457 U.S. 830 (1982)
The New Perspectives School is a nonprofit private institution located on privately owned property in Brookline, Massachusetts.1 It was founded and operated by a board of directors none of whom are public officials or chosen by public officials.2 The school specializes in dealing with students who have experienced difficulty completing public high schools.3 Many of those students have drug, alcohol, behavioral problems, or other special needs.4 In recent years nearly all of its approximately fifty students were referred to it by the Brookline or Boston School Committees or by the Drug Rehabilitation Division of the Massachusetts Department of Mental Health.5 The school issues high school diplomas certified by the Brookline School Committee.6
Public funds accounted for at least ninety percent and in one year ninety-nine percent of the school's operating budget.7 None of the students paid tuition.8 To remain eligible for tuition funding under Chapter 766 of the Massachusetts Acts of 1972 the school must comply with a variety of state regulations covering record-keeping, student-teacher ratios, and other matters.9 Its contracts with the Boston School Committee and the State Drug Rehabilitation Division refer to the school as a contractor.10 Those contracts require it to carry out individualized student plans.11 They impose few specific requirements on personnel policies.12
Petitioner Rendell-Baker was hired as a vocational counselor under a grant from the federal Law Enforcement Assistance Administration.13 Its funds are distributed in Massachusetts through the State Committee on Criminal Justice.14 That committee must approve the school's initial hiring decisions to ensure counselors meet the qualifications described in the grant proposal.15 However, the committee does not interview applicants for counselor positions.16 The five other petitioners served as teachers at the school.17
In December 1976 students presented a petition to the school's board of directors seeking greater responsibilities for a student-staff council.18 Director Kohn opposed the proposal while Rendell-Baker supported it and so advised the board.19 On December 13 Kohn notified the State Committee on Criminal Justice that she intended to dismiss Rendell-Baker.20 Kohn notified Rendell-Baker of her dismissal in January 1977.21 Rendell-Baker advised the board that she had been discharged without due process.22 She demanded reinstatement or a hearing.23 She complained to the State Committee on Criminal Justice. The committee requested and received a written explanation from the school.24 Rendell-Baker objected to the composition of a grievance committee.25 Its proceedings never went forward.26 She filed suit in July 1977 under 42 U.S.C. § 1983 alleging violations of her First, Fifth, and Fourteenth Amendment rights.27
In the spring of 1978 the five teachers wrote a letter to the board urging Kohn's dismissal.28 The board affirmed its confidence in Kohn. Students picketed the home of the board president and were threatened with suspension.29 A local newspaper ran a story about the controversy.30 The teachers wrote a letter to the editor stating that the prohibition of picketing was unconstitutional.31 On the day the letter to the editor appeared the five teachers told the president of the board that they were forming a union.32 Kohn discharged the teachers the next day.33 They brought suit against the school and its directors in December 1978 under § 1983 alleging violations of their First, Fifth, and Fourteenth Amendment rights.34
On April 16, 1980 the District Court for the District of Massachusetts granted summary judgment for the defendants in Rendell-Baker's case.35 On April 7, 1980 a different judge of the same court denied a motion to dismiss in the teachers' case.36 The Court of Appeals for the First Circuit consolidated the actions.37 It concluded that the school was not dominated by the state especially with respect to personnel decisions.38 The court separately rejected Rendell-Baker's claim based on her position's direct funding.39 It affirmed the dismissal of both actions.40 The Supreme Court granted certiorari.41
Whether a private school whose income is derived primarily from public sources and which is regulated by public authorities acted under color of state law when it discharged its employees?42
A private entity's actions constitute state action under the Fourteenth Amendment and 42 U.S.C. § 1983 only when the state has exercised coercive power or provided significant encouragement. The choice must then be deemed that of the state.43 Alternatively, the entity must perform a function traditionally the exclusive prerogative of the state.44
No. The New Perspectives School received at least 90% and up to 99% of its funding from public sources under Chapter 766 yet the state did not compel or influence the discharge decisions.45 The regulators showed relatively little interest in the school's personnel matters and imposed few specific requirements on hiring or firing.46 Education of maladjusted high school students is not traditionally the exclusive prerogative of the state.47 The school's fiscal relationship with the state is not different from that of many contractors performing services for the government and lacks the symbiotic relationship found in Burton v. Wilmington Parking Authority.48
The New Perspectives School did not act under color of state law when it discharged the petitioners.49
Related opinions on this issue
Justice White concurred in the judgment.50 He emphasized that the issue of state action focuses on an employment decision made by a private school receiving most of its funding from public sources.51 The critical factor is the absence of any allegation that the employment decision was itself based upon some rule of conduct or policy put forth by the State.52
The regulators showed relatively little interest in the school's personnel matters.53 The employment decision remains a private decision not fairly attributable to the State.54
Joined by Justice Brennan
Justice Marshall dissented.55 He argued that the State has delegated to the New Perspectives School its statutory duty to educate children with special needs.56 The school receives almost all of its funds from the State and is heavily regulated.57
This nexus between the school and the State is so substantial that the school's action must be considered state action.58 He stressed that the school provides a substitute for public education.59 The State should not avoid constitutional requirements by delegating its statutory duty to a private entity.60