decided as amended november 26 1979.: September 26, 1979.
APPEAL FROM THE DISTRICT COURT OF THE WESTERN DISTRICT OF PENNSYLVANIA PITTSBURGH D.C. Civil No. 78-0930
Before Adams and Rosenn, Circuit Judges, and Lacey, District Judge.*fn*
We are required in this appeal to plunge once again into the murky waters of the state action doctrine underlying a civil rights action brought under 42 U.S.C. § 1983.*fn1 Specifically, we are asked to determine whether the act of a heavily state regulated private harness racing association in expelling a licensed trainer and driver from its track without a hearing, on the ground that the driver has violated a state harness racing commission rule, is state action for purposes of a section 1983 suit. The district court concluded that state action was present and granted a preliminary injunction enjoining the association from denying the driver access to its racetrack. Fitzgerald v. Mountain Laurel Racing, Inc., 464 F. Supp. 263 (W.D.Pa. 1979). We agree and affirm the order of the district court granting the preliminary injunction.
Appellant Mountain Laurel Racing Inc., ("Mountain Laurel") is a private Pennsylvania corporation operated for a profit and licensed by the Pennsylvania State Harness Racing Commission ("Racing Commission") to conduct harness racing in the Commonwealth. Mountain Laurel, in order to conduct harness races, leases The Meadows Race Track, a privately owned facility near Washington, Pennsylvania.
Harness racing, as it is in most states, is a stringently regulated business in Pennsylvania. A private racing association engaged in pari-mutuel wagering, like Mountain Laurel, must be licensed by the State before it may conduct harness races. The officers, and even the stockholders of a private racing association are subject to Commission approval. The State derives substantial tax revenues from harness racing, collecting a percentage of the track's wagering income.*fn2
Further, all of the individuals directly engaged in harness racing are state licensed. Drivers, trainers, grooms and owners of horses must be licensed by the Racing Commission before they may pursue harness racing. Racing associations like Mountain Laurel privately employ officials licensed by the State to enforce Racing Commission Rules at the private racetracks. Most notably, the racing associations defray the salaries of racing judges who oversee the conduct of the races and a racing secretary who performs certain administrative duties, specifically fixed by the Racing Commission, including the establishing of standards for horses.*fn3 Pennsylvania State Harness Racing Commission, Rules and Regulations, Rule 6, § 23 (1977). The presiding judge is charged by the Racing Commission with the task of enforcing the rules and regulations of the Commission, supervising all other licensed race officials, and with rendering daily records to the Commission of the activities and conduct of the race meetings. Id., Rule 6, § 10.
Appellee William Fitzgerald is a licensed harness racing trainer and driver. At the beginning of the 1978 racing season, Fitzgerald had nine horses under his care to train and drive at the Meadows. Mountain Laurel has a policy by which it privately contracts to provide free stall space at the track to trainers and drivers as long as the horses are run in races and are managed according to the terms of the contract. This "stall agreement" must be first approved by the Racing Commission before it may be used by a racing association. The key provision in the stall agreement is a clause by which Mountain Laurel reserves the unrestricted right to revoke the agreement upon giving the owner or trainer a 72 hour notice to vacate the premises.*fn4 The stall agreement also contains clauses reserving Mountain Laurel's rights to reject entry or eject from the Meadows individuals considered undesirable by it.*fn5
Fitzgerald and Mountain Laurel entered into a stall agreement for the 1978 racing season. In March of 1978, Fitzgerald was suspended by the racing judges for "inconsistent driving," an offense under Rule 18, § 5 of the Racing Commission Rules & Regulations.*fn6 The gist of the offense is that the driver is not giving the best performance possible, which detracts from the quality of the race.
In August of 1978, Mountain Laurel suspected Fitzgerald of again engaging in inconsistent driving. On August 19, 1978, Mountain Laurel's management met with the racing secretary and the presiding racing judge. The racing officials confirmed management's impression that Fitzgerald was indeed engaging in inconsistent driving. Mountain Laurel decided to exercise its 72-hour option to vacate in the stall agreement and notified Fitzgerald to remove his horses from the track. The decision to exercise the option was conveyed to Fitzgerald later in the day in the presence of the racing judges by Kenneth Marshall, the racing secretary.
Fitzgerald instituted a lawsuit under 42 U.S.C. § 1983 on August 24, 1978, against Mountain Laurel, Kenneth Marshall, the track racing secretary, and John Knight, the track presiding judge, alleging that the defendants had denied him due process of law in violation of the fourteenth amendment. Fitzgerald sought immediate as well as permanent injunctive relief to restrain the defendants from denying him access to the Meadows. The court treated the complaint as a request for a temporary restraining order under Fed.R.Civ.P. 65(b) and a preliminary injunction under Fed.R.Civ.P. 65(a). The court denied issuance of a temporary restraining order on August 24, 1978. On August 28, 1978, a hearing was held on the motion for a preliminary injunction at which time Mountain Laurel moved to dismiss the complaint on the ground, Inter alia, that the state action prerequisite to the maintenance of a section 1983 action was lacking.
Mountain Laurel contended that its decision to exercise the 72-hour order to vacate in the stall agreement was a purely private act devoid of state involvement. The district judge disagreed, finding a sufficient connection between the State's involvement in harness racing and the challenged conduct to warrant a finding of state action under Jackson v. Metropolitan Edison Company, 419 U.S. 345, 95 S. Ct. 449, 42 L. Ed. 2d 477 (1974). The district court granted Fitzgerald's motion for a preliminary injunction on August 31, 1978, enjoining Mountain Laurel from denying Fitzgerald "the right to stall horses, drive horses, train horses, and make other use of the facilities." Mountain Laurel thereafter filed a motion to invoke disciplinary procedures under the Rules and Regulations of the Racing Commission, proposing to afford Fitzgerald a hearing thereunder. The district court denied this motion on September 7, 1978. Mountain Laurel appeals from both the issuance of the preliminary injunction and the denial of its motion to invoke Racing Commission procedures.*fn7
At the outset, we are presented with the possibility that this controversy is now moot. Fitzgerald did return to the Meadows after the grant of the injunction and he continued to train and race horses there until the close of the racing season in November 1978. At that time, Fitzgerald voluntarily left the track and there is no indication that he has returned.
We believe that the dispute between the parties is still alive. The preliminary injunction issued by the district court was not limited to the duration of the 1978 season. Under the protective aegis of the injunction, Fitzgerald could return to the Meadows at any time and demand that Mountain Laurel permit him to train and race horses there. It is an accepted legal principle that a controversy is not moot when it is "capable of repetition, yet evading review." Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 514-15, 31 S. Ct. 279, 283, 55 L. Ed. 310 (1911); Moreland v. W. P. I. A. L., 572 F.2d 121, 123 n.1 (3d Cir. 1978). In the present case, were we to dismiss this appeal as moot and should Fitzgerald return to the Meadows to train and race horses, the controversy would be revived and Mountain Laurel would have to seek review De novo. We believe, therefore, that this case fits the "capable of repetition, yet evading review" exception to the mootness doctrine. Accordingly, we proceed to the merits of this appeal.
The core of this lawsuit is whether or not Mountain Laurel's eviction of Fitzgerald from the Meadows constituted state action sufficient to establish a jurisdictional basis for a section 1983 suit. The answer to this question turns on the precise nature of the State's relationship to Mountain Laurel in the factual context of this case.
Our starting point for an analysis of state action is Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S. Ct. 856, 6 L. Ed. 2d 45 (1961). There, the Court found state action present in a racial discrimination case brought against a privately owned restaurant operated in a publicly owned and state subsidized parking garage. The test announced in Burton was simply that when the State has not clearly directed the private act of discrimination but where the private enterprise has a "symbiotic" relationship with the State, state action is present. The Court held:
The State has so far insinuated itself into a position of interdependence with (the restaurant) that it must be recognized as a joint participant in the challenged activity, which, on that account, cannot be considered to have been so "purely private" as to fall without the scope of the Fourteenth Amendment.
Id. at 725, 81 S. Ct. at 862. The Court, however, cautioned that "only by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance." Id. at 722, 81 S. Ct. at 860.
The limits of the Burton symbiotic relationship test were subsequently explored in Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S. Ct. 1965, 32 L. Ed. 2d 627 (1972), in which the Court found no state action present in racial discrimination by a private club regulated by the Pennsylvania Liquor Control Board. The Court noted that the symbiotic relationship between state and private enterprise found in Burton was lacking in this case inasmuch as the Moose Lodge was a private social club operating in a private building. Id. at 175, 92 S. Ct. 1965. Despite the pervasive nature of the regulations of private clubs by the State Liquor Control Board, the Court held that "however detailed this type of regulation may be in some particulars, it cannot be said to in any way foster or encourage racial discrimination. Nor can it be said to make the State in any realistic sense a partner or even a joint venturer in the club's enterprise." Id. at 176-77, 92 S. Ct. at 1973. The Moose Lodge case therefore stands for the basic principle that heavy state regulation of a private entity does not necessarily give rise to a Burton symbiotic relationship so as to warrant a finding of state action "within the ambit of the Equal Protection Clause of the Fourteenth Amendment." Id. at 177, 92 S. Ct. at 1973.
The Supreme Court, however, continued to explore the relationship between extensively state regulated private enterprises and the commission of allegedly unconstitutional acts by them in Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S. Ct. 449, 42 L. Ed. 2d 477 (1974). That case involved a heavily regulated but privately owned utility company, which discontinued service to a customer without a hearing after she failed to pay her utility bills. The termination of service without a hearing did Not constitute state action in violation of the fourteenth amendment. The Court held that "the inquiry must be whether there is a sufficiently close nexus between the State and the challenged action of the regulated entity so that the action of the latter may be fairly treated as that of the State itself." Id. at 351, 95 S. Ct. at 453. The Court further held that:
Approval by a state utility commission of such a (termination) request from a regulated utility, where the commission has not put its own weight on the side of the proposed practice by ordering it, does not transmute a practice initiated by the utility and approved by the commission into "state action."
Id. at 357, 95 S. Ct. at 456. The "close nexus" test of Jackson posits that the State must be intimately involved in the challenged private conduct before that conduct becomes attributable to the State for purposes of a section 1983 action alleging a violation of the Due Process Clause of the fourteenth amendment.
There was some question after Jackson whether the "close nexus" test of that decision totally superseded the "symbiotic relationship" test of Burton. This Circuit concluded that Burton is still viable.*fn8 Judge Adams in Braden v. University of Pittsburgh (Braden II), 552 F.2d 948, 958 (1977) (footnote omitted) explained:
It may be that only in the absence of an inextricably-linked relationship between the state and a private entity does the "close nexus" test of Jackson come into play. Where a private enterprise stands, in its operations, as a veritable partner with the state, then it seems proper to hold such enterprise subject to the same constitutional requirements to which the state is accountable. But the situation may be otherwise where no pervasive state-private relationship exists. For without such an arrangement, there would be no basis for holding a private entity to constitutional strictures, unless the state is closely involved in the very activity challenged by a litigant.
Thus, it is possible that a symbiotic relationship between state and private enterprise could give rise to state action, or in the absence of such a relationship, state action still might be found if "the state is closely involved in the very activity challenged." Id.
The key facts of this case involve the narrow circumstances under which Mountain Laurel exercised its right to expel Fitzgerald under the terms of the stall agreement. The impetus for Fitzgerald's expulsion came from Mountain Laurel's renewed suspicion that Fitzgerald was engaging in "inconsistent driving," a violation of Racing Commission Rules for which he had been recently disciplined by the Commission. It is undisputed that prior to exercising its rights under the stall agreement, Mountain Laurel's management met with the presiding racing judge and racing secretary who confirmed the allegations of inconsistent driving against Fitzgerald. Plainly, the racing judges possessed delegated authority from the Commonwealth of Pennsylvania to discipline Fitzgerald for inconsistent driving following a hearing under the Racing Commission Rules. Yet no decision to suspend Fitzgerald was made at Mountain Laurel's meeting with the racing officials. Rather, from that meeting emanated Mountain Laurel's decision to evict Fitzgerald under the option to vacate in the stall agreement. The decision to evict Fitzgerald was communicated to him by the racing secretary, allegedly acting solely in his capacity as a representative of management, in the presence of the racing judges. These crucial facts provide the predicate to which we must apply the Supreme Court's pronouncements on state action to determine if state action is present.
Fitzgerald vigorously asserts that the very interrelationship of the State with private racing associations constitutes a "symbiotic relationship" like that involved in Burton and affords him the protective embrace of the fourteenth amendment. Although Mountain Laurel is a private corporation, Fitzgerald points to Pennsylvania's extensive regulation of racing operations requiring that track management and racing participants be licensed. Furthermore, Pennsylvania through its Racing Commission delegates significant authority to racing officials who, although privately employed by the racing association, nevertheless have broad authorization from the State to enforce Racing Commission Rules. Pennsylvania also has a substantial financial interest in harness racing inasmuch as it collects tax revenues from the ...