Guillemard-Ginorio v. Contreras-Gomez

Not for Publication in West's Federal Reporter

Citation Limited Pursuant to 1st Cir. Loc. R. 32.3

United States Court of Appeals

For the First Circuit

Nos. 04-1331, 04-2045

ANDRES GUILLEMARD-GINORIO; MARIA M. NOBLE-FERNANDEZ;

CONJUGAL PARTNERSHIP GUILLEMARD-NOBLE;

LONE STAR INSURANCE PRODUCERS, INC;

JORGE R. URRUTIA-VALLES; CAROLYNE J. WIEWALL-NAVAS;

CONJUGAL PARTNERSHIP URRUTIA-WIEWALL;

URRUTIA VALLES, INC.,

Plaintiffs, Appellees,

v.

FERMIN M. CONTRERAS GOMEZ, Individually and as Insurance

Commissioner of Puerto Rico;

Defendants, Appellants,

JANE DOE; CONJUGAL PARTNERSHIP CONTRERAS-DOE;

JANE DOE; JOHN DOE,

Defendants.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Jay A. García-Gregory, U.S. District Judge]

Before

Selya, Circuit Judge,

Baldock,* Senior Circuit Judge,

and Howard, Circuit Judge.

*

Of the Tenth Circuit, sitting by designation.

Luis Rodriguez-Muñoz with whom Eileen Landron Guardiola,

Eduardo A. Vera Ramírez, Ivette M. Berrios Hernandez, and Landrón

& Vera, LLP, were on brief, for appellants.

Joseph D. Steinfield with whom Prince Lobel, Glovsky & Tye,

LLP, Charles A. Cuprill-Hernandez, and Joan S. Peters, were on

brief, for appellees.

December 13, 2005

Per Curiam. We address two interlocutory appeals brought

by Commissioner Fermin M. Contreras Gomez and the Office of the

Insurance Commissioner of Puerto Rico("OIC")1 challenging the

district court's entry of a preliminary injunction and denial of a

motion to dismiss on the basis of sovereign, absolute, and

qualified immunity.

We take the facts from the complaint. Andres Guillemard-

Ginorio and his spouse, Maria Noble-Fernandez, both well-known

members of the New Progressive Party ("NPP"), have held insurance

licenses as insurance agents for approximately 20 years.

Guillemard and Noble have conducted their business through the

entity Lone Star Insurance Producers, Inc. ("Lone Star")

(collectively "Lone Star plaintiffs"). The Lone Star plaintiffs

have never received any complaints regarding their services or

trustworthiness.

In November and December of 2001 (after a change in

government in the 2000 elections), Lone Star was audited by the

OIC. The audit focused on Lone Star's sales to Puerto Rico

governmental entities and sharing of commissions with an affiliated

1

Plaintiffs brought this action against Contreras in both his

official capacity as Commissioner of the OIC and his personal

capacity. Dorelisse Juarbe succeeded Contreras as Commissioner

after this action was filed, and plaintiffs added her as a

defendant shortly after the motions at issue were decided in the

district court.

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insurance broker.2 Lone Star plaintiffs cooperated fully with the

auditor, providing all necessary information and documentation. At

the close of the audit, the auditor informed Lone Star plaintiffs

that he had discovered no irregularities and that his final report

would issue in early 2002. Since the audit, Lone Star's insurance

license has been renewed twice.

In early 2002, Lone Star plaintiffs learned that

Contreras was making disparaging remarks about Guillemard and

Noble's membership in the NPP. They also learned that Contreras

was investigating Guillemard and Noble's personal and business

affairs by ordering several banks to provide financial information

about both Lone Star and its principals. On December 10, 2003, Lone

Star plaintiffs filed this action seeking damages and injunctive

relief against Contreras and OIC, alleging that Contreras's

improper "investigation" was motivated by political animus.

On December 23, 2003, without providing notice or a

hearing, Contreras issued an order that (1) declared Lone Star

plaintiffs non-trustworthy and incompetent; (2) revoked Lone Star

plaintiffs' insurance license for five years; (3) barred Lone Star

2

Lone Star sold insurance to Puerto Rico government agencies from

1994 to 2000 as part of a consortium with licensed insurance broker

Urrutia Valles, Inc.(and its principals Jorge Urrutia Valles and

Carolyne Wiewall Navas)(collectively "Urrutia Valles plaintiffs").

Lone Star plaintiffs' action was consolidated with Urrutia Valles

plaintiffs' similar action in the district court. Urrutia Valles

plaintiffs voluntarily dismissed their action in the district court

on November 12, 2004, and Urrutia Valles plaintiffs were dismissed

from this appeal on February 15, 2005.

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plaintiffs from applying for another license for five years; and

(4) imposed a $2,035,000 fine. The order was scheduled to become

effective on January 7, 2004, but provided that Lone Star

plaintiffs could request an administrative hearing to contest it.3

The order also stated that, while a request for an administrative

hearing would stay the imposition of the fine, the revocation would

remain in effect pending a final administrative decision.

Following receipt of the order, Lone Star plaintiffs filed an

amended complaint adding claims of retaliation and violation of due

process. Lone Star plaintiffs also requested a temporary

restraining order to prevent the revocation from taking effect, and

moved for a preliminary injunction. The district court granted the

temporary restraining order and scheduled a hearing on the motion

for a preliminary injunction.

After a hearing, at which only Lone Star plaintiffs chose

to present evidence, the district court entered an injunction

restraining Contreras and other officials at OIC from revoking Lone

Star plaintiffs' license pending completion of a full and fair

hearing and decision on Lone Star plaintiffs' challenge to the

revocation order. In its order, the district court concluded that

abstention under the Younger or Burford doctrines4 was unwarranted

3

Lone Star promptly requested this administrative hearing.

4

As developed by the Supreme Court in Younger v. Harris, 401 U.S.

37 (1971), and Burford v. Sun Oil Co., 319 U.S. 315 (1943).

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and that Contreras was not entitled to absolute immunity because

his conduct was neither quasi-judicial nor quasi-prosecutorial.

Contreras filed an interlocutory appeal challenging the preliminary

injunction ("injunction appeal").

Shortly thereafter, Contreras filed in the district court

a motion to dismiss, raising abstention and immunity issues. The

court denied the motion, reaffirmed its prior conclusions regarding

abstention and absolute immunity, held that Contreras was not

entitled to qualified immunity, and concluded that sovereign

immunity was no bar to Lone Star plaintiffs' request for injunctive

relief. Contreras filed a second interlocutory appeal challenging

this decision ("immunity appeal"). The appeals were consolidated

for briefing and argument.

Contreras's challenge to the preliminary injunction

stumbles over a fundamental issue – the existence of a live

controversy. At argument, the panel inquired of both parties

whether the administrative hearing that Lone Star plaintiffs

requested had been held. Both sides agreed that the hearing had

been held two months before argument, that the sanction had been

reduced to a six-month suspension and a $200,000 fine, and that

Lone Star plaintiffs had appealed the decision in the Puerto Rico

court system. As the preliminary injunction's function was purely

to prevent the revocation of Lone Star plaintiffs' license pending

the administrative hearing and decision, the appeal therefore is

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moot. See generally Matos v. Clinton School District, 367 F.3d 68,

71-72 (1st Cir. 2004); CMM Cable Rep., Inc. v. Ocean Coast

Properties, Inc., 48 F.3d 618, 620-21 (1st Cir. 1995); Oakville

Development Corp. v. FDIC, 986 F.2d 611, 613 (1st Cir. 1993).5 We

proceed to the immunity appeal.

We note at the outset that this appeal is narrower than

appellants have suggested, as only the immunity claims are properly

before us.6 Moreover, only Contreras's claim that qualified

immunity bars the claims against him in his personal capacity

merits significant discussion.7

5

Both sides essentially conceded that the injunction appeal was

moot at argument, but we gave Contreras the opportunity to file a

supplemental statement if he disagreed after further consideration

of the issue. No such filing has been made.

6

There is no jurisdiction for reaching the abstention claims

because the preliminary injunction appeal has been dismissed as

moot and the immunity appeal does not properly extend to the

abstention claims. See generally Limone v. Condon, 372 F.3d 39, 50

(1st Cir. 2004)(interlocutory review of qualified immunity issue

does not confer jurisdiction over other issues in the case).

7

Contreras also claims that sovereign immunity and absolute

immunity shield him. Contreras is correct that sovereign immunity

shields an officer in his official capacity from monetary damages,

see Nieves-Marquez v. Commonwealth of Puerto-Rico, 353 F.3d 108,

123 (1st Cir. 2003), but the Lone Star plaintiffs' complaint also

seeks declaratory and prospective injunctive relief against him and

such claims are not barred by sovereign immunity. We note that

Contreras's argument on this issue has lumped the claims against

the OIC and those against Contreras together. This is

inappropriate, as Contreras may properly be subject to prospective

injunctive relief but not so the agency. See id. at 114 n. 1.

Lone Star plaintiffs have acknowledged as much in their brief,

noting that dismissal of the OIC would not impact upon their case.

With respect to absolute immunity, Contreras argues that his

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To determine whether a government official is entitled to

qualified immunity we consider: "(1) whether plaintiff's

allegations, if true establish a constitutional violation; (2)

whether that right was clearly established at the time of the

alleged violation; and (3) whether a similarly situated reasonable

official would have understood that the challenged action violated

the constitutional right at issue." Mihos v. Swift, 358 F.3d 91,

102 (1st Cir. 2004). As the case comes to us in the context of a

motion to dismiss, we must ask "whether the facts alleged, viewed

in the light most favorable to the complaining party, show that the

[defendant's] conduct violated some constitutional right." Limone,

372 F.3d at 44.

As to the first prong, Contreras argues, with little

explanation, that Lone Star's complaint fails because the district

court is required to abstain under Younger or Burford and that the

actions in investigating insurers and suspending their licenses

were essentially judicial or quasi-judicial. See Destek Group,

Inc. v. New Hampshire Public Utilities Commission, 318 F.3d 32, 41

(1st Cir. 2003)("Absolute immunity is available to certain 'quasi

judicial' agency officials who, irrespective of their title,

perform functions essentially similar to those of judges . . . in

a setting similar to that of a court")(internal quotation and

citation omitted). However, Lone Star plaintiffs allege that

Contreras suspended their insurance license, essentially by fiat,

without notice or a hearing. Contreras's activities, as pleaded,

bear no resemblance to what one normally considers "judicial"

functions. See generally Diblasio v. Novello, 344 F.3d 292, 296-

302 (2d Cir. 2003)(summary suspension process too dissimilar to

judicial process to warrant absolute immunity). Thus, at least for

purposes of a motion to dismiss, Contreras is not entitled to

absolute immunity.

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complaint fails to adequately plead a due process violation.8 The

abstention issue is not relevant in a qualified immunity analysis.

As to the unexplained inadequacy of the due process allegations,

Contreras appears to be trying to enforce a heightened pleading

requirement. No such requirement exists. See, e.g., Centro Medico

Del Turabo, Inc. v. Feliciano De Melecio, 406 F.3d 1, 5 (1st Cir.

2005). Our review of the complaint reveals that the district court

correctly determined that the complaint alleges at least three

constitutional violations, one of procedural due process

(deprivation of property without a hearing) and two under the First

Amendment (political discrimination and retaliation).

As to the second prong, Contreras concedes that Lone Star

plaintiffs have a property interest in the license and that a

hearing is typically required before the State may deprive an

individual of his property. Given the weight of authority, it

would be hard to suggest otherwise. See, e.g., Bell v. Burson, 402

U.S. 535, 542 (1971)("except in emergency situations . . . due

process requires that when a State seeks to terminate an interest

such as that here involved, it must afford notice and opportunity

for hearing appropriate to the nature of the case before the

termination becomes effective")(internal quotation and citation

omitted); Mard v. Town of Amherst, 350 F.3d 184, 192 (1st Cir.

8

Contreras only challenges the due process portion of Lone Star

plaintiffs' complaint.

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2003)( "[i]n general, the state must provide some kind of hearing

before depriving an individual of a protected property

interest")(internal quotation and citation omitted); Beauchamp v.

Abadia, 779 F.2d 773, 775 (1st Cir. 1985)(physician entitled to

hearing before license could be revoked). Nonetheless, Contreras

argues the rule is not clearly established, pointing to authority

allowing prehearing suspensions of certain property rights in

certain circumstances. See Gilbert v. Homar, 520 U.S. 924 (1997);

FDIC v. Mallen, 486 U.S. 230 (1988).

Both Gilbert and Mallen acknowledge that due process can

sometimes be satisfied by a post-deprivation hearing. However,

the circumstances in which a post-deprivation hearing is adequate

are narrow:

An important government interest, accompanied

by a substantial assurance that the

deprivation is not baseless or unwarranted,

may in limited cases demanding prompt action

justify postponing the opportunity to be heard

until after the initial deprivation.

Mallen, 486 U.S. at 240; see also Gilbert, 520 U.S. at 930-31.

Contreras claims that his actions meet this standard.

This argument cannot succeed at the motion to dismiss

stage because the argument requires the development of the factual

record. See Mihos, 358 F.3d at 99 ("[w]hen motion to dismiss is

based on the complaint . . . the facts alleged in the complaint

control"). There is nothing in the pleading record establishing

urgency, a special government interest, or "substantial assurance"

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that the deprivation was not baseless. Indeed, the only

"substantial assurance" Contreras refers to is his two-year

investigation, which the Lone Star plaintiffs allege was wrongful

and motivated by political animus. This is in marked contrast to

the situations described in Mallen and Gilbert, where the

"substantial assurance" that the deprivation was warranted came in

the form of the initiation of a criminal prosecution by independent

third parties. See 486 U.S. at 241; 520 U.S. at 934.

As to the third prong of the qualified immunity test,

given the facts alleged in the complaint, we have no difficulty

concluding that a reasonable official in Contreras's position would

have known that instigating an investigation to punish Lone Star

plaintiffs for their political beliefs, and terminating their

insurance license without notice or a hearing in retaliation for

their filing of a legal action would violate their constitutional

rights. See generally Mihos, 358 F.3d at 110. Contreras's

argument -- that his two-year investigation gave him sufficient

information of wrongdoing on the part of Lone Star plaintiffs to

give rise to a reasonable belief that a pre-hearing suspension was

justified -- is directly contrary to Lone Star plaintiffs'

allegations, which must be accepted as true for purposes of the

motion to dismiss. Contreras will have the opportunity to develop

these arguments during discovery. See id. at 98-9 (denial of

qualified immunity simply means that the case may go forward).

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For the reasons stated above, the appeal of the district

court's order granting a preliminary injunction is dismissed as

moot, and the decision of the district court denying the motion to

dismiss on the grounds of immunity is affirmed.

So ordered.

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