**FEDERAL MARITIME COMMISSION**

+-------------------------------------------+---------------------------+
| [Odyssea Stevedoring of Puerto Rico,      | Docket Nos. 02-08; 04-01; |
| Inc]{.smallcaps}.                         | 04-06                     |
|                                           |                           |
| *v*.                                      |                           |
|                                           |                           |
| [Puerto Rico Ports                        |                           |
| Authority]{.smallcaps};                   |                           |
|                                           |                           |
| [International Shipping Agency,           |                           |
| Inc.]{.smallcaps}                         |                           |
|                                           |                           |
| *v*.                                      |                           |
|                                           |                           |
| [Puerto Rico Ports                        |                           |
| Authority]{.smallcaps};                   |                           |
|                                           |                           |
| [San Antonio Maritime                     |                           |
| Corporation]{.smallcaps}                  |                           |
|                                           |                           |
| *v*.                                      |                           |
|                                           |                           |
| [Puerto Rico Ports                        |                           |
| Authority]{.smallcaps}.[Number range      |                           |
| CHAPTERNumber range CHAPTER]{.smallcaps}  |                           |
+-------------------------------------------+---------------------------+

Served: November 30, 2006

The Puerto Rico Ports Authority is found not to be an arm of the
Commonwealth, and is therefore not entitled to sovereign immunity from
the regulatory adjudication of privately-filed complaints before the
Federal Maritime Commission.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
**BY THE COMMISSION:** Steven R. BLUST, *Chairman*, A. Paul ANDERSON and
Rebecca F. DYE, *Commissioners*, announcing the decision of the
Commission with respect to Part I, II, III A-C and IV; with A. Paul
ANDERSON, Joseph E. BRENNAN, and Harold J. CREEL, Jr., *Commissioners*,
delivering the opinion of the Commission with respect to Part III-D; A.
Paul ANDERSON filed a concurring opinion with respect to Part III-D;
Steven R. BLUST and Rebecca F. DYE dissenting with respect to Part
III-D; and Joseph E. BRENNAN and Harold J. CREEL filed a dissenting
opinion.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**[ORDER]{.underline}**

These proceedings were initiated by complaints filed against Puerto Rico
Ports Authority ("PRPA") by Odyssea Stevedoring of Puerto Rico, Inc.
("Odyssea"), International Shipping Agency, Inc. ("Intership"), and San
Antonio Maritime Corp. and Antilles Cement Corp. (collectively
"SAM").[^1] Complainants allege that PRPA's marine terminal leasing
practices violate sections 10(b)(10), 10(d)(1), 10(d)(3), and 10(d)(4)
of the Shipping Act of 1984 ("Shipping Act" or "Act"), 46 U.S.C. §§
41102 and 41106. Further, Intership alleges that PRPA violated section
10(a)(3) of the Act, 46 U.S.C. § 41102(b), by failing to act in
accordance with the terms of an agreement filed with the Federal
Maritime Commission ("Commission").[^2] The cases are now before the
Commission for a determination of whether PRPA is entitled to sovereign
immunity. For the reasons set forth below, the Commission has determined
that PRPA has failed to meet its burden to show that it is entitled to
sovereign immunity as an arm of the Commonwealth. These cases are
therefore remanded to the Administrative Law Judge for further
proceedings consistent with this Order.

I. [BACKGROUND]{.underline}

A. [Case Status]{.underline}

> 1\. [Odyssea Stevedoring of Puerto Rico, Inc. v. Puerto Rico Ports
> Authority]{.underline}, Docket No. 02-08

Odyssea is a marine terminal operator involved in the business of
providing stevedore and marine terminal operator services to common
carriers engaged in U.S. domestic and foreign commerce at facilities in
the Port of San Juan, Puerto Rico.

Odyssea filed a complaint against PRPA on May 31, 2002, claiming several
violations of the Shipping Act and seeking reparations, a cease and
desist order, and other relief as the Commission may deem appropriate.
On December 24, 2003, PRPA filed a Motion for Summary Judgment arguing,
in part, that sovereign immunity bars the adjudication of Odyssea's
complaint. On September 15, 2004, the presiding Administrative Law Judge
("ALJ") issued an oral ruling denying PRPA's motion, and denying its
request for a stay pending appeal to the Commission. The oral ruling was
followed by a written ruling to the same effect issued on November 9,
2004. On September 16, 2004 the Commission issued an order staying the
proceeding in order to permit the Commission to review whether PRPA is
entitled to sovereign immunity.

> 2\. [International Shipping Agency, Inc. v. Puerto Rico Ports
> Authority]{.underline}, Docket No. 04-01

Intership is a marine terminal operator involved in the business of
providing stevedore and marine terminal operator services to ocean
common carriers engaged in U.S. domestic and foreign commerce at several
berthing facilities in the Port of San Juan, Puerto Rico.

Intership filed a complaint against PRPA on December 29, 2003, claiming
several violations of the Shipping Act and seeking reparations and other
appropriate relief. On March 5, 2004, PRPA filed a Motion to Dismiss, in
part, on the basis of sovereign immunity. On September 17, 2004, the ALJ
denied PRPA's motion and ordered it to respond to the complaint. On
September 21, 2004, the Commission issued an order staying the
proceeding in order to review the issue of whether PRPA is entitled to
sovereign immunity.

> 3\. [San Antonio Maritime Corp. and Antilles Cement Corp. v. Puerto
> Rico Ports Authority]{.underline}, Docket No. 04-06

SAM is a marine terminal operator engaged in the development of land and
dock facilities and the administration of vessels and berthing
facilities in the Port of San Juan, Puerto Rico. SAM's operations and
facilities are dedicated to the receiving, handling, storing, packing
and distribution of cement and related materials.

SAM filed a complaint against PRPA on April 21, 2004, claiming several
violations of the Shipping Act and seeking reparations, a cease and
desist order, and other appropriate relief. On June 16, 2004, PRPA filed
a Motion to Dismiss, in part, on the basis of sovereign immunity. On
September 27, 2004, the ALJ referred the issue of PRPA's sovereign
immunity to the Commission.

B. [Respondent - Puerto Rico Ports Authority]{.underline}

PRPA is a public corporation and government instrumentality of the
Commonwealth of Puerto Rico. It is a marine terminal operator that owns
and controls marine terminal facilities at the Port of San Juan, Puerto
Rico, including facilities at: Puerto Nuevo, Puerto de Tierra, Isla
Grande, and the Army Terminal. PRPA is involved in the business of
furnishing terminal facilities and services to ocean common carriers
operating in U.S. domestic and foreign commerce. PRPA leases facilities
to other marine terminal operators, such as Odyssea, Intership and SAM.

PRPA filed dispositive motions in all three cases arguing that the
complaints were barred by PRPA's sovereign immunity as an arm of the
Commonwealth of Puerto Rico. PRPA's motions argue that the Commonwealth
of Puerto Rico is entitled to sovereign immunity, that the Shipping Act
does not abrogate that immunity, and that PRPA is an arm of the
Commonwealth of Puerto Rico entitled to share in the Commonwealth's
sovereign immunity. All three Complainants opposed PRPA's claim of
sovereign immunity.

C. [Commission Proceedings]{.underline}

On November 22, 2004, the Commission issued an Order in all three cases
requesting briefing on the issue of whether the Commonwealth of Puerto
Rico should be treated as a state for the purpose of constitutional
sovereign immunity in light of the origin and purposes of such immunity
("Order"). The Complainants filed a joint petition for reconsideration
of the November 22^nd^ Order on December 20, 2004. On December 22, 2004,
the Commission denied the joint petition, but granted their request to
extend the briefing schedule. All of the parties filed opening briefs on
January 7, 2005 and reply briefs on February 15, 2005. The Commonwealth
of Puerto Rico filed an [amicus curiae]{.underline} brief on January 7,
2005. In its February 15, 2005 reply memorandum, Odyssea requested that
the Commission issue an order to show cause directing PRPA and the
Commonwealth to explain why [Trans-Caribbean Maritime Corp. v.
Commonwealth of Puerto Rico]{.underline}, 2002 PR App. Lexis 595 (March
27, 2002) is not controlling in this proceeding. On March 2, 2005, PRPA
filed an Opposition to Odyssea's Petition to Show Cause, and on March 9,
2005, the Commonwealth filed a Response to Odyssea's Request for an
Order to Show Cause. Intership filed a Motion to Strike on March 17,
2005, to which PRPA and the Commonwealth filed pleadings in opposition

The Commonwealth of Puerto Rico petitioned the Commission for leave to
file a brief as [amicus curiae]{.underline} on January 7, 2005 in
response to the Commission's November 22 Order. The Commonwealth's
petition for leave is granted. In its [amicus]{.underline} brief, the
Commonwealth argues that although it should be treated as if it were a
state for the purposes of sovereign immunity, it is unnecessary to reach
the constitutional question since the Puerto Rico Federal Relations Act
establishes a default rule that requires application of the laws of the
United States to the Commonwealth with the same force and effect as in
the states.

On October 17, 2006, the Commission held oral argument in all three
proceedings on the specific question of whether PRPA is an arm of the
Commonwealth.

II\. [SUMMARY OF PRPA'S ENABLING STATUTE]{.underline}

The Commission finds that PRPA's enabling statute establishes the
following:

1.  Puerto Rico Ports Authority is a public corporation and government
    instrumentality of the Commonwealth of Puerto Rico.
    [See]{.underline} 23 L.P.R.A. §§ 331-352.

2.  PRPA was created with a legal existence and personality separate and
    apart from those of the Commonwealth of Puerto Rico and any
    officials thereof. [See]{.underline} 23 L.P.R.A. § 331(b).

3.  The debts, obligations, contracts, bonds, notes, debentures,
    receipts, expenditures, accounts, funds, undertakings and properties
    of the Authority, its officers, agents or employees, have been
    deemed to be those of PRPA, and not those of the Commonwealth of
    Puerto Rico, or any office, bureau, department, commission,
    dependency, municipality, branch, agent, officials, or employees
    thereof. [See]{.underline} 23 L.P.R.A. § 333.

4.  The purpose of PRPA is to develop and improve, own, operate, and
    manage any and all types of marine transportation facilities and
    services in, to and from the Commonwealth of Puerto Rico.
    [See]{.underline} 23 L.P.R.A. § 336.

5.  PRPA has complete control and supervision of any undertaking
    constructed by it or acquired by it including the power to determine
    the character of and necessity for all expenditures and the manner
    in which they shall be incurred, allowed and paid without regard to
    the provisions of any laws governing the expenditure of public
    funds, and such determination shall be final and conclusive upon all
    officers of the Commonwealth of Puerto Rico. [See]{.underline} 23
    L.P.R.A. § 336(d).

6.  PRPA has the power to sue and be sued. [See]{.underline} 23 L.P.R.A.
    § 336(e).

7.  PRPA has the power to acquire by purchase, by the exercise of
    eminent domain, or by any other lawful means, equipment, supplies,
    services, goods, and such other property real and personal as PRPA
    deems necessary in connection with its activities. PRPA is further
    empowered to lease as lessor or exchange any such property or
    interest therein. [See]{.underline} 23 L.P.R.A. § 336(h-j).

8.  Upon request of the Authority, the Governor of Puerto Rico or the
    Secretary of the Department of Transportation and Public Works shall
    have the power to purchase in the name or on behalf of the
    Commonwealth of Puerto Rico any property, title or interest that
    PRPA deems necessary and convenient, either by agreement or by the
    exercise of the right to eminent domain. In either case, PRPA is
    obligated to reimburse the Commonwealth for the cost of obtaining
    such property. [See]{.underline} 23 L.P.R.A. § 339.

9.  PRPA has the power to determine, fix, alter, impose and collect
    rates, fees, rents and other charges for the use of the facilities
    or services of PRPA. [See]{.underline} 23 L.P.R.A. § 336(l)(1).

10. PRPA has the power to borrow money, make and issue bonds of PRPA for
    any of its corporate purposes or for the purpose of financing,
    refinancing, paying or discharging any of the outstanding or assumed
    bonds or obligations and to secure payment of such bonds.
    [See]{.underline} 23 L.P.R.A. §§ 331(n)-(o).

11. Bonds and other obligations issued by PRPA are not a debt of the
    Commonwealth of Puerto Rico or any of its municipalities or other
    political subdivisions, and neither the Commonwealth nor any
    political subdivisions shall be liable for such obligations.
    [See]{.underline} 23 L.P.R.A. § 345.

12. The legislature has provided certain minimal criteria for the rates,
    fees, rents and other charges imposed by PRPA. [See]{.underline} 23
    L.P.R.A. §§ 331(l)(1)(A)-(C).

13. PRPA has no power to pledge the credit or taxing power of the
    Commonwealth of Puerto Rico or any of its political subdivisions,
    nor can the Commonwealth of Puerto Rico or any of its political
    subdivisions be liable for the payment of the principal or interest
    on any bonds issued by the authority. [See]{.underline} 23 L.P.R.A.
    § 336(u).

14. All monies of PRPA are deposited in qualified depositories for funds
    of the Government of the Commonwealth of Puerto Rico, but such funds
    are kept in a separate account, or accounts, registered in the name
    of PRPA. The disbursements are made by PRPA pursuant to regulations
    and budgets approved by the board. The Secretary of the Treasury, in
    consultation with PRPA, shall establish an accounting system for all
    expenses and income of PRPA; and the Controller of Puerto Rico shall
    examine the books and records of PRPA every three years and provide
    a report to the Board of Directors of PRPA, the Governor of Puerto
    Rico and the Legislature of Puerto Rico. [See]{.underline} 23
    L.P.R.A. § 338.

15. PRPA is obligated to submit to the Legislature and the Governor of
    Puerto Rico, on an annual basis, unless otherwise required, the
    following items: (1) a financial statement and complete report of
    the business of the Authority for the preceding fiscal year; and (2)
    a complete report on the status and progress of all of its
    undertakings and activities since the date of the last report.
    [See]{.underline} 23 L.P.R.A. § 345.

16. PRPA is exempt from payment of taxes. PRPA is obligated to pay four
    hundred thousand dollars (\$400,000) on an annual basis to the
    Commonwealth Treasury, when such funds are available after payment
    of operating and maintenance expenses, the principal of and interest
    on outstanding obligations and the reserves established by PRPA for
    such purposes. [See]{.underline} 23 L.P.R.A. § 348.

III\. [DISCUSSION]{.underline}

The issue currently before the Commission is whether PRPA is entitled to
sovereign immunity as an arm of the Commonwealth of Puerto Rico.

A. [Arm of the State]{.underline}[^3]

PRPA argues that it is entitled to sovereign immunity as an arm of the
Commonwealth of Puerto Rico. If PRPA is found to be an arm of the
Commonwealth, then PRPA would be entitled to share in any immunity
enjoyed by the Commonwealth. PRPA is related to the Commonwealth.
However, not every government-related entity is an arm of the state. For
example, arm of the state status, or, in this case, status as an arm of
the Commonwealth, does not extend to counties and similar municipal
corporations. [Mt. Healthy City School Bd. of Educ. v.
Doyle]{.underline}, 429 U.S. 274, 280-281 (1977); [Alden v.
Maine]{.underline}, 527 U.S. 706, 756 (1999); [Northern Ins. Co. of New
York v. Chatham County]{.underline}, 126 S.Ct. 1689 (2006); [Ceres
Marine Terminals, Inc. v. Maryland Port Admin.]{.underline}, 30 S.R.R.
358, 366 (2004). Accordingly, the Commission must determine whether PRPA
is an arm of the Commonwealth.

It is PRPA's burden to demonstrate that it is an arm of the
Commonwealth, not the Complainants' burden to prove that it is not.
[Gragg v. Ky Cabinet for Workforce Dev.]{.underline}, 289 F.3d 958, 963
(6^th^ Cir. 2002). As discussed more fully below, we find that PRPA has
not met its burden of proof, and we find that PRPA is not an arm of the
Commonwealth, and is therefore not entitled to immunity from the
adjudication of privately-filed complaints before this Commission.

1\. [Applicable Standard]{.underline}

As discussed in [Number range CHAPTERCeres Marine Terminals, Inc. v.
Maryland Port Administration]{.underline}, 30 S.R.R. 358 (2004), the
Commission's test to determine whether an entity is an arm of the state
includes a review of the structure of the entity and the risk to the
state treasury. In reviewing the structure of the entity, three factors
are considered: 1) the degree of control that the state exercises over
the entity at issue; 2) whether the entity deals with local or statewide
concerns; and 3) the manner in which applicable law treats the entity.
[See]{.underline} [Ceres]{.underline}, 30 S.R.R. at 368-69; [Carolina
Marine Handling, Inc. v. South Carolina State Ports Authority, et
al.]{.underline}, 30 S.R.R. 1017, 1029 (2006). This test takes into
consideration recent Supreme Court case law that has modified the
analysis used to determine whether an entity is an arm of the state. In
[Federal Maritime Commission v. South Carolina State Ports
Authority]{.underline}, 535 U.S. 743, 760 (2002), the Supreme Court
altered traditional notions of determining arm of the state status
through its pronouncement that state dignity, rather than risk to the
state treasury, is the preeminent purpose of state sovereign immunity.

As noted in an earlier Commission order in these proceedings, the
Commission cannot simply follow the law of the circuit in which an
action arises since, as a federal agency, cases before it can arise in
any jurisdiction and can be subject to appeal in a multitude of
circuits. [See]{.underline} Commission Order in Docket Nos. 02-08;
04-01; 04-06, November 22, 2004. The standard employed by the Commission
is consistent with the substance of the analysis used by the First
Circuit. However, the First Circuit reviews the risk to the treasury
only if the structural analysis is inconclusive. [See]{.underline}
[Fresenius Medical Care Cardiovascular Resources, Inc. v. Puerto Rico
and the Caribbean Cardiovascular Center Corp.]{.underline}, 322 F.3d 56,
68 (1^st^ Cir. 2003).

> 2\. [PRPA's Status under the Applicable Standard]{.underline}

a\. [Structure]{.underline}

As noted, there are three questions that must be examined in reviewing
the structure of an entity. These include the degree of control that the
state (here, the Commonwealth) exercises over PRPA, whether PRPA deals
with local or statewide concerns, and the manner in which the laws of
Puerto Rico treat PRPA.

i\. [Degree of Control]{.underline}

The first step in reviewing the structure of PRPA is to determine the
degree of control that the Commonwealth exercises over PRPA. We have
relied on the Commonwealth statute which created PRPA to aid in our
analysis of this factor. We have concluded that this enabling statute
indicates that PRPA is not under the control of the Commonwealth. The
following statutory provisions from PRPA's enabling act indicate the
lack of Commonwealth control: (1) PRPA was created with a legal
existence and personality separate and apart from those of the
Commonwealth and any officials thereof, 23 L.P.R.A. § 331(b); (2) the
debts, obligations, contracts, etc. of PRPA are deemed to be those of
PRPA and not those of the Commonwealth, 23 L.P.R.A. § 333; (3) the
purpose of PRPA is to own, operate and manage transportation facilities,
23 L.P.R.A. § 336; (4) PRPA has complete control and supervision of its
undertakings, including the power to determine the character and
necessity for its expenditures, and such determinations are final and
conclusive upon all officers of the Commonwealth of Puerto Rico, 23
L.P.R.A. § 336(d); (5) PRPA has the power to sue and be sued, 23
L.P.R.A. § 336(e); (6) PRPA has the power and authority to set rates,
fees, rents and other charges for the use of its facilities, within
established minimums set by the legislature, 23 L.P.R.A. §
331(1)(A)-(C); (7) PRPA has the power to borrow money and issue bonds,
although such bonds and other obligations issued by PRPA are not a debt
of the Commonwealth or any of its municipalities or other political
subdivisions, nor is the Commonwealth or any of its political
subdivisions liable for such obligations, 23 L.P.R.A. § 345; (8) PRPA
cannot pledge the credit of the Commonwealth, and has not been given the
taxing power of the Commonwealth, 23 L.P.R.A. § 331(u); and finally, (9)
PRPA's accounts, although deposited in qualified depositories for funds
of the Government of the Commonwealth, are to be kept separate and apart
from the funds of the Commonwealth, are kept under the name of PRPA, and
disbursements of such funds are made pursuant to the regulations and
budgets approved by the Board of Directors of PRPA, 23 L.P.R.A. § 338.
Finally, despite PRPA's argument to the contrary, PRPA does not have the
authority to exercise eminent domain. While section 336(h) allows PRPA
to obtain property through the exercise of eminent domain, section 339
provides that it is the Commonwealth that actually has the right to
exercise the power of eminent domain, upon PRPA's request.

We note that there are several provisions of the enabling act which PRPA
asserts demonstrate that the Commonwealth exercises some control over
PRPA. However, in our evaluation, taken as a whole, PRPA's enabling
statute establishes PRPA as an entity with substantial independence from
the government of the Commonwealth. PRPA asserts that the following
provisions indicate control: (1) the Board of Directors of PRPA is
appointed by the Governor, 23 L.P.R.A. § 334; (2) the Controller of
Puerto Rico is charged with auditing the books and records of PRPA every
three years and providing a report to the Board of Directors of PRPA,
the Governor and the Legislature of Puerto Rico, 23 L.P.R.A. § 338; (3)
PRPA is exempt from payment of taxes, although it is required to pay an
annual fee in the amount of \$400,000, if it has sufficient annual net
income, 23 L.P.R.A. §§ 348, 354; and finally, (4) the Commonwealth
established PRPA for the public purpose of promoting "the general
welfare, and the increase of commerce and prosperity," 23 L.P.R.A. §
348(a).

We find PRPA's assertions unpersuasive. The fact that the statute
explicitly creates PRPA with a legal existence and personality separate
and apart from that of the Government of the Commonwealth, with the
power to sue and be sued, and with its funds kept separate and apart
from those of the Commonwealth, among other provisions, demonstrates
that the legislature did not intend for the Government of the
Commonwealth to control PRPA.

A plain reading of the enabling act indicates that the Commonwealth does
not exercise significant control over PRPA. Accordingly, this factor
does not support finding that PRPA is an arm of the Commonwealth.

ii\. [Local vs. Statewide Concerns]{.underline}

The second step in the structural analysis is to consider whether PRPA
deals with local or statewide concerns. PRPA notes that the Commission
has previously found that terminal operations are an essential state
function. [See]{.underline} [Ceres]{.underline}, 30 S.R.R. at 369.
Further, PRPA's enabling statute entrusts PRPA to manage transportation
in order to promote the general welfare, and to increase commerce and
prosperity for the whole of Puerto Rico. [See]{.underline} 23 L.P.R.A. §
336.

Accordingly, the Commission finds that PRPA deals with statewide
concerns.

> iii\. [PRPA's Treatment Under the Law of Puerto Rico]{.underline}

The final factor of the structural analysis is to consider the manner in
which the law of the Commonwealth treats PRPA. We find that PRPA is not
entitled to immunity pursuant to either statutory or case law. As
indicated [supra]{.underline}, PRPA's enabling statute created PRPA with
sufficient autonomy so as to be separate and independent from the
Commonwealth.

Both Commonwealth and federal courts have found that PRPA is not an arm
of the Commonwealth. The Circuit Court of Appeals of Puerto Rico held
that the Commonwealth is not answerable for complaints against PRPA when
PRPA is exercising its proprietary rights as a marine terminal operator.
[Trans-Caribbean Maritime Corp. v. Commonwealth of Puerto
Rico]{.underline}, 2002 PR App. Lexis 595 (March 27, 2002). In its
original Motion to Dismiss in [Trans-Caribbean Maritime]{.underline}, as
well as in its [writ of certiorari]{.underline}, the Commonwealth
expressly argued that PRPA is a separate legal entity, and that the
Commonwealth should not be answerable for complaints against PRPA
relating to breach of contract matters. Specifically, the Commonwealth
argued that, due to the enabling act, "it is clear that \[PRPA\] is a
separate legal entity independent of the Commonwealth with the authority
to enter into contracts" and "therefore, the Commonwealth is not liable
for the obligations entered into by PRPA." Appellant's Writ of
Certiorari at 5, [Trans-Caribbean Maritime Corp.]{.underline}, 2002 PR
App. Lexis 595 (KLCE2001) (2002).

There is also consistent history of federal courts finding that immunity
does not extend to PRPA. In [Canadian Transport Auth. v. Puerto Rico
Ports Auth.]{.underline}, 333 F.Supp. 1295 (D.C.P.R. 1971), the U.S.
District Court for the District of Puerto Rico ruled that the
Commonwealth's immunity does not extend to PRPA because: PRPA was a
public corporation with a sufficient identity of its own; PRPA had the
power to sue and be sued; and that PRPA, not the Commonwealth, was the
real party in interest. The U.S. Court of Appeals for the First Circuit
also ruled that PRPA is not entitled to immunity as an arm of the
Commonwealth in [Royal Caribbean Corp. v. Puerto Rico Ports
Auth.]{.underline}, 973 F.2d 8 (1st Cir. 1992). The [Royal
Caribbean]{.underline} Court found that "the Ports Authority is an
entity that enjoys a considerable degree of autonomy, that it provides a
service (maintaining and operating docking facilities) that it, in
effect, 'sells' to users, and \[that\]. . . a judgment \[is\] likely to
be paid from the Authority\'s funds, not from the Commonwealth\'s
treasury." [Id.]{.underline} at 12.

PRPA notes that the First Circuit held in favor of immunity in [Puerto
Rico Ports Auth. v. M/V Manhattan Prince]{.underline}, 897 F.2d 1
(1990). However, and as discussed by the First Circuit in [Royal
Caribbean]{.underline}, [Manhattan Prince]{.underline} is distinguished
due to the type of activity at issue. [Manhattan Prince]{.underline}
found that PRPA enjoyed immunity when acting as a regulatory body. The
[Royal Caribbean]{.underline} Court found the distinction appropriate
due to the primarily governmental function at issue in [Manhattan
Prince]{.underline} (regulating the licensing of pilots), compared with
the commercial function of owning and operating marine terminal
facilities. [Royal Caribbean]{.underline}, 973 F.2d at 12. Moreover, the
First Circuit has specifically reviewed this distinction in PRPA's role
as a regulatory body and when operating as a marine terminal operator in
[Metcalf & Eddy, Inc. v. Puerto Rico Aqueduct and Sewer
Authority]{.underline}, 991 F.2d 935, 942 n.6 (1^st^ Cir. 1993). In
[Metcalf & Eddy]{.underline}, the Court noted that:

> In [Manhattan Prince]{.underline}, the Ports Authority \[PRPA\] was
> acting only as the licensor of harbor pilots for whom it provided no
> training and over whom it exercised no assignment power. The Authority
> derived no revenue from the licensing function. Moreover, the
> legislature had explicitly made Authority members' misfeasance of the
> kind alleged in [Manhattan Prince]{.underline} attributable only to
> the Commonwealth. [See]{.underline} P.R. Laws Ann. tit. 23, § 2303(b)
> (1987). \[This\] case is much different; \[Puerto Rico Aqueduct and
> Sewer Authority\] charges for its services, controls its total
> operations, and answers for its own bevues. Thus a more apt Ports
> Authority analogy is found in [Royal Caribbean Corp. v. Puerto Rico
> Ports Authority]{.underline}, 973 F.2d 8 (1^st^ Cir. 1992). That case
> involved not licensing, but the operation of the ports.
> [See]{.underline} [id.]{.underline} at 9. Because the Ports Authority
> charged user fees that supported the costs of its port operations and
> was relatively free of central government control, we ruled that
> \[PRPA\] did not enjoy Eleventh Amendment immunity with respect to its
> management of the ports. [Id.]{.underline} at 12.

[Metcalf & Eddy, Inc.]{.underline}, 991 F.2d at 942 n.6.

Courts have also found that entities similar in structure to PRPA have
not been entitled to share in the Commonwealth's immunity.
[See]{.underline} [Riefkohl v. Alvarado, 749 F.Supp. 374, 375 (D.P.R.
1990)](http://web2.westlaw.com/find/default.wl?DB=345&SerialNum=1990161758&FindType=Y&ReferencePositionType=S&ReferencePosition=375&AP=&mt=Westlaw&fn=_top&sv=Split&vr=2.0&rs=WLW6.03)
(Puerto Rico Electric Power Authority not immune, despite statute
declaring it a \"governmental instrumentality\" with the purpose of
\"promot\[ing\] the general welfare and increas\[ing\] commerce and
prosperity\") and [Paul N. Howard Co. v. Puerto Rico Aqueduct Sewer
Auth.]{.underline}, 744 F.2d 880, 886 (1^st^ Cir. 1984) (government
corporation established to provide drinking water and sewage facilities
is not normally immune).

The First Circuit has most recently reviewed an entity very similar in
structure to PRPA in [Pastrana-Torres v. Corporacion De Puerto Rico Para
La Difusion Publica]{.underline}, 460 F.3d 124 (1^st^ Cir. 2006).
[Pastrana-Torres]{.underline} found that the Puerto Rico public
broadcasting company, WIPR, enjoyed a significant degree of autonomy
from the Commonwealth since: (1) it was structured as a public
corporation with a juridical personality that is independent and
separate from the Commonwealth; (2) its Board of Directors was empowered
to approve, amend or repeal regulations necessary to fulfill its mission
and may determine the use of its operating budget; (3) the Governor did
not have veto authority over the Board of Directors; and (4) the
enabling act empowered WIPR with the right to sue and be sued, to enter
contracts, to acquire and maintain property and to raise its own
revenue. [Id.]{.underline}

Significantly, the [Pastrana-Torres]{.underline} Court found it
uncontrolling that the Board of Directors was comprised of certain
government officials, including a cabinet secretary and private citizens
appointed by the Governor and confirmed by the Senate, or that the
entity was required to submit reports to the Governor and the
Legislature.  [Pastrana-Torres]{.underline}, 460 F.3d at 127-128. 
PRPA's enabling act contains provisions similar to each of the above.
After balancing the factors in the enabling act,
[Pastrana-Torres]{.underline} evaluated the risk to the treasury.  The
Court ultimately found against the entity being an arm of the
Commonwealth since the Commonwealth was not bound to pay WIPR's debts,
even despite the fact that over 70% of its annual funding came from the
Commonwealth. The connections between WIPR and the Commonwealth appear
to be much closer than those between PRPA and the Commonwealth.

In sum, PRPA's enabling statute, as well as local and federal case law,
overwhelmingly indicate that PRPA is not an arm of the Commonwealth. Our
structural analysis, therefore, does not support a finding that PRPA is
entitled to treatment as an arm of the Commonwealth.

b\. [Risk to the Treasury]{.underline}

The second prong of the arm of the state analysis requires examining
whether the treasury of the Commonwealth is placed at risk by a judgment
against PRPA. PRPA's enabling act indicates the legislature's intent to
create PRPA as a fiscally autonomous public corporation, financially
independent from the Government. Several statutory provisions provide
clear evidence of such intent:

Section 333(b) of 23 L.P.R.A. provides:

> The debts, obligations, contracts, bonds, notes, debentures, receipts,
> expenditures, accounts, funds, undertakings, and properties of the
> Authority, its officers, agents or employees, shall be deemed to be
> those of said government controlled corporations, and not those of the
> Commonwealth of Puerto Rico, or any office, bureau, department,
> commission, dependency, municipality, branch, agent or employees
> thereof.
>
> Section 336(u) of 23 L.P.R.A provides:
>
> The Authority shall have no power at any time or in any manner to
> pledge the credit or taxing power of the Commonwealth of Puerto Rico
> or any of its political subdivisions, nor shall the Commonwealth of
> Puerto Rico or any of its political subdivisions be liable for the
> payment of the principal or of the interest on any bonds issued by the
> Authority.

Section 338(a) of 23 L.P.R.A provides:

> All monies of the Authority shall be deposited in qualified
> depositories for funds of the Government of the Commonwealth of Puerto
> Rico, but they shall be kept in a separate account or accounts
> registered in the name of the Authority.

Section 346 of 23 L.P.R.A provides:

> The bonds and other obligations issued by the Authority shall not be a
> debt of the Commonwealth of Puerto Rico or any of its municipalities
> or other political subdivisions, and neither the Commonwealth of
> Puerto Rico nor any such municipality or other political subdivisions
> shall be liable thereon, nor shall such bonds or other obligations be
> payable out of any funds other than those of the Authority.

Further, PRPA does not rely on Commonwealth financing for its operating
budget. To the contrary, although PRPA does not pay taxes, it makes
payments to the Commonwealth Treasury in the amount of \$400,000 per
year, which can be reduced if the annual net income of PRPA is
insufficient to make payment in full. 23 L.P.R.A. § 354.

The First Circuit reviewed a similar situation in [Fresenius Medical
Care Cardiovascular Resources, Inc. v. Puerto Rico and the Caribbean
Cardiovascular Center Corp.]{.underline}, 322 F.3d 56 (1^st^ Cir. 2003).
In [Fresenius]{.underline}, the Court noted that:

> 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. As discussed [supra]{.underline}, although the Governor
appoints PRPA's board of directors, the Commonwealth has insulated its
treasury from the debts and obligations of PRPA.

In its Motions for Summary Judgment and to Dismiss, PRPA acknowledged
that its accounts are separate from the Commonwealth and that this fact
weighs against finding a risk to the Commonwealth's treasury. PRPA's
Motion for Summary Judgment in Dkt. No. 02-08 at 43; PRPA's Motion to
Dismiss in Dkt. No. 04-01 at 11; and PRPA's Motion to Dismiss in Dkt.
No. 04-06 at 4. However, at oral argument, PRPA argues, for the first
time, that the real party in interest is the Commonwealth since its
treasury is put at risk by the fault or negligence standards of 23
L.P.R.A. § 2303(b). 

Section 2303, however, relates to damages arising under the Dock and
Harbor Act of Puerto Rico of 1968.  The Dock and Harbor Act charges PRPA
with the performance of certain regulatory duties, [e.g.]{.underline},
licensing harbor pilots, as was at issue in [Manhattan
Prince]{.underline}. Section 2303(b) subjects the Commonwealth to
liability for the fault or negligence of PRPA's administrator, or any
officer, employee or agent of PRPA in the administration of the Dock and
Harbor Act. However, section 2303(b) specifically exempts the
Commonwealth from such liability when PRPA is acting as a marine
terminal operator. The full text of 23 L.P.R.A. § 2303(b) provides:

> The damages caused through the action or omission of the Administrator
> or of any officer, employee or agent of the Authority, while acting in
> his official capacity and within the scope of his function, employment
> or commitment as an agent of the Government of the Commonwealth of
> Puerto Rico under the provisions of this chapter (in contraposition as
> when acting in the exercise of the property rights of the Authority as
> a public corporation) intervening fault or negligence, shall
> exclusively be requirable to the Commonwealth of Puerto Rico as
> provided by law.

In reviewing the distinction between PRPA acting "in the exercise of the
property rights of the Authority as a public corporation" and when
acting pursuant to the Dock and Harbor Act, the Court of Appeals of
Puerto Rico stated that "beyond any doubt, . . . management of the
operations of the ports form part of those 'proprietary rights' referred
to in section 2303(b)." [Trans-Caribbean Maritime]{.underline}, 2002 PR
App. Lexis 595. [Trans-Caribbean Maritime]{.underline} makes clear that
PRPA's actions as a marine terminal operator do not subject the
Commonwealth to liability under section 2303(b). [Id.]{.underline} The
First Circuit has also specifically reviewed this statutory provision
and has also distinguished PRPA's role in licensing harbor pilots from
that of operating ports. [Metcalf & Eddy]{.underline}, 991 F.2d at 942
n.6; [compare]{.underline} [Royal Caribbean]{.underline}, 973 F.2d 8,
[with]{.underline} [Manhattan Prince]{.underline}, 897 F.2d 1. 

We find that there is a strong statutory basis to conclude that the
treasury of the Commonwealth of Puerto Rico is not put at risk by a
judgment against PRPA. PRPA's debts and obligations are not considered
those of the Commonwealth; PRPA does not rely on the Commonwealth for
its operating budget; PRPA maintains separate accounts from the
Commonwealth, and there is no evidence that the Commonwealth has paid
litigation claims and settlements on behalf of PRPA in the past.
Accordingly, the above facts demonstrate that the treasury of the
Commonwealth would not be placed at risk by a judgment against PRPA.

Our evaluation of all of the relevant factors supports a finding that
PRPA is not an arm of the Commonwealth since: the Commonwealth does not
appear to exercise a significant measure of control over PRPA;
Commonwealth law does not treat PRPA as an arm of the Commonwealth; and
the Commonwealth's treasury is not at risk by a judgment against PRPA.
That PRPA deals with Commonwealth rather than local concerns is not,
when compared with the totality of the evidence, sufficient to negate
this finding.

This determination is consistent with recent Commission decisions in
[Ceres Marine Terminals, Inc.]{.underline}, 30 S.R.R. 358 (2004), and
[Carolina Marine Handling, Inc.]{.underline}, 30 S.R.R. 1017 (2006). In
[Ceres]{.underline}, the Commission found that the Maryland Port
Administration ("MPA") was entitled to immunity as an arm of the State
of Maryland. MPA is a constituent unit of the Maryland Department of
Transportation and is overseen by the Maryland Secretary of
Transportation. [Ceres Marine Terminals, Inc.]{.underline}, 30 S.R.R. at
368. The Maryland General Assembly appropriates funds for the Maryland
Department of Transportation and the MPA, and places such funds into the
Transportation Trust Fund, which pays MPA's debt service and funds
authorized transportation activities and projects. [Id.]{.underline} MPA
does not retain revenues generated from taxes, fees and charges, but
instead, MPA remits such revenues to the trust fund. A judgment for
damages against MPA would be satisfied from the Transportation Trust
Fund; however it was found that MPA failed to meet its burden that a
judgment would impact the Maryland Treasury. [Id.]{.underline} at
368-69. Finally, at least one Maryland court has held that MPA was
immune from suit in state court. [Id.]{.underline} at 368. These factors
supported the conclusion that the State of Maryland exercised a
significant degree of control over MPA.

We also note that in [Carolina Marine Handling, Inc., t]{.underline}he
Charleston Naval Complex Redevelopment Authority ("RDA") was found to be
entitled to immunity. Number range CHAPTERIn that decision, a majority
of the Commission concluded that South Carolina exercises a high degree
of control over RDA, RDA deals with issues of statewide importance, and
South Carolina law treats RDA as an arm of the state. In reaching this
conclusion, the majority noted that South Carolina law authorizes RDA to
act as an agent of the state. It also noted that RDA's operations are
subject to review by a legislative committee of the state legislature.
Finally, with regard to risk to the state treasury, the majority
concluded that an adjudication against RDA could impact South Carolina's
revenues, as RDA would likely seek funds from the state for payment of a
reparations award exceeding RDA's funds. [Carolina Marine Handling,
Inc.]{.underline}, 30 S.R.R. at 1030-1035.

In contrast, PRPA's enabling statute indicates that PRPA was created
with a legal existence and personality separate and apart from those of
the Commonwealth. PRPA is not authorized by statute to act as an agent
of the Commonwealth. PRPA's accounts are separate and apart from those
of the Commonwealth. The Commonwealth is not liable for the debts and
obligations of PRPA, and, therefore, the Commonwealth's treasury is not
put at risk by a judgment against PRPA. Finally, numerous courts have
held that PRPA is not entitled to immunity when acting as a marine
terminal operator, as is alleged in these cases.

> 3\. [Golden Triangle and Regatta 2000]{.underline}

PRPA argues that it "is entitled to immunity for certain actions
performed on behalf of the Commonwealth government." PRPA's Motion to
Dismiss in Dkt. No. 04-01 at 38; [see also]{.underline} PRPA's Motion
for Summary Judgment in Dkt. No. 02-08 at 12-14 and 40-44; PRPA's Motion
to Dismiss in Dkt. No. 04-06 at 6,8. These acts, PRPA alleges, include
steps taken in order to execute direct orders of the Governor in
furtherance of the Golden Triangle and Regatta 2000 projects, which
amount to PRPA acting as an agent of the Commonwealth. PRPA's Reply to
Complainant's Opposition to Respondent's Motion to Dismiss in Dkt. No.
04-06 at 5 (PRPA was "acting as the agent of the Commonwealth's chief
executive. . . ."); [see also]{.underline} PRPA's Motion to Dismiss in
Dkt. No. 04-01 at 13; PRPA's Motion for Summary Judgment in Dkt. No.
02-08 at 12-14 and 40-44; PRPA's Motion to Dismiss in Dkt. No. 04-06 at
6,8. The Governor's orders, PRPA argues, required certain adjustments in
leasehold interests, including demolition of facilities which gave rise
to some portions of the complaints in these proceedings.

PRPA correctly points out that entities that are not normally entitled
to immunity can be immune when acting as an agent of the government.
PRPA's Reply to Complainant's Opposition to Respondent's Motion to
Dismiss in Dkt. No. 04-06 at 5 n.21, [citing]{.underline} [Shands
Teaching Hospital and Clinics, Inc. v. Beech Street Co.]{.underline},
208 F.3d 1308, 1311 (11th Cir. 2000) (private health care administrator
immune where adverse judgment could implicate state treasury); [Scott v.
O'Grady]{.underline}, 975 F.2d 366, 371 (7th Cir. 1993) (county sheriff
entitled to immunity when acting as an arm of the state judicial system
in executing a state warrant). [See also]{.underline}, [Boyle v. United
Technologies Corp.]{.underline}, 487 U.S. 500 (1988) (independent
contractors may be entitled to immunity when performing work for the
federal government); [Yearsley v. W.A. Ross Constr. Co.]{.underline},
309 U.S. 18, 19 (1940) ("\[I\]f \[the\] authority to carry out the
project was validly conferred, that is, if what was done was within the
constitutional power of Congress, there is no liability on the part of
the contractor for executing \[the will of Congress\].\").

However, in this case, PRPA has failed to demonstrate that it is
entitled to such immunity. PRPA's argument that it was acting on orders
from the Governor and therefore entitled to immunity was soundly
rejected in [Trans-Caribbean Maritime Corp.]{.underline}, 2002 PR App.
Lexis 595. In [Transcaribbean Maritime]{.underline}, Transcaribbean sued
the Commonwealth alleging that the Commonwealth should be liable for a
breach of contract committed by PRPA. The contract at issue was a lease
between PRPA and Transcaribbean. Transcaribbean argued that the
Commonwealth should be held liable because PRPA breached the contract in
furtherance of an order of the Governor related to Regatta 2000. The
Circuit Court of Appeals of Puerto Rico found that PRPA, in breaching
the contract, acted in its capacity as the administrator of the ports
and not as an agent of the Commonwealth. The facts of [Transcaribbean
Maritime]{.underline} are closely analogous to those alleged by PRPA in
the instant proceedings. PRPA alleges that the complaints arise from
actions undertaken when PRPA was acting as an agent of the Commonwealth
pursuant to a direct order of the Governor in furtherance of the Golden
Triangle and Regatta 2000 projects.

PRPA's position is unsustainable. PRPA has failed to meet its burden of
demonstrating that it was acting as an agent of the Commonwealth. PRPA
offers only two facts to support its agency relationship. First, PRPA
relies on a keynote address given by the Hon. Pedro Rosello, Governor of
Puerto Rico, delivered at Hilton Incentive and Meeting Management
Summit, Caribe Hilton Hotel and Casino, in San Juan, Puerto Rico on
November 18, 1998. In this speech, the Governor notes that PRPA will be
engaged in the relocation of cargo operations to make room for cruise
ship operations and a convention center. Second, PRPA offers deposition
testimony indicating that in a meeting between the Governor and top
government officials, the Governor ordered PRPA to demolish certain
maritime facilities in order to accommodate the Golden Triangle project.
Deposition of Victor M. Carrion, former Chief of the Maritime Bureau of
the Ports Authority, in Docket No. 02-08, dated June 5, 2003, at 68-72.

PRPA provides no evidence of a state law or a contractual obligation
with the Commonwealth requiring PRPA to demolish warehouses or otherwise
carry out the Governor's orders, and no direct evidence of any order at
all. In fact, PRPA's enabling act provides that PRPA has "complete
control and supervision" of all of its undertakings, 23 L.P.R.A. §
336(d), and, as we have determined, the Commonwealth does not exercise
significant control over the operations of PRPA. Furthermore, as the
[Transcaribbean Maritime]{.underline} Court holds, PRPA's contractual
obligations are undertaken based upon PRPA's own authorities and not as
an agent of the Commonwealth. [See]{.underline} [Trans-Caribbean
Maritime Corp.]{.underline}, 2002 PR App. Lexis 595. PRPA's evidence is
insufficient to sustain the existence of an agency relationship in the
face of clear evidence that PRPA was created as an entity independent
from the Commonwealth, as discussed [supra]{.underline}.

Based on the foregoing, the Commission finds that PRPA has failed to
meet its burden of demonstrating that there was an agency relationship
between PRPA and the Commonwealth. Accordingly, we find that PRPA is not
entitled to immunity for actions undertaken pursuant to an order of the
Governor.

C. [Status of Puerto Rico]{.underline}

Since we have determined that PRPA is not an arm of the Commonwealth, it
is unnecessary to reach either the question of whether the Commonwealth
is entitled to constitutional sovereign immunity, or whether the Puerto
Rico Federal Relations Act would bar private complaints under the
Shipping Act. Accordingly, we have determined not to rule upon
constitutional or statutory immunity.

D. [Procedural Issues]{.underline}

As noted [supra]{.underline}, in response to Odyssea's February 15, 2005
reply memorandum, PRPA filed an Opposition to Odyssea's Petition to Show
Cause, the Commonwealth filed a Response to Odyssea's Request for an
Order to Show Cause, Intership filed a Motion to Strike, and both PRPA
and the Commonwealth filed Oppositions to Intership's Motion to Strike.
These pleadings were placed in the public docket and circulated to the
Commission. Subsequently, at the oral argument held October 17, 2006, to
consider the issue of whether PRPA is an arm of the Commonwealth,
information contained in these pleadings was discussed by the Commission
and counsel for the parties involved. The pleadings were treated by the
Commission and the parties as though they were part of the record. In
light of the Commission's treatment of these pleadings, a majority of
the Commission (Commissioners Anderson, Brennan and Creel) accept them
into the record.

Chairman Blust and Commissioner Dye would find that these filings are
not authorized by the Commission's Rules of Practice and Procedure and
would therefore reject them. Rule 74 expressly provides that a reply to
a reply is not permitted. 46 C.F.R. § 502.74(a)(1). Similarly, they
would not waive the procedural rules to accept these filings, as
provided for in Rule 10. The authority to waive any of the Commission's
Rules should only be invoked when such a waiver would not be
inconsistent with those rules, and that is not the case here. 46 C.F.R.
§ 502.10. Moreover, Rule 10 provides for waiver in particular cases "to
prevent undue hardship, manifest injustice, or if the expeditious
conduct of business so requires." 46 C.F.R. § 502.10. They believe none
of these conditions exist here. Rather, it is their view that invoking
the waiver procedure would cause significant harm to the Complainants,
particularly Intership who has filed a motion to strike the offending
filings. In any case, Chairman Blust and Commissioner Dye believe that
the Commonwealth's views constitute legal argument and not evidence, and
that their argument is substantially undermined by the Commonwealth's
prior inconsistent statements submitted to the Circuit Court of Appeals
of Puerto Rico in the [Trans-Caribbean]{.underline} case.

IV\. [CONCLUSION]{.underline}

For the foregoing reasons, the Commission: grants the Commonwealth of
Puerto Rico's Petition for Leave to File a Brief as an [amicus
curiae]{.underline} on the question of whether the Commonwealth is
entitled to constitutional sovereign immunity; finds that PRPA is not an
arm of the Commonwealth of Puerto Rico and is therefore not entitled to
the protections of sovereign immunity; and finds that PRPA is also not
entitled to sovereign immunity as an agent of the Commonwealth of Puerto
Rico.

THEREFORE, IT IS ORDERED, that the above captioned proceedings are
remanded to the Office of the Administrative Law Judge for further
proceedings consistent with this Order.

By the Commission.

Bryant L. VanBrakle

Secretary

*Concurring Opinion*

Number range CHAPTERCommissioner ANDERSON, concurring in the result.

While I concur in the conclusion that PRPA is not an arm of the
Commonwealth of Puerto Rico, I believe that a statement included in a
pleading filed by the Commonwealth should be addressed in reaching this
conclusion. The statement is that the Commonwealth agrees that PRPA is
an arm of the Commonwealth. As suggested by counsel for PRPA at the oral
argument, this statement should be weighed with other relevant evidence
in reaching a decision as to whether PRPA is entitled to immunity as an
arm of the Commonwealth. Other relevant evidence includes PRPA's
enabling statute, the treatment of PRPA under the law of Puerto Rico,
and whether a judgment against PRPA would place the Commonwealth's
treasury at risk.

Taken as a whole, PRPA's enabling statute establishes it as an entity
with substantial independence from the Commonwealth: it provides that
PRPA has a legal existence and personality separate from that of the
Government of the Commonwealth; it has the power to sue and be sued; its
debts, obligations and contracts are not considered to be those of the
Commonwealth; it has complete control and supervision of its
undertakings; and its funds are separate from those of the Commonwealth.
In addition, local and federal case law indicate that PRPA is not an arm
of the Commonwealth. Finally, as the Commonwealth is not liable for the
debts and obligations of PRPA, it does not appear that the
Commonwealth's treasury would be placed at risk by a judgment against
PRPA. Weighed against this evidence, the Commonwealth's statement is not
persuasive, especially when considered in light of its position in
[Trans-Caribbean]{.underline}, in which it argued that PRPA does not
operate in a governmental capacity when it engages in certain dock
operating activities.

*Number range CHAPTERDissenting Opinion*

Commissioner BRENNAN and Commissioner CREEL, dissenting.

For the reasons set forth below, we find that the Puerto Rico Ports
Authority ("PRPA") is an arm of the Commonwealth of Puerto Rico and is
entitled to whatever privileges that status affords it in these
proceedings before the FMC.

A. [Ceres Analysis]{.underline}

Our analysis of arm-of-the-state status is conducted pursuant to the
factors that the Commission established in [Ceres Marine Terminals v.
Maryland Port Administration]{.underline}, 30 S.R.R. 358 (2004),
subsequent to the United States Supreme Court's decision in [Federal
Maritime Commission v. South Carolina State Ports
Authority]{.underline}, 535 U.S. 743 (2002). In [Ceres]{.underline}, the
Commission noted that the issue of whether the Maryland Port
Administration is an arm of the state was a question of federal law and
that the tests for determining that status varied among the circuits.
[Ceres]{.underline} at 366. The Commission then adopted and applied a
two-part test focusing on: 1) the structure of the entity and 2) the
risk to the state treasury. With respect to the structure of the entity,
the Commission examined: 1) the degree of control that the state
exercises over the entity; 2) whether the entity deals with local or
statewide concerns; and 3) the manner in which state law treats the
entity. [Ceres]{.underline} at 368-370. In concluding that PRPA is an
arm of the Commonwealth, we have considered all relevant facts within
the [Ceres]{.underline} framework. As in [Ceres]{.underline} and
[Carolina Marine Handling v. South Carolina State Ports Authority, et
al.]{.underline}, 30 S.R.R. 1017 (2006), the Commission determines
whether an entity is an arm of the state based on all of the
[Ceres]{.underline} factors taken together. [Id.]{.underline} at 1035.
No one factor is controlling, and it is not necessary for all of the
[Ceres]{.underline} factors to be satisfied for an entity to be an arm
of the state.

*Control* is the first element of the "structure" analysis of the
[Ceres]{.underline} test; that is, what degree of control does the state
exercise over the entity? In the instant cases, the Commonwealth has
created PRPA in such a manner that it exercises significant control over
the Ports Authority. As a practical matter, the Governor of Puerto Rico
controls PRPA's Board of Directors and therefore PRPA, because the
Governor can remove 80% of the Board at any time as he or she sees
fit.[^4] The chairman of the Board of Directors is the Secretary of
Transportation and Public Works. 23 L.P.R.A. § 334. Four of the five
members of PRPA's Board of Directors are members of the Governor's
cabinet[^5] and serve at the governor's pleasure. Moreover, in practice,
it appears that, on occasion, the Board has acted at the Governor's
direction or control in certain policy matters.[^6]

Other facts also show significant Commonwealth control over PRPA. Each
year, the Ports Authority must submit to the Governor and the
Legislature a financial statement and complete report of its business
for the preceding year. 23 L.P.R.A. § 345. In addition, PRPA must submit
a complete report on the status and progress of all of its undertakings
and activities since its last report. [Id.]{.underline} The Secretary of
the Treasury establishes PRPA's accounting system, in consultation with
PRPA. 23 L.P.R.A. § 338.

The Controller of Puerto Rico must examine PRPA's books at least every
three years, or as necessary, and report to PRPA's Board of Directors,
the Governor, and the Legislature. [Id.]{.underline} Moreover, the rates
PRPA charges are subject to criteria established by the Legislature. 23
L.P.R.A. § 336(l). If PRPA's Board of Directors wishes to change the
general rate structure immediately, it must file the rate regulations
with the Department of State in accordance with statutory requirements
and must hold a hearing within 30 days of the filing. 23 L.P.R.A. §
336(l)(1)(c).

As to *local vs. statewide concerns*, the second element of the
[Ceres]{.underline} "structure" analysis, the Puerto Rico Ports
Authority plainly deals with statewide, not merely local, concerns. The
Authority is defined as a "public corporation and government
instrumentality of the Commonwealth of Puerto Rico" (23 L.P.R.A. §
333(a)) and was created to develop, own, operate, and manage all air and
marine transportation facilities and systems to and from the
Commonwealth of Puerto Rico, for the purpose of promoting the general
welfare and increasing commerce and prosperity. 23 L.P.R.A. § 336. As
noted by the Commission in [Carolina Marine,]{.underline} "ports in the
United States . . . serve as vital gateways to international commerce,
impacting the economies of their respective states." [Carolina
Marine]{.underline} at 1032. The economic importance of ports is even
greater given the geographic nature of Puerto Rico; it is an isolated
island commonwealth, with no roads, bridges, or tunnels connecting it to
the U.S. mainland. All of Puerto Rico's imports and exports arrive or
depart by sea or air and are subject to PRPA's jurisdiction or control.

The third "structure" element under [Ceres]{.underline} is the manner in
which state law treats the entity. Again, the balance of the facts
indicates arm-of-the-state status. The Solicitor General of the
Commonwealth of Puerto Rico unambiguously affirms that "the Commonwealth
fully agrees that the Ports Authority is an arm of the Commonwealth."
Commonwealth's [Response to Odyssea's Request for an Order to Show
Cause]{.underline} at 2, submitted by Salvador J. Antonetti-Stutts,
Esq., Solicitor General, Department of Justice, Commonwealth of Puerto
Rico on March 9, 2005. The Commonwealth also explicitly joins and
supports PRPA's briefs, which argue in favor of finding that PRPA is an
arm of the Commonwealth. [Id.]{.underline} The Commonwealth further
noted that it was doing so ". . . because the Commonwealth exercised a
significant degree of control over the actions of the Ports Authority
that are at issue in this case. [Id.]{.underline} at 6.

There are further facts relevant to how Commonwealth law treats the
Ports Authority. For example, the Authority is specifically referenced
by statute as a "*government controlled*

corporation." 23 L.P.R.A. § 333(b) (emphasis added). It was set up as a
"public corporation and government instrumentality" (23 L.P.R.A. §
333(a)) to serve the public welfare. 23 L.P.R.A. § 348 (PRPA established
for "public purposes for the benefit of the people of Puerto Rico"). The
harbors, waters, and public docks of Puerto Rico were placed under the
control of PRPA and are to be administered by PRPA to benefit the people
of Puerto Rico in the interest of navigation and commerce. 23 L.P.R.A. §
2202. Having the power of eminent domain,(23 L.P.R.A. § 336(h)), PRPA
may, in coordination with the Commonwealth, acquire any property that
the Board of Directors deems necessary and convenient for its purposes.
23 L.P.R.A. § 339. Also relevant to the structure analysis is the fact
that, by law, no person having an economic interest in any private
interest engaged in the transportation business may hold office on
PRPA's Board of Directors or as an officer, employee, or agent of the
Puerto Rico Ports Authority. 23 L.P.R.A. §§ 334, 337(b).

Moreover, PRPA deposits its funds in qualified depositories for funds of
the Government of Puerto Rico, even if such funds are kept in separate
accounts in the name of PRPA. 23 L.P.R.A. § 338. PRPA is exempt from
state taxes. 23 L.P.R.A.§ 348. It must pay \$400,000 into the
Commonwealth Treasury annually, but only if such funds are available. 23
L.P.R.A. § 354. PRPA is also exempt from all fees, taxes, and imposts
relating to judicial proceedings, governmental certifications, and the
execution and registration of public documents in Puerto Rico. 23
L.P.R.A. § 348. These numerous facts indicate that Commonwealth law
treats PRPA as an arm of the Commonwealth.

With respect to the second part of the [Ceres]{.underline} analysis,
whether a judgment against PRPA would implicate the treasury of the
Commonwealth, we agree with the majority that PRPA has not met its
burden. As noted in [Ceres]{.underline} and [Carolina
Marine]{.underline}, however, this is hardly a fatal flaw to reaching a
determination here that PRPA is an arm of the Commonwealth.

In conducting our [Ceres]{.underline} analysis, we are mindful that the
United States Supreme Court, in considering the application of sovereign
immunity to proceedings before federal administrative agencies, has
emphasized protecting the dignity of the sovereign. The
governmental/proprietary analysis of [Royal Caribbean Corp. v. Puerto
Rico Ports Authority]{.underline}, 973 F.2d 8 (1^st^ Cir. 1992), played
no part in the Supreme Court's analysis in [Federal Maritime Commission
v. South Carolina State Ports Authority]{.underline}, 535 U.S. 743
(2002), the 2002 case that markedly changed the landscape for sovereign
immunity issues, and which the Commission took into account in
formulating its [Ceres]{.underline} test in 2004. In [South Carolina
Ports Authority]{.underline}, the Supreme Court held that state
sovereign immunity precluded the Federal Maritime Commission from
adjudicating a private-party complaint alleging that a state-run port
had violated the Shipping Act.

"The preeminent purpose of state sovereign immunity," the Court
declared, "is to accord States the dignity that is consistent with their
status as sovereign entities." 535 U.S. at 760. In this regard, the
Court further stated, "simply put, if the Framers thought it an
impermissible affront to a State's dignity to be required to answer the
complaints of private parties in federal courts, we cannot imagine that
they would have found it acceptable to compel a State to do exactly the
same thing before the administrative tribunal of an agency, such as the
FMC." [Id.]{.underline} In the proceedings currently before us, the
sovereign agrees with PRPA and maintains that PRPA is an arm of the
Commonwealth. We believe that for the Commission to conclude otherwise
would be a significant affront to the sovereign's dignity.

Under the two-part [Ceres]{.underline} test, the focus is properly on
the entity's structure and the financial risk to the state. The
particular complained-of conduct is relevant only to the extent that it
is probative of structure or financial risk. In this regard, once it is
decided that an entity is an arm of the state, we believe that the
entity is an arm of the state for all purposes. In [Royal Caribbean
Corp. v. Puerto Rico Ports Authority]{.underline}, 973 F.2d 8 (1^st^
Cir. 1992), the Court of Appeals for the First Circuit declined to find
that PRPA, when operating and maintaining docks, was an arm of the
Commonwealth. The Court relied, in part, on the fact that PRPA's marine
terminal activities (specifically, the allegedly negligent maintenance
of a pier) were proprietary rather than governmental in nature. While
[Royal Caribbean]{.underline}[^7] did look at several factors used in
the [Ceres]{.underline} analysis, the Court was also persuaded to a
large degree by a "proprietary vs. governmental" distinction which is
not part of the Commission's [Ceres]{.underline} test and which became
incorrect following the Supreme Court's emphasis on state dignity in its
2002 ruling in [South Carolina Ports Authority]{.underline}.[^8]

We accord [Transcaribbean Maritime Corp. v. Commonwealth of Puerto
Rico]{.underline}, 2002 PR App. LEXIS 595 (March 27, 2002) much less
weight than does the majority in the analysis of how Commonwealth law
treats PRPA. In the first place, [Transcaribbean]{.underline} was issued
not by the Commonwealth's highest court, but by an intermediate court,
the Circuit Court of Appeals of Puerto Rico. Furthermore, the court did
not directly address Eleventh Amendment sovereign immunity. The issue
before it was a simple breach of contract claim brought by a lessee,
Transcaribbean, against the Commonwealth and PRPA The court dismissed
the Commonwealth from the proceeding pursuant to 23 L.P.R.A. §
2303(b)[^9] not only because the relevant dock operations of PRPA were
held to be proprietary, rather than governmental, in nature, but more
fundamentally because the complaint failed to "state facts which
attribute any specific negligent act whatsoever to the Administrator,
nor to any of the employees of the Authority."
[Transcaribbean]{.underline} at 7. In this context, the holding in
[Transcaribbean]{.underline} is narrow and not indicative of a
Commonwealth viewpoint that PRPA is not arm of the Commonwealth with
regard to claims of constitutional sovereign immunity.

B. [Prior Commission Applications of the Ceres Analysis]{.underline}

It appears that the factors in this proceeding weigh at least as
strongly in favor of arm-of-the-state status as those of
[Ceres]{.underline} and [Carolina Marine]{.underline}. We also note that
the types of activities that are the gravamen of the complaints in the
instant proceedings\--the leasing of marine terminal facilities\--are
exactly the same kinds of activities that were subject to review in
[Ceres]{.underline} and [Carolina Marine]{.underline}. In
[Ceres]{.underline}, the Commission concluded that MPA had not proven
that any judgment against it would be paid from state funds and still
found it to be an arm of the state. As for the degree of control, the
Commission noted that the indicators were mixed, but nonetheless
concluded that Maryland exercises significant control over MPA. The
Commission further noted that "the provenance of the officials who run
MPA suggests that they are political appointees who are compensated by
the state and are intended to be answerable to the state."
[Ceres]{.underline} at 369. The Commission next concluded that MPA
exercised authority over statewide concerns and that its oversight of
maritime commerce is an essential function to the state of Maryland. As
for the remaining issue, how state law treats MPA, the Commission merely
noted that one local court had held MPA immune from suit in state court.

In [Carolina Marine]{.underline}, the Commission had another opportunity
to determine whether certain entities were arms of the state. The
Commission affirmed the ALJ's dismissal of South Carolina State Ports
Authority ("SCSPA") as a party to the proceeding, relying on the prior
determination that SCSPA is an arm of the state of South Carolina.[^10]
The Commission then considered whether the Charleston Naval Complex
Redevelopment Authority ("RDA") is an arm of the state of South Carolina
under the [Ceres]{.underline} test. It ultimately concluded that RDA is
an arm of the state.

As for degree of control, the Commission noted that: 1) RDA had
authority to carry out redevelopment projects and to act as an agent for
the state; 2) two of RDA's nine members are representatives of the state
and that the others are appointed with the advice and consent of the
S.C. Senate; 3) RDA could dissolve itself by a 2/3 vote; 4) RDA members
must comply with a state ethics act; 5) RDA must comply with the South
Carolina procurement code; and 6) RDA's operations were reviewed by a
special legislative committee. After reviewing RDA's legislative
mandate, the Commission concluded that RDA deals with statewide
concerns. The Commission noted that "ports in the U.S. serve as vital
gateways to international commerce, impacting the economies of their
respective states." [Carolina Marine]{.underline} at 1032.

Turning to the manner in which state law treats RDA, the Commission
noted that RDA's enabling act stated that it is " a public body,
corporate and politic, exercising public and essential governmental
powers . . . ." [Carolina Marine]{.underline} at 1033. RDA is an agency
of South Carolina under the South Carolina Torts Claims Act. RDA is also
the sole representative of the state in negotiating with the federal
government. Lastly, the Commission noted that RDA must provide notice of
its meetings to the media and public. The Commission also found that a
judgment against RDA might impinge on the state fisc. It noted that RDA
would likely seek funds from South Carolina for payment of a reparations
award exceeding its existing funds.

Of course, the Commission does not need to find a risk to the treasury
in order to find that PRPA is an arm of the state. In [South Carolina
State Ports Authority]{.underline}, in response to the United States'
argument that actions before the FMC do not implicate the financial
integrity of states, the Court noted:

> This argument . . . reflects a fundamental misunderstanding of
> purposes of sovereign immunity. While state sovereign immunity serves
> the important function of shielding state treasuries and thus
> preserving 'the States' ability to govern in accordance with the will
> of their citizens,' the doctrine's central purpose is to 'accord the
> States the respect owed them as joint sovereigns.' 535 U.S. at 765
> (citations omitted).[^11]

Furthermore, in [Ceres]{.underline} itself, the Commission found *no*
risk to Maryland's treasury and still determined that the Maryland Port
Administration was an arm of the state.

C. [Sovereign's Views]{.underline}

A majority of the Commissioners accepts the clear statement of the
Commonwealth that it considers PRPA to be an arm of the Commonwealth.
[Majority Opinion]{.underline} at 29. The Commonwealth's filing came
into the record as follows. On February 15, 2005, Odyssea filed a Reply
Memorandum in response to the Commission's Order of November 22, 2004
("Odyssea Reply"). In this document, Odyssea first noted that the Office
of the Solicitor General of the Commonwealth of Puerto Rico had filed a
petition to file an *amicus curiae* brief in that proceeding. Odyssea
then stated that it ". . . does not object to the receipt and
consideration of the submission by the Commonwealth of Puerto Rico. It
is the position of Odyssea that the involvement of the Commonwealth in
these proceedings is long overdue." [Odyssea Reply]{.underline} at 2.
Odyssea further stated that, "since the Commonwealth has now appeared
and inserted itself in these proceedings, the matter is ripe for an
*order to show cause*[^12] to be issued to BOTH the Solicitor General
and counsel to PRPA."^1^[^13] In its prayer for relief, therefore,
Odyssea asked the Commission to issue such an order.^1^[^14]

In response to Odyssea's petition requesting that the Commission issue a
show cause order, PRPA filed an "Opposition to Odyssea's Petition for a
Show Cause Order" on March 2, 2005. In addition, on March 9, 2005, the
Commonwealth of Puerto Rico filed a "Response to Odyssea's Request for
an Order to Show Cause." In its response, the Commonwealth's Solicitor
General made the following representations on behalf of the
Commonwealth: ". . . the Commonwealth has allowed the Ports Authority to
characterize itself as an arm of the Commonwealth because the
Commonwealth fully agrees that the Ports Authority *is* an arm of the
Commonwealth." [Response to Odyssea's Request for an Order to Show
Cause]{.underline} at 2 (emphasis in original). The Commonwealth further
explained that the reason it had not expressed itself sooner on this
issue was because it had not been asked to do so. [Id.]{.underline}

Here, the key issue before us is whether the Commission might offend the
dignity of a sovereign, the Commonwealth of Puerto Rico, by entertaining
private-party complaints against it or one of its arms or constituent
entities. In this regard, the view of the sovereign on the issue of
whether PRPA is an arm of the Commonwealth takes on particular
significance. We agree with the Commission minority in [Carolina
Marine]{.underline} that the views of the sovereign should be
considered, if available, in making our determination. [Carolina
Marine]{.underline} at 1040 (pointing out that "South Carolina has
remained silent on whether it intended to confer arm of state status on
RDA") and at 1041 (noting that "nowhere in the record does RDA
convincingly show on its own behalf that South Carolina characterizes or
treats RDA as a state agency with arm of the state status"). In the
instant case, we have a clear statement on behalf of the Commonwealth of
Puerto Rico that it considers PRPA to be an arm of the Commonwealth for
all purposes. We should accord views due deference.

D. [Conclusion]{.underline}

Based on the foregoing, we believe that the facts relating to control,
statewide concerns, and state-law treatment of the entity establish that
the Puerto Rico Ports Authority is an arm of the Commonwealth of Puerto
Rico. In conducting an arm-of-the-state analysis, there is no reason to
give each factor equal weight. In fact, some factors will obviously be
of greater importance. For example, in the instant case, the legislature
created PRPA to oversee the maritime and air transportation systems for
an island commonwealth of four million people. The fact that Puerto Rico
is an island makes the statewide, economic significance of the Ports
Authority especially clear, and more important than it might be in
certain mainland jurisdictions. We also find it particularly significant
that four out of the five members of PRPA's Board of Directors are
members of the Governor's cabinet and serve at his or her pleasure.
Lastly, the Solicitor General has stated, on behalf of Puerto Rico, that
it believes that PRPA is an arm of the Commonwealth of Puerto Rico.

\*\*\*\*\*\*\*\*\*\*

[^1]: These proceedings have not been consolidated. However, for the
    purpose of judicial economy, these cases have been treated in a
    similar manner for the purpose of determining whether PRPA is
    entitled to sovereign immunity as an arm of the Commonwealth of
    Puerto Rico.

[^2]: The citations herein reflect the recent codification of Title 46,
    Pub. L. No. 109-304 (2006).

[^3]: The Commonwealth of Puerto Rico is not a state. However, in order
    to remain consistent with established legal precedent, the term
    "state" is used to refer to the concerns of the Commonwealth. This
    is not intended to elevate the Commonwealth to "state" status based
    on the application of a legal test to review sovereign immunity.

[^4]: ^1^ ^1^This degree of control was not present in [Pastrana-Torres
    v. Corporación de Puerto Rico para la Difusión Pública]{.underline},
    460 F.3d 124 (1^st^ Cir. 2006), the federal case cited by the
    majority opinion in its discussion of how Commonwealth law treats
    PRPA. Of eleven board members of the Public Broadcasting
    Corporation, only one was a cabinet member, eight were from the
    private sector, and all were appointed with the advice and consent
    of the Senate. There are other significant differences between PRPA
    and PBC, which we do not need to address here.

[^5]: ^2^ ^2^23 L.P.R.A. § 334.

[^6]: ^3^ ^3^Deposition of Victor M. Carrion, former Chief of the
    Maritime Bureau of the Ports Authority, in Docket No. 02-08, dated
    June 5, 2003, at 68-72 (stating that, in June 1998, Governor Pedro
    Rosseló summoned PRPA management and the heads of the Departments of
    Tourism, Transportation and Public Works, and Economic Development
    and told them, "I want everything torn down\--all the facilities
    from Pier 8 to the Frontier Base."). Furthermore, the former general
    counsel and executive director of PRPA testified that the Board of
    Directors reports to the Governor of the Commonwealth. Deposition of
    Jose Guillermo Baquero, Vol. II, at 7-9 (Aug. 26, 2003).

[^7]: ^4^ ^4^By citing federal cases such as [Royal
    Caribbean]{.underline} for the purpose of establishing, in part, how
    state (or Commonwealth) law treats the entity, the majority departs
    from the [Ceres]{.underline} test.

[^8]: ^5^ ^5^Two years earlier, the 1^st^ Circuit found that PRPA was an
    arm of the Commonwealth and entitled to 11^th^ Amendment immunity.
    [Puerto Rico Ports Authority v. M/V Manhattan Prince, et
    al.]{.underline}, 897 F.2d 1 (1^st^ Cir 1990). In that case, which
    was a tort action alleging negligence by a PRPA-licensed harbor
    pilot, the court concluded that PRPA's licensing of the harbor pilot
    was not a proprietary function, but rather a governmental one,
    exercised by it as an arm of the Commonwealth.

[^9]: ^6^ ^6^The plaintiff, Transcaribbean Maritime Corp., also based
    its claim on the Federal Civil Rights Act, 42 U.S.C. § 1983, the
    Civil Rights Act of Puerto Rico, 1 L.P.R.A. §§ 13-18, and the
    Shipping Act of 1984. [Transcaribbean]{.underline} at 2.

[^10]: ^7^ ^7^Citing [Ristow v. South Carolina Ports Auth]{.underline}.,
    58 F.3d 1051 (4^th^ Cir. 1995).

[^11]: ^8^ ^8^The Supreme Court did not address whether SCSPA was an arm
    of the State of South Carolina, but simply affirmed the judgment of
    the Court of Appeals.

[^12]: ^9^ ^9^[Odyssea Reply]{.underline} at 2 (emphasis added).

[^13]: ^0^ ^10^[Id.]{.underline} (emphasis in original).

[^14]: ^1^ ^11^[Id.]{.underline} at 17.