Garcia-Rubiera v. Fortuno , 727 F.3d 102 ( 2013 )

United States Court of Appeals
For the First Circuit
No. 12-2002
GLADYS GARCÍA-RUBIERA ET AL.,
Plaintiffs, Appellants,
v.
LUIS G. FORTUÑO, Governor of Puerto Rico;
JUAN CARLOS PUIG-MORALES, Treasury Secretary,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gustavo A. Gelpí, U.S. District Judge]
Before
Lynch, Chief Judge,
Torruella and Kayatta, Circuit Judges.
Antonio J. Amadeo-Murga for appellants.
Susana I. Peñagarícano-Brown, Assistant Solicitor
General, Department of Justice, for appellees.
August 16, 2013
KAYATTA, Circuit Judge. As this court has detailed in
prior opinions, Puerto Rico law has operated since 1995 in a manner
that effectively causes hundreds of thousands of motor vehicle
owners to pay twice for liability insurance, once through a
Commonwealth-run plan, and once in the private market. García-
Rubiera v. Calderon ("García-Rubiera I"), 570 F.3d 443 (1st Cir.
2009); García-Rubiera v. Fortuño ("García-Rubiera II"), 665 F.3d
261 (1st Cir. 2011). Under this more-or-less duplicate premium
regime, Commonwealth law declared motor vehicle owners to be
entitled to a refund of the excess premiums paid. P.R. Laws Ann.
tit. 26, §§ 8051, 8055(n). The procedures for seeking such
refunds, however, were complicated, varied, and, most importantly,
bereft of any meaningful notice; so much so as to be, in effect,
hidden. See García-Rubiera II, 665 F.3d at 273 (no notice mailed,
nothing posted online, no posting in any readily available
publication, and no writing subject to easy discovery even by those
who go in person to the pertinent government office). Large
amounts of unclaimed refunds accumulated. Beginning in 2002, every
two years the Commonwealth placed the unclaimed refunds with its
Treasury Secretary to be held "in trust," with the proviso that, if
not claimed within five years, the funds escheated to the
Commonwealth without notice to the owners of the funds.
In García-Rubiera I, this court held that vehicle owners
who paid twice for private and Commonwealth-issued insurance
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possess a constitutionally protected property interest in those
duplicate premiums. 570 F.3d at 452, 257. In García-Rubiera II,
we concluded that the Commonwealth's failure to notify affected
vehicle owners of their reimbursement rights amounted to a
violation of the procedural due process guarantees of the Fifth and
Fourteenth Amendments. 665 F.3d at 274-76. We held that "under
these conditions the Commonwealth is required to give individual
notice to insureds owed reimbursement to the maximum extent
feasible," and we instructed the district court to resolve factual
issues as to "feasibility" on remand. Id. at 276. We also held
that "the Commonwealth must publish Procedure 96, in full, online
and in other places readily accessible by the public." Id. at 277.
On remand, the district court ordered the Commonwealth to
notify individual vehicle owners of their reimbursement rights, to
publish information regarding the reimbursement procedure in two
newspapers, and to allow at least 120 days for vehicle owners to
claim the reimbursements to which they are entitled. The district
court's order represents a marked improvement of the status quo.
Even so, the relief ordered by the district court fails to satisfy
the minimum requirements of procedural due process under the Fifth
and Fourteenth Amendments. The Commonwealth has in its possession
vehicle-specific information without which many insured owners will
not be able to obtain the reimbursements to which they are
entitled, yet the district court's order does not require the
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Commonwealth to release this information to vehicle owners.
Moreover, although the district court's order only provides for a
120-day grace period in which vehicle owners can claim
reimbursement before their premium payments escheat to the
Commonwealth, the Commonwealth's counsel conceded at oral argument
that a one-year grace period would be more appropriate in this
context. And while the district court ordered the Commonwealth to
publish two notices--one in an English-language newspaper and one
in a Spanish-language newspaper--alerting vehicle owners of their
reimbursement rights, the district court did not engage in the
required balancing analysis to determine whether one-time notice in
two newspapers is sufficient to satisfy the Commonwealth's
constitutional obligations.
Accordingly, we will remand this case to the district
court once again, this time to allow it to craft with the benefit
of further guidance an injunction that more fittingly remedies the
Commonwealth's constitutional violations. In the meantime, we
order that no duplicate premiums shall escheat to the Commonwealth
until it has established and complied with a reimbursement
procedure which meets the basic requirements of constitutional due
process.
Finally, we reverse the district court's denial of
plaintiffs' request for an award of interim attorneys' fees. This
lawsuit is now entering its twelfth year. Our decision today means
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that many more months may elapse before a judgment is final.
Throughout this extended period, plaintiffs' attorney has sought to
vindicate the constitutional rights of hundreds of thousands of
vehicle owners across Puerto Rico. Plaintiffs have already
prevailed in this court on the merits of their procedural due
process claims. Accordingly, as prevailing parties in a civil
rights action, plaintiffs are statutorily entitled to an award of
attorney's fees from the Commonwealth. On remand, the district
court should make such an award in an amount determined by the
court to be sufficient to cover the compensable work performed from
the beginning of this action through the date of this opinion.
I. Background
For a detailed description of the background of this case
prior to 2012, we refer the reader to our opinions in García-
Rubiera I and II. We note here only that the rulings in those
opinions are not subject to reconsideration on this third appeal.
United States v. Matthews, 643 F.3d 9, 13 (1st Cir. 2011)("[A]
legal decision made at one stage of a criminal or civil proceeding
should remain the law of that case throughout the litigation,
unless and until the decision is modified or overruled by a higher
court" (quoting United States v. Moran, 393 F.3d 1, 7 (1st Cir.
2004))).
On remand following our decision in García-Rubiera II,
plaintiffs sought a permanent injunction requiring the
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Commonwealth1 to send individualized notices to all vehicle owners
who are entitled to reimbursements. Plaintiffs requested that the
notices be sent by certified mail and that each notice state the
amount of the refund (including interest) to which the owner is
entitled, the license plate and vehicle identification number
("VIN") associated with each vehicle for which a duplicate premium
was paid, and basic information regarding the corresponding
insurance policy.2 Plaintiffs also sought to require the
Commonwealth to publish a list of the vehicle owners entitled to
reimbursement in two daily newspapers of general circulation once
a week for two consecutive weeks.
For vehicle owners whose premiums had not yet been
transferred from the Asociación Conjunta del Seguro de
Responsabilidad Obligatorio ("JUA") to the Treasury Department,
plaintiffs' proposed injunction would allow the owners at least 120
days in which to seek reimbursement from the JUA. After the
transfer of funds from the JUA to the Treasury Department (and for
vehicle owners whose premiums have previously been transferred to
1
Named Defendant Luis G. Fortuño is the former governor of
Puerto Rico. Named Defendant Carlos Puig-Morales is the former
treasury secretary.
2
The text of the plaintiffs' proposed injunction refers to
"the insurance policy description," without clarifying what
specific details should be included in this description. It
appears from Plaintiffs' other filings, however, that that they
are seeking the name of the insurance company, the policy number,
the policy commencement date, and the policy expiration date.
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the Treasury), plaintiffs' proposed injunction would allow an
additional five-year grace period during which the vehicle owners
could file for reimbursement. Plaintiffs sought the appointment of
an independent monitor to ensure compliance with the injunction.
Plaintiffs also filed a motion in district court for an
award of attorney's fees. The motion sought an interim fee award
of $1.5 million and a final award equal to 25 percent of "the
common fund and interest created by [plaintiffs' attorney's]
efforts." Plaintiffs suggested that the "common fund" should
include not only the premium payments that are ultimately
reimbursed, but all duplicate premium payments held by the JUA or
transferred to the Treasury (apparently without regard to whether
these monies are ever claimed by the vehicle owners). Plaintiffs
estimated that this fund amounted to more than $180 million before
interest--in which case plaintiffs' percentage-of-funds proposal
would allow their attorney to recover an award of at least $45
million.
The district court referred the matter of injunctive
relief to a magistrate judge, whose report and recommendation the
court ultimately adopted with only minor modifications. See
García-Rubiera v. Fortuño, 873 F. Supp. 2d 421 (D.P.R. 2012). The
district court's permanent injunction required the Commonwealth to
compile the names and addresses of all motor vehicle owners who
paid a duplicate premium that has not been refunded, and to send
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individual notices by mail3 to all such persons. Id. at 426. The
district court further ordered that each notice include (1) the
fact that the vehicle owner is entitled to a refund; (2) the date
that the vehicle owner's premium was or will be transferred to the
Treasury; (3) the text of Procedure 96; and (4) the relevant
portions of Law 230.4 Id. However, the district court did not
require the notices to include the amounts of the refunds, the
license plate numbers and VINs associated with each refund, or any
information regarding the insurance policies corresponding to each
refund. Id.The district court also ordered the JUA to publish notice
once in an English-language newspaper of general circulation and
once in an Spanish-language newspaper of general circulation, and
to make the text of Procedure 96 freely available online and at the
government offices that collect JUA premiums. Id. According to
the permanent injunction, the Commonwealth must allow at least 120
days from the time of notice before any additional premiums are
3
The magistrate judge's report and recommendation left to the
Commonwealth the decision of whether to mail notice by certified or
regular mail. García-Rubiera, 873 F. Supp. 2d at 427-28. The
district court's injunction simply referred to "mail" and "mailing"
and therefore also implicitly left the decision to the
Commonwealth. Plaintiffs have not appealed this portion of the
ruling so we do not review it.
4
As our previous opinions explain in greater detail, Law 230
is the name of the statute enacted on September 11, 2002 and
codified at P.R. Laws Ann. tit. 26, § 8055(l) that established the
system of transferring unclaimed duplicate premiums to the
commonwealth. García-Rubiera II, 570 F.3d at 449.
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transferred from the JUA to the Treasury. Id. For premiums that
have already been transferred to the Treasury (including those that
have already escheated to the Commonwealth), the permanent
injunction provided a 120-day grace period during which vehicle
owners can file their reimbursement claims.5 Id. at 426. The
district court retained jurisdiction over the matter itself but
denied plaintiffs' request for an independent monitor. Id. at 423,
428-29.
With regard to attorney's fees, the district court issued
a one-sentence order on July 9, 2012, denying plaintiffs' request
that the fee award be calculated on a percentage-of-funds basis.
The July 9 order stated that the court would calculate attorney's
fees according to the lodestar method, which is based on the number
of hours that plaintiff's attorney has devoted to the case and the
attorney's hourly rate. The court entered another one-sentence
order on September 19, 2012 denying plaintiffs' motion for interim
fees.
Plaintiffs have filed timely appeals from the district
court's permanent injunction order and from the court's order
regarding interim attorney's fees. We have jurisdiction under 28
5
Law 230 already provides for a five-year waiting period
between the time that premiums are transferred from the JUA to the
Treasury and the time that those funds escheat to the Commonwealth.
P.R. Laws tit. 26 § 8055(l). The permanent injunction would not
narrow that five-year window; the 120-day grace period would only
apply to funds that have already escheated to the Commonwealth or
that are scheduled to escheat within four months of the order.
-9-
U.S.C. § 1292(a)(1). See, e.g., United States v. Mass. Mar. Acad.,
762 F.2d 142, 147 (1st Cir. 1985); see also Marathon Oil Co. v.
United States, 807 F.2d 759, 763-764 (9th Cir. 1986).
II. Analysis
On appeal, plaintiffs argue that the injunctive relief
ordered by the district court is not sufficient to remedy the
Commonwealth's constitutional violations. Plaintiffs also argue
that the district court abused its discretion by denying their
motion for interim attorney's fees and by refusing to announce that
it would follow the percentage-of-funds approach in calculating the
ultimate fee award. After setting out the common standard of
review that governs both the injunctive-relief and attorney's-fee
elements of the appeal, we consider these arguments in turn.
A. Standard of review
Our cases recognize that a district court is "in the best
position to tailor the scope of injunctive relief to the its
factual findings"; accordingly, our review of the terms of an
injunction is for abuse of discretion only. Vaqueria Tres
Monjitas, Inc. v. Irizarry, 587 F.3d 464, 487 (1st Cir. 2009); see
also Hiller Cranberry Prods., Inc. v. Koplovsky, 165 F.3d 1, 4 (1st
Cir. 1999). We apply the same abuse-of-discretion standard when
reviewing a district court's calculation of attorney's fees.
Pearson v. Fair, 980 F.2d 37, 44 (1st Cir. 1992). When applying
the abuse-of-discretion standard, we review the district court's
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underlying factual findings for clear error and its legal
conclusions de novo. Global NAPS, Inc. v. Verizon New Eng., Inc.,
706 F.3d 8, 12 (1st Cir. 2013). A mistake of law embedded in an
injunction or a fee award always constitutes an abuse of
discretion. In re Volkswagen & Audi Warranty Extension Litig., 692
F.3d 4, 13 (1st Cir. 2012).
B. Challenges to the scope and substance of the injunctive remedy
Plaintiffs raise five distinct objections to the district
court's permanent injunction order. First, they argue that the
class should have been expanded to encompass vehicle owners who
double-paid for insurance in the years 2008 to 2012. Second, they
argue that vehicle owners whose premiums have already been
transferred from the JUA to the Treasury should have five years
within which to file for reimbursement, rather than the greater of
120 days or five years minus the amount of time that has run from
the transfer, as provided by the district court's order. Third,
plaintiffs argue that the individual notices mailed to vehicle
owners should include the license plate numbers, VINs, and
insurance policy numbers corresponding to the class members'
duplicate premium payments. Fourth, plaintiffs argue that the
permanent injunction's provisions regarding newspaper notice are
insufficient to apprise vehicle owners of their reimbursement
rights. Fifth, and finally, plaintiffs argue that the district
court ought to have appointed an independent monitor to ensure the
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Commonwealth's compliance with the permanent injunction. We
consider each of these arguments in turn.
1. The class definition
Plaintiffs argue that "in the interest of judicial
economy," the certified class of unreimbursed vehicle owners who
made duplicate premium payments in the 1997-2007 period should be
extended to include vehicle owners who are entitled to
reimbursement for duplicate premiums paid in the years 2008 to
2012. The parties do not claim that the Commonwealth's conduct
changed in any material way during the 2008-2012 period: vehicle
owners who acquired or renewed their registrations during the
latter timeframe were automatically charged for coverage under the
Commonwealth's insurance plan unless they produced proper proof of
private insurance, and the Commonwealth failed to post Procedure 96
online or to make it available at the offices where JUA premiums
are collected until early 2013. Moreover, the Commonwealth made no
apparent effort to inform vehicle owners of their right to
reimbursement during the 2008-2012 period.
The Commonwealth asserts that plaintiffs never moved in
the district court to expand the class definition (as provided for
by Fed. R. Civ. P. 23(c)(1)(C)). To this argument, plaintiffs
offer no response. Since we are remanding the case for further
consideration anyhow, we therefore leave the question of whether
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and how to expand the class definition to the district court on
remand.6
2. The time period within which class members may seek
reimbursement
In his report and recommendation to the district court,
the magistrate judge emphasized that "the Commonwealth has a valid
interest in making a final disposition of the[] funds" that, under
Puerto Rico's Law 230, have already escheated to the Commonwealth.
García-Rubiera, 873 F. Supp. at 426. Accordingly, the magistrate
judge advised that the district court set a 120-day grace period
during which vehicle owners whose duplicate premium payments have
already escheated to the Commonwealth can submit their
reimbursement claims. The magistrate judge explained that "[t]he
120-day period is the same length of time plaintiffs suggest for
giving notice of a premium transfer from the JUA to the
Commonwealth, and should therefore be a reasonable amount of time
for insureds to prepare and submit requests for reimbursement."
Id. The district court followed this recommendation without adding
any reasons of its own for the 120-day deadline. Id. at 421-22.
6
The Commonwealth suggests that we preemptively dispose of
this issue on the grounds that an expansion of the class would
entail further class notice. This is not so, as the class here is
a Rule 23(b)(2) class. See Fed. R. Civ. P. 23(c)(2) ("For any
class certified under Rule 23(b)(1) or (b)(2), the court may direct
appropriate notice to the class." (emphasis added)); Wal-Mart
Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2558 (2011) (notice not
mandatory for Rule 23(b)(2) class).
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Plaintiffs argue that the clock should be reset so that
class members have the full five-year grace period they would have
enjoyed had notice been given as it should have been given.
Although the plaintiffs' argument has a certain logic to it, we are
not persuaded that a five-year grace period is required as part of
the remedy for the constitutional violation. While Puerto Rico's
Law 230 provides for a five-year period, "a failure to implement
state law . . . in itself does not violate the Due Process Clause."
Hoffman v. City of Warwick, 909 F.2d 608, 621 (1st Cir. 1990).
The aim here is not to restart a statutory grace period
that was part of a flawed scheme in which no meaningful notice was
given. The aim, rather, is to provide notice and a reasonable
opportunity to act on that notice. See United States v. Locke, 471
U.S. 84, 108 (1985) (constitutionally adequate process where
legislature "afford[s] those within the statute's reach a
reasonable opportunity both to familiarize themselves with the
general requirements imposed and to comply with those
requirements"); see also Hodel v. Irving, 481 U.S. 704, 729 (1987)
(Stevens, J., concurring in the judgment). While five years is
certainly far more than is necessary, the Commonwealth has not
shown that a 120-day grace period would give vehicle owners whose
premiums have been transferred to the Treasury a "reasonable
opportunity" to avoid the escheat of those funds. As noted above,
a vehicle owner submitting a reimbursement claim under Procedure 96
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must, inter alia, obtain a certification from her private insurance
company that payment was received and that neither the company nor
the consumer has been reimbursed to date. In some cases, the
insurance companies will be asked to certify that payments were
received more than one-and-a-half decades ago.
In sum, while we cannot say that due process demands a
five year grace period, we cannot find any basis in the record for
a finding that a 120-day grace period provides a "reasonable
opportunity" for vehicle owners to avoid escheat. At oral
argument, the Commonwealth's counsel said that it was willing to
allow all vehicle owners at least one year in which to file for
reimbursement. On remand, the district court should determine
whether a grace period of not less than one year from the mailing
and publication of notice as proposed by the Commonwealth suffices
for due process purposes. If the district court is persuaded that
private insurance companies will be able to respond to
certification requests well within that window, then a grace period
of no less than one year should be sufficient to give vehicle
owners a reasonable opportunity to protect their property interest
in unreimbursed funds. If a one-year grace period does not allow
enough time for private insurance companies to process the
anticipated certification requests, then the district court in its
discretion should fashion an alternative approach that will
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reasonably ensure a reasonable opportunity to avoid loss of the
funds.
3. The inclusion of information that will put the recipients
in a position to seek reimbursement
While the district court ordered the Commonwealth to mail
individual notices to vehicle owners who are entitled to
reimbursement, notice required by the court only includes: (1) a
statement that the owner is entitled to a refund; (2) the date of
the transfer of the premium from the JUA to the Treasury; (3) the
text of Procedure 96; and (4) the provisions of Law 230 regarding
escheat. 873 F. Supp. 2d at 422. In this respect, the district
court adopted the Commonwealth's proposal. The magistrate judge's
report explained that the Commonwealth's proposal "tracks" the
notice described in García-Rubiera II and that the plaintiffs have
not demonstrated that the Commonwealth can "readily correlate"
additional information--such as the license plate numbers, VINs,
and insurance policy numbers corresponding to the duplicate premium
payments--so that those details can be included in the individual
mailings. Id. at 427. According to the magistrate judge's report,
"[w]hile defendants could show good faith by collecting and sending
this additional information, due process does not require it." Id.
The requirements of due process are not satisfied,
however, "if the notifying party knew or had reason to know that
notice would be ineffective." Gates v. City of Chi., 623 F.3d 389,
403 (7th Cir. 2010). As the Supreme Court stated in Locke, the
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Constitution requires not just notice of the requirements to be
followed to protect one's property, but "a reasonable opportunity
. . . to comply with those requirements." 471 U.S. at 108; see
also Greene v. Lindsey, 456 U.S. 444, 451 (1982) ("In determining
the constitutionality of a procedure established by the State to
provide notice in a particular class of cases, its effect must be
judged in the light of its practical application to the affairs of
men as they are ordinarily conducted." (internal quotation marks
omitted)).
Here, the required notice is in many cases being sent
years too late, long after many vehicle owners will have since
stopped retaining records or even their vehicles themselves. The
notice would only apprise recipients that, at some time between
1997 and 2007, they double-paid for automobile liability insurance.
It would not tell the recipients when they double-paid, for which
vehicle, or on which insurance policy they double-paid--all
information that they will need in order to file for reimbursement.
Even vehicle owners who have kept meticulous records of their
personal finances for the last one-and-a-half decades would have
difficulty determining how exactly they might go about recouping
their money.
García-Rubiera II said that notice to vehicle owners
"must include notice of the transfer of funds from JUA to the
Commonwealth, of Procedure 96, and of Law 230's escheat
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provisions." 665 F.3d at 277. That statement of what the notices
certainly need include did not preclude Plaintiffs from
establishing that other information was also necessary in order to
render the notices effective in providing a meaningful opportunity
to comply with the reimbursement requirements. The record makes
clear that additional information may in many instances be
essential in order to provide recipients with a reasonable
opportunity to comply with the refund requirements. In turn,
Counsel for the Commonwealth conceded at oral argument that it
would be "feasible" to include license plate numbers and VINs in
the individual notices to vehicle owners. On remand, the district
court should hold the Commonwealth to that concession absent
convincing proof that supplying such information, while feasible,
would create a burden disproportionate to the benefit created.
As for the plaintiffs' specific argument that the
individual notices should include insurance policy numbers as well
as license plate numbers and VINs, the Commonwealth continues to
assert that this information is not available. Yet in their
submissions to the district court and their appendix on appeal, the
plaintiffs have included a CD that, they say, contains the names,
addresses, VINs, license plate numbers, and insurance policy
numbers of the vehicle owners who are entitled to reimbursement.
On remand, the district court should determine, first, whether the
information is or is not available. To the extent that it is
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available, the district court should weigh the benefit to vehicle
owners of receiving the information in their notices against
whatever burden the Commonwealth might incur in gathering,
organizing, and supplying the information. Cf. Greene, 406 U.S. at
451. On the one hand, it is difficult to see why information that
already exists in useable databases matched to owner names should
not be provided. On the other hand, providing remedial notice
should not be so costly as to impose too great a burden in light of
the benefit conveyed.
4. Additional publication notice
On remand from García-Rubiera II, plaintiffs proposed
that the Commonwealth be required to publish a list of vehicle
owners entitled to reimbursement, along with the text of Procedure
96, in two daily newspapers once a week for two consecutive weeks.7
Given that sixteen years have passed since the first of the
duplicate premium payments, many of the addresses on record with
the JUA and the Treasury Department may no longer be accurate, and
the publication of newspaper notice in this case is therefore
particularly important. In its counterproposal, the Commonwealth
sought an order requiring publication in two newspapers of general
circulation--one English-language newspaper and one Spanish-
7
Plaintiffs also proposed that the newspaper notices include
the amount of the refund to which each vehicle owner is entitled,
the license plate number associated with each refund, and the name
of the company that issued the corresponding insurance policy.
Plaintiffs do not press these arguments on appeal.
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language newspaper8--but the Commonwealth proposed that publication
occur only once in each newspaper (rather than once a week over the
course of consecutive weeks). The magistrate judge recommended
that the district court follow the Commonwealth's counterproposal,
and the court adopted the magistrate judge's report. 873 F. Supp.
2d at 422-23, 428.
The question on appeal is whether the Commonwealth's
counterproposal for one-time publication in two newspapers--one
English, one Spanish--is consistent with the approach that "one
desirous of actually informing the [vehicle owners] might
reasonably adopt." Mullane v. Cent. Hannover Bank & Trust Co.,
339 U.S. 306, 315 (1950). We note "the impossibility of setting up
a rigid formula as to the kind of notice that must be given; notice
required will vary with circumstances and conditions." Walker v.
City of Hous., 352 U.S. 112, 115 (1956); accord Jones v. Flowers,
547 U.S. 220, 226 (2006)(quoting Walker). The number of newspapers
8
The Commonwealth's counsel stated at oral argument that
plaintiffs are "not interested" in English-language publication
notice. While portions of plaintiffs' brief on appeal might be
interpreted this way, we understand plaintiffs to be arguing that
the district court ought to have expanded the publication notice
requirement to include a second Spanish-language newspaper--not
that the district court should drop the English-language
publication notice. While the vast majority of Puerto Ricans are
Spanish-speakers, approximately 5 percent of the population speaks
only English at home. See U.S. Census Bureau, Detailed Languages
Spoken at Home and Ability To Speak English for the Population 5
Years and Over for the United States: 2006-2008 tbl. 41 (Apr.
2010), available at http://www.census.gov/hhes/socdemo/language.
Publication notice in an English-language newspaper is a reasonable
step in reaching this portion of the population.
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and the frequency of publication are not necessarily determinative.
Ultimately, "assessing the adequacy of a particular form of notice
requires balancing the 'interest of the State' against 'the
individual interest sought to be protected by the [Due Process
Clauses].'" Jones, 547 U.S. at 229 (quoting Mullane, 339 U.S. at
314).
As a general rule, an appellate court will "leave the
question of what constitutes sufficient notice primarily to the
district court's discretion and apply a deferential standard of
review." People of State of Ill. ex rel. Hartigan v. Peters, 871
F.2d 1336, 1340 (7th Cir. 1989). Here, however, we have difficulty
discerning the basis for the district court's decision to adopt the
Commonwealth's counterproposal rather than the plaintiffs'
suggestion. The only explanation offered for ordering one-time
notice--rather than notice over the course of consecutive
weeks--was that the Supplemental Rules for Admiralty or Maritime
Claims and Asset Forfeiture Actions allow a judgment of forfeiture
to be entered after one-time publication of newspaper notice if
accompanied by posting on a government website. 873 F. Supp. 2d at
428 (citing Supplemental R. G(4)(a)(iii)). But a judgment of
forfeiture is generally entered with respect to personal property
under the Supplemental Rules only after an arrest warrant is issued
and executed, see Supplemental R. G(3)(b)-(c), and only after
notice is sent "to any person who reasonably appears to be a
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potential claimant," id. R. G(4)(b)(I). Thus, the supplemental
rule allowing for one-time publication of newspaper notice is
typically invoked after the federal government has made
significantly greater (and generally more timely) efforts to
contact potential claimants than the Commonwealth has made so far.
Two other points counsel against the approach taken by
the district court. First, the notice to be provided here is
notice aimed at achieving a remedy for a long ago defalcation
where, due to the passage of time, publication is likely more
necessary than in other situations. Second, the value of the
property interests at stake here--perhaps more than $150 million--
makes the costs of repeat publication relatively minor. Rather
than relying on the Supplemental Rules, which address a very
different set of circumstances, the district court should on remand
engage in the balancing exercise that case law requires. See
Jones, 547 U.S. at 229; Dusenbery v. United States, 534 U.S. 161,
167-68 (2002); Mullane, 339 U.S. at 314. The district court must
weigh the vehicle owners' collective interest in adequate notice of
their reimbursement rights against the cost to the Commonwealth of
publishing notice in an additional newspaper and repeating the
notices over a second consecutive week. When asked how her client
would be burdened by the plaintiffs' proposal, Commonwealth's
counsel cited only "costs," and, while the record does not indicate
that the costs of publishing notices in three newspapers over the
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course of consecutive weeks would be substantial in comparison to
the amount of unclaimed funds at stake, the Commonwealth will have
another opportunity to supplement the record on remand.
Meanwhile, the plaintiffs point out that two
newspapers--El Nuevo Día and Primera Hora--dominate the Puerto
Rican market. One recent poll suggests that 48 percent of Puerto
Ricans read a printed newspaper each day, with 24 percent reading
El Nuevo Día and 21 percent reading Primera Hora. Ryan, About Half
of Puerto Ricans Read Newspapers Daily, Carribean Bus., Oct. 21,
2010, available at http://cbonlinepr.com/prnt_ed/news02.php?nw_id
=4184. If this is more or less correct, it appears that by
publishing notice in two Spanish-language newspapers--as well as
one English-language newspaper--the Commonwealth can increase the
likelihood that information regarding the reimbursement process
will reach a broad swath of the Puerto Rican population. On
remand, the district court should determine whether the "costs"
cited by the Commonwealth are sufficiently burdensome as to
outweigh the benefits from a broader reach.
The plaintiffs also argue that the newspaper notices
ought to include the text of Treasury Procedure 96. However, it
appears to us that the district court's order already accomplishes
what the plaintiffs have requested: the order clearly requires
that "[i]n publishing . . . notice, defendants shall state . . .
the text of Procedure 96." 873 F. Supp. 2d at 422. If any
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ambiguity lingers, the district court will have the opportunity on
remand to clarify that the newspaper notices must include the text
of Procedure 96 in full (or some meaningful summary of the key
points in the text that recipients will need to know).9
5. Plaintiffs' request for appointment of an independent
monitor
Plaintiffs' fifth and final objection to the scope of the
permanent injunction is that the district court's order does not
provide for an independent monitor to oversee the Commonwealth's
compliance with the injunction's terms. We take plaintiffs to be
arguing that the district court should have exercised its
discretion under Rule 53 of the Federal Rules of Civil Procedure to
appoint a "special master" to oversee implementation of the
injunction (although plaintiffs do not cite Rule 53 or any other
provision in support of their argument). Rule 53 of the Federal
Rules of Civil Procedure allows for the appointment of a master
only where a statute provides for it, "some exceptional condition"
is present, the master is needed "to perform an accounting or
resolve a difficult computation of damages," or the district court
9
The procedure is twelve short paragraphs in length, and it
includes important information such as the address to which
reimbursement claims should be sent, the documents that vehicle
owners must attach to their claims, and the length of time that
vehicle owners can expect to wait between submission of their
reimbursement claims and receipt of payment from the Commonwealth.
While the Commonwealth submitted an unsworn declaration after oral
argument averring that this information is now available online,
the district court has not found that all or almost all class
members are internet users.
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cannot "effectively and timely" address pretrial or post-trial
matters. Fed. R. Civ. P. 53(a)(1). Yet, plaintiffs do not cite
any statute that provides for the appointment of a master here;
they do not explain why this case is "exceptional"; the only forms
of relief requested at this stage of the litigation are declaratory
and injunctive; and the district court is capable of proceeding
forward in a timely and effective manner. Even assuming arguendo
that Rule 53 would have nevertheless permitted the appointment of
a special master here, the district court certainly did not abuse
its discretion in deciding not to do so.
C. Award and calculation of interim attorneys' fees
Apart from their challenge to the scope of the permanent
injunction, plaintiffs also argue that the district court erred by
(1) denying plaintiffs' request for an interim fee award and
(2) refusing to apply the percentage-of-funds method in calculating
attorney's fees. We agree that an interim award is required here,
but we see no error in refusing to employ a percentage-of-funds
approach in setting the amount of fees.
1. The award of interim fees
Plaintiffs asked the district court for an interim award
of attorney's fees. In a single-sentence order, the court
explained that it was denying plaintiffs' motion "without prejudice
given the pending appeal." This cursory explanation does not
satisfy our requirement that district courts adequately explain
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their fee decisions. See T-Peg, Inc. v. Vt. Timber Works, Inc.,
669 F.3d 59, 63 (1st Cir. 2012); Janney Montgomery Scott LLC v.
Tobin, 571 F.3d 162, 166 (1st Cir. 2009).
It is black-letter law that the pendency of an appeal
does not operate as an absolute barrier to an interim fee award
under § 1988 when a party "has established his entitlement to some
relief on the merits of his claims." Hanrahan v. Hampton, 446 U.S.
754, 757 (1980); see also Hutchinson ex rel. Julien v. Patrick, 636
F.3d 1, 12 (1st Cir. 2011); Coal. for Basic Human Needs v. King,
691 F.2d 597, 602 (1st Cir. 1982). The present case is precisely
the sort of litigation in which an award of interim fees is called
for. The plaintiffs "prevailed on an important matter," Hannarah,
446 U.S. at 757, when--in García-Rubiera II--we ruled that the
Commonwealth had violated the procedural due process rights of
hundreds of thousands of vehicle owners across Puerto Rico. That
ruling is no longer subject to revision by the district court (or
by this panel, for that matter). Plaintiffs' "substantial right,"
Hannarah, 446 U.S. at 757, to adequate notice has been
recognized--although their relief has yet to arrive.
The Commonwealth argues against an award of interim
attorney's fees on the ground that plaintiffs are somehow at fault
for the delay in arriving at a final judgment: "If not for the
appeal filed by Plaintiffs challenging the limited injunctive
relief," the Commonwealth contends, there is "no reason why" the
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case could not have come to an end by now. This argument actually
underscores the importance of allowing interim fee awards in cases
like this: counsel entitled to a fee for success already finally
achieved should not be told that payment will be delayed unless
they forgo additional vindication of their client's rights on
appeal (as here).
The Ninth Circuit confronted a similar situation in
Taylor v. Westly ("Taylor III") and it reached a similar result.
525 F.3d 1288 (9th Cir. 2008). There, shareholders whose stock had
escheated to the State of California sued to get their property
back; on a second appeal to the Ninth Circuit, an appellate panel
unanimously found that the state had failed to provide the
shareholders with constitutionally adequate notice of their rights.
See Taylor v. Westly ("Taylor I"), 402 F.3d 924, 925-29 (9th Cir.
2005) (factual background); Taylor v. Westly ("Taylor II"), 488
F.3d 1197, 1201 (9th Cir. 2007) (per curiam) (analysis of
constitutional claims). After Taylor II, the Taylor plaintiffs
sought an interim award of attorney's fees from the state; the
district court denied the request; and the Ninth Circuit reversed.
Taylor III, 525 F.3d at 1290. While noting that "interim
attorney's fees are the exception rather than the rule," the Taylor
III court ruled that such fees should be awarded where plaintiffs
have prevailed in a "discrete stage" of the case and "the disparity
in litigation resources between parties" means that "failure to
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award interim fees would create a considerable risk of starving out
plaintiffs with what we have already determined to be good claims."
Id.The Taylor III court's analysis applies with full force
here. The district court abused its discretion when it denied
plaintiffs' motion for interim attorney's fees due only to the
pendency of an appeal, overlooking the fact that plaintiffs had
already prevailed on the merits of their procedural due process
claims and despite the disparity in litigation resources between
the parties. On remand, the district court should make an award of
attorney's fees to plaintiffs in an amount determined by the court
to be sufficient to cover the compensable work performed from the
beginning of this action through the date of this opinion.
2. The calculation of fees
Plaintiffs also argue that the district court was wrong
to deny their motion that the final fee award be calculated using
the percentage-of-funds approach instead of the lodestar method.
It is unclear, however, if the district court's order is
sufficiently final to give us jurisdiction to address the issue.
28 U.S.C. § 1291. The district court indicated in a one-sentence
order that it would eventually use the lodestar method to calculate
the total amount of attorneys' fees, but did not attempt to
actually determine the amount of fees which should be awarded. In
some circumstances, awards of attorneys' fees may be reviewed
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before a case has been definitively resolved on the merits. In re
Nineteen Appeals Arising Out of San Juan Dupont Plaza Hotel Fire
Litig., 982 F.2d 603, 610 (1st Cir. 1992). But such review is only
permissible where the award "definitively resolves claims for
attorneys' fees." Id.A ruling on attorneys' fees is definitive "where a
dollar-specific order for attorneys' fees has been entered and
further action on the main case will not require revisiting that
order." Id. at 609 n.10. The only exception that we are aware of
to this general rule is the "peculiar circumstance" where a final
amount of attorneys' fees has not been determined but there is "a
final judgment on the only issue in which [the appealing party]
still had an interest." Boeing Co. v. Van Gemert, 444 U.S. 472,
482 n.7 (1980). Here, in contrast, there remain issues regarding
attorneys' fees in which plaintiffs' have an interest and which
have not been resolved by the District Court. For example, we have
remanded for further consideration of the class definition. The
district court's determination of this issue may affect the total
amount of fees awarded. Even if we determined definitively that we
had jurisdiction to review the district court's order on the choice
of fee-award mechanism, we would decline to exercise it in order to
give the district court an opportunity to explain its reasoning
more fully after resolving the other issues before it on remand.
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Our order that the district court make an interim award
of attorneys' fees, however, itself raises the question of how to
calculate the amount of such a fee award. That question, in turn,
may require the court to anticipate how it would calculate a final
award so as to ensure that interim and final awards can be
reconciled. We therefore offer the following guidance for remand.
A district court can hardly go wrong in selecting the so-
called lodestar method when called upon to determine how much of an
attorneys' fee a losing defendant need pay a prevailing plaintiff.
Perdue v. Kenny A. ex rel. Winn, 130 S.Ct. 1662, 1673 (2010);
Coutin v. Young & Rubicam P.R. Inc., 124 F.3d 331, 337 (1st Cir.
1997). Plaintiffs nevertheless argue that the district court in
this case can and should base either the interim or final fee award
on a percentage-of-funds approach. This approach "appl[ies] only
where attorneys seek compensation from a discernable pot of money
won by the plaintiffs." In re Volkswagen & Audi Warranty Extension
Litig., 692 F.3d 4, 16 (1st Cir. 2012). Where this approach is
applicable, a court may compensate Plaintiffs' counsel by awarding
them a percentage of the pot of money recovered for the plaintiffs.
Id. Plaintiffs suggest they should receive a percentage of the
total funds that escheated to the Commonwealth. Amounts not
refunded to class members following due notice, however, will
belong to the Commonwealth, providing neither a direct nor indirect
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benefit to class members. Therefore, they will not be part of any
common fund of which Plaintiffs' counsel might claim a percentage.10
A percentage-of-funds approach based on the amount of
funds refunded, while better justified in theory, is unworkable in
this case. The district court cannot know the approximate amount
of refunds made until after the refunds have been paid out over a
period of years. Hence, it is not possible to know what percentage
award would generate what total amount. If few refunds are
claimed, a 30 percent award could be too little. Yet if most
refunds are claimed, 10 percent could be too much. And once one
knows after the fact how much has been paid out, there will remain
no pot of money not due the Commonwealth out of which counsel might
receive a percentage. In such a situation we know of no precedent
requiring the use of any method other than the lodestar method.
III. CONCLUSION
In conclusion, the district court's permanent injunction
is vacated; and the court's order denying plaintiffs' motion for an
interim award of attorney's fees is reversed. We order that no
duplicate premiums shall escheat to the Commonwealth until it has
established and complied with a reimbursement procedure which meets
10
Boeing is not to the contrary. The final judgment in Boeing
was for a sum certain, with pro rata shares to be claimed by class
members merely upon request and proof of identity. 444 U.S. at
479. Here, the judgment is in the form of injunctive and
declarative relief, making clear that the Commonwealth will have to
pay only what is properly claimed. See id. at 479 n.5.
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the basic requirements of constitutional due process. Costs are
awarded to the Plaintiffs. We remand to the district court for
further proceedings consistent with this opinion.
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