
conclude
omitted).
that
there
Here,
is
given
no
the
record,
sufficient
we
allegation
similarly
that
the
Municipality acted under color of law.
In summary, for purposes of a motion to dismiss, we
conclude
secure
that
the
the
source
construction
of
site
the
Municipality’s
stemmed
from
authority
its
to
proprietary
capacity under the contract, and not its sovereign capacity.
Because the Municipality is not alleged to have engaged in a
sovereign act, there is no substantial constitutional claim that
would support a cause of action pursuant to § 1983. Thus, here,
the Municipality’s acts of terminating the construction contract
and temporarily detaining OSSAM’s property do not give rise to
constitutional claims cognizable under § 1983.
Finally, to the extent that OSSAM complains about its
exclusion
from
the
construction
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site,
OSSAM
had
no
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constitutional right to access the Municipality’s construction
site that would give rise to a § 1983 claim. The appellants do
not dispute that the construction site is “on the property of
the
Municipality.”
plausible
Appellee
constitutional
Off.
claim
Br.
that
3.
the
There
cannot
Municipality
be
a
cannot
secure its own property.
IV.
Because there is no substantial constitutional claim,
we also conclude that there is no federal jurisdiction over the
plaintiffs’ state law claims, as the remaining state law claims
were
only
argued
supplemental
to
“be
jurisdiction.”
allowed
to
Appellant
proceed
Br.
33.
. . .
“As
a
[under]
general
matter, a court will decline supplemental jurisdiction if the
underlying
[federal]
claims
are
dismissed
before
trial.”
13D
Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal
Practice and Procedure § 3567.3, at 429 (3d ed. 2007). Case law
from this circuit supports this “general principle [that] the
unfavorable disposition of a plaintiff’s federal claims at the
early stages of a suit . . . will trigger the dismissal . . . of
any
supplemental
state-law
claims.”
González-De-Blasini,
377
F.3d at 89 (quoting Rodríguez v. Doral Mortgage Corp., 57 F.3d
1168,
1177
(1st
Cir.
1995)).
Specifically,
in
Camelio
v.
American Fed., 137 F.3d 666 (1st Cir. 1998), this court held
- 17 -
Case: 16-1319
Document: 00117102207
Page: 18
Date Filed: 01/09/2017
Entry ID: 6060368
that after the district court had dismissed a suit’s federal
claims
for
failure
to
state
a
claim,
it
also
“should
have
refrained from exercising supplemental jurisdiction over [the]
state law claims and remanded them to state court.” Id. at 673.
We review a district court’s decision not to exercise
supplemental jurisdiction for abuse of discretion. González-DeBlasini, 377 F.3d at 89. We conclude that the district court did
not do so in dismissing the appellants’ supplemental state law
claims.
AFFIRMED. Costs to appellees.
- 18 -
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