MEDICAL EDUCATIONAL AND HEALTH SERVICES INC et al v. MUNICIPALITY OF MAYAGUEZ et al

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IN THE UNITED STATES BANKRUPTCY COURT FOR
THE DISTRICT OF PUERTO RICO
IN RE:
MEDICAL EDUCATIONAL & HEALTH
SERVICES, INC.
CASE NO. 10-04905 BKT
DEBTOR
Chapter 11
MEDICAL EDUCATIONAL & HEALTH
SERVICES, INC.
PLAINTIFF 	ADV. NO.: 10-148
VS.
INDEPENDENT MUNICIPALITY OF MAYAGUEZ,
ET ALS.
DEFENDANTS
FILED & ENTERED ON 09/02/2011
OPINION AND ORDER
This matter is before the Court on a motion to dismiss [Docket No. 67]
filed 	on 	March 	5, 	2011, 	by 	defendants 	Hon. 	Jose 	Guillermo 	Rodriguez 	(the
“Mayor”), in his personal capacity, his wife Mrs. Marisel Mora Gonzalez (“Mrs.
Gonzalez”) and their conjugal partnership (collectively, “Defendants”). 	Medical
Educational 	& 	Health 	Services, 	Inc. 	(“Debtor” 	and 	“Plaintiff”) 	filed 	its
opposition [Docket No. 85] to Defendants’ motion to dismiss on April 12, 2011.
Plaintiff filed a complaint (the “Complaint”) in the adversary alleging
violations 	of 	civil 	rights 	and 	bringing 	claims 	against 	Defendants 	and 	co-
defendants under section 1983 of Title 42 of the United States Code (“Section
1983”) 	for 	Fourteenth 	Amendment 	violations. 	In 	addition, 	Plaintiff 	asserts
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violations of the Racketeering Influenced Corruption Organization (“RICO”) Act.
Defendants move to dismiss these claims for failure to state a claim under Rule
12(b)(6) of the Federal Rules of Civil Procedure (“FRCP”). 	Plaintiff further
asserts 	the 	following 	state 	law 	claims 	against 	Defendants: 	(1) 	breach 	of
contract; 	(2) 	fraud; 	(3) 	damages 	incidental 	to 	contract; 	(4) 	tortious
interference 	with 	contractual 	relations; 	(5) 	loss 	of 	opportunities 	and
reputation; (6) loss of business opportunity; and (7) damages to other sub-
lessors. 	In their motion, Defendants ask this Court to dismiss these state law
claims for lack of jurisdiction. 	For the reasons set forth below, Defendants’
motion to dismiss is GRANTED in part and DENIED in part.
I. 	FACTUAL BACKGROUND
Unless 	otherwise 	noted, 	the 	relevant 	allegations 	are 	derived 	from 	the
Complaint [Docket No. 1], which was filed on September 1, 2010. 	We recite the
facts and all reasonable inferences to be drawn therefrom in the light most
favorable to Plaintiff.
On August 27, 2009, Plaintiff entered into an operation and administration
agreement 	(the 	“Lease”) 	with 	the 	Autonomous 	Municipality 	of 	Mayagüez 	(the
“Municipality”) to lease the Mayagüez Medical Center (the “Hospital”). 	The Lease
involved the participation of Sistemas Integrados de Salud del Sur Oeste, Inc.
(“SISSO”), 	who 	entered 	into 	a 	sublease 	and 	administration 	agreement 	(the
“Sublease”) directly with Plaintiff. 	Under the Sublease, SISSO was authorized to
sub-sublease portions of the Hospital under its administration to various medical
service providers. 	Because SISSO was obligated to pay rents to Plaintiff, the
Municipality required SISSO to guarantee the Lease since any default by SISSO
would necessarily result in Plaintiff defaulting on its own obligation to the
Municipality. 	Acting on behalf of the Municipality, the Mayor signed the Lease.
Throughout the Complaint, Plaintiff argues that the Municipality, under the
direction of the Mayor, interfered with its ability to run the hospital and
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breached its contractual duties to Plaintiff on various occasions. 	For instance,
the 	Municipality 	allegedly 	did 	not 	deliver 	possession 	of 	the 	Hospital 	until
August 	31, 	2009 	(four 	days 	after 	execution 	of 	the 	Lease), 	at 	which 	point
Plaintiff discovered that three of the six floors were in a state of ruin and
that 	the 	IRS 	had 	liens 	on 	every 	piece 	of 	equipment 	in 	the 	Hospital. 	The
Municipality allegedly misrepresented the condition of the Hospital by failing to
advise 	Plaintiff 	of 	the 	Hospital’s 	true 	condition. 	Shortly 	thereafter, 	and
allegedly without consulting with Plaintiff or considering the Lease, the Mayor
announced at a press conference that the third floor of the Hospital would serve
as a trauma ward. 	Plaintiff, however, had allegedly designated the third floor
to 	a 	pediatric 	ward 	and 	had 	already 	begun 	negotiating 	with 	the 	appropriate
groups. 	In turn, Plaintiff proposed that the Municipality repair another floor
in order to accommodate both wards. 	Moreover, on October 7, 2010, Plaintiff
allegedly 	issued 	a 	letter 	to 	the 	Municipality 	proposing 	that 	the 	rent 	be
renegotiated 	because 	only 	half 	of 	the 	floors 	were 	functional. 	After 	the
Municipality answered requesting specific proposals, Plaintiff submitted specific
proposals for rent modification on November 2, 2010.
On November 13, 2009, the principal stockholder and CEO of SISSO, Dr.
Orlando Marini (“Marini”), alleged a cash shortage that would inhibit SISSO from
making timely payments to Plaintiff. 	Based on this allegation, SISSO’s minority
stockholders transferred 45% of their interest to Marini in order to capitalize
and save the corporation. 	As an additional attempt to subsidize SISSO, Plaintiff
allegedly agreed to temporarily relinquish its interest in SISSO by allowing
SISSO to pay rent directly to the Municipality (which supposedly was an amount
less than the rent SISSO was paying to Plaintiff). 	Plaintiff alleges that this
informal agreement was a good faith effort to help SISSO and promote the forward
movement of the project. 	Unbeknownst to Plaintiff, however, SISSO allegedly had
collectibles totaling approximately $6,000,000, which Plaintiff argues could have
been used as guarantee to raise capital.
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On 	December 	1, 	2009, 	the 	Municipality 	informed 	Plaintiff 	that 	SISSO’s
tendered 	check 	bounced 	and 	demanded 	Plaintiff 	to 	pay 	the 	rent 	due. 	When
Plaintiff informed SISSO of its noncompliance, SISSO allegedly explained that it
was not required to pay rent because the Mayor advised SISSO that rent would not
be paid by Plaintiff to the Municipality for a “reasonable period of time.”
Compl. p. 21. 	Thus, SISSO would allegedly not have to pay rent to Plaintiff. 	On
December 8, 2010, the Municipality again demanded payment of the rent due from
Plaintiff. 	Plaintiff allegedly responded to SISSO, reaffirming that no agreement
had been reached with the Mayor and reminding SISSO that it was contractually
obligated to Plaintiff, not to the Municipality. 	Plaintiff further demanded
payment of rent due from SISSO.
On January 4, 2010, Plaintiff was allegedly advised that Marini of SISSO,
Mr. Jose Quiros (“Quiros”) of the Manati Medical Center (“MMC”), and the Mayor of
the Municipality secretly met to discuss Quiros’ acquisition of SISSO. 	At this
meeting, the Municipality supposedly agreed to grant SISSO a six-month moratorium
of rent and utility payments. 	As a result, SISSO could allegedly default on its
obligation to Plaintiff and the Municipality would hold it harmless. 	Meanwhile,
the 	Municipality 	continued 	to 	demand 	specific 	performance 	from 	Plaintiff.
Allegedly, Plaintiff anticipated cancellation of the Lease, eviction of Plaintiff
and 	its 	sub-lessees, 	and 	replacement 	by 	SISSO 	or 	its 	successor. 	Plaintiff
immediately 	requested 	a 	meeting 	with 	Marini. 	Marini 	allegedly 	agreed, 	but
conditioned his acceptance on having the meeting at the Mayor’s counsel’s office.
On January 5, 2010, representatives from the Municipality, SISSO, MMC and
Plaintiff met. 	At the meeting, it was allegedly confirmed that Marini, Quiros,
and the Mayor entered into an agreement in which Marini would sell its SISSO
stock 	to 	Quiros, 	thereby 	transferring 	operation 	and 	administration 	of 	the
Hospital to Quiros. 	Plaintiff refers to this agreement as the “scheme.” 	Before
the meeting ended, SISSO representatives allegedly offered Plaintiff $400,000 in
exchange for control of Plaintiff and relinquishment of Plaintiff’s sub-lessees’
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facilities. 	Plaintiff declined the offer.
On January 29, 2010, the Mayor, acting on behalf of the Municipality,
allegedly messengered a letter to Plaintiff terminating the Lease for “lack of
payment” and requesting immediate surrender of the Hospital. 	Allegedly, the
reason for the cancellation was a charade since the Municipality had supposedly
granted the moratoria and knew that no rent was actually in arrears. 	Plaintiff
claims that the cancellation letter was in violation of Sections 13.1.1 of the
Lease because the Municipality breached its duty to resolve disputes in good
faith. 	Also, the letter was not delivered to the contracted address in Section
14.2.
Marini allegedly responded to the Mayor’s letter without authorization from
Plaintiff and accepted the termination of the Lease. 	Marini explained that SISSO
was unable to finance the operation of the Hospital and agreed to surrender the
Lease (yet there was no lease agreement between SISSO and the Municipality to be
surrendered since SISSO was only a guarantor). 	Allegedly, Marini’s actions were
taken 	in 	furtherance 	of 	the 	“scheme.” 	The 	Mayor 	allegedly 	accepted 	the
surrender, ignored the contractual reality, and forgave SISSO’s debt. 	Shortly
thereafter on February 1, 2010, Plaintiff responded to the Mayor’s cancellation
letter 	expressing 	its 	position 	that 	“the 	only 	parties 	in 	violation 	of 	the
contract were the Municipality and SISSO.” 	Compl. p. 30. 	Moreover, Plaintiff
allegedly invited the Municipality to reconsider its position.
On 	January 	29, 	2010, 	the 	Mayor 	signed 	MCC’s 	proposal 	letter, 	which
allegedly contained inaccurate representations regarding Plaintiff’s position.
Supposedly, the proposal letter falsely alleged that Plaintiff, together with
SISSO and MMC, requested approval of the transfer and payment moratorium. 	The
Municipality’s new lease agreement with MMC and SISSO designated SISSO to remain
as administer of the Hospital, which contradicted the supposed cancellation. 	At
this point, Quiros had supposedly obtained control over SISSO. 	MMC allegedly was
representing 	itself 	as 	a 	new 	corporation 	acting 	under 	new 	contracts.
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Simultaneously, MMC was “doing business as” SISSO.
On 	June 	3, 	2010, 	Plaintiff 	filed 	for 	relief 	under 	Chapter 	11 	of 	the
Bankruptcy Code and subsequently filed the Complaint in this adversary proceeding
on 	September 	1, 	2010. 	Plaintiff 	alleges 	that 	the 	Mayor, 	on 	behalf 	of 	the
Municipality, conspired with Marini of SISSO to tortiously interfere with the
Lease. 	Based on the foregoing factual allegations, Plaintiff brings this suit
for 	damages, 	averring 	that 	the 	Mayor’s 	cancellation 	of 	the 	Lease 	deprived
Plaintiff 	of 	its 	property 	rights 	without 	due 	process 	of 	law. 	In 	addition,
Plaintiff alleges that Defendants violated the RICO Act by influencing MMC and
SISSO to commit mail and interstate wire fraud. 	Moreover, Plaintiff alleges that
Defendants are guilty of conspiring with co-defendants to violate RICO. 	The
agreement as to the conspiracy between the Mayor and MMC allegedly required MMC
to falsely represent itself to potential sub-lessors and judicial forums as the
valid lessee of the Hospital.
In its answer, Defendants move to dismiss the Complaint for failure to
state a claim. 	Moreover, Defendants deny a number of Plaintiffs allegations,
assert the affirmative defense of "Qualified Immunity", and argue that the Court
lacks jurisdiction to hear the additional state law claims.
II. 	DISMISSAL STANDARD
Pursuant to Rule 12(b)(6) of the FRCP, which is applicable to adversary
proceedings under Rule 7012 of the Federal Rules of Bankruptcy Procedure, a
defendant may file a motion to dismiss for failure to state a claim upon which
relief can be granted in response to an initial pleading.
In evaluating a motion to dismiss, the court “take[s] as true all well-
pleaded allegations and draw[s] all reasonable inferences in the plaintiff’s
favor.” 	Ezra Charitable Trust v. Tyco Int'l, Ltd., 466 F.3d 1, 5-6 (1st Cir.
2006). 	The inquiry is therefore limited to facts alleged in the complaint,
incorporated into the complaint, or susceptible to judicial notice. 	See In re
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Colonial Mortg. Bankers Corp., 324 F. 3d 12, 15 (1st Cir. 2003); Young v. Lepone,
305 F. 3d 1, 11 (1st Cir. 2002) (“The fate of a motion to dismiss under Rule
12(b)(6) ordinarily depends on the allegations contained within the four corners
of the plaintiff’s Complaint.”). 	“The Court’s function on a Rule 12(b)(6) motion
is not to weigh the evidence which might be presented at trial but merely to
determine whether the Complaint itself is legally sufficient.” 	Flamand v. Am.
Intem. Group, Inc., 876 F. Supp. 356, 360 (D.P.R. 1994) (citing Festa v. Local 3
Int’l Bhd. Of Elec. Workers, 905 F.2d 25, 37 (2d Cir. 1990). 	“The court need not
accept a plaintiff’s assertion that a factual allegation satisfies an element of
a claim, however, nor must a court infer from the assertion of a legal conclusion
that 	factual 	allegations 	could 	be 	made 	that 	would 	justify 	drawing 	such 	a
conclusion.” 	Cordero-Hernández v. Hernández-Ballesteros, 449 F.3d 240, 244 n.3
(1st Cir. 2006). 	“Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” 	Ashcroft v. Iqbal, 129
S. Ct. 1937, (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). 	A
plaintiff “must allege ‘a plausible entitlement to relief’” in order to survive
dismissal. 	Rodríguez-Ortíz v. Margo Caribe, Inc., 490 F.3d 92, 95 (1st Cir.
2007) (citing Twombly, 550 U.S. at 544).
III. 	LEGAL ANALYSIS AND DISCUSSION
Defendants, who appear in their personal capacities only, ask the Court to
grant their motion to dismiss on the basis that: (1) Plaintiff failed to state a
claim under 42 U.S.C. § 1983 against Defendants for due process violations under
the Fourteenth Amendment; (2) in the alternative, the Mayor is protected in his
personal capacity from a law suit under the doctrine of qualified immunity; (3)
Plaintiff failed to state a claim under the RICO Act, 18 U.S.C. § 1962(c) and §
1962(d); 	and 	(4) 	the 	Court 	lacks 	supplemental 	jurisdiction 	over 	Plaintiffs’
auxiliary claims. 	This Court will now proceed to consider Defendants’ arguments.
A. 42 U.S. C. § 1983 Claim
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Plaintiff brings the suit under Section 1983 against Defendants, seeking
injunctive 	relief 	and 	damages 	for 	violation 	of 	Plaintiff’s 	rights 	under 	the
Fourteenth Amendment. 	Section 1983 provides a cause of action against a person
who, 	acting 	under 	color 	of 	state 	law, 	violated 	an 	individual’s 	federally
protected rights. 	See 42 U.S.C. § 1983. 	Officials sued in their individual or
personal capacities are “persons” within the meaning of Section 1983, and can be
sued for monetary damages, injunctive relief, and attorney’s fees. 	Hafer v.
Melo, 502 U.S. 21, 31 (1991). 	“While the plaintiff in an individual capacity
suit need not establish a connection to governmental policy or custom, officials
sued 	in 	their 	personal 	capacities, 	unlike 	those 	sued 	in 	their 	official
capacities, may assert personal immunity defenses.” 	Id. at 35.
In order to sustain an “individual capacity” claim under Section 1983, two
– and only two – allegations are required. 	First, the plaintiff must allege that
some person has deprived him of a federal right. 	Gomez v. Toledo, 446 U.S. 635,
640 (1980). 	Second, the plaintiff must allege that the person who has deprived
him of that right acted under color of state law.1 	Id. 	In satisfying the first
element, 	it 	is 	not 	enough 	for 	a 	plaintiff 	to 	show 	that 	she 	suffered 	a
deprivation. 	Rather, a plaintiff must allege a deprivation of a constitutionally
protected interest without due process of law. 	Parratt v. Taylor, 451 U.S. 527,
537 	(1981). 	In 	addition, 	a 	plaintiff 	must 	demonstrate 	a 	causal 	connection
linking 	the 	defendant’s 	conduct 	to 	the 	alleged 	deprivation. 	See 	Gutiérrez-
Rodríguez v. Cartagena, 882 F.2d 553 (1st Cir. 1989). 	To establish a “but for”
causal 	connection, 	a 	plaintiff 	must 	show 	that 	the 	defendant 	was 	personally
involved in the constitutional violation, see Monell v. Dep’t of Soc. Servs. of
New York, 436 U.S. 658 (1978), and that the conduct was either intentional,
1 For section 1983 liability purposes, “a state employee generally acts under color of state law when,
while performing in his official capacity or exercising his official responsibilities, he abuses the
position given to him by the State.” West v. Atkins, 487 U.S. 42, 49 (1988).
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grossly negligent, or amounted to a reckless indifference to the plaintiff’s
constitutional rights. 	See Simmons v. Dickhaut, 804 F.2d 182, 185 (1st Cir.
1986). 	Section 	1983 	applies 	to 	the 	Commonwealth 	of 	Puerto 	Rico 	and 	its
instrumentalities 	with 	the 	same 	force 	as 	to 	any 	state. 	Deniz 	v. 	Mun. 	of
Guaynabo, 285 F.3d 142, 146 (1st Cir. 2002).
In the present case, Defendants move to dismiss the Section 1983 claims for
failure to plead specific allegations against Defendants in their individual
capacities. 	To support this argument, Defendants recite the broad allegations
asserted in the Complaint’s fifth cause of action for damages for violation of
civil rights pursuant to Section 1983:
“The joint actions, performed by co-defendants constitute an attempt to
deprive [Plaintiff] of its property rights, without the benefit of due process of
law. 	It is so because the relevant actions were performed by state actors, the
Municipality 	and 	its 	Mayor 	and 	associates….Their 	actions, 	performed 	under
knowingly false pretenses, were directed to deprive [Plaintiff] of its rights.
The remaining actors acted jointly with the state actors, with common intent.
That, under civil rights law, 42 U.S.C. § 1983, makes them state actors and
subject to the penalties provided by said law…. ” 	Mot. To Dismiss p. 15; Compl.
p. 39.
This Court agrees with Defendants that any “joint actions performed by co-
defendants” 	lack 	the 	specificity 	to 	assert 	a 	claim 	against 	Defendants
individually. 	Moreover, 	the 	above 	allegations 	are 	conclusory 	and 	lack 	the
factual support necessary to state a plausible claim to relief. 	However, as
Plaintiff 	argues 	in 	its 	opposition, 	Defendant’s 	dismissal 	theory 	fails 	to
consider the entirety of the Complaint. 	We must look beyond the Complaint’s
poorly pled fifth cause of action and analyze the four corners of the Complaint,
which includes the material attached or incorporated by reference, to determine
if Plaintiff’s pleading is adequate to allege Defendants’ personal involvement in
the conduct that violated a clearly established federal law.
Based on the facts alleged in the Complaint, there is absolutely no basis
for Plaintiff’s Section 1983 claim asserted against Mrs. Gonzalez or the conjugal
partnership. 	These co-defendants were clearly not state employees and could,
therefore, not have acted under color of law. 	Moreover, Plaintiff only included
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them “to answer, financially, for the damages that [the Mayor’s] unconstitutional
and tortious actions have caused.” 	Compl. p. 4. 	Therefore, this Court dismisses
the 	Section 	1983 	claims 	against 	Mrs. 	Gonzalez 	and 	the 	conjugal 	partnership
because the Complaint is void of factual allegations that could connect co-
defendants to the alleged due process violation. 	Based upon the foregoing,
Defendants’ 	motion 	to 	dismiss 	Plaintiff’s 	Section 	1983 	claim 	against 	Mrs.
Gonzalez and the conjugal partnership is GRANTED.
We now must determine whether the four corners of the Complaint contain
enough facts to state a plausible Section 1983 claim against the Mayor.
i. 	Deprivation of a Federal Right: Fourteenth Amendment
Regarding the first element of a Section 1983 claim, Plaintiff alleges that
the 	Mayor’s 	termination 	of 	the 	Lease 	between 	Plaintiff 	and 	the 	Municipality
deprived Plaintiff of its procedural due process rights secured by the Fourteenth
Amendment of the Constitution. 	The Fourteenth Amendment “provides that certain
substantive rights—life, liberty, and property—cannot be deprived except pursuant
to constitutionally adequate procedures.” 	Cleveland Bd. of Educ. v. Loudermill,
470 U.S. 532, 541 (1985). 	To succeed on a Fourteenth Amendment procedural due
process claim under Section 1983, a plaintiff must establish that: (1) he had a
life, liberty or property interest; (2) the defendant, acting under color of
state 	law, 	deprived 	him 	of 	that 	interest 	without 	due 	process; 	and 	(3) 	the
defendant’s 	alleged 	conduct 	was 	causally 	connected 	to 	the 	plaintiff’s
deprivation. 	See id. at 538. 	Moreover, property interests are not created by
the Constitution, but instead are created by an independent source such as state
law. 	Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577 (1972).
Upon review of the Complaint, Plaintiff alleges a plausible Fourteenth
Amendment claim against the Mayor. 	The Complaint asserts that Plaintiff, by
contracting with the Municipality, acquired a protected property right in the
leasehold of the Hospital. 	Because the Fourteenth Amendment’s protection of
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“property” 	has 	been 	read 	broadly 	to 	extend 	protection 	to 	“any 	significant
property interest,” see Fuentes v. Shevin, 407 U.S. 67, 85 (1983), this asserted
property interest in the leasehold sufficiently satisfies this element. 	The
Complaint also states that the Mayor, as the highest elected official of the
Municipality, acted under color of state law when he terminated the Lease for
“lack of payment” and requested immediate surrender of the property.
Specifically, 	Plaintiff 	alleges 	that 	the 	Mayor’s 	termination 	letter
violated 	Section 	13.1.1 	of 	the 	Lease, 	which 	details 	the 	contract’s 	dispute
resolution process. 	Section 13.1.1 requires the parties to make good faith
efforts to resolve any disputes between each other through formal negotiations.
Formal 	negotiations 	would 	commence 	only 	after 	one 	party 	receives 	written
notification 	from 	the 	opposing 	party 	describing 	the 	problem 	and 	proposed
solution. 	Plaintiff 	alleges 	that 	the 	Mayor, 	acting 	on 	behalf 	of 	the
Municipality, 	breached 	his 	duty 	to 	send 	written 	notification 	to 	Plaintiff
regarding Plaintiff’s rent default. 	Moreover, Plaintiff claims that the Mayor
violated Section 14.2 of the Lease by delivering the termination notification to
an incorrect address. 	As a result, the termination deprived Plaintiff of its
property interest in the leasehold without adequate notice or an opportunity to
be heard. 	This Court finds that these factual allegations are sufficient to
assert a plausible deprivation of due process under the Fourteenth Amendment.
ii. 	Under Color of State Law
In regards to the second element, Plaintiff alleges that the Mayor acted
under color of Puerto Rican law when he, performing in his official capacity as
Mayor of the Municipality, terminated the Lease. 	Regarding the required showing
of a causal connection, Defendants argue that the Complaint fails to allege that
the Mayor “took any intentional decision regarding the lease contract status.”
This 	argument, 	however, 	is 	unconvincing 	and 	does 	not 	prevent 	Plaintiff 	from
stating a claim against the Mayor. 	Based on the Complaint’s allegations and the
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fact that the Mayor personally signed and sent the letter terminating the Lease,
the Mayor’s connection and personal involvement in the due process violation is
established.
Thus, this Court holds that Plaintiff has adequately stated a plausible
cause of action under Section 1983 for due process violations against the Mayor.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 569 (2007) (reiterating that Rule 8(a)
“do[es] not require a heightened fact pleading of specifics, but only enough
facts to state a claim to relief that is plausible on its face.”). 	Based upon
the 	foregoing, 	Defendants’ 	motion 	to 	dismiss 	Plaintiff’s 	Section 	1983 	claim
against the Mayor is DENIED.
B. Qualified Immunity
Defendants argue that in the alternative the Court finds that Plaintiff has
sufficiently pled a Section 1983 claim against the Mayor, which we do, the Mayor
is entitled to qualified immunity.
“Qualified immunity ‘provides a safe harbor for public officials acting
under the color of state law who would otherwise be liable under 42 U.S.C. § 1983
for infringing the constitutional rights of private parties.” 	Borges-Colón v.
Román-Abreu, 438 F.3d 1, 18 (1st Cir. 2006) (quoting Whitfield v. Meléndez-
Rivera, 431 F.3d 1, 6 (1st Cir. 2005)). 	To determine whether a public official
is 	entitled 	to 	qualified 	immunity, 	the 	court 	applies 	a 	three-part 	test
determining: 	“(1) 	whether 	plaintiff’s 	allegations, 	if 	true, 	establish 	a
constitutional violation; (2) whether that right was clearly established at the
time of the alleged violation; and (3) whether a similarly situated reasonable
official 	would 	have 	understood 	that 	the 	challenged 	action 	violated 	the
constitutional right at issue.” 	Mihos v. Swift, 358 F.3d 91, 102 (1st Cir.
2004). 	The Court denies qualified immunity only if all three questions are
answered in the affirmative. 	Id. at 110. 	“In order to conclude that the
right 	which 	the 	official 	allegedly 	violated 	is 	‘clearly 	established,’ 	the
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contours of the right must be sufficiently clear that a reasonable official would
understand that what he is doing violates that right.” 	Anderson v. Creighton,
483 U.S. 635, 640 (1987).
Further, the Court must determine whether a similarly situated reasonable
official 	could 	have 	believed 	his 	actions 	were 	lawful 	in 	light 	of 	clearly
established law and the information the official possessed at the time of his
allegedly unlawful conduct.” 	Singer v. Maine, 49 F.3d 837, 844 (1st Cir. 1995).
“Since qualified immunity is a defense, the burden of proving it rests with the
defendant.” 	Gomez v. Toledo, 446 U.S. 635, 641 (1980); see Fed. R. Civ. P. 8(c)
(defendant 	must 	plead 	any 	“matter 	constituting 	an 	avoidance 	or 	affirmative
defense”).
In their motion to dismiss, Defendants provide a thorough recitation of the
law regarding the defense and jump to the conclusion that “[D]efendants are
entitled to qualified immunity.” 	As Plaintiff contends in its opposition, the
Defendants’ motion completely fails to offer any arguments or specific facts in
support of the alleged immunity from suit. 	As such, Defendants fail to meet
their burden of pleading and their request for dismissal based on qualified
immunity is DENIED.
C. The RICO Claims
In 	the 	Complaint’s 	eleventh 	cause 	of 	action, 	Plaintiff 	claims 	that
Defendants 	along 	with 	co-defendants 	violated 	and 	conspired 	to 	violate 	RICO.
Plaintiff 	alleges 	that 	Defendants 	participated 	in 	a 	pattern 	of 	racketeering
activity involving mail and wire fraud in violation 18 U.S.C. § 1962(c). 	In
addition, Plaintiff avers that Defendants conspired to commit those fraudulent
acts 	in 	violation 	of 	18 	U.S.C. 	§ 	1962(d). 	Defendants 	subsequently 	move 	to
dismiss all RICO claims against them for failure to meet the pleading standard
for claims brought under the RICO Act.
i. 	Substantive Rico Claim
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To survive dismissal on a RICO action under § 1962(c), a plaintiff must
allege “(1) conduct (2) of an enterprise (3) through a pattern of racketeering
activity.” 	Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985). 	Although
FRCP, 	Rule 	8 	usually 	allows 	a 	plaintiff 	to 	make 	general 	allegations 	in 	a
complaint, see Fed. R. Civ. P. 8, more specific pleadings are required where
fraud is alleged. 	Rule 9(b) requires that claims grounded in fraud be pled with
particularity, and extends to pleading predicate acts of mail and wire fraud
under RICO. 	Feinstein v. Resolution Trust Corp., 942 F.2d 34, 42 (1st Cir.
1991). 	To plead specificity in RICO, “the plaintiff must go beyond a showing of
fraud 	and 	state 	the 	time, 	place 	and 	content 	of 	the 	alleged 	mail 	and 	wire
communication perpetrating that fraud.” 	New England Data Serv. Inc. v. Becher,
829 F.2d 286, 291 (1st Cir. 1987).
In their motion to dismiss, Defendants argue that the allegations of mail
and interstate wire fraud lack the particularity required to sustain a RICO cause
of 	action. 	Moreover, 	Defendants 	aver 	that 	Plaintiff’s 	allegations 	fail 	to
establish an enterprise and a pattern of racketeering activity to state a valid
claim. 	We shall discuss each in turn.
a. 	Enterprise
An enterprise consists of “any union or group of individuals associated in
fact.” 	Boyle v. U.S., 129 U.S. 2239, 2243 (2009). 	Moreover, RICO reaches “a
group of persons associated together for a common purpose of engaging in a course
of conduct.” 	U.S. v. Turkette, 452 U.S. 580, 583 (1981). 	In the Complaint,
Plaintiff identifies SISSO as the enterprise, stating that “[c]o-defendants’
first victim was … SISSO, which is, in ‘RICO’ terms, the [e]nterprise.” 	Compl.
p. 51. 	It is well established, however, that the enterprise itself cannot be a
RICO defendant. 	“The person or persons alleged to be engaged in racketeering
activity must be entities distinct from the enterprise.” 	Odishelidze v. Aetna
Life & Cas. Co., 853 F.2d 21, 23 (1st Cir. 1988). 	Here, Plaintiff asserts a RICO
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cause of action against Defendants and all other co-defendants, including SISSO.
As 	such, 	Plaintiff 	fails 	to 	establish 	the 	element 	of 	an 	enterprise 	and,
therefore, fails to state a valid RICO claim.
b. 	Pattern of Racketeering Activity
Moreover, 	Plaintiff 	also 	fails 	to 	establish 	a 	pattern 	of 	racketeering
activity. 	Civil liability under § 1962(c) requires a “pattern of racketeering
activity” 	consisting 	of 	two 	or 	more 	related 	predicate 	acts 	of 	racketeering
activity that are committed over an extended period of time. 	Schultz v. Rhode
Island Hosp. Trist Nat’l Bank, N.A., 94 F.3d 721, 731-732 (1st Cir. 1996). 	Thus,
this element has two prerequisites: (1) two predicate acts of racketeering, and
(2) continuity of those acts.
The RICO Act provides a list of what activities constitute “racketeering
activity,” which includes acts indictable under 18 U.S.C. § 1341, the mail fraud
statute. 	18 	U.S.C. 	§ 	1961(1)(B). 	Plaintiff 	alleges 	in 	the 	Complaint, 	and
further in its opposition, that Defendants acted together “with a common goal to
defraud or attempt to defraud [Plaintiff] … of [its] contractual and property
rights.” 	Compl. p. 47. 	According to Plaintiff, MMC and SISSO effectively merged
to become one operating entity (“MMC/SISSO”) when MMC acquired SISSO and became
the new administrator of the Hospital. 	Plaintiff alleged that MMC/SISSO, acting
under Defendants’ control, contracted with the federal government under false
pretenses, misleading the government to believe SISSO was the valid administrator
of the Hospital (which was previously authorized by the Sublease). 	This was
allegedly done to exploit Plaintiff’s license, which SISSO had formerly operated
under, in order to receive Medicare funds. 	Compl. p. 52. 	Allegedly, MMC/SISSO
continuously submitted invoices via mail and/or interstate wire to Medicare and
other heath insurance companies, and received payments (in SISSO’s name) via
interstate mail or wire for alleged medical services. 	Plaintiff argues that
these alleged acts of fraud, although committed by MMC/SISSO, were the result of
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the Mayor’s influence and control over MMC/SISSO.
These 	general 	allegations 	of 	fraud, 	however, 	do 	not 	meet 	the 	pleading
requirements under Rule 9(b) in order to constitute a claim for mail or wire
fraud. 	Even though Plaintiff states the general contents of the communications
(i.e., invoices and payments), Plaintiff does not state the time nor place of the
alleged mail and wire communication perpetrating that fraud. 	Given the lack of
specificity 	in 	Plaintiff’s 	complaint, 	Plaintiff 	cannot 	be 	said 	to 	have
sufficiently 	pled 	mail 	or 	interstate 	wire 	fraud 	under 	Rule 	9(b). 	As 	such,
Plaintiff has failed to allege that Defendants committed any predicate acts under
the RICO Act.
Furthermore, 	even 	if 	Plaintiff 	had 	pled 	mail 	and 	wire 	fraud 	with 	the
required specificity, Plaintiff would have still failed to state a claim upon
which relief could be granted. 	Mail and interstate wire fraud requires proof
that (1) defendants knowingly devised or participated in a scheme to defraud, (2)
to 	obtain 	money 	or 	property 	by 	means 	of 	false 	or 	fraudulent 	pretenses,
representations 	and 	promises, 	and 	(3) 	that 	the 	mails 	or 	interstate 	wire
facilities were used in carrying out the scheme. 	Neder v. United States, 527
U.S. 1, 20 (1999). 	The use of the mails or wires need not be essential to the
scheme to defraud, or even done by a defendant, so long as the mailing or wire is
a closely related and reasonably foreseeable incident of the scheme. 	United
States v. Morrow, 39 F.3d 1228, 1236-123 (1st Cir. 1994).
Because an essential element of the federal fraud statute is the use of
interstate communication lines, Plaintiff is required to allege that the wire
communications took place across state lines. 	Here, Plaintiff did not allege
that the wire communications between MMC/SISSO and the federal agencies went
outside 	of 	Puerto 	Rico. 	Thus, 	the 	Court 	can 	assume 	that 	the 	fraudulent
communications 	between 	the 	parties 	occurred 	within 	Puerto 	Rico. 	Because
Plaintiff has only pled the use of intrastate communications as wire fraud,
Plaintiff has failed to plead RICO predicate acts as required by 18 U.S.C. §§
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1961(1), 1962(c).
Even on the supposition that two related predicate acts could somehow been
established from the vague language contained in the Complaint, Plaintiff runs up
against 	another 	insurmountable 	obstacle 	of 	establishing 	the 	requirement 	of
“continuity”. 	This element is satisfied by alleging: (1) a series of related
predicates extending over a substantial period of time that amount to a threat of
continued 	criminal 	activity 	(“the 	closed-ended 	approach”) 	or 	(2) 	that 	the
racketeering acts themselves include a specific threat of repetition extending
indefinitely into the future (“the open-ended approach”). 	H.J. Inc. v. Nw. Bell
Tel. Co., 492 U.S. 229, 242 (1989). 	Here, Plaintiff does not allege either type
of continuous racketeering activity, and completely fails to specify any sort of
“pattern” (which is defined as two or more acts) of fraudulent communications.
Thus, Plaintiff fails to state a claim under RICO.
ii. 	Conspiracy to Violate RICO Claim
Our conclusion that Plaintiff has failed to adequately plead a substantive
violation of RICO makes it unnecessary for us to consider Plaintiff’s conspiracy
claim. 	A conspiracy claim under § 1962(d) may survive a fact finder's conclusion
that there is insufficient evidence to prove a RICO violation, Howard v. Am.
Online, Inc., 208 F.3d 741, 751 (9th Cir. 2000), cert. denied, 121 S. Ct. 77
(2000), but if the pleadings do not state a substantive RICO claim upon which
relief 	may 	be 	granted, 	then 	the 	conspiracy 	claim 	also 	fails, 	id.; 	see 	also
Salinas v. United States, 522 U.S. 52, 65 (1997) (“A conspirator must intend to
further an endeavor which, if completed, would satisfy all of the elements of a
substantive criminal offense....”). 	As 	such, 	Defendant’s 	motion 	to 	dismiss
Plaintiff’s claim alleging conspiracy to violate RICO is GRANTED.
D. 	Jurisdiction of the State Law Claims
Defendants also argue that the Court does not have proper jurisdiction over
Plaintiff’s following state law claims: (1) breach of contract; (2) fraud; (3)
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damages incidental to contract and/or tort; (4) damages incidental to tortious
interference 	with 	contractual 	relations; 	(5) 	loss 	of 	opportunities 	and
reputation; (6) loss of business opportunity; and (7) damages to other sub-
lessors. 	Defendants aver that these claims should be dismissed based on lack of
supplemental jurisdiction. 	This argument is based on Defendants’ position that
no 	valid 	federal 	claim 	exists 	against 	them 	because, 	according 	to 	Defendants
motion, 	Plaintiff’s 	Section 	1983 	and 	RICO 	claims 	should 	both 	be 	dismissed.
Although this Court dismisses Plaintiff’s RICO cause of action, we disagree with
Defendants and hold that a valid federal claim exists because Plaintiff has
sufficiently stated a Section1983 claim against the Mayor.
The jurisdiction of the bankruptcy court, like that of any other federal
court, is limited by statute. 	Section 1334(b) of Title 28 provides that "the
district courts shall have original but not exclusive jurisdiction of all civil
proceedings arising under title 11 or arising in or ‘related to’ cases under
title 11." 	The district courts may, in turn, refer "any or all proceedings
arising under title 11 or arising in or ‘related to’ a case under title 11 … to
the 	bankruptcy 	judges 	for 	the 	district." 	At 	its 	essence, 	bankruptcy 	court
jurisdiction exists in cases “under” the United States Bankruptcy Code, 11 U.S.C.
§§ 101 et seq., and those cases “arising under,” “arising in,” and “related to”
title 11. 28 U.S.C. § 1334(b); 28 U.S.C. § 157(a). 	These types of proceedings
are further delineated as “core” or “non-core.” 	Because of the constitutional
limits imposed upon bankruptcy court jurisdiction, distinguishing between core
and non-core proceedings is vital to the exercise of jurisdiction by a bankruptcy
court. 	A bankruptcy court may hear and finally determine all core bankruptcy
proceedings; the parties' agreement is not needed. 28 U.S.C. § 157(b). 	In non-
core “related to” proceedings, however, only the district court may enter final
orders absent consent of the parties. 	28 U.S.C. § 157(c).
i. 	“Related To”
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Bankruptcy courts may exercise subject matter jurisdiction over core claims
that "arise under" or "arise in" a bankruptcy case. 	A bankruptcy court will also
have subject matter jurisdiction over those non-core proceedings that "relate to"
a bankruptcy case. 	In re Middlesex Power Equip. & Marine Inc., 292 F.3d 61, 68
(1st Cir. 2002). 	A civil proceeding is "related to" a bankruptcy case, for
jurisdictional purposes, when the action between the parties affects how much
property is available for distribution to creditors of the bankruptcy estate or
allocation of property among such creditors, or if the outcome could alter the
debtor’s rights or liabilities. 	Id. at 68. 	By its very definition, “related-to”
jurisdiction 	only 	applies 	in 	non-core 	matters 	as 	an 	alternative 	basis 	of
jurisdiction. 	It assumes that the matter does not ‘arise in’ the case at hand
and therefore it requires some other nexus vis-à-vis the estate involved.
Whether the claims are sufficiently “related to” a bankruptcy case is a
question 	of 	whether 	they 	are 	“sufficiently 	connected” 	to 	the 	debtor’s
reorganization. 	The Third Circuit has established a much-cited standard for
determining whether a proceeding is “related.” 	In Pacor, Inc. v. Higgins, 743
F.2d 984 (3rd Cir. 1984), the court described the test as whether “the outcome of
that 	proceeding 	could 	conceivably 	have 	any 	effect 	on 	the 	estate 	being
administered in bankruptcy.” 	The First Circuit has recognized this standard.
See In re G.S.F. Corp., 938 F.2d 1467, 1475 (1st Cir. 1991). 	In addition,
numerous First Circuit district and bankruptcy courts have accepted and applied
this test. See, e.g., In re Santa Clara Cnty Child Care Consortium, 223 B.R. 40,
45 (B.A.P. 1st Cir. 1998) (providing a lengthy list of First Circuit district and
bankruptcy courts adopting the Pacor test). 	Simply stated, if the determination
of the controversy could have an effect on the bankruptcy estate, the controversy
is a “related matter.” 	28 U.S.C.A. § 157(a).
Here, Plaintiff’s complaint is clear that Defendants’ alleged interference
of 	the 	Lease 	and 	lack 	of 	payment 	from 	SISSO 	was 	the 	direct 	cause 	of 	the
bankruptcy filing. 	The funding of the plan would come in large part from the
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final determination of the amounts owed to Plaintiff. 	Thus, there exists a
sufficient 	nexus 	between 	the 	determination 	of 	this 	controversy 	and 	the
administration of the estate to find that this Court has jurisdiction over this
matter.
ii. 	Core v. Non-Core
Once this Court’s jurisdiction is established, the Court determines whether
a civil proceeding is categorized as either a “core proceeding” or a “non-core
proceeding.” 	The Judicial Code differentiates between core proceedings and non-
core proceedings and includes a non-exhaustive list of core proceedings. 	See 28
U.S.C. § 157(b)(2). 	Section 157 does not provide the bankruptcy courts with the
full 	authority 	over 	all 	matters 	as 	to 	which 	a 	district 	court 	may 	exercise
jurisdiction under Section 1334. 	Pursuant to 28 U.S.C. §157(b)(1), a bankruptcy
judge "may hear and determine all…core proceedings arising under title 11…and may
enter appropriate orders and judgments, subject to review [under 28 U.S.C. §
158]." 	A core proceeding, for bankruptcy jurisdictional purposes, is an action
that has as its foundation the creation, recognition, or adjudication of rights
that would not exist independent of a bankruptcy environment.
Section 157(c) effectively creates three categories of proceedings: (1) a
core proceeding, in which a bankruptcy court may hear the proceeding and make
final determinations; (2) a non-core, related proceeding, in which a bankruptcy
court 	may 	hear 	the 	proceeding, 	but 	cannot 	make 	final 	determinations 	absent
consent; and (3) proceedings that are non-core and not “related to” a case under
title 11, wherein a bankruptcy court may not hear the proceeding. 	The Supreme
Court decided upon the power of bankruptcy judges to decide core and non-core
proceedings in the seminal case of N. Pipeline Constr. Co. v. Marathon Pipeline
Co., 458 U.S. 50 (1982). 	This case involved an adversary proceeding brought by a
debtor-in-possession 	seeking 	damages 	for 	an 	alleged 	pre-petition 	breach 	of
contract. 	The 	Supreme 	Court 	held 	that 	the 	proceeding 	could 	not 	be 	finally
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adjudicated 	by 	the 	bankruptcy 	court. 	The 	Court 	explained 	that 	while 	the
restructuring of debtor-creditor relationships is at the core of the federal
bankruptcy power, the adjudication of state-created private rights is not. 	Id.
at 71.
The First Circuit defines non-core proceedings as “claims concerned only
with state law issues that did not arise in the core bankruptcy function of
adjudicating debtor-creditor rights, referring to them as ‘Marathon-type suits.’”
In re Arnold Print Works, Inc., 815 F.2d at 167 (quoting 130 Cong. Rec. H1848
(daily ed. March 21, 1984) (statement of Representative Kindness)). 	In this
case, the court ruled that bankruptcy courts were empowered to finally determine
suits 	filed 	by 	an 	estate 	representative 	to 	collect 	debts 	arising 	after 	the
commencement of the bankruptcy case, but not empowered to finally determine suits
relating to debts arising before commencement of the case. 	In re Arnold Print
Works, 815 F.2d at 168. 	While the former was deemed to be core, the latter was
deemed non-core. 	Id. 	The court based its decision on Marathon stating that,
“[n]on-core proceedings, those that the statute calls ‘related to’ bankruptcy
cases, concern aspects of the bankruptcy case that Marathon barred non-Article
III judges from determining on their own.” 	Id. at 167.
The present adversary proceeding relates to a pre-petition action for a
breach of contract (the termination of the Lease) that commenced outside the
bankruptcy court. 	The Court in In re Mec Steel Bldgs., Inc. held that, “[i]f an
action survive[s] outside of bankruptcy, and in the absence of bankruptcy would
have been initiated in a state or district court, then it clearly involves non-
core matter.” 	136 B.R. 606 (Bankr. D. Puerto Rico 1992). 	Here, Plaintiff’s
action could survive outside of bankruptcy and in the absence of bankruptcy,
would have been resolved in local court. 	Plaintiff’s action relates to pre-
petition claims arising under local law, which is deemed non-core under cited
case law and specifically pursuant to the Supreme Court's decision in Marathon.
Cases where courts find that there is “related to” jurisdiction are deemed non-
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core. 	By definition, these actions are non-core related proceedings because they
existed prior to the filing of the bankruptcy petition. 	Applying the case law
and 	statutes 	to 	the 	facts 	of 	the 	case 	before 	us, 	this 	Court 	concludes 	that
Plaintiff’s auxiliary claims are non-core proceedings “related to” a case under
title 11. 	Pursuant to 11 U.S.C. § 157(c)(1) and (c)(2), this Court may only
submit proposed findings of facts and conclusions of law. Any final judgment must
be entered by an Article III judge, absent consent of all parties. Thus, this
Court 	has 	proper 	jurisdiction 	to 	hear 	Plaintiff’s 	state 	law 	claims 	against
Defendants and DENIES Defendants’ request to dismiss these claims.
iii. 	Abstention
Our analysis now turns to whether this Court should consider abstaining
from this proceeding altogether, even though jurisdiction has been established
over the controversy. 28 U.S.C. § 1334(c) provides for two types of abstention,
mandatory and discretionary (sometimes referred to as permissive). Mandatory
abstention under §1334(c)(2) provides that “upon timely motion of a party in a
proceeding based upon a State law claim or State law cause of action, “related
to” a case under title 11 but not arising under title 11 or arising in a case
under title 11, with respect to which an action could not have been commenced in
a court of the United States absent jurisdiction under this section, the district
court shall abstain from hearing such proceeding if an action is commenced, and
can be timely adjudicated in a State forum of appropriate jurisdiction.” The key
factors for discretionary abstention under 28 U.S.C. § 1334 (c)(1) implicate: (1)
the interest of justice; (2) the interest of comity with state courts; or (3)
respect for state law.
a. 	Mandatory Abstention
Therefore, in order for mandatory abstention to apply, the proceeding must:
1) 	be 	based 	on 	a 	state 	law 	claim 	or 	cause 	of 	action, 	2) 	lack 	a 	federal
jurisdictional basis absent the bankruptcy, 3) be commenced in a state forum of
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appropriate jurisdiction, 4) be capable of timely adjudication, and 5) be a non-
core proceeding. 28 U.S.C. Sec. 1334(c)(2). 	“Pursuant to section 1334(c)(2), the
‘district court must abstain from hearing a purely state law claim where there is
no 	other 	basis 	for 	federal 	jurisdiction 	other 	than 	its 	relatedness 	to 	a
bankruptcy proceeding (including one where the debtor is a party) and where the
claim can be timely adjudicated in state court.’” In re Interamericas Turnkey
Development Co., Inc., 94 B.R. 9, 13 (D. Puerto Rico 1988), citing Matter of
Candelero Sand & Gravel, Inc., 66 B.R. 903, 908 (D. Puerto Rico 1986)(quoting
State Bank of Lombard v. Chart House, 46 B.R. 468, 472 (N.D. Ill. 1985)); see
also Goya Foods v. Unanue-Casal (In re Unanue-Casal), 164 B.R. 216, 222-23 (D.
Puerto Rico 1993)(discussing requirements for mandatory abstention), aff'd., 32
F.3rd. 561 (1st Cir. 1994). 	The language of the statute is clear that one of the
prerequisites for mandatory abstention is that an action must have been initiated
in a state forum with jurisdiction. See, Juan Flores Rivera v. Telemundo Group,
133 B.R. 674 (D. Puerto Rico 1991); In re Mec Steel Bldgs., Inc., 136 B.R. at
610. 	Applying these factors to the present case, it is clear that all factors
can be satisfied except for, arguably, factor four where the timeliness of the
resolution in state court could be questioned; and factor three, which requires
that a state court case be pending. As there is no state litigation pending in
this case, and in view of the facts that not all of the required elements for
mandatory abstention are met, abstention in this form is deemed inapplicable.
b. 	Discretionary Abstention
Even though mandatory abstention does not apply, § 1334(c)(1) provides for
discretionary or permissive abstention. Section 1334(c)(1) states that “[n]othing
in this section prevents a district court in the interest of justice, or in the
interest of comity with State courts or respect for State law, from abstaining
from hearing a particular proceeding arising under title 11 or arising in or
‘related to’ a nor difficult, or the matters involved do not have an impact on
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state policy. Telemundo, 133 B.R. at 675.
In Telemundo, The District Court of Puerto Rico listed the factors to
consider upon reaching a determination as to discretionary abstention:
(1) the effect or lack thereof on the efficient administration of
the estate if a court recommends abstention, (2) the extent to which
state 	law 	issues 	predominate 	over 	bankruptcy 	issues, 	(3) 	the
difficulty 	or 	unsettled 	nature 	of 	the 	applicable 	law, 	(4) 	the
presence of a related proceeding commenced in state court or other
non bankruptcy court, (5) the jurisdictional basis, if any, other
than 28 U.S.C. § 1334, (6) the degree of relatedness or remoteness
of the proceeding to the main bankruptcy case, (7) the substance
rather than form of an asserted core proceeding, (8) the feasibility
of severing state law claims from core bankruptcy matters to allow
judgments to be entered in state court with enforcement left to the
bankruptcy court, (9) the burden of [the bankruptcy's court] docket,
(10) 	the 	likelihood 	that 	the 	commencement 	of 	the 	proceeding 	in
bankruptcy court involves forum shopping by one of the parties, (11)
the existence of a right to jury trial, and (12) the presence in the
proceeding of non-debtor parties.
Telemundo, 133 B.R. at 677. This case involves a collection of monies action and
breach of contract which requires the application of well established state law.
The fact that the case involves issues of state law alone is not sufficient to
warrant 	abstention. 	In 	fact, 	upon 	considering 	core 	matters 	this 	court 	must
interpret state law routinely. For example, when deciding which creditor has a
better claim, the court must look at the validity of the lien according to state
law. See, In re Arnold Print Works, 815 F.2d at 169. As to the interest of
justice, an abstention with respect to the Plaintiff’s dispute would not advance
judicial economy or the administration of this bankruptcy case. The non-core
related 	proceeding 	could 	result 	in 	the 	payment 	of 	the 	substantial 	amounts
claimed 	to 	be 	owed. 	This 	fact 	should 	be 	determined 	in 	the 	context 	of 	this
bankruptcy case and should not be delayed as the result of requiring Plaintiff
to commence another case in the state court. See, In re Earle Industries, Inc.,
72 B.R. 131, 134 (Bankr. E.D. Pa. 1987); In re Climate Control Engineers, Inc.,
51 B.R. 359, 363 (Bankr. M.D. Fla. 1985) (“Because there is no action commenced
in state court covering the same subject matter ... and because the power to
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abstain should be exercised sparingly”). In regard to the interest of comity
with state courts, there is no action pending in state court covering the same
subject matter. 	As to the requirement regarding the respect for state law, the
action for breach of contract or fraud does not involve unsettled issues of
state law or matters of substantial public importance. Telemundo, 133 B.R. at
675. Therefore, discretionary abstention with regard to Plaintiff’s claims, in
either its mandatory or discretionary form, is inapplicable to this proceeding.
iv. 	The Stern v. Marshall Case
A thorough analysis of this court's jurisdiction over the state law claims
presently before us would not be complete without discussing the recent ruling
by the Supreme Court. In Stern v. Marshall, ____U.S. ____ , 131 S. Ct. 2594
(2011), the U.S. Supreme Court, in a 5-4 decision, held that the bankruptcy
court 	could 	not, 	as 	a 	constitutional 	matter, 	enter 	a 	final 	judgment 	on 	a
counterclaim that did not arise under title 11 or in a case under title 11, even
though 	28 	U.S.C. 	§ 	157(b)(2)(C) 	expressly 	permits 	it 	to 	do 	so. 	The 	Court
affirmed a 2010 ruling of the Ninth Circuit Court of Appeals and held that a
bankruptcy court, as a non-Article III court, did not have the constitutional
authority to decide a state law claim brought by a debtor against a creditor,
even though the matter was part of the “core” statutory jurisdiction of the
bankruptcy 	court. 	This 	significant 	decision 	limits 	the 	power 	of 	bankruptcy
courts and may have wide-ranging implications, requiring certain types of claims
to 	be 	decided 	in 	a 	non-bankruptcy 	forum, 	even 	where 	they 	are 	central 	to 	a
debtor’s bankruptcy case. In a dispute concerning the estate of the late J.
Howard Marshall II, Pierce Marshall filed a complaint in Vickie Lynn Marshall's
bankruptcy case alleging that V.L. Marshall defamed him and that such defamation
claim 	was 	not 	dischargeable. 	V.L. 	Marshall 	counterclaimed 	for 	tortious
interference 	with 	a 	gift 	expected 	from 	her 	late 	husband 	J. 	Howard. 	The
bankruptcy court granted V.L. Marshall summary judgment on Pierce Marshall's
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claim for defamation and awarded V.L. Marshall more than $400 million on her
counterclaim against Pierce Marshall.
Justice Roberts began his majority opinion by examining 28 U.S.C. § 157,
which 	“divide[s] 	bankruptcy 	proceedings 	into 	three 	categories: 	those 	that
‘arise[e] under title 11’; those that ‘aris[e] in a title 11 case’; and those
that are ‘related to a case under title 11.’” “Bankruptcy judges may hear and
enter final judgment in ‘all core proceedings arising under title 11, or arising
in a case under title 11.” 11 U.S.C. § 157(b)(2)(C) details 16 types of core
proceedings, including counterclaims by a debtor against a claimant. The majority
found that V.L. Marshall's counterclaim against Pierce Marshall for tortious
interference constituted a “core proceeding” under the plain text of the statute.
The majority held that as a statutory matter, the Bankruptcy Court had authority
to enter a final judgment on the debtor’s counterclaim for tortious interference.
However, the analysis did not end there. Despite finding that 28 U.S.C. § 157
permitted the Bankruptcy Court to enter a final order in the matter, the majority
agreed with Pierce Marshall that Article III of the Constitution rendered this
statutory provision unconstitutional and held that the Bankruptcy Court could not
enter a final order on the state law counter-claim.
With a stern lecture to Congress not to hand off the work of judges to
others, even if those others might have the title “judge,” a divided Supreme
Court 	took 	out 	of 	the 	reach 	of 	specialized 	federal 	bankruptcy 	courts 	the
authority to decide a small, but potentially significant, group of debtors’
claims. 	Striking down a part of a 1984 law designed to satisfy an earlier
Supreme Court decision limiting bankruptcy judges’ powers, the Court ruled that
specialized 	judges 	who 	do 	not 	have 	life 	tenure 	and 	other 	guarantees 	of
independence cannot decide in a final way a debtors’ claim that is based upon
state 	law 	with 	no 	link 	whatever 	to 	federal 	law 	or 	regulations. 	For 	the
specialized bankruptcy courts, the decision was as momentous a constitutional
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ruling on those courts’ authority as was the Justices’ decision in the 1982
case 	of 	Northern 	Pipeline 	Construction 	v. 	Marathon 	Pipe 	Line, 	supra,
nullifying 	an 	earlier 	congressional 	law 	against 	those 	courts’ 	powers.
Congress, in 1984, passed a new law to salvage the bankruptcy courts’ authority
by changing the way their judges were named, and the way those courts’ rulings
were reviewed in higher federal courts. 	But the decision found that Congress
had violated Article III in giving bankruptcy courts final authority to decide
one kind of claim that debtors assert in those cases. 	That claim, the new
decision 	made 	clear, 	is 	one 	that 	is 	based 	solely 	on 	state 	law, 	and 	that
characteristic 	puts 	it 	— 	because 	of 	Article 	III 	— 	beyond 	the 	reach 	of 	a
bankruptcy 	judge. 	Under 	the 	1984 	law, 	Congress 	gave 	the 	regional 	federal
appeals courts the authority to name bankruptcy judges and limited such judges
to 14-year terms. 	By contrast, 	federal judges named under Article III are
appointed by the President, subject to Senate confirmation, and serve for life
unless removed by impeachment. 	The new ruling specifies that a 	non-Article
III judge of a bankruptcy court cannot constitutionally be given the authority
to decide a debtor’s claim that is exclusively based upon some legal right
assured by state law.
While Stern v. Marshall is probably the Supreme Court's most significant
ruling on bankruptcy jurisdiction in recent years, the impact is not yet clear.
Moreover, the opinion may be restricted by its facts to counterclaims with
little or no relation to the underlying bankruptcy claim. Despite our analysis
of this seminal opinion, this Court finds that at this stage in our proceedings
its applicability to the matters at hand is non conclusory. Our jurisdictional
conclusion remains the same. The safe interpretation as to the limitations upon
this court due to the effect of the Stern case is that this Court may only
submit proposed findings of facts and conclusions of law regarding the state
law claims against Defendant. Any final judgment will be entered by an Article
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III judge, absent consent of all parties.
IV. 	CONCLUSION
WHEREFORE, in view of the above, IT IS ORDERED that the following claims
be dismissed for failure to state a claim pursuant to FRCP, Rule 12(b)(6):
(a) Plaintiff’s Section 1983 claim against Mrs. Gonzalez and the
conjugal partnership
(b) Plaintiff’s RICO claims against Defendants
IT IS FURTHER ORDERED that the following claims be sustained:
(a) 	Plaintiff’s Section 1983 claim against the Mayor
(b) 	Plaintiff’s 	state 	law 	claims 	against 	Defendants: 	(1) 	breach 	of
contract; (2) fraud; (3) damages incidental to contract; (4) tortious
interference with contractual relations; (5) loss of opportunities and
reputation; (6) loss of business opportunity; and (7) damages to other
sub-lessors.
IT IS SO ORDERED.
San Juan, Puerto Rico this 02 day of September, 2011.
Brian K. Tester
U.S. Bankruptcy Judge
CC: 	ALL CREDITORS
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