Santiago-Ramos v. Autoridad De Energía Eléctrica De Puerto Rico

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
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"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.
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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
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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
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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
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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
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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.
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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"
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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.
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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).
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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
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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.
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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"
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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.
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