Aluma Construction Corporation v. Puerto Rico Ports Authority et al
Filing
82
AMENDED OPINION AND ORDER denying 59 MOTION to dismiss under Federal Civil Rule 12 (c) and granting 60 Amended MOTION for Partial Summary Judgment pursuant to Order at Docket No. 80 . Signed by Judge Daniel R. Dominguez on 7/5/2017. (EA)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
Aluma Construction Corporation,
Plaintiff,
CIVIL NO. 14-1610 (DRD)
v.
Puerto Rico Ports Authority, et. al.,
Defendants.
AMENDED OMNIBUS OPINION AND ORDER
Pending before the Court are co-defendant, Puerto Rico Maritime Authority’s
(hereinafter, “PRMTA”) Motion to Dismiss (Docket No. 59) and Plaintiff, Aluma
Construction Corporation’s (hereinafter, “Aluma”) Omnibus Amended Motion for Partial
Summary Judgment and Opposition to Motion to Dismiss (Docket No. 60).
For the reasons stated herein, the Court DENIES PRMTA’s Motion to Dismiss and
GRANTS Aluma’s Amended Motion for Partial Summary Judgment.
I.
PROCEDURAL BACKGROUND
On August 8, 2014, maintenance services company, Aluma, filed a Complaint
against the Puerto Rico Ports Authority (hereinafter, “PRPA”)1 and PRMTA under
federal admiralty law. The events that lead to the complaint are two claims for
maintenance and repair services provided to two different vessels, “M/V Cayo Blanco”
and “M/V Santa María”, which are property of co-defendant, PRMTA. According to
1
A dismissal without prejudice was entered in favor of PRPA on February 11, 2015. See Docket No. 23.
Aluma, those services are unpaid as PRMTA refuses to pay based on their interpretation
of the applicable federal maritime and Commonwealth of Puerto Rico laws. See Docket
No. 27, p. 2 ¶ 4. Consequently, Aluma argues that both of these claims are overdue, liquid
and enforceable. Aluma further alleges that prior extrajudicial collection efforts have
been made without success. Id. at ¶ 5.
Aluma is seeking partial summary judgment concerning the claim of $25,000.00
for certain emergency work that was provided to repair the four exhaust systems
(mufflers) of the “M/V Cayo Blanco”. See Docket No. 27 pp. 5-6. According to Aluma,
the work was performed under an emergency verbal order for goods and services, issued
by then Executive Director, Eng. Fernando Cedeño, through the executives duly in charge
of service and maintenance of the PRMTA vessels. Aluma alleges that PRMTA’s officers
made a representation that such a minuscular expense did not require a written contract
and was within the power of the Director to authorize a verbal order. Additionally, these
repairs were performed by Aluma in an emergency basis since they were needed in order
to comply with the United States Coast Guard’s (hereinafter, “USCG”) strict
requirements, to be able to provide transportation services of goods and passengers
between the main island and Vieques and Culebra as to the passenger vessel “M/V Cayo
Blanco”. See Docket No. 60. PRMTA submitted its opposition to Aluma’s motion for
partial summary judgment. See Docket No. 63. Aluma also filed a motion to supplement
its request for partial summary judgment. See Docket No. 66.
Notwithstanding, PRMTA is seeking dismissal of the entire claim alleging that it
is an instrumentality of the Commonwealth of Puerto Rico; thus, it is immune under the
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Eleventh Amendment from suits in the federal court absent its consent. Proper analysis
of Aluma’s and PRMTA’s motions require careful scrutiny of the underlying legal
framework.
II.
FACTUAL FINDINGS
The following factual findings are taken from the parties’ statement of undisputed
facts, Plaintiffs’ unopposed statement of uncontested facts2, and supporting
documentation. Upon careful review of the record, the Court finds the following facts are
undisputed:
1. On January 2010, a verbal order was presented to Aluma, for the performance of
certain emergency work, to be provided to the vessel “M/V Cayo Blanco”. (Docket
No. 60-3 pp. 33-34).
2. “M/V Cayo Blanco’s” repair work was ordered and authorized, originally, by the
then Executive Director of PRMTA, Eng. Fernando Cedeño, and so it was represented
to Aluma, in the person of Mr. Carlos Claudio, by Mr. Arturo Vaello, the officer in
charge of fleet maintenance for the PRMTA. (Docket No. 60-3 pp. 32, 54 and 57).
3. Mr. Vaello was the person who originally contacted Aluma and requested that Aluma
personnel present themselves at Fajardo, with the necessary equipment, to perform
emergency repairs to “M/V Cayo Blanco”. (Docket No. 60-3 pp. 32-33).
The major drawback on PRMTA’s failure to answer Aluma’s Statement of Uncontested Facts (Docket No.
60-1) is that “statement of material facts . . . shall be deemed admitted,” but only “if supported by record
citations” as required by Local Rule 56. Not properly answering and/or opposing a summary judgment
request under Local Rule 56(c) is “at their own peril.” See Local Rule 56(c) and (e); see also Morales v. A.C.
Orssleff's EFTF, 246 F.3d 32, 33 (1st Cir. 2001).
2
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4. On January 2012, Aluma performed emergency work to the four exhaust systems
(mufflers) of the “M/V Cayo Blanco”, as required. (Docket No. 60-3 p. 30 and Docket
No. 60-8).
5. The required work was approved on the 6th day of January of 2012, by Lieutenant Jeff
Manion of the U.S. Coast Guard, Marine Inspection Department. (Docket No. 60-8).
6. An invoice of said work was presented on January 30, 2012 for a total amount of
$25,000.00, as previously announced and agreed. Notwithstanding repeated attempts
to collect, said amount remains unpaid. (Docket No. 60-7)
7. On December 30, 2011, the United States Coast Guard issued form CG-835 requiring
that certain repairs be made to the vessel “M/V Cayo Blanco”, prior to allowing
passenger transport in the vessel. (Docket No. 60-6 and 60-3 pp. 30-32).
8. On January 2012, said form was delivered to Aluma, with the specific order that the
repairs required in the form, pertaining to the mufflers of the “M/V Cayo Blanco”, be
performed forthwith, on an emergency character. (Docket No. 60-3 pp. 32-33).
9. The emergency work consisted in the repair of the four exhaust systems (mufflers) of
the “M/V Cayo Blanco”. (Docket No. 60-3 p. 32).
10. During the period of January 3 to January 6, 2012, the repair work was performed by
Aluma. (Docket No. 60-8).
11. On January 30, 2012, Mr. Carlos González [representing Aluma] sent a letter to Mr.
Arturo Vaello describing the repairs made to “M/V Cayo Blanco”. (Docket No. 60-8).
12. The above-mentioned letter, sent by Mr. Carlos González, was received and signed
by Mr. Arturo Vaello on January 31, 2012. (Docket No. 60-8).
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13. Once the repairs works were finished, the vessel was inspected and approved by Mr.
Arturo Vaello, fleet maintenance manager of PRMTA, at the time. (Docket No. 60-3
p. 33).
14. On January 30, 2012, and invoice was issued by Aluma for the emergency repair
works that were performed, approved and accepted. (Docket No. 60-7 and 60-8).
15. The total amount invoiced for the work performed, was $25,000.00. (Docket No.
60-7).
16. Photographs of the repair work were taken to evidence that the repairs were made.
(Docket No. 60-4).
17. The USCG approved the repair made to “M/V Cayo Blanco” and the vessel was
authorized to continue providing transport services. (Docket No. 60-7 and 60-3
p. 32-33).
18. The purpose of the emergency repairs was to qualify the vessel for [USCG]
certification. (Docket No. 60-3 p. 11).
19. Those changes were necessary to comply with the “rules and regulations of regulatory
services” requested by the USCG. (Docket No. 60-3, pp. 66-67).
20. The USCG had issued an 835 form, disqualifying “M/V Cayo Blanco” from carrying
passengers, until certain items were repaired, inspected and approved. (Docket No.
60-3, p. 31-32).
21. There was urgency requiring the vessel back in service, hence, Mr. Vaello contacted
Mr. Claudio of Aluma, on an emergency basis, and requested the immediate repair of
the vessel’s mufflers. (Docket No. 60-3, p. 32).
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22. There was no purchase order issued by PRMTA to perform the “M/V Cayo Blanco”
vessel repairs; there is no record in the agency of any document to sustain that
allegation. (Docket No. 63-1).
III.
A.
APPLICABLE LAW
Maritime Jurisdiction
Pursuant to Article III of the United States Constitution, Federal Courts have
jurisdiction over all admiralty and maritime law ([t]he judicial power shall extend to all
cases... of admiralty and maritime jurisdiction). U.S.C.A Const. Art. III § 2. Moreover,
pursuant to 28 U.S.C. § 1333 ("[t]he district courts shall have original jurisdiction,
exclusive of the courts of the States, of... [a]ny civil case of admiralty or maritime
jurisdiction..."). “A claim cognizable only in the admiralty or maritime jurisdiction is an
admiralty or maritime claim for those purposes, whether or not so designated.” Fed. R.
Civ. P. 9(h)(1).
It is beyond debate that federal courts have jurisdiction of admiralty and maritime
matters because of the recognized necessity of national control over this important
commercial area. See J. Ray McDermott & Co. v. Vessel Morning Star, 457 F.2d 815 (5th
Cir. 1972). Moreover, in Kossick v. United Fruit Co., 365 U.S. 731, 739 (1961), the Supreme
Court correctly expressed that maritime law constitutes federal law, displacing local
[state] interest no matter how pressing and significant, thus, federal law is supreme
because of its constitutional implications, as follows:
. . . the fact that maritime law is—in a special sense at least, (citations
omitted)—federal law and therefore supreme by virtue of Article VI of the
Constitution carries with it the implication that wherever a maritime
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interest is involved, no matter how slight or marginal, it must displace a
local interest, no matter how pressing and significant. But the process is
surely rather one of accommodation, entirely familiar in many areas of
overlapping state and federal concern, or a process somewhat analogous to
the normal conflict of laws situation where two sovereignties assert
divergent interests in a transaction as to which both have some concern.
Surely the claim of federal supremacy is adequately served by the
availability of a federal forum in the first instance and of review in this
Court to provide assurance that the federal interest is correctly assessed and
accorded due weight. (Emphasis ours).
“The delegation of cognizance of ‘all civil cases of admiralty and maritime
jurisdiction’ to the courts of the United States comprehends all maritime contracts, torts,
and injuries. The latter branch is necessarily bounded by locality; the former extends over
all contracts, (wheresoever they may be made or executed, or whatsoever may be the
form of the stipulations,) which relate to the navigation, business or commerce of the
sea.” DeLovio v. Boit, 7 F. Cas. 418, 444 (C.C.D. Mass. 1815) (Emphasis ours). The place
of execution and the place of performance of a contract does not determine whether a
contract is within admiralty jurisdiction or not. Rather, “[i]f a contract is determined to
be “maritime in nature” then it is a maritime contract and causes of action arising from
that contract will fall within the admiralty jurisdiction of the federal courts.” 14A Fed.
Prac. & Proc. Juris. § 3675 (4th ed.).
“To ascertain whether a contract is a maritime one, we cannot look to whether a
ship or other vessel was involved in the dispute, as we would in a putative maritime tort
case.” Norfolk S. Ry. Co. v. Kirby, 125 S. Ct. 385, 393, (2004). “Nor can we simply look to
the place of the contract's formation or performance. Instead, the answer “depends upon
... the nature and character of the contract,” and the true criterion is whether it has
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“reference to maritime service or maritime transactions.” Id. at 393. (Emphasis ours).
See North Pacific S.S. Co. v. Hall Brothers Marine Railway & Shipbuilding Co., 249 U.S.
119, 125, (1919) (citing Insurance Co. v. Dunham, 11 Wall. 1, 26, 20 L.Ed. 90 (1871)).
Most critical and determinative, Federal courts have traditionally held that
contracts to repair a ship fall within the umbrella of admiralty jurisdiction. See Kossick,
365 U.S. at 735; (citing Endner v. Greco, 3 F. 411, 412–413 (S.D.N.Y. 1880) (holding that a
contract for furnishing repairs to a ship already built is held to be maritime.) “Such
contracts, for repairs on ships are governed by the Suits in Admiralty Act, 46 U.S.C. §§
741–752 (1982), a body of law judicially entrusted to the United States District Courts.”
Jo-Mar Corp. v. United States, 15 Cl. Ct. 602, 607 (1988); see United States v. United
Continental Tuna Corp., 425 U.S. 164, 172, 96 S.Ct. 1319, 1324, 47 L.Ed.2d 653 (1961);
Whitey's Welding & Fabrication v. United States, 5 Cl.Ct. 284, 285–87 (1984). If subject
matter of contract is the repair or refitting of a ship, contract is within maritime
jurisdiction of the federal court. See Hinkins S.S. Agency v. Freighters, Inc., N.D.Cal.1972,
351 F.Supp. 373, affirmed 498 F.2d 411. “Contracts for the repair of ships are governed by
admiralty law.” Point Adams Packing Co. v. Astoria Marine Const. Co., 594 F.2d 763, 766
(9th Cir. 1979) (citing New Bedford Dry Dock Co. v. Purdy, 258 U.S. 96, 99 (1922)).
Furthermore, in maritime law, oral contracts are traditionally regarded as valid.
Kossick, 365 U.S. at 734. “For it is an established rule of ancient respectability that oral
contracts are generally regarded as valid by maritime law.” Orient Mid-E. Great Lakes
Serv. v. Int'l Exp. Lines, Ltd., 207 F. Supp. 127, 129 (D. Md. 1962), rev'd, 315 F.2d 519 (4th
Cir. 1963) (citing Kossick, 365 U.S. at 735) (Emphasis ours). Therefore, the instant case is
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seen by the District Judge under maritime law, since repair of vessels are considered
under maritime jurisdiction and maritime jurisdiction preempts state law. Federal law
supersedes state law in maritime cases when maritime interest is involved. “Wherever a
maritime interest is involved, no matter how slight or marginal, it must displace a local
interest, no matter how pressing and significant.” See Kossick, 365 U.S. at 739. But as
discussed infra, works performed for $25,000.00 or less if contracted as an emergency do
not require either bidding or other contractual formalities.
B.
Motion for Summary Judgment Standard
A motion for summary judgment is governed by Rule 56 of the Federal Rules of
Civil Procedure, which entitles a party to judgment if “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a). “A dispute is ‘genuine’ if the evidence about the fact is such
that a reasonable jury could resolve the point in favor of the non-moving party.” See
Johnson v. Univ. of P.R., 714 F.3d 48, 52 (1st Cir. 2013); Prescott v. Higgins, 538 F.3d 32,
40 (1st Cir. 2008) (citing Thompson v. Coca–Cola Co., 522 F.3d 168, 175 (1st Cir. 2008)); see
also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-250 (1986); Calero–Cerezo v. U.S.
Dep't of Justice, 355 F.3d 6, 19 (1st Cir. 2004). The analysis with respect to whether or not
a “genuine” issue exists is directly related to the burden of proof that a non-movant
would have in a trial. “[T]he determination of whether a given factual dispute requires
submission to a jury must be guided by the substantive evidentiary standards that apply
to the case.” Liberty Lobby, Inc., 477 U.S. at 255 (applying the summary judgment
standard while taking into account a higher burden of proof for cases of defamation
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against a public figure). In order for a disputed fact to be considered “material” it must
have the potential “to affect the outcome of the suit under governing law.” Sands v.
Ridefilm Corp., 212 F.3d 657, 660–661 (1st Cir. 2000) (citing Liberty Lobby, Inc., 477 U.S.
at 247–248); Prescott, 538 F.3d at 40 (1st Cir. 2008) (citing Maymí v. P.R. Ports Auth., 515
F.3d 20, 25 (1st Cir. 2008)).
The objective of the summary judgment is to “pierce the pleadings and to assess
the proof in order to see whether there is a genuine need for trial.” DeNovellis v. Shalala,
124 F.3d 298, 306 (1st Cir. 1997) (citing the advisory committee note to the 1963
Amendment to Fed. R. Civ. P. 56(e)). The moving party must demonstrate the absence
of a genuine issue as to any outcome-determinative fact on the record. Shalala, 124 F.3d
at 306. Upon a showing by the moving party of an absence of a genuine issue of material
fact, the burden shifts to the nonmoving party to demonstrate that a trier of fact could
reasonably find in his favor. Id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)).
The non-movant may not defeat a “properly focused motion for summary judgment by
relying upon mere allegations,” but rather through definite and competent evidence.
Maldonado–Denis v. Castillo Rodriguez, 23 F.3d 576, 581 (1st Cir. 1994). The nonmovant’s burden thus encompasses a showing of “at least one fact issue which is both
‘genuine’ and ‘material.’” Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990); see
also Suarez v. Pueblo Int'l., 229 F.3d 49, 53 (1st Cir. 2000) (stating that a non-movant may
shut down a summary judgment motion only upon a showing that a trial-worthy issue
exists). As a result, the mere existence of “some alleged factual dispute between the
parties will not affect an otherwise properly supported motion for summary judgment.”
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Liberty Lobby, Inc., 477 U.S. at 247–248. Similarly, summary judgment is appropriate
where the nonmoving party rests solely upon “conclusory allegations, improbable
inferences and unsupported speculation.” Ayala–Gerena v. Bristol Myers–Squibb Co.,
95 F.3d 86, 95 (1st Cir. 1996); Medina-Muñoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8
(1st Cir. 1990).
When considering a motion for summary judgment, the Court must “draw all
reasonable inferences in favor of the non-moving party while ignoring conclusory
allegations, improbable inferences, and unsupported speculation.” Smith v. Jenkins, 732
F.3d 51, 76 (1st Cir. 2013) (reiterating Shafmaster v. United States, 707 F.3d 130, 135 (1st
Cir. 2013)). The Court must review the record as a whole and refrain from engaging in
the assessment of credibility or the gauging the weight of the evidence presented. Reeves
v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 135 (2000); Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986); see also Pina v. Children's Place, 740 F.3d 785, 802 (1st
Cir. 2014). “Credibility determinations, the weighing of the evidence, and the drawing
of legitimate inferences from the facts are jury functions, not those of a judge.” Reeves,
530 U.S. at 150 (quoting Anderson, 477 U.S. at 250–51).
The Court further points out that when ruling upon a motion for summary
judgment, a party’s improper answering and/or opposing a summary judgment request
under Local Rule 56(c) is “at their own peril”. On that same note, in Morales v. A.C.
Orssleff's EFTF, 246 F.3d 32, 33, the First Circuit established “. . . a lesson in summary
judgment practice” regarding the consequences of improperly answering a motion for
summary judgment as follows:
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We recently reiterated, with reference to this particular rule, that “parties
ignore [it] at their own peril,” and that “failure to present a statement of
disputed facts, embroidered with specific citations to the record, justifies
deeming the facts presented in the movant's statement of undisputed facts
admitted.” Morales v. A.C. Orssleff's EFTF, 246 F.3d at 33 (1st Cir. 2001)
(citing Ruiz Rivera v. Riley, 209 F.3d 24, 28 (1st Cir.2000)).
Summarizing, “[t]he court shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” (Emphasis provided). See Fed. R. Civ. P. 56(a).
Hence, in order to prevail, Defendant must demonstrate that, even admitting wellpleaded allegations in light most favorable to Plaintiff, the applicable law compels a
judgment in its favor.
C.
State Immunity under Eleventh Amendment
The Eleventh Amendment of the Constitution of the United States provides the
following:
The judicial power of the United States shall not be construed to
extend to any suit in law or equity, commenced or prosecuted against one
of the United States by citizens of another state or by citizens or subjects of
any foreign state.
U.S. Const. Amend XI.
Puerto Rico has long been considered a state for Eleventh Amendment purposes.
See Irizarry–Mora v. Univ. of Puerto Rico, 647 F.3d 9 (1st Cir. 2011); Metcalf & Eddy, Inc.
v. P.R. Aqueduct & Sewer Auth., 991 F.2d 935 (1st Cir. 1993). “The Eleventh Amendment
bars the recovery of damages in a federal court against the Commonwealth of Puerto
Rico, and, by the same token, it bars the recovery of damages in official capacity suits
brought against Puerto Rico officials where recovery will come from the public fisc.”
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Culebras Enterprises Corp. v. Rivera Rios, 813 F.2d 506, 516 (1st Cir. 1987) (citing Ramirez
v. P.R. Fire Service, 715 F.2d 694, 697 (1st Cir. 1983) and Kentucky v. Graham, 473 U.S.
159 (1985)) (emphasis in the original); Maysonet–Robles v. Cabrero, 323 F.3d 43 (1st Cir.
2003). The problem is that the corporation that requested the services is not an “arm of
the state” and therefore, does not enjoy Eleventh Amendment immunity, for the reasons
explained by the Court hereafter.
The determination as to whether an entity is an arm of the state entitled to
immunity requires a two-step analysis: “[t]he first step of the analysis concerns how the
state has structured the entity.”; and if structural indicators point to different directions
“. . . the vulnerability of the state's purse [which] is the most salient factor in the Eleventh
Amendment determination.” Fresenius Med. Care Cardiovascular Res., Inc. v. Puerto
Rico & Caribbean Cardiovascular Ctr. Corp., 322 F.3d 56, 65 (1st Cir. 2003).
In Fresenius, an action was brought directly against a corporation for the collection
of moneys and/or damages. The First Circuit held that “[w]here it is clear that the state
treasury is not at risk, then the control exercised by the state over the entity does not
entitle the entity to Eleventh Amendment immunity.” Id. “The control asserted by the
state is an important guide to the initial inquiry. But where the evidence is that the state
did not structure the entity to put the state treasury at risk of paying the judgment, then
the fact that the state appoints the majority of the governing board of the agency does not
itself lead to the conclusion that the entity is an arm of the state.” Id. at 68.
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Moreover, the First Circuit recently addressed the controversy of state immunity
under the Eleventh Amendment as to the PRPA, in the case of Grajales v. Puerto Rico
Ports Auth., 831 F.3d 11, 21 (1st Cir. 2016), as follows:
The first structural indicator is Puerto Rico law's characterization of
PRPA. We focus on PRPA's enabling act (the “Act”). P.R. Laws Ann. tit. 23
§ 331, et seq.10 Like the enabling act in Fresenius, this one “does not by its
terms structure [PRPA] to be an arm of the [Commonwealth].” Fresenius,
322 F.3d at 68. We thus need to determine what signals the Act nevertheless
sends.
In Fresenius, we concluded that, far from indicating that the public
corporation at issue was structured to be an “arm,” the relevant Puerto Rico
enabling act characterized the entity in terms that “suggest[ed] exactly the
opposite.” Id. There, the act referred to the entity as one “independent and
separate from any other agency or instrumentality of the Government of
the Commonwealth of Puerto Rico.” P.R. Laws Ann. tit. 24 § 343a (emphasis
added).
Following Fresenius, we addressed another Puerto Rico enabling act
that, like the one in Fresenius, did not expressly characterize the public
corporation at issue as an arm of the Commonwealth. See Pastrana–Torres,
460 F.3d at 126–27 & n. 2. Rather, the relevant Puerto Rico enabling act
referred to the entity as a “public corporation” and “an instrumentality of
the Commonwealth of Puerto Rico ... with a juridical personality that is
independent and separate from any other entity, agency, department or
instrumentality of the Government of Puerto Rico.” P.R. Laws Ann. tit. 27
§ 501. Relying on Fresenius, we concluded that this language also suggested
that the public corporation at issue was not an arm. Pastrana–Torres, 460
F.3d at 126–27 & n. 2.”
The First Circuit further assessed PRPA’s immunity under the Eleventh
Amendment as to whether the Commonwealth would be liable for actions against PRPA:
PRPA has failed to show that this action poses any risk to the
Commonwealth's fisc. PRPA does not contend, and we see no basis for
concluding, that the Commonwealth would, as a legal matter, be liable for
a judgment against PRPA in this case. See P.R. Laws Ann. tit. 23 § 333(b). In
addition, the Commonwealth did not structure PRPA so that the
Commonwealth would be liable, as a practical matter, for any such adverse
judgment. In this regard, we note that the Commonwealth designed PRPA
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to raise enough revenue to shoulder its own costs, including its litigation
costs, and to bear its own debts, including (generally) any judgments
against it. Id. at 29.
Accordingly, consistent with Fresenius and Grajales since, the First Circuit
resolved that PRPA does not enjoy sovereign immunity since it is not considered an arm
of the state. “It would be every bit as much an affront to the state’s dignity and fiscal
interest were a federal court to find erroneously that an entity was an arm of the state,
when the state did not structure the entity to share its sovereignty.” Fresenius, 322 F. 3d
at 63.
D.
PRMTA’s Enabling Act
Act number 1 of January 1, 2000 (amended by Act 231 of August 26, 2004, Act 52
of August 4, 2009, and Act 103 of July 23, 2014) also known as Maritime Transport Authority
of Puerto Rico and the Municipality Islands Act, PR. ST. T. 23 § 3202, et. seq., is PRMTA’s
enabling act. As part of its legal analysis, the Court must review articles within PRMTA’s
enabling act that are applicable to the instant controversies.
First, the Court reviews Puerto Rico’s description of PRMTA. Thus, PRMTA’s
enabling act does not describe the corporation as an arm of the state. Instead, it is
described as a separate entity from the Government of Puerto Rico:
A corporate and body politic is hereby created as a public
corporation and instrumentality of the Government of the Commonwealth
of Puerto Rico, attached to the Department, which shall be known as the
Puerto Rico and the Island Municipalities Maritime Transport Authority,
subject to the control of the Secretary, with legal existence and personality
separate from the Government of the Commonwealth of Puerto Rico, its
agencies, instrumentalities and political subdivisions. PR. ST. T. 23 § 3202.
(Emphasis provided).
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Furthermore, the enabling act instead of describing that PRMTA as a public
corporation structured to be an arm of the Puerto Rico Government refers to the entity as
follows:
The debts, obligations, contracts, notes, receipts, expenses, accounts,
funds, pledges and properties of the Authority, its officials, agents or
employees shall be deemed as belongings of said Authority and not as
property of the Government of Puerto Rico or of any office, bureau,
department, instrumentality, agency, or public subdivision, municipality,
agent, official or employee thereof. Id.
Moreover, the enabling act’s description of the acquisition of property is also
subject to evaluation from the Court:
By request of the Authority, the Governor of Puerto Rico or the
Secretary may acquire in the name and in representation of the Government
of Puerto Rico, through purchase, eminent domain or any other legal
means, for the use and benefit of the Authority, in the manner provided in
this Act and the laws of Puerto Rico on eminent domain, the title of any
property or interest thereon that the Authority deems necessary or
convenient for its purposes, including its future needs.
The enabling act further sets the rules for construction, operations and purchase
contracts as follows:
(b) When the estimated sum for the acquisition or work does not exceed
twenty-five thousand dollars ($25,000), it may be executed without the
need to hold the bidding process or request for bids. Furthermore, it shall
not be necessary to hold a public bidding or request for bids in the
following cases:
(1) When due to an emergency, the immediate delivery of materials,
goods and equipment, or the rendering of services is required. PR. ST.
T. 23 § 3210. (Emphasis ours).
Finally, the description of purposes of the creation of the PRMTA is the following:
The purposes for which the Authority is created and for which it
shall exercise its powers are of a public nature for the benefit of the People
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of Puerto Rico, and the exercise of the powers conferred by this chapter
constitutes the compliance of essential government functions. Every work,
project, enterprise and property and their accessories that the Authority
deems necessary or convenient to use in order to carry out the purposes of
this chapter, are hereby declared of public usefulness. PR. ST. T. 23 § 3212.
Armed with the applicable provisions of law, the Court is ready to resolve the
controversies at hand.
E.
LEGAL ANALYSIS
The Court is called upon to determine whether a dismissal is warranted in favor
of PRMTA for being an arm of the Commonwealth of Puerto Rico3. Further, the Court
must rule upon Aluma’s pending motion for partial summary judgment.4 However, the
Court must first determine as to the instant controversy, whether it is maritime or state
law that applies. Consequently, the Court will begin its legal analysis with the
determination as to the applicability of maritime law in the instant case.
A. Maritime Jurisdiction
After a careful analysis of the legal standard applicable in the instant case, the
Court finds that jurisdiction over this dispute stems from Article III of the constitution
([t]he judicial power shall extend to all cases... of admiralty and maritime jurisdiction)
and 28 U.S.C. § 1333 ("[t]he district courts shall have original jurisdiction, exclusive of the
courts of the States, of... [a]ny civil case of admiralty or maritime jurisdiction..."). Hence,
maritime law supplies the rule of decision.
3
4
See Docket No. 59.
See Docket No. 60.
-17-
The Supreme Court has squarely stated that contracts to repair a ship fall within
the umbrella of admiralty jurisdiction. See Kossick, 365 U.S. at 735. Furthermore, pursuant
to maritime law, oral contracts, as the one in controversy, are traditionally regarded as
valid. Consequently, Aluma’s verbal contract with PRMTA is valid under the applicable
maritime law.
The Court emphasizes that the repair and maintenance request of vessel “M/V
Cayo Blanco” was issued by the USCG. Without the repair, the vessel was an uncertified
maritime vessel. The vessel was repaired on an emergency request of the highest official
of the PRMTA to be performed as an “emergency” in order to operate a vessel that served
for public transportation to Culebra and/or Vieques from the mainland.
With this jurisdictional hurdle out of the way, the Court may proceed discussing
PRMTA’s request for dismissal on state immunity grounds. The Court further decides
(infra) that PRMTA is not immune to be sued under the Eleventh Amendment.
B. Motion to Dismiss Under Federal Rule of Civil Procedure 12(b)
PRMTA buttresses it claim of state immunity under the Eleventh Amendment on
the following factors:
1. PRMTA is subject to control of the Secretary of the Department of
Transportation and Public Works, according to the Marine Transit Act.5
2. Two of PRMTA’s five board director members are high-ranking Government
officials who automatically serve the PRMTA in accordance with their
S
See Docket No. 59 p. 12.
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Government positions, and a third who is directly designated by the Governor
of Puerto Rico.6
3. The Governor of Puerto Rico has the power to remove any member from office
for cause, upon notice and hearing.7
4. PRMTA can request the Governor of Puerto Rico or the Secretary of the
Department of Transportation and Public Works to acquire in the name of the
Government.
5. PRTMTA’s directors, official, and employees are subject to the Commonwealth
of Puerto Rico Government Ethics Act, pursuant to their public servant
designation.8
6. Its purpose is the performance of essential government functions in the mass
transportation of the population of Puerto Rico.9
PRMTA also compares itself with the PRPA and alleges that such agency is an arm
of the state immune from suits absent its consent.10 See Docket No. 59 p. 15. Furthermore,
upon the creation of PRMTA, its enabling act transferred property, funds, employees and
functions of the PRPA to the PRMTA.
If the Court were to compare both agencies, they are both public corporations of
the Commonwealth of Puerto Rico; they were both created with legal existence and
personality separate from the Government of the Commonwealth of Puerto Rico; the
Id. at 13.
Id.
8 Id.
9 Id. at 14.
10 But PRPA was held to be not an “arm of the state” by the First Circuit. See Grajales, 831 F.3d at 29.
6
7
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Government has active involvement in its public policy and appointments; and the
Commonwealth is not to be liable for actions against neither of these corporations.
Moreover, pursuant to its enabling act, PRMTA was created “. . . with legal
existence and personality separate from the Government of the Commonwealth of Puerto
Rico, its agencies, instrumentalities and political subdivisions.”11 Hence, all that is left for
the Court is to conduct the two-step analysis pursuant to Fresenius.
1) How the state structured the entity
The Government structured PRMTA as separate from the Commonwealth, where
“. . . debts, obligations, contracts, notes, receipts, expenses, accounts, funds, pledges and
properties of the Authority, its officials, agents or employees shall be deemed as
belongings of said Authority and not as property of the Government of Puerto Rico.”12
(Emphasis ours). Its legal existence and personality was structured as separate from the
Government of Puerto Rico.13
Notwithstanding, the Government has active involvement in its public policy and
appointments, which includes designations of board of directors’ officials, and power to
remove any member from office for cause. Further, PRMTA’s employees are public
servants subject to the Commonwealth of Puerto Rico Government Ethics Act.
PR. ST. T. 23 § 3202.
Id.
13 Id.
11
12
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2) Vulnerability of the state’s purse
Pursuant to Fresenius, the second-step is the “most salient factor”14 in the
determination as to immunity under the Eleventh Amendment. PRMTA’s enabling act
identifies all debts and obligations of the entity as separate from the Government of
Puerto Rico. Thus, the Commonwealth’s fisc is at no risk when actions are pursued
against PRMTA.
Consequently, upon the Court’s evaluation of PRMTA’s structure pursuant to the
First Circuit’s ruling on Fresenius and Grajales, PRMTA’s Eleventh Amendment
immunity contention suffers the same fatality as the PRPA. To wit, although the
Government has an active involvement in PRMTA’s public policy and appointments, the
Commonwealth’s fisc is not at risk when actions are pursued against PRMTA. Further,
upon a careful review of PRMTA’s enabling act, the Government clearly did not structure
PRMTA to be an arm of the state, rather it was created as separate from the
Commonwealth, where “. . . debts, obligations, contracts, notes, receipts, expenses,
accounts, funds, pledges and properties of the Authority, its officials, agents or
employees shall be deemed as belongings of said Authority and not as property of the
Government of Puerto Rico.”15
Having found that PRMTA is not an arm of the state but an entity separate from
the Government, PRMTA’s Motion to Dismiss (Docket No. 59) must be DENIED.
14
15
322 F.3d at 65.
Id.
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C. Amended Motion for Partial Summary Judgment
Aluma is seeking summary judgment in regards to a claim of $25,000.00 related to
an emergency reparation of “M/V Cayo Blanco’s” four exhaust systems (mufflers)
requested by PRMTA, and performed by Aluma. The request was issued verbally by
PRMTA’s then Executive Director, Eng. Fernando Cedeño, through the executives that
were in charge of service and maintenance of PRMTA’s vessels, Mr. Carlos Claudio and
Mr. Arturo Vaello. These repairs were performed by Aluma in emergency fashion from
January 3 to January 6, 2012 in an emergency basis since they were needed in order to
comply with the USCG requirements, to be able to provide transportation services of
goods and passengers between the main island and Vieques and Culebra during the ongoing holiday season.
PRMTA is refusing to pay for the invoice of such repairs since there is no written
contract to that effect. They further allege they are immune under the Eleventh
Amendment from suits in the federal court absent its consent, thus a dismissal is
warranted. The Court previously ruled that PRMTA is not an arm of the state; hence, it
is not protected under the Eleventh Amendment immunity. Consequently, pending
before the Court is the ruling regarding Aluma’s request for summary judgment.
After a careful review of the legal standard applicable to the instant controversy
as well as the positions of both Aluma and PRMTA, the Court understands that there is
no genuine issue of fact in controversy that prevents the Court from resolving this matter
summarily. There is also no controversy as to the fact that Aluma performed emergency
reparations to four exhaust systems from “M/V Cayo Blanco” pursuant to Mr. Arturo
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Vaello’s instructions16. The emergency had to be quickly addressed as the vessel had been
grounded by the USCG until the repairs were performed. Further, the emergency
reparations were performed and invoiced for the amount of $25,000.00. Such invoice has
not been paid by PRMTA.
Withal, many of the allegations sustained by Aluma, were confirmed by Mr.
Vaello, fleet maintenance manager of PRMTA (at that time), during his deposition.
Pursuant to the Court’s undisputed factual findings, Mr. Vaello confirmed the emergency
nature of the services that were provided by Aluma, and the fact that he, himself,
contacted Aluma and requested that its personnel present themselves at Fajardo, with the
necessary equipment, to perform emergency repairs to “M/V Cayo Blanco”. Said vessel
could not navigate by orders of the USCG without having previously undergone the
required repairs and without USCG’s inspection of the performed repairs. He further
confirmed that such repairs were authorized by PRMTA’s Executive Director. Further,
once the repairs were finished, “M/V Cayo Blanco” was inspected and approved by Mr.
Vaello. Mr. Vaello was the public servant that received and signed Aluma’s letter
detailing the works that were performed. Additionally, he was the person who received
the invoice that was issued by Aluma for the emergency repair works that were
performed, approved and accepted by PRMTA.
The Court concludes that the vessel was grounded by the USCG pending the
repairs, which were an emergency preventing the vessel to transport passengers to the
Fleet Maintenance Manager of PRMTA authorized by then Executive Director, Eng. Fernando Cedeño,
to take necessary measures to resolve the emergency situation of “M/V Cayo Blanco”.
16
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islands due to inappropriate exhaust systems. There is no doubt that the emergency
existed as passengers could have suffered serious respiratory conditions and further the
boat could have suffered severe consequential maintenance repercussions.
PRMTA alleges that since Aluma’s repair work on vessel “M/V Cayo Blanco” was
performed pursuant to a verbal order, it is invalid as a matter of law. They further argue
that a purchase order was necessary pursuant to the state’s applicable law No. 230 of July
23, 1974, as amended, also known as “Law of Accounting in the Government of Puerto
Rico”. See 3 L.P.R.A. § 283, et. seq. Since no purchase order was ever issued for the repairs
performed by Aluma, no contractual obligation emerged and Aluma has no right to
collect the amount of $25,000.00 claimed. See Docket No. 63. However, the Court notes
that PRMTA’s own enabling act provides the entity with the power to forego public
bidding or request for bids in emergencies where immediate services are required, and
the estimated sum for work does not exceed $25,000.00.17 However, PRMTA’s alleged
defense of the necessity of an oral contract is superseded by the “supremacy” of the
federal law that validates oral contracts enhanced by the emergency situation stated
above.
As previously discussed, federal courts have jurisdiction of admiralty and
maritime matters because of the recognized necessity of national control over this
important commercial area. See J. Ray McDermott & Co. v. Vessel Morning Star, 457 F.2d
815 (5th Cir. 1972). Moreover, the Supreme Court has previously held that since maritime
17
See PR. ST. T. 23 § 3210.
-24-
law is federal law it carries a constitutional implication that “. . . wherever a maritime
interest is involved, no matter how slight or marginal, it must displace a local interest, no
matter how pressing and significant.” Kossick, 365 U.S. at 739.
Further and most determinative, under federal maritime law “oral contracts are
traditionally regarded as valid”. Kossick, 365 U.S. at 734. Even more critical is the fact
that “[c]ontracts for the repair of ships are governed by admiralty law.” Point Adams
Packing Co, 594 F.2d at 766 (citing New Bedford Dry Dock Co., 258 U.S. at 99).
Consequently, the Court cannot accept PRMTA’s allegations, since the instant
controversy is a matter of maritime law, not state law which has been preempted. The
rule of decision in the instant claim is clearly maritime law; hence, PRMTA’s verbal order
to Aluma is valid, overdue, liquid, and enforceable.
Having found that Aluma’s claim for $25,000.00 for a verbal order of emergency
repair work on vessel “M/V Cayo Blanco” is valid under maritime law pursuant to
Kossick18, PRMTA is ordered to pay the amounts demanded in the Complaint’s Second
Cause of Action, plus legal interests since the amount became due, costs and attorney’s
fees. See Docket No. 27 ¶ 24. Payment is not yet ordered.
IV.
CONCLUSION
For all the foregoing reasons, the Court hereby DENIES PRMTA’s motion to
dismiss under Federal Rule of Civil Procedure 12(b); and GRANTS Aluma’s motion for
partial summary judgment. As to these matters, the Court need proceed no further.
18
365 U.S. at 731.
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IT IS SO ORDERED.
In San Juan, Puerto Rico, on this 5th day of July, 2017.
S/DANIEL R. DOMÍNGUEZ
DANIEL R. DOMÍNGUEZ
UNITED STATES DISTRICT JUDGE
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