Universal Insurance Company et al vs Department of Justice, et al

Filing 78

OPINION AND ORDER re 48 Motion to Dismiss. The Court GRANTS IN PART AND DENIES IN PART defendants' motion to dismiss. Defendants' request to dismiss plaintiffs' claims for lack of standing is DENIED. The motion to dismiss is DENIE D as to plaintiffs' claims under the Due Process Clause and the Contract Clause of the United States Constitution, and those claims remain active. The motion to dismiss is GRANTED as to plaintiffs' claims under the Takings Clause and the Ex Post Facto Clause of the United States Constitution. Those claims are hereby DISMISSED WITH PREJUDICE. Signed by Judge Francisco A. Besosa on 02/23/2012. (brc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
UNIVERSAL INSURANCE COMPANY, et
al.,
Plaintiffs,
v.

CIVIL NO. 11-1968 (FAB)

DEPARTMENT OF JUSTICE, et al.,
Defendant.

OPINION AND ORDER
BESOSA, District Judge.
Before the Court is the motion to dismiss filed by defendants
Commonwealth of Puerto Rico, the Department of Justice of the
Commonwealth of Puerto Rico, and, in his official capacity as
Attorney

General,

“defendants”).

Guillermo

(Docket No. 48.)

Somoza-Colombani

(collectively,

For the reasons set forth below,

defendants’ motion to dismiss is DENIED in part and GRANTED in
part.
DISCUSSION
I.

Background
On July 12, 2011, the Commonwealth of Puerto Rico Legislative

Assembly (“the legislature”) passed Public Law No. 119, known as
the Uniform

Seizure

and

Forfeiture

Act

of 2011

(“Law

119”).

Law 119 establishes the rules that govern all asset forfeiture
procedures in Puerto Rico.

(Docket No. 26-1 at p. 1.)

Law 119

Civil No. 11-1968 (FAB)

2

repealed Public Law No. 93 of 1988 (“Law 93”), which “granted
certain Commonwealth

instrumentalities

assets used for illegal purposes.”

the

Id.

authority

to seize

According to the Puerto

Rico legislature, the main reason for enacting Law 119 is that
“multiple amendments and judicial constructions . . . have caused
confusion in the implementation of [Law 93].”

Id.

Therefore, Law

119 was passed allegedly to “clarif[y] the requirements that each
person must meet to challenge a seizure.”

Id.

Notably, Law 119

changes the requirements for who can challenge a forfeiture.

Id.

Specifically, Article 15 of Law 119 provides that “persons notified
as provided in this Act and who demonstrate they are the owners of
the property” may challenge the seizure (emphasis added).
No. 26-1 at p. 7.)

(Docket

An owner is “the individual who exercised

dominion and control over the property in question before it was
seized.”

Id. at p. 2.

Article 16 then states that:

“the plaintiff [who challenges a seizure] shall have the
right to furnish a guaranty in favor of the Commonwealth
of Puerto Rico . . . for the sum of the appraisal of the
seized property within twenty (20) days after the
complaint challenging the seizure is filed.”
Id. at
p. 7-8.
Law 119 also allows insurance companies to challenge automobile
seizures,

but

only

on

behalf

of

the

owners.

Specifically,

Article 16 states that:
“In the case of motor vehicles whose insurance policy
includes a seizure endorsement, the insurance company may

Civil No. 11-1968 (FAB)

3

only file a complaint challenging the seizure on behalf
of the owner of the vehicle, for which it shall have to
furnish the guaranty provided in this article (emphasis
added). Id. at p. 8.
Plaintiffs

Universal

Insurance

Company,

MAPFRE

PRAICO

Insurance Company, and Cooperativa de Seguros Multiples de Puerto
Rico (collectively, “plaintiffs”) are licensed by the Office of the
Insurance Commissioner to operate as insurance carriers in Puerto
Rico.

(Docket No. 53 at p. 1.)

Plaintiffs provide insurance

coverage to banks and other financial institutions that finance the
purchase of automobiles.

(Docket No. 10 at ¶ 14.)

Most vehicles

purchased in Puerto Rico are financed; some vehicles are leased.
(Docket No. 53 at p. 1.)

When a financial institution finances a

vehicle, it may register its lien on the license and title of the
vehicle with the Department of Transportation and Public Works.
Id.

Financial institutions may require an insurance policy to

finance vehicles.

Id.

Plaintiffs state that they issue those

insurance policies to cover a number of risks, including asset
forfeiture.

(Docket No. 10 at ¶¶ 9-11, 15.)

They also assert that

when an insured vehicle is seized and then forfeited to the Puerto
Rico government, plaintiffs will pay the financial institutions
pursuant to their insurance contracts.

Id. at ¶ 16.

Then,

plaintiffs allegedly have the right to subrogation where “the
insurer is placed in the same legal position as the bank or

Civil No. 11-1968 (FAB)

4

financial institution that financed the vehicle and is entitled to
recover the balance owed to the bank by the proprietor.”

Id.

On September 30, 2011, plaintiffs filed a complaint for
declaratory judgment and permanent injunction. (Docket No. 1.) On
October 25, 2011, plaintiffs filed a verified amended complaint
against all defendants.
complaint,

plaintiffs

(Docket No. 10.)

seek

Law 119 unconstitutional.
that

Law

119

subgrogation

prevents
pursuant

a

declaratory

In their amended

judgment

Id. at ¶¶ 38 and 49.
them

to

from

their

exercising

insurance

to

declare

Plaintiffs argue
their

policies

right
with

to
the

financial institutions and thus, that Law 119 removes their right
to challenge automobile seizures. Id. at ¶ 36. Plaintiffs request
that defendants be permanently enjoined from enforcing Law 119
because Law 119 violates rights guaranteed by the United States
Constitution.

Id. at ¶ 66.

They assert that Law 119 violates the

Takings Clause and Due Process under the Fifth and Fourteenth
Amendments, and the Ex Post Facto and the Contract Clauses under
Article I Section 10 of the United States Constitution.

Id. at

¶¶ 38 and 49.
On November 22, 2011, defendants filed a motion to dismiss,
(See Docket No. 48), alleging that under Federal Rule of Civil
Procedure 12(b)(6) (“Rule 12(b)(6)”) plaintiffs fail to state a
claim upon which relief can be granted.

Defendants argue that

Civil No. 11-1968 (FAB)

5

plaintiffs 1) have no property interest in the forfeited vehicles
and no injury - economic or otherwise - and therefore, have no
standing to challenge the constitutionality of the statute, 2) fail
to state a claim under the Takings Clause, 3) fail to state a claim
for a Due Process violation, 4) fail to state a claim under the Ex
Post Facto Clause, and 5) fail to state a claim under the Contract
Clause.

Id.

The Court will consider each argument in turn.

On November 25, 2011, plaintiffs filed an opposition to
defendants’ motion to dismiss.
argue

that

defendants

(See Docket No. 52.)

“misinterpret”

plaintiffs’

Plaintiffs
arguments

regarding the Takings Clause and Due Process, id. at p. 2 and 8,
and re-assert that they have stated a claim for an Ex Post Facto
Clause violation and for a Contract Clause violation, id. at p. 9.
II.

Rule 12(b)(6) Motion to Dismiss Standard
Rule 12(b)(6) allows the Court to dismiss a complaint when it

fails to state a claim upon which relief can be granted.

When

considering a motion under Rule 12(b)(6), a “court must view the
facts contained in the pleadings in the light most favorable to the
nonmovant and draw all reasonable inferences therefrom . . .” R.G.
Fin. Corp. v. Vergara–Nunez, 446 F.3d 178, 182 (1st Cir. 2006).
“[A]n adequate complaint must provide fair notice to the defendants
and state a facially plausible legal claim.”

Ocasio–Hernandez v.

Fortuño–Burset, 640 F.3d 1, 11 (1st Cir. 2011).

When faced with a

Civil No. 11-1968 (FAB)

6

motion to dismiss, “[a] plaintiff is not entitled to ‘proceed
perforce’ by virtue of allegations that merely parrot the elements
of the cause of action.”
S.Ct.

1937,

1950

Id. at 12 (quoting Ashcroft v. Iqbal, 129

(2009)).

Any

“[n]on-conclusory

factual

allegations in the complaint [,however,] must . . . be treated as
true, even if seemingly incredible.” Id. (citing Iqbal, 129 S.Ct.
at 1951).

Where those factual allegations “‘allow[ ] the court to

draw the reasonable inference that the defendant is liable for the
misconduct alleged,’ the claim has facial plausibility.”
(quoting Iqbal, 129 S.Ct. at 1949).

Id.

Furthermore, a court may not

“attempt to forecast a plaintiff’s likelihood of success on the
merits; ‘a well-pleaded complaint may proceed even if . . . a
recovery is very remote and unlikely’.”

Id. at 13 (citing Bell

Atlantic Corp v. Twombly, 550 U.S. 544, 556 (2007)).

The relevant

inquiry, therefore, “focuses on the reasonableness of the inference
of liability that the plaintiff is asking the court to draw from
the facts alleged in the complaint.”
According

to

Rule

12(b)(6),

Id. at 13.
a

court

will

base

its

determination solely on the material submitted as part of the
complaint or central to it.

Fudge v. Penthouse Int’l. Ltd., 840

F.2d 1012, 1015 (1st Cir. 1988).

Generally, “a court may not

consider documents that are outside of the complaint, or not
expressly incorporated therein, unless the motion is converted into

Civil No. 11-1968 (FAB)
one for summary judgment.”

7
Alternative Energy, Inc. v. St. Paul

Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001).

“When

. . . a complaint’s factual allegations are expressly linked to and admittedly dependent upon - a document (the authenticity of
which is not challenged), [however,] that document effectively
merges into the pleadings and the trial court can review it in
deciding a motion to dismiss under Rule 12(b)(6).”1

Beddall v.

State St. Bank & Trust Co., 137 F.3d 12, 17 (1st Cir. 1998)
(internal citation omitted).

This is especially true where the

plaintiff has “actual notice . . . and has relied upon these
documents in framing the complaint.”

Watterson v. Page, 987 F.2d

1, 4 (1st Cir. 1993).
III. Standing
The Court must first address defendants’ contention that
plaintiffs lack standing to challenge the constitutionality of
Law 119. “Article III of the United States Constitution limits the
‘judicial power’ of the United States to the resolution of ‘cases’
and ‘controversies.’”

1

Valley Forge Christian Coll. v. Ams. United

In their opposition to motion to dismiss, plaintiffs stated that
they “hereby adopt by reference the arguments included in their
‘Reply to Response to Motion for Preliminary Injunction,’ at docket
number 30.” (Docket No. 52 at p. 1.) The Court, however, has
decided not to convert defendants’ motion to dismiss into one for
summary judgment.
Therefore, the Court will not consider any
arguments or facts outside of the complaint or any documents not
expressly incorporated into it.

Civil No. 11-1968 (FAB)

8

for Separation of Church & State, 454 U.S. 464, 471 (1982).

A

crucial part of the case and controversy limitation on the power of
federal courts is the requirement that a plaintiff must have
standing

to

invoke

federal

jurisdiction.

Id.

at

471-73.

“[S]tanding is a threshold issue” and determines “whether the court
has the power to hear the case, and whether the putative plaintiff
is entitled to have the court decide the merits of the case.”
Libertad v. Welch, 53 F.3d 428, 436 (1st Cir. 1995) (internal
citation omitted).

Therefore, if a plaintiff lacks standing to

bring a matter to federal court, the court lacks jurisdiction to
decide the merits of the case and must dismiss the complaint.
United States v. AVX Corp., 962 F.2d 108, 113 (1st Cir. 1992).
To establish Article III standing, plaintiffs must show that
they have a “personal stake in the outcome” of the claim asserted
by meeting a three-part test.

Pagan v. Calderon, 448 F.3d 16, 27

(1st Cir. 2006) (citing Baker v. Carr, 369 U.S. 186, 204 (1962)).
(internal citations omitted).

Id.

They must show (1) “a concrete

and particularized injury in fact, (2) a causal connection that
permits tracing the claimed injury to defendant’s actions, and
(3) a likelihood that prevailing in the action will afford some
redress for the injury.”

Weaver’s Cover Energy, LLC v. R.I.

Coastal Res. Mgmt. Council, 589 F.3d 458, 467 (1st Cir. 2009)
(internal quotation marks omitted).

Civil No. 11-1968 (FAB)

9

The Supreme Court has held that the party invoking federal
jurisdiction bears the burden of establishing these elements.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (internal
citations omitted). “Since they are not mere pleading requirements
but rather an indispensable part of the plaintiff’s case, each
element must be supported in the same way as any other matter on
which the plaintiff bears the burden of proof, i.e., with the
manner and degree of evidence required at the successive stages of
litigation.”

Id. (internal citations omitted).

Thus, at the

pleading or motion to dismiss stage, “general factual allegations
of injury resulting from the defendant’s conduct may suffice,”
because “[the courts] presum[e] that general allegations embrace
those specific facts that are necessary to support the claim.” Id.
(internal citation omitted).
Defendants argue that plaintiffs have no property interest,
either “as innocent third parties [or] as interested parties with
property interest in the motor vehicles.”

(Docket No. 48 at p. 7.)

Therefore, defendants contend that plaintiffs’ economic interests

Civil No. 11-1968 (FAB)

10

are not at stake and no real injury is present.2

Id. at p. 11.

This “speculative injury,” defendants state, “is not traceable to
the letter of Act 119.”

Id. at p. 11.

Therefore, they argue that

the Court should dismiss the case for lack of subject matter
jurisdiction.

Id.

The

Court

finds

defendants’

arguments

unpersuasive.
Plaintiffs do not need to prove that they have a property
interest at the motion to dismiss stage.

They only need to state

“general factual allegations” to establish that they have standing.
Lujan, 504 U.S. at 561.

Plaintiffs have sufficiently alleged that

they have a “personal stake in the outcome” of the claims asserted.
First, they have stated general factual allegations of a concrete
and particularized injury.

Plaintiffs have stated that they have

subrogation rights to the liens that are registered on the license
and title of forfeited vehicles.

(Docket No. 10 at ¶ 16.)

Plaintiffs allege that they have personally suffered an injury

2

Defendants also argue that “only the person toward whom the state
action was directed, and not those incidentally affected, may
maintain a section 1983 claim.”
(Docket No. 48 at p. 6.)
Defendants are unclear as to which section 1983 they are referring
to but cite to a case in this district that addresses civil rights
claims that were brought pursuant to 42 U.S.C. § 1983.
Id.
Defendants also make arguments regarding section 1983 in other
sections of their motion to dismiss. (See, e.g., Docket No. 48 at
p. 13.) Plaintiffs do not indicate in their amended complaint,
however, that they are bringing their claims pursuant to 42 U.S.C.
§ 1983. (See Docket No. 10.)

Civil No. 11-1968 (FAB)

11

because Law 119 prevents them from challenging any forfeiture on
their own behalf.

(See Docket No. 52 at p. 8-9.)

Furthermore,

plaintiffs have sufficiently alleged that they will suffer an
economic injury because they have to pay out insurance claims but
cannot recuperate their losses because of Law 119. (Docket No. 10,
¶¶ 59-60); see Lujan, 504 U.S. at 582 (discussing how “an economic
interest”

often

is

sufficient

to

confer

standing).

Second,

plaintiffs have stated general factual allegations of a causal
connection that permits tracing the claimed injury to defendants’
actions.

Plaintiffs allege that the enactment of Law 119 and its

enforcement is what will cause them their injury.
No. 10.)

(See Docket

Indeed, the text of Law 119 specifically disallows

plaintiffs from challenging any forfeiture on their own behalf.
(Docket No. 26-1 at p. 8.) Finally, plaintiffs have stated general
factual allegations of the likelihood that prevailing in the action
will afford some redress for the injury.

If plaintiffs receive

their requested relief - a declaratory judgment and injunction then defendants will be prevented from enforcing Law 119 and
therefore, plaintiffs will be able to contest forfeitures on their
own behalf.
Additionally,

defendants

cite

Puerto

opinions that allegedly support their claim.

Rico

Supreme

Court

Defendants fail to

file, however, certified English translations of such authority

Civil No. 11-1968 (FAB)
pursuant

to

the

12

Local

Rules

of

this

Court.

See

D.P.R.

Loc.Civ.R. 5(g) (“All documents not in the English language which
are presented or filed, whether as evidence or otherwise, must be
accompanied by a certified translation into English prepared by an
interpreter certified by the Administrative Office of the United
States

Courts.”);

cf.

48

U.S.C.

§

864

(“All

pleadings

and

proceedings in the United States District Court for the District of
Puerto

Rico

Therefore,

shall

the

be

Court

conducted
will

not

in

the

consider

English
this

defendants file certified English translations.

language.”).

authority

until

See Puerto Ricans

for Puerto Rico Party v. Dalmau, 544 F.3d 58, 67 (1st Cir. 2008)
(“Where a party makes a motion to dismiss based on a decision that
was written in a foreign language, the party must provide the
district court with and put into the record an English translation
of the decision.”).
In their motion to dismiss, defendants argue in a footnote
that they have not submitted certified translations of the Puerto
Rico Supreme Court cases cited in their motion because the “purpose
of citing these cases is to have the Court take judicial knowledge
of the jurisprudence set forth therein, not as evidence or to
establish any facts.”

(See Docket No. 48 at p. 9.)

They further

contend that the First Circuit Court of Appeals held that “this is
a proper course of action and that certified translations may be

Civil No. 11-1968 (FAB)

13

filed if and when the case goes on appeal.”

Id.

Defendants rely

on Berrios-Romero v. Estado Libre Asociado de Puerto Rico to
support their contentions.

641 F.3d 24, 26-27 (1st Cir. 2011).

This argument is unavailing.

The plaintiff in Berrios-Romero

argued that the First Circuit Court of Appeals should ignore an
English translation of a relevant Puerto Rico decision because it
was not put into the record until the appeal.

The Berrios-Romero

court held that it can take judicial notice of law at any time and
found that it was unnecessary to ignore an English translation
“simply to punish the derelictions of district court counsel” when
appellate counsel has remedied the error.

641 F.3d at 28.

The

Berrios-Romero court’s holding, therefore, focuses on whether the
court

should

translation

consider

and

not

an

already-filed

whether

it

translations to be filed on appeal.

was

certified

proper

for

English
certified

Because defendants have not

demonstrated that plaintiffs’ factual allegations are insufficient
to meet standing requirements, the Court finds that plaintiffs pled
sufficient information to demonstrate that they have standing.
IV.

Discussion
A.

Plaintiffs’ Takings Claim
Defendants argue that plaintiffs fail to state a claim

for a violation of the Takings Clause of the Fifth Amendment to the
United States Constitution.

(See Docket No. 48 at p. 14.)

The

Civil No. 11-1968 (FAB)

14

Takings Clause provides that:

“private property [shall not] be

taken for public use, without just compensation.”
amend. V.

U.S. Const.

Defendants argue that there is no physical taking.

at pp. 12-15.

Id.

Even if there were a taking, defendants argue, there

is just compensation “since the Commonwealth returns the vehicles
or pays the amount of the assessment of said property plus the
interest accumulated since the seizure.” Id. at p. 15. Plaintiffs
respond, however, that there are no grounds for “the State . . . to
take away the property interests of a party with a recorded lien
and

make

it

their

own

(Docket No. 52 at p. 8.)

property,

without

just

compensation.”

The Court finds plaintiffs’ arguments

unpersuasive.
The Supreme Court has held that an in rem forfeiture of
property involved in criminal activity is not a taking for which
just compensation is required.

See Bennis v. Michigan, 516 U.S.

442, 452 (1996) (forfeiture of car used in prostitution was not a
taking and “[t]he government may not be required to compensate an
owner for property which it has already lawfully acquired under the
exercise of governmental authority other than the power of eminent
domain.”); Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S.
663, 680-90 (1974).

Other circuit courts, including the First

Circuit Court of Appeals, have also followed suit and have held
that seizures pursuant to civil forfeiture statutes are not takings

Civil No. 11-1968 (FAB)

15

under the Fifth Amendment to the United States Constitution but
rather, an exercise of the government’s police power.

See, e.g.,

Acadia Tech., Inc. v. United States, 458 F.3d 1327, 1331 (Fed. Cir.
2006) (“When property has been . . . subjected to in rem forfeiture
proceedings, such deprivations are not ‘takings’ for which the
owner is entitled to compensation.”); U.S. v. $7,990.00 in U.S.
Currency, 170 F.3d 843, 845-846 (8th Cir. 1999) (“ . . . [t]he
forfeiture of contraband is an exercise of the government’s police
power, not its eminent domain power.
to

the

Fifth

Amendment’s

Takings

A forfeiture is not subject
Clause when

it

deprives

an

innocent owner of his property.”); United States v. One Parcel of
Real Property with Buildings, Appurtenances, and Improvements,
Known as Plat 20, Lot 17, Great Harbor Neck, New Shoreham, R.I.,
960 F.2d 200, 210 (1st Cir. 1992) (“We think it is settled that if
the

federal

government’s

actions

comport,

procedurally

and

substantively, with the terms of a lawfully enacted forfeiture
statute, it may seize private property without compensating the
owner.”)
Therefore,

because

the

Supreme

Court

and

the

First

Circuit Court of Appeals have specifically held that forfeitures
are not takings under the Fifth Amendment of the United States
Constitution, plaintiffs’ claim that Law 119 violates the Takings

Civil No. 11-1968 (FAB)
Clause fails.

16

Accordingly, defendants’ motion to dismiss for

failure to state a claim under the Takings Clause is GRANTED.
B.

Plaintiffs’ Due Process Claim
Plaintiffs also claim that Law 119 fails to meet minimal

procedural

due

Constitution.

process

requirements

under

the

United

States

The Due Process Clause of the Fourteenth Amendment

to the United States Constitution provides that substantive rights,
life, liberty, and property, “cannot be deprived except pursuant to
constitutionally adequate procedures.” Cleveland Bd. of Educ. v.
Loudermill, 470 U.S. 532, 541 (1985). “Due Process claims may take
either of two forms:
process.’”
Defendants

‘procedural due process’ or ‘substantive due

Pittsley v. Warish, 927 F.2d 3, 6 (1st Cir. 1991).
argue

that

plaintiffs

do

not

establish

either

substantive due process or a procedural due process claim.

a

(See

Docket No. 48 at p. 15-16.) Plaintiffs assert, however, that their

Civil No. 11-1968 (FAB)

17

complaint only addresses procedural due process violations.3
Docket No. 52 at p. 8.)

(See

The Court, therefore, does not evaluate

any substantive due process claims. With regard to the plaintiffs’
claim for a procedural due process violation, the Court finds that
plaintiffs have alleged sufficient facts to state a claim.
To establish a procedural due process claim, plaintiffs
must show that 1) they had a liberty or property interest, and
2)

that defendants

deprived

them

constitutionally adequate process.

of that

interest

without

a

Logan v. Zimmerman Brush Co.,

455 U.S. 422, 428 (1982); Gonzalez-Droz v. Gonzalez-Colon, 660 F.3d
1, 13 (1st Cir. 2011) (internal citation and quotation marks
omitted); PFZ Properties, Inc. v. Rodriguez, 928 F.2d 28, 30 (1st
Cir. 1991).

3

Plaintiffs’ amended complaint is vague as to exactly which
claims
they
are
establishing
under
which
constitutional
provisions.
Plaintiffs state that “procedural due process
requires pre-seizure notice and an opportunity to be heard.”
(Docket No. 10 at ¶ 40.)
This seems to be a procedural due
process claim under the Due Process Clause of the Fourteenth
Amendment;
immediately
after
plaintiffs’
statement
about
procedural due process, however, they cite the Fifth Amendment
and discuss the Takings Clause.
Id. at ¶ 41. Plaintiffs have
argued, however, that Law 119 “must be declared invalid under the
Fifth and Fourteenth Amendments . . . ”
Id. at ¶ 47.
Furthermore, defendants also address plaintiffs’ arguments under
the Due Process Clause of the Fourteenth Amendment. (See Docket
No. 48 at p. 16.) Plaintiffs do not dispute this analysis by the
defendants and state in their opposition to defendants’ motion to
dismiss that “plaintiffs’ complaint is based on lack of
procedural due process only.” Thus, the Court will also analyze
the claim as an alleged procedural due process violation.

Civil No. 11-1968 (FAB)
1.

18

Deprivation of Property
To

have

a

constitutionally

protected

property

interest, “a person clearly must have more than an abstract need or
desire for it.

He must have more than a unilateral expectation of

it. He must, instead, have a legitimate claim of entitlement to
it.” Board of Regents of State Colleges v. Roth, 408 U.S. 564, 577
(1972); see also Coyne v. City of Somerville, 972 F.2d 440, 443
(1st Cir. 1992).

Property interests are not created by the

Constitution; instead, “they are created . . . by existing rules or
understandings that stem from an independent source such as state
law - rules or understandings that secure certain benefits and that
support claims of entitlement to those benefits.”

Roth, 408 U.S.

at 577.
Defendants argue that because plaintiffs have no
property interest, the Court must dismiss the due process claim.
(Docket No. 17 at p. 22.)

They argue that the only property

affected by Law 119 is the seized automobile and that plaintiffs
are not the owners of the property.

Id.

Instead, defendants

contend that plaintiffs only have a “conditional creditor” status
through subrogation of the financial institutions’ rights pursuant
to plaintiffs’ insurance policy contracts with the institutions.
(See Docket No. 48 at p. 9.)

To support that they have a

constitutionally protected property interest, however, plaintiffs

Civil No. 11-1968 (FAB)

19

state and defendants agree that when a financial institution
finances a vehicle, it may register its lien on the licenses and
title of the vehicle with the Department of Transportation and
Public Works.

(See Docket Nos. 10 at ¶ 14 and 53 at p. 1.)

Defendants argue that these facts are not sufficient to demonstrate
a property interest in Puerto Rico.

(See Docket No. 48 at p. 9.)

Defendants cite Puerto Rico Supreme Court authority that allegedly
supports their argument but have not filed any certified English
translations of the cited opinions pursuant to Local Rule 5(g).
(“All documents not in the English language which are presented or
filed, whether as evidence or otherwise, must be accompanied by a
certified translation into English prepared by an interpreter
certified

by

the

Administrative

Office

of

the

United

States

Courts.”); cf. 48 U.S.C. § 864 (“All pleadings and proceedings in
the United States District Court for the District of Puerto Rico
shall be conducted in the English language.”). As with defendants’
arguments regarding standing, the Court will not consider this
authority until defendants file certified English translations.
See Dalmau, 544 F.3d at 67 (1st Cir. 2008) (“Where a party makes a
motion to dismiss based on a decision that was written in a foreign
language, the party must provide the district court with and put
into

the

Therefore,

record

an

because

English

translation

defendants

have

not

of

the

decision.”).

demonstrated

that

Civil No. 11-1968 (FAB)
plaintiffs’

factual

20

allegations

are

insufficient

to

state

a

property interest in Puerto Rico, the Court finds at this time that
plaintiffs have pled sufficient information to suggest that they
have a property interest in the seized vehicles.
2.

Constitutionally Adequate Process
“[D]ue process ensures that government, when dealing

with private persons, will use fair procedures.”
Raffaelly, 424 F.3d 112, 118 (1st Cir. 2005).

Depoutot v.
“An essential

principle of due process is that a deprivation of life, liberty, or
property

be

preceded4

by

notice

and

opportunity

appropriate to the nature of the case.”

for

hearing

Loudermill, 470 U.S.

at 542 (internal citation and quotation marks omitted).

“The

fundamental requirement of due process is the opportunity to be
heard at a meaningful time and in a meaningful manner.”

4

Bibiloni

Defendants argue that “‘pre-seizure notice and hearing are not
required by due process in the context of forfeitures,’” and
therefore, that plaintiffs’ pre-seizure and forfeiture due
process claim should be dismissed with prejudice. (Docket No. 48
at p. 17) (citing Calero-Toledo, 416 U.S. at 677).
The Court
agrees with defendants that pre-seizure and pre-forfeiture notice
and hearing are not required (emphasis added). The Calero-Toledo
Court emphasized in its holding, however, that notice and hearing
are still required, even though it may occur after seizure. See
416 U.S. at 679-80 (“ . . . we hold that this case presents an
‘extraordinary’ situation in which postponement of notice and
hearing until after seizure did not deny due process”).
Therefore, the Court will focus on plaintiffs’ and defendants’
arguments about whether plaintiffs state a claim for procedural
due process regarding post-seizure actions under Law 119
(emphasis added).

Civil No. 11-1968 (FAB)

21

Del Valle de Puerto Rico, 661 F. Supp. 2d 155, 182 (D.P.R. 2009)
(internal citations and quotation marks omitted).
Defendants argue that even assuming that plaintiffs
have a property interest in the forfeited vehicles, Law 119’s
procedure for the insurance companies to challenge the forfeiture
and to recover the vehicle provides constitutionally adequate
process.

(See Docket No. 48 at p. 18.)

Plaintiffs respond that

under this procedure, however, insurance companies may challenge
the forfeiture only on behalf of the owner; they cannot challenge
the forfeiture “on their own to defend their own rights and
property interest.”

(See Docket No. 52 at p. 8-9.)

Defendants

have not cited any authority demonstrating that this procedure
satisfies the “opportunity to be heard” in order to meet the
requirement of constitutionally adequate process.

At this stage,

without more guidance from the parties on this issue, the Court
finds that plaintiffs have sufficiently pled facts to show that
they have been deprived of constitutionally adequate process.
The Court, therefore, will not at this juncture
dismiss plaintiffs’ procedural due process claim.

Accordingly,

defendants’ motion to dismiss plaintiffs’ claims for procedural due
process violations is DENIED.

Civil No. 11-1968 (FAB)
C.

22

Plaintiffs’ Ex Post Facto Claim
Plaintiffs also claim that Law 119 violates the Ex Post

Facto Clause

of

the

United

States

Constitution.

Article

I,

Section 9 of the United States Constitution, commonly known as the
Ex Post Facto Clause, forbids Congress from enacting a “bill of
attainder or ex post facto law.”

U.S. Const. art. I, § 9, cl. 3.

Article I, Section 105 of the United States Constitution prohibits
states from doing the same under the Ex Post Facto Clause.

While

“ex post facto” is defined as “done or made after the fact; having
retroactive force or effect,” see Black’s Law Dictionary 661 (9th
ed. 2009), the Supreme Court has limited the application of the Ex
Post Facto Clause to criminal laws.6

See Calder v. Bull, 2 U.S.

386, 390 (1798) (discussing how the Ex Post Facto Clause applies
exclusively to the retroactivity of criminal or penal legislation);
see also Smith v. Doe, 538 U.S. 84, 92, (2003) (finding that the Ex
Post Facto Clause does not apply to a sex offender registration and
notification statute because the statute was a civil sanction and
not a criminal one); Kansas v. Hendricks, 521 U.S. 346, 369 (1997)

5

“No State shall . . . pass any . . . ex post facto Law.” U.S.
Const., art. I, § 10, cl. 1. Even though Puerto Rico is not a
state, defendants do not contest that the Ex Post Facto Clause
binds Puerto Rico.

6

In its definition of “ex post facto law,” Black’s Law Dictionary
also states that “retrospective civil laws may be allowed.” See
Black’s Law Dictionary 661 (9th ed. 2009).

Civil No. 11-1968 (FAB)

23

(holding that a state’s civil commitment statute did not implicate
the Ex Post Facto Clause because it was not punitive and not a
criminal proceeding).

Therefore, when analyzing an Ex Post Facto

Clause claim, the Court must first ask whether the challenged law
constitutes a civil, regulatory measure or a criminal, punitive
one. Smith, 538 U.S. at 92.

If the legislature intended to impose

punishment, then the inquiry ends.

Smith, 538 U.S. at 92.

If “the

[legislature’s] intention [,however,] was to enact a regulatory
scheme

that

is

civil

and

nonpunitive,”

then

the

Court

must

determine whether the “statutory scheme was so punitive either in
purpose or effect as to negate that intention to deem it civil.”
Simmons v. Galvin, 575 F.3d 24, 44 (1st Cir. 2009) (quoting United
States v. Ward, 448 U.S. 242, 248-49 (1980)).

Generally, a court

will defer to the legislature’s stated intent and “‘only the
clearest proof’ will suffice to override legislative intent and
transform what has been denominated a civil remedy into a criminal
penalty.”

Smith, 538 U.S. at 92 (internal citations omitted).
1.

The Legislature’s Intent as to Whether
Forfeiture Statute is Civil or Criminal

the

To determine whether a law is civil or criminal, the
Court must “ascertain whether the legislature intended for the
statute to establish ‘civil’ proceedings.”

Smith, 538 U.S. at 92

(2003) (quoting Kansas, 521 U.S. at 361).

First, the Court must

Civil No. 11-1968 (FAB)

24

construe the statute to examine its text and structure to determine
the legislative objective.
U.S. 603, 617 (1960)).

Id. (citing Flemming v. Nestor, 363

Evidence of the legislature’s intent to

establish a civil measure exists if the legislature “indicated
either

expressly

proceedings].”

or

impliedly

a

preference

[for

civil

Hudson v. United States, 522 U.S. 93, 99 (1997).
Plaintiffs

have

not

stated

any

facts

in

their

amended verified complaint to show that the legislature intended to
impose

a

criminal

law.

(See

Docket

No.

10.)

Furthermore,

defendants have filed a certified translation of Law 119, which
shows that the legislature expressly intended to impose a civil
measure.

(See Docket No. 26-1.)

Notably, the “Purposes Article”

of Law 119 states:
“In our jurisdiction, forfeitures are a civil or in rem
action, distinct and separate from any in personam
action. Forfeitures conducted by the State are based on
the legal fiction that the thing is the primary offender.
The in rem proceedings exist independently from the
criminal proceedings of an in personam nature and are in
no way affected by same. Civil forfeiture proceedings
may be conducted and concluded before a person is
accused, declared guilty or absolved. In fact, they may
be conducted even when no charges have been filed. This
is due to the fact that the civil action is aimed at the
thing itself; generally, the guilt or innocence of the
owner is irrelevant in regards to the legitimacy or
illegitimacy of the civil forfeiture. Goldsmith-Grant
Co. v. United States, 254 U.S. 505 (1921). Calero-Toledo
v. Pearson Yacht Leasing Co., 416 U.S. 663 (1974).
United States v. One Assortment of 89 Firearms, 465 U.S.
354 (1984).”
(Id. at p. 2, translation provided by
defendants.)

Civil No. 11-1968 (FAB)

25

Therefore, plaintiffs have failed to show facts indicating that the
legislature intended to establish a criminal or punitive measure.
The defendants have shown, however, that the legislature expressly
intended to impose a civil, not criminal, measure.
2.

Clear Proof to Override Legislative Intent to Impose
Civil Measure
Because the legislature stated that its intent was

to enact a civil and nonpunitive law, the Court must then determine
whether the statute was so punitive as to negate the intention to
make

it

civil.

Simmons,

575

F.3d

at

44

(1st

Cir.

2009).

Generally, the Court will defer to the legislature’s stated intent
and “‘only the clearest proof’ will suffice to override legislative
intent and transform what has been denominated a civil remedy into
a criminal penalty.” Smith, 538 U.S. at 92 (internal citations and
quotations omitted).

When analyzing the purpose or effect of a

statutory scheme, the non-exclusive and non-dispositive factors
test set forth in Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168-69
(1963) are useful guideposts.
Simmons, 575 U.S. at 44.
sanction
2)

involves

whether

it

has

an

See Smith, 538 U.S. at 97; see also
The factors are:

affirmative

historically

disability

been

regarded

“1) whether the
of

restraint;

as

punishment;

3) whether it comes into play only on a finding of scienter;
4) whether its operation will promote the traditional aims of

Civil No. 11-1968 (FAB)

26

punishment-retribution and deterrence; 5) whether the behavior to
which it applies is already a crime; 6) whether there is a rational
connection to a nonpunitive purpose; and 7) whether it appears
excessive in relation to the alternative purpose assigned.”
(citing Mendoza-Martinez, 372 U.S. at 168-69).

Id.

Whether a law is

“so punitive in fact” as to violate the ex post facto prohibition,
however, is a highly context-specific matter.
U.S. at 617.

See Flemming, 363

Sometimes one factor will be dispositive of whether

a law is punitive and other times, a different factor will be
crucial to whether a law is punitive for ex post facto purposes.
See, e.g., Ward, 448 U.S. at 259-60 (discussing only one commonly
considered factor); United States v. Usery, 518 U.S. 267, 268-69
(1996) (finding that forfeiture is civil by focusing only on the
facts that forfeitures are historically considered to be civil and
that forfeitures do not require a finding of scienter); see also
Doe v. Pataki, 120 F.3d 1263, 1272-76 (2d Cir. 1997) (discussing
various Supreme Court opinions that found different factors to be
dispositive).
Plaintiffs fail to present any arguments or facts
regarding these factors to negate the legislature’s stated intent,
and therefore,

waive

these

arguments.

See United

States

v.

Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (“[I]ssues adverted to in
a perfunctory manner, unaccompanied by some effort at developed

Civil No. 11-1968 (FAB)
argumentation,

are

27

deemed

waived”).

Instead,

plaintiffs’

statements “merely parrot” what is required to show an ex post
facto law.

Ocasio–Hernandez, 640 F.3d at 12 (quoting Ashcroft v.

Iqbal, 556 U.S. 662 (2009)).

In their verified amended complaint,

plaintiffs cursorily assert that forfeiture statutes are penal
because

they

are

“quasi-criminal

procedures”

and

all

Fourth

Amendment, Fifth Amendment, and Fourteenth Amendment protections
are applicable to them.

(Docket No. 10 at ¶ 27.)

They also

contend that forfeiture statutes are penal “since by design, they
are enacted to punish a criminal conduct” and that frequently, an
asset forfeiture is related to a “criminal action against [the
asset’s] owner.”

(Docket No. 10 at ¶ 45.)

Plaintiffs provide no

other facts to support their conclusion that forfeiture statutes
are penal

in

their

verified

amended complaint.

(See

Docket

No. 10.)
Even if plaintiffs presented facts in regards to
these factors, the Court finds that plaintiffs’ claim that Law 119
violates the Ex Post Facto Clause fails.

The Court finds that an

analysis of the Mendoza-Martinez factors strongly suggest that the
purpose of Law 119 is, indeed, civil and not criminal.

With regard

to the first factor, the statute does not impose any affirmative
disability or restraint, “physical or otherwise.”
F.3d at 44.

Simmons, 676

The First Circuit Court of Appeals has stated that

Civil No. 11-1968 (FAB)

28

“imprisonment . . . is the paradigmatic affirmative disability or
restraint.”

Id. (quoting Smith, 538 U.S. at 100).

With regard to

the second factor, the Supreme Court and the First Circuit Court of
Appeals

have

noted

the

“historic

civil

nature

of

forfeiture

statutes” and “ha[ve] repeatedly refused to limit [the forfeiture
statutes’] application by imposing the full range of constitutional
protections usually associated with criminal sanctions.”

$250,000

in U.S. Currency, 808 F.2d at 900. With regard to the third factor,
Law 119’s effectiveness does not depend on a finding of scienter:
forfeiture may occur with or without the government demonstrating
scienter.

With regard to the fourth, sixth, and seventh factors,

while forfeiture does serve as a deterrent, (see Docket No. 26-1,
p. 1), the Supreme Court has stated that deterrence in civil
forfeiture statutes may serve civil as well as criminal goals. See
Usery, 518 U.S. at 292; see also Calero-Toledo, 416 U.S. at 668
n. 26 (“Seizure and forfeiture statutes also help compensate the
Government for its enforcement efforts and provide methods for
obtaining security for subsequently imposed penalties and fines.”)
Furthermore, the “Purposes Article” of Law 119 states valid civil
goals.

(See Docket No. 26-1 at p. 1.)

Law 119 aims to establish

a “speedy, fair and uniform procedure” for asset forfeiture and to
prevent “the seized property from deteriorating due to passage of
time.”

Id.

The statute does not appear excessive in relation to

Civil No. 11-1968 (FAB)

29

the alternative civil purposes, because Law 119 is modeled after
federal forfeiture statutes that have been deemed civil.
Docket 10 at ¶ 44.)

(See

With regard to the fifth factor, while an

alleged crime must have occurred to trigger the forfeiture of an
asset, a civil forfeiture is an in rem action that is “aimed at the
thing itself.”

(See Docket No. 26-1, p. 2.)

The forfeiture exists

independently from any criminal proceedings, and applies whether or
not the owner of the item is guilty or innocent.

The Supreme Court

has also stated that it is “‘insufficient to render [a] statut[e]
punitive’” just because it may be “‘tied to criminal activity.’”
Simmons, 676 F.3d at 45 (citing Usery, 518 U.S. at 291).7
In addition, the Supreme Court and the First Circuit
Court of Appeals have already described similar federal forfeiture
statutes as civil in nature. Plaintiffs argue, however, that “most
circuit courts of appeals have uniformly expressed that forfeiture
laws are penal in nature . . . ,” but fail to point to any case law

7

Although the Usery Court analyzed civil forfeiture statutes
with regards to the Double Jeopardy Clause, circuit courts of
appeals have held that the same analysis applies to whether
underlying statutes are criminal or penal for purposes of the Ex
Post Facto Clause.
See, e.g., United States v. Certain Funds
Contained in Account Numbers 600-306211-006, 600-306211-011 &
600-306211-014 Located at Hong Kong & Shanghai Banking Corp., 96
F.3d 20, 26 (2d Cir. 1996). Furthermore, the Supreme Court also
implicitly approved the usage of one test for challenges to the
Double Jeopardy Clause and the Ex Post Facto Clause when it
undertook a single analysis to answer both constitutional
challenges. See Hendricks, 521 U.S. at 370.

Civil No. 11-1968 (FAB)
that

supports

their

30

assertion.

(Docket

No.

52

at

p.

10.)

Plaintiffs then state that the First Circuit Court of Appeals has
specifically “determined that the ex post facto prohibition applies
to forfeiture procedures.” Id. at p. 10.

They cite only one case,

United States v. One Parcel of Real Property, 395 F.3d 1 (1st Cir.
2004), to support this proposition.

(Docket No. 52 at p. 10.)

The

One Parcel court, however, did not address any ex post facto claim;
instead, the court discussed how the forfeiture of real property
used to commit a drug offense was not grossly disproportional to
the gravity of the crime so as to violate the Excessive Fines
Clause of the Eighth Amendment.

Plaintiffs also ignore First

Circuit case law that is on point.

The First Circuit Court of

Appeals has stated that while the Supreme Court “has considered
forfeiture statutes as criminal for the purpose of protecting
certain fourth and fifth amendment rights, [the statutes] are
predominantly civil in nature.”

United States v. $250,000 in

United States Currency, 808 F.2d 895, 900 (1st Cir. 1987).

The

First Circuit Court of Appeals has “rejected the argument that the
forfeiture provisions of 21 U.S.C. §§ 881 [,a federal forfeiture
law,] trigger the panoply of constitutional safeguards present in
criminal actions, reaffirming that this statute is ‘predominantly
civil in nature.’”

Id.; see also United States v. One 1974 Porsche

911-S Vehicle, 682 F.2d 283, 285 (1982) (“A forfeiture proceeding

Civil No. 11-1968 (FAB)

31

is a civil, in rem action that is independent of any factually
related criminal actions.”).
Therefore, plaintiffs fail to state a claim for an
Ex Post Facto Clause violation because they fail to state any
arguments or facts to negate the legislature’s stated intent.
Furthermore, even if plaintiffs presented facts in regard to the
Mendoza-Martinez factors, the Court finds that plaintiffs fail to
state clear proof to override the legislature’s stated intent to
impose a civil measure.

Plaintiffs ignore case law that is on

point and fail to provide supporting facts or case law for their
perfunctory arguments.

Their claim that Law 119 is penal and that

its retroactivity makes it an ex post facto law fails.
Therefore, to the extent that plaintiffs fail to
state a claim that Law 119 violates the Ex Post Facto Clause of the
United States Constitution, defendants’ motion to dismiss under
Fed.R.Civ.P. 12(b)(6) is GRANTED in part.
D.

Plaintiffs’ Contract Clause Claim
The Contract Clause declares that: “No State shall . . .

pass any . . . Law impairing the Obligation of Contracts.”
Const. art. I., § 10, cl. 1.
individuals

and

legal

entities

U.S.

The Contract Clause protects
who

have

freely

entered

into

contracts from legislative action that impairs the obligations
under those contracts.

See Rooker v. Fidelity Trust Co., 261 U.S.

Civil No. 11-1968 (FAB)
114, 118 (1923).

32

To prevail on a Contract Clause claim, a

plaintiff must meet a two-part test.
F.3d 1, 4-5 (1st Cir. 1997).

See Parker v. Wakelin, 123

The first inquiry is whether a

“change in state law has resulted in the substantial impairment of
a contractual relationship.”

Parella v. Retirement Bd. of the

Rhode Island Emp.’s Ret. Sys., 173 F.3d 46, 59 (1st Circ. 1999)
(internal quotations and citations omitted).
impairment

is

found,

the

Court

must

then

If a substantial
address

the

second

inquiry, which is “whether or not the impairment is nonetheless
justified as reasonable and necessary to serve an important public
purpose.” Parella, 173 F.3d at 59 (quoting United States Trust Co.
v. New Jersey, 431 U.S. 1, 25 (1977)); see also Houlton Citizens’
Coalition v. Town of Houlton, 175 F.3d 178, 191 (1st Cir. 1999)
(internal citations omitted) (“. . . even a state law that creates
a substantial impairment does not transgress the Contract Clause as
long as it is appropriate for, and necessary to, the accomplishment
of a legitimate public purpose.”).
1.

Substantial Impairment
The first inquiry, whether a substantial impairment

exists, is broken down into three elements:

(1) whether there is

a contractual relationship, (2) whether a change in law impairs
that contractual relationship, and (3) whether the impairment is
substantial.

Id. (quoting General Motors Corp. v. Romein, 50 U.S.

Civil No. 11-1968 (FAB)
181, 196 (1992)).

33

Whether an impairment is substantial requires a

court to consider the parties’ reasonable expectations to the
alleged contract.

Mercado-Boneta v. Administracion del Fondo de

Compensacion al Paciente, 125 F.3d 9, 13 (1st Cir. 1997).
expectations

must

be

adjusted

accordingly,

however,

Those

when

the

parties are “operating in a heavily regulated industry,” such as
insurance,

or

when

the

parties

can

“readily

foresee

future

regulation involving the subject matter of their contract.”
at 13-14.

Id.

Generally, the “severity of the impairment measures the

height of the hurdle the state legislation must clear.

Minimal

alteration of contractual obligations may end the inquiry at its
first stage.”

Allied Structural Steel Co. v. Spannaus, 438 U.S.

234, 245 (1978).

If there is severe impairment, however, then

there must be “a careful examination of the nature and purpose of
the state legislation.”

Id.

The Court finds that plaintiffs have pled sufficient
facts to

show

that

a

substantial

impairment

exists.

First,

plaintiffs have shown that contractual relationships exist between
them and the financial institutions that they insure.

(See Docket

No. 10 at ¶ 53; see also Docket Nos. 60-1 and 60-2.)

Second,

plaintiffs have alleged that Law 119 impairs those contractual
relationships because the law prevents plaintiffs from subrogating
in the position of the financial companies to institute forfeiture

Civil No. 11-1968 (FAB)

34

proceedings pursuant to their insurance contracts.
No.

10,

¶¶

59-60.)

Third,

the

plaintiffs

allege

(See Docket
that

this

impairment is substantial because they may still be compelled to
pay claims by the financial institutions when forfeiture occurs but
cannot exercise their right to subrogate under the insurance
contract to appear in an asset forfeiture proceeding to mitigate
that loss.

Id.
Defendants argue that when looking at this first

inquiry of whether or not a substantial impairment of a contractual
relationship has occurred, the Court should take note that the
insurance industry is “subject to a strict government regulation.”
(See Docket No. 48 at p. 20.)

Defendants also argue that the

states have “a virtually exclusive domain over the insurance
industry” and therefore, have “broad authority to regulate the
insurance industry.”

Id.

While it may be true that states have

broad authority to regulate the insurance industry, Law 119 is a
civil forfeiture statute and the purpose of the statute has nothing
to

do

with

the

regulation

of

the

insurance

industry.

particular type of regulation must still be foreseeable.

The
See

Mercado-Boneta, 125 F.3d at 9, n. 7 (discussing how the “Contract
Clause analysis would be enervated if the mere fact of regulation
meant there was always foreseeability of more regulation and thus
no substantial impairment”).

The analysis might be different if

Civil No. 11-1968 (FAB)
the purpose

of

the

insurance industry.

35

statute

was

specifically

to

regulate

the

See id. at 14-15 (finding that a Puerto Rico

statute abrogating a malpractice liability insurer, an entity
created by Puerto Rico, and thus, barring claims against insurer,
was

not

a

substantial

impairment

of

the

insured

physician’s

contract with the insurer); see also Energy Reserves Group, Inc. v.
Kansas Power and Light Co., 459 U.S. 400, 416 (1983) (holding that
a Kansas statute imposing certain regulations on oil and gas
contracts did not impair existing contractual obligations between
an oil company and a public utility).
2.

Reasonable and
Public Purpose

Necessary to

Serve

a

Legitimate

Because the Court has determined that plaintiffs
state sufficient facts to show a substantial impairment, the Court
must address the second inquiry in the Contracts Clause analysis:
whether the legislation is reasonable and necessary to serve a
legitimate public purpose.
The Supreme Court has determined that “the State
. . . must have a significant and legitimate public purpose behind
a regulation [that is challenged under the Contracts Clause], such
as remedying of a broad and general social or economic problem.”
Energy Reserves, 459 U.S. at 411-12. The legitimate public purpose
requirement “guarantees that the State is exercising its police

Civil No. 11-1968 (FAB)

36

power, rather than providing a benefit to special interests.”
at 412.

Id.

Once a legitimate purpose has been identified, the Court

must still find that the legislation is reasonable and necessary to
achieve such a purpose.
at

191.

“When

the

See Houlton Citizens’ Coalition, 175 F.3d
contracts

at

issue

are

private

and

no

appreciable danger exists that the governmental entity is using its
regulatory power to profiteer or otherwise serve its own pecuniary
interests,” the Court “may defer to the legislature’s judgment” and
need not assess the reasonableness or necessity of the impairing
regulation.
(discussing

Id.;
how

a

see

also

Mercado-Boneta,

legislative

decision

125

F.3d

“deserves

at

16

significant

deference because the state is essentially acting not according to
its economic interest, but pursuant to its police powers”).

The

Supreme Court has warned, however, that “private contracts are not
subject to unlimited modification under the police power.”

United

States Trust Co., 413 U.S. at 22; Wakelin, 124 F.3d at 5 (when a
state’s own self-interest is at stake, a state’s decision about
necessity and reasonableness is given less deference).
Drawing all reasonable inferences in plaintiffs’
favor, the Court finds that plaintiffs have stated sufficient facts
to suggest that Law 119 fails to address a legitimate public
purpose in a reasonable and necessary manner.

Defendants argue

that the only interest behind Law 119 is to “eliminate from the

Civil No. 11-1968 (FAB)

37

market every property that is being used in the commission of a
crime and to expedite the forfeiture process” while “providing a
due process to the owner8 of the motor vehicle.”

(Docket No. 48 at

p. 21.) Assuming that this stated interest is a “broad and general
social or economic problem,” and therefore, a legitimate public
purpose,

the

Court

must

then

address

the

reasonableness

and

necessity of the regulation. See Energy Reserves, 459 U.S. at 41112. Plaintiffs argue that the regulation fails to serve reasonably
as punishment and fails to stop crime.

(Docket No. 52 at p. 11.)

Instead, plaintiffs assert, the Puerto Rico government has an
economic

interest

in

enacting

Law

119.

Id.

Specifically,

plaintiffs state that the purported “owner” of a vehicle has not
paid in full for the car, and, thus, forfeiting the car does not
serve to punish the owner.

Id.

Therefore, plaintiffs argue that

forfeiting property with a “registered lien in favor of a third
party” without any way to recover the property is just a way for
the “government to enrich itself on the
parties.”
argument.

8

Id.

account of innocent third

Plaintiffs state several facts to bolster their

First, plaintiffs indicate that as registered lien

As previously mentioned, Law 119 states that “the definition of
owner of the property deals with the identity of the individual
who exercise dominion and control over the property in question
before it was seized.”
(See Docket No. 26-1 at p. 2.)
This
definition, therefore, excludes those who have a registered lien
on the property.

Civil No. 11-1968 (FAB)

38

holders, they can only “file a complaint in court challenging the
forfeiture on behalf of the owner of the vehicle” (emphasis added).
(See Docket No. 10 at ¶ 21.)

In addition, in order to even

challenge the forfeiture on behalf of the owner, plaintiffs must
post bond.

(See Docket 26-1 at p. 7-8.)

After the posting of a

bond, plaintiffs must then show that they had “domain and control
of the vehicle” during forfeiture in order to recover it.
Docket No. 10 at ¶ 23.)

(See

Drawing the reasonable inference that in

most cases, the insurance companies do not have “domain or control
of the vehicle,” it seems that they will rarely recover the vehicle
or the bond that they posted.

Furthermore, it seems reasonable to

draw the inference that most insurance companies and the purported
“owners,” as defined in Law 119, will not attempt to make a claim
in forfeiture proceedings.
light most

favorable

to

Thus, after viewing the facts in a
the

plaintiff, the Court

finds

that

plaintiffs have stated sufficient facts to show that Law 119 does
not address

a

legitimate

public

purpose

in

a

reasonable

and

necessary manner.
At the motion to dismiss stage, the Court need only
find a plausible entitlement to relief in order for plaintiffs’
contract clause claim to survive dismissal.

After drawing all

reasonable inferences in plaintiffs’ favor, we conclude that such

Civil No. 11-1968 (FAB)
burden has been met.

39

These issues may be revisited, if warranted,

at the summary judgment stage.
Therefore, to the extent that plaintiffs state a
claim that Law 119 violates the Contract Clause of the United
States’

Constitution,

defendants’

motion

to

dismiss

under

Fed.R.Civ.P. 12(b)(6) is DENIED in part.
V.

CONCLUSION
For the reasons expressed, the Court GRANTS IN PART AND DENIES

IN PART defendants’ motion to dismiss.

(Docket No. 48.)

Defendants’ request to dismiss plaintiffs’ claims for lack of
standing is DENIED.

The motion to dismiss is DENIED as to

plaintiffs’ claims under the Due Process Clause and the Contract
Clause of the United States Constitution, and those claims remain
active.

The motion to dismiss is GRANTED as to plaintiffs’ claims

under the Takings Clause and the Ex Post Facto Clause of the United
States Constitution.

Those claims are hereby DISMISSED WITH

PREJUDICE.
IT IS SO ORDERED.
San Juan, Puerto Rico, February 23, 2012.

s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE