Starlight Sugar v. Soto, 00-1487

• Decision Date: 16 November 2000
• Docket Number: No. 00-1487,00-1487
• Citation: 253 F.3d 137
• Parties: (1st Cir. 2001) STARLIGHT SUGAR, INC., PAN AMERICAN GRAIN CO., INC., Plaintiffs, Appellees, v. NEFTAL SOTO, INDIVIDUALLY AND AS SECRETARY OF THE DEPARTMENT OF AGRICULTURE OF THE COMMONWEALTH OF PUERTO RICO, Defendant, Appellant, SUGAR CORPORATION OF PUERTO RICO ("LA CORPORACI N AZUCARERA DE PUERTO RICO"), MANUEL D AZ SALDANA, INDIVIDUALLY AND AS SECRETARY OF THE DEPARTMENT OF THE TREASURY OF THE COMMONWEALTH OF PUERTO RICO. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 137

253 F.3d 137 (1st Cir. 2001)

STARLIGHT SUGAR, INC., PAN AMERICAN GRAIN CO., INC., Plaintiffs, Appellees, v. NEFTAL SOTO, INDIVIDUALLY AND AS SECRETARY OF THE DEPARTMENT OF AGRICULTURE OF THE COMMONWEALTH OF PUERTO RICO, Defendant, Appellant,

SUGAR CORPORATION OF PUERTO RICO ("LA CORPORACI N AZUCARERA DE PUERTO RICO"), MANUEL D AZ SALDANA, INDIVIDUALLY AND AS SECRETARY OF THE DEPARTMENT OF THE TREASURY OF THE COMMONWEALTH OF PUERTO RICO.

No. 00-1487

United States Court of Appeals For the First Circuit

Heard November 16, 2000

Decided June 11, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO. Hon. Juan M. Perez-Gimenez, U.S. District Judge. [Copyrighted Material Omitted] Richard H. Fallon, Jr., with whom Juan A. Lopez-Conway and Garcia & Fernandez, were on brief, for appellant.

Eduardo A. Vera-Ramrez, with whom Ramrez Lavandero, Landron & Vera, were on brief, for appellees.

Before Torruella, Chief Judge, Lipez, Circuit Judge, and Garcia-Gregory,^* District Judge.

TORRUELLA, Chief Judge.

This is an appeal from an Opinion and Order denying appellant Neftal Soto's qualified immunity defense. Soto, acting in his capacity as Secretary of the Department of Agriculture of the Commonwealth of Puerto Rico, has been sued in his personal capacity under 42 U.S.C. § 1983 for enforcing a sugar regulation that prevented appellees, Starlight Sugar, Inc. and Pan American Grain Company, Inc. ("Starlight/PanAm"), from importing sugar into Puerto Rico in bulk for packaging in consumer-sized units. We reverse the district court opinion and hold that Soto is entitled to qualified immunity.

BACKGROUND

Section VI of Market Regulation No. 13 prohibits the importation of sugar into Puerto Rico for consumer use unless the sugar has been packaged in consumer-sized bags (two- and five-pound bag sizes) prior to its arrival in Puerto Rico.¹ In other words, sugar cannot be shipped to Puerto Rico in bulk for packaging in Puerto Rico. It is undisputed that the effect of this regulation is to prevent sugar intended for consumer use from being brought into Puerto Rico.

An explanation of the history of the sugar industry in Puerto Rico is provided in the district court opinion granting Starlight/PanAm a preliminary injunction, Starlight Sugar, Inc. v. Soto, 909 F. Supp. 853, 855-56 (D.P.R. 1995) [hereinafter Starlight Sugar I], aff'd, 114 F.3d 330 (1st Cir. 1997) [hereinafter Starlight Sugar II], and need not be retold here. A summary of the litigation history of Market Regulation No. 13, however, is worth noting.

The prohibition on repackaging imported sugar was first challenged in the Puerto Rico court system in 1984. While the Puerto Rico Supreme Court was considering the issue, a concurrent suit was filed in federal district court in 1987. The district court stayed the proceedings pending a decision by the Puerto Rico Supreme Court. On November 30, 1987, the Puerto Rico Supreme Court rendered such a decision, upholding Regulation No. 13 against due process and equal protection claims based on the Puerto Rico Constitution. Puerto Rico Sugar Corp. v. Garcia, CE-85-481, RE-85-496, P.R. Offic. Trans. Sugar repacker Garcia returned to the federal district court seeking relief in that forum. The district court, after dismissing the claims brought under the Due Process and Equal Protection Clauses of the United States Constitution, held that a claim could be maintained under the Commerce Clause, because such a claim could not have been litigated in the Puerto Rico courts.² Garcia v. Bauz Salas, 686 F. Supp. 965, 967 (D.P.R. 1988) ("under Puerto Rican law, as espoused by the Puerto Rico Supreme Court, the clause is inapplicable to the Island"). The district court went on to enjoin enforcement of the regulation. Id. at 974. On appeal, this Court vacated the injunction, holding that the district court's action violated the Anti-Injunction Act, 28 U.S.C. § 2283, because the order enjoining enforcement of Regulation No. 13 directly conflicted with the injunction affirmed by the Puerto Rico Supreme Court barring Garcia from repackaging sugar in Puerto Rico. Garcia v. Bauza Salas, 862 F.2d 905, 907-08 (1st Cir. 1988).

In 1994, appellee Pan American Grain imported approximately 80,000 pounds of sugar into Puerto Rico for consumer repackaging by appellee Starlight Sugar. Pursuant to Regulation No. 13, the Department of Agriculture issued a detention order prohibiting appellees from selling the sugar to grocery stores in Puerto Rico. Starlight/PanAm sued, seeking declaratory and injunctive relief, as well as damages, and based their challenge of Regulation No. 13 on the Commerce and Equal Protection Clauses of the United States Constitution.

The district court granted Starlight/PanAm's motion for preliminary injunctive relief, holding that there was a likelihood of success on the merits as to both the Commerce Clause and equal protection arguments. Starlight Sugar I, 909 F. Supp. at 861. The court found that Regulation No. 13 "facially discriminates against interstate commerce" and that the government had failed to assert a compelling interest sufficient to justify this "discriminatory purpose and effect," thus implicating the Commerce Clause. Id. In addition, the district court held that the government had put forth no "legitimate government objective" for Regulation No. 13, and that the regulation, therefore, likely violated the Equal Protection Clause. Id.

This Court affirmed the grant of the preliminary injunction, finding "no abuse of discretion and no error of law." Starlight Sugar II, 114 F.3d at 331. Regarding the likelihood of success on the merits, we "note[d]" that "Commerce Clause case law strongly supports the position of the plaintiff sugar importers." Id. We characterized Regulation No. 13 as "facially discriminatory," and thus "presumptively invalid." Id.

In the most recent development of this case, the district court ruled, in an Opinion and Order, in favor of Starlight/PanAm's Motion for Summary Judgment. Starlight Sugar, Inc. v. Soto, 86 F. Supp. 2d 23 (2000) [hereinafter Starlight Summary Judgment]. The court affirmed its prior intimations that Market Regulation No. 13 violated both the Commerce and Equal Protection Clauses. Pursuant to this finding, the district court granted injunctive relief against Soto. The court next turned to Starlight/PanAm's § 1983 claim for damages against Soto in his personal capacity, and, in that context, analyzed Soto's assertion of qualified immunity.

Citing Harlow v. Fitzgerald, 457 U.S. 800 (1981), the district court identified a two-part test for determining whether an official is entitled to qualified immunity: (1) whether the law was clearly established at the time the action was taken; and (2) if so, whether the official knew or reasonably should have known that the action or inaction would violate petitioner's constitutional rights. Id. at 818. The district court found that the law was clearly established and that Soto knew or should have known that enforcement of Market Regulation No. 13 violated Starlight/PanAm's constitutional rights. The court called the Commerce Clause "a cornerstone of our economy and our country" and was "hard pressed to believe that Soto, an attorney, would be unaware of the existence of the Commerce Clause." Starlight Summary Judgment, 86 F. Supp. 2d at 30. In a footnote, the court stated, "A similar result is found when analyzing the Equal Protection Clause . . . ." Id. at 30 n.9.

Appellant Soto brings this interlocutory appeal pursuant to 28 U.S.C. § 1291, challenging only the district court's rejection of his qualified immunity defense. See Mitchell v. Forsyth, 472 U.S. 511, 530 (1984). Entitlement to the defense of qualified immunity is a question of law subject to de novo review. See, e.g., Elder v. Holloway, 510 U.S. 510, 516 (1994). Accordingly, we proceed to the merits of this appeal.

DISCUSSION

This Court has identified a three-step process for evaluating qualified immunity claims: (1) whether the claimant has alleged the deprivation of an actual constitutional right; (2) whether the right was clearly established at the time of the alleged action or inaction; and (3) if both of these questions are answered in the affirmative, whether an objectively reasonable official would have believed that the action taken violated that clearly established constitutional right. Nelson v. Kline, 242 F.3d 33, (1st Cir. 2001); Abreu-Guzman v. Ford, 241 F.3d 69, 73 (1st Cir. 2001); see Wilson v. Layne, 526 U.S. 603, 609 (1999). This particular order of analysis "is designed to 'spare a defendant not only unwarranted liability, but unwarranted demands customarily imposed upon those defending a long drawn-out lawsuit.'" Wilson, 526 U.S. at 609 (quoting Siegert v. Gilley, 500 U.S. 226, 232 (1991)). Addressing the constitutional question first "promotes clarity in the legal standards for official conduct, to the benefit of both the officers and the general public." Id.

The district court held that Market Regulation No. 13 violated clearly established Commerce Clause and Equal Protection Clause case law. We will examine both, turning first to the Commerce Clause claim.

A. Commerce Clause Analysis

In explaining "dormant" Commerce Clause jurisprudence, the district court quoted the following passage:

This "negative" aspect of the Commerce Clause prohibits economic protectionism--that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors. . . . Thus, state statutes that clearly discriminate against interstate commerce are routinely struck down . . . unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism.

Starlight Sugar I, 909 F. Supp. at 857 (quoting West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 192-93 (1994) (quoting New England Co. of Ind. v. Limbach, 486 U.S. 269, 273-74 (1988))). The district court found Market...