Gladys Garcia-Rubiera v. Luis Fortuno

Filing

OPINION issued by Sandra L. Lynch, Chief Appellate Judge; Juan R. Torruella, Appellate Judge and Rogeriee Thompson, Appellate Judge. Published. [10-2507]

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Date Filed: 12/02/2011

Entry ID: 5600223

United States Court of Appeals
For the First Circuit
No. 10-2507
GLADYS GARCÍA-RUBIERA; DOMINGO A. CORPORAN-SUÁREZ; ADALBERTO
RODRÍGUEZ; LOURDES MATOS; JOSÉ R. MALDONADO; JOSÉ PÉREZ-CANABAL;
MANUEL MOLINA-GODÍNEZ; DAVID CASTRO; ADALBERTO AVILÉS; JORGE
PLARD; LAURA PLARD-OCASIO; GINOVA TORO-MORALES; NOEMÍ
VALENTÍN-MARRERO,
Plaintiffs, Appellants,
v.
LUIS G. FORTUÑO, Governor; JUAN CARLOS PUIG-MORALES,
Treasury Secretary,
Defendants, Appellees,
JUAN ANTONIO FLORES-GALARZA; SILA MARÍA CALDERÓN,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gustavo A. Gelpí, U.S. District Judge]
Before
Lynch, Chief Judge,
Torruella and Thompson, Circuit Judges.

A.J. Amadeo Murga for appellants.
Miguel A. Rangel-Rosas, with whom Angel E. Rotger-Sabat,
and Maymí, Rivera & Rotger, P.S.C., were on brief, for appellees.

December 2, 2011

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LYNCH, Chief Judge.

Date Filed: 12/02/2011

Entry ID: 5600223

At stake in this case are the due

process rights of privately-insured motor vehicle owners in Puerto
Rico to over $100 million in insurance payments, which have been
collected by the Commonwealth, and are owed back as reimbursement
to these vehicle owners, but which have not been repaid and have
been used instead for the Commonwealth's general budget.
Puerto Rico law requires all motor vehicle owners to pay
for

compulsory,

state-issued

automobile

insurance

when

they

purchase or renew their vehicle registrations, even if they have
obtained equivalent private insurance, with limited exceptions.
P.R. Laws Ann. tit. 26, § 8051 et seq.

As a result, many vehicle

owners who have already paid for private insurance must pay again
for the same coverage through the Commonwealth.

By law, these

privately-insured vehicle owners ("insureds") who pay twice for
insurance coverage are entitled to reimbursements of the duplicate,
state payments.
payment,
insurers.

Id. § 8055(n).

insureds

may

seek

For two years after the date of

reimbursement

from

their

private

However, a great deal of the money owed to insureds is

not returned during this two-year period.

Although there is no

doubt that insureds have a property interest in the duplicate
payments, no statute or regulation provides notice to insureds of
how to obtain reimbursement during this two-year period from their
respective insurers, and apparently only some insurers provide
their insureds with notice of how to obtain reimbursements.

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By statute, every two years the Commonwealth transfers
to itself the large pool of unreimbursed duplicate payments that
have accumulated to the private insurers.

Act No. 230 of Sept. 11,

2002, § 2 (codified at P.R. Laws Ann. tit 26, § 8055(l)).

The

Commonwealth holds this money in trust for the insureds for another
five years, during which insureds can seek reimbursement directly
from Puerto Rico's Treasury Department.

Id.

At the end of the

five year period "these funds . . . become property of the
Commonwealth of Puerto Rico and . . . pass to the General Fund of
the Commonwealth Treasury."

Id.

However, the governing statute

does not itself set up a procedure for reimbursement or tell
insureds where or how to find such procedures.
requires Puerto

Rico's

Secretary

of

the

The statute only

Treasury

to

issue

a

procedure for reimbursement.
The Secretary of the Treasury has established such a
procedure, but has failed to give insureds notice of the contents
of that procedure or where to find it.

In fact, insureds will not

find it unless they go in person to the proper office of government
and make an "appropriate request" for a copy of the regulation.
In

addition

to

receiving

no

notice

about

the

Commonwealth's procedures for reimbursement, insureds receive no
individual

notice

that

their

duplicate

payments

have

been

transferred from their private insurers to the Commonwealth, or
that they may apply directly to the Secretary of the Treasury for

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reimbursement after this transfer. They also receive no individual
notice

that

their

duplicate

payments

will

escheat

to

the

Commonwealth after five years, and so be permanently lost to them.
A class of insureds owed reimbursement challenged the
Commonwealth's compulsory insurance scheme in both Puerto Rico's
courts and federal court.

In this federal suit, the insureds

claim, inter alia, that the compulsory insurance scheme violates
the fundamental requirements of procedural due process. The Puerto
Rico suit, which has been stayed in favor of this suit, makes the
additional claim that the Commonwealth has breached its fiduciary
duties as trustee of the duplicate premiums on behalf of insureds.
We

agree

that

the

Commonwealth

of

Puerto

Rico

has

violated the notice requirements of the Due Process Clause and
direct entry of a declaratory judgment and injunctive relief to
that effect.

We reject plaintiffs' remaining federal claims.

The

question of whether the Commonwealth has violated its fiduciary
duties to plaintiffs under Puerto Rico trust law remains before the
Puerto Rico courts.
I.
A.

Background
In 1995, Puerto Rico passed Law 253, which requires all

motor vehicles traveling on public roads to obtain liability
insurance.

P.R. Laws Ann. tit. 26, § 8051 et seq.

Pursuant to Law

253, the owners of such vehicles are required to purchase either

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the

Document: 00116299527

Commonwealth's

liability

private insurance plan.
subsequent

year

Page: 5

when

Date Filed: 12/02/2011

insurance

plan

or

an

Entry ID: 5600223

equivalent

Thus, at the time they acquire and each

they

renew

their

vehicle

registrations,

vehicle owners must either pay premiums (of $99 for private and
$148 for commercial vehicles) to the Commonwealth, id. § 8053(a),
or opt-out of the Commonwealth's insurance plan by using the
appropriate procedures to present proof of private insurance, id.
§ 8061(a).
Law

253

also

created

the

Asociación

de

Suscripción

Conjunta del Seguro de Responsabilidad Obligatorio ("JUA") to
administer

the

Commonwealth's

insurance

plan.

Id.

§

8055.

Composed of and operated by Puerto Rico's largest private insurance
companies, JUA insures vehicle owners who buy the Commonwealth's
insurance product.

Id. § 8055(b).

Periodically, the Commonwealth

remits to JUA the insurance premiums paid in by vehicle owners,
which JUA then uses or distributes among its member companies. Id.
§ 8055(c), (e), amended by Act 201 of Dec. 29, 2009, art. 4.
The Commonwealth insurance option provides only minimal
coverage to vehicle owners (initially $3,000, but later increased
to

$4,000,

worth

of

coverage

for

property

damage

to

other

vehicles); thus, many drivers obtain private liability insurance
for more complete coverage.
Dec. 29, 2009, art. 2.

Id. § 8052(j), amended by Act 201 of

Under Law 253, drivers who obtain private

insurance with coverage "similar to or greater than that of the

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compulsory liability insurance" are not required to pay for state
insurance on top of their private insurance, and may opt out of the
state insurance option.

Id. § 8061.

Puerto Rico's Insurance Commissioner has enacted varying
procedures over the years designed to help these privately-insured
vehicle owners avoid paying for both private and state insurance,
but, in fact, a substantial percentage of privately-insured vehicle
owners have not utilized these procedures successfully and so have
been required to pay the state premium on top of their private
insurance.1
insured

In 2000, for example, only one-third of privately-

vehicle

owners

successfully

1

avoided

paying

the

state

In the first year of the scheme's operation, every
vehicle owner was required to purchase state insurance regardless
of whether he or she had also purchased adequate private insurance.
In later years, millions of privately-insured vehicle owners have
purchased both options.
A variety of reasons exist for why
privately-insured vehicle owners also purchase the state option.
Initially, the Insurance Commissioner required JUA to
issue to these insureds a check in the amount of the requisite
state premium made payable to the Secretary of the Treasury. See
P.R. Ins. Comm'r, Regulation No. 5737 (Dec. 30, 1997). However,
this process was rescinded in favor of the current method, by which
insureds are automatically charged for the state insurance when
they renew their registration unless they present a JUA-issued
Certificate of Compliance certifying their private insurance. See
Amendment to Regulation No. 5737 (Sept. 14, 2000).
These
certificates must be ordered from one's private insurance company
after the purchase of private insurance but well in advance of the
state registration or renewal date. Id. This timing is critical:
if an insured's private policy is up for renewal too close to or
after the insured's vehicle registration date, he or she will not
be able to obtain a certificate and will be forced to pay the state
premium. Similarly, if an insured is late in paying his or her
private insurance premium or makes any changes to the policy, he or
she may be required to pay the state premium.
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premium, and the remaining two-thirds had to pay for both private
and state insurance.
By law, when an insured pays twice, he or she is entitled
to a reimbursement of the state premium fee.

The Insurance

Commissioner has promulgated regulations to this effect which
direct private insurers to first reimburse their insureds who pay
twice, and then seek their own reimbursement from JUA.

However,

the Commissioner's regulations do not establish a uniform procedure
for reimbursement or instruct insureds on precisely how to obtain
reimbursement, but merely indicate that the insurance companies may
establish their own internal reimbursement procedures.
These internal procedures for reimbursement vary from one
insurer to the next.

Significantly, the Insurance Commissioner's

regulations instruct insurers to reimburse insureds where "the
insured provides

evidence

that

the

payment

was

made

[to

the

Commonwealth]," Amendment to Regulation No. 5737, art. 5(a) (Sept.
14, 2000), but do not further delineate what constitutes this
evidence of payment, and do not require insurers to notify their
insureds of the proper procedures for proving payment or for
obtaining reimbursements in general.

As a consequence, many

insureds (in some years, a majority of insureds) do not receive
their

reimbursements

from

their

insurers

and

payments simply remain in the custody of JUA.

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their

duplicate

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The sums JUA has accumulated from this state of affairs
are truly enormous.
into

effect,

see

By 2000, just three years after Law 253 went
Act

253

of

Dec.

27,

1995,

§

16,

JUA

had

accumulated $72 million worth of duplicate premiums which had not
been reimbursed, a figure representing 42% of the total amount that
should have been reimbursed by insurers to their insureds. Of this
$72

million,

duplicate

$24

payments

million

was

owed

to

that

year,

but

the

insureds
remaining

who
$42

had

made

million

represented a backlog of unreimbursed payments from the previous
two years.

By 2001, this sum had grown to almost $92 million.
By law, JUA is required to keep all duplicate premium

payments separate from other funds in a special "Reserve" account.
Each year, JUA calculates how much money to place in this Reserve
account by estimating what percentage of the total number of
premium payments received will be "claimed" as duplicate payments
by vehicle owners who are privately insured but who end up paying
twice.

Typically, JUA estimates that 13% to 15% of the total

number of premium payments received each year are in fact duplicate
payments made by privately-insured vehicle owners.
In most years, fewer insureds claim reimbursements than
expected.

JUA thus designates some portion of the Reserve account

as "excess," or money that will never be claimed by insureds.

In

2001, for example, JUA estimated that of the $73 million in the

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Reserve account, somewhere between $8 and $10 million would never
be claimed by insureds and thus constituted "excess" funds.
JUA's accumulation of these large, unreimbursed sums did
not go unnoticed.
Law

230,

which

In 2002, the Legislature of Puerto Rico enacted
directed

JUA

to

transfer

all

of

the

funds

accumulated in the Reserve account as of December 31, 2001 -- a sum
of approximately $73 million -- to the Secretary of the Treasury,
and to repeat this transfer every two years thereafter.
230 of Sept. 11, 2002, § 2.

Act No.

The Law's Statement of Motives

explained, "during the existence of [JUA], certain funds have been
accumulated to it that do not belong to it. . . . [I]t is of
greater benefit to the public interest in general to immediately
transfer those funds to the . . . custody of the Department of the
Treasury."

Id., Statement of Motives (emphasis added).
Pursuant to Law 230, the Secretary of the Treasury is

required to hold the transferred funds "as trustee" for five years,
after which, any remaining funds that have not been reimbursed to
insureds escheat to the Commonwealth.2
§ 8055(l).
Secretary

P.R. Laws Ann. tit. 26,

Law 230 also states, without elaborating further: "The
of

the

Treasury

shall

establish

a

procedure

for

processing the reimbursement request from any person alleging a

2

Under a provision of Law 230 challenged by plaintiffs in
an earlier phase of this case, the Commonwealth also gained
immediate title over any interest accrued to those funds
transferred from JUA to the Treasury Department. García-Rubiera v.
Flores-Galarza, 516 F. Supp. 2d 180, 197 (D.P.R. 2007).
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right to the retained funds."

Id.

Date Filed: 12/02/2011

Entry ID: 5600223

Law 230 does not require the

Secretary of the Treasury to give notice of that procedure to the
insureds.
In

2003,

the

Secretary

of

the

Treasury

formulated

Procedure 96, under which insureds may seek reimbursement directly
from the Treasury Department once JUA has transferred the funds
there.

Thus, after making a duplicate payment, an insured has two

years in which to submit a reimbursement request directly to his or
her

insurer;

if

the

insured

is

unsuccessful

in

securing

reimbursement during this period, he or she has five years in which
to seek reimbursement from the Treasury Department.3
Under Procedure 96, a claimant must obtain and fill out
various forms and send these, as well as the following attachments,
to the Secretary of the Treasury: (1) a copy of the motor vehicle
license for which the reimbursement is being claimed; (2) a copy of
the insurance policy for each year claimed; (3) certification from

3

Intervenor Attorney General of Puerto Rico argued on
appeal that the Insurance Commissioner's regulations should be
interpreted to permit insureds to obtain reimbursements directly
from their private insurers even after their duplicate payments
have been transferred by JUA to the Treasury Department.
The
Attorney General's stated position in this case is vigorously
disputed by the parties and was the subject of much confusion at
oral argument. Our conclusion does not turn on this point, but we
note that the Attorney General's interpretation is not the only
interpretation
-and
not
necessarily
the
most
natural
interpretation -- of the regulations. The inordinate confusion
over this point is further evidence of the inadequacy of the
Commonwealth's notice to insureds of the procedures for
reimbursement.
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the insurance company of payment of the policy for each year
claimed;

(4)

certification

that

the

claimant

has

not

been

reimbursed; and finally, (5) verification that the applicant does
not have any tax debts with the Treasury Department.
Treasury, Procedure 96 (Apr. 1, 2003).
private

insurance

company

seeking

P.R. Dep't of

If the claimant is a

reimbursement,

it

must

additionally attach certified copies of each insurance policy for
which it is claiming, certification that it has not yet received
reimbursement from JUA for each policy claimed, and verification
that it does not have any tax debts outstanding with the Treasury
Department.

Id.

The parties have not disputed that Procedure 96 was
promulgated

pursuant

to

Puerto

Rico's

Uniform

Administrative

Procedure Act (UAPA). Under the UAPA, once the Treasury Department
finalizes Procedure 96, it is required to forward the regulation to
the Secretary of State for approval.
§§ 2128(a), 2131.

P.R. Laws Ann. tit. 3,

If approved, the Secretary of State must

"publish in two newspapers of general circulation a summary of [the
regulation]," which includes "its number, effective date and the
agency

that

approved

it."

Id.

§

2128(d)

(emphasis

added).

Subsequently, the Secretary of State must keep in his office "a

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permanent file of [the regulation] for public inspection."4 Id. § 2130.
Thus, unlike federal regulations, which are published in
multiple legal databases available both in print and for free
online, under the Commonwealth's application of the UAPA in this
case, the only way to obtain a full copy of Procedure 96 is to go
to the Secretary of State's office, in person, and place a request
to inspect the specific regulation.

Even the UAPA's "publication"

requirement, as applied to Procedure 96 in this case, requires only
that a summary be published one time in two newspapers, a summary
which need only include the regulation's number, date, and agency
of issuance.

Id. § 2128(d).

Under

the

Treasury's

insureds slowed to a trickle.

trusteeship,

reimbursements

to

The Secretary of the Treasury

reimbursed just $500,000 in the first year of the administration of
the trust.

By the summer of 2010, the Secretary of the Treasury

4

Under the original UAPA, enacted August 12, 1988, the
requirement that the Secretary of State retain a copy of each
regulation in his or her office for public inspection was the
extent of the Act's filing requirement.
In 2008, the Act was
amended to additionally require the Secretary of State to
"establish and keep, permanently, in the webpage of the Department
of State over the Internet, a copy of all regulations filed
therewith for public access and inspection . . . free of charge and
available in a format easily accessible for the public." P.R. Laws
Ann. tit. 3, § 2130 (2009). The law is unclear as to whether the
internet publication requirement is retroactive to regulations
issued prior to July 16, 2008; however, the Attorney General of
Puerto Rico has represented in its brief -- and a search of the
Secretary of State's online collection of regulations confirms -that Procedure 96 is available only in hard copy in the Secretary
of State's office.
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had reimbursed
Meanwhile,

as

a
of

Page: 13

Date Filed: 12/02/2011

total of

$9

the

accounting

last

million in
in

duplicate
2009,

the

Entry ID: 5600223

payments.
Treasury

Department has received approximately $157 million in duplicate
payments from JUA.
The
Commonwealth's

difference
general

has

budget,

been
and

used
the

to

supplement

Commonwealth

has

the
not

hesitated to use the funds for its own purposes both before and
after the funds have officially escheated.

As early as 2002, when

the Department of the Treasury acquired the first installment of
$73 million in duplicate payments, it estimated that of this
amount, only $20 million would ever be claimed by insureds in
reimbursements (JUA had assessed this sum at $63 million), and
promptly transferred the balance of $53 million in "excess" funds
to the Commonwealth's budget for fiscal year 2001-2002, which, at
that time, was running a deficit of approximately $200 million.
Two years later, with the Treasury having reimbursed just
$500,000 of the $20 million initially reserved for reimbursements,
the Legislature passed Act 414, which permitted the Secretary of
the Treasury to transfer the remainder of that $20 million to the
Commonwealth's
reimbursements.

2004-2005

budget,

less

another

$500,000

for

Act 414 of Sept. 22, 2004 (codified at P.R. Laws

Ann. tit. 26, § 8055(l)).

Act 414 required that in the case the

sum of $500,000 proved insufficient to cover reimbursement claims
made prior to the next transfer from JUA, funds for reimbursement

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be

taken

Budgetary Fund.

out

of

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the

Date Filed: 12/02/2011

Commonwealth's

General

Entry ID: 5600223

Fund

and

Id.

In 2007, the first of the duplicate premiums transferred
by JUA to the Treasury escheated to the Commonwealth; additional
funds escheated in 2009, and more are scheduled to escheat at the
end of this year. All told, the Commonwealth has obtained title by
escheat to almost 95 percent of the duplicate premiums transferred
under Law 230.
B.

Procedural History
Law

litigation.

253

and

its

amendments

have

produced

extensive

This court has heard three other cases5 concerning the

Law and its amendments in addition to the present litigation and
its companion case,6 and the courts of Puerto Rico have heard
additional cases.

In the present case, plaintiffs appeal to this

court from the district court's grant of defendant's motion for
summary judgment, entry of judgment for defendant, and denial of
plaintiffs' summary judgment motion.

García-Rubiera v. Fortuño,

752 F. Supp. 2d 180 (D.P.R. 2010).

5

See Asociación de Suscripción Conjunta del Seguro de
Responsabilidad Obligatorio v. Juarbe-Jiménez, 659 F.3d 42 (1st
Cir. 2011); Asociación de Suscripción Conjunta del Seguro de
Responsabilidad Obligatorio v. Flores-Galarza, 484 F.3d 1 (1st Cir.
2007); Arroyo-Melecio v. Puerto Rican Am. Ins. Co., 398 F.3d 56
(1st Cir. 2005).
6

Colón-Rivera v. Asociación de Suscripción Conjunta del
Seguro de Responsabilidad Obligatorio, No. 11-1148 (1st Cir. argued
Sept. 8, 2011).
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Plaintiffs

filed

Page: 15

their

Date Filed: 12/02/2011

complaint

in

this

February, 2002 as an action under 42 U.S.C. § 1983.
plaintiffs'

complaint

declaratory

judgment

sought
that

the

Law

230

following
and

its

Entry ID: 5600223

case

in

As amended,

relief:

(1)

amendments

a
are

unconstitutional under the Takings and Due Process Clauses, (2)
reimbursement from the Commonwealth of their duplicate premiums
with

accrued

interest,

(3)

injunctive

relief

to

prevent

the

continued transfer and escheat of funds to the Commonwealth, and
(4) damages from the Governor of Puerto Rico and the Secretary of
the Treasury in their personal capacities.7
The district court entered an order dismissing the case
without prejudice as premature in 2004.

See García-Rubiera v.

Fortuño, No. 3:02-cv-01179 (D.P.R. Feb. 11, 2004). On a Rule 60(b)
motion, the court heard additional motions in the case, at which
time plaintiffs moved for class certification and for a preliminary
injunction, and defendants moved to dismiss.

On August 30, 2007,

the district court granted the defendants' motion to dismiss with
respect to plaintiffs' individual capacity claims for damages, and
denied plaintiffs' motions with respect to all their claims, with
the exception of their request for a preliminary injunction against
any further deposit into Puerto Rico's General Fund of the interest

7

In 2001, plaintiffs filed a similar, but broader, action
in the Puerto Rico court of first instance, which has been stayed
pending the resolution of this case. García-Rubiera v. Asociación
de Suscriptores Conjunta del Seguro de Responsabilidad Obligatorio,
No. KDP01-1441 (P.R. Gen. Ct. of J. Cir. Mar. 16, 2011).
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accrued

to

the

Page: 16

duplicate

Date Filed: 12/02/2011

premiums,

which

the

court

Entry ID: 5600223

granted.

García-Rubiera v. Flores-Galarza, 516 F. Supp. 2d 180, 197-98 &
n.20 (D.P.R. 2007).
The

district

court

rejected

all

of

plaintiffs'

constitutional claims on their motion for a preliminary injunction
with respect to the duplicate premiums themselves.

The court held

that plaintiffs' takings claim for the duplicate payments was not
ripe because plaintiffs had failed to utilize Procedure 96 to
retrieve their money, and that, while ripe, plaintiffs' due process
claims failed because plaintiffs did not demonstrate either that
"available
redress

remedies

any

under

deprivation

Commonwealth
resulting

from

law
the

are

inadequate

transfer

of

to
the

Duplicate Premiums to the Secretary," or that Procedure No. 96 is
"onerous."

Id. at 196.
In 2009, this court reversed the district court in part,

affirmed

in

part,

and

remanded

for

further

proceedings.

García-Rubiera v. Calderón, 570 F.3d 443 (1st Cir. 2009). We held,
under our circuit precedent, that plaintiffs' takings claims were
ripe despite their failure to utilize state procedures to reclaim
their money, id. at 453-54 (citing Asociación de Suscripción
Conjunta

del

Flores-Galarza,

Seguro
484

F.3d

de

Responsabilidad
1,

19

(1st

Cir.

Obligatorio
2007)),

but

v.
see

Downing/Salt Pond Partners v. R.I. & Providence Plantations, 643
F.3d 16, 26 (1st Cir. 2011), cert. denied, 2011 WL 3794357 (Oct.

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31, 2011), and remanded for further consideration of plaintiffs'
takings claims.
We also held that plaintiffs retained a property interest
in the transferred duplicate premiums sufficient for purposes of
procedural due process.

Id. at 455.

Finding the district court

had failed to directly address plaintiffs' due process claim, id.,
we remanded for further consideration of their claim, and for a
specific

determination

as

to

whether

the

transfer

of

funds

constituted a "deprivation" sufficient to require notice under the
Due Process Clause, id. at 458.8
On remand, plaintiffs moved for summary judgment on their
constitutional claims.
full,

holding

that

The district court denied their motion in

Law

230

did

not

constitute

a

sufficient

deprivation as to require notice under the Due Process Clause,
García-Rubiera, 752 F. Supp. 2d at 186-88, and further, that the
transfer of funds did not amount to a taking for which insureds
were entitled to just compensation, id. at 188-89.

The court

denied plaintiffs relief under substantive due process, finding
that Law 230 easily passed muster under rational basis review, id.

8

This court also affirmed the district court's holding
that the Secretary of the Treasury and Governor were entitled to
qualified immunity in their personal capacities and affirmed the
district court's rejection of various of plaintiffs' other claims,
including its equal protection claim. García-Rubiera v. Calderón,
570 F.3d 443, 461 (1st Cir. 2009). We ordered certification of
plaintiffs' class action. Id.
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at 186, and additionally denied plaintiffs' evidentiary requests.
The court granted defendants' motion for summary judgment.
II.
Plaintiffs appeal the district court's decision as to all
their claims.

Our review of the district court's disposition of

plaintiffs' legal claims is de novo, Rodriguez v. Am. Int'l Ins.
Co. of P.R., 402 F.3d 45, 46-47 (1st Cir. 2005); our review of the
court's denial of plaintiffs' evidentiary requests is for abuse of
discretion, Doe v. Solvay Pharm., Inc., 153 Fed. App'x 1, 1-2 (1st
Cir. 2005) (per curiam).
A.

Procedural Due Process Claim
Plaintiffs

regulations

deprive

argue
them

that
of

Law

their

230

and

property

its

companion

interests

in

duplicate premiums without constitutionally adequate process.

the
To

establish a procedural due process claim under § 1983, plaintiffs
must demonstrate that they have "a property interest as defined by
state law" and that the defendants deprived them of this property
interest without constitutionally adequate process.

SFW Arecibo,

Ltd. v. Rodríguez, 415 F.3d 135, 139 (1st Cir. 2005) (quoting PFZ
Properties, Inc. v. Rodriguez, 928 F.2d 28, 30 (1st Cir. 1991)).
1.

Deprivation of a Property Interest

In García-Rubiera v. Calderón, 570 F.3d 443, this court
held that plaintiffs have a property interest in their duplicate
premiums both before and after the premiums are transferred from

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JUA to the Treasury Department, id. at 455, and remanded for a
determination as to whether Law 230 and its companion regulations
effect a deprivation of plaintiffs' property for purposes of the
Due Process Clause, id. at 458.
The district court held that because Law 230 and its
amendments

merely

substitute

one

custodian

of

the

duplicate

payments for another, and replace one reimbursement procedure with
another, they do not "deprive" plaintiffs of any property interests
in the funds.
The

court

García-Rubiera v. Fortuño, 752 F. Supp. 2d at 187.
also

rejected

plaintiffs'

argument

that

Commonwealth's reimbursement procedure is too burdensome.

Id.

the
We

disagree with the first holding, and agree as to the second.
Law 230 and its companion regulations, viewed in the full
context of the Commonwealth's compulsory insurance scheme, clearly
effect a deprivation of property for purposes of due process
analysis.
Law

253

contemplates

and

empowers

the

Insurance

Commissioner to establish a system to exempt privately-insured
vehicle owners from paying duplicate state fees for insurance.
P.R. Laws Ann. tit. 26, § 8061(b); see also Act No. 94 of Aug. 20,
1997,

Statement

of

Motives,

§

12.

However,

the

Insurance

Commissioner has chosen not to establish a reliable method for
exempting insureds from the fees up front, but has chosen to rely
on a reimbursement scheme, at least as to some insureds.

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Specifically,
"Certificate

of

duplicate fees.
2000).

Page: 20

the

Compliance"

Date Filed: 12/02/2011

Commissioner
process

for

has

Entry ID: 5600223

instituted

avoiding

payment

a
of

See Amendment to Regulation No. 5737 (Sept. 14,

However, by the Commonwealth's own admission, this process

is not available to all insureds,9 and plaintiffs have presented
evidence that many, if not most, insureds pay twice.

Insureds who

do not obtain a Certificate of Compliance are forced to pay the
Commonwealth's

duplicate

fees

or

suffer

serious

sanctions,

including the impounding of their license plate, revocation of
their

driving

privileges

for

the

vehicle

imposition of a misdemeanor charge and fine.

in

question,

and

P.R. Laws Ann., tit.

26, §§ 8053, 8060.
Thus, instead of determining whether insureds actually
owe the state fees, in many cases the Commissioner simply charges
insureds automatically for the state insurance product, and relies
on a refund process for returning moneys paid but not actually owed
to the state.

9

As discussed above, whether an insured can obtain a
certificate depends on, among other things, his or her timing in
purchasing or renewing his or her insurance policy.
If an
insurance policy is altered or renewed within one and a half months
of an insured's vehicle registration renewal date, JUA will not
issue a certificate at all. See Amendment to Regulation No. 5737
(Sept. 14, 2000).
Further, the record reveals that even when
Certificates of Compliance are issued, only a fraction of these are
successfully redeemed. In 2000, for example, approximately 33% of
issued certificates were successfully redeemed by insureds. The
Commonwealth does not currently provide any pre-payment procedures
other than the certificate of compliance for avoiding the duplicate
fees.
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Although
broader

the

pre-payment

Page: 21

Commissioner
exemption

Date Filed: 12/02/2011

could

process,

have
or

Entry ID: 5600223

established
given

a

insureds

information about the refund process at the time they make the
duplicate payments, the Commissioner has chosen to rely on a postpayment refund application process for returning plaintiffs' money.
Under these conditions, the Commonwealth has an obligation to set
up

a

meaningful

procedure

for

reimbursement,

which

includes

adequate notice of the procedure.
The Commonwealth does not contest its obligation to
return plaintiffs' money upon a proper application for refund. The
lawfulness of the Commonwealth's initial duplicate collection of
the

payments

procedures

does

for

not

the

insulate

return

of

it

from

property

providing

meaningful

that

rightfully

is

plaintiffs', and as to which the Commonwealth has no valid claim
prior to escheat.

See City of West Covina v. Perkins, 525 U.S.

234, 240 (1999) ("At this stage, no one contests the right of the
State to have seized the property in the first instance or its
ultimate obligation

to

return

it.

So

rules

restricting

the

substantive power of the State to take property are not implicated
by this case.").
The Supreme Court has held in the tax context that "[i]f
a State places a taxpayer under duress promptly to pay a tax when
due and relegates him to a postpayment refund action in which he
can challenge the tax's legality, the Due Process Clause . . .

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obligates the State to provide meaningful backward-looking relief."
McKesson Corp. v. Div. of Alcoholic Beverages & Tobacco, 496 U.S.
18, 31 (1990).

In such circumstances, a state must ensure that its

tax scheme comports with due process.
The right focal point for the due process deprivation
analysis is thus not on the moment of transfer of funds from the
custody of JUA to that of the Commonwealth, but on the overriding
obligation of the Commonwealth, throughout the total process, to
provide notice and a meaningful procedure to return to plaintiffs
the property that is rightfully theirs.

That plaintiffs have two

years in which to seek a refund from JUA before the funds are
transferred

does

not

obviate

the

Commonwealth's

independent

obligation to provide a meaningful refund procedure after the funds
have been transferred and before their final escheat. See Jones v.
Flowers, 547 U.S. 220, 232-33 (2006).
2.

What Process is Due?

Plaintiffs

make

two

basic

procedural

due

process

arguments that the refund process provided by the Commonwealth is
inadequate under the Due Process Clause.

The first is that they

have not been given adequate notice as to what procedures are
available or from whom they should obtain reimbursement.

This

encompasses the argument that they have not been given notice that
the funds have been transferred from JUA to the Commonwealth.

The

second argument is that the Commonwealth's application process for

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reimbursement of individual requests is too burdensome.

Entry ID: 5600223

We take

each argument in turn.
As to plaintiffs' first argument, it is true that the
requirements of due process vary with the particulars of the
circumstance at issue.

See Morrissey v. Brewer, 408 U.S. 471, 481

(1972); Boddie v. Connecticut, 401 U.S. 371, 378 (1971).

One such

variation turns on whether the government conduct affecting the
protected property interest is legislative or adjudicative in
nature.

This is often put in terms of two poles, with a continuum

in between.
affected

by

At one end is legislative action.
generally-applicable

legislative

Where property is
action,

property

owners are not entitled to notice above and beyond the notice
provided by the enactment and publication of the statute.

See,

e.g., United States v. Locke, 471 U.S. 84, 108 (1985); Bi-Metallic
Inv. Co. v. State Bd. of Equalization, 239 U.S. 441, 445 (1915).
At the other end are individual adjudications, which require more
specific procedures, see, e.g., Mathews v. Eldridge, 424 U.S. 319,
335 (1976), as well as more specific notice, see Dusenbery v.
United States, 534 U.S. 161, 167-68 (2002); Mullane v. Cent.
Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).

In our

previous opinion in this case, we cited to Mullane for the scope of
due process notice guarantees, implicitly recognizing that this
case is not at the legislative end.
570 F.3d at 456-57.

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García-Rubiera v. Calderón,

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Entry ID: 5600223

The Commonwealth argues that this is a case of clear
statutory notice.

That is plainly not so, since Law 230 gives no

notice to insureds of how to obtain reimbursement; it merely
directs the Secretary of the Treasury to "establish a procedure for
processing the reimbursement request from any person."
Ann. tit. 26,

§ 8055(l).

P.R. Laws

This administrative procedure, in turn,

cannot be found in any readily available publication or online, and
even if insureds go to the Treasury Department in person, they will
not find the regulations.

This is not the notice due insureds, and

on this basis alone, this scheme is constitutionally deficient.
However, plaintiffs' argument that Procedure 96 is like
a full adjudicatory hearing is also not fully accurate.

But

plaintiffs are not entirely off the mark. Procedure 96 falls along
the continuum between legislative and adjudicative action.

Thus,

we do not say that the procedural due process inquiry ends if the
Commonwealth, today, were to publish the terms of Procedure 96
online and/or in some other publically available source.

Rather,

we turn to useful analogies for guidance on what form of notice
will satisfy the Commonwealth's obligations under the Due Process
Clause to give notice to insureds of the administrative procedure
for reimbursement.

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i.

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The Commonwealth Has Not Established Legislative
Notice

We explain why we reject the Commonwealth's argument that
plaintiffs have been provided with adequate legislative notice of
the procedures for reimbursement.
In

some

circumstances,

the

publication

of

clear,

reasonably comprehensible regulations publically available in hard
copy and/or online may suffice to provide adequate notice of the
procedures for reclaiming property.

In City of West Covina v.

Perkins,

Court

for

example,

the

Supreme

held

that

although

government agents must give notice to property owners that their
property has been taken "so that the owner[s] can pursue available
remedies for [the] return" of their property, individualized notice
of the remedies for return is not required where those remedies are
"established by published, generally available state statutes and
case law."

525 U.S. at 240-41.

The Court held that property

owners can turn to these readily available "public sources" for
specific instructions on how to reclaim their property.

Id. at

241; see also Reetz v. Michigan, 188 U.S. 505, 509 (1903) (holding
that when a statute clearly fixes the time and place of meeting of
a permitting board or tribunal, additional notice to persons
wishing to attain a permit may not be required).
However, the principle of legislative notice does not
extend to regulations that are not publically available.

See,

e.g., City of West Covina, 525 U.S. at 242 ("[N]otice of the
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procedures for protecting one's property interests may be required
when those procedures are arcane and are not set forth in documents
accessible to the public." (discussing Memphis Light, Gas & Water
Div. v. Craft, 436 U.S. 1 (1978))); Butler v. Castro, 896 F.2d 698,
703 (2d Cir. 1990) (holding that where New York City's procedures
for returning seized property were contained in an unpublished
judicial order, and not reflected in the most updated version of
the municipal code, the City failed to demonstrate legislative
notice and the administrative scheme violated the basic notice
requirements of the Due Process Clause).
In the present case, the Commonwealth's notice falls
below the

standard

for

legislative

notice.

The

Puerto

Rico

statutes do not give any notice of the Commonwealth's reimbursement
procedures.

Law 230 merely directs the Secretary of the Treasury

to "establish a procedure for processing the reimbursement request
from any person."
added).

The

P.R. Laws Ann. tit. 26, § 8055(l) (emphasis

Treasury

Department's

"procedure

for

processing

reimbursement," Procedure 96, has not been published in hard copy
or online and is not readily available to the public.
As the Attorney General of Puerto Rico has admitted, once
the

Secretary

of

the

Treasury

formulated

Procedure

Commonwealth took only the following two actions.

96,

the

First, the

Secretary of the Treasury submitted the regulation to the Secretary
of State, who published a "summary" of the regulation "in two

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newspapers of general circulation", "including its number, its
effective date and the agency that approved it."
has

been

provided

as

to

when

or

where

these

No information
summaries

were

published, their content, or where an insured might search to
obtain this information.

Second, the Secretary of State retained

a copy of the regulation in an office, for public inspection upon
a proper request.

The regulation is thus not readily available

online or in other publically accessible hard copy sources or
databases.

Nor would insureds know to look for the regulation at

the office of the Secretary of State instead of the Treasury
Department.
Moreover, neither Law 230 nor any of its companion
regulations require private insurance companies or JUA to provide
insureds with notice of the Commonwealth's reimbursement process.
Although there is evidence that some private insurance companies
may have informed insureds of the proper procedures for obtaining
reimbursement through the Treasury Department, there is ample
evidence that many insurance companies have not provided their
insureds with any information whatsoever concerning the existence
or particulars of Procedure 96.
Absent a trip, in person, to the appropriate office of
government and a proper request to inspect the regulation, the
Commonwealth has left plaintiffs in the dark as to every aspect of

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Procedure 96.

Page: 28

Date Filed: 12/02/2011

Entry ID: 5600223

The Commonwealth's statutory notice argument thus

fails.
ii.

What Notice Is Required?

Plaintiffs argue that the Commonwealth's reimbursement
procedure constitutes an individual adjudication to which the full
array of procedural due process protections attach.
entirely accurate either.
falls

somewhere

in

This is not

The Commonwealth's reimbursement scheme

between

legislative

action

and

individual

adjudications.
As courts have recognized, the line between legislative
and adjudicative action for purposes of procedural due process
analysis is not always easy to draw.

See United States v. Fla. E.

Coast Ry. Co., 410 U.S. 224, 245 (1973) ("[T]he line dividing them
may not always be a bright one . . . ."); L C & S, Inc. v. Warren
Cnty. Area Plan Comm'n, 244 F.3d 601, 603 (7th Cir. 2001) ("[T]he
line between legislation and adjudication is not always easy to
draw . . . ."); Thomas v. City of New York, 143 F.3d 31, 36 n.7 (2d
Cir. 1998) (examining whether the government action at issue "[is],
in fact, fully legislative or, at least in part, adjudicative");
see also Gallo v. U.S. Dist. Court For The Dist. of Ariz., 349 F.3d
1169, 1182 (9th Cir. 2003); 75 Acres, LLC v. Miami-Dade Cnty.,
Fla., 338 F.3d 1288, 1296 (11th Cir. 2003).
More importantly, not all government actions fall neatly
into these polar categories.

As with the requirements of due

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Case: 10-2507

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process

in

general,

the

Page: 29

"'notice

circumstances and conditions.'"

Date Filed: 12/02/2011

required

will

Entry ID: 5600223

vary

with

Jones, 547 U.S. at 226 (quoting

Walker v. City of Hutchinson, 352 U.S. 112, 115 (1956)).

A complex

administrative scheme, like the one challenged in this case, may
contain both legislative elements -- the application of a general
rule to a large number of people -- as well as adjudicative
elements -- fact-specific determinations of rule compliance in
individual instances.

See Texaco, Inc. v. Short, 454 U.S. 516,

534-36 (1982) (contrasting the lapse of a mineral interest as
provided for by statute with an adjudicative determination as to
whether that interest has in fact lapsed and if so, to whom, which
requires individualized notice).
In

this

case,

the

Secretary

of

the

Treasury

has

instituted an individualized process for evaluating and processing
specific

claims

for

reimbursement.

Under

Procedure

96,

the

Treasury Department must grant or deny individual claims for
reimbursement

from

both

individuals

and

private

insurance

companies, verifying in each instance that the claimant has paid
the compulsory premium, has purchased valid alternative insurance
for the coverage period, has not been reimbursed by a private
insurer or by the Treasury Department, and has submitted proper
documentation for each claim.

Where the claimant is an insurance

company, the Treasury Department must verify additional facts,

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including that the company has not yet received reimbursement from
JUA.
Significantly,

all

claimants

must

additionally

demonstrate that they do not owe any taxes to the Commonwealth.
The regulation provides that if a claimant has any tax debts, the
Treasury Department "shall inform the Collections Bureau to apply
this amount to the debt."
(Apr. 1, 2003).

P.R. Dep't of Treasury, Procedure 96

This appears to be an attempt to give the

Commonwealth a priority right to set off any purported tax debt
against the reimbursement owed. Further, there are no instructions
as to what an insured should do if he or she disputes the tax debt.
There is, moreover, no mention of further steps that may be taken
when claims generally are denied by the Treasury Department.
However, plaintiffs do not specifically complain about the tax set
off procedure or the absence of an appeals process.
Procedure 96 thus has elements of an individualized
adjudicative process. As a consequence, more than statutory notice
is required.

We have found no Supreme Court case on point, but we

do find useful analogies in a variety of other contexts, including
seizure and forfeiture, unclaimed property laws, and tax refund
laws, in which courts have analyzed what process is required when,
after taking property belonging to others, the government sets up
some form of claims process for returning that property to its
rightful owners.

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In one analogous situation, the Second Circuit has held
in a series of cases that New York City's procedure for returning
property seized from arrestees failed to meet the minimum due
process

requirements

for

notice.

Under

the

City's

original

forfeiture procedure, property seized from arrestees could be
disposed of without any individualized notice to the property
owners.

In McClendon v. Rosetti, 460 F.2d 111 (2d Cir. 1972), the

Second Circuit struck down this procedure for the first time,
holding

that

the

City's

practice

of

releasing

or

forfeiting

property seized from arrestees without providing any meaningful
individualized notice to the owners of that property violated the
notice requirements of the Due Process Clause.

Id. at 114-115.

Later, in Alexandre v. Cortes, 140 F.3d 406 (2d Cir. 1998), the
court held that the City's procedures continued to violate due
process where they failed to provide any notice or procedure for
resolution of disputes concerning the ownership of property prior
to releasing the property to a lienholder.

See also Frith v. Hill,

No. 07-5899, 2009 WL 3073716, at *5 (S.D.N.Y. Sept. 23, 2009)
(rejecting

City's

argument

that

arrestee

had

notice

of

the

procedures for recovery of his property).
In these cases, although the plaintiffs typically knew
that their property had been seized, the City did not provide any
notice

to

the

plaintiffs

of

the

procedures for reclaiming property.

-31-

existence

or

specifics

of

The Second Circuit held that

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the City must provide the plaintiffs with that information, on an
individualized basis, to meet the basic notice requirements of due
process.

See Alexandre, 140 F.3d at 412-13; cf. United States v.

James Daniel Good Real Prop., 510 U.S. 43, 53 (1993) (requiring
notice and a hearing before proceedings for forfeiture of real
property in order "to protect [the individual's] use and possession
of

property

substantively

from
unfair

arbitrary
or

encroachment

mistaken

--

to

deprivations

of

minimize
property")

(quoting Fuentes v. Shevin, 407 U.S. 67, 81 (1972)).
Courts have also required individualized notice in the
context of unclaimed property laws. See Taylor v. Westly, 488 F.3d
1197 (9th Cir. 2007) (issuing preliminary injunction against the
operation of California's Unclaimed Property Law, under which
California seized dormant property from known persons and then
placed that property in a custodial trust ad infinitum or until the
property was reclaimed by owners without individualized notice at
any point, and holding that California must provide individualized
notice of seizure to property owners); Taylor v. Westly, 402 F.3d
924 (9th Cir.

2005)

(finding

Eleventh

Amendment

did

not

bar

plaintiffs' claims).
The Supreme Court has also held in the due process notice
context that "a party's ability to take steps to safeguard its
interests

does

not

relieve

the

State

of

its

constitutional

obligation." Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 799

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(1983).

Page: 33

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Entry ID: 5600223

Significantly, in Jones v. Flowers, the state argued that

an owner has "inquiry" notice that her property may be subject to
forfeiture if she fails to receive a property tax bill and fails to
pay property taxes.

547 U.S. at 231-32.

Recognizing that it is

"common knowledge that property may become subject to government
taking when taxes are not paid," the Supreme Court nevertheless
held that "inquiry" notice "does not excuse the government from
complying with its constitutional obligation of notice."
232.

Id. at

Where a state affords a person "the right to settle accounts

with the State and redeem his property," the state must provide
constitutionally adequate notice even to citizens who fail to take
the initiative to inquire about their property.

Id. at 233.

In

Jones, the Court held that adequate notice for the tax forfeiture
of a person's home required personalized notice mailed to the
homeowner's last known address, and additional reasonable steps
toward

notification

unclaimed.

where

this

mailed

notice

was

returned

Id. at 234.
These cases have all required the government to provide

some form of individualized notice where the government has in its
possession

property

belonging

instituted

a

process

claims

to
or

others,

other

form

and
of

where

it

has

individualized

adjudication for returning or disposing of this property.

In some

cases, the property owners knew or should have known that the state
had possession of their property, see, e.g., Jones, 547 U.S. at

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231-32; Butler, 896 F.2d at 699, and in all of the cases, the
government placed the impetus upon the property owners to reclaim
their property, see, e.g., Jones, 547 U.S. at 233; Taylor, 402 F.3d
at 927; Butler, 896 F.2d at 699.
In the present case, much like in the cases described
above, the Commonwealth has set up a claims process for property
that it has exacted from insureds, but provides individual insureds
with no information about how to reclaim their property.
We hold that under these conditions the Commonwealth is
required to give individual notice to insureds owed reimbursement
to the maximum extent feasible.

On remand, the district court can

resolve any factual issues as to feasibility.
Plaintiffs

have

produced

some

evidence

that

the

Commonwealth keeps current a list of the names of insureds, their
addresses, and other identifying information, and thus, could
easily provide individualized notice.
this, at least in part.

The Commonwealth disputes

If, in fact, the Commonwealth has the

names and addresses of those insureds owed reimbursement, or can
obtain that information readily, then it must send individualized
notice.

If it has in its possession, or can readily obtain, only

the names, but not addresses, of insureds owed reimbursement, it
must publish that list of names online and in other places readily
accessible by the public.

If the Commonwealth does not have any

way to determine the identities or addresses of those insureds owed

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reimbursement, it must arrange to obtain this information -- either
from JUA or from the private insurance companies -- and must
subsequently provide individualized or publication notice.
This notice must include notice of the transfer of funds
from JUA to the Commonwealth, of Procedure 96, and of Law 230's
escheat provisions, and must be provided either individually or via
publication,

to

those

insureds

whose

duplicate

premiums

are

currently or will be in the possession of the Commonwealth.

In

addition, the Commonwealth must publish Procedure 96, in full,
online and in other places readily accessible by the public.
B.

Plaintiffs' Other Federal Claims Fail
Plaintiffs raise three additional constitutional claims,

all of which fail. First, plaintiffs argue that the Takings Clause
prohibits the Commonwealth from collecting and asserting custody
over the duplicate payments because no legitimate purpose is
fulfilled by the Commonwealth's scheme.

Plaintiffs characterize

Law 230 and its Amendments as a "forced loan" imposed on plaintiffs
by the Commonwealth in "an illegitimate use of government powers"
to "cover[] its budget shortfall."
Although plaintiffs raise this claim under the Takings
Clause, and rely on the Supreme Court's decision in Lingle v.
Chevron U.S.A. Inc., 544 U.S. 528 (2005), as the Court explained in
that case, such a challenge to the underlying validity of a
regulation "is logically prior to and distinct from the question

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whether a regulation effects a taking."

Id. at 543.

Entry ID: 5600223

The Takings

Clause does not prohibit government from interfering with property
rights, but rather requires just compensation for an "otherwise
proper interference amounting to a taking."

Id. (emphasis added)

(quoting First English Evangelical Lutheran Church of Glendale v.
Cnty. of Los Angeles, 482 U.S. 304, 315 (1987)).
Plaintiffs' grievance is with what they characterize as
the Commonwealth's "misuse" of governmental powers.

They argue

that "[t]he takings clause cannot be used to obtain forced loans
from citizens even if the government institutes a fair repayment
procedure."

(Emphasis added).

Plaintiffs thus have mischaracterized what is in fact a
substantive due process claim as a takings claim.
argument

that

the

Commonwealth's

purpose

in

Plaintiffs'

collecting

and

retaining custody over the duplicate payments "is not legitimate"
is an argument that goes to the core of substantive due process
law. See Cnty. of Sacramento v. Lewis, 523 U.S. 833, 845-46 (1998)
("We have emphasized time and again that '[t]he touchstone of due
process is protection of the individual against arbitrary action of
government,' whether the fault lies in a denial of fundamental
procedural fairness, or in the exercise of power without any
reasonable

justification

in

the

service

of

a

legitimate

governmental objective." (internal citations omitted)). Plaintiffs

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concede as much at points in their "takings" argument, in which
they rely heavily on substantive due process law.
We reject this attempt by plaintiff to cast their due
process claim as an independent takings claim.

If plaintiffs have

another theory of takings, they have not clearly articulated it and
we deem their takings claim waived.
However, plaintiffs do raise an independent substantive
due process challenge to the compulsory insurance reimbursement
scheme, which we now address.

Plaintiffs argue that Law 230 and

its amendments are so arbitrary and illegitimate as to violate the
substantive component of the Due Process Clause.
We reject this challenge to the underlying validity of
the compulsory insurance scheme.

It is not unconstitutional for

the Commonwealth to charge plaintiffs the duplicate fees upfront in
order to guarantee coverage, and thereafter take custody of the
payments,

provided

meaningful

notice

that
and

the

refund

Commonwealth

also

process

complies

that

implements
with

a
due

process.
Plaintiffs also argue that the burdens Procedure 96
imposes on individual claimants constitutes a separate violation of
procedural due process.

The district court rejected this argument

finding that plaintiffs failed to demonstrate on the facts that
Procedure 96 was excessively burdensome under the Due Process

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Clause.

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García-Rubiera v. Fortuño, 752 F. Supp. 2d at 187.

We

agree with the district court.
We

also

reject

plaintiffs'

remaining

claims

and,

reviewing for abuse of discretion, Mack v. Great Atl. & Pac. Tea
Co., 871 F.2d 179, 186 (1st Cir. 1989), affirm the district court's
decisions denying plaintiffs' request for disclosure of a sealed
agreement between JUA and the Commonwealth and request to deem
certain

facts

Commonwealth.

presented

by

plaintiffs

as

conceded

by

the

García-Rubiera v. Fortuño, No. 3:02-cv-01179 (Sept.

14, 2010).
C.

The Puerto Rico Litigation Concerning the Commonwealth's
Fiduciary Duties
Law 230 directs the Commonwealth to take into trust

property belonging to plaintiffs for a statutorily prescribed
period, during which it is required to administer that trust. P.R.
Laws Ann. tit. 26, § 8055(l). The Commonwealth's status as trustee
over the funds was conceded by all the parties in this case, and
has been recognized repeatedly by both the district court and this
court over the course of this litigation, see García-Rubiera, 570
F.3d at 452 ("Furthermore, upon transfer to the Secretary, Law 230
requires

the

Secretary

to

hold

the

duplicate

premiums

in

a

fiduciary capacity." (citing P.R. Laws Ann. tit. 26, § 8055(1)
("The Secretary of the Treasury shall retain these funds as trustee
. . . ."))); id. (comparing the funds entrusted to the Commonwealth
to "funds held in trust in an IOLTA account or an interpleader
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account");

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752

Supp.

188-89;

García-Rubiera,

F.

2d

at

184,

García-Rubiera, 516 F. Supp. 2d at 191 n.14 ("Therefore, it appears
that the trust continues even after the Secretary has transferred
the money to the General Fund."); id. at 198 (directing the
Commonwealth to cease its acquisition of any interest accrued on
the duplicate payments).
The fact that the Commonwealth holds the funds in trust
presents several important questions of the possible breach of
fiduciary duties under Puerto Rico trust law, as to the notice
requirements for fiduciaries, the complexity and burdens of the
refund procedure, and its tax set off provision.

We leave to the

Puerto Rico courts the question of whether the particulars of
Procedure

96

violate

the

Commonwealth's

fiduciary

duties

to

plaintiffs under Puerto Rico trust law.
III.
In summary, we affirm the district court's rejection of
plaintiffs'

substantive

due

process

claim

and

procedural

due

process burdensomeness claim and reject plaintiffs' takings claim.
We

also

affirm

the

district

court's

denial

of

plaintiffs'

evidentiary requests.
We reverse the district court's rejection of plaintiffs'
notice claim, and direct the court to enter a declaratory judgment
in

favor

of

plaintiffs

that

the

Commonwealth's

reimbursement

scheme, as embodied in Law 230 and its companion amendments and

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regulations, violates the notice requirements of the Due Process
Clause.
relief

We further direct the district court to enter injunctive
requiring

the

Commonwealth

to

provide

adequate

public

notice, as well as individualized notice to those insureds owed
reimbursement, of the Commonwealth's procedures for reimbursement,
consistent with this opinion.
We remand to the district court for entry of declaratory
and injunctive relief consistent with this opinion.
So ordered.

Costs are awarded to plaintiffs.

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