Phillips v. Youth Development Program, Inc.

¶1(concurring). There has been a significant trend in recent years towards cutting back on the direct provision of social services by the Commonwealth in favor *640of contracting out such services to private providers. The trend is an outgrowth of a widespread perception that direct governmental provision of services is apt to be cost-ineffective because of built-in rigidities in the State personnel system — tenure laws, civil service laws, due process requirements, and the like — which give private enterprise an advantage in flexibility of response to changing conditions. Whether that perception is valid or not, the Legislature has elected over the last decade to provide many social services on the contract-out model in the expectation that the services could in that manner be provided at lower cost, and to the extent that we find “State action” in the activities of the contracting providers we tend to defeat the realization of that goal by reintroducing the very inflexibilities in the hiring and firing of personnel that the Legislature sought to avoid. I doubt very much that the employees of the myriad private social-service providers think of themselves as being entitled to the various due process and tenure benefits of Commonwealth employees.

¶2It is difficult to know precisely where the Rendell-Baker case, 457 U.S. 830 (1982), and its companion cases (see infra) have left this area of the law; none was unanimous, and there was a different spokesman for the majority in each. It is easy, however, to sense that the three cases mark a significant shift in the direction of shrinking the concept of State action and that it will no longer suffice merely to find a closeness or “nexus” between the State and the contracting corporation which will bring all the corporation’s personnel decisions within the broad sweep of “State action.” Rather, as Justice Smith indicates, the relevant inquiry seems now to be whether the particular action complained of — in this case the discharge of the plaintiff — is the product of a State “rule of conduct or policy,” Rendell-Baker v. Kohn, 457 U.S. 830, 844 (1982) (White, J., concurring), or was made “in concert with [SJtate actors.” Id.at 838 n.6 (majority opinion).

¶3There is no suggestion in this case that the plaintiff’s discharge resulted from some rule of conduct or policy pro*641mulgated by the State. The aspect of the case that most gives one pause is the fact that three of the nine members of YDP’s board of directors and one of the five who voted for the discharge were employees in the Springfield Juvenile Court. That fact is, in my opinion, not analytically relevant to the determination whether the discharge decision was “State action,” because there is no suggestion in the record that any of the three acted in his capacity as a State employee in connection with the plaintiff’s discharge. Case illustrating the relevant analysis of cases involving State actors are discussed in note 6 (at 838) of the Rendell-Bakeropinion. To carry the analysis beyond the scope of those cases would portend the possibility that the mere presence of State employees on a board of trustees of a charitable corporation having significant contracts with the State (such as the hospital in Bello v. South Shore Hosp., 384 Mass. 770 [1981]) would bring the personnel actions of the board within the sphere of “State action.” Such would be to extend the concept of State action considerably beyond the outermost frontiers of the decided Federal cases.

¶4It is worth mentioning that the very closeness of the relationship between the Springfield Juvenile Court and the board of YDP may be suspect under State law. The problem arises from the court’s role in engaging the services of a provider whose board of directors includes employees of the court, those employees standing in a position, arguably, to influence the court’s decision whether to utilize the services of YDP in particular cases. There is no suggestion here of possible violations other than technical in nature (the members of the board apparently receive no compensation from YDP), but the application of the Conflict of Interest Law does not necessarily turn on the presence of absence of a personal financial interest, direct or indirect. See, e.g., G. L. c. 268A, § 6(a), inserted by St. 1962, c. 779, § 1 (“[A]ny [S]tote employee who participates as such employee in a particular matter in which to his knowledge ... a business organization in which he is serving as . . . director . . . has a financial interest . . . shall be punished . . .”). Cf. G. L. *642c. 268A, § 4(c). State law favors (if it does not mandate) arm’s-length dealings in the making of contracts between agencies of the Commonwealth and providers of services, suggesting that the safer course might be for employees of the Springfield Juvenile Court to sever their connection with the board of YDP.

¶5Actions taken by a State officer may be “State action” notwithstanding that those actions violate State policy, see Lugar v. Edmondson Oil Co., 457 U.S. 922, 933 (1982), but here it seems clear that the action of the court employee who voted as a member of the YDP board to discharge the plaintiff was not taken in his capacity as an employee of the Commonwealth and was not guided or encouraged by any rule, decision, or policy of the Commonwealth. Accordingly, the discharge decision was not action by the Commonwealth, and for that reason I concur in the opinion of Justice Smith.

¶6(dissenting). There is ample support for the conclusion that Ms. Phillips has been discharged in violation of her rights under the First, Fifth, and Fourteenth Amendments to the United States Constitution and arts. 12 and 16 of the Massachusetts Declaration of Rights.1 The majority hold, however, that the judgment must be reversed because *643the defendant’s decision to discharge Ms. Phillips cannot be attributed to the State. In my view, the defendant’s performance of a public function and the substantial involvement of the State, through the Springfield Juvenile Court, in its affairs establish “a sufficiently close nexus between the State and the [defendant’s] challenged action ... so that the action of the latter may be fairly treated as that of the State itself.” Jackson v. Metropolitan Edison Co., 419 U.S. 345, 351 (1974). See Evans v. Newton, 382 U.S. 296, 299 (1966); Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 175 (1972); Flagg Bros. v. Brooks, 436 U.S. 149, 157 (1978).

¶7The critical facts merit restatement. Ms. Phillips was hired as an employee of the Springfield Juvenile Court and assigned to the court’s “intensive juvenile probation program” (program), directed by the court’s assistant chief probation officer. The defendant’s incorporation in 1972, under G. L. c. 180, was expressly approved by the Juvenile Court judge and several court officials. The court had significant representation on the defendant’s board of directors thereafter. After incorporation, Ms. Phillips and others were transferred to the defendant’s staff and sworn, under G. L. c. 276, § 89A, as deputy probation officers. The defendant’s staff was permitted to use a letterhead bearing the Commonwealth’s seal and the words “Springfield Juvenile Court — Intensive Probation Program.” On its left side the letterhead listed the names of the Juvenile Court judge and other court officials; and on the right side the names of the defendant’s supervisory staff. Staff members also carried business cards with the Commonwealth’s seal, identifying the program as part of the “Trial Court of the Commonwealth — Juvenile Court Department, Springfield Division.”

¶8Prior to July 1, 1979, the effective date of the Court Reorganization Act, the defendant was exclusively funded by the county of Hampden under a written agreement with the county commissioners. This agreement named the defendant the exclusive provider for the intensive juvenile probation needs of the Springfield Juvenile Court. During this period, *644Ms. Phillips was paid by checks issued by the county treasurer’s office, and she received annual wage and tax statements (W-2’s) which identified her as a county employee. After the implementation of court reorganization, the defendant was exclusively funded by the Commonwealth. Ms. Phillips was thereafter paid by checks of the Commonwealth, issued by the State Treasurer’s office. Deductions were made for insurance but not under the Federal Insurance Contributions Act (FICA). The W-2 statements identify the Commonwealth as Ms. Phillips’ “employer,” but also bear the notation “non-employee.”

¶9In a document depicting the court’s activities and functions, the defendant’s probation program is listed as acting under the direct aegis of the Juvenile Court judge; its internal policy documents are replete with references to the court. At all relevant times, the defendant supplied services to the court pursuant to a written contract with the office of the Chief Administrative Justice.2 That office required Ms. Phillips to complete an “Employee Position Evaluation Questionnaire” for the “Trial Court Department — Commonwealth of Massachusetts.”

¶10The vote to discharge Ms. Phillips occurred at a meeting of six directors, two of whom were court employees. One of these officials voted to discharge her. (The other abstained from voting.) Under the defendant’s by-laws, five votes were necessary to discharge an employee. The purported ground for termination was insubordination. At all rele*645vont times, the by-laws contained a further provision that the activities of the “Intensive Probation Program will be subject, in all phases, to the final approval of the presiding justice of the Springfield Juvenile Court[,] which will include policy, programming, and personnel.”

¶11The majority appear to construe Rendell-Baker v. Kohn, 457 U.S. 830 (1982), as requiring separate analysis of each indication of State action. That analysis fails to evaluate the aggregate of all the circumstances bearing on the question in light of established Federal precedents, none of which was changed by the Rendell-Bakerdecision.3

¶12Rendell-Bakerenumerates four general principles. First, the receipt by a private enterprise of a large amount of public funding alone will not constitute a legally tenable basis for finding State action. Id. at 840-841. Second, extensive general regulation of that enterprise by the State similarly will not be sufficient by itself to make the State responsible for actions taken by the enterprise, especially where the particular transaction is of a type not heavily burdened by regulation. Id. at 841-842. Third, the enterprise’s performance of a public function, i.e., a function which has been “traditionally exclusively reserved to the State,” Jacksonv. Metropolitan Edison Co., 419 U.S. at 352, continues to be a significant indication that the State has cloaked the enterprise with its authority. Rendell-Baker, at 842. Fourth, where a “symbiotic relationship” exists between the State and the enterprise, so that the two may be engaged in a mutually beneficial combination, the actions of the enterprise may reasonably be attributed to the State. Id. at *646842-843. See Burton v. Wilmington Parking Authy., 365 U.S. 715, 723-724 (1961).4

¶13Here the facts substantially support the conclusion that the defendant’s probation program was designed to be, and at the time of the plaintiff’s dismissal was, an integral part of the Springfield Juvenile Court, an admitted agency of the State. There is no assertion that any action taken by court officials contravened their authority. The program was established under the authority of the Juvenile Court judge, exclusively served the court, and employed staff who were hired by the judge and were paid directly from the State Treasurer’s office. The staff used court materials which, on their face, conveyed the clear impression that the defendant’s employees were acting as officers of the Juvenile Court. Supervisory court employees held three seats on the defendant’s board of directors, while the Juvenile Court judge retained express approval power over matters of “policy, programming and personnel.” I can find no evidence that the program’s public characteristics were dissipated by incorporation.5 Instead, I find a close, working partnership between the Juvenile Court and the defendant in which the latter’s freedom of decision making was circumscribed by State officers of the Juvenile Court who possessed, and exercised, the power to approve its staffing, policies, and operating methodology.6

¶14*647The defendant’s probation activities also meet the public function test stated in Jacksonv. Metropolitan Edison Co., 419 U.S. at 352, and reemphasized as a critical indicator of State action in Rendell-Bakerv. Kohn, 457 U.S. at 842. The facts stressed by the majority on this issue — that other civic and charitable organizations provide help to troubled youths and that “no statute or State regulation . . . requires a court to establish an intensive probation program” — are of little relevance. There is no question, as the majority concede, that the maintenance of a juvenile probation system is a traditional and required function of State government. And the long standing view of probation in this area has always been that youthful offenders should be treated “not as criminals, but as children in need of aid, encouragement and guidance.” G. L. c. 119, § 53. See Metcalf v. Commonwealth, 338 Mass. 648, 651-652 (1959). The trial judge found that the defendant’s “services when not identical to, complement the service[s] of the Juvenile Court Probation Department as . . . provided for in [G. L. c.] 119, [ §§] 57 to 59, 62, 67 and 68.” If the defendant did not exist, the supervision it provided to youthful offenders on probation would be assumed by the Juvenile Court’s probation officers.7 The defendant’s program, viewed in light of the enumerated statutes, indicates that the defendant fulfilled obligations which are traditionally performed by the probation office of a Juvenile Court.

¶15It is in this factual context that the circumstances of the defendant’s funding take on significance. As the Rendell*648Baker decision points out, the grant of funds by the State alone will not make an enterprise a State actor. Here, however, the State went considerably beyond the mere provision of funding. It provided for payment of the defendant’s staff by the State Treasurer in a manner consistent with State employment (i.e. a deduction for insurance and no FIGA deduction). In the absence of the characteristics usually found in a relationship with an independent contractor,8 the defendant’s complete financial dependence on the State and the latter’s disbursement of its funds buttresses the conclusion that the government had become more than superficially involved in the defendant’s affairs.

¶16I also disagree with the majority’s ruling that the decision to discharge was solely the decision of a private contractor. As previously noted, the defendant’s personnel matters were subject to broad control by the Juvenile Court judge. The discharge was occasioned by publicity bearing on the defendant’s providing probation services pending receipt of State funding, an issue of obvious and vital concern to both the Juvenile Court and the defendant.9 The critical fifth vote necessary under the defendant’s by-laws to discharge Ms. Phillips was supplied by a State officer. To the extent relevant, the “symbiotic relationship” between the two entities made the employment decision, for all practical purposes, one “based upon [a] rule of conduct. . . put forth by the State [i.e., the Juvenile Court].” Furthermore, I see no reasonable support in the record for the majority’s con*649clusion that the Juvenile Court judge’s reserved power over personnel decisions applied exclusively to hiring. The fact that Ms. Phillips did not seek the judge’s intervention to reverse her discharge would not warrant such an inference in view of the esoteric nature of the by-laws, the peremptory manner in which the discharge took place, and the virtual absence of notice of her rights of review.

¶17I thus conclude that the defendant is quite unlike the private contractor who “depends primarily on contracts to build roads, bridges, dams, ships, or submarines for the government.” Rendell-Bakerv. Kohn, 457 U.S. at 841. I see no reason to fear that finding State action here will expose the State to unjustified liability or hamper its operations. I suspect the present situation is quite peculiar and that the usual social-services contracts between the State and other private agencies are of the sort scrutinized in Rendell-Bakerand described in the concurrence of Justice Armstrong. In these contracts some funding and general regulation by the State typically will be involved, but the existence of a true, easily ascertainable independent contractor relationship will relieve the State from any liability for the agency’s actions. In the absence of a finding that anything done here was unauthorized, the bonds tying the defendant and the Juvenile Court together for a mutually beneficial purpose warrant a conclusion that the requisite State action existed. I would affirm the judgment.