Opinion ID: 6342766
Heading Depth: 2
Heading Rank: 1

Heading: State Action and Color of State Law

Text: Like many constitutional provisions, “the Free Speech Clause prohibits only governmental abridgment of speech,” not “private abridgement of speech.” Manhattan Cmty. Access Corp. v. Halleck, 139 S. Ct. 1921, 1928 (2019). So courts must ensure “that constitutional standards” such as the First Amendment are only enforced “when it can be 2 “When faced with cross-motions for summary judgment, we consider ‘each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law.’” Bacon v. City of Richmond, 475 F.3d 633, 637–38 (4th Cir. 2007) (quoting Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003)). “We review the district court’s grant of summary judgment de novo, applying the same legal standards as the district court and viewing the facts and inferences drawn from the facts in the light most favorable to . . . the nonmoving party.” Evans v. Techs. Applications & Serv. Co., 80 F.3d 954, 958 (4th Cir. 1996). And we apply the same de novo standard when reviewing the district court’s denial of summary judgment. Cannon v. Vill. of Bald Head Island, 891 F.3d 489, 497 (4th Cir. 2018). “Summary judgment is appropriate only when ‘there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law.’” Evans, 80 F.3d at 958. 7 said that the State is responsible for the specific conduct of which the plaintiff complains”—a requirement known as “state action.” Brentwood Acad. v. Tenn. Secondary Sch. Athletic Ass’n, 531 U.S. 288, 295 (2001) (emphasis omitted) (quoting Blum v. Yaretsky, 457 U.S. 991, 1004 (1982)). Alongside the constitutional state-action limitation, § 1983 contains a distinct color-of-law requirement. See West, 487 U.S. at 48. The statute applies, by its terms, only to a “person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory” deprives a person of a constitutional or statutory right, privilege, or immunity. 42 U.S.C. § 1983. A person, which includes a corporation, acts “under color of” state law when they exercise “power ‘possessed by virtue of state law and made possible only because the wrongdoer is clothed with the authority of state law.’” West, 487 U.S. at 49 (quoting United States v. Classic, 313 U.S. 299, 326 (1941)). While the constitutional state-action and statutory color-of-law requirements are technically distinct, courts treat them “as the same thing.” United States v. Price, 383 U.S. 787, 794 n.7 (1966). 3 “The ultimate issue in determining whether a person is subject to suit under § 1983 is the same question” as the state-action inquiry: “is the alleged infringement of federal rights ‘fairly attributable to the State?’” Rendell-Baker v. Kohn, 3 The Supreme Court has reserved the possibility that there may be some set of cases in which the color-of-law requirement is satisfied even where the state-action requirement is not. Lugar v. Edmondson Oil Co., 457 U.S. 922, 935 n.18 (1982). And § 1983 only covers actions under the color of state law. But because both requirements must be satisfied when challenging a state’s conduct under the First Amendment, it is adequate to find that the stricter state-action requirement is satisfied. See Rendell-Baker v. Kohn, 457 U.S. 830, 838 (1982). 8 457 U.S. 830, 838 (1982). Often, that means asking whether there is a “close nexus” between the government and the conduct being challenged. See Brentwood Acad., 531 U.S. at 295 (quoting Jackson v. Metro. Edison Co., 419 U.S. 345, 351 (1974)). But this appeal presents a more basic question: What is the government? Often, the answer is clear. The army is the government. See Goldman v. Weinberger, 475 U.S. 503, 507 (1986). So is a municipal zoning board. See Vill. of Euclid v. Ambler Realty Co., 272 U.S. 365, 389 (1926). And usually, private corporations are not the government. See Burton v. Wilmington Parking Auth., 365 U.S. 715, 721–22 (1961); cf. Trs. of Dartmouth Coll. v. Woodward, 17 U.S. (4 Wheat.) 518, 636–37 (1819) (Marshall, C.J.) (“But this [corporate] being does not share in the civil government of the country, unless that be the purpose for which it was created. . . . It is no more a State instrument, than a natural person exercising the same powers would be.”). Usually, but not always. In Lebron, the Supreme Court noted a special class of corporate entities, “Government-created and -controlled corporations,” that are part of the government despite their ostensibly private character. 513 U.S. at 397. The Court there confronted a similar case to our own: The National Railroad Passenger Corporation, commonly known as Amtrak, refused to display a political advertisement, which prompted a First Amendment challenge. Id. at 376–77. Amtrak argued that it was a corporation, not a government entity, so it was not bound by the First Amendment. Id. at 392. The Supreme Court disagreed, holding Amtrak was a government entity. Id. at 400. The government is afforded administrative flexibility to achieve its ends, but organizational 9 creativity cannot release it from its constitutional mandates: “It surely cannot be that government, state or federal, is able to evade the most solemn obligations imposed in the Constitution by simply resorting to the corporate form. On that thesis, Plessy v. Ferguson can be resurrected by the simple device of having the State of Louisiana operate segregated trains through a state-owned Amtrak.” Id. at 397 (citation omitted). Instead, the Court held that where “the Government creates a corporation by special law, for the furtherance of governmental objectives, and retains for itself permanent authority to appoint a majority of the directors of that corporation, the corporation is part of the Government for purposes of the First Amendment.” Id. at 400. So Lebron establishes that a corporation is “Government-created and -controlled” and part of the government for purposes of the First Amendment where: (1) creation of the corporation occurred by “special law”; (2) creation was “for the furtherance of governmental objectives”; and (3) retention by the government of “permanent authority to appoint a majority of the directors of that corporation.” Id. at 397, 400. 4 Richmond Transit satisfies all three elements. 5 4 Note that the Lebron test differs from those state-action theories that focus on whether a particular action of a private actor is “fairly attributable to the State.” RendellBaker, 457 U.S. at 838. A government-created and -controlled corporation is part of the government itself and is a state actor for all purposes, just like any other government entity. 5 White Coat urges that Lebron’s three prongs are merely one way that a corporation might be government-created and -controlled, and so Lebron does not require each to be satisfied in all cases. See Horvath v. Westport Libr. Ass’n, 362 F.3d 147, 153–54 (2d Cir. 2004) (Lebron satisfied where exactly half of the corporation’s board was governmentappointed); but see Richardson v. Hartford Pub. Libr., 969 F. Supp. 2d 237, 244 (D. Conn. 2013) (Lebron and Horvath not satisfied where five of seventeen board members were (Continued) 10
To understand what constitutes creating a corporation by “special law,” we turn first to Lebron. Amtrak’s creation was authorized by the Rail Passenger Service Act of 1970, Pub. L. 91-518, 84 Stat. 1327 (repealed 1994). Lebron, 513 U.S. at 384. 6 The Act did not incorporate Amtrak under a federal charter, but merely authorized the executive branch to file the articles of incorporation. Rail Passenger Service Act, § 301–02, 84 Stat. at 1330. The executive branch exercised the Act’s authority by appointing agents, who then formed Amtrak under the general corporate law of the District of Columbia. Lebron, 513 U.S. at 385. The Supreme Court determined that this Act was a “special law.” See id. at 399 (“[W]here, as here, the Government creates a corporation by special law . . . .” (emphasis added)). Thus, the “special law” prong is satisfied when a law authorizes the incorporation of a particular entity, including when a law does not explicitly create the corporation but authorizes the government to form the corporation later. This is true even when that authority is used to create the entity under the general corporate law of a state. Such a government-appointed). Because all three prongs are satisfied here, we need not reach this issue. 6 Though now repealed, the relevant statutory provisions at the time stated: “There is authorized to be created a National Railroad Passenger Corporation. The Corporation shall be a for profit corporation, the purpose of which shall be to provide intercity rail passenger service, employing innovative operating and marketing concepts so as to fully develop the potential of modern rail service in meeting the Nation’s intercity passenger transportation requirements.” Rail Passenger Service Act, § 301, 84 Stat. at 1330. It also stated that “[t]he President of the United States shall appoint not fewer than three incorporators,” who “shall take whatever actions are necessary to establish the Corporation, including the filing of the articles of incorporation, as approved by the President.” Id. § 302, 84 Stat. at 1330. 11 corporation is in one sense a creature of general corporate law; but the government authorized it under a special law too, so it was created by “special law.” Despite Lebron, Richmond Transit argues that a “special law” must actually charter the corporation, directly bringing it into being. That would suffice. See, e.g., Hack v. President & Fellows of Yale Coll., 237 F.3d 81, 83–84 (2d Cir. 2000) (holding that Yale College’s charter, recognized in Connecticut’s constitution, was a “special law”), abrogated on other grounds by Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002); Hall v. Am. Nat’l Red Cross, 86 F.3d 919, 921 (9th Cir. 1996) (holding that the Red Cross, reincorporated under a federal charter, was created by “special law”). But under Lebron, it is unnecessary. Richmond Transit alternatively argues that a “special law” must lay out unique rules for the organization and functioning of the corporation. Because Richmond’s resolution authorizing Richmond Transit’s creation did not provide special rules—instead relying on the default rules of Virginia corporate law to dictate Richmond Transit’s form—Richmond Transit submits that it was not a special law. We reject that interpretation for two reasons. First, it would undermine the core principle of Lebron: that the government cannot evade the Constitution by resorting to a corporate form. Lebron focuses on substance, not the formal details of a corporation’s structure—whether the government chose to structure the corporation under the default rules of general corporate law or to opt out and organize it differently. It cannot be that government can evade the most solemn obligations imposed in the Constitution by simply resorting to the corporate form prescribed by a state’s general corporate law. See Lebron, 12 513 U.S. at 397. Second, Richmond Transit’s proposed interpretation of the phrase “special law”—a law providing detailed rules for the corporation—is inconsistent with the actual meaning of “special law.” That a law is detailed, providing specific rules for the corporation, does not make it “special.” 7 A corporation created by such a law would be a “special” corporation (i.e., “of a distinct or particular kind or character”), since its structure would be unique from other corporations. But that does not mean that the law creating it would be “special.” Instead, we conclude that “created by special law” means something simpler than Richmond Transit suggests: The government must form the corporation under a particular legal grant of authority. In other words, the incorporation of the entity must be authorized by a law “having a specific or particular function” or “purpose,” under which the corporation is formed. In that sense, “special” operates simply to clarify that Lebron does not apply to all corporations, even though almost all corporations are created by a state’s general corporate law in a technical sense. See James D. Cox & Thomas Lee Hazen, Business Organizations Law § 1.2 (5th ed. 2020); cf. Trs. of Dartmouth Coll., 17 U.S. (4 Wheat.) at 637 (noting that a corporation does not become “a part of the civil government 7 According to Random House Webster’s College Dictionary (2d rev. ed. 2000), “special” may mean: 1. “of a distinct or particular kind or character” 2. “pertaining or peculiar to a particular person, thing, instance, etc.; distinctive” 3. “having a specific or particular function, purpose, etc.” 4. “distinguished from what is ordinary or usual” 5. “extraordinary; exceptional” 6. “particularly valued” 13 of the country” merely “because its existence, its capabilities, its powers, are given by law”). Nor would it apply to a corporation formed by a government actor who is acting in a private capacity. Rather, the Lebron test is only satisfied where the government creates a corporation under specific legal authority. Language in Lebron makes this clear. The Court describes government-created and -controlled corporations as those where the government “has specifically created that corporation for the furtherance of governmental objectives, and not merely holds some shares but controls the operation of the corporation through its appointees.” 513 U.S. at 399 (emphasis added). 8 Thus, the key is specific government creation. When a law authorizes government actors to incorporate entities for the government’s purposes, and the actor forms a corporation under that authority, “the Government creates a corporation by special law.” Id. at 400. 8 Kerpen v. Metropolitan Washington Airport Authority, 907 F.3d 152 (4th Cir. 2018), presents a helpful counterexample where a law did not authorize formation of a corporation. Kerpen dealt with a litany of constitutional challenges to the Metropolitan Washington Airport Authority, a joint venture between the federal government and the governments of Virginia and the District of Columbia. Id. at 156–57. Because the plaintiff made challenges under Articles I and II of the Constitution, we needed to determine whether the Airport Authority was part of the federal government specifically. Id. at 158. Concluding that it was not, we noted that no “special law” existed because the federal statute about the Airport Authority did not authorize its formation. Id. at 159. Instead, the Airport Authority was created when Virginia and the District of Columbia passed reciprocal laws in 1985. Id. So when Congress enacted the Transfer Act, 49 U.S.C. § 49106, the next year—which authorized the Secretary of Transportation to lease the airports to the Airport Authority—it did not authorize the creation of the Airport Authority (which already existed), it “simply specified the minimum powers [the Airport Authority] must have in order to lease Dulles and National.” Id. at 159 (citations omitted). So federal law played no role in specifically authorizing the creation of the Airport Authority. Id. 14 Here, Virginia authorized Richmond to “acquire, operate, lease, or otherwise provide for the operation of a public transportation system.” Act of March 15, 1973, ch. 348, 1973 Va. Acts at 476 (emphasis added). This empowered Richmond to incorporate a public-transit corporation, which it did by specifically creating Richmond Transit in its April 1973 resolution. That resolution expressly authorized a group of “incorporators” to create the “Greater Richmond Transit Company . . . for the purpose of providing mass transportation service as a public service corporation,” and empowered Richmond’s attorney to “do all other necessary things to bring such corporation into being.” Richmond Council Res. 73-R44-45. When the incorporators acted to form Richmond Transit, they were doing so not as private citizens or as ministerial approvers of a private corporation, but as agents of the state, acting under Virginia’s statutory grant of authority as delegated to them by Richmond. Richmond Transit therefore owes its existence to two “special laws” of the state 9 that authorized its creation; that it relies on general Virginia corporate law for its internal structure is irrelevant. Our conclusion today is not undermined by our decision in Philips v. Pitt County Memorial Hospital, 572 F.3d 176 (4th Cir. 2009). There we considered a hospital owned by the nonprofit corporation Pitt County Memorial Hospital, Inc. We said that the hospital corporation “was not created by special law” but “created in 1953, presumably at the instance of Pitt County, under the general nonprofit incorporation statutes of North 9 The legislative powers of Virginia municipalities derive from the Commonwealth. See City of Richmond v. Confrere Club of Richmond, Va., Inc., 387 S.E.2d 471, 473 (Va. 1990). 15 Carolina.” Id. at 186. It is not clear this was a holding: Philips apparently did not challenge the district court’s ruling on the Lebron test. See id. (observing that the plaintiff “cites Lebron but once in his briefing, and he does not point us to any allegation in the complaint in satisfaction of the special law requirement”). But even if it were a holding, Philips is distinguishable from this case. In Philips, we lacked evidence that Pitt County had expressly authorized the creation of the hospital corporation. Instead, we described the hospital corporation as having been “created in 1953, presumably at the instance of Pitt County, under the general nonprofit incorporation statutes of North Carolina.” Id. First, as conveyed by the word “presumably,” we were unsure of how much Pitt County was involved with the corporation’s formation. And we presumed only that the hospital corporation was created “at the instance of” Pitt County (i.e., “at the urging or suggestion of” Pitt County, Instance, Random House Webster’s College Dictionary (2d revised ed. 2000)), not by government designees acting under a law authorizing its formation. In summary, Richmond Transit owes its existence to particularized laws authorizing Richmond to incorporate it. So it was created by “special law” under Lebron. 2. Creation for the Furtherance of Governmental Objectives Having found Richmond Transit was created by “special law,” we next ask if it was created to further governmental objectives. While some cases might present difficult questions of what counts as a “governmental objective,” this case does not. Virginia’s original statutory grant authorized Richmond to “provide for the operation of a public transportation system,” Act of March 15, 1973, ch. 348, 1973 Va. Acts at 476, and 16 Richmond’s enacting resolution makes plain that “the corporation shall be organized for the purpose of providing mass transportation service as a public service corporation,” Richmond Council Res. 73-R44-45. And we know from Lebron that public transportation is a governmental objective. See 513 U.S. at 383–84, 400. So Richmond Transit was created to further governmental objectives. 10 3. Government Appointment of Directors Richmond Transit also satisfies the final aspect of Lebron—that the government “retains for itself permanent authority to appoint a majority of the directors of that corporation.” 513 U.S. at 400. The City of Richmond appoints half of Richmond Transit’s board, with Chesterfield County appointing the other half. Thus, the government 11 appoints all of Richmond Transit’s board, and retains—through ownership of Richmond Transit’s stock—the permanent authority to do so. 10 Note that Lebron’s “governmental objectives” inquiry is different from the “public function” state-action test, in which we ask whether there has been an “exercise by a private entity of powers traditionally exclusively reserved to the State.” Jackson, 419 U.S. at 352. Lebron’s “governmental objectives” inquiry looks not to the function the entity performs, but the government’s objective in creating it. And that objective need not be one exclusively charged to the government. Accordingly, many things that are not traditional and exclusive public functions under Jackson—such as higher education—may still be valid “governmental objectives” under Lebron. See Hack, 237 F.3d at 84 (“[H]igher education is a government objective (although not the exclusive province of government).”). 11 Although two different local governments equally split the appointment power, both exercise the power of the Commonwealth of Virginia, see Confrere Club of Richmond, 387 S.E.2d at 473, and so are both “the government” for our purposes. 17 Richmond Transit challenges this conclusion by claiming that the directors are not “policymakers,” pointing to language from Lebron that the government must exercise control “not as a creditor but as a policymaker.” 513 U.S. at 399. That language in Lebron distinguished Amtrak from Conrail, a company in which the government temporarily appointed a majority of board members. Id. The Court noted that the government assumed control of Conrail only temporarily to ensure that it would repay obligations it owed to the United States. Id. The government-appointed board members fulfilled only that purpose, and their voting power would cease after enough of that debt was repaid. Id. This is not the role that Richmond and Chesterfield County have in the operation of Richmond Transit. Under Richmond Transit’s bylaws, the board members appointed by the two government entities exercise, directly or indirectly, “[a]ll powers of the corporation” and manage all “business and affairs of the corporation.” J.A. 490; accord Va. Code Ann. § 13.1-673. So the government-appointed directors set the “policy” of Richmond Transit, including the advertising policy challenged before us. Richmond Transit also relies extensively on language from Philips about control of the corporation, suggesting that the third Lebron element is satisfied only if government actors directed the policy at issue. But Philips did not consider control in the context of the Lebron test. Its discussion of control related to the distinct “entwinement” and “close nexus” state action inquiries. Philips, 572 F.3d at 182–84. Philips’s discussion of Lebron occurred in a separate section of the opinion, and it did not address the control element. See id. at 185–86. And adopting Richmond Transit’s position would directly contradict Lebron, where just as here, the challenged rejection of the advertisement came from 18 ostensibly private employees. See 513 U.S. at 377. Indeed, the point of Lebron is to determine whether these ostensibly private decisionmakers are, for § 1983 and constitutional law, state decisionmakers. All that the Lebron test requires is that the government control the corporation by appointing a majority of its board, which is true here. Because all three elements of the Lebron test are satisfied, Richmond Transit is a part of the government for constitutional purposes and acts under the color of state law for purposes of § 1983. 12 See id. at 378 (suggesting official actions of the state are necessarily state action); West, 487 U.S. at 49 (“[I]f a defendant's conduct satisfies the state-action requirement . . . ‘that conduct [is] also action under color of state law and will support a suit under § 1983.’” (third alteration in original) (quoting Lugar v. Edmondson Oil Co., 457 U.S. 922, 935 (1981))).