Guillemard-Ginorio v. Contreras-Gomez
| Decision Date | 29 October 2009 |
| Docket Number | No. 08-1302.,08-1302. |
| Citation | 585 F.3d 508 |
| Court | U.S. Court of Appeals — First Circuit |
| Parties | Andrés GUILLEMARD-GINORIO; María M. Noble-Fernández; Conjugal Partnership Guillemard-Noble; Lone Star Insurance Producers, Inc., Plaintiffs, Appellees, Jorge R. Urrutia-Vallés; Carolyne J. Wiewall-Navas; Conjugal Partnership Urrutia-Wiewall' Urrutia Vallés, Inc., Plaintiffs, v. Fermín M. CONTRERAS-GÓMEZ, Individually; Dorelisse Juarbe-Jiménez; Individually and as Insurance Commissioner of Puerto Rico; Office of the Insurance Commissioner, Defendants, Appellants, María Awilda Quintana; Conjugal Partnership Contreras-Doe; Conjugal Partnership Báez-Juarbe; José Báez; Jane Doe 03CV2390; Annabelle Rodríguez, Defendants. |
Carlos A. Del Valle-Cruz, Special Counsel, Department of Justice, with whom Roberto J. Sánchez-Ramos, Secretary of Justice, Commonwealth of Puerto Rico, and Maite Oronoz-Rodríguez, Acting Solicitor General, was on brief for appellants.
Joseph D. Steinfield, with whom Jeffrey J. Pyle, Prince, Lobel, Glovsky & Tye, LLP, Joan S. Peters and Nachman & Guillemard, was on brief for appellees.
Before TORRUELLA, Circuit Judge, SILER,* Senior Circuit Judge, and HOWARD, Circuit Judge.
Plaintiffs-appellees, Andrés Guillemard-Ginorio ("Guillemard") and his wife, María Noble-Fernández ("Noble"), along with their jointly-owned insurance agency, Lone Star Insurance Producers, Inc. ("Lone Star"), brought suit against defendants-appellants, the Office of the Insurance Commissioner of Puerto Rico ("OIC") and two consecutive Insurance Commissioners, Fermín Contreras-Gómez ("Contreras") and Dorelisse Juarbe-Jiménez ("Juarbe"), individually and in their official capacities, alleging, inter alia, that defendants investigated and sanctioned them for purported Insurance Code violations solely because of their political affiliation with the New Progressive Party ("NPP"). The complaint included federal claims under the First and Fourteenth Amendments pursuant to 42 U.S.C. § 1983 (" § 1983") along with supplemental claims for relief under the Commonwealth Constitution. Following a jury trial, plaintiffs were awarded a $4.7 million money judgment as well as permanent injunctive relief. It is from this judgment, the permanent injunction, and the denial of their post-trial motions, that defendants now appeal.
Defendants raise numerous grounds for relief. After careful consideration, finding none meritorious, we affirm.
Plaintiffs Guillemard and Noble are husband and wife. Both are licensed insurance agents in Puerto Rico, each owning 50% of Lone Star, an insurance agency licensed to do business in Puerto Rico. Both Guillemard and Noble are prominent members of the NPP, having contributed substantial time and financial support to NPP candidates. Defendant Contreras is the former Insurance Commissioner of the Commonwealth of Puerto Rico, having served in that capacity from March 2001 to December 31, 2003. He was succeeded on January 7, 2004 by defendant Juarbe, who served as Insurance Commissioner until December 2008, when a new administration came to power. Both Contreras and Juarbe served under Popular Democratic Party ("PDP") administrations. The NPP and PDP are opposing political parties in Puerto Rico.
Lone Star first began doing business with government agencies in 1993, when it was the agency that placed insurance for the Puerto Rico Ports Authority. In 1994, the government of Puerto Rico determined that public authorities and government agencies should be represented by licensed insurance brokers for the purpose of obtaining insurance. It thus moved from an open bidding process to a brokered system where a handful of brokers were selected to handle all government insurance. Based on testimony presented at trial, Guillemard met with then Commissioner of Insurance Juan Antonio García, who advised him to affiliate with a government insurance broker and suggested he do so with Urrutia Vallés, Inc. ("UVI"),1 one such broker licensed in Puerto Rico.2 In 1994, Lone Star entered into a consortium with UVI. Testimony and exhibits at trial established that "from 1994 to approximately April 2001, [UVI], acting on behalf of the consortium, negotiated insurance policies and provided related insurance services to several government agencies and public corporations." Lone Star and UVI shared commissions on premiums for insurance of the kind that plaintiffs were licensed to solicit. There was evidence at trial showing that OIC and the governmental agencies were aware of the arrangement between Lone Star and UVI.
A change of government took place during the 2000 general election, bringing into power the PDP administration of Governor Sila M. Calderón. In May 2001, then Treasury Secretary Juan Flores Galarza announced an investigation of all insurance entities which had been providing insurance services to government agencies during the previous administration. UVI was named as a target of that investigation and, on November 2, 2001, the OIC assigned Angela Rivera to investigate UVI for its conduct in connection with the performance of a contract with the government of Puerto Rico. Pursuant to that investigation, Rivera found evidence suggesting that UVI paid commissions to Lone Star from the sale of the government insurance policies.
On November 20, 2001, then Insurance Commissioner, Contreras, issued a "Notification and Examination Order" calling for an investigation of Lone Star's operations and transactions from January 1, 1997 through September 30, 2001. The notification did not include any charges of wrongdoing. Pursuant to that investigation, David Castro Anaya ("Castro"), an OIC auditor, was assigned to perform the Lone Star audit. Castro reviewed Lone Star's transactions for the relevant period, including all documents pertaining to insurance provided to government agencies. Plaintiffs fully cooperated with Castro's investigation. According to Castro's own testimony at trial, the sole purpose of his investigation was to determine whether Lone Star had made improper payments such as bribes to third parties. Castro never found any such payments. By December 17, 2001, Castro concluded his audit. Castro informed Guillemard that he had found no irregularities and that he would prepare a final report in early 2002 and send Guillemard a copy.
On July 10, 2003, Castro submitted his report relating to the Lone Star audit to his supervisor, which was entitled "Final Investigation Findings Report." The Report made no reference to improper payments to third parties, but found that Lone Star had entered into a commission-sharing arrangement with an insurance broker, UVI, thereby deriving substantial commissions from policies insuring the risks of the Commonwealth. The Report concluded that the sharing of commissions was a violation of Section 939 of the Puerto Rico Insurance Code. See P.R. Laws Ann. tit. 26, § 939 (2003) (repealed by Law No. 10 of Jan. 19, 2006, Art. 8). A copy of the report was not sent to Guillemard, and thus, Guillemard had no opportunity to object to its contents.
According to his own testimony at trial, at some point after November 20, 2001, but before March 2002, Melvin Rosario Crespo ("Rosario"), the Director of the Anti-Fraud Unit at the OIC and Castro's supervisor, met privately with Contreras regarding the Lone Star investigation and told Contreras that he "did not feel comfortable with the legal grounds for such an investigation." Rosario explained that the sharing of commissions, as in the case of Lone Star and UVI, was common and normal in the way that business was conducted and that he had not found anything in the Insurance Code prohibiting it. Rosario testified that he told Contreras that "there was no legal grounds for this type of investigation" and thus, he did not wish to investigate Lone Star for commission sharing. In response, Contreras told Rosario that he would "have to go after this NPP" anyway. Rosario asked to be relieved from the assignment, and Contreras agreed that Castro would report to Aurea López instead.
During the course of the investigation, defendants Contreras and Juarbe also issued ex parte subpoenas to various Puerto Rico banks and obtained documents concerning the business and personal accounts of Guillemard and Noble. Many of these accounts had nothing to do with Lone Star's business. Defendants did not give plaintiffs prior notice of the subpoenas, nor did they obtain any court orders authorizing such subpoenas.
In early 2003 plaintiffs learned that Contreras and the then, Sub-commissioner, Juarbe, had issued the ex parte subpoenas and obtained documents concerning Guillemard's and Noble's business and personal accounts.3 Guillemard also learned that Contreras had made disparaging remarks regarding his and Noble's political affiliation. On December 10, 2003 plaintiffs filed the instant suit in the Federal District Court for the District of Puerto Rico pursuant to 28 U.S.C. § 2201 and 42 U.S.C. § 1983 against the OIC and against Contreras for damages in his individual capacity and injunctive relief in his official capacity, alleging, inter alia, that Contreras' investigation was motivated by political animus toward Guillemard in violation of the First and Fourteenth Amendments and that the subpoenas constituted an invasion of privacy under local law. Contreras was served with summons on December 19, 2003. At that time, the OIC had not issued any charges, reports or orders in connection with the Lone Star investigation.
On December 23, 2003, Contreras, without affording plaintiffs notice or a hearing, issued an Order against plaintiffs charging them with various violations of the Insurance Code ("the Order"). Juarbe, who was then the Sub-Commissioner, attended the meetings leading up to the issuance of the Order. The Order (1) revoked the plaintiffs' insurance licenses for a five-year period; (2)...
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