Opinion
Civil Action No. 01-40164-NMG.
December 10, 2004
MEMORANDUM ORDER
This case arises out of a dispute between a developer and a Town Planning Board over the construction of public ways and improvements for a new residential subdivision. The developer, Eric E. Pearson ("Pearson"), and the associated construction firm, Deer Run, Inc. ("Deer Run") allege 1) violations 42 U.S.C. § 1983, 2) negligence and 3) violations of M.G.L. c. 93A against ten defendants including, inter alia, the Town of Rutland ("Rutland"), members of Rutland's Planning Board in their individual and official capacities, Cullinan Engineering, Inc. ("Cullinan"), Cullinan Engineer, Tom Hogan ("Hogan") and First Massachusetts Bank, N.A. Pearson brings this action pro se but the corporate co-plaintiff is represented by counsel.
Pending before this Court is the motion to dismiss of the defendant, First Massachusetts Bank, N.A. ("the Bank"), on the grounds that, with respect to any claims raised against it, 1) the plaintiff has not pled a viable § 1983 claim, 2) the dismissal of the § 1983 claim mandates dismissal of the alleged common law claims and 3) a prior, parallel action is pending in a state court in New Hampshire.
The Town of Rutland and members of its Planning Board ("the Municipal Defendants") move simultaneously to stay this matter until September 27, 2002 pursuant to an order of the Commonwealth Court of Pennsylvania.
I. Legal Standard
A Court should not dismiss a complaint for failure to state a claim under Fed.R.Civ.P. 12(b)(6) unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Roeder v. Alpha Indus., Inc., 814 F.2d 22, 25 (1st Cir. 1987), quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957). A court's purpose in reviewing a motion to dismiss is to gauge whether the complaint alleges facts adequate to support a cause of action.Beddall v. State St. Bank Trust Co., 137 F.3d 12, 17 (1st Cir. 1998). In considering such a motion, the court must "draw all inferences reasonably extractable from the pleaded facts in the manner most congenial to the plaintiff's theory." Id.
Federal courts traditionally have safeguarded the rights ofpro se litigants, examining pro se complaints under less stringent standards. See e.g., Raineri v. United States 233 F.3d 96, 97 (1st Cir. 2000); Haines v. Kerner, 404 U.S. 519, 520-21 (1972) (per curiam). However, a plaintiff, even one proceeding pro se, may not rely on "bald assertions, periphrastic circumlocutions, unsubstantiated conclusions, [and] outright vituperation." Berner v. Delahanty, 129 F.3d 20, (1st Cir. 1997) (internal citations omitted).
When ruling on a 12(b)(6) motion to dismiss for failure to state a claim, the court may consider only the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the complaint and matters of which judicial notice may be taken. Nollet v. Justices of the Trial Court of Mass., 83 F. Supp. 2d 204, 208 (D. Mass. 2000) aff'd, 248 F.3d 1127 (1st Cir. 2000) (unpublished opinion); C. Wright A. Miller, Federal Practice and Procedure Civil 2d § 1357, (noting that in the context of a Rule 12(b)(6) motion, while the court principally evaluates the allegations in the complaint, a court may take into account matters of public record, orders and exhibits attached to the complaint).
Here, the Bank has attached to its motion materials relevant to its New Hampshire action including the writ of summons, pleadings and a request for admissions. Although this Court's analysis draws upon the parties' uncontroverted statements about the New Hampshire action, it deems it prudent, with the exception of the Banks' petition for attachment, not to consider any of the remaining extrinsic evidence. Boateng v. InterAmerican Univ., Inc., 210 F.3d 56 (1st Cir. 2000), cert. denied 531 U.S. 904 (2000) (court may look to matters of public record, including documents from prior state court adjudications); Citicorp North America, Inc. v. Ogden Martin Sys. of Haverhill, Inc., 8 F.Supp.2d 72 (D.Mass 1998) (court may consider documents whose authenticity is not questioned). The full record in a separate, albeit related, action is unnecessary to the disposition of this suit in its current posture.
II. Factual Background
On a motion to dismiss, the facts are presumed as alleged in the plaintiffs' pleadings. Monahan v. Dorchester Counseling Ctr., 961 F.2d 987, 988 (1st Cir. 1992).
The present case involves the ill-starred construction of a residential complex in Rutland, Massachusetts by Pearson, through an associated construction company, Deer Run. Pearson, a New Hampshire resident, is the principal of Deer Run, a Massachusetts corporation headquartered in Worcester, Massachusetts.
The members of Rutland's Planning Board, Michael Sullivan ("Sullivan"), Norman W. Anderson ("Anderson"), Harry C. Johnson ("Johnson"), Brian Stidsen ("Stidsen"), Charles Richard Williams ("Williams") and Carl Christiansen ("Christiansen"), were responsible for overseeing the application for and subsequent development of the ways and municipal services for new building projects in the Town and were involved in the events precipitating this dispute.
On August 13, 1996, the Planning Board granted final subdivision approval ("the Approval") for a 45-lot, single family subdivision on Pleasantdale Road. Pursuant to M.G.L. c. 41, § 81U, Deer Run, the Bank and Rutland entered into a tri-partite agreement ("the Bond") in order to guarantee the completion of the road and other public improvements at the subdivision. Deer Run executed a note and mortgage in favor of the Bank to fund the Bond and Pearson personally guaranteed the loan.
To oversee the project, Rutland hired Cullinan Engineering, a Massachusetts corporation with its principal place of business in Auburn, Massachusetts. Cullinan was to serve as the Town's engineer to inspect Deer Run's construction of public improvements and to report to the Planning Board Deer Run's progress. Cullinan's employee, Thomas Hogan ("Hogan"), acted as Cullinan's representative to the Planning Board.
Although the pleadings do little to illuminate the sequence of events, Deer Run apparently began construction of the roads and other public improvements sometime thereafter, and, pursuant to § 81U, requested that the Planning Board disburse funds upon the completion of phases of the required roadway construction. Deer Run alleges that it finished a portion of the required public improvements for the Pleasantdale Road project and, in order to recover its capital outlay, provided to the Planning Board evidence of the costs of completion of the remaining work.
Deer Run's work conformed with 1) Rutland's standards for its own road and public improvement projects, 2) the standards applicable to similarly situated developers and builders, 3) the conditions stated on the Planning Board's final approval of the Pleasantdale Project and 4) the promulgated rules and regulations of the Planning Board. At some point, Hogan (and through him, Cullinan) approved the improvement work done by Deer Run on the public ways.
As the Pleasantdale Road subdivision neared completion, however, Hogan re-inspected the subdivision and reported to the Board that it was unsatisfactory. Notwithstanding Deer Run's compliance with the litany of relevant standards, the Planning Board refused to reduce the Bond to reflect the completed work pursuant to § 81U. The Planning Board applied more rigorous standards to the Pleasantdale Road project than to similar developments and required Deer Run to re-do much of its earlier work.
Deer Run consequently expended additional time and funds to overhaul the project in order to obtain the requisite Certificate of Occupancy to sell the units. It was unable to complete the road and other improvements within the time frame established in the Bond.
The relationship between the Planning Board and Deer Run reached an impasse. On August 22, 2000, the Planning Board set the process in motion to "call" Deer Run's Bond. The Planning Board did not extend to Deer Run the statutorily mandated notice but rather conducted a meeting, the precise purpose of which is unclear from the pleadings. In lieu of calling the Bond, the Planning Board entered into an agreement with the Bank assigning to it the responsibility of completing the public improvements for the Pleasantdale Road project under the tutelage of the Bank's engineer, "Buddy" Vaughn ("Vaughn"). That same day, Deer Run again requested that Rutland reduce the amount of the Bond to reflect its completed work.
At that time, Deer Run had written estimates and contracts for finishing the road and improvements for $93,870. Deer Run presented those estimates and contracts to the Planning Board and represented that the work to be done complied with the relevant rules and regulations. The Planning Board required Cullinan in the person of Hogan to review the project. At the direction of the Planning Board, he applied stricter standards to the development than those set forth in the Planning Board's Approval or imposed on other builders in similar projects. Ultimately, the Planning Board required Deer Run to construct improvements not required in the Approval.
Although Vaughn was aware that the Planning Board required Deer Run to perform work not called for in the Approval, he, as the Bank's representative, acquiesced in the Planning Board's requests. The defendants, in fact, did not afford the plaintiffs the opportunity to participate in the selection of contractors. Rather, the Board remained ostensibly indifferent, if not hostile, to the plaintiffs. In particular, the defendant, Sullivan made disparaging remarks about the plaintiffs, leading to a spate of unfavorable publicity about Deer Run in the local press. Because of Deer Run's blemished reputation, contractors were reluctant to work with the plaintiffs, further delaying completion of the development.
Under the direction of the Planning Board, the cost to complete the project exceeded $280,000 which was beyond the capability of Deer Run to finance. The Bank called Pearson's guaranty and filed suit in New Hampshire state court in January, 2001 (Superior Court, Southern Dist. 01-0023). Seven months later, the plaintiffs brought suit in this Court alleging a § 1983 violation and two state law claims.
III. Discussion
A. Abstention
In 1824, Chief Justice John Marshall observed that a "court will not take jurisdiction if it should not: but it is equally true, that it must take jurisdiction, if it should." Cohens v.Virginia, 6 Wheat. 264, 404 (1821). Since then it has become a general rule that a federal court may not depart from its "virtually unflagging obligation" to exercise jurisdiction when authorized to do so by Congress. Colorado River Conservation District v. United States, 424 U.S. 800, 821 (1976) ("Colorado River").
Mindful of that duty, a federal court may not dismiss or stay a case solely based upon the existence of a concurrent state suit implicating the same or similar issues. Abstention refers to judge-made doctrine, or more properly doctrines, describing categories of cases in which a federal court will typically dismiss or stay a federal suit due to the presence of a concurrent state proceeding. Colorado River, 424 U.S. at 813-16; see 17A C. Wright, A. Miller E. Cooper Federal Practice and Procedure § 4241 (1988). Considerations of comity and judicial economy usually motivate a federal court's abdication of its jurisdiction to a state court. It is a bed-rock principle, however, that "[a]bstention from the exercise of federal jurisdiction is the exception, not the rule." Colorado River, 424 U.S. at 813.
Although not considered in this memorandum, the other abstention doctrines include 1) a case that may be resolved on a question of state law so as to avoid a federal constitutional question and 2) a federal case that may interfere or otherwise impede state criminal proceedings. see 17A C. Wright, A. Miller E. Cooper Federal Practice and Procedure § 4241 (1988).
1. The New Hampshire Action and Colorado River
Here, the preliminary question is whether this Court should decline to exercise jurisdiction over certain claims against the Bank based upon abstention principles. Although the Bank did not formally raise the abstention issue, it seeks a dismissal of the plaintiffs' state law claims based upon case law from the 1930s. This Court has, in any event, authority to raise an abstention issue sua sponte. Pustell v. Lynn Pub. Schs., 18 F.3d 50, 51 n. 1 (1st Cir. 1994); Neptune v. McCarthy, 706 F.Supp. 958, 961 (D.Mass. 1989).
Typically, a district court exercises wide discretion when determining if the "exceptional circumstances" are present that warrant abstention after Colorado River and its progeny. Although no one factor is determinative, six considerations frame its analysis:
(1) whether either court has assumed jurisdiction over a res;
(2) the inconvenience of the federal forum;
(3) the desirability of avoiding piecemeal litigation;
(4) the order in which the forums obtained jurisdiction;
(5) whether federal law or state law controls; and
(6) whether the state forum will adequately protect the interests of the parties.Currie v. Group Ins. Com'n, 290 F.3d 1, 10 (1st Cir. 2002) (quoting Rivera-Puig v. Garcia-Rosario, 983 F.2d 311, 320-21 (1st Cir. 1992)); Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1, 23-27 (1983).
The Colorado River factors are "to be applied in a pragmatic, flexible manner with a view to the realities of the case at hand." Moses H. Cone, 460 U.S. at 21. Although not dispositive, the presence of a federal question in the litigation weighs against abstention under Colorado River. Id. at 23-24.
The first two factors are of no moment in the instant dispute. Here, even if the state court attached Pearson's real property in New Hampshire, this Court and the state court are not concurrently determining rights in property over which the state court has already assumed jurisdiction. To be sure, the state court has jurisdiction over unrelated property in New Hampshire to secure any judgment there. This action does not, however, relate to the ownership of that New Hampshire property but rather concerns whether, inter alia, the defendants' actions violated the plaintiffs' constitutional rights. Forehand v. First Alabama Bank of Dothan, 727 F.2d 1033, 1036 (11th Cir. 1984).
Furthermore, there is no credible allegation that the New Hampshire forum is more convenient. It is undisputed that 1) the defendants all reside or are incorporated in Massachusetts, 2) Deer Run is a Massachusetts corporation, 3) the entire disputed transaction occurred in Massachusetts and 4) Massachusetts law governs the promissory note. Massachusetts is likely to be the more convenient forum.
The risk of duplicative or piecemeal litigation is present to some degree here. Both actions derive from the same series of events, although not all the defendants in this matter are parties to the New Hampshire suit. The plaintiffs' claims here are not identical to the Bank's claims in New Hampshire in what the parties agree is essentially a collection action. Although the defendants in either case could assert counterclaims that would render the cases substantially similar, they have not yet done so. Furthermore, the presence of additional parties in this action militates against abstention, particularly when, as here, the federal suit is not "vexatious or reactive." Moses H. Cone 460 U.S. at 18 n. 20; Gonzalez v. Cruz, 926 F.2d 1, 4 (1st Cir. 1991).
Moreover, there is no risk of inconsistent or contradictory judgments here because judgment on the overlapping claims (if any arise) may be res judicata with respect to the relevant claims in the remaining case. Id.; see Cruz v. Melecio, 204 F.3d 14, 24 (1st Cir. 2000). Assuming arguendo that the Bank prevails in its bill collection action and the plaintiffs prevail on their § 1983, negligence and Chapter 93A claims before this Court, there will be no inconsistency, e.g., even if the Bank is found negligent by a jury, it may nonetheless be entitled to recover what it is owed by Deer Run and/or Pearson.
Although the state complaint preceded the federal complaint, timing is not conclusive lest abstention be deemed to depend upon a race to the courthouse. Woodford v. Community Action Agency of Greene County, Inc., 239 F.3d 517 (2d Cir. 2001). Drawing upon that intuition, the Supreme Court has explained that the issue of timing does not depend upon the filing date, but rather the relative development of both suits. Moses H. Cone, 460 U.S. at 21; Currie, 290 F.3d at 10. There is no credible allegation here that the New Hampshire action is farther advanced than the instant case.
With respect to the final two Colorado River factors, the arguments for abstention are no stronger. Although there is no allegation that the New Hampshire state forum will inadequately protect the parties' interests, the plaintiffs' Chapter 93A claim is a creature of Massachusetts statutory law.
In sum, the concurrent proceedings in New Hampshire do not present exceptional circumstances. Duplication and inefficiency, without more, are insufficient grounds on which to justify abstention. Rojas-Hernandez v. Puerto Rico Electric Power Authority, 925 F.2d 492 (1st Cir. 1991). It bears emphasis, moreover, that "Congress has deliberately afforded the section 1983 plaintiff an alternative forum", Duke v. James, 713 F.2d 1506, 1510 (11th Cir. 1983), and this Court's obligation to exercise jurisdiction is only enhanced when faced with an issue of federal constitutional dimension. Neptune, 706 F.Supp. at 964.
2. Municipal Defendants' Request for a Stay
There is yet another jurisdictional wrinkle that gives this Court pause before it continues to analyze the issues. The Municipal Defendants have moved to stay this case pursuant to an order of the Commonwealth Court of Pennsylvania ("the Pennsylvania Court"). On April 1, 2002, the Pennsylvania Court allowed the petition of the Insurance Commissioner of the Commonwealth of Pennsylvania for Rehabilitation of Legion Insurance Company ("Legion") and ordered that all court actions pending against any insured of Legion be stayed for 90 days. The Municipal Defendants are insured by Legion. On June 28, 2002, the Pennsylvania Court extended that stay for an additional 90 days until September 27, 2002 and the Municipal defendants, accordingly, renewed their unopposed motion to stay.
The Order provides in relevant part that:
All court actions, arbitrations and mediations currently or hereafter pending against an insured of Legion in the Commonwealth of Pennsylvania or elsewhere are stayed for (90) days from the effective date of this Order or such additional time as the Rehabilitator may request.
In moving for a stay, the Municipal Defendants provide no substantive legal or factual basis for their request. Notably, they fail to elaborate on core factual points in their pleadings. They provide neither a description of the nature or scope of the subject Legion policy nor a discussion of the potential impact of the pending dispute, if any, on the Rehabilitation proceedings in Pennsylvania. Finally, the defendants make no assertion that Legion has a duty to defend them in this litigation.
It is axiomatic that a state court cannot enjoin or abridge federal litigation. General Atomic Co. v. Felter, 434 U.S. 12 (1977) (per curiam). The proscriptions set forth in a Rehabilitation order of the Pennsylvania Court do not mandate that this Court grant the stay. Fragoso v. Lopez, 991 F.2d 878, 882 (1st Cir. 1993) (noting that a state court liquidation order was not binding).
This Court may, nonetheless, stay this action if it deems it appropriate. Certain bedrock principles guide that determination. In the first instance, principles of comity counsel this Court to give "full faith and credit" to the Order. 28 U.S.C. § 1738;Royal and Sunalliance Ins. Co. of America v. Settlement Health and Med. Servs., Inc., 2000 WL 679788 (S.D.N.Y.) ("Royal"). Similarly, the Burford abstention doctrine instructs "federal courts to stay their hand lest they provoke needless conflict with the administration by a state of its own affairs." Hartford Cas. Ins. Co. v. Borg-Warner Corp., 913 F.2d 419 (7th Cir. 1990) (quoting Kelly Servs., Inc. v. Johnson, 542 F.2d 31, 32 (7th Cir. 1976)); Burford v. Sun Oil Co., 319 U.S. 315 (1943).
Mindful of that broad mandate, courts usually analyze the propriety of abstention where there is a concurrent state insurance rehabilitation or liquidation proceeding under the principles set forth in Burford and its progeny. See, e.g., id.; Grimes v. Crown Life Ins. Co., 857 F.2d 699, 704-05 (10th Cir. 1988), cert. denied, 489 U.S. 1096 (1989);Melahn v. Pennock Ins., Inc., 965 F.2d 1497 (8th Cir. 1992).
Although Burford abstention is amorphous in theory, the Supreme Court has instructed federal courts "sitting in equity" that interference with orders or proceedings of state administrative agencies is inappropriate where:
timely and adequate state-court review is available [and]: . . . (1) when there are "difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar; or (2) where the exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.New Orleans Pub. Serv. Inc. v. City Council of New Orleans, 491 U.S. 350, 360-64 (1989) ("NOPSI") (quoting Colorado River, 424 U.S. at 814) (internal quotation marks omitted).
In light of this teaching, the First Circuit Court of Appeals has observed that Burford abstention applies only where "deference to a state's administrative processes for the determination of complex, policy-laden, state-law issues would serve a significant local interest . . .". Fragoso, 991 F.2d at 882.
Insurance is a state law issue. Under the McCarran-Ferguson Act, Congress has conferred upon the states the primary responsibility for regulating the insurance industry. Consistent with that mandate, Pennsylvania has adopted a statutory scheme to govern the rehabilitation of insolvent insurers in order to protect the interests of insureds, creditors and the public. 40 P.S. §§ 221.1 et. seq.
Notwithstanding the complex regulations that the Pennsylvania legislature has promulgated to regulate insolvent insurance companies, the relevance of Burford to this particular case is dubious. As the First Circuit has made plain, Burford abstention applies to state administrative agencies. It is unclear whether the rehabilitation scheme here establishes a state administrative agency of the kind contemplated inBurford. Fragoso, 991 F.2d at 883 (considering Puerto Rico's Liquidation Act).
Based upon the record before this Court, a decision to proceed will not interfere with any state issues or state proceedings. The record does not indicate whether the Rehabilitator commenced a specialized proceeding in the first instance. Property Cas. Insur., Ltd. v. Central Nat'l Insur. Co., 936 F.2d 319, 323 (7th Cir. 1991). The maintenance of this action against the Municipal Defendants (i.e., the insured) prejudices no creditor nor does it interfere with the administration of the Rehabilitation process.
To be sure, the Order purports to stay this proceeding for only 90 days and a temporary stay is less burdensome than an indefinite one. There are, however, costs that inhere in the delay of any action. Evidence and witnesses become stale. This Order is the second of its kind that this Court has received and it is unclear how many more will be issued as the rehabilitation process continues. See Royal Sun, 2000 WL 679788 at *2 (discussing the potentially negative impact of a stay on the non-moving defendants in the suit).
In the interim, the Municipal defendants may have to bear some litigation expenses for which Legion would have been responsible if its financial state had been sound. The Municipal Defendants make no credible allegation, however, that those costs will render them unable to defend this action. Whatever the outcome of the rehabilitation proceeding, it will have no substantive impact on this case because the Municipal Defendants' liability is unaffected by Legion's solvency or lack thereof.Royal Sun, 2000 WL 679788 at *2.
Assuming arguendo that Burford abstention has some relevance, it has no application to this case. The plaintiffs are not suing their insurance carrier for money damages or equitable relief but are, rather, suing the carrier's insured. Any judgment received by the plaintiffs will not interfere with the Rehabilitator's control of Legion's assets. Fragoso, 991 F.2d at 884-85; cf. Hartford Casualty Ins. Co., 913 F.2d at 427; Lac D'Amiante du Quebec, LTEE v. American Home Assurance Co., 864 F.2d 1033, 1044 (3d Cir. 1988). Moreover, the risk that this action will disrupt a local proceeding or, more generally, frustrate Pennsylvania's regulatory framework is without support. Indeed, the First Circuit Court of Appeals has expressed doubt that "federal court decisionmaking of the kind that exists alongside state insurance liquidation proceedings so significantly disrupts state regulatory frameworks to call for abstention." Fragoso, 991 F.2d at 884.
In sum, the Municipal Defendants provide no support, in the record or in law, for their request. Considering the circumstances of this case, this Court will decline the invitation to stay.
B. Section 1983: Under Color of State Law
Section 1983 affords a remedy for deprivations of rights established by the Constitution or the laws of the United States when the offending action is made "under color of any statute, regulation, custom, or usage of any state. . . ." 42 U.S.C. § 1983. As with the state action requirement under the Fourteenth Amendment, the under-color-of-state law element of § 1983 "excludes from its reach merely private conduct, no matter how discriminatory or wrongful." American Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40 (1999) (quoting Blum v. Yaretsky, 457 U.S. 991 (1982)). The "color-of-law" provision requires that "the conduct allegedly causing the deprivation of a federal right be fairly attributable to the State". Lugar v. Edmondson Oil Co., Inc., 457 U.S. 922, 937 (1982) (emphasis added).
The plaintiffs' Section 1983 claim is ill-defined, stating in relevant part:
the actions of the defendants constituted irrational and wholly arbitrary discrimination . . . with the intent to deny the plaintiffs the right to due process and equal protection of the law afforded them under the Fifth and Fourteenth Amendments . . .
the Bank does not, however, challenge the plaintiffs' Section 1983 claim for failure to allege sufficiently a deprivation of a constitutional right. For the purpose of this motion, the pleadings indicate that the plaintiffs allege, among other things, a deprivation of their property rights through the imposition of unduly rigorous standards with respect to its development project.
Whether an action can be fairly attributed to the state is "a matter of normative judgment, and the criteria lack rigid simplicity." Brentwood Academy v. Tennessee Secondary Sch. Athletic Ass'n, 531 U.S. 288 (2001). Courts must consider the totality of circumstances as no one factor is determinative.
Although the state action requirement belies simple categorization, several factors come to the fore when assessing whether private conduct can be fairly attributed to the State so as to establish § 1983 liability. The Supreme Court has held, for example, that the challenged activity may constitute state action where "the State has exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be deemed to be that of the State." American Mfrs. Mut. Ins. Co. v.Sullivan, 526 U.S. 40, 50 (1999) (quoting Blum v. Yaretsky, 457 U.S. 991, 1002 (1982) (internal quotation marks omitted)). However, the State's acquiescence to, or mere approval of, the conduct of a private entity is insufficient to demonstrate state action. Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 164 (1978); Jackson v. Metropolitan Edison Co., 419 U.S. 345, 357 (1974).
A private entity may also be deemed a state actor where the State has delegated to it a public function or that entity is a "willful participant in joint activity with the State or its agents." Lugar, 457 U.S. at 941. Courts have also found state action where a private entity was "overborne by the pervasive entwinement of public institutions and public officials in its composition and workings . . ." Id. at 298; accord Tomaiolo v. Mallinoff, 281 F.3d 1, 9 (1st Cir. 2002).
The Bank asserts that the plaintiffs allege no viable § 1983 claim against it because, as a purely private actor, it cannot act under color of state law. To be sure, banks are subject to extensive government regulation but the presence of a regulatory scheme does not compel a finding of state action. Fletcher v.Rhode Island Hospital First National Bank, 496 F.2d 927 (1st Cir. 1974) cert. denied, 419 U.S. 1001 (1974); Tunca v. Lutheran General Hospital, 844 F.2d 411, 413 (7th Cir. 1988). Moreover, even assuming the plaintiffs' rendition of events is true, the Bank contends that, similar to a general contractor, it did no more than complete the public ways and improvements as directed by the Town in a perfunctory manner.
The plaintiffs, in turn, contend that the Bank's actions fall squarely within the reach of § 1983. Their theory assumes two different guises. Similar to an entwinement theory, the plaintiffs imply that the Planning Board delegated to the Bank its responsibility to oversee the development and the construction of the public ways and improvements on the Pleasantdale Road subdivision in the manner prescribed by the Planning Board which intermingled state action with private action. Likewise, appealing to a joint action theory, the plaintiffs allege that the Planning Board and the Bank jointly engaged in actions contrary to plaintiffs' interest.
Specifically, the plaintiffs assert that the Bank, acting as the Town's agent and general contractor 1) imposed standards on the Pleasantdale Road project that the Bank was aware exceeded those set forth in the Approval, 2) finished the roadways and other public improvements at the Pleasantdale Road project and 3) jointly participated with the Town in the illegal taking under the Bond. The plaintiffs place particular reliance upon the fact that the Bank was allegedly aware in some instances that its actions were illegal or contrary to the terms of the Approval.
The necessarily fact-bound inquiry suggests that the plaintiffs have alleged a viable case for state action here. Lugar, 457 U.S. at 939. Although this Court renders no judgment on the relative merit of the plaintiffs' claims, there is a credible allegation that the Bank was a willful participant in joint activity with the State or its agents. Viewing the plaintiff's allegations as a whole, the Bank's engagement in the completion of the public ways and improvements on Pleasantdale Road suggests an indicia of state action.
The Bank's role as a general contractor does not constitute state action "by reason of . . . [its] significant or even total engagement in performing public contracts." Rendell-Baker v.Kohn, 457 U.S. 830, 841 (1982). Here, the plaintiffs allege that the Bank did more than perform a mere service for the government, and that it actively and knowingly took part in the alleged denial of due process rights.
To that end, the plaintiffs' pleadings indicate that there was a "meeting of the minds" between the Bank and the Planning Board sufficient to place it within the sphere of state action.Wagenmann v. Adams, 829 F.2d 196, 209, 209-11 (1st Cir. 1987). To be sure, it is not clear, what involvement the Bank had, if any, in the Planning Board's meetings, the selection of contractors or in the enforcement of standards for road construction in the first instance. Such factual questions underscore the inappropriateness of deciding this issue on a motion to dismiss.
C. Pendent State Law Claims and Supplemental Jurisdiction
Because this Court will not dismiss the plaintiffs' § 1983 claim, there is no reason to consider defendants' request that it decline to exercise supplemental jurisdiction over the plaintiffs' state law claims. 28 U.S.C. § 1367.
ORDER
For the foregoing reasons, the motion to dismiss of the defendant, First Massachusetts Bank, N.A. (Docket No. 5) and the motion to stay proceedings of the defendants Town of Rutland, Michael Sullivan, Norman W. Anderson, Harry C. Johnson, Jr., Brian Stidsen, Charles R. Williams and Carl Christiansen (Docket No. 16) are DENIED.
So ordered.