Opinion ID: 199490
Heading Depth: 2
Heading Rank: 2

Heading: Protective Order in Favor of Lopez-Gerena

Text: 21 Our precedent makes clear that the plaintiffs face a heavy burden in seeking to overturn the district court's protective order. Under the abuse of discretion standard applied in discovery matters, we may reverse a district court only upon a clear showing of manifest injustice, that is, where the lower court's discovery order was plainly wrong and resulted in substantial prejudice to the aggrieved party. Ameristar Jet Charter, Inc. v. Signal Composites, Inc., 244 F.3d 189, 192 (1st Cir. 2001) (quoting Mack v. Great Atl. & Pac. Tea Co., 871 F.2d 179, 186 (1st Cir. 1989)). However, it is also well-established that an order denying or limiting discovery may not be upheld if it rests on an incorrect legal standard or a misapplication of the law to the relevant facts. See Reed v. Baxter, 134 F.3d 351, 358 (6th Cir. 1998) (vacating a protective order premised on a mistaken application of the law of attorney-client privilege); Springer v. Seaman, 821 F.2d 871, 882-83 (1st Cir. 1987) (vacating an order denying discovery based upon an incorrect conclusion regarding the relevance of the information sought); Trevino v. Celanese Corp., 701 F.2d 397, 406 (5th Cir. 1983) (vacating a protective order limiting discovery where district court gave no explanation for its actions and appeals court could find no sound reason for granting the protective order); 13 see also Pye v. NLRB, 238 F.3d 69, 73 (1st Cir. 2001) (A court abuses its discretion if it applies an improper legal standard or erroneously applies the law to particular facts.). Finding the district court's protective order in favor of Lopez-Gerena to be unsupportable on the grounds given, and discerning no alternative ground adequate to sustain it, we conclude that vacatur of the protective order is required.
22 In its written opinion, the district court found a protective order in favor of Lopez-Gerena to be justified because, as a matter of law, Humacao cannot be liable for the punitive damages judgment. The district court's reasoning appears to rest on two grounds: first, that recovery is barred by the Commonwealth of Puerto Rico's sovereign immunity, and, second, that recovery of punitive damages is prohibited by the scope of Law 9. We address these issues in turn. 23 The district court's discussion of sovereign immunity focuses entirely on language in Law 9 stating that the statute is not to be construed as a waiver of the Commonwealth's sovereign immunity--that is, the immunity afforded it under the Eleventh Amendment. See Ortiz-Feliciano v. Toledo-Davila, 175 F.3d 37, 39 ([T]he Commonwealth is protected by the Eleventh Amendment to the same extent as any state. . . .) (citing Metcalf & Eddy, Inc. v. P.R. Aqueduct & Sewer Auth., 991 F.2d 935, 939 n.3 (1st Cir. 1993)). Nothing in the district court's opinion explains why it believed the Commonwealth's Eleventh Amendment immunity was implicated by this case, and we see no reason why it would be. The Commonwealth is not a named defendant in this action. Nor is there any indication that the Commonwealth would be called upon to pay the damages plaintiffs seek. Although, in many applications, Law 9 requires the Commonwealth to pay the judgment of an indemnified official, see P.R. Laws Ann. tit. 32, §§ 3092 (stating that, in general, [t]he Secretary of the Treasury shall pay the judgments, costs and attorney's fees imposed on the defendants from the available funds in the Treasury of Puerto Rico), the provisions of the statute relating to indemnification of mayors and ex-mayors indicate that judgments in these cases are paid by the municipalities themselves, see id. (explaining that, when Law 9 benefits are provided to mayors and ex-mayors, the resulting judgments, costs and attorney's fees . . . shall be defrayed from available funds in the corresponding . . . municipality). 14 24 Indeed, it appears undisputed that the portions of the judgment in this case that have been paid -- the compensatory damages and attorneys' fees -- were paid by Humacao. In light of these facts, this case is clearly distinguishable from those in which we have found the Eleventh Amendment to present a bar to recovery under Law 9. See Ortiz-Feliciano 175 F.3d at 40-41 (affirming a district court's denial, on Eleventh Amendment grounds, of plaintiffs' request for an order directing the Commonwealth to accord Law 9 benefits to the defendants and pay the judgment); Fernandez v. Chardon, 681 F.2d 42, 59-60 (1st Cir. 1982), aff'd sub nom. Chardon v. Fumero Soto, 459 U.S. 987 (1982) (holding that the Eleventh Amendment precluded a district court from issuing an order requiring the Commonwealth to pay a damages award entered against officials of the Puerto Rico Department of Education). 25 In addition, the district court's analysis appears to rest on the assumption that the plaintiffs only have a judgment against Vega- Sosa in his personal capacity, and thus may only reach Humacao through Law 9. We find nothing in the record before us to support this assumption and think that it may well be incorrect. 15 This is significant because, if there is a judgment against Vega-Sosa in his official capacity, it runs against Humacao itself, 16 and the Commonwealth's immunity is irrelevant with respect to that judgment. See Monell v. Dep't of Soc. Servs., 436 U.S. 658, 690 n. 54 (1978) (noting that state sovereign immunity is no bar to municipal liability under §§ 1983). 26 The district court's reliance on Law 9 as a basis for the protective order is also inapposite. To begin with, we question whether the issue of Law 9's scope was open to the district court to interpret, in light of this court's precedent on the subject. In Gonzalez-Torres v. Toledo, 586 F.2d 858 (1st Cir. 1978), we specifically considered the scope of indemnification available under Puerto Rico law, in order to determine whether an individual capacity defendant, once afforded Law 9 benefits, retained an interest in the judgment sufficient to maintain an appeal. See id. at 859. The defendant in question had been the target of a §§ 1983 suit and had a damages judgment -- including a significant punitive damages component -- entered against him. Id. The Commonwealth, acting pursuant to Law 9, moved to indemnify him against the judgment, but the defendant nonetheless sought to appeal the verdict. Id. In connection with this issue, the Secretary of Justice of Puerto Rico filed a certification with this court stating that the Commonwealth had assumed full payment of any judgment that might be entered. Id. (emphasis added). Thereafter, this Court held that the superintendent was under no personal obligation as a result of the judgment, and thus not a real party in interest, id. at 859-60 -- necessarily implying that the Commonwealth had assumed payment of all the damages, including the punitive damages. 27 Furthermore, even if the issue was properly considered by the district court, the conclusion the court reaches could not be supported on the grounds given. In reasoning that Law 9 must be interpreted to preclude indemnification of punitive damages, the court relied not on the language of Law 9 itself, 17 but on two unrelated statutory provisions describing the recovery available in suits brought against the Commonwealth or its municipalities under various Puerto Rico causes of action. 18 The district court offers no explanation as to why the scope of liability described in these statutes should influence our understanding of Law 9's indemnification provisions, 19 and we find its approach to interpreting the statute unconvincing. 28 Finally, we reiterate that the district court's reasoning ignores the plaintiffs' claim that they have a judgment directly against Humacao deriving from the official capacity suit. Because Law 9 is only implicated where there is a personal capacity judgment against an official, the district court's second rationale would be no bar to recovery against Humacao on an official capacity judgment.
29 Although we find that the district court failed to articulate a valid basis for its conclusion that Humacao could not be liable for the punitive damages judgment, we may still uphold the protective order if the court's decision to grant it can be justified on another ground having record support. E.g., Hodgens v. Gen. Dynamics Corp., 144 F.3d 151, 172 (1st Cir. 1998). On appeal, the defendants press the argument, offered in their motion for a protective order but not reached by the district court, that the court's decision may be justified as an application of the principles outlined by the Supreme Court in City of Newport. We now turn to this contention. 30 In City of Newport, the Court held that, as a general rule, municipalities are immune from punitive damages judgments when sued under §§ 1983. 453 U.S. at 271. In reaching this result, the Court employed a framework it has used on a number of occasions to determine whether immunities available at common law should be allowed as affirmative defenses in §§ 1983 actions. Id. at 258 & n. 18 (discussing Court's approach to incorporating common-law immunities and citing cases). Under this approach, the Court considered, first, whether incorporation of the immunity was consistent with the history of §§ 1983, and, second, whether the policies served by the immunity were compatible with the purposes of §§ 1983. Id. The Court concluded that incorporation of the common law immunity from punitive damages was justified under both prongs of the analysis. After an extensive review of contemporary cases and the available legislative history, the Court found that municipal immunity from punitive damages was not open to serious question when the statute was enacted, id. at 259, and that there was no evidence that Congress intended to disturb the settled common-law immunity, id. at 266. In addition, the Court concluded that such immunity was not inconsistent with the purposes of §§ 1983, reasoning that the imposition of punitive damages awards was likely to provide a windfall to plaintiffs -- at taxpayers' expense -- without significantly advancing the compensation or deterrence aims of the statute. Id. at 266-271. 31 It is undisputed that Humacao is a municipality that would, as an initial matter, be entitled to the immunity defense recognized by City of Newport. The question for us, then, is whether the defendants are correct that, as a matter of law, the plaintiffs cannot show a waiver of Humacao's City of Newport immunity, and, therefore, cannot establish Humacao's liability for the punitive damages. This question cannot be answered with certainty on the present record. However, we find that the plaintiffs have articulated plausible grounds supporting a possible waiver of immunity, and therefore conclude that the district court's order cannot be justified on the basis of City of Newport. 20 32 The plaintiffs' principal contention, both below and on appeal, is that certain documents relating to the extension of Law 9 benefits to Vega-Sosa and Vega-Sosa's acceptance of those benefits operate as a waiver of Humacao's immunity. The plaintiffs provide limited detail concerning the contents of these documents; however, they suggest that, among other things, the requested discovery will reveal one or more resolutions of Humacao's municipal council indicating a consent to pay the full judgment, including punitive damages. In response, the defendants offer a variety of arguments that, in their view, establish that the plaintiffs cannot succeed in proving waiver, no matter what the documents may say. We need consider only two of these arguments. 21 The first focuses on whether Vega-Sosa had authority to waive Humacao's immunity; the second challenges the plaintiffs' ability to make any waiver argument at this point in the proceedings, given the plaintiffs' failure to do so at trial. 33 The defendants' first argument is easily rejected. Although the plaintiffs do imply in their briefs that Vega-Sosa may be responsible for waiving Humacao's immunity, this is not their only theory for waiver. See Pl. Br. p. 16 (alleging the existence of a resolution by which[,] in accepting legal representation by the Justice Department [pursuant to Law 9,] the municipality accepted also to pay any judgment entered in the case) (emphasis added). The defendants do not appear to dispute that Humacao's municipal legislature could have executed a waiver of its City of Newport immunity, and precedent supports the view that such a waiver is possible. See, e.g., O'Neill v. Krzeminski, 839 F.2d 9, 13 (3d Cir. 1988) (holding that municipality's indemnification agreement with defendant constituted a waiver of its City of Newport immunity); Cornwell v. City of Riverside, 896 F.2d 398, 399-400 (9th Cir. 1990) (holding that City of Newport did not bar municipality from deciding to pay a punitive damages judgment for an official pursuant to a state statute that allowed, but did not require, municipalities to pay such damages); see also Bell, 746 F.2d at 1271-72 (holding that state indemnification statute waived municipality's immunity from punitive damages with respect to indemnified judgments). As a result, the defendants' argument, even if correct, would not preclude the possibility that the plaintiffs might prove a waiver of immunity. 34 The defendants' second contention fares no better, at least on the present record. In arguing that the plaintiffs were required to make their waiver-of-immunity arguments at trial, the defendants take it as a given that the immunity defense itself was properly raised below. This is far from clear. Our review of the record indicates that the defendants made only one bare, unexplained reference to non-liability for punitive damages in their answer, 22 and never said anything else that could be construed as raising the issue until long after the judgment became final. Furthermore, the language that appeared in the answer failed to mention either the word immunity or the City of Newport case, nor did it attempt to distinguish between the personal capacity suit and the official capacity suit. As a result, it was perhaps most logically read not as invoking any immunity, but as rejecting the plaintiffs' contention that the actions complained of could justify a punitive damages award. 35 Under the circumstances, we are skeptical that such a brief, ambiguous reference was sufficient to place the issue before the court, or to trigger any duty on the part of the plaintiffs to respond. See Violette v. Smith & Nephew Dyonics, Inc., 62 F.3d 8, 11 (1st Cir. 1995) (holding that defendants' mere mention of affirmative defense of preemption in answer, never developed or pressed before the court, was insufficient to meet requirement that party must actually present a claim or defense to the district court before arguing the matter on appeal); Williams v. Ashland Eng'g Co., 45 F.3d 588, 592 (1st Cir. 1995) (discussing the standard to be applied when determining if an affirmative defense is preserved by non-specific language in an answer and noting that a defendant who asserts [an affirmative defense] in a largely uninformative way[] acts at his peril); see also Sales v. Grant, 224 F.3d 293, 296 (4th Cir. 2000), cert. denied, ___ U.S. ___, 121 S. Ct. 1959 (2001) (holding that the inclusion of a single, cursory sentence on the defense of qualified immunity in the answer was insufficient to preserve the defense where it was never mentioned again and defendants sought to raise it for the first time on remand from an earlier appeal). If it was not, the plaintiffs have at least a plausible argument that it is the defendants, not they, whose arguments are barred on procedural grounds. See Barnett v. Housing Auth. of Atlanta, 707 F.2d 1571, 1580 (11th Cir. 1983) (finding City of Newport defense to be waived by defendants' failure, at trial, to challenge jury instruction regarding punitive damages); Black v. Stephens, 662 F.2d 181, 184 n.1 (3d Cir. 1981) (same). 23 36 In view of the foregoing, we conclude that, on the present record, the district court could not have found that Humacao's City of Newport immunity was non-waivable. While plaintiffs' assertions regarding alleged waivers of immunity were somewhat non-specific, 24 they included allegations that, if true, could constitute waivers of immunity under relevant precedent. As a result, the district court's grant of the protective order cannot be justified on this basis.