Court Opinion

ID: 4028105
Source: CourtListenerOpinion
Date Created: 2016-08-24 20:00:29.634993+00
Date Added: 2024-06-11T14:08:26.453637
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 15-1507

    DUAMEL SANTIAGO-RAMOS, individually and as representative
      of the Conjugal Partnership; MARINÉS RIVERA-FIGUEROA;
                   CARIBBEAN ECONOMIC COUNCIL,

                     Plaintiffs, Appellants,

                               v.

         AUTORIDAD DE ENERGÍA ELÉCTRICA DE PUERTO RICO,
             AEE, a/k/a Puerto Rico Power Company,

                      Defendant, Appellee,

                      MARIMAR PÉREZ-RIERA,

                           Defendant.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF PUERTO RICO
        [Hon. Jay A. García-Gregory, U.S. District Judge]

                             Before
                      Howard, Chief Judge,
              Torruella and Lynch, Circuit Judges.

     Eric Quetglas-Jordán, with whom Quetglas Law Offices, Ricardo
Izurieta, Luis Rafael Rivera, Luis Rafael Rivera Law Offices, and
Allan Amir Rivera-Fernández, were on brief, for appellants.
     Fernando J. Fornaris-Fernández, with whom Victoria D. Pierce-
King and Cancio, Nadal, Rivera & Díaz, P.S.C., were on brief, for
appellee.

                         August 24, 2016
            TORRUELLA, Circuit Judge.        Plaintiffs-Appellants Duamel

Santiago-Ramos      ("Santiago"),        Marinés   Rivera-Figueroa,     and

Caribbean Economic Council filed a class action suit on behalf of

approximately 1.5 million Puerto Rican residents who are customers

of Autoridad de Energía Eléctrica de Puerto Rico ("PREPA") against

Defendant-Appellee PREPA alleging that PREPA's use of a portion of

its    overall   revenue    to   subsidize   municipalities'   energy   use

violates the Takings Clause and deprives Plaintiffs-Appellants of

their property interest in electricity and/or the funds they paid

for electricity in violation of procedural due process.                 The

district court granted summary judgment for PREPA.              We affirm,

finding Plaintiffs-Appellants lack standing.

                                 I.   The Basics

            "We describe the facts, drawing all inferences in the

plaintiff's favor, as we must do in summary judgment."            Chaloult

v. Interstate Brands Corp., 540 F.3d 64, 66 (1st Cir. 2008).

            PREPA charges consumers a base rate of five cents per

kilowatt-hour ("kwh").      In addition to the base rate, PREPA charges

customers an adjustment fee each month, which has two components:

(1) a fuel purchase charge based on the estimated price of fuel

that is recalculated monthly and (2) an energy purchase charge.

PREPA's Regulation of General Terms and Conditions for the Supply

of    Electric   Energy    ("PREPA    Regulations")   term   electricity   a

                                       -2-
"movable good" that can be illegally appropriated.        P.R. Reg. AEE

Reg. 7982.   Puerto Rico law defines movable property as things

that can be appropriated.    31 L.P.R.A § 1061.

          Puerto Rico law requires that PREPA use eleven percent

of its overall revenue to fund, inter alia, subsidies and credits

to select beneficiaries1 -- for example, churches or social welfare

organizations -- and a Contribution in Lieu of Taxes ("CILT") to

municipalities to subsidize their energy use in exchange for

exempting PREPA from taxes.       22 L.P.R.A. § 212(b).      As of 2011,

following an amendment to 22 L.P.R.A. § 212(b), Law 233, the CILT

calculation effectively excludes consumption billed to municipal

facilities housing for-profit establishments.      P.R. Laws No. 233-

2011. A 2014 amendment to 22 L.P.R.A. § 212(b), Law 57, maintained

that exclusion.2   P.R. Laws No. 57-2014.

                            II.   The Claims

          Plaintiffs-Appellants      allege    PREPA   has    subsidized

municipalities' private use by $360 million since 2005 and $140

million since 2011, despite Law 233 and Law 57.        They also claim

1 According to Plaintiffs-Appellants, about thirty-three percent
of PREPA consumers benefit from subsidies or grants.
2  This amendment changed the basis for calculating the eleven
percent from PREPA's "net income" to "gross revenues." It further
outlined a complex energy use reduction scheme and mandated that
PREPA create a stabilization fund with a portion of the CILT. P.R.
Laws No. 57-2014.

                                   -3-
no procedure exists for resolving disputes regarding the taking of

electricity. Plaintiffs-Appellants are seeking "just compensation"

in the amount of $360 million.               A magistrate judge recommended

granting    PREPA's    motion    for   summary     judgment    and    dismissing

Plaintiffs-Appellants' claims with prejudice, finding that they

had not identified a valid property interest, no taking had

occurred, and no valid procedural due process claim existed in

light of the absence of a property interest.               The district court

adopted the magistrate judge's recommendation and granted summary

judgment for PREPA.         Plaintiffs-Appellants appeal the grant of

summary judgment.

            On    appeal,       Plaintiffs-Appellants         argue       (1) they

identified a valid property interest in both electricity as movable

property and the monies paid for electricity; (2) PREPA effects an

unconstitutional taking of that property by taking "the electric

energy     paid   by   [Plaintiffs-Appellants]        to   give      it   to   the

Municipalities" for private use without any rational purpose;

(3) the "11% [Appellants] are charged by PREPA . . . to purchase

electric power" is arbitrary and irrational; and (4) Appellants

have been denied procedural due process.

                         III.    A Standing Problem

            This Court "review[s] a grant or denial of summary

judgment, as well as pure issues of law, de novo."                   Sun Capital

                                       -4-
Partners III, LP v. New Eng. Teamsters & Trucking Indus. Pension

Fund, 724 F.3d 129, 138 (1st Cir. 2013).        Here, our de novo review

yields the definite conclusion that Plaintiffs-Appellants lack

standing to bring suit.

              "To satisfy the 'irreducible constitutional minimum of

standing,' Plaintiffs must show (1) that they have suffered an

injury in fact, (2) that the injury is fairly traceable to the

[defendant]'s allegedly unlawful actions, and (3) that 'it [is]

likely, as opposed to merely speculative, that the injury will be

redressed by a favorable decision.'"      Nulankeyutmonen Nkihtaqmikon

v. Impson, 503 F.3d 18, 26 (1st Cir. 2007) (alterations in the

original) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555,

560-61 (1992)).      To establish an injury in fact for purposes of

Takings Clause and procedural due process claims, plaintiffs must

"show that they had an identifiable personal stake in the property

rights at issue."     Bingham v. Mass., 616 F.3d 1, 7 (1st Cir. 2010);

see    also   Asociación   de   Subscripción   Conjunta   del     Seguro   de

Responsabilidad Obligatorio v. Flores Galarza, 484 F.3d 1, 27 (1st

Cir.    2007)   (holding   plaintiff   must    identify   valid    property

interest to bring takings claim); Aponte v. Calderón, 284 F.3d
184, 191 (1st Cir. 2002) (same regarding procedural due process);

cf. Roedler v. U.S. Dep't of Energy, No. CIV.98-1843(DWF/AJB),

1999 WL 1627346, at *10 (D. Minn. Dec. 23, 1999) ("To establish

                                    -5-
standing pursuant to a taking claim, the plaintiff must show proof

of personal injury, that is, the requisite interest in the property

at issue and the deprivation thereof by the United States." (citing

Maniere v. United States, 31 Fed. Cl. 410, 420 (1994))), aff'd sub

nom. Roedler v. Dep't of Energy, 255 F.3d 1347 (Fed. Cir. 2001).

            Here, Plaintiffs-Appellants fail to establish a valid

protected    interest    in    either      electricity   consumed    by   the

municipalities or the funds paid to PREPA, as a result of which

they do not have standing to bring either the takings or due

process claims.    See Bingham, 616 F.3d at 7.           First, Plaintiffs-

Appellants did not establish that they have a property interest in

electricity itself, as PREPA Regulations do not create such an

interest.     P.R. Reg. AEE Reg. 7982.            "An interest becomes a

protected property interest when recognized by state statute or a

legal contract, express or implied, between the state agency and

the individual."     Marrero-García v. Irizarry, 33 F.3d 117, 121

(1st Cir. 1994).    Contracts with state agencies that "include []

a provision that the state entity can terminate the contract only

for cause" can create a property interest.          Redondo-Borges v. U.S.

Dep't of Hous. & Urban Dev., 421 F.3d 1, 10 (1st Cir. 2005) (quoting

Linan–Faye Constr. Co. v. Hous. Auth., 49 F.3d 915, 932 (3d Cir.

1995)) (internal quotation marks omitted).               And customers of

utilities   can   have   a    property   interest   in   continued   utility

                                     -6-
service, in certain circumstances.       See Memphis Light, Gas & Water

Div. v. Craft, 436 U.S. 1, 9-11 (1978).         Accordingly, Puerto Rico

law   requires   public   corporations    and   government    entities   to

"provide [subscribers with] an administrative procedure for the

suspension of its services for nonpayment."        27 L.P.R.A. § 262(b).

However,   in    Marrero-García,   this    Court   rejected    claimants'

assertions that a definition in a public corporation's regulations

could create a property interest in the service itself. 33 F.3d

at 123 (noting that "relevant case-law . . . suggests that . . .

regulatory definitions cannot establish a constitutional right to

receive water services").     Thus, no matter how PREPA Regulations

are construed, Plaintiffs-Appellants have at most an interest in

continuing to receive electricity, which is not at issue here.

See 27 L.P.R.A. § 262(b); Memphis Light, 436 U.S. at 9-11; Redondo-

Borges, 421 F.3d at 10.

           We note that, even assuming, arguendo, that Plaintiffs-

Appellants did prove electricity is a moveable good in which they

could assert a valid property interest in this context on the basis

of P.R. Reg. AEE Reg. 7982 and 31 L.P.R.A § 1061, no one is "taking"

electricity from consumers and redirecting it to municipalities,

nor does Santiago or any other putative class member actually

receive "eleven percent less electricity than he pays for."          (Nor

do putative class members claim that, for example, they pay for

                                   -7-
100 kwh but only receive 89 kwh.)              PREPA consumers pay a basic

rate for the electricity that they receive, plus an additional

fee; municipalities consume electricity, then receive a subsidy

from   PREPA's     overall   revenue    for     their   energy    consumption;

consumers    pay   only   for   what    they    receive   and    there   is   no

redirection of any electricity.               There is no unaccounted-for

electricity that Santiago and other putative class members paid

for and did not receive -- no wire snaking from an outlet in

Santiago's home to the municipal bus stop -- thus no electricity

in which to assert a valid property interest nor a taking of said

interest.

            Finally, Plaintiffs-Appellants cannot assert a valid

property interest in funds paid for electricity.                Customers lose

their interest in money paid to utilities companies for their

service.    See Koontz v. St. Johns River Water Mgmt. Dist., 133 S.

Ct. 2586, 2600 (2013) (fees do not implicate the Takings Clause);

Bd. Pub. Util. Comm'rs v. N.Y. Tel. Co., 271 U.S. 23, 31 (1926)

("[R]evenue paid by [utility] customers for service belongs to the

company.").   Once Santiago and members of the putative class paid

for electricity -- the funds are paid, not "taken" -- ownership of

those funds transfers to PREPA.

                                       -8-
                          IV.   Conclusion

          Because Plaintiffs-Appellants did not identify a valid

property interest, they do not have standing to bring the takings

and due process claims.   Thus, we affirm the district court's grant

of summary judgment on standing grounds.     Cf. Lujan, 504 U.S. 555.

          AFFIRMED.

                  "Concurring opinion follows"

                                 -9-
          HOWARD, Chief Judge (concurring in the judgment).       I

agree that plaintiffs have not established that they have a

protected property interest, and so we must affirm.     But I would

characterize this defect as going to the merits, not to standing.

In addition, I would not decide whether PREPA's regulations give

plaintiffs a property interest in electricity.

                                 I.

          "Standing under Article III of the Constitution requires

that an injury be concrete, particularized, and actual or imminent;

fairly traceable to the challenged action; and redressable by a

favorable ruling."   Monsanto Co. v. Geertson Seed Farms, 561 U.S.
139, 149 (2010).   To establish standing for their takings claims,

plaintiffs allege economic injury: they pay higher electricity

bills.   And to establish standing for their due process claims,

they allege that PREPA has afforded them inadequate process, "the

disregard of which could impair a separate concrete interest of

theirs" in paying lower rates.     Lujan v. Defs. of Wildlife, 504
U.S. 555, 572 (1992).    These two harms are fairly traceable to

(and indeed directly caused by) PREPA's allegedly unlawful rates

and procedures, respectively.   And the harms are likely redressable

by an award of money damages.    Therefore, I think that plaintiffs

have standing to bring this action.

                                -10-
            Certainly, the takings and due process clauses both

require a plaintiff to show a protected property interest.                     It

seems to me, however, that requirement goes to the merits of the

claims. See, e.g., Town of Castle Rock v. Gonzales, 545 U.S. 748,

768 (2005); Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ.

Expense Bd., 527 U.S. 666, 672 (1999); Bowen v. Gilliard, 483 U.S.
587, 604-5 (1987); Dames & Moore v. Regan, 453 U.S. 654, 674 n.6

(1981).    But Article III standing "in no way depends on the merits

of   the   claim."      Ariz.     State       Legislature   v.     Ariz.   Indep.

Redistricting Comm'n, 135 S. Ct. 2652, 2663 (2015) (internal

quotation marks omitted).             Nor does Article III independently

require a plaintiff to establish a protected property interest.

See Ass'n of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S.
150, 153 (1970).       For example, a plaintiff may have standing to

vindicate economic harms without showing a protected property

interest at all.      See, e.g., Clinton v. City of New York, 524 U.S.
417, 432-33 (1998); Bennett v. Spear, 520 U.S. 154, 167-68 (1997);

Data Processing, 397 U.S. at 152.               And even where, as here, a

protected property interest is an element of the cause of action,

standing exists so long as "accepting [plaintiff's] version of

[state]    law   as   true,"    the    plaintiff    "has    been    deprived   of

property." Stop the Beach Renourishment, Inc. v. Florida Dep't of

Envtl. Prot., 560 U.S. 702, 729 n.10 (2010).

                                       -11-
          This distinction between standing and merits may appear

to be a quibble in this case, but it is fundamental to Article III

and the judicial role.      Where jurisdiction otherwise exists,

Article III imposes upon a federal court the obligation to exercise

it; thus, a court generally may not resolve a weak merits claim on

jurisdictional grounds.   See Mata v. Lynch, 135 S. Ct. 2150, 2156

(2015).   The risk in treating merits issues as questions of

standing is that this empowers a court to decide the merits first,

resolving them even absent Article III authority to do so, see

Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998),

and to sua sponte raise the issues at any stage of the litigation

since standing cannot be waived, see Bender v. Williamsport Area

Sch. Dist., 475 U.S. 534, 541 (1986).

          It is possible that standing and merits blend together

in the takings and procedural due process contexts, but the First

Circuit cases cited in support of that suggestion don't really say

so.   See supra at 5-6.    Two of the cases decided the property

interest issue on the merits, not on standing grounds.         See

Asociación de Subscripción Conjunta del Seguro de Responsabilidad

Obligatorio v. Flores Galarza, 484 F.3d 1, 27 (1st Cir. 2007);

Aponte v. Calderón, 284 F.3d 184, 191 (1st Cir. 2002).     And the

other case, Bingham v. Massachusetts, 616 F.3d 1 (1st Cir. 2010),

denied standing not for lack of a protected property interest, but

                               -12-
because the plaintiffs lacked a "personal stake" in the alleged

property interest.   Id. at 7.    The question of a personal stake -

- whether a plaintiff is seeking to vindicate her personal rights

as opposed to those of third parties or the public -- is a genuine

standing   issue.    See   Lexmark   Int'l,   Inc.   v.   Static   Control

Components, Inc., 134 S. Ct. 1377, 1387 n.3 (2014).          But that is

not the question here.     In this case, plaintiffs have demonstrated

a personal stake, for they seek to vindicate their own interests

in electricity they paid for and fees they paid, not in anyone

else's electricity or fees.     Rather, the question here is whether

electricity and fees are protected property interests.         These are

merits questions.

                                  II.

           On the merits, I would affirm the judgment for lack of

a protected property interest.       I agree that plaintiffs had no

property interest in their voluntarily paid electricity fees,

which is fatal to their fees-based claims.       In addition, I would

hold plaintiffs to their conceded lack of a property interest in

purchasing electricity at a lower rate; this concession is fatal

to their electricity-based claims.       I also agree, for the reasons

that my colleagues state, that, even assuming that plaintiffs had

a property interest in electricity, PREPA did not take it.

                                  -13-
          Because these holdings suffice to affirm the judgment,

I would not decide whether PREPA's regulations confer a property

interest in electricity upon plaintiffs.         Our decision in Marrero-

García v. Irizarry, 33 F.3d 117 (1st Cir. 1994), said to establish

that the regulations do not confer a property interest, dealt with

different regulatory language.        That case held that a utility

regulation, defining the utility's "users" as persons who enjoy

the utility's services, did not confer a property interest in

continued service.    See id. at 123.      Unlike in Marrero-García, the

regulation   here    does   not   define   who   the   users   of    PREPA's

electricity services are.         Instead it defines electricity as

movable property that can be unlawfully appropriated.               See P.R.

Reg. AEE Reg. 7982; see also 33 L.P.R.A. § 4642(g) (for purposes

of the Penal Code, defining "personal property" as including

"electric power").    This suggests the possibility that plaintiffs

may have a property interest in using their purchased electricity,

against PREPA's allegedly unlawful redirection of that electricity

to other customers.

          Nonetheless, we need not resolve this question because,

as discussed above, we can affirm on other grounds.

                     "Concurring opinion follows"

                                   -14-
          LYNCH, Circuit Judge, (concurring).    All three judges

agree that the plaintiffs have not established a constitutionally

protected property interest, and that we should affirm the district

court's grant of summary judgment.

          All three judges also agree that the question of standing

has both a constitutional Article III component and a prudential

component, and that we may address the two components in any order.

See Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S.
422, 431 (2007).

          My two colleagues have different views as to whether the

plaintiffs' payment of electric bills claimed to be inflated is an

injury sufficient to give them standing.     The parties have not

briefed questions of standing, and the issues are in my view quite

difficult.

          So, for the sake of resolving this case, I join Judge

Torruella's opinion without any intimation that I necessarily

disagree with Judge Howard's analysis.

                               -15-