William Castle v. Eurofresh, Inc.

                FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

WILLIAM W. CASTLE,                        No. 11-17947
              Plaintiff-Appellant,
                                             D.C. No.
                 v.                       3:09-cv-08114-
                                               JWS
EUROFRESH, INC., AKA Eurofresh
Farms; ARIZONA DEPARTMENT OF
CORRECTIONS, an agency of the               OPINION
State of Arizona; DORA B. SCHRIRO,
Warden, former Director, Arizona
Department of Corrections;
CHARLES L. RYAN, Director,
Arizona Department of Corrections;
STATE OF ARIZONA,
               Defendants-Appellees.


      Appeal from the United States District Court
               for the District of Arizona
      John W. Sedwick, District Judge, Presiding

                Argued and Submitted
         April 11, 2013—Pasadena, California

               Filed September 24, 2013

    Before: Marsha S. Berzon, Richard C. Tallman,
       and Milan D. Smith, Jr., Circuit Judges.

         Opinion by Judge Milan D. Smith, Jr.;
            Concurrence by Judge Berzon
2                  CASTLE V. EUROFRESH, INC.

                           SUMMARY*


                      Prisoner Civil Rights

    The panel affirmed in part and reversed in part the district
court’s summary judgment and remanded in an action
brought by an Arizona state prisoner who alleged that
defendants violated the Americans with Disabilities Act,
42 U.S.C. §§ 12131–12134, and the Rehabilitation Act of
1973, 

29 U.S.C. § 794

, by failing to reasonably accommodate
his disability at a prison job.

    The panel held that plaintiff’s claims against Eurofresh,
a private company that contracted with the Arizona
Correctional Industries for a convict labor force, were
properly dismissed. The panel held that plaintiff was not
Eurofresh’s “employee” under Title I of the ADA because his
labor belonged to the State of Arizona, which put him to work
at Eurofresh in order to comply with its statutory obligations.
The panel further held that because Eurofresh did not receive
federal financial assistance, either directly or indirectly, it
was not subject to the requirements of the Rehabilitation Act.

    The panel reversed the judgment in favor of the State
Defendants because it determined that those defendants could
be held liable for acts of disability discrimination committed
by Eurofresh, its contractor. The panel stated that the law
was clear—State Defendants may not contract away their
obligation to comply with federal discrimination law. The


  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                CASTLE V. EUROFRESH, INC.                   3

panel remanded to the district court to determine in the first
instance whether any such discrimination occurred.

    Concurring, Judge Berzon stated that this circuit’s
precedent compelled the conclusion that plaintiff was not an
employee under Title I of the ADA. Judge Berzon stated that
the notion that prisoners who work for covered employers can
never be “employees” for purposes of federal employee-
protective statutes undermines those statutes as applied to
employees generally and misconstrues the reach of the
“employee” designation.


                        COUNSEL

Candace Carroll and certified law students Sara Belvill
(argued), Austin Berger, Allison Capozzoli, and Lauren
Presser, University of San Diego Legal Clinics, San Diego,
California, for Plaintiff-Appellant.

Jeffrey Willis and Melissa A. Marcus (argued), Snell &
Wilmer L.L.P., Tuscon, Arizona, for Defendant-Appellee
Eurofresh Inc.

Joseph D. Estes, Assistant Attorney General, and Katherine
E. Watanabe (argued), Arizona Attorney General’s Office,
Phoenix, Arizona, for Defendants-Appellees State of Arizona,
Arizona Department of Corrections, Dora Schriro and Charles
Ryan.
4                      CASTLE V. EUROFRESH, INC.

                                 OPINION

M. SMITH, Circuit Judge:

    William Castle, formerly an Arizona state prisoner,1
appeals the district court’s entry of judgment in favor of
defendants Eurofresh Inc., the State of Arizona (the State),
the Arizona Department of Corrections (ADC), and certain
officials of the ADC.2 Castle alleges that the defendants
violated the Americans with Disabilities Act (ADA),
42 U.S.C. §§ 12131–12134, and the Rehabilitation Act of
1973 (RA), 

29 U.S.C. § 794

, by failing to reasonably
accommodate his disability. We conclude that Castle’s
claims against Eurofresh were properly dismissed. Castle
was not Eurofresh’s “employee” under Title I of the ADA,
and Eurofresh does not receive federal financial assistance, as
it must in order to subject it to the requirements of the RA.
However, we reverse the judgment in favor of the State
Defendants, because those defendants may be held liable for
acts of disability discrimination committed by one of their
contractors. We therefore remand Castle’s claims against the
State Defendants for further proceedings required by this
opinion.

                             BACKGROUND

    Castle was convicted of theft and perpetuating a scheme
or artifice to defraud in violation of 

Ariz. Rev. Stat. §§ 13

-



    1
        Castle was released from prison on April 22, 2013.
  2
    Throughout this opinion we refer collectively to the State, the ADC,
and the individual defendants as the State Defendants.
                   CASTLE V. EUROFRESH, INC.                            5

1802, 13-2310. He was sentenced to a ten-year prison term
and placed in the custody of the ADC.

    Arizona law requires all able-bodied inmates in ADC’s
custody to “engage in hard labor for not less than forty hours
per week.” 

Ariz. Rev. Stat. § 31-251

(A). Most inmates
satisfy this requirement by participating in the ADC’s Work
Incentive Pay Program (WIPP). Inmate wages under the
WIPP range from ten to fifty cents per hour, although inmates
can earn raises for good performance. Some inmates,
however, receive significantly more remunerative work
assignments through a separate convict labor program run by
Arizona Correctional Industries (ACI).3 See 

Ariz. Rev. Stat. §§ 41

-1621–1630. ACI contracts with private companies to
provide them with a convict labor force. One company that
contracts with ACI is Eurofresh, which describes itself as
“America’s largest greenhouse operation,” capable of
growing 200 million pounds of “hydroponic tomatoes” each
year.

    Castle began picking tomatoes for Eurofresh in July 2008
at a greenhouse located approximately sixty miles from the
prison where he was incarcerated. The job was physically
strenuous—Castle was required to be on his feet for his entire
seven hour shift and often had to push a 600 pound tomato


     3
        ACI is a statutorily created entity that operates under the
“organizational auspices of the ADC,” but is funded solely “through its
own operations.” See 

Ariz. Rev. Stat. § 41-1624

. ACI describes its
mission as creating “opportunities for offenders to develop marketable job
skills and good work habits through enterprises that produce quality
products and services for [ACI’s] customers.” Those customers have
included firms that produce “clothing, fabricated steel, livestock, dairy
products, and hotel reservations for Best Western motels.” Hale v. State
of Arizona, 

993 F.2d 1387, 1390

 (9th Cir. 1993) (en banc).
6                  CASTLE V. EUROFRESH, INC.

cart. Toward the end of August 2008, Castle began
experiencing “intolerable pain and swelling” in his left ankle
after working for two or more hours at Eurofresh. Castle had
seriously injured his ankle decades earlier during a parachute
accident that occurred while Castle attended the United States
Army Airborne School.4

    Because of his pain, Castle asked a Eurofresh supervisor
if he could take short breaks during the work day to rest his
ankle. According to Castle, the supervisor indicated that
Castle would be fired if he insisted on taking breaks. Castle
continued working at Eurofresh, but sought medical treatment
for his injury from the ADC. One of Castle’s medical
providers suggested that he ask for a job change or
accommodation.

    In October 2008, Castle sent certified letters to both ACI
and Eurofresh informing them that he could not walk or stand
for long periods without experiencing extreme pain. He
asked to be provided with a position at Eurofresh “that does
not require walking for long periods of time, as well as
pushing heavy carts.” Castle later met with representatives of
both Eurofresh and ACI to discuss his disability. He again
suggested that he be reassigned to a different job, such as
operating box or label machinery in the “pack house.” A
Eurofresh manager responded that there were no other
positions available to inmate laborers,5 but that Eurofresh and


    4
   The Department of Veterans Affairs has assigned Castle a 20 percent
service-connected disability rating as a result of the accident.
    5
    Defendants claim that Castle could not be reassigned to another job,
such as a job in the pack house, because civilian workers were employed
in those positions, and “the inmate-to-security personnel ratio was not
                   CASTLE V. EUROFRESH, INC.                            7

ACI would take Castle’s request “under advisement.” Castle
claims that he was later informed that no accommodation
would be made, and that his only option was to quit his
position at Eurofresh. Defendants claim that Eurofresh
offered to promote Castle to a “de-leafer” position,6 but that
Castle refused the offer. No party disputes, however, that the
ADC eventually reassigned Castle to a WIPP job in the prison
motor pool. Castle’s new job paid 50 cents per hour. Castle
had been receiving more than $2.25 per hour picking
tomatoes at Eurofresh.

    After pursuing a grievance with the ADC, Castle filed a
discrimination claim with the Equal Employment Opportunity
Commission (EEOC). After the EEOC issued Castle a Notice
of Suit Rights letter, Castle brought suit against Eurofresh and
the State Defendants.

     In his initial complaint, Castle alleged that Eurofresh and
the State Defendants violated his rights under Titles I and II
of the ADA, Section 504 of the RA, and the Arizona Civil
Rights Act, by failing to reasonably accommodate his
disability. Castle also claimed that Eurofresh had breached
its contractual obligations with the State, which required that
Eurofresh comply with all applicable federal and state




adequate” to have inmates work alongside non-convict laborers. Castle
disputes this claim, and contends that inmates regularly worked among
Eurofresh’s civilian employees in the pack house and elsewhere.
   6
     Defendants acknowledge that the de-leafer position also requires
walking and standing, but claim the job is less physically taxing than
picking tomatoes because the carts used for the de-leafing job are lighter
than those used by the tomato pickers.
8                  CASTLE V. EUROFRESH, INC.

employment laws.7 Castle sought money damages but did not
request reinstatement at Eurofresh.

    The district court dismissed Castle’s Title I claim against
Eurofresh with prejudice. The court found that Castle lacked
standing to sue under the ADA because, as a prisoner, he did
not have an employment relationship with Eurofresh. The
district court also dismissed Castle’s RA claim against
Eurofresh, reasoning that Castle had not adequately alleged
that Eurofresh is the direct or indirect recipient of federal
financial assistance. Castle was given leave to amend his RA
claim against Eurofresh.

    In the same order, the district court also dismissed
Castle’s ADA and RA claims against the State Defendants.
The court concluded that Castle could not state a claim under
either statute because “plaintiff’s own evidence shows that he
was given a different work assignment [in the motor
pool]—one that does not require prolonged standing and
walking.” Castle was granted leave to amend his complaint
against the State Defendants.

    After Castle twice amended his complaint, Eurofresh and
the State Defendants filed motions seeking dismissal of
Castle’s remaining claims. The district court granted
Eurofresh’s motion with prejudice, again concluding that
Castle failed to adequately allege that Eurofresh received
federal financial assistance. The district court denied the
State Defendants’ motion, however, and ordered them to
answer Castle’s allegations that they violated Title II of the
ADA and Section 504 of the RA.

 7
   Castle only appeals the district court’s determinations regarding his
ADA and RA claims.
                CASTLE V. EUROFRESH, INC.                     9

    The State Defendants filed their answer in October 2010.
In June 2011, the State Defendants filed a motion for
summary judgment on Castle’s remaining claims against
them. The district court granted the motion in November
2011. The court reasoned that the State Defendants did not
violate either the ADA or the RA because: (1) the State
Defendants lacked the power to reassign or otherwise
accommodate Castle within Eurofresh; and (2) the State
Defendants had accommodated Castle by reassigning him to
a job in the prison motor pool. Castle timely appealed.

   JURISDICTION AND STANDARD OF REVIEW

    We have jurisdiction to review the district court’s entry of
judgment under 

28 U.S.C. § 1291

. We review an order
granting a motion to dismiss de novo. Cousins v. Lockyer,

568 F.3d 1063, 1067

 (9th Cir. 2009). “All well-pleaded
allegations of material fact in the complaint are accepted as
true and are construed in the light most favorable to the non-
moving party.” Faulkner v. ADT Sec. Servs., Inc., 

706 F.3d 1017, 1019

 (9th Cir. 2013) (citations omitted). However, a
complaint must allege “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570

 (2007). “A claim has facial plausibility
when ‘the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable
for the misconduct alleged.’” Faulkner, 

706 F. 3d at 1019

(quoting Ashcroft v. Iqbal, 

556 U.S. 662, 678

 (2009)).

    We similarly review a grant of summary judgment de
novo. Cameron v. Craig, 

713 F.3d 1012, 1018

 (9th Cir.
2013). We “must determine whether, viewing the evidence
in the light most favorable to the nonmoving party, there are
any genuine issues of material fact and whether the district
10                  CASTLE V. EUROFRESH, INC.

court correctly applied the relevant substantive law.” 

Id.

(quoting Lopez v. Smith, 

203 F.3d 1122, 1131

 (9th Cir. 2000)
(en banc)).

                            DISCUSSION

I. Castle’s ADA Claim Against Eurofresh

    Title I of the ADA prohibits discrimination “against a
qualified individual on the basis of disability in regard to . . .
[the] privileges of employment.” 

42 U.S.C. § 12112

(a)
(emphasis added). Thus the first question we must resolve is
whether Castle, an inmate required to work under Arizona
law, had an employment relationship with Eurofresh within
the meaning of the ADA.

    The ADA defines an “employee” as “an individual
employed by an employer.” 

42 U.S.C. § 12111

(4). All
parties agree that Eurofresh is an “employer” under the
ADA.8 But the parties vigorously dispute whether Castle was
“employed” by Eurofresh. While this specific issue appears
to be one of first impression under the ADA, we do not write
on a wholly blank slate: we, as well as a number of our sister
circuits, have previously considered whether prisoners should
be treated as “employees” under various other federal
statutes.9

 8
      See 

42 U.S.C. § 12111

(5)(A).
  9
    See, e.g., Hale, 

993 F.2d at 1395

 (prisoner is not an employee under
the Fair Labor Standards Act (FLSA)); Morgan v. MacDonald, 

41 F.3d 1291, 1293

 (9th Cir. 1994) (same); Alexander v. Sara, Inc., 

721 F.2d 149, 150

 (5th Cir. 1983) (per curiam) (same); Coupar v. Dep’t of Labor,

105 F.3d 1263, 1267

 (9th Cir. 1997) (prisoner not an employee within the
meaning of the whistleblower provisions of the Clean Air Act and the
                   CASTLE V. EUROFRESH, INC.                         11

    The leading case in our circuit is our en banc decision in
Hale, 

993 F.2d 1387

. There, we addressed whether certain
Arizona state prisoners were “employees” within the meaning
of the FLSA. 

Id.

 at 1389–90. Like the plaintiff in this case,
the appellants in Hale participated in labor programs
administered by ACI for the purpose of implementing
Arizona’s requirement that all able-bodied prisoners perform
hard labor.10 

Id.

 We concluded that the appellants were not
“‘employees’ of the prison entitled to be paid a minimum
wage under the FLSA.” 

Id. at 1395

.

    In reaching our holding in Hale, we first acknowledged
the “general rule” that we must consider the “economic
reality” of a labor relationship when determining whether it
is an employment relationship under federal law. 

Id.

 at
1393–94. In this circuit, we typically evaluate the “economic
reality” of a labor relationship by considering the factors laid
out in Bonnette v. California Health and Welfare Agency,

704 F.2d 1465

 (9th Cir. 1983).11 In Hale, however, we
determined that the Bonnette factors “are not a useful


Toxic Substances Control Act); Williams v. Meese, 

926 F.2d 994, 997

(10th Cir. 1991) (prisoner not an employee under Title VII or the Age
Discrimination in Employment Act). But see Baker v. McNeil Island
Corr. Ctr., 

859 F.2d 124, 128

 (9th Cir. 1988) (prisoner potentially an
employee under Title VII); Carter v. Dutchess Comm. Coll., 

735 F.2d 8, 14

 (2d Cir. 1984) (prisoner may be an employee under FLSA).
      10
     The appellants in Hale worked for ARCOR Enterprises, ACI’s
predecessor entity. See Hale, 993 F.3d at 1389.
 11
    Those factors include “whether the alleged employer has the power to
hire and fire the employees, supervises and controls employee work
schedules or conditions of employment, determines the rate and method
of payment, and maintains employment records.” Hale, 993 F.3d at 1394
(citing Bonnette, 

704 F.2d at 1470

).
12              CASTLE V. EUROFRESH, INC.

framework in the case of prisoners who work for a prison-
structured program because they have to.” Hale, 993 F.2d at
1394; see also Vanskike v. Peters, 

974 F.2d 806, 809

 (7th Cir.
1992) (noting that the Bonnette factors are useful where “it is
clear that some entity is an ‘employer’ and the question is
which one,” but not where the question is more basic: can
prisoners “plausibly be said to be ‘employed’ in the relevant
sense at all”). We concluded that “[r]egardless of how the
Bonnette factors balance . . . the economic reality of the
relationship between the worker and the entity for which
work was performed lies in the relationship between prison
and prisoner. It is penological, not pecuniary.” Hale,
993 F.2d at 1394–95; see also Gilbreath v. Cutter Biological,
Inc., 

931 F.2d 1320, 1331

 (9th Cir. 1991) (Rymer, J.
concurring) (reasoning that “inmate labor belongs to the
institution”).

    A few years after Hale, in Coupar v. Department of
Labor, 

105 F.3d 1263

 (9th Cir. 1997), we once again had the
opportunity to consider a prisoner’s employment status under
federal law. Douglas Coupar was a federal inmate obligated
to work as a condition of his sentence. 

Id. at 1264

. Coupar
filed environmental complaints against the government
corporation where he worked, claiming that he subsequently
faced discrimination in violation of the whistleblower
provisions of the Clean Air Act and the Toxic Substances
                  CASTLE V. EUROFRESH, INC.                         13

Control Act.12 

Id.

 We found that Coupar was not protected
by either statute. 

Id.

    Coupar relied on Baker v. McNeil Island Corrections
Center, 

859 F.2d 124

 (9th Cir. 1988), to argue that he was an
employee for the purposes of obtaining whistleblower
protection. Coupar, 

105 F.3d at 1266

. In Baker, we left open
the possibility that a prisoner could state a claim for
employment discrimination under Title VII, and remanded to
the district court for further findings regarding the precise
labor relationship between the plaintiff and his jailors. See
Baker, 

859 F.2d at 128

 (holding that it was not “beyond doubt
that no set of facts could be proven to entitle Baker to relief”).
The plaintiff in Baker, however, had not alleged that the
position he sought was “one that fulfilled a prison work
requirement.” Coupar, 

105 F.3d at 1266

. Coupar, on the
other hand, was obligated to work—just like the plaintiffs in
Hale.     We found this to be the crucial fact that
“differentiate[d] Baker from Coupar’s case.”                   

Id.

Consequently, we held that where an inmate is obligated to
work at some job pursuant to a prison work program, “[t]hat
fact [alone] brings him within the rule of Hale.” 

Id. at 1265

.

   Like the plaintiff in Coupar, Castle cites Baker for the
proposition that he should be treated as Eurofresh’s employee
under the ADA. But as we did with the plaintiff in Coupar,
we must reject Castle’s claim: Castle “was obligated to work


   12
      Those provisions state that “[n]o employer may discharge any
employee or otherwise discriminate against any employee with respect to
. . . compensation, terms, conditions, or privileges of employment”
because the employee engages in protected activities related to the
enforcement of the Acts. 

15 U.S.C. § 2622

(a) (Toxic Substances Control
Act); 

42 U.S.C. § 7622

(a) (Clean Air Act).
14                 CASTLE V. EUROFRESH, INC.

at some job pursuant to a prison work program,” 

id.,

 and this
fact alone brings Castle’s claims within the rule of Hale.13
Baker is inapposite.

    We are equally unpersuaded by Castle’s other attempts to
distinguish this case from Hale and Coupar. For example,
Castle notes that he worked for a private corporation, while
the plaintiffs in Hale and Coupar toiled for government-
controlled entities. Castle further argues that one of the
supporting rationales for the Hale decision is not present here,
because the purpose of the ADA is different than that of the
FLSA.14 While these distinctions have some substance, they
are ultimately irrelevant. Coupar identifies one factor that
triggers application of the Hale rule—an inmate’s legal
obligation to work. That factor is indisputably present in this
case. The absence of other elements, therefore, has no
bearing on Castle’s standing under the ADA. Castle is not
Eurofresh’s employee under the ADA because his labor
belongs to the State of Arizona, which put him to work at
Eurofresh in order to comply with its statutory obligations.
See Hale, 993 F.2d at 1395; Coupar, 

105 F.3d at 1267

.

  13
     Castle argues that he did not “work for a prison-structured program
because he had to,” and notes that he had a choice whether or not to work
for Eurofresh. This argument misses the mark. While Castle did not have
to work for Eurofresh specifically, he was nevertheless obligated to work
for some prison-structured labor program. See 

Ariz. Rev. Stat. § 31

-
251(A). In any event, we rejected the same argument in Coupar. See
Coupar, 

105 F.3d at 1265

. (“Although Coupar did not have to work for
FPI in particular, as an inmate he was obligated to work at some job
pursuant to a prison work program.”).
  14
    In Hale, we noted that the primary concern of the FLSA—ensuring
laborers’ minimum standards of living—“does not apply to prisoners, for
whom clothing, shelter, and food are provided by the prison.” Hale,
993 F.2d at 1396.
                 CASTLE V. EUROFRESH, INC.                    15

II. Castle’s RA Claim Against Eurofresh

    “The Rehabilitation Act is materially identical to and the
model for the ADA, except that it is limited to programs that
receive federal financial assistance . . . .” Armstrong v. Davis,

275 F.3d 849

, 862 n.17 (9th Cir. 2001) (internal quotations
omitted), abrogated on other grounds by Johnson v.
California, 

543 U.S. 499

, 504–05 (2005); see also Gilstrap v.
United Air Lines, Inc., 

709 F.3d 995, 999

 (9th Cir. 2013).
The district court dismissed Castle’s RA claim against
Eurofresh because it concluded that Castle could not
plausibly allege that Eurofresh received federal financial
assistance, either directly or indirectly. We find no error in
the district court’s conclusion.

    In United States Department of Transportation v.
Paralyzed Veterans of America, the Supreme Court held that
Congress intended to strictly limit the scope of the RA solely
“to those who actually ‘receive’ federal financial assistance.”

477 U.S. 597, 605

 (1986), superseded by statute on other
grounds, Air Carrier Access Act of 1986, 

Pub. L. No. 99-435

(1986). The Court explained that “[b]y limiting coverage to
recipients, Congress imposes the obligations of § 504 upon
those who are in a position to accept or reject those
obligations as a part of the decision whether or not to
‘receive’ federal funds.” Id. at 606 (emphases added); see
also Greater L.A. Council on Deafness, Inc., v. Zolin,

812 F.2d 1103

, 1111 (9th Cir. 1987) (recognizing that the RA
“does not prohibit discrimination against the handicapped as
such; it simply bars the use of federal funds to support
programs or activities that so discriminate”). Consequently,
while those who affirmatively choose to receive federal aid
may be held liable under the RA, liability will “not extend as
far as those who benefit from it,” because application of
16              CASTLE V. EUROFRESH, INC.

§ 504 to all who benefit economically from federal assistance
would yield almost “limitless coverage.”           Paralyzed
Veterans, 477 U.S. at 607–08.

    Castle argues that Eurofresh is the indirect recipient of
federal financial assistance. Specifically, Castle contends that
ACI is a direct recipient of federal financial assistance, and
that Eurofresh indirectly receives federal financial assistance
through its contract with ACI, which provides that ACI, and
not Eurofresh, will pay Social Security and Medicare taxes on
the wages of Eurofresh’s prison laborers. These allegations
are insufficient to survive a motion to dismiss.

    First, it is unclear what connection, if any, exists between
ACI’s receipt of federal funds and its decision to assume
responsibility for the federal tax liabilities related to
Eurofresh’s use of prison laborers. But even if such a
connection exists, it is not enough to establish Eurofresh’s
liability under the RA. To state a claim, Castle must do more
than simply show that Eurofresh benefits from federal
monies—he must show that Eurofresh has affirmatively
chosen to “provid[e] employment for the handicapped as a
quid pro quo for the receipt of federal funds.” Id. at 605; see
also Nat’l Collegiate Athletic Ass’n v. Smith, 

525 U.S. 459, 468

 (1999). This Castle has not done. Indeed, Castle has
presented no evidence that Eurofresh affirmatively chose to
receive federal monies, and in so doing accepted the
concomitant responsibilities of complying with certain
federal mandates, such as those contained in the RA. See
Paralyzed Veterans, 

477 U.S. at 605

 (placing substantial
emphasis on the “contractual nature of the receipt of federal
moneys”). Nor has Castle plausibly alleged that Eurofresh is
the intended recipient of federal funds, and that ACI is a
“mere conduit[] of the aid to its intended recipient[].” 

Id.

 at
                 CASTLE V. EUROFRESH, INC.                     17

607. Because Castle has not alleged facts which plausibly
demonstrate that Eurofresh receives federal financial
assistance, Castle’s RA claim against Eurofresh was properly
dismissed.

III.    Castle’s ADA and RA Claims Against the State
        Defendants

     We next consider the potential liability of the State
Defendants. The State Defendants may be liable under Title
II of the ADA even though Eurofresh may not be sued under
Title I. See, e.g., Disabled Rights Action Comm. v. Las Vegas
Events, Inc., 

375 F.3d 861

, 883–84 (9th Cir. 2004) (noting
that plaintiffs often sue multiple defendants under separate
titles of the ADA); Johnson v. City of Saline, 

151 F.3d 564

,
571–72 (6th Cir. 1998) (“Even though the [private]
businesses may be subject to Title III of the ADA . . . the city
is simultaneously subject to Title II because it is a landlord.”).
Moreover, unlike Eurofresh, the State Defendants cannot
plausibly deny that they receive federal financial assistance,
and thus they are obligated to comply with the RA.

     The State Defendants concede, as they must, that Title II
applies to the operation of state prisons. See Penn. Dep’t of
Corr. v. Yeskey, 

524 U.S. 206, 213

 (1998) (“[T]he plain text
of Title II of the ADA unambiguously extends to state prison
inmates.”). Consequently, State Defendants must ensure that
disabled prisoners are not discriminated against with regard
to the provision of “the benefits of [their] services, programs,
or activities” on account of a prisoner’s disability. 

42 U.S.C. § 12132

; see also Yeskey, 

524 U.S. at 210

 (finding that prison
vocational programs are “benefits” of a public entity).
Nevertheless, the State Defendants contend that Title II does
not apply in this case, because “[the State Defendants] had no
18                 CASTLE V. EUROFRESH, INC.

authority to determine which jobs or job duties were available
to inmates at Eurofresh, nor could they overturn [Eurofresh’s]
decision to refuse a request for a job modification.” The State
Defendants are mistaken.

    In Armstrong v. Schwarzenegger, 

622 F.3d 1058

,
1065–67 (9th Cir. 2010), we rejected the State of California’s
argument that it could not be held liable for ADA violations
committed by county jails that were housing state prisoners
pursuant to contracts with the state. We found it wholly
irrelevant that the ADA violations occurred at county jails,
rather than at state prisons under California’s immediate
control. Rather, we clarified that Title II’s obligations apply
to public entities regardless of how those entities chose to
provide or operate their programs and benefits. See 

id. at 1065

 (“[A] public entity, in providing any aid, benefit, or
service, may not, directly or through contractual, licensing,
or other arrangements, discriminate against individuals with
disabilities.” (quoting 

28 C.F.R. § 35.130

(b)(1)) (emphasis
added)).

    The State Defendants admit that ACI contracts with
Eurofresh to provide “benefits” to state inmates, including
paid labor and vocational training. The State Defendants are
free to enter into such contracts, and likely reap numerous
benefits from such arrangements. But one benefit State
Defendants may not harvest is immunity for ADA violations:
State Defendants are obligated to ensure that Eurofresh—like
all other State contractors—complies with federal laws
prohibiting discrimination on the basis of disability.15 See


     15
      We note with interest that while State Defendants disclaim this
obligation on appeal, ACI’s contract with Eurofresh explicitly requires
Eurofresh to comply with all federal and state employment laws, including
                   CASTLE V. EUROFRESH, INC.                         19

Armstrong, 622 F.3d at 1065–67; see also Henrietta D. v.
Bloomberg, 

331 F.3d 261, 286

 (2d Cir. 2003) (“All
governmental activities of public entities are covered, even if
they are carried out by contractors. For example, a State is
obligated by [T]itle II to ensure that the services, programs,
and activities of a State park inn operated under contract by
a private entity are in compliance with [T]itle II’s
requirements.”) (citation omitted)). The same principle
applies to RA violations committed by contractors.
Henrietta D., 

331 F.3d at 286

 (holding that a state is “liable
to guarantee that those it delegates to carry out its programs
satisfy the terms of its promised performance, including
compliance with the Rehabilitation Act”). The law is
clear—the State Defendants may not contract away their
obligation to comply with federal discrimination laws.

    Nevertheless, we cannot determine on this record whether
a violation actually occurred in this case. Federal law
requires public entities to “make reasonable modifications in
policies, practices, or procedures when the modifications are
necessary to avoid discrimination on the basis of disability,
unless the public entity can demonstrate that making the
modifications would fundamentally alter the nature of the
service, program, or activity.” 

28 C.F.R. § 35.130

(b)(7).
Determining whether a modification is reasonable (or even
required) is necessarily a fact-specific inquiry, requiring
“analysis of the disabled individual’s circumstances and the
accommodations that might allow him to meet the program’s


the ADA. In district court, Castle alleged that ACI breached its contract
for failing to comply with such statutes. The court dismissed this claim,
reasoning that Castle had not alleged elements necessary to establish
himself as a third-party beneficiary. Castle does not object to that
dismissal on appeal and we express no opinion on the matter.
20               CASTLE V. EUROFRESH, INC.

standards.” Wong v. Regents of Univ. of Cal., 

192 F.3d 807, 818

 (9th Cir. 1999). Specifically in the prison context, we
have held that a district court may consider “with deference
to the expert views of facility administrators, a detention or
correctional facility’s legitimate interests (namely, in
maintaining security and order and operating an institution in
a manageable fashion) when determining whether a given
accommodation is reasonable.” Pierce v. Cnty. of Orange,

526 F.3d 1190, 1217

 (9th Cir. 2008) (citations and internal
quotation marks omitted).

    Likely because the district court erroneously concluded
that the State Defendants are not liable under either Title II or
the RA, the court made insufficient findings regarding
whether a reasonable modification was made. Instead, the
district court simply concluded without analysis that Castle’s
reassignment to a different job in the WIPP program was
reasonable. While that may ultimately be correct, where the
district court makes no findings regarding the reasonableness
of a proposed modification or accommodation, we must
remand to the district court to perform the necessary analysis.
See McGary v. City of Portland, 

386 F.3d 1259, 1270

 (9th
Cir. 2004) (citing Crowder v. Kitagawa, 

81 F.3d 1480, 1485

(9th Cir. 1996)).

                       CONCLUSION

    Castle’s claims against Eurofresh were properly dismissed
because Castle and Eurofresh were not in an employment
relationship, and Eurofresh does not receive federal financial
assistance. However, judgment was improperly granted to
the State Defendants. The State Defendants are liable for
disability discrimination committed by a contractor. We
                 CASTLE V. EUROFRESH, INC.                    21

consequently remand to the district court to determine in the
first instance whether such discrimination occurred.

   Each party shall be responsible for its own costs on
appeal. Fed. R. App. P. 39(a)(4).

  AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED.



BERZON, Circuit Judge, concurring:

    I concur in Part II and Part III of the majority opinion, and
also, reluctantly, in Part I.

    Part I holds Castle not an employee under Title I of the
Americans with Disabilities Act (“ADA”). 

42 U.S.C. §§ 12111

(4), 12112(a). The sweep of Hale v. Arizona,

993 F.2d 1387

 (9th Cir. 1993), and Coupar v. Department of
Labor, 

105 F.3d 1263

 (9th Cir. 1997), compels that
conclusion. But the notion that prisoners who work for
covered employers can never be “employees” for purposes of
federal employee-protective statutes undermines those
statutes as applied to employees generally and misconstrues
the reach of the “employee” designation.

    Castle labored for a private employer, off prison grounds,
under compulsion of a sentence requiring work. Hale, by
contrast, concerned prison labor that shared only the latter
two of these three characteristics, and so did not expressly
decide the employee status of prisoners working on behalf of
private employers. Hale, 993 F.2d at 1390. That distinction,
I would like to think, matters: A profit-seeking firm that
22              CASTLE V. EUROFRESH, INC.

hires convicts at its own worksite should not be shielded from
the costs of compliance with the ADA. Those costs can be
substantial, as the ADA requires employers to make
“reasonable accommodation,” allowing disabled employees
to complete a job’s “essential functions,” 

42 U.S.C. §§ 12111

(8), 12112(a), unless such accommodation “would
impose an undue hardship” on the employer’s business,

42 U.S.C. §§ 12112

(b)(5)(A). Permitting private employers
to escape those costs while profiting from the use of prison
labor markets undermines the enforcement of the statutory
requirements generally, by creating incentives for competing
employers to shirk compliance with regard to non-prison
labor—and thereby economically disadvantaging competitors
of those employers using prison labor.

    Precedent, however, forecloses consideration of such
concerns when deciding whether prison laborers are covered
by federal statutes protecting employees. Hale proclaimed
broadly that the usual standard for evaluating employee
status—the economic reality test described by Bonnette v.
California Health & Welfare Agency, 

704 F.2d 1465, 1470

(9th Cir. 1983)—is inapplicable “in the case of prisoners who
work for a prison-structured [labor] program because they
have to.” Hale, 993 F.2d at 1394. In that circumstance, we
held, “the economic reality of the relationship between the
worker and the entity for which work was performed lies in
the relationship between prison and prisoner.            It is
penological, not pecuniary.” Id. at 1395. In other words, “the
economic reality is that [prisoner] labor belong[s] to the
institution.” Id.

    Hale recognized the problem of unfair competition
through the use of prison labor. But it viewed the Ashurst-
Sumners Act, 18 U.S.C. §§ 1761–1762, as Congress’ entire
                 CASTLE V. EUROFRESH, INC.                    23

response to the adverse effects of “unfair competition in the
products market from prison-made goods.” Hale, 993 F.2d
at 1397. That Act criminalizes the distribution of prisoner-
made products in interstate commerce, 

18 U.S.C. § 1761

(a),
with exceptions for certain classes of goods, 

18 U.S.C. § 1761

(b)–(c), including agricultural commodities, 

18 U.S.C. § 1761

(b). But it does not reimburse firms not employing
prison labor, or the workers at such firms, for the bottom-line
impact (through intrastate sales and services or sales and
services of excepted products) of the cost-savings achieved
by ignoring federal employee protection for prison laborers.
Mandatory labor may be “penological, not pecuniary,” for
prisoners and their jailers. Hale, 993 F.2d at 1395. But it is
assuredly a matter of dollars and cents to firms seeking profit
in a competitive market and law-abiding citizens vying to
work for them.

    Hale’s broad language is all the more disturbing because
that case concerned prisoner wages under the Fair Labor
Standards Act (“FLSA”), 

29 U.S.C. § 201

 et seq., not the
ADA. The FLSA regulates matters that are, on their face,
pecuniary. Williamson v. Gen. Dynamics Corp., 

208 F.3d 1144, 1154

 (9th Cir. 2000) (“[T]he Supreme Court and the
Ninth Circuit have consistently found that the central purpose
of the FLSA is to enact minimum wage and maximum hour
provisions designed to protect employees.”). The ADA, by
contrast, prohibits discrimination, with an eye toward the
“conditions . . . of employment,” 

42 U.S.C. § 12112

(a)
(emphasis added). “[T]he mere fact of discrimination offends
the dignitary interest that the statute[ is] designed to protect,
regardless of whether the discrimination worked any direct
economic harm to the plaintiffs.” Shaver v. Indep. Stave Co.,

350 F.3d 716, 724

 (8th Cir. 2003). The non-pecuniary
character of prison labor thus tells us little about the
24              CASTLE V. EUROFRESH, INC.

applicability of the ADA, which addresses non-economic
harms. Indeed, habituating prisoners to the sort of
discrimination that Congress has outlawed elsewhere in the
economy hardly rehabilitates them to our national norms or
prepares them to participate in the workforce once released.
See Hale, 993 F.2d at 1398 (listing rehabilitative goals of
hard labor); City of S. Tuscon v. Indus. Comm’n of Ariz.,

753 P.2d 1199, 1205

 (Ariz. Ct. App. 1988) (same).

    Yet our primary case interpreting Hale rejects this
commonsense distinction between purely economic employee
protections and protections with a dignitary aspect. Coupar
applied Hale to a prisoner seeking the protection of the anti-
retaliation provisions of the Clean Air Act, 

42 U.S.C. § 7622

(a), and the Toxic Substances Control Act, 

15 U.S.C. § 2622

(a), notwithstanding the non-pecuniary policies that
animate those Acts. See Coupar, 

105 F.3d at 1265

. It
reasoned that Congress “extend[ed] whistleblower protection
only to ‘employees,’” and not “retaliation by any violator
against any whistleblower.” 

Id. at 1266

 (emphasis in
original). A prisoner “obligated to work at some job pursuant
to a prison work program” falls “within the rule of Hale,” no
matter the policies the statute addresses, when that statute
applies to “employees.” 

Id. at 1265

.

    Like the whistleblower protections in Coupar, the
protections of the ADA’s Title I run only to “employees.”

42 U.S.C. §§ 12111

(4), 12112(a). Given Coupar’s gloss on
Hale, I cannot avoid the conclusion that Castle is not an
“employee.” Consequently, although I would support
reconsideration of Hale, or at least of Coupar’s reading of
Hale, I concur in the majority’s application of those cases to
this one.
                CASTLE V. EUROFRESH, INC.                   25

    As today’s opinion demonstrates, however, Castle—and
the commonsense congressional policies he seeks to
vindicate—is not without recourse. Because his jailers
cannot contract away their obligations under Title II of the
ADA, the majority holds them liable for any violation of
Castle’s right to accommodation under the ADA. See Maj.
Op. Part III. To the extent the state passes along any such
liability—and the costs of avoiding it in the future by
accommodating disabled employees—to the private
employers with whom it contracts, today’s holding will also
dampen the competitive advantages of hiring convict labor.

    Other anti-discrimination statutes might be amenable to
a similar solution to the problem our cases have created.
Many violations of Title VII, for example, may be actionable
against the prison authorities under 

42 U.S.C. § 1983

. Cf.
Williams v. Meese, 

926 F.2d 994, 998

 (10th Cir. 1991)
(observing that a federal prisoner may be able to bring a
Bivens action if prison officials “discriminate against him on
the basis of his age, race, or handicap, in choosing whether to
assign him a job or in choosing what job to assign him”).

    This observation, along with the majority’s Title II
holding, somewhat reduces my concern about the adverse
consequences of today’s rulings—but only if the prison’s
ADA responsibilities are fully met. To meet their ADA Title
II obligations, prison officials cannot simply provide some
job to disabled prisoners, at whatever rate of pay and
whatever working conditions. Rather, Title II requires “that
persons with disabilities have the opportunity to receive the
same benefits as non-disabled” people who are similarly
situated, Castellano v. City of New York, 

142 F.3d 58, 70

(2d Cir. 1998), so long as such opportunity can be provided
via “‘reasonable modifications’ that would not fundamentally
26               CASTLE V. EUROFRESH, INC.

alter the nature of the service provided,” Tennessee v. Lane,

541 U.S. 509, 532

 (2004). That means, to me, that, if the
prison is going to farm out prison labor to offsite private
employers, at higher pay and a more favorable location than
are available to prisoners within the prison’s walls, the prison
must ensure that the ADA standards are met with regard to
that opportunity.

     With those observations, I concur in the opinion.