Rivera-Nazario et al v. Corporacion del Fondo del Seguro et al

Filing 77

OPINION AND ORDER granting in part and denying in part 30 Motion to Dismiss for Failure to State a Claim; granting 44 Motion for Joinder; granting in part and denying in part 44 Motion to Dismiss for Failure to State a Claim. Partial Judgmen t shall be entered accordingly in a separate docket entry. Should Defendants wish to renew their motion to dismiss as to Plaintiffs' antitrust claims, they shall do so by 9/24/2015. Plaintiffs, in turn, will have until 10/6/2015 to oppose the motion. No extensions of time, replies, or filings in excess pages will be allowed. For further specifications, see Opinion and Order. Signed by Judge Jay A. Garcia-Gregory on 9/9/2015. (CLM)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

DR. LUIS B. RIVERA-NAZARIO, et al.,
Plaintiffs,
v.

CIVIL NO. 14-1533 (JAG)

CORPORACION DEL FONDO DEL SEGURO
DEL ESTADO, et al.,
Defendants.
OPINION AND ORDER
GARCIA-GREGORY, D.J.
On September 16, 2014, a group of licensed chiropractors and chiropractic clinics filed a
suit against Corporacion del Fondo del Seguro del Estado (“CFSE”) and several CFSE directors
and officials1 (collectively “Defendants”) alleging violations of federal antitrust laws, U.S.
Constitution, and Puerto Rico law. Docket No. 28. Specifically, Plaintiffs claims arise under: (1)
Sections 1 and 2 of the Sherman Antitrust Act (“Sherman Act”), 15 U.S.C. §§ 1-7. et seq.; (2) Due
Process and Equal Protection Clauses of the United States and Puerto Rico Constitutions, U.S.
Const., amend. XIV, § 1 and P.R. Laws Ann. tit. 1, Art. II, § 7; (3) First Amendment, U.S. Const.,
amend. 1; (4) Contract Clause of the United States and Puerto Rico Constitutions, U.S. Const.,

1

These officials are: Liza M. Estrada (“Estrada”) in her official capacity as Administrator of CFSE; Sheila
Rivera-Serrano (“Rivera-Serrano”) in her personal and official capacity as Director of the CFSE Medical
Area; Maria I. Lastra-Gonzalez (“Lastra-Gonzalez”) in her personal and official capacity as Medical
Director at the CFSE Bayamon Regional Office; Jose Colon-Grau (“Colon-Grau”) in his personal and
official capacity as an External Advisor; and Lorena Diaz-Trancon (“Diaz-Trancon”) in her personal and
official capacity as a Type VII Internal Medical Council of CFSE.

Civil No. 14-1533 (JAG)

2

Art. 1, § 10 and P.R. Laws Ann. tit. 1, Art. II, § 7; and (5) Article 1802 of the Puerto Rico Civil
Code, 31 P.R. Laws Ann. § 5141. Id.
Pending before the Court are two motions to dismiss under Fed. R. Civ. P. 12(b)(6) filed
by Defendants on October 6 and November 20, 2014. Docket Nos. 30 and 44. Plaintiffs opposed
each motion to dismiss in a timely manner. Docket Nos. 41 and 45. Defendants, in turn, filed a
Reply to Plaintiffs’ Oppositions. Docket No. 53. For the reasons outlined below, Defendants’
motions to dismiss are GRANTED in part and DENIED in part.
FACTUAL BACKGROUND2
The discrimination against chiropractors in the CFSE goes back to 2003, when
Defendant Lastra-Gonzalez denied contracts to several chiropractors, including Plaintiffs,
without any reasonable cause. Only after appearing at the CFSE headquarters to protest this
decision and fight for their rights, Plaintiffs were able to get their contracts.
Beginning in February 2013 and even to the present day, Lastra-Gonzalez has denied
referrals to chiropractors even after the patients’ occupational primary care physicians approved
the treatment. In May 2004, Lastra-Gonzalez sent an internal memo to the CFSE’s regional
medical directors instructing them to cease all referrals of new patients for chiropractic
treatment during a three-week period. Plaintiffs were not notified of said instruction in violation
of their chiropractic service agreements. Moreover, Lastra-Gonzalez began to spread the rumor
that the CFSE was in the process of eliminating chiropractic care from the corporation’s
compensated services due to its harmful side effects and the ineffectiveness of the treatment. To
2

The facts in this section were taken from Plaintiffs’ Amended Complaint and are presumed to be true
for purposes of Defendants’ motions to dismiss. See Docket No. 28.

Civil No. 14-1533 (JAG)

3

this day, some occupational primary care physicians opt not to refer patients to chiropractors
due to the negative and misleading information disseminated by Lastra-Gonzalez in accordance
and in agreement with her co-defendants.
On August 9, 2013, the CFSE issued a letter concerning the adoption of new guidelines
and policies regarding chiropractic services and patient referrals. The letter discussed in an
inflammatory and exaggerated manner the contraindications and side effects of chiropractic
treatment. This letter, which was signed by Defendant Rivera-Serrano, was sent to 9 regional
directors and 310 occupational primary care physicians, as well as several patients. In addition,
Defendant Diaz-Trancon had an important role in drafting the letter and in elaborating the
guidelines and policies contained therein.
In October 2013, Plaintiff Miguel Serrano met with Defendant Rivera-Serrano to discuss
the letter and the new policies. Nonetheless, Defendant Rivera-Serrano denied the existence of
the letter and expressed that chiropractic care was just an alternative medicine treatment that
does not really correct or cure neuromusculoskeletal injuries. As a result of the new policies and
the letter, orthopedic spine surgeons, such as Defendant Rivera-Serrano’s nephew, Dr. Yamil C.
Rivera-Colon, have benefited from a significant rise in the treatment of patients that were
previously referred to chiropractors.
On November 12, 2013, Plaintiffs Elvin Siverio-Casanova and Marino Roman met with
Defendants Colon-Grau and Rivera-Serrano, who assured them that there were no changes
made to the CFSE guidelines and policies. Defendants Colon-Grau and Rivera-Serrano also
denied the existence of the letter and expressed that they were unaware of the alleged
substantial decrease in the referral of CFSE patients for chiropractic treatment.

Civil No. 14-1533 (JAG)

4

Under the new guidelines, an occupational primary care physician that wishes to refer to
a chiropractor an injured worker with acute spinal-related conditions must complete a referral
form and accompany it with the medical history, relevant physical examination, an Employers’
Report, a Special Medical Report, and evidence of previous treatments, consultations, and
referral studies. Then, the regional medical director must authorize the chiropractic service and
then submit a monthly report to the director of the CFSE Medical Area for her final approval.
This regulatory scheme only applied to chiropractors.
Prior to the adoption of the policies, the regional medical director did not have to
approve the chiropractic treatment of referred patients. Also, the covered treatment consisted of
eighteen (18) visits to be offered in a maximum period of six (6) weeks. The new guidelines and
health policy, however, limited chiropractic services to three (3) weekly visits during a
maximum period of two (2) weeks. If an extension of the treatment is necessary, the
chiropractor must submit a written request to the regional medical director. The director may
authorize the treatment, which could be extended for two (2) additional weeks for a total of
twelve (12) visits. The chiropractic service agreements, however, establish that the treatment
plan will last a maximum of six weeks and/or eighteen chiropractic treatments.
Furthermore, four out of the seven members of the Industrial Medical Council, the body
in charge of promulgating and adopting the challenged guidelines, are medical doctors that
compete with Plaintiffs in treating injured workers with neuromusculoskeletal conditions.
Therefore, Plaintiffs claims that the Industrial Medical Council and Defendants had a
competitor’s interest in discouraging the use of chiropractic services through CFSE policies.

Civil No. 14-1533 (JAG)

5

On June 18, 2014, Plaintiff Juan M. Lopez arrived at the CFSE offices to sign and renew
his chiropractic service agreement. Plaintiff Lopez noticed that the new service agreement
included an “Attachment A,” which was the August 9, 2013 letter signed by Defendant RiveraSerrano. Since Plaintiff Lopez disagreed with the content of the letter, he refused to sign the
contract. Plaintiffs’ contracts, including that of Plaintiff Lopez, were set to expire by the end of
June 2014.
On July 3, 2014, Plaintiffs filed an original Complaint against Defendants asserting, inter
alia, violations of the Sherman Act, Due Process Clause, Equal Protection Clause, Contract
Clause, and Puerto Rico law. See Docket No. 1. On July 10, just seven days after the filing of the
original complaint, Plaintiff Roman received an email from the CFSE canceling his already
approved service agreement. According to the email, Defendant Estrada decided not to renew
Plaintiff Roman’s contract and informed him not to attend the scheduled visit where he was
supposed to sign the new contract. Finally, the CFSE has failed to renew any of Plaintiffs’ service
agreements in retaliation for the filing of the original complaint. On September 16, 2014,
Plaintiffs filed a Verified Amended Complaint that added a First Amendment retaliation claim as
a new cause of action.
STANDARD OF REVIEW
A defendant may move to dismiss an action for lack of subject matter jurisdiction
pursuant to Fed. R. Civ. P. 12(b)(1). As courts of limited jurisdiction, federal courts have the
duty of narrowly construing jurisdictional grants. See, e.g., Alicea-Rivera v. SIMED, 12 F. Supp. 2d
243, 245 (D.P.R. 1998). Since the justiciability requirement of standing is generally viewed as a

Civil No. 14-1533 (JAG)

6

component of subject matter jurisdiction, see, e.g., Dubois v. U.S. Dep’t of Agric., 102 F.3d 1273, 1280-81
(1st Cir. 1996), standing challenges are more appropriately brought under Fed. R. Civ. P. Rule
12(b)(1). See Valentin v. Hosp. Bella Vista, 254 F.3d 358, 362-63 (1st Cir. 2001) (stating that
justiciability issues should be analyzed under Rule 12(b)(1)).
Motions brought under Rule 12(b)(1) are subject to the same standard of review as Rule
12(b)(6) motions. Negron-Gaztambide v. Hernandez-Torres, 35 F.3d 25, 27 (1st Cir. 1994). To survive
dismissal for failure to state a claim under Fed. R. Civ. P. 12(b)(6), a complaint must allege “a
plausible entitlement to relief.” Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1967 (2007). According to
Twombly, the complaint must state enough facts to “nudge [the plaintiff’s] claims across the line
from conceivable to plausible.” Id. at 1974. Therefore, to preclude dismissal pursuant to Fed. R.
Civ. P. 12(b)(6), the complaint must rest on factual allegations sufficient “to raise a right to relief
above the speculative level.” Id. at 1965.
At the motion to dismiss stage, courts accept all well-pleaded factual allegations as true,
and draw all reasonable inferences in the plaintiff’s favor. See Correa-Martinez v. Arrillaga-Belendez,
903 F.2d 49, 51 (1st Cir. 1988). Courts need not address complaints supported only by “bald
assertions, unsupportable conclusions, periphrastic circumlocutions, and the like.” Aulson v.
Blanchard, 83 F.3d 1, 3 (1st Cir. 1996). Finally, affirmative defenses, such as claims of immunity,
may be raised in a motion to dismiss under Fed. R. Civ. P. 12(b)(6) provided that “the facts
establishing the defense [are] clear ‘on the face of the plaintiff’s pleadings.’” Blackstone Realty LLC
v. FDIC, 244 F.3d 193, 197 (1st Cir. 2001) (quoting Aldahonda-Rivera v. Parke Davis & Co., 882 F.2d
590, 591 (1st Cir. 1989)) (other citations omitted). Accordingly, the Court will evaluate

Civil No. 14-1533 (JAG)

7

Defendants’ standing challenge, immunity defenses, and arguments regarding the insufficiency
of Plaintiffs’ allegations under this standard.
DISCUSSION
Defendants argue that Plaintiffs’ Complaint must be dismissed for various reasons. First,
Defendants claim that Plaintiffs Lopez-Garcia, Arraiza-Caban, and Velez lack standing to bring
the instant lawsuit on the basis that they cannot assert claims on behalf of corporations which
had entered into contracts with CFSE or on behalf of corporations which do not exist. Docket
No. 30 at 18-29. Second, Defendants contend that a corporation and its officers cannot engage in
the type of concerted conduct prohibited by § 1 of the Sherman Act. Id. at 32-33. In the
alternative, Defendants assert that Plaintiffs failed to make plausible allegations regarding the
underlying motive of Defendants’ putative anticompetitive conduct. Id. at 33-42. Consequently,
Defendants suggest that Plaintiffs’ allegations are insufficient to state a claim under § 1 of the
Sherman Act. Id.
Third, with respect to Plaintiffs’ claim under § 2 of the Sherman Act, Defendants argue
that the Puerto Rico Legislature has granted CFSE with monopoly power in the workers’
compensation context. Id. at 42-50. As a result, Defendants claim that CFSE is exempt from
antitrust laws pursuant to the state action doctrine. Id. Moreover, Defendants suggest that the
establishment of maximum limitations and the decision not to compensate certain services does
not render such actions anticompetitive. Id. at 49-50. In addition, Defendants state that Plaintiffs
failed to plead any facts showing that any of the individual defendants used CFSE as a
subterfuge for their own benefit. Id at 50.

Civil No. 14-1533 (JAG)

8

Fourth, Defendants also argue that Plaintiffs’ allegations fail to state a due process claim
because their alleged anticompetitive conduct was neither egregious nor outrageous. Id. at 53-55.
With respect to Plaintiffs’ equal protection claim, Defendants point out that Plaintiffs are not
members of a protected class and that there are no allegations suggesting discriminatory intent.
Id. at 56-57. Fifth, Defendants indicate that there is no particularized conduct alleged in the
Complaint that could be attributed to the individual co-defendants that could potentially give
rise to a First Amendment retaliation claim. Id. at 57-59. Defendants add that CFSE had the
authority to refuse to renew any expired contracts without incurring in a violation of the First
Amendment. Id. at 60-62.
Sixth, with respect to the Contracts Clause claim, Defendants assert that the Complaint
fails to allege any state legislative action that could have impaired Plaintiffs’ contractual
obligations with CFSE. Id. at 62-63. Seventh, the individual co-defendants argue that —to the
extent Plaintiffs’ allegations are sufficient to establish their antitrust and Fourteenth
Amendment claims— they are entitled to qualified immunity as to these claims because they did
not violate any legal right that was clearly established at the time of the alleged conduct. Id. at
64-66. Finally, Defendants ask the Court to refuse to exercise its supplemental jurisdiction in
the instant case and dismiss Plaintiffs’ Puerto Rico law claims —namely those arising under
Article 1802 of the Civil Code and the Due Process, Equal Protection, and Contracts Clauses of
the Puerto Rico Constitution. Id. at 66.3

3

The Court notes that Defendants did not argue that they were entitled to state sovereign immunity
under the Eleventh Amendment of the U.S. Constitution. In any event, this Court agrees with the
reasoning and holding of Judge Salvador Casellas and Judge Gustavo Gelpi that the CFSE is not an “arm

Civil No. 14-1533 (JAG)

I.

9

Standing
It is well-established that “Article III of the Constitution confines the federal courts to

deciding actual cases and controversies.” Cotter v. City of Boston, 323 F.3d 160, 166 (1st Cir. 2003)
(quoting Allen v. Wright, 468 U.S. 737, 750 (1984)). It is also clear that a case or controversy
requires litigants bringing forth a claim to demonstrate their “standing to challenge the action
sought to be adjudicated in the lawsuit.” Valley Forge Christian College v. Americans United for
Separation of Church and State, 454 U.S. 464, 471 (1982) (quotation marks omitted).
In order to establish standing under Article III, a plaintiff must have a “personal stake in
the outcome of the controversy,” see Baker v. Carr, 369 U.S. 186, 204 (1962), and meet the
following three constitutional requirements:
(1) an injury in fact (i.e., a “concrete and particularized” invasion of
a “legally protected interest”); (2) causation (i.e., a “fairly . . .
treace[able]” connection between the alleged injury in fact and the
alleged conduct of the defendant); and (3) redressability (i.e., it is
“likely” and not “merely speculative” that the plaintiff’s injury will
be remedied by the relief plaintiff seeks in bringing suit).
Sprint Commc’ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 274 (2008) (quoting Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-561 (1992)). In addition to these three constitutional requirements,
courts have also considered certain prudential factors as part of the standing analysis. Among
these considerations are that: (1) a “plaintiff generally must assert his own legal rights and

of the State” for purposes of the Eleventh Amendment and state sovereign immunity. See, e.g., Joubert-

Vazquez v. Alvarez-Rubio, 820 F. Supp. 2d 289, 298-300 (D.P.R. 2011) (Casellas, J.) and AponteRamos v. Alvarez-Rubio, 2011 WL 5855313, at *1 (D.P.R. Oct. 28, 2011) (Gelpi, J.).

Civil No. 14-1533 (JAG)

10

interests and cannot rest his claim to relief on the legal rights or interests of third parties,” see
Warth v. Seldin, 422 U.S. 490, 499 (1975); (2) the alleged injury is not merely a generalized
grievance; (3) the alleged injury falls within the zone of interests protected by the law invoked.
N.H. Right to Life Political Action Coomm. v. Gardner, 99 F.3d 8, 15 (1st Cir. 1996).
Defendants specifically argue that Plaintiffs Lopez-Garcia, Arraiza-Caban, and Velez
lack standing to file the instant lawsuit on behalf of their corporations, namely Centro
Quiropractico Dr. Juan M. Lopez P.S.C., Grupo Quiropractico del Norte, C.S.P., and Centro
Quiropractico de Cayey P.S.C., respectively.4 Docket No. 30 at 20-21. These corporations were
the ones that entered into contracts with CFSE. Id. at 23. According to Defendants, since the
individual plaintiffs operated through their corporate entities to undertake the various
transactions discussed in the Complaint, it follows that these corporations were the ones that
could have suffered the alleged harm. Id. Defendants invoke the shareholder standing rule for the
proposition that, even if Lopez-Garcia, Arraiza-Caban, and Velez were controlling or sole
shareholders/officers of their respective corporations, they do not have an individual right to
assert any claims on behalf of their clinics. Id. at 25-26. Finally, Defendants claim that Lopez-

4

Out of these three chiropractic clinics, only Centro Quiropractico de Cayey P.S.C. is not a plaintiff in
this case. In addition, throughout their sixty-eight page motion to dismiss, Defendants consistently argue
that Lopez-Garcia’s chiropractic clinic and co-plaintiff in this case, Centro Quiropractico Dr. Juan M.
Lopez P.S.C., is not properly registered in the Puerto Rico Department of State as an existing and duly
incorporated entity. See, e.g., Docket No. 30 at 21 n.12. The Court takes judicial notice, however, that the
company is registered as “Centro Quiropractico Dr. Juan M. Lopez, DC P.S.C.” See Department of State’s
Corporate
Registry
of
the
Commonwealth
of
Puerto
Rico,
available
at
https://prcorpfiling.f1hst.com/CorporationSearch.aspx. Since it is evident that we are talking about the
same corporate entity, —the one that entered into a service provider contract with CFSE and is owned
by Plaintiff Lopez-Garcia— the Court will not address Defendants’ argument any further.

Civil No. 14-1533 (JAG)

11

Garcia, Arraiza-Caban, and Velez have no standing to file derivative claims on behalf of their
respective corporations. Id. at 28-29.
Defendants are right in pointing out that “[a]ctions to enforce corporate rights or redress
injuries to [a] corporation cannot be maintained by a stockholder in his own name . . . even
though the injury to the corporation may incidentally result in the depreciation or destruction of
the value of the stock.” Pignato v. Dein Host, Inc., 835 F.2d 107, 109 (1st Cir. 1987) (quoting Brictson v.
Woodrough, 164 F.2d 107, 109 (8th Cir. 1947)).5 Defendants’ argument, however, misses the point.
Plaintiffs Lopez-Garcia, Arraiza-Caban, and Velez do not seek “to enforce corporate rights or
redress injuries to [their respective] corporation[s].” Id. Instead, they are seeking redress for
alleged injuries that are both separate and distinct from those suffered by their respective
corporate entities. Docket No. 40 at 7-8.
For example, Plaintiffs allege that Defendants have impeded and discouraged patients
from seeking treatment by chiropractors, as well as dissuading occupational primary care
physicians from referring patients to chiropractors. Docket No. 28 at 27. Moreover, Plaintiffs
aver that Defendants have relied on false and misleading information to tarnish their individual
reputation and, thus, manipulate the public’s perception of chiropractic healthcare. Id. at 27 and
40. In addition, with respect to Plaintiffs’ First Amendment retaliation claim, Plaintiffs allege
that Defendant Estrada gave specific instructions not to extend or renew any service agreement

5

The First Circuit has recently held that the shareholder standing rule constitutes a prudential factor, as
opposed to a constitutional requirement, for the courts to consider as part of the standing analysis. See
Gianfrancesco v. Town of Wrentham, 712 F.3d 634 (1st Cir. 2013). In other words, courts may circumvent this
rule under certain circumstances to reach the merits of the case. Id.

Civil No. 14-1533 (JAG)

12

to chiropractors, including the individual plaintiffs in this case. Id. at 42. Consequently, LopezGarcia, Arraiza-Caban, and Velez are not suing on behalf of their respective corporations, but
rather, to vindicate their own rights and seek redress of their separate and distinct injuries. Cf.
Diva’s Inc. v. City of Bangor, 411 F.3d 30, 42 (1st Cir. 2005) (dismissing the individual plaintiff for
lack of standing because he failed “to allege any injury, separate from the injury” to the
corporation).
Since it cannot be said at this stage that Lopez-Garcia, Arraiza-Caban, and Velez’s only
stake in this litigation is to enforce the rights of their respective corporations, it necessarily
follows that they have standing to file the Complaint at bar.
II.

Sherman Antitrust Act Claims
Plaintiffs allege violations of both Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and

2. Docket No. 28 at 43-46. Specifically, Plaintiffs base their antitrust claims on the adoption of
the new CFSE guidelines and health policy for chiropractic services, which limit chiropractic
treatment to two (2) weeks with a frequency of three (3) visits per week. Docket No. 28 at 31.6
The guidelines allow the Regional Medical Director to authorize the treatment’s extension to
two (2) additional weeks for a total of twelve (12) visits. Id. According to the Complaint, these
guidelines reflect Defendants’ animus towards chiropractic treatment and their clear disregard
of accepted practices and scientific data. Id. at 43-46. In other words, the Complaint avers that
Defendants, individually and acting in concert, adopted discriminatory and anticompetitive

6

It is unclear from the face of the Amended Complaint whether Plaintiffs base their antitrust claims on
any other actions besides the limitation of chiropractic services through the adoption of the alleged
discriminatory guidelines.

Civil No. 14-1533 (JAG)

13

policies that ultimately excluded and eliminated chiropractic treatment from the medical and
health compensation provided under Act No. 45 of April 18, 1935, as amended, P.R. Laws Ann.
tit. 11, § 1-42 (“Act No. 45”). Docket No. 28 at 4.
Defendants claim that since the CFSE is a public corporation with state-sponsored
monopoly power over workers’ compensation claims, it follows that CFSE is immune from
antitrust challenges pursuant to the state action (or Parker) doctrine. Docket No. 30 at 43-46.
With this in mind, the Court proceeds to analyze Defendants’ immunity argument.
A. The State Action Doctrine
The state action doctrine immunizes state efforts to displace competition with
regulation from federal antitrust laws.7 In Parker v. Brown, the Supreme Court held that the
Sherman Act does not prohibit a State in its sovereign capacity from imposing anticompetitive
restraints that would otherwise be impermissible. 317 U.S. 341, 351-52 (1943); see also F.T.C. v.
Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003, 1010 (2013) (citation omitted) (quotation marks
omitted) (“[B]ecause nothing in the language of the Sherman Act or in its history suggested that
Congress intended to restrict the sovereign capacity of the States to regulate their economies,
the Act should not be read to bar States from imposing market restraints as an act of
government.”).

7

The term “state action” should not be confused with our constitutional analysis under the Fourteenth
Amendment. Unlike Fourteenth Amendment state action, the concept of “state action” for antitrust
immunity purposes does not cover “inadvertent or unilateral acts of state officials not acting pursuant to
state policy.” 1 P. Areeda & H. Hovenkamp, Antitrust Law ¶221, p. 356 (2d ed. 2000) (Areeda &
Hovencamp).

Civil No. 14-1533 (JAG)

14

While Parker antitrust immunity has been extended to state subdivisions (e.g., agencies
and public corporations) and private parties that act pursuant to the sovereign power of the
State, it is clear that these nonsovereign entities “do not receive all the federal deference of the
States that create them.” City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 412-13 (1978)
(“[T]he Parker doctrine exempts only anticompetitive conduct engaged in as an act of
government by the State as sovereign, or, by it subdivisions, pursuant to state policy to displace
competition with regulation or monopoly public service.”). A state subdivision invoking Parker
immunity has the burden to establish that it acted “pursuant to a clearly expressed state policy.”
Town of Hallie v. City of Eau Claire, 471 U.S. 34, 40 (1985). In doing so, the state subdivision need not
“point to a specific, detailed legislative authorization,” but rather, show that the “legislature
contemplated the kind of action complained of.” Louisiana Power & Light, 435 U.S. at 415; see also
Corey v. Look, 641 F.2d 32, 36-37 (1st Cir. 1981). This burden, also known as the “clear articulation”
requirement, is met so long as the challenged action is a reasonable foreseeable consequence of
the state’s authorization. Id.
In addition to the “clear articulation” requirement, private actors seeking Parker
immunity must prove that their anticompetitive acts were “actively supervised by the State.”
California Retail Liquor Dealers Ass’n. v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980). Up until
recently, it was unclear whether formal state agencies and political subdivisions were subject to
Midcal’s “active state supervision” requirement. In 2013, the Supreme Court stated that, “unlike
private parties, [local governmental] entities are not subject to the ‘active state supervision
requirement’ because they have less of an incentive to pursue their own self-interest under the

Civil No. 14-1533 (JAG)

15

guise of implementing state policies.” Phoebe Putney, 133 S. Ct. at 1011 (citing Hallie, 4712 U.S. at
46-47). Earlier this year, however, the Supreme Court clarified that its holding in Phoebe Putney,
was premised on the fact that the “need for supervision turns not on the formal designation
given by States to regulators but on the risk that active market participants will pursue private
interests in restraining trade.” N. Carolina State Bd. of Dental Examiners v. F.T.C., 135 S. Ct. 1101, 11131114 (2015) (citing 1A Areeda & Hovencamp, Antitrust Law ¶ 226, p. 180 (4th ed. 2013)) (“State
agencies controlled by active market participants, who possess singularly strong private
interests, pose the very risk of self-dealing Midcal 's supervision requirement was created to
address.”).
In Board of Dental Examiners, the Supreme Court held that “MidCal’s active supervision test
is an essential prerequisite of Parker immunity for any nonsovereign entity —public or private—
controlled by active market participants.” Id. at 1113. The Court also stated that “[w]hen a State
empowers a group of active market participants to decide who can participate in its market, and
on what terms, the need for supervision is manifest.” Id. at 1114. Given that the Supreme Court
issued its Board of Dental Examiners decision on February 25, 2015, the parties have been unable to
brief this Court on whether CFSE is a nonsovereign entity controlled by active market
participants and, thus, subject to the supervision requirement.
Plaintiffs argue that the individual defendants “are engaged in the private practice of
medicine in areas of specializations that directly compete with chiropractic services in the
market for healthcare . . . and the submarket for treatment of neuromusculoskeletal conditions.”
Docket No. 41 at 11. Nonetheless, Plaintiffs’ position in their Opposition was that Defendants’

Civil No. 14-1533 (JAG)

16

actions were not subject to the “active state supervision requirement.” Id. at 17-18. Interestingly
enough, Defendants assumed the contrary position that “the challenged restraint must be one
clearly articulated and affirmatively expressed as state policy and . . . actively supervised by the
state itself.” Docket No. 30 at 45 (citing Corey v. Look, 641 F.2d 32, 36-37 (1st Cir. 1981)) (emphasis
added). Defendants mention in passing that the CFSE is “actively supervised” because “it is
restricted in the types of actions it can undertake through [Act No. 45].” Id. at 47. Nevertheless, a
cursory reading of any case discussing the nature of this requirement would suffice to conclude
that this argument is completely circular and fails as a matter of law.
Consequently, not only have the parties been unable to discuss the impact of Board of
Dental Examiners on this case, but also, they seem to be confused as to what is the applicable test.
Furthermore, although it is well-established that individuals may qualify for Parker antitrust
immunity, it was unclear from Defendants’ motions to dismiss whether they are claiming that
only the CFSE would benefit from such immunity in this case. See Llewellyn v. Crothers, 765 F.2d
769 (9th Cir. 1985) (Kennedy, J.) (affirming the district court’s dismissal of a lawsuit brought by
licensed chiropractors on the basis that the director and medical directors of the Oregon
Workers’ Compensation Department, along with Oregon’s State Accident Insurance Fund
Corporation, were immune from antitrust liability). In any event, in Board of Dental Examiners, the
Supreme Court specifically reserved the question of whether a private board member of a public
entity —that is, an individual who exercises public authority but also actively participates in
the relevant market— could qualify for state-action immunity. 135 S. Ct. at 1115.

Civil No. 14-1533 (JAG)

17

Leaving aside the Parker immunity issue, the parties’ analysis of the federal antitrust
claims, while wordy and extensive, was lacking in substance to the say the least. For example,
Defendants mention in passing that § 1 of the Sherman Act does not reach unilateral conduct.
Docket No. 30 at 32-33. Defendants claim that a corporation and its officers cannot engage in the
type of concerted conduct prohibited under § 1 because they “are deemed to be the same legal
entity for purposes of the Sherman Act.” Id. at 33 (citing Podiatrist Ass’n, Inc. v. La Cruz Azul de P.R.,
Inc., 332 F.3d 6, 13 (1st Cir. 2003)). The Supreme Court, however, has constantly rejected the
formalistic approach of the intraenterprise conspiracy doctrine in favor of a more functional
approach. American Needle, Inc. v. National Football League, 130 S. Ct. 2201, 2211 (2010). Instead of
looking at whether the defendants are “a legally single entity,” courts must determine whether
the alleged conspiracy or agreement “deprives the marketplace of independent centers of
decisionmaking . . . and thus of actual or potential competition.” Id. at 2211-2212 (citations and
quotation marks omitted). Not only did Defendants recite the law incorrectly, but also, they
failed to apply any legal test to the facts in the instant case. See id. at 32-33.8 Similarly, Defendants
did not explain whether the “independent personal stake exception” invoked by Plaintiffs could
apply in this case.
Another example is the parties’ perfunctory discussion of the qualified immunity
defense. Without much specificity or analysis, Defendants claim that Plaintiffs failed to plea or
show that Defendants’ actions —namely, limiting the number of compensated referrals—

8

For what it is worth, Plaintiffs incorrectly referenced the defunct intraenterprise conspiracy doctrine as
applicable and also failed to identify the correct legal standard. See Docket No. 41 at 10-13.

Civil No. 14-1533 (JAG)

18

violated clearly established antitrust law. Docket No. 30 at 65.9 This argument is conclusory and
lacks substance. “It is not enough to merely mention a possible argument in the most skeletal
way, leaving the court to do counsel’s work, create the ossature for the argument, and put flesh
on its bones.” See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990). From the Motion to Dismiss
and the quality of the analysis, this seems to be exactly what Defendants pretended the Court to
do. On the other hand, Plaintiffs did not even acknowledge Defendants’ qualified immunity
defense.10 Similarly, Plaintiffs failed to cite any caselaw or even argue that the alleged violations
in fact violated clearly established law. Since “[j]udges are not expected to be mindreaders,” the
parties had “an obligation to spell out [their] arguments squarely and distinctly.” Rivera-Gomez v.
de Castro, 843 F.2d 631, 635 (1st Cir. 1988) (internal citations omitted). None of the parties
complied with this obligation as to the antitrust claims.
Given that many of the defenses and arguments were not briefed properly, the Court
hereby refuses to do counsel’s work and, therefore, denies Defendants’ motions to dismiss the
antitrust claims without prejudice. In the interest of justice and efficiency, the Court will allow
Defendants to renew their Motion to Dismiss only as to the these claims. Plaintiffs, in turn, will

9

This is the extent of Defendants’ analysis. The Motion to Dismiss consists of a two-page, boilerplate
summary of what the defense of qualified immunity entails and a small paragraph indicating that the
individual defendants are entitled to this defense. Defendants’ analysis did not even recognize a
distinction between Plaintiffs’ antitrust claims under § 1 and § 2 of the Sherman Act. See Docket No. 30 at
65.
10

Defendants only raised a vague qualified immunity defense as to Plaintiffs’ Sherman Act and Fourteenth
Amendment claims. See Docket No. 30 at 64-66. Nonetheless, Defendants’ arguments were unopposed
because Plaintiffs only responded to a non-existent qualified immunity defense with respect to the First
Amendment retaliation claim. See Docket No. 41 at 30-31. The Court is perplexed at such a degree of
carelessness.

Civil No. 14-1533 (JAG)

19

be entitled to file a joint Opposition. To the extent that Defendants renew their Motion to
Dismiss, the parties’ briefs shall be limited to the following topics:
1. Parker immunity defense
(a) whether, in light of the unresolved question in Board of Dental Examiners, the individual
defendants could qualify for Parker immunity;
(b) whether Defendants acted pursuant to a clearly articulated state policy;11
(c) whether the “active state supervision” requirement applies and, if so, whether it is
met in the instant case;
2. Section 1 of the Sherman Act
(a) whether the CFSE and the individual defendants could engage in the type of
concerted conduct required by § 1 as discussed in American Needle;
(b) whether the “independent personal stake exception” is applicable;
(c) to the extent that Plaintiffs’ allegations stated a claim under § 1, whether Defendants’
conduct violated clearly established law as discussed in the relevant caselaw;
3. Section 2 of the Sherman Act
(a) whether Plaintiffs’ allegations stated a claim under § 2;
(b) to the extent that Plaintiffs stated a claim, whether Defendants’ conduct violated
clearly established law as discussed in the relevant caselaw.
The Court hopes that this outline will assist the parties write clearer briefs and avoid
unnecessary wordiness. To make sure this happens, no replies will be allowed and the briefs
shall not exceed fifteen (15) pages.12 In addition, the parties are hereby advised that failure to
comply with the aforementioned specifications shall result in the filing being stricken from the
docket.

11

The parties’ discussion of this requirement was quite comprehensive. Therefore, the parties may rely on
the arguments that were already raised.
12

The Court expects the font and margins to comply with Rule 7(d) of the Local Rules of Civil Procedure.
Failure to comply with such rules shall result in the filing being stricken from the record.

Civil No. 14-1533 (JAG)

III.

20

Due Process Clause
Plaintiffs argue that the adoption of the new guidelines was unreasonable, arbitrary, and

capricious.13 See Docket No. 41 at 20. Aside from this vague contention, Plaintiffs’ analysis of
their substantive due process claim is borderline frivolous. For example, Plaintiffs argue that the
proper standard of review is one of “strict scrutiny due to the infringement of [their] personal
constitutional rights.” Docket No. 41 at 22. The Court does not know what infringement or
constitutional rights Plaintiffs are referring to or how do they reach such an unsupported
conclusion. Plaintiffs proceed to argue that “[i]n any event, Defendants have failed to show any
kind of legitimate state interests at stake under both rational and strict constitutional scrutiny .
. . [and, thus,] the requirements for a Due Process claim are clearly satisfied.” Id. This argument is
devoid of any substance. Not only did Plaintiffs fail to explain their reasoning, but also, their
discussion does not seem to resemble in any way how courts traditionally analyze substantive
due process claims.
In light of the allegations stated in the Amended Complaint, “the threshold question is
whether [Defendants’] behavior . . . [was] so egregious, so outrageous, that it may fairly be said
to shock the contemporary conscience.” Gonzalez-Fuentes v. Molina, 607 F.3d 864, 880 (1st Cir.
2010) (quoting County of Sacramento v. Lewis, 523 U.S. 833, 847 n. 8 (1998) (internal quotation
marks omitted). “Substantive due process protects only those interests that implicate one of

13

Defendants claim that Plaintiffs failed to specify which component of the Due Process Clause was
allegedly violated. See Docket No. 30 at 52-53. As a result, Defendants felt the need to analyze Plaintiffs’
allegations under both substantive and procedural due process theories. Id. The Amended Complaint,
however, clearly states in bold and capital letters that Plaintiffs only alleged violations of their
substantive due process rights. See Docket No. 28 at 46. Plaintiffs confirmed the obvious in their main
Opposition. See Docket No. 41 at 20.

Civil No. 14-1533 (JAG)

21

‘those fundamental rights and liberties which are, objectively, deeply rooted in this Nation’s
history and tradition and implicit in the concept of ordered liberty, such that neither liberty nor
justice would exist if they were sacrificed.” Id. at 880 n. 13 (citation and internal quotation marks
omitted). It is also worth noting that “[s]ubstantive due process, as a theory of constitutional
redress has in the past fifty years been disfavored, in part because of its virtually standardless
reach.” Colon Medina &Sucesores, Inc. v. Custodio, 964 F.2d 32, 41-42 (1st Cir. 1992).
The Court agrees with Defendants that it cannot be seriously argued that the challenged
actions in this case were either egregious or outrageous. Plaintiffs failed to explain what
fundamental right “deeply rooted in this Nation’s history and tradition and implicit in the
concept of ordered liberty” was infringed. Washington v. Glucksberg, 521 U.S. 702, 720-721 (1997)
(citations omitted). Also, Plaintiffs failed to point out how Defendants deprived them of a
protected interest in life, liberty, or property. See Harron v. Town of Franklin, 660 F.3d 531, 536 (1st
Cir. 2011) (stating that to establish a substantive due process violation by executive officials, the
plaintiff must show “both that the acts were so egregious as to shock the conscience and that
they deprived him of a protected interest in life, liberty, or property”) (emphasis added).
Moreover, limiting the number of compensated referrals hardly constitutes conduct that is
either “shocking or violative of universal standards of decency.” Amsden v. Moran, 904 F.2d 748,
753-754 (1st Cir. 1990); c.f. Rochin v. California, 342 U.S. 165 (1952) (holding that an officer’s
conduct in pumping suspect’s stomach so as to uncover illicit drugs was conduct that
“shock[ed] the conscience” in violation of the suspect’s substantive due process rights). This
Court refuses to hold that the adoption of a treatment schedule limitation for chiropractic
services violated Plaintiffs’ substantive due process rights and, thus, hereby dismisses the claim.

Civil No. 14-1533 (JAG)

IV.

22

Equal Protection Clause
The Fourteenth Amendments’ Equal Protection Clause guarantees that “no person or

class of persons shall be denied the same protection of the laws which is enjoyed by other
persons or other classes in the same place and under like circumstances.” Walsh v. Massachusetts,
618 F.2d 156, 158 (1st Cir. 1980) (citation omitted). In the instant case, Plaintiffs concede that
Defendants’ actions are only subject to rational basis review —namely, whether the challenged
action was rationally related to a legitimate state interest. Docket No. 41 at 23. Taking the
allegations in the Amendment Complaint as true, the Court finds as a matter of law that
Plaintiffs have failed to state an equal protection violation.
It is well-established that “[t]he state has broad authority and discretion in the
regulation of economic affairs.” Crothers, 765 F.2d at 775 (citing Williamson v. Lee Optical of
Oklahoma, Inc., 348 U.S. 483 (1955)). Plaintiffs describe the adopted guidelines as an “oppressive
regulatory scheme” that explicitly targets chiropractors and deliberately excludes “other medical
professionals involved in the treatment of neuromusculoskeletal disorders and conditions.”
Docket No. 41 at 24. According to Plaintiffs, this inequity is evidence of Defendants’
discriminatory animus towards chiropractors. Id.
The Court disagrees with Plaintiffs’ exaggerated characterization of the adopted
guidelines. Reducing the maximum number of compensated referrals from eighteen (18) to
twelve (12) visits hardly constitutes an “oppressive regulatory scheme.”14 The Amended

14

It is worth noting that this number only refers to the maximum amount of compensated referrals under
the CFSE. The adopted guidelines at no point prevent injured workers from seeking additional treatment
so long as they pay those expenses out of their own pocket. See Docket No. 28 at 11.

Civil No. 14-1533 (JAG)

23

Complaint itself acknowledges that Defendants’ “determination to limit the quantity of
treatment sessions [was] based on the Council on Chiropractic Guidelines and Practice
Parameters approved by the American Chiropractic Association.” Docket No. 28 at 31. This
shows that the adopted guidelines were not pulled out of thin air and, much less, were
motivated by invidious discrimination.15
The Amended Complaint proceeds to mention that various nationally-recognized
guidelines allow for substantially more chiropractic treatment than what the adopted guidelines
provide for. Id. Equal protection principles, however, do not require that the CFSE engage in
what Plaintiffs consider to be the “ideal” chiropractic practice. In Act No. 45, the Puerto Rico
legislature authorized the CFSE to adopt medical guidelines prescribing, inter alia, the maximum
treatment period for each condition. P.R. Laws Ann. tit. 11, § 1b-4 and 1c(b). In addition, the
legislature articulated the need of the state to reduce costs in the area of worker’s compensation
health care. See P.R. Laws Ann. tit. 11, § 1a (articulating Puerto Rico’s public policy to reduce
health care costs by minimizing the prospect for litigation and providing a single compensation
system). Since reducing the number of compensated referrals certainly minimizes costs in this
area, it follows that the adopted guidelines and Defendants’ actions were rationally related to a
legitimate governmental purpose.16

15

This analysis applies with equal force to Plaintiffs’ substantive due process claim as it is evidence that
the guidelines were neither arbitrary nor capricious. This is one of many examples in which equal
protection principles prove to be instructive as to the applicability and meaning of the due process
clause.
16

Even if this is not the reason articulated by Defendants when adopting the guidelines, “[t]he burden is
on the plaintiff to disprove every conceivable basis which might support the classification, ‘whether or

Civil No. 14-1533 (JAG)

24

Furthermore, even if the reason to adopt the challenged guidelines was to minimize the
risks and side effects associated with chiropractic care, there is no question that limiting the
maximum number of compensated referrals is rationally related to such purpose. Also, assuming
arguendo that chiropractors and health professionals involved in the treatment of
neuromusculoskeletal disorders are similarly situated in terms of the treatments’ side effects and
contraindications, the Equal Protection Clause allows Defendants to act “one step at a time.” See
Williamson, 348 U.S. at 489. In other words, Defendants were not required to reduce the number
of compensated referrals to other professionals engaging in similar treatments. See Romer v. Evans,
517 U.S. 620, 632 (1996) (citations omitted) (“In the ordinary case, a law will be sustained if it
can be said to advance a legitimate government interest, even if the law seems unwise or works
to the disadvantage of a particular group, or if the rationale for it seems tenuous.”).
Since “each profession has its own distinctive qualifications and licensing requirements,”
this Court concludes that there is a rational basis to distinguish between chiropractors and
other healthcare providers. Crothers, 765 F.2d at 776 (finding that there was a “rational basis to
distinguish between chiropractors and other healthcare providers in setting reasonable rates of
reimbursement for their services.”); see Giacalone v. Wehner, 387 F. Supp. 2d 383, 385-385 (S.D.N.Y.
2005) (dismissing an equal protection claim on the basis that there is a “rational basis for
distinguishing chiropractors from physical therapists in the setting of rates for the workers’

not the basis has a foundation in the record.’” Giacalone v. Wehner, 387 F. Supp. 2d 383, 385-385 (S.D.N.Y.
2005) (quoting Heller v. Doe, 509 U.S. 312, 320-321 (1993)).

Civil No. 14-1533 (JAG)

25

compensation and no-fault insurance programs”).17 As such, the Court finds that no equal
protection violation was properly alleged. Plaintiffs’ equal protection claim is hereby dismissed.
V.

First Amendment Retaliation
Plaintiffs allege that Defendants’ decision “to revoke and withdraw the already approved

chiropractic services agreements just a few days after [the filing] of their original complaint”
constitutes an adverse and retaliatory action against them for their exercise of First Amendment
rights —specifically, the right to petition the Government for redress of grievances. Docket No.
28 at 50-51. Defendants, in turn, ask this Court to dismiss Plaintiffs’ First Amendment
retaliation claim because the chiropractic service agreements had already expired. Docket No. 30
at 58-62.18 Specifically, Defendants claim that Plaintiffs had no property interest in the renewal
of their expired contracts and that the CFSE contracts included a no litigation clause. Id.19 It

17

While Plaintiffs seem to suggest that the actions giving rise to their equal protection claim was the
adoption of the new guidelines, the Court notes that the same reasoning applies to the inclusion of
“Attachment A” to the new contracts. See Docket No. 28 at 38-39. Defendants were not required to
include the same attachment to the new contracts of other health professionals because: (1) there is a
rational basis to distinguish chiropractors from the other healthcare providers; and (2) the Equal
Protection Clause allows Defendants to act one step at a time.
18

It is not clear whether Plaintiffs’ contracts had already expired or were in fact terminated. On the one
hand, Plaintiffs’ Opposition states that Defendants “revoked and withdrew the already approved . . .
agreements just a few days after Plaintiffs filed their Complaint.” Docket No. 41 at 24. According to the
Amended Complaint, however, only Plaintiff Roman’s contract was authorized for renewal and then
revoked. See Docket No. 28 at 42-43. The other contracts had already expired and the CFSE chose not to
extend or renew the service agreements. Id. Therefore, it appears that the alleged retaliatory action in this
case was the non-renewal of Plaintiffs’ contracts with CFSE.
19

According to Defendants, both the expired and the new proposed contracts included the following no
litigation clause: “The Provider certifies that he or she currently has no litigation in process against any
instrumentality of the Government of the Commonwealth of Puerto Rico, or any of its municipalities.”
Docket No. 30 at 60-61. This information was included as an Exhibit to the Motion to Dismiss. Id., Ex. 1.
Therefore, Defendants essentially ask this Court to look beyond the four corners of the Amended
Complaint at this early stage of the case.

Civil No. 14-1533 (JAG)

26

follows, according to Defendants, that the CFSE was within its right to refuse to renew the
contracts. Id. Had Defendants bothered to conduct a scintilla of research, they would have
realized that, not only did they fail to recite the law correctly, but also, their arguments fail as a
matter of law.
First, the argument that Plaintiffs’ claim should be dismissed because they had no
property interest in the renewal of expired contracts is clearly wrong. The First Circuit has
repeatedly held that “[f]or purposes of First Amendment retaliation claim, the non-renewal of an
[independent contractor or] employee’s contract constitutes an adverse employment action.” Id.
at 29 (citing Barton v. Clancy, 632 F.3d 9, 26 (1st Cir. 2011) (“First Amendment protections apply
with equal force whether the public employee is terminated from a position or not
reappointed.”).
Second, the argument that the no litigation clause in Plaintiffs’ contracts authorized the
CFSE to refuse to continue contracting with Plaintiffs misses the point.20 In Del Valle Group v.
Puerto Rico Ports Authority, this Court enjoined a government-owned corporation from enforcing a
similar no litigation clause in its awarded contracts. 756 F. Supp. 2d 169, 180-183 (D.P.R. 2010).
In that case, the Court found that using this language against government contract bidders
likely constituted a violation of a prospective bidder’s First Amendment right to petition the
government for redress. Id.; see also Oscar Renda Contracting, Inc. v. City of Lubbock, 463 F.3d 378, 385-

20

Defendants argue that this no litigation clause “does not contravene Puerto Rico’s laws, morality, or
the public order.” Docket No. 30 at 62. Defendants, however, fail to explain why or how that is the case.
They also fail to cite any authority in support of such proposition. Therefore, this is yet another
conclusory argument lacking substance.

Civil No. 14-1533 (JAG)

27

386 (5th Cir. 2006) (holding that the city’s rejection of the lowest bidder because of a previously
filed lawsuit against the city could violate the bidder’s First Amendment rights).21
It is clearly established that “as a general matter the First Amendment prohibits
government officials from subjecting an individual to retaliatory actions . . . for speaking out.”
Decotiis v. Whittemore, 635 F.3d 22, 29 (1st Cir. 2011) (citation omitted). This right, however, is not
absolute. In deciding whether a plaintiff successfully states a First Amendment retaliation claim,
courts must conduct a three-part inquiry. First, it must determine “whether the employee spoke
as a citizen on a matter of public concern.” Id. (quoting Garcetti v. Ceballos, 547 U.S. 410, 418
(2006)) (other citation omitted). Then, it must balance “the interests of the [employee], as a
citizen, in commenting upon matters of public concerns and the interest of the State, as an
employer, in promoting the efficiency of the public services it performs through its employees.
Id. (quoting Pickering v. Bd. of Educ., 391 U.S. 563, 568 (1968)) (other citation omitted). Finally, the
court must determine whether “the protected expression was a substantial or motivating factor
in the adverse employment decision.” Id. (citation omitted). Even if a plaintiff satisfies this threepart inquiry, a defendant “may still escape liability if it can show that it would have reached the
same decision even absent the protected conduct.” Id. at 29-30 (citations and quotation marks
omitted).22 Finally, this First Amendment framework for government-employee speech also

21

Both Del Valle Group and Oscar Renda involved contract bidders that lacked a pre-existing relationship
with the state. Therefore, if anything, the reasoning in these decisions becomes even more forceful in the
instant case where the Complaint alleges that Plaintiffs were independent contractors with pre-existing
contractual relationships.
22

Both parties fail to utilize, or even recognize, this three-part inquiry. Once again, the parties “leav[e]
the court to do counsel’s work, create the ossature for the[ir] argument[s], and put flesh on [their]
bones.” See Zannino, 895 F.2d at 17.

Civil No. 14-1533 (JAG)

28

applies to independent contractors. Id. at 26 n. 1 (citing Board of County Commissioners v. Umbehr,
518 U.S. 668, 685 (1996)).
With respect to the first prong, a lawsuit “constitutes speech protected under the First
Amendment if it ‘address[es] a matter of public concern.” Sanders v. Dist. of Columbia, No. 061411(PLF), 2015 WL 1567898, at *6 (D.D.C. Apr. 7, 2015) (quoting Pearson v. Dist. of Columbia, 644
F. Supp. 2d 23, 44 (D.D.C. 2009)) (other citation omitted). It is well settled that “[s]peech is a
matter of public concern when it ‘concerns issues about which information is needed or
appropriate to enable members of society to make informed decisions about the operation of
their government.’” Id. (quoting LeFande v. Dist. of Columbia, 613 F.3d 1155, 1159 (D.C. Cir. 2010))
(other citation omitted); Decotiis, 635 F.3d at 30 (stating that “official malfeasance or the neglect
of duties” are examples of “speech [that] relates to a matter of inherent public concern.”).
In the instant case, the Complaint alleges that Defendants relied on false and misleading
information to adopt discriminatory guidelines that reduced the number of compensated
referrals and harmed the reputation of chiropractors. See Docket No. 28. It follows that, as
Plaintiffs correctly point out, this lawsuit relates to a health-related public concern regarding
the access of injured workers to chiropractic treatment under Act No. 45. Docket No. 41 at 25.
In addition to touching upon a matter of public concern, the allegations make clear that
the speech at issue in the lawsuit was not made pursuant to the Plaintiffs’ employment duties.
See Decotiis, 635 F.3d at 30 (quoting Garcetti, 547 U.S. at 421-423) (stating that speech made
pursuant to employment duties include “speech that ‘owes its existence to a public employee’s
professional responsibilities’ speech that the employer ‘has commissioned or created’, speech
that the employee ‘was paid to’ make, speech that the employee’s ‘duties . . . required him to’

Civil No. 14-1533 (JAG)

29

make, speech that amounts to the employee’s ‘work product’, and speech that is an ‘ official
communication[ ]’”). Therefore, the Court finds that the Complaint alleged sufficient facts to
conclude that Plaintiffs spoke as citizens on a matter of public concern when they filed the
original lawsuit. See id. at 31 (finding that a “public employee who is hired to perform certain
specific functions [who] believes her employer is not complying with the law and suggests to
constituents a method to exert pressure on the public agency to encourage compliance” is
speaking as a citizen on a matter of public concern).
With respect to the second prong, the Court must “balance the value of an employee’s
speech . . . against the employer’s legitimate government interest in ‘preventing unnecessary
disruptions and inefficiencies in carrying out its public service mission.’” Id. (quoting Guilloty
Perez v. Pierluisi, 339 F.3d 43, 52 (1st Cir. 2003)) (other citations omitted). When evaluating the
government’s interest, courts must consider “(1) the time, place, and manner of the employee’s
speech, and (2) the employer’s motivation in making the adverse employment decision.” Id.
(quoting Davignon v. Hodgson, 524 F.3d 91, 104 (1st Cir. 2008)).
In the instant case, just by looking at the allegations, the value of Plaintiffs’ speech seems
significant given the fact that the CFSE is the sole provider of medical services for work-related
accidents. On the Defendants’ side, there are no allegations of major disruptions to the CFSE’s
operations. Plaintiffs’ protected speech came in the form of a lawsuit, as opposed to some kind of
protest or manifestation that could disrupt Defendants’ services. Also, accepting the pleaded
facts as true, “the sole motivation behind the non-renewal was retaliation, not the furtherance of

Civil No. 14-1533 (JAG)

30

governmental interests.” Id. at 36.23 Therefore, it cannot be said at this stage that Defendants’
interest “in allaying disruption and inefficiencies in the workplace” outweighs the value of
Plaintiffs’ protected speech. Id. at 35-36.24 Similarly, since Plaintiffs’ protected speech was the
reason for Defendants’ alleged retaliatory conduct, it follows that the third prong was met and
that Plaintiffs properly stated a First Amendment retaliation claim.
Finally, the Court notes that the Amended Complaint failed to link Defendants LastraGonzalez, Diaz-Trancon, Rivera-Serrano, and Colon-Grau to any actionable conduct that could
potentially violate the First Amendment. Plaintiffs had the burden “to allege facts linking each
defendant to the grounds on which that particular defendant is potentially liable.” See Redondo
Waste Sys., Inc. v. Lopez-Freytes, 659 F.3d 136, 140 (1st Cir. 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009)). With respect to their First Amendment claim, Plaintiffs’ failure to satisfy this
burden is evident. Plaintiffs were not allowed to lump Defendants together without pleading
individualized facts. The Amended Complaint only identifies the CFSE and Defendant Estrada
as those responsible for the decision not to renew the expired chiropractic service agreements.

23

For some reason the Court will never quite understand, Defendants’ Motion to Dismiss seems to
confirm that Plaintiffs’ original lawsuit was the real reason behind the non-renewal of Plaintiffs’
contracts. See Docket No. 30 at 60-62. Even more surprisingly, Defendants seem to even justify their
alleged retaliatory conduct. For example, Defendants state: “Plaintiffs want to proverbially have their
cake and eat it too; they want to sue their former contractual partner yet still receive business via the
[CFSE’s] referrals. No individual or private entity would tolerate such behavior and the [CFSE] cannot
be expected to do the same . . . .” Id. at 61. This appears to be a truly unwise admission by Defendants that,
if taken literally, would seem to confirm Plaintiffs’ allegations of retaliation.
24

Given the “fact-intensive nature” of this First Amendment framework for government-employee
speech, the First Circuit has stated that the analysis under the framework’s first two prongs “does not
easily lend itself to dismissal on a Rule 12(b)(6) motion.” Decotiis, 635 F.3d at 35 (citing Jordan v. Carter,
428 F.3d 67, 73 (1st Cir. 2005)).

Civil No. 14-1533 (JAG)

31

See Docket No. 42-43.25 Therefore, the Court dismisses Plaintiffs’ First Amendment claim as to
Defendants Lastra-Gonzalez, Diaz-Trancon, Rivera-Serrano, and Colon-Grau.
VI.

Contracts Clause
Plaintiffs’ next cause of action is premised on the Contract Clause of the U.S.

Constitution, which prohibits states from passing laws “impairing the Obligations of Contracts .
. . .” U.S. Const. Art. 1, § 10. A Contract Clause claim requires the court to “first ascertain
whether a change in state law has resulted in the substantial impairment of a contractual
relationship” and, then, determine “whether the impairment is nevertheless justified as
reasonable and necessary to serve an important public interest.” Parker v. Wakelin, 123 F.3d 1, 4-5
(1st Cir. 1997) (citations and internal quotation marks omitted). A Contract Clause violation
also requires that the alleged impairment arises out of a legislative action. See id. This is because
the Contract Clause “is aimed at the legislative power of the State, and not at the decisions of its
courts, the acts of administrative or executive boards or officers, or the doings of corporations or
individuals.” New Orleans Waterworks Co. v. La. Sugar Ref. Co., 125 U.S. 18, 30 (1888); see also Allied
Structural Steel Co. v. Spannaus, 438 U.S. 234 (1978).
The Amended Complaint alleges that Defendants’ arbitrary and discriminatory
guidelines substantially impaired their contractual relationship with the CFSE. See Docket No.
28 at 48-49. For purposes of their motions to dismiss, Defendants do not seem to contest that

25

In their Motion to Dismiss, Defendants correctly noted the Amended Complaint’s lack of specificity as
to this claim. See Docket No. 30 at 59 and Docket No. 44. The Court notes that this argument went
unopposed as Plaintiffs fell silent in their Opposition and continued to lump Defendants together in
violation of the standard articulated in Iqbal. See Docket No. 41 at 24-26.

Civil No. 14-1533 (JAG)

32

Plaintiffs have adequately pled the existence of a contractual relationship that was substantially
impaired. Instead, Defendants claim that Plaintiffs failed to state a viable Contract Clause claim
because they failed to allege that the impairment resulted from a legislative action. See Docket
No. 30 at 63.
It is clearly established that “it is not strictly and literally true that a law of a state, in
order to come within the constitutional prohibition, must be either in the form of a statute
enacted by the legislature in the ordinary course of legislation, or in the form of a constitution
established by the people of the state as their fundamental law.” New Orleans Waterworks Co., 125
U.S. at 30. In fact, “[a]ny enactment, from whatever source originating, to which a state gives the
force of law, is a statute of the state, within the meaning of the [Contract Clause].” Id. at 31
(quoting Williams v. Bruffy, 96 U.S. 176, 183 (1877)). The relevant question then is whether the
challenged CFSE guidelines involved an exercise of legislative power.
In the instant case, it is clear that the limitation on the number of compensated referrals
is not an act of legislative power, but rather, an administrative one. The fact that Act No. 45
authorized Defendants to issue guidelines prescribing the maximum treatment period for
medical conditions does not mean that there was an “attempt on the part of the state and its
officials to use the law . . . to repudiate a contractual obligation.” Smith v. Sorensen, 748 F.2d 427,
436-37 (8th Cir. 1984) (citation and internal quotation marks omitted) (holding that the
drafting of a reduction-in-force guideline interpreting the merit system rules created by the
State was an administrative act and, thus, did not violate the Contract Clause).

Civil No. 14-1533 (JAG)

33

Courts have defined “‘legislative power’ as the lawmaking power of a legislative body
involving actions that relate to subjects of permanent or general character.” Skoutelas v. Port Auth.
of Allegheny Cnty., 2008 WL 1773876, at *4 (W.D. Pa. Apr. 16, 2008) (citing Black's Law Dictionary
900 (6th ed.1990)) (other citation omitted); see also Contemporary Music Group, Inc. v. Chicago Park
Dist., 343 F.Supp. 505, 508 (N.D. Ill. 1972). The guidelines at issue relate only to the number of
compensated referrals for chiropractors within the CFSE and, thus, cannot be described as
topics of “permanent or general character.” Compare Skoutelas, 2008 WL 1773876, at *4 (holding
that, although the Internal Revenue Code authorized governmental employers to create a trust
to pay certain pension benefits, the port authority’s discontinuance of said benefits to current
retirees and future plan participants was an administrative act and did not involve an exercise of
legislative power) with New Orleans Waterworks Co., 125 U.S. at 30-31 (citing Murray v. Charleston, 96
U. S. 432, 440 (1877)) (stating that “the power of determining what persons and property shall
be taxed belongs exclusively to the legislative branch of the government, and, whether exercised
by the legislature itself, or delegated by it to a municipal corporation, is strictly a legislative
power.”). Since the guidelines fell shy of resembling a legislative act of “permanent or general
character” or “possess[ing] any of the characteristics of a law of general application,” it cannot
be said that they involved an exercise of legislative power delegated by the Puerto Rico
legislature. Skoutelas, 2008 WL 1773876, at *4; see also Montauk Bus Co., Inc. v. Utica City School
Dist., 30 F. Supp. 2d 313 (N.D.N.Y. 1998) (denying Contract Clause claim because the school
district’s actions relating to bus contract were not legislative acts).
In Act No. 45, the Puerto Rico legislature authorized the creation of medical guidelines
to govern the CFSE’s services and specifically prescribed what those guidelines must include. See

Civil No. 14-1533 (JAG)

34

P.R. Laws Ann. tit. 11, § 1b-4 and 1c(b). Therefore, all that was left to the CFSE to do was to
determine the maximum period of treatment and the number of compensated referrals. See id. In
other words, since “[t]he rule was established by the legislature, and its execution . . . committed
to the [CFSE],” it necessarily follows that “[t]he power conferred upon the [CFSE] was not
legislative, but administrative, and might equally well have been vested by law in [other
officials].” New Orleans Waterworks Co., 125 U.S. at 32 (citations omitted).
In light of this analysis, the Court holds that Plaintiffs have failed “to allege the
‘legislative action’ threshold requirement.” Joubert-Vazquez, 820 F. Supp. 2d at 297-298. In its
main Opposition, “Plaintiffs urge the Court, without supporting legal authority, to overlook
such a fatal deficiency and to focus on the fact that” Defendants acted pursuant to their
authority under Act No. 45.26 Id.; see also Futura Development of Puerto Rico v. Estado Libre Asociado de
Puerto Rico, 276 F.Supp.2d 228, 241 (D.P.R. 2003) (denying a Contract Clause claim challenging
non-legislative conduct). Since Defendants’ actions did not involve an exercise of legislative
power, this Court hereby dismisses Plaintiffs’ Contract Clause claim.27

26

Since Plaintiffs failed to provide any relevant analysis or legal authority in support of their position, it
follows that Defendants’ main argument was basically unopposed. Plaintiffs’ only relevant argument is
conclusory, lacks legal support, and is devoid of any substance. See Docket No. 41 at 28 (“The above
summarized acts are not merely the enforcement of already-existing regulations, but rather delve into a
wide array of powers delegated to Defendants by . . . Act No. 45 . . . .[and, thus,] such actions are to be
considered an exercise of “legislative power” that the Contracts Clause is specifically designed to
police.”).
27

The Court also notes that it is not entirely clear that the challenged guidelines substantially impaired
Plaintiffs’ contractual obligations with the CFSE. It would seem that what Plaintiffs are really alleging is
the impairment of their contracts’ performance. See Docket No. 28 at 33-34. This issue was neither raised
nor briefed by either party. But, to the extent that the Complaint really alleges an impairment of the
performance of the contracts, Plaintiffs’ claim should also be dismissed because it would not implicate
the Contract Clause and our Constitution does not provide a federal action for simple breach of contract.

Civil No. 14-1533 (JAG)

VII.

35

Puerto Rico law claims
The parties did not address the merits of Plaintiffs’ state law claims. See Docket No. 30 at

66 and Docket No. 41 at 31. Instead, Defendants only asked this Court to refuse to exercise its
supplemental jurisdiction over such claims. See Docket No. 30 at 66. Since there are still federal
claims pending, the Court will not dismiss Plaintiffs’ state law claims at this moment and will
not address their merits without proper briefing.
CONCLUSION
In view of the foregoing, Defendants’ Motions to Dismiss are GRANTED in part and
DENIED in part. Plaintiffs’ substantive due process, equal protection, and contract clause claims
are hereby dismissed with prejudice. Similarly, Plaintiffs’ First Amendment retaliation claim is
dismissed with prejudice only as to Defendants Lastra-Gonzalez, Diaz-Trancon, Rivera-Serrano,
and Colon-Grau. Therefore, Defendants’ Motion to Dismiss Plaintiffs’ First Amendment claim,
Docket No. 30, is denied as to the CFSE and Defendant Estrada. Finally, Defendants’ Motions to
Dismiss Plaintiffs’ Sherman Act claims, Docket Nos. 30 and 44, are denied without prejudice.
Defendants may refile a new motion to dismiss the antitrust claims so long as it complies with
the specifications described in this Opinion and Order. Defendants will have until Thursday,
September 24, 2015 to renew their motion to dismiss. Plaintiffs, in turn, will have until
Tuesday, October 6, 2015 to file their opposition. No extensions of time and replies will be
allowed.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 9th day of September, 2015.
s/ Jay A. Garcia-Gregory

Civil No. 14-1533 (JAG)

36

JAY A. GARCIA-GREGORY
United States District Judge