Garcia-Rubiera, takings, due process, “regulatory lag” and sovereign immunity

Having just blogged on one of my favorite topics, Rule 80B and 80Cs, a recent First Circuit decision allows me to riff upon another subject dear to my heart, takings.  Garcia-Rubiera v. Fortuno, Docket No. 10-2507 (  This one discusses the thorny issue of when a claim is for a violation of substantive due process, procedural due process, or the takings clause.

Puerto Rico has a law that requires all motor vehicle owners to pay for compulsory, state-issued automobile insurance, even if they have equivalent private insurance.  If you have both, you are entitled to a reimbursement of the state payment, and you get two years to seek it.  The Court (CJ Lynch, writing for the panel, which included Judges Torruella and Thompson) held that requiring the state-mandated insurance was constitutional, but because the insureds had a property interest in the duplicate payment, the lack of notice to them on how to obtain those reimbursements violated their procedural due process rights, and the Court directed entry of a declaratory judgment and injunctive relief to that effect.

This litigation has quite a history, including a previous round before the First Circuit armwrestling with another murky takings issue, ripeness.  See Garcia-Rubiera v. Calderon, 570 F.3d 443 (1st Cir. 2009) (  As an aside, in summarizing this history, CJ Lynch noted how the previous panel had found the claim ripe, noting the precedent that the panel had relied on, then adding "but see" Downing/Salt Pond Partners v. R.I. Providence Plantations, 643 F.3d 16, 26 (1st Cir. 2011).  Downing didn't purport to question or distinguish the previous Garcia-Rubiera decision at page 26.  If one were a tea leaf reader, one might  conclude that CJ Lynch was suggesting that the ripeness ruling there was limited to its facts and that generally there is a strong ripeness requirement in the First Circuit.  As this complicated history, endemic of takings claims reflects, pursuing a takings claim in any form is not for the faint hearted or those who aren't seeped in the law in this area.   

Back on point.  The previous panel had concluded that the plaintiffs retained a property interest in the premiums sufficient to trigger procedural due process requirements, and had remanded for further consideration whether the transfer of the funds to the state kitty was a deprivation sufficient to require notice.  On remand, the district court found that the law was not a sufficient deprivation so as to require notice; the transfer to the public kitty wasn't a taking; and there was no substantive due process claim because there was a rational basis for the law.

The First Circuit disagreed on the procedural due process front, holding that the law effected a deprivation of property for purposes of due process analysis.  Just because the Commonwealth has the right to collect the payment in the first place "does not insulate [the Commonwealth] from providing meaningful procedures for the return of property that is rightfully plaintiffs', and as to which the Commonwealth has no valid claim prior to escheat."  For procedural due process purposes, the key point in time is not when the Commonwealth transferred the $ to the public kitty after collection, but rather "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."

The First Circuit then talks about what process is due (it must be individualized), but life is short, so we're moving on to the Court's analysis on the takings claim.

Plaintiffs argued that the Commonwealth couldn't collect the $ in the first place because it had no legitimate basis to do so.  Because the plaintiffs asserted this claim as a takings claim, this gave the Court of Appeals the opportunity to talk about how the Supreme Court's decision in Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005) [] has made clear that this kind of argument is not asserted under the takings clause, but rather is a substantive due process claim.  If there were a true takings claim in the complaint, the Court said, it was not clearly articulated by plaintiffs, and waived.  The Court then rejected the claim, re-treaded as a substantive due process claim, because it found the regulatory scheme rational, requiring the duplicate fees upfront in order to guarantee coverage, and not arbitrary as long as the Commonwealth provided meaningful notice on how to get the $ back.

So was there any takings claim to be had here based on these facts? 

In Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994), not overruled in Lingle, the Court said that to take property, with or without compensation, the taking must substantially advance a legitimate state interest, and that the taking must be in "rough proportionality" to that interest.  Both Nollan and Dolan involved conditions – the state conditioned a permit based on the applicant giving up a property interest, and the Court was saying, hold the phone, under the unconstitutional condition test, just because the state can deny a permit entirely doesn't mean that it can condition granting a permit on forcing a property owner to surrender property rights.  Lingle then said that this precedent doesn't mean there's any stronger test than due process rationality in determining whether the state can take something. 

There is a kind of condition in this Puerto Rican law - you can't drive your car without ponying up bucks to the state – but you get that $ back if you hurdle the complexities of seeking the refund.  So this predicate doesn't seem to present a takings claim like that presented in Nollan or Dolan.  Hence, even if sometimes a claim disputing the rationality of the state's reasoning for imposing a taking is properly articulated as a takings claim and not a substantive due process claim, this would not seem to be one of those cases.  And even if it were, the test would be the same – rationality.

There's one little asterisk to this reasoning.  What the plaintiffs had to give up here was $.  Governmental $ requirements aren't  usually analyzed under the takings clause.  There's a very murky case called Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), which was all about money, and the plurality used a takings analysis, finding a taking, while the deciding vote, Justice Kennedy's, used a due process analysis.  His subsequent ruminations on some of the counterintuitive aspects of modern takings law have also explored the use of substantive due process clause instead of takings in some instances. 

So the line between when something is a substantial due process claim and when it's a taking claim remains, I think, somewhat obscure, and I'd phrase the claim both ways in my complaint if I had a situation like this.  Where in the end this gets you, phrased as one versus the other, I'm not too sure, since the current judicial view appears to be whatever constitutional clause invoked, the court reviews the legitimacy of the governmental action under a deferential rationality test. 

The final wrinkle in this analysis (at least for the purposes of this entry) is that some purposes for takings aren't too popular, e.g., economic development.  Remember Kelo v. City of New London, 545 U.S. 469 (2005) []?  This was a 5:4 decision letting the government take someone's home to build a spanking new mall etc. that the government said would generate more tax income.  If that's ok, then when is the state prohibited from re-distributing property from one private owner to another, if the latter private party will allegedly improve the property for tax generation purposes?  That's what a lot of people asked after Kelo was decided, with the result that many states passed laws limiting their rights to take property for such purposes.  Whether Kelo would be decided the same way today is an interesting question.  If my takings claim involved a state objective falling into this economic development-re-distribution to another private owner  category, then whether the standard purportedly applied is rationable basis or not, my guess is the state's purpose would be subject to higher scrutiny as a practical matter. 

My specific question with this particular decision is remedy.  The decision said that the plaintiffs would get injunctive relief.  Do they get their money back?  If not, why not?  And if so, should they get it back with interest? 

If you have a property interest in your $, and the state takes it, then isn't the state using it to its benefit?  That's what the plaintiffs argued – that the law required a forced loan.  The First Circuit I think responded by saying this is ok under a due process analysis, as long as there's a reasonable mechanism to get it back.  How about under takings law?  In takings law, a plaintiff doesn't get compensated for reasonable "regulatory lag."  If there's a process, however, that no matter how vigilant you are, takes a long time to get your $ back, and you want to be compensated, then I think your claim isn't a procedural due process claim, but is either a substantive due process claim under Justice Kennedy's reasoning in Eastern Enterprises, or a temporary takings claim.

The usual takings claim dealing with regulatory lag is one in which one plaintiff has to wait years for relief, and the court usually says that's ok under the specific circumstances.  But what happens if the state has a regulatory scheme that takes less time than that, but the required lag affects a whole lot of people?  Should a shorter regulatory lag time be deemed unacceptable if it is built into a process that affects a large number of people?  Should it make any difference if you can prove that the state's motive for that lag time is to get the time value of that money?  Should you be allowed to show motive?  You can't in a due process claim not involving a suspect class.  Can you do it in a takings claim?  I can't tell from just reading the decision whether there was any argument made by the plaintiffs to this effect.  It could appear from this text that there's an argument that Puerto Rico set this up for the purpose of making it as hard for people to get their money back as possible, so that they wouldn't try, as opposed to setting this up with an unavoidable but unnecessary time lag to get the time value of everyone's money.  The latter might be a takings claim; the former I'm not so sure, and I'm not sure about the remedy – but it would seem a little odd not to get the time value of the money in the former context but get it in the latter.  If it's a due process claim under Section 1983, however, then there's qualified immunity, but if it's a taking, there's no sovereign immunity, and direct liability by the state.  Does that make a difference in result in this type of argument?  It seems to me that if it's a due process claim, the state can say, "oops, who knew?" plus you've got all those hurdles in getting $ from the state.  But if it's a takings claim, then aren't those defenses no good?      

The Court held that the state needed to provide meaningful notice to allow someone to seek a return of their property.  Isn't this another way of saying that the law is arbitrary absent such a provision?  And if I'm one of the people who had to pony up the $ for redundant insurance a long time ago, and my inability to get it back was caused by this arbitrary lack of notice of how to get my refund, then hasn't the state kept my $ – permanently retained my property without a legitimate basis for doing so?  And if so, why isn't that a taking, and why can't I get my property back?  I understand going forward why the ruling that this was a procedural due process problem which could be fixed by proper notice makes sense.  What I'm not so sure of is whether there's some sort of takings claim for the period prior to fixing the notice problem, as to individuals who lost their property due to the due process problem.   

Oh, how I could go on and on about this topic (and already have).  The only conclusion one can make with any confidence in this area is that there is nothing simple about a regulatory takings claim.      

To top