Garcia-Rubiera v. Calderon

Decision Date30 June 2009
Docket NumberNo. 07-2409.,07-2409.
Citation570 F.3d 443
CourtU.S. Court of Appeals — First Circuit
PartiesGladys GARCÍA-RUBIERA; Domingo A. Corporan-Suárez; Adalberto Rodríguez; Lourdes Matos; José R. Maldonado; José Pérez-Canabal; Manuel Molina-Godinez; David Castro; Adalberto Avilés; Jorge Plard; Laura Plard-Ocasio; Ginova Toro-Morales; Noemí Valentín-Marrero, Plaintiffs, Appellants, v. Sila María CALDERÓN, Governor of Puerto Rico, sued in her personal capacity and in her official capacity as Governor; Juan Antonio Flores-Galarza, Secretary of the Treasury Department of the Commonwealth of Puerto Rico, sued in his personal capacity and in his official capacity, Defendants, Appellees.

Antonio J. Amadeo-Murga, for appellants.

Irene S. Soroeta-Kodesh, Assistant Solicitor General, with whom Salvador J. Antonetti-Stutts, Solicitor General, were on brief for appellees.

Before TORRUELLA, HOWARD, Circuit Judges, and DiCLERICO,* District Judge.

TORRUELLA, Circuit Judge.

This difficult appeal concerns constitutional challenges to amendments to Puerto Rico's Compulsory Motor Vehicle Liability Insurance Act, Act No. 253 ("Law 253").

Law 253 requires Puerto Rican motor vehicle owners to pay an annual premium for compulsory car insurance at the time of acquisition or renewal of vehicle registration. The premiums, initially collected by the Secretary of the Treasury (the "Secretary"), are transferred to the Compulsory Liability Joint Underwriting Association of Puerto Rico ("JUA"), a Commonwealth-created association of all private insurers in Puerto Rico. JUA then provides the compulsory car insurance.

Motor vehicle owners can opt out of the compulsory liability insurance scheme by privately purchasing insurance with the same or comparable coverage. Those owners who opt out can either avoid paying the uniform premium at vehicle registration or seek reimbursement of the "duplicate premium" paid.

The amendments at issue in this appeal, Law 230 and Law 414, concern the duplicate premiums collected by JUA. In essence, the amendments mandate the transfer of funds designated by JUA for the reimbursement of duplicate premiums (plus the interest they generate) back to the Secretary for use by the Commonwealth to address budget shortfalls. Moreover, Law 230 promulgates a separate procedure, Procedure No. 96, to provide reimbursement.

In 2002, the plaintiffs-appellants (the "Plaintiffs"), all owners of motor vehicles in Puerto Rico who privately purchased car insurance but paid duplicate premiums, filed suit against the Secretary and the Governor of the Commonwealth (the "Governor" and, together with the Secretary, the "Defendants") in their official and personal capacities.1 Plaintiffs claim that Law 230 and Law 414 violate the Takings, Due Process, and Equal Protection Clauses. They sought declaratory relief, preliminary and permanent injunctive relief, reimbursement, compensatory damages, and certification of a class of similarly situated vehicle owners. The district court denied almost all relief requested, including Plaintiffs' request for class certification. However, the district court granted a preliminary injunction, later made permanent, enjoining the transfer of the interest generated by the duplicate premiums and ordering the Commonwealth to develop an adequate scheme of reimbursement of that interest. This appeal followed. After careful consideration, we affirm-in-part, reverse-in-part, and remand for further proceedings.

I. Background

Our discussion of Law 253 and the amendments at issue in this appeal draw from, and incorporate by reference, our prior decisions concerning Law 253. See Asociación De Subscripción Conjunta Del Seguro De Responsibilidad 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).

A. Law 253

Law 253, codified at P.R. Laws Ann. tit. 26, §§ 8051-61, requires liability insurance coverage for all registered motor vehicles in Puerto Rico "that travel on public thoroughfares." Flores Galarza, 484 F.3d at 6. To that end, Law 253 provides for compulsory liability insurance, "`with $3000 of coverage for damages caused to third parties per accident in exchange for a uniform premium, initially set at $99 for each private passenger vehicle and $148 for each commercial vehicle.'" Id. (quoting Arroyo-Melecio, 398 F.3d at 60-61). The compulsory liability insurance is provided by JUA, "an association of all private insurers in Puerto Rico." Id. at 7. JUA must provide this coverage to all drivers, even high risk ones, with "`the risk of insuring these high-risk drivers ... spread among all of the private insurers.'" Id. (quoting Arroyo-Melecio, 398 F.3d at 62).

To fund the compulsory liability insurance, Law 253 requires motor vehicle owners to pay the uniform premium annually to the Secretary at the time of acquisition or renewal of vehicle registration. Id. (citing Arroyo-Melecio, 398 F.3d at 61 n. 2). The Secretary then transfers the premiums periodically to JUA. Id. (citing P.R. Laws Ann. tit. 26, § 8055(c)).

Motor vehicle owners can "opt out of the compulsory liability insurance scheme by privately purchasing liability insurance with comparable or better coverage." See id. at 7 (citing Arroyo-Melecio, 398 F.3d at 61 n. 2). Although, in some circumstances, individual motor vehicle owners who opt out can "avoid paying the compulsory insurance premium to the Secretary" at the time of registration, see id. at 7 n. 2, a number of such vehicle owners still pay the compulsory insurance premium.2 For those owners, Law 253 provides for reimbursement; in particular, vehicle owners "may then seek reimbursement directly from the JUA or from his insurer, who will, in turn, seek reimbursement from the JUA." Id. at 7. These procedures are not at issue in this appeal.

"Because a portion of the total amount of premiums received by JUA may be owed to third parties who seek refunds for duplicate payments," JUA is required by law to "set aside these premiums and accumulate them in a separate reserve account (the `Reserve')." Id. at 8. However, since January 1, 1998, the effective date of Law 253, JUA "has been unable to determine exactly how many registered motor vehicles in Puerto Rico are covered by private liability insurance." Id. As a result, JUA has divided the Reserve account between the "duplicate premiums" it estimates it is required to reimburse to motor vehicle owners, and an "overstated" amount of funds, which are funds set aside by JUA as a buffer to meet all requests for reimbursement. See id. at 8-9.3

The general provisions of Puerto Rico insurance law with respect to "unclaimed funds" apply to Law 253. See id. at 8 n. 5 ("Puerto Rico's Insurance Code makes clear that this general provision applies to the compulsory liability insurance system under Law 253." (citing P.R. Laws Ann. tit. 26, § 2612)). Under Puerto Rico insurance law, vehicle owners have seven years to claim a duplicate premium. See P.R. Laws Ann. tit. 26, § 2603; see also Flores Galarza, 484 F.3d at 10 n. 9. Otherwise, the duplicate premium escheats to the Commonwealth.

B. Law 230 and Law 414

On September 11, 2002, the Puerto Rican legislature enacted Law 230, codified at P.R. Laws Ann. tit. 26, § 8055(l). Law 230 requires JUA to retransfer to the Secretary all funds held in the Reserve every two years to balance the Commonwealth's budget. The first transfer mandated under Law 230, $73 million, occurred the same month of Law 230's enactment.4 Law 230 also provided that the Commonwealth could spend $53 million of the funds immediately. The $53 million, according to the Statement of Motives of the subsequently enacted Law 414, corresponded to the overstated funds contained in the Reserve.5

Under Law 230, the remaining $20 million, an estimate of the actual duplicate premiums paid, remained in the custody of the Secretary as trustee for five years, after which all unclaimed duplicate premiums became the property of the Commonwealth. However, any income generated by the funds, such as interest, reverted to the Commonwealth's General Fund as it accrued.

Accordingly, under Law 230, "the seven-year period provided by the general provisions of Puerto Rico's Insurance Code ... [is divided] among the JUA (which holds the funds for two years) and the Secretary (who holds the funds for five additional years), after which time the funds lapse to the general fund." Flores Galarza, 484 F.3d at 10 n. 9.

Pursuant to Law 230, the Secretary adopted Procedure No. 96, a procedure by which motor vehicle owners can seek reimbursement from the Secretary. To obtain reimbursement, a vehicle owner must fill out a model form and submit, via mail or at certain designated offices, the following:

a. Copy of the Motor Vehicle Registration License for which such reimbursement is being claimed;

b. Copy of the insurance policy. Said policy shall be for each year that is being claimed;

c. In the case such that it is the insurance firm which is making the claim, it shall attach certified copies of those policies that it is claiming;

d. Certification of payment of the policy for each year being claimed. Such certification shall be issued by the insurance firm;

e. Certification that such insurance firm has not received any reimbursement from [JUA], nor has reimbursed the premium for the Mandatory Liability Insurance, to the insured party.

According to the Statement of Motives of Law 414, the Secretary has only reimbursed approximately $500,000 of duplicate premiums in the first two years of the enactment of Law 230.

On September 22, 2004, the legislature passed Law 414, also codified at P.R. Laws Ann. tit. 26, §§ 8055(1). Among other things, Law 414 permitted the Commonwealth to use $19 million of the remaining funds transferred in September 2002 to balance the 2004-05 fiscal year budget. Law 414 also requires the Commonwealth to use money from the General Fund...

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