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Masso-Torrellas v. Municipality of Toa Alta

United States Court of Appeals, First Circuit

January 9, 2017

FRANCISCO JOSE MASSO-TORRELLAS; CONJUGAL PARTNERSHIP MASSO-ESTEVEZ; JOSE; FRANCISCO MASSO-TORRELLAS; CONJUGAL PARTNERSHIP MASSO-MALDONADO; OSSAM CONSTRUCTION, INC., Plaintiffs, Appellants,
v.
MUNICIPALITY OF TOA ALTA; CLEMENTE AGOSTO-LUGARDO, in his official capacity as Mayor of the Municipality of Toa Alta and in his individual capacity; YARITZA ROSARIO-SOTO; CONJUGAL PARTNERSHIP AGOSTO-ROSARIO, Defendants, Appellees, INDETERMINED NUMBER OF UNNAMED MUNICIPAL POLICE OFFICERS; INDETERMINED NUMBER OF JANE DOES; CONJUGAL PARTNERSHIP; RICHARD DOE; JOHN DOE; ABC INSURANCE COMPANY, Defendants.

         APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Pedro A. Delgado-Hernández, U.S. District Judge]

          Roberto Busó-Aboy, for appellants.

          Eduardo A. Vera Ramírez, with whom Landrón Vera, LLC., Eileen Landron Guardiola, and Luis A. Rodríguez Muñoz were on brief for appellees Municipality of Toa Alta and Clemente Agosto-Lugardo, in his official capacity as Mayor.

          Margarita Mercado-Echegaray, Solicitor General, with whom Susana I. Peñagarícano-Brown, Assistant Solicitor General, was on brief for appellee Clemente Agosto-Lugardo, in his individual capacity.

          Before Howard, Chief Judge, Torruella and Dyk, [*] Circuit Judges.

          DYK, Circuit Judge.

         Plaintiffs appeal from a district court order dismissing their 42 U.S.C. § 1983 claim for lack of subject matter jurisdiction, and declining to exercise supplemental jurisdiction over related state law claims. We affirm the district court's dismissal. The district court found that it lacked subject matter jurisdiction because the parties had failed to comply with the mediation/arbitration clause in their contract. Although we conclude that the district court erred by holding that the mediation/arbitration clause applied to the § 1983 claim, we conclude that the § 1983 claim should be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Accordingly, there is also no supplemental jurisdiction over the state law claims.

         I.

         This dispute relates to contracts for the construction of a municipal transportation terminal. On May 7, 2010, defendant, the Municipality of Toa Alta ("Municipality"), awarded a construction project to plaintiff, OSSAM Construction Inc. ("OSSAM"), to build the terminal on land owned by the Municipality. The parties contemplated that the construction project would be undertaken in two phases, with two separately executed contracts. The Phase I contract was executed on September 10, 2010, and the work was apparently completed without incident within the 120 days provided in the contract. The Phase II contract was executed on September 4, 2012. From September of 2014 and continuing through December of 2014, disputes arose regarding payments for the work performed in connection with the Phase II contract. On January 20, 2015, OSSAM issued a notice of default against the Municipality due to its alleged nonpayment for the completed construction work. On February 4, 2015, the Municipality notified OSSAM by letter that the contract between OSSAM and the Municipality was being terminated effective immediately "[d]ue to reasons of public policy in connection with the sound administration of [municipal] funds." JA 122. This letter was signed by Mayor Clemente Agosto-Lugardo ("Agosto") on behalf of the Municipality. On the same day, municipal officials and police officers took control of the construction site, which was on municipal property.

         After taking control of the site, the Municipality initially barred OSSAM from removing any property from the construction site. The Municipality alleges that this was necessary to fully inventory the on-site property and determine the correct ownership pursuant to the contract. On February 5th and 14th, OSSAM was permitted to retrieve some of its property from the site. And on February 18th, OSSAM was finally permitted access to the site to retrieve "most" of its property. Appellants allege that at the time of filing the Complaint, the Municipality still retained security barriers and fences belonging to OSSAM.

         On May 4, 2015, OSSAM, its president José Francisco Massó-Torrellas and his wife Sarina Maldonado-Alfandari, and OSSAM's vice-president Francisco José Massó-Torrellas and his wife Rosa Julia Estévez-Datiz, filed a complaint in the District Court of Puerto Rico, against the Municipality, Agosto in his official capacity as mayor, Agosto and his wife Yaritza Rosario-Soto in their personal capacities, an indeterminate number of unnamed Municipality police officers and officials in their official and personal capacities, along with their spouses, and any "insurance compan[ies] that may be responsible to [the] Plaintiffs." JA 12. The plaintiffs claimed that the defendants violated 42 U.S.C. § 1983 when the defendants acted under color of law to interfere with the plaintiffs' Fourth, Fifth, and Fourteenth Amendment rights during the construction site takeover in February of 2014. The plaintiffs also claimed that these actions constituted a breach of contract and "a violation of the Constitution and laws of the Commonwealth of Puerto Rico." JA 23.

         The defendants moved to dismiss the § 1983 claim for failure to state a claim, and also argued that "OSSAM has not complied with the mandatory arbitration clause in the contract." JA 41.

         The Phase II construction contract between OSSAM and the Municipality included clause 35, which we refer to as the mediation/arbitration clause. It provided that

[i]n the event that any controversy arises from the interpretation or of any other class among the parties with respect to any matter related to this contract, it shall be previously be [sic] required that before resorting to a judicial forum for the adjudication of their rights, that the parties exhaust a mediation procedure. The Municipality and [OSSAM] will at all times attempt to resolve their claims and disputes among themselves in [good] faith and if unable to arrive at an agreement[, ] they bind themselves to resolving the controversy or dispute through mediation.

JA 117-18 (emphases added). The Phase I contract included the same clause with an additional final sentence stating that "[t]he mediator's decision will be final and firm." Add. 2. This sentence was not included in the Phase II contract.[1]

         The usual meaning of arbitration is that the dispute resolution is binding and final. See Fit Tech, Inc. v. Bally Total Fitness Holding Corp., 374 F.3d 1, 7 (1st Cir. 2004). Conversely, the usual meaning of mediation is that the dispute resolution is non-binding. See In re Atlantic Pipe Corp., 304 F.3d 135, 141 (1st Cir. 2002). For purposes of resolving this ...


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