United States Court of Appeals
For the First Circuit
No. 05-2607
COUNCIL OF INSURANCE AGENTS & BROKERS,
Plaintiff, Appellee,
v.
DORELISSE JUARBE-JIMÉNEZ, in her official capacity
as the Puerto Rico Commissioner of Insurance,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. José Antonio Fusté, U.S. District Judge]
Before
Selya, Circuit Judge,
Hansen,* Senior Circuit Judge,
and Lynch, Circuit Judge
Rosa Elena Pérez-Agosto, Assistant Solicitor General, Office
of the Solicitor General, Department of Justice, Commonwealth of
Puerto Rico, with whom Salvador Antonetti-Stutts, Solicitor
General, and Mariana D. Negrón-Vargas, Deputy Solicitor General,
were on brief, for appellant.
Scott A. Sinder, with whom Alysa N. Zeltzer, Daniel S. Blynn,
Collier Shannon Scott, PLLC, and Guillermo Ramos Luiña were on
brief, for appellee.
March 30, 2006
*
Of the Eighth Circuit, sitting by designation.
LYNCH, Circuit Judge. This appeal arises from the entry
of an injunction based on a finding of facial unconstitutionality
of provisions of the Puerto Rico Insurance Code which impose
restrictions on the ability of nonresident licensed insurance
agents and brokers to participate in the Puerto Rico insurance
market, thus advantaging resident agents and brokers.
The suit was brought by the Council of Insurance Agents
and Brokers, an association. The defendant Puerto Rico
Commissioner of Insurance moved for summary judgment on the ground
that the Council lacked standing, and the Council filed a cross-
motion for summary judgment. The district court, in a thoughtful
opinion, denied the Commissioner's motion and granted the
Council's, holding that the Council had standing, that the
challenged provisions were unconstitutional, and that declaratory
and injunctive relief were warranted. See Council of Ins. Agents
& Brokers v. Juarbe-Jiménez, 363 F. Supp. 2d 47 (D.P.R. 2005).
On appeal, the Commissioner does not challenge the ruling
that the statutes are unconstitutional under the Privileges and
Immunities Clause (although she does question the language of the
injunction). At the heart of her appeal is her argument that the
Council lacked standing to raise its challenge in the first place.
We disagree, and we affirm.
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I.
The provisions challenged in this case are P.R. Laws Ann.
tit. 26, §§ 329 and 927 (2003), which have the effect of requiring
the business of insurance in Puerto Rico to be done by using agents
resident in Puerto Rico. Section 329 provides that "[n]o insurer
shall effectuate any direct insurance upon or relative to any
person, property, or other subject of insurance resident, located,
or to be performed in Puerto Rico, except through a licensed agent
of such insurer residing in Puerto Rico."1 P.R. Laws Ann. tit. 26,
§ 329(1). Furthermore, under § 329(2), all such policies and
contracts must be countersigned by the insurer's manager, general
agent, or authorized agent, who must reside in Puerto Rico.2
Section 927 prohibits nonresident agents and brokers from
soliciting insurance and inspecting risks in Puerto Rico. Id.
§ 927(1). It allows nonresident agents and brokers to place
insurance upon subjects located or to be performed in Puerto Rico
only if the insurance was "directly procured from the insured
outside of Puerto Rico," id., or if the nonresident agent or broker
1
In addition, "[i]f the insured is represented by a licensed
broker resident in Puerto Rico, such insurance may be effectuated
through the insurer's manager, general agent, or licensed agent,
resident in Puerto Rico." P.R. Laws Ann. tit. 26, § 329(1).
2
Moreover, "[i]f any person, property or other material
object subject to insurance that resides, is located in, or is to
be carried out in Puerto Rico is also covered by an insurance
policy placed or issued outside of Puerto Rico, the same must be
countersigned" by a Puerto Rico resident. P.R. Laws Ann. tit. 26,
§ 329(2).
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places the insurance "through a resident agent or broker of Puerto
Rico, and in an insurer authorized to transact insurance in Puerto
Rico," id. § 927(2). Countersigning can be done only by resident
agents authorized by the insurer. Id. § 927(3).
The Council filed suit, arguing that these provisions
violated both the Privileges and Immunities Clause, U.S. Const.
art. IV, § 2, cl. 1, and the Equal Protection Clause, id. amend.
XIV, § 1, because they gave local insurance agents and brokers an
unfair competitive advantage over nonresident agents and brokers
(even though the nonresident agents and brokers are licensed to
sell insurance in Puerto Rico). The Council alleged that it
represents hundreds of insurance agencies and brokerage firms; that
its "member agencies and brokerages and their officers, directors,
principals, and employees are located/reside outside of Puerto Rico
but sell insurance in . . . the Commonwealth"; that its members and
their individual associates,3 some of whom are licensed in Puerto
Rico, "are suffering immediate injury and are being deprived of
significant rights" because of the challenged laws; and that one of
the Council's central purposes is to protect the interests of its
members and their individual associates. The Council sought
declaratory and injunctive relief.
3
We refer to the officers, directors, principals, and
employees of the Council's members as "individual associates."
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The Commissioner alleged in her answer that the Council
lacked standing. She later moved for summary judgment on the same
ground. Her argument was that the Council had not demonstrated
that any of its members had suffered an injury in fact, which meant
it had not shown that at least one of its members would otherwise
have standing to sue in its own right, which meant the Council's
claim of associational standing must fail.
The Council then filed a cross-motion for summary
judgment and submitted a memorandum in opposition to the
Commissioner's motion for summary judgment. The Council asserted
that at least some of its entity members had standing to sue in
their own right, on the ground that entity employers may assert the
constitutional rights of their employees where violation of those
rights adversely affects the financial interests or patronage of
the business. The Council attached a declaration by Ken A. Crerar,
the Council's President, which we describe in more detail below.
The Commissioner replied, arguing, inter alia, that the
Council had not shown that any one of its members "as such" was
licensed as a nonresident agent or broker in Puerto Rico.
Therefore, she argued, none of the entity members could engage in
the insurance business in Puerto Rico through its individual
associates (even if the individual associates were licensed and
could have acted in Puerto Rico on their own behalf), and none
could have suffered any injury as a result of the challenged laws.
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The Commissioner did not argue that she needed discovery on this
matter. See Fed. R. Civ. P. 56(f). Nor did she argue that she had
proof that none of the Council's members could have suffered
injury.
The Council responded, attaching a supplemental
declaration of Crerar, also described below.
The district court denied the Commissioner's motion and
granted the Council's cross-motion for summary judgment. See
Council of Ins., 363 F. Supp. 2d at 56. The court determined that
the Council's members had third-party standing to assert the claims
of their individual associates, reasoning that "the employers have
suffered injury in fact of thousands of dollars in lost revenues,"
the employers' relationship with their employees made them
effective advocates of the employees' interests, and the employees
were ill-situated to press their own rights here. Id. at 53. The
court concluded that the Council had associational standing to
assert the rights of its members, and since the members had
standing to assert the rights of their individual associates, the
Council had standing to assert the individual associates' rights.
Id. at 54.
As to the constitutionality of the challenged provisions,
the district court determined that "the countersignature
requirement for nonresidents" violated the Privileges and
Immunities Clause. Id. at 55. It did not reach the equal
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protection question. Id. at 56. The judgment repeated the final
language of the court's opinion and order:
[T]he countersignature requirements of . . .
§§ 329 and 927 are unconstitutional to the
extent that they deny Puerto Rico-licensed
nonresident insurance agents the same rights
and privileges that they afford Puerto Rico-
licensed resident agents. The . . .
Commissioner . . . is enjoined from denying to
Puerto Rico-licensed nonresident agents the
same rights and privileges possessed by Puerto
Rico-licensed resident agents under the
governing statutes.
Id.
The Commissioner moved for reconsideration of the
standing issue and for clarification of the judgment. The Council
opposed this motion, and it was denied.
II.
We review de novo a district court's rulings on
cross-motions for summary judgment, see Calero-Cerezo v. U.S.
Dep't. of Justice, 355 F.3d 6, 19 (1st Cir. 2004), and (usually)
its conclusions about standing, see Donahue v. City of Boston, 304
F.3d 110, 115 (1st Cir. 2002). We may affirm the summary judgment
order on any ground justified in the record, even if our rationale
differs from the district court's. Houlton Citizens' Coal. v. Town
of Houlton, 175 F.3d 178, 184 (1st Cir. 1999).
The litany on summary judgment is familiar. Summary
judgment is appropriate "if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
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affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law." Fed. R. Civ. P. 56(c). Once the party moving
for summary judgment "has asserted that no genuine issue of
material fact exists," the party opposing summary judgment has the
burden of pointing to "specific facts demonstrating that there is,
indeed, a trialworthy issue." Calero-Cerezo, 355 F.3d at 19. We
agree with the district court that the Commissioner not only failed
to justify her own motion, but also failed to oppose adequately the
Council's motion.
The general standing inquiry involving any plaintiff
focuses on "whether the litigant is entitled to have the court
decide the merits of the dispute or of particular issues"; it
involves both "constitutional limitations on federal-court
jurisdiction and prudential limitations on its exercise." Warth v.
Seldin, 422 U.S. 490, 498 (1975). The constitutional constraints
are designed to ensure compliance with Article III's "case or
controversy" requirement; they require that the plaintiff allege a
sufficient personal stake in the outcome of the controversy. See
id.
The Supreme Court has outlined a three-part test for
Article III standing to ensure that these constitutional limits are
observed. "First, the plaintiff must have suffered an injury in
fact -- an invasion of a legally protected interest which is (a)
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concrete and particularized, and (b) actual or imminent, not
conjectural or hypothetical[.]" Lujan v. Defenders of Wildlife,
504 U.S. 555, 560 (1992) (footnote, citations, and internal
quotation marks omitted) (quoting Whitmore v. Arkansas, 495 U.S.
149, 155 (1990)). "Second, there must be a causal connection
between the injury and the conduct complained of"; in other words,
the injury must be fairly traceable to the defendant's challenged
action rather than to some third party's independent action. Id.
And third, it must be likely that a favorable decision will redress
the injury. Id.
The question of standing of plaintiff associations, while
within the general rule, is subject to its own subset of rules.
"Even in the absence of injury to itself, an association may have
standing solely as the representative of its members." Warth, 422
U.S. at 511; see also Rumsfeld v. Forum for Academic &
Institutional Rights, Inc., 126 S. Ct. 1297, No. 04-1152, 2006 U.S.
LEXIS 2025, at *10 n.2 (March 6, 2006) (association of law schools
and law faculties had associational standing to bring suit on
behalf of its members). There are three requirements for an
association, which has not itself suffered injury, to have standing
to bring suit on behalf of its members: "(a) its members would
otherwise have standing to sue in their own right; (b) the
interests it seeks to protect are germane to the organization's
purpose; and (c) neither the claim asserted nor the relief
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requested requires the participation of individual members in the
lawsuit." Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333,
343 (1977).
The dispute on appeal is whether the Council has met its
burden of showing associational standing, see Lujan, 504 U.S. at
561 (burden of establishing elements of standing is on party
invoking federal jurisdiction), to challenge the Puerto Rico
Insurance Code provisions on behalf of its entity members. Even
more narrowly, the dispute is whether the first prong of the Hunt
test is satisfied,4 that is, whether "at least some members of the
[Council] would have had standing to bring this suit in their own
right." UAW v. Brock, 477 U.S. 274, 286 (1986); see also United
States v. AVX Corp., 962 F.2d 108, 116 (1st Cir. 1992) (noting that
if "at least one" member "possesses standing to sue in [its] own
right," first prong is satisfied).
As to the standing of the association's entity members to
raise the rights of their individual associates, there is yet
another three-part test. In addition to showing that the third-
party claim satisfies the three basic Article III requirements, the
litigant asserting third-party standing must show the following:
first, "that the litigant personally has suffered an injury in fact
4
The Commissioner does not argue on appeal that the
germaneness requirement is not satisfied or that individual
members' participation is necessary. In any event, it is clear
that Hunt's second and third prongs are satisfied.
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that gives rise to a sufficiently concrete interest in the
adjudication of the third party's rights"; second, "that the
litigant has a close relationship to the third party"; and third,
"that some hindrance exists that prevents the third party from
protecting its own interests." Eulitt v. Me., Dep't of Educ., 386
F.3d 344, 351 (1st Cir. 2004).
The Council says its licensed members have standing to
challenge the laws on behalf of their individual associates, and so
the Council has standing. The Commissioner argues that the Council
failed to carry its burden of proof to establish standing. See
Lujan, 504 U.S. at 561 ("[E]ach element [of standing] must be
supported in the same way as any other matter on which the
plaintiff bears the burden of proof, i.e., with the manner and
degree of evidence required at the successive stages of the
litigation."). The Commissioner has two main theories.
She argues first her theory that the Council has no
standing unless its entity members have suffered injury5 in their
5
The Commissioner's only challenge to the standing of the
individual associates is that they are free to act on their own
behalf and that they cannot be harmed by the challenged laws when
they are unable to act on their employers' behalf, since the
employers are not licensed to participate in the Puerto Rico market
anyway. This final proposition fails, as explained in the text.
The Commissioner does not otherwise challenge injury in fact,
causation, and redressability, as to the individual associates.
Nor does she dispute that the Council's members have sufficiently
close relationships with their employees, and that the members are
far better situated than the employees to protect the employees'
interests.
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own right, and that the entities cannot gain standing through their
employees. She argues that a peculiarity of Puerto Rico law
permits her to make the argument. As a matter of federal law, the
theory itself is questionable. The Council's entity members
ordinarily would have third-party standing to represent the
interests of their individual associates, and the Council has
associational standing on behalf of its members. See N.Y. State
Club Ass'n v. City of New York, 487 U.S. 1, 9-10 (1988)
(undertaking a similar analysis).
The Commissioner's argument is based on the Puerto Rico
law requirement that entities and not just individuals must be
licensed to engage in the insurance industry in Puerto Rico. See
P.R. Laws Ann. tit. 26, § 926. Misreading the record, she contends
that it is an uncontested fact that none of the Council's members
has a license to operate in the Puerto Rico market. That means,
she argues, that none of the Council's members can compete in that
market, nor can their individual associates compete there on the
members' behalf, even if the individual associates are licensed.
Because of the total inability to compete created by the members'
lack of licenses, she says, the members cannot be harmed by the
challenged provisions, which at best make it more difficult or
expensive for licensed nonresident insurance agencies and
brokerages to compete in Puerto Rico. The fact that none of the
Council's members has suffered an injury in fact, she says,
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vitiates any possibility that the members could have third-party
standing to raise the rights of the members' individual associates
and destroys the Council's claim of associational standing.
The Commissioner's factual assertion is squarely refuted
by the record, and she has offered no contrary evidence to create
a dispute of material fact on this or any other point. The
supplemental Crerar declaration clearly states that "[s]ome Council
members that are based outside of Puerto Rico are licensed as
nonresident agents and brokers by the Insurance Commissioner of
Puerto Rico . . . and sell insurance services and products,
currently through unaffiliated countersigning resident agents, in
Puerto Rico." (Emphases added.) The Commissioner argues this
Crerar declaration must be disregarded because it was filed too
late and without the court's permission. But the district court
was clearly entitled to and did consider the declaration, which
only clarified evidence that was proffered earlier.6
6
During discovery, in responding to the Commissioner's
interrogatories, the Council had stated that "[a]ll nonresident
agents and brokers, some of whom are Council members and their
[individual associates], are subject to the burdens and injuries
caused by complying with the challenged countersignature laws."
The Council later submitted the first Crerar declaration, which
stated that "[t]he Council's members include insurance agencies and
brokerage firms that are based outside of Puerto Rico" and that
"[t]he Council also represents its members' [individual associates]
who are licensed [in Puerto Rico] and act as licensed nonresident
insurance agents and brokers selling insurance services and
products, currently through countersigning resident agents, in
Puerto Rico, but who reside outside of that Commonwealth." The
supplemental Crerar declaration clarified that "[t]he Council's
membership includes insurance agencies and brokerages -- all
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The Commissioner next objects that the declaration failed
to "particularize or specify" who the licensed nonresident members
were.7 But the Council was not obliged to provide specific names
absent some contest by the Commissioner of the accuracy of the
representation by the Council.8 What was important was that the
Council's President declared, under penalty of perjury, that such
members existed. This declaration was facially sufficient. Had it
been called into question by competent evidence from the
Commissioner, there would have been a genuine factual dispute, but
it was not; the only facts on the record were those put there by
the Council. The Commissioner's failure to controvert the
Council's version of the facts with her own evidence is fatal to
her appeal.9 See Fed. R. Civ. P. 56(e) (providing that party
corporations, limited liability companies, and partnerships; its
membership does not include any individuals."
7
The Commissioner also argues that the Council failed to
specify which of the members' individual associates were licensed.
This argument fails for the reasons stated in the text.
8
Indeed, the Council had offered to make its confidential
membership list available, if certain reasonable conditions were
met, so that the Commissioner could check that list against her own
records to determine which members and individual associates were
licensed in Puerto Rico.
9
We emphasize that the Commissioner could have sought
additional time to conduct more pointed discovery on this issue
before she responded to the Council's cross-motion for summary
judgment. See Fed. R. Civ. P. 56(f) (providing that if it appears
from the affidavits of the party opposing summary judgment that the
party "cannot for reasons stated present by affidavit facts
essential to justify the party's opposition," then the court may,
among other things, "order a continuance to permit affidavits to be
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opposing adequately supported summary judgment motion may not rest
upon "mere allegations or denials," but must, by affidavit or
otherwise, "set forth specific facts showing that there is a
genuine issue for trial").
The Commissioner's second theory is that, licensure
aside, the Council's allegations regarding its members' injury in
fact were not sufficiently concrete and specific. Again, the
argument misrepresents the record. The Council, in answering an
interrogatory, identified numerous specific injuries suffered by
its members and their individual associates, including: losing
business because of the total prohibition on certain activities,
having to engage in burdensome administrative efforts to arrange
for resident countersigning agents for permitted transactions (and
losing clients unhappy with these transaction costs), and, in some
cases, foregoing participation in the Puerto Rico market
altogether. The first Crerar declaration described these and other
burdens, such as interference with individual associates'
relationships with their clients, and stated that annual costs of
compliance were in the hundreds of thousands of dollars in lost
business. This evidence, unrebutted by any factual proffer from
obtained or depositions to be taken or discovery to be had"). She
did not do so.
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the Commissioner, was enough to support summary judgment for the
Council.10
In the end, this appeal involves the Commissioner's
attempt to preserve in place an unconstitutional statutory scheme
on the flimsy basis that the wrong plaintiff sued, when in fact the
plaintiff has asserted all of the elements needed for standing and
the Commissioner has never contested the accuracy of those
assertions.
III.
The Commissioner also appeals the district court's denial
of her motion for reconsideration and clarification, which was
brought under Federal Rule of Civil Procedure 59(e). See Fed. R.
Civ. P. 59(e) (providing for motions to alter or amend the
judgment). We normally review the district court's denial of such
motions for "manifest abuse of discretion." Binkley Co. v. E.
Tank, Inc., 831 F.2d 333, 337 (1st Cir. 1987).
The Commissioner sought from the district court
clarification of whether the judgment declared unconstitutional
those provisions of §§ 329 and 927, especially § 927(1) and (2),
that are not technically "countersignature" provisions, and whether
it applies to brokers (as distinct from agents).
10
The Commissioner also argues that the Crerar declarations
were insufficient because they were not based on personal
knowledge. The declarations and the Council's answers to the
Commissioner's interrogatories, also supplied by Crerar, were
adequate; as stated, Crerar was the President of the Council.
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The motion for clarification as presented to the district
court appeared to seek to undo the declaration of
unconstitutionality. It is no surprise the Council opposed it and
the court rejected it without opinion. To the extent the
"clarification" sought was merely technical, as the Commissioner
now suggests on appeal, we note that the Commissioner made no
attempt to work with the Council to agree on substitute language
until prompted by us at oral argument.
After we raised this issue at oral argument, the parties
agreed to work together, and they have jointly submitted a proposed
modified judgment. They have agreed that the judgment extends to
all provisions of §§ 329 and 927, including § 927(1) and (2), that
deny Puerto Rico-licensed nonresident agents and brokers the same
rights and privileges that they afford Puerto Rico-licensed
resident agents and brokers. They also have agreed that the
judgment should be modified to make this meaning clearer by
deleting the one instance of the word "countersignature" and by
adding the words "and brokers" after each of the four references to
"agents."
The parties' proposal reflects our understanding of the
district court's intended meaning. In light of the parties'
agreement, we remand with instructions for the district court to
enter a modified judgment with the clarifications described above.
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IV.
The judgment is remanded for modification and, as
modified, is affirmed. Costs are awarded to the Council.
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