Asociacion de Sus v. Flores-Galarza

United States Court of Appeals
For the First Circuit

No. 05-1430

ASOCIACIÓN DE SUBSCRIPCIÓN CONJUNTA
DEL SEGURO DE RESPONSABILIDAD OBLIGATORIO,

Plaintiff, Appellee,

v.

JUAN A. FLORES GALARZA, in his personal and official capacity as
the Secretary of the Treasury of the Commonwealth of Puerto Rico;
and ANNABELLE RODRÍGUEZ, Secretary of Justice of the Commonwealth
of Puerto Rico,

Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

[Hon. Daniel R. Dominguez, U.S. District Judge]

Before

Lipez, Circuit Judge,
Gibson,* Senior Circuit Judge,
Howard, Circuit Judge.

Eduardo do Vera Ramírez, with whom Julio César Alejandro
Serrano and Landrón & Vera, LLP were on brief, for appellants.
Veronica Ferraiuoli-Hornedo, with whom Rubén T. Nigaglioni,
Rafael J. Martínez, and Nigaglioni & Ferraiuoli Law Offices, PSC
were on brief, for appellee.

March 1, 2007

* Of the Eighth Circuit, sitting by designation.
 LIPEZ, Circuit Judge. The Compulsory Liability Joint

Underwriting Association of Puerto Rico ("JUA"), a Commonwealth-

created entity, filed a lawsuit against Juan A. Flores Galarza

("Flores Galarza" or "Secretary"), then the Secretary of the

Treasury of the Commonwealth, in both his official and personal

capacities,1 claiming that he violated the Takings Clause of the

United States Constitution by withholding from the JUA and

appropriating insurance premiums generated by Puerto Rico's

compulsory liability insurance law to alleviate the cash-flow

problems of the Commonwealth. Flores Galarza moved for judgment on

the pleadings, claiming that the forms of relief sought by the

plaintiff (declaratory, injunctive, and damages) were barred by the

Eleventh Amendment and the doctrine of qualified immunity. The

1
During the pendency of this case, Juan Carlos Méndez replaced
Flores Galarza as Secretary of the Treasury. As a matter of law,
Méndez was automatically substituted as a party for Flores Galarza
in his official capacity as Secretary. See Fed. R. Civ. P.
25(d)(1) ("When a public officer is a party to an action in his
official capacity and during its pendency dies, resigns, or
otherwise ceases to hold office, the action does not abate and the
officer's successor is automatically substituted as a party.").
Flores Galarza remains a party in his personal capacity. See,
e.g., Batistini v. Aquino, 890 F.2d 535, 536 n.1 (1989). While the
parties' briefs do not acknowledge this substitution, these
misnomers do not affect the substantial rights of the parties and,
therefore, we disregard them. See Fed. R. Civ. P. 25(d)(1)
("[M]isnomer[s] not affecting the substantial rights of the parties
shall be disregarded."). For the sake of consistency with the
parties' briefs, we use the name of the former Secretary of the
Treasury, Flores Galarza, when referring to the official-capacity
suit against the Secretary.

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district court denied that motion. We have before us an

interlocutory appeal from that denial.

Among other complexities, this case tests the sometimes

uncertain boundary between official- and personal-capacity claims

against a government official, and the applicability of the

qualified immunity doctrine to an unusual takings claim. For the

reasons set forth below, after concluding that the JUA has standing

to sue Flores Galarza, we conclude that, consistent with the

Eleventh Amendment, Flores Galarza is amenable to suit in his

official capacity for injunctive and declaratory relief, but is

protected from damages in his personal capacity by the doctrine of

qualified immunity.

I.

A. Law 253: The Compulsory Liability Insurance System

The following facts are drawn from the complaint and,

where noted, from relevant statutory and case law. On December 27,

1995, in response to financial losses from uncompensated damages to

motor vehicles in traffic accidents, the Commonwealth of Puerto

Rico ("Commonwealth") enacted the Compulsory Motor Vehicle

Liability Insurance Act, Act No. 253 ("Law 253"), codified at P.R.

Laws Ann. tit. 26, §§ 8051-61. Under Law 253, liability insurance

coverage is required for all motor vehicles that travel on public

thoroughfares. Law 253 "provides each insured vehicle owner with

$3000 of coverage for damages caused to third parties per accident

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in exchange for a uniform premium, initially set at $99 for each

private passenger vehicle and $148 for each commercial vehicle."

Arroyo-Melecio v. P.R. Am. Ins. Co., 398 F.3d 56, 60-61 (1st Cir.

2005) (citing P.R. Laws Ann. tit. 26, §§ 8052(j), 8056(a)).

All "private insurers" – defined under Law 253 as those

with more than 1% of the total volume of vehicle liability premiums

in Puerto Rico, P.R. Laws Ann. tit. 26, § 8052(b) – are required to

provide compulsory liability insurance in one of two ways. First,

private insurers are "bound to provide the compulsory liability

insurance to those motor vehicle owners that request it," id. §

8054(a), unless those owners meet certain statutory criteria, most

of which "identify applicants who are bad drivers or otherwise of

high risk," Arroyo-Melecio, 398 F.3d at 61. Second, private

insurers are required to provide compulsory liability insurance as

members of the JUA, to which they must belong. The JUA is an

association of all private insurers in Puerto Rico, which "provides

compulsory liability insurance to all drivers, including those

high-risk drivers whom private insurers are not required to

insure." Id. (footnote omitted). "Through the JUA, the risk of

insuring these high-risk drivers is thus spread among all the

private insurers." Id. at 62.

Every vehicle owner must either: (1) pay the premium for

compulsory liability insurance to the Secretary of the Treasury at

the time that the owner acquires or renews a vehicle license,

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effectively as part of the license payment; or (2) opt out of the

compulsory liability insurance scheme by privately purchasing

liability insurance with comparable or better coverage. Id. at 61

n.2 (citing P.R. Laws Ann. tit. 26, § 8061).2 In the case of those

vehicle owners who pay the Secretary for compulsory liability

insurance, "[t]he [JUA] shall receive from the Secretary of the

Treasury the total amount of the compulsory liability insurance

premiums received by said official, for its eventual distribution

among the private insurers and the [JUA] itself, as the case may

be." P.R. Laws Ann. tit. 26, § 8055(c). The JUA's administrative

and operating expenses are "charged to the amount received from the

corresponding premiums according to this distribution." Id.

If a vehicle owner does not present a Certificate of

Compliance proving that he carries traditional liability insurance,

he must pay the compulsory liability insurance premium on the date

2
Section 8061(a) states that motor vehicle owners with sufficient
"traditional" liability insurance may rely on that coverage to
comply with Law 253. "Traditional liability insurance" is defined
by Law 253 as standard vehicle insurance, which in turn is defined
in P.R. Laws Ann. tit. 26, § 407(1) as, inter alia, insurance
protecting against both personal and property damage "resulting
from or incident to ownership, maintenance, or use of any . . .
vehicle."
According to the JUA's website, individuals who have the
requisite amount of traditional liability insurance may obtain a
Certificate of Compliance from their insurer to present when they
obtain or renew licenses, and may thereby avoid paying the
compulsory insurance premium to the Secretary. See P.R. Laws Ann.
tit. 26, § 8061(b) (empowering the Insurance Commissioner to
establish regulations "so that motor vehicle owners who comply with
the insurance requirements of subsection (a) of this section may
present attesting proof of . . . compliance").

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of issuance or renewal of the vehicle license, and may then seek

reimbursement directly from the JUA or from his insurer, who will,

in turn, seek reimbursement from the JUA.3 Thus, the funds

transferred from the Secretary to the JUA appear to consist of: (1)

premium payments from individuals seeking to purchase insurance

through the JUA who paid the Secretary, as required by the statute,

when they obtained or renewed their vehicle licenses, (2) duplicate

premium payments from individuals who are purchasing the compulsory

insurance directly from a private insurer, but who paid the

compulsory assessment to the Secretary along with their license

fees (and who thus are eligible for a refund from the JUA), and (3)

duplicate premium payments from individuals who have adequate

traditional liability coverage, but who did not obtain the

Certificate of Compliance that would have exempted them from the

compulsory assessment (who also are eligible for a refund). The

JUA is responsible for distributing the premiums it receives from

the Secretary to its member insurers for the coverage they provide.

Arroyo-Melecio, 398 F.3d at 61 n.2.4

3
The statute does not indicate whether individuals who privately
purchase only the compulsory coverage – and not the more
comprehensive traditional liability coverage – may avoid the
premium payment to the Secretary by presenting proof of coverage.
For purposes of this appeal, we assume that they may not, and that,
consequently, this group of vehicle owners must seek later
reimbursement of their duplicate payments.
4
Although the JUA's member insurers provide the compulsory
coverage, "every vehicle for which the requisite compulsory

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 The JUA is required to file an annual statement with the

Insurance Commissioner detailing its financial condition,

transactions, and affairs for the preceding calendar year. Because

a portion of the total amount of premiums received by the JUA may

be owed to third parties who seek refunds for duplicate payments –

i.e., vehicle owners who bought insurance from a private insurer

but also paid the compulsory liability premium when obtaining

licenses, or private insurers who have reimbursed their insureds

for payment of the compulsory premium – the JUA is required by

regulation to set aside these premiums and accumulate them in a

separate reserve account ("Reserve").5

liability insurance premium has been paid is considered to be
insured by the JUA unless the owner of the vehicle opts out by
selecting a private insurer or purchasing a traditional insurance
policy." Arroyo-Melecio, 398 F.3d at 61 n.2.
5
Pursuant to the general provisions of Puerto Rico's Insurance
Code, P.R. Laws Ann. tit. 26, §§ 2603-2607, the JUA's obligation to
reimburse these so-called "unearned premiums" lasts seven years,
after which time the premiums lapse to the Insurance Commissioner
and are then deposited in the general fund of the Commonwealth
Treasury. Although the JUA did not reference this general
provision in either its brief before us or at oral argument, Puerto
Rico's Insurance Code makes clear that this general provision
applies to the compulsory liability insurance system under Law 253.
See id. § 2612 ("The [general provision governing unclaimed funds]
shall prevail over the provisions of any other chapter present or
future which may be in conflict herewith."). Flores Galarza
invokes this statutory provision in his brief.

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B. The Secretary's Withholding of Funds

Since the effective date of the compulsory liability

insurance system on January 1, 1998,6 the JUA has been unable to

determine exactly how many registered motor vehicles in Puerto Rico

are covered by private liability insurance. The JUA initially

estimated that 25% of all vehicles were covered by policies from

private insurers, and, accordingly, set aside 25% of all premiums

received and accumulated them in the Reserve. By 2001, experience

and additional data revealed that the actual proportion of

privately insured registered motor vehicles was closer to 17%. As

a result, the Reserve as disclosed in the December 2001 annual

statement – approximately $73 million – exceeded the actual amount

owed to third parties by approximately $10 million ("Overstated

Reserve Funds"). In other words, the JUA set aside and accumulated

in the Reserve approximately $10 million more than was actually

owed to privately insured vehicle owners and their insurers who

would be seeking reimbursement for the purchase of duplicative

compulsory liability insurance. In 2001, the JUA sought permission

from the Insurance Commissioner to adjust the Reserve to the

accumulated level that it would have been if only 17% of all

6
While Law 253 was enacted in 1995, the compulsory liability
insurance system established under Law 253 did not take effect
until January 1, 1998. 1995 P.R. Laws 253, § 16.

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premiums had been set aside, rather than 25%. The Insurance

Commissioner agreed to allow the JUA to adjust the Reserve for the

2001 fiscal year, but did not allow any adjustments for the

preceding fiscal years.

In 1998 and 1999, the Secretary collected the insurance

premiums and transferred them to the JUA in accordance with Law

253.7 The JUA then set aside a portion of these premiums in the

Reserve. Beginning in 2000, however, the Secretary discontinued

the transfer of compulsory liability insurance premiums to the JUA

in an attempt to ease the Commonwealth's cash-flow problems.8 On

7
At oral argument, counsel for the JUA explained that "[p]rior to
the year 2000, the premiums were being turned over [by the
Secretary] . . . in a term of about 30-60 days," which the JUA
found "reasonable, given the bureaucratic process" involved with
such transfers.
8
The record contains conflicting information about when the
Secretary began withholding the compulsory insurance premiums. At
oral argument before us, in their appellate brief, and in their
opposition to Flores Galarza's motion for judgment on the
pleadings, the JUA states that the Secretary withheld the insurance
premiums beginning in 2000. In the complaint, the JUA likewise
states that it was forced to liquidate its investments as early as
January 2000 "[a]s a result of the [Secretary's] failure to
transfer th[e premiums]." Elsewhere in the complaint, however, the
JUA states that the Secretary withheld premiums "[d]uring the past
two years," which would mean that the alleged withholding began in
approximately February 2001, based on the February 2003 filing date
of the complaint. Flores Galarza argues that "although not alleged
in the complaint, the supposed withholding of the transfers would
have started on March 2001." While our analysis does not require
that we resolve this discrepancy, we use for our analysis the
earliest date that Flores Galarza is alleged to have withheld the
premiums (January 2000), which date is supported by the record at
this stage of the proceedings.

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May 30, 2002, the JUA filed a petition for mandamus against the

Secretary in the Puerto Rico Superior Court, requesting an order

that the Secretary transfer to the JUA the withheld compulsory

liability insurance premiums. By September 2002, the Secretary had

withheld approximately $173 million in premiums from the JUA.

Because of the Secretary's failure to transfer the insurance

premiums, the JUA was forced to liquidate approximately $98 million

of investments in order to comply with its own cash-flow needs.

The liquidation of the JUA's investments, together with the lost

opportunity to invest new premiums, resulted in a loss to the JUA

of $14.2 million in interest. Despite the Secretary's withholding

of premiums, the JUA continued to reimburse privately insured

motorists and their insurers from its own funds. From January 2002

through September 2002, the JUA reimbursed third parties out-of-

pocket a total of $13.6 million ("Out-of-Pocket Funds").

C. The 2002 Amendment to Law 253

On September 11, 2002, the Puerto Rico Legislature

amended Law 253, 2002 P.R. Laws 230 ("2002 Amendment"), to require

the JUA to turn over to the Secretary all funds held in the Reserve

as of December 31, 2001 (i.e., $73 million), and to continue

providing such funds every two years thereafter. The 2002

Amendment requires the Secretary to keep these funds in a fiduciary

capacity for five years, to be reimbursed to owners of privately

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insured motor vehicles and their insurers who seek refunds, after

which time the funds become the property of the Commonwealth and

pass to the general fund of the Commonwealth Treasury.9 The 2002

Amendment also provides that any excess funds in the Reserve, that

is, any funds included in the Reserve based on estimates which

exceed the actual amount owed to third parties (the Overstated

Reserve Funds), shall be immediately available for use by the

Commonwealth. Income generated from the funds provided to the

Secretary shall also be immediately available for use by the

Commonwealth. Lastly, while the Secretary continues to transfer to

the JUA the total amount of compulsory liability insurance

premiums, the 2002 Amendment allows the Secretary to deduct from

these premiums a fee for the collection service it performs.

D. The 2002 Settlement

In November 2002, pursuant to a settlement stipulation in

the mandamus action in the Puerto Rico Superior Court, the

Secretary transferred to the JUA a significant portion of the $173

million in insurance premiums that had been withheld ("2002

Settlement").10 Rather than transferring the full amount of funds

9
The 2002 Amendment thus allocates the seven-year period provided
by the general provisions of Puerto Rico's Insurance Code, P.R.
Laws Ann. tit. 26, § 2603, among the JUA (which holds the funds for
two years) and the Secretary (who holds the funds for five
additional years), after which time the funds lapse to the general
fund of the Commonwealth Treasury.
10
In his answer to the JUA's complaint, Flores Galarza asserts
that, by November 2002, he had paid the JUA approximately $85.8

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withheld, however, the Secretary retained approximately $73 million

– an amount corresponding to the amount of funds in the Reserve as

of December 2001, which the JUA was required to turn over to the

Secretary pursuant to the 2002 Amendment.

II.

In February 2003, the JUA filed a complaint under 42

U.S.C. § 1983 against Flores Galarza in his personal capacity and

in his official capacity as Secretary of the Treasury.11 In the

complaint, the JUA alleged that Flores Galarza took the JUA's

million ($8,576,709.37 on October 23, 2002 and $77,190,384.31 on
November 13, 2002), which amount represented "all the moneys" owed
to the [JUA]." While the JUA's complaint suggests that the amount
paid by Flores Galarza was closer to $100 million, what matters for
purposes of our analysis is the amount which Flores Galarza did not
pay – $73 million. The parties do not dispute that these funds
were never paid to the JUA.
11
Defendant-Appellant Annabelle Rodríguez, then the Secretary of
Justice of the Commonwealth of Puerto Rico, is not listed as a
defendant in either the complaint or in the district court order
that is the subject of this appeal. The first mention of Rodríguez
comes in the Notice of Interlocutory Appeal, which references her
by political office only, not by name. The parties refer to
Rodríguez again – this time, in her official capacity as Secretary
of Justice – in the caption on their briefs before us, but neither
party makes any argument respecting her. Assuming that Rodríguez
was properly joined as a party to this action, she ceased to be a
party when she left her post as Secretary of Justice in 2004 and
was succeeded by William Vazquez Irizarry, who was, in turn,
succeeded by the present Secretary of Justice, Roberto J. Sánchez
Ramos. See Fed. R. Civ. P. 25(d). We therefore do not reach
Rodríguez's interests here. Furthermore, since neither the
complaint nor the district court order lists the Secretary of
Justice as a party, and since neither party argues that we should
adjudicate the interests of the Secretary of Justice in this
appeal, we do not reach the interests of Sánchez Ramos. On remand,
it will be important for the district court to clarify Sánchez
Ramos's status in this litigation.

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property without just compensation and deprived the JUA of its

property without due process in violation of the Fifth and

Fourteenth Amendments and § 1983.12 Specifically, the JUA contends

that "in order to alleviate the Commonwealth's cash-flow problems,"

Flores Galarza temporarily withheld "for [an] unreasonable period[]

of time" (i.e., from January 2000 through November 2002) $173

million in insurance premiums, which are "the private property of

the [JUA]" and "which [Flores Galarza] was bound by law to transfer

to JUA." By temporarily withholding these premiums, the JUA

argues, Flores Galarza also wrongfully appropriated $14.2 million

in "interest generated by those premiums [which is] also the

private property of the [JUA]." While Flores Galarza subsequently

paid to the JUA a large portion of the withheld premiums pursuant

to the 2002 Settlement, the JUA argues that by retaining $73

million, an amount of funds equal to the Reserve as of December

2001, Flores Galarza wrongfully appropriated the following amounts:

approximately $10 million13 in Overstated Reserve Funds which do not

12
For the sake of clarity, we note that § 1983 cannot be
"violated," as the JUA suggests in the complaint. "Section 1983
does not confer substantive rights but merely provides a means to
vindicate rights conferred by the Constitution or laws of the
United States." Wilson v. Spain, 209 F.3d 713, 715 (8th Cir.
2000). Here, the JUA seeks to vindicate its right under the Fifth
and Fourteenth Amendments to be free from an uncompensated taking.
13
The JUA uses two different percentages to calculate the
Overstated Reserve Funds, and therefore arrives at two different
totals for such funds. As noted above, the JUA originally
estimated that 25% of all registered motor vehicles were privately
insured, and so set aside 25% of all premiums received and

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belong to third parties and therefore constitute the JUA's private

property; and approximately $13.6 million in Out-of-Pocket Funds

which the JUA was forced to pay to third parties from its own funds

when Flores Galarza withheld $173 million in insurance premiums to

meet the cash-flow needs of the Commonwealth.14

accumulated them in the Reserve. In its complaint, the JUA argues
that the number of privately insured motor vehicles as of 2001 was
actually 17.4%, which means that the JUA overstated the Reserve by
approximately $10 million. In its brief before us and at oral
argument, however, the JUA argues that the number of privately
insured motor vehicles in 2001 was actually 19.3%, which means that
the Reserve was overstated by approximately $8 million. Counsel
for the JUA also explained at oral argument that the Insurance
Commissioner used the higher percentage in adjusting the Reserve
for fiscal year 2001. The Secretary says nothing about this
discrepancy. Because we must draw all reasonable inferences in
favor of the non-movant when considering a motion for judgment on
the pleadings, and because the 17% figure set forth in the
complaint would presumably yield a higher damages award for the JUA
than the 19% figure, i.e., $10 million as opposed to $8 million, we
use the lower percentage yielding the higher damages amount for
purposes of our analysis.
We note that even that amount might understate the damages
figure. If, as the JUA indicates, the Reserve is based on the
estimated total number of privately insured vehicles – in an
attempt to reflect the greatest number of owners who might be
entitled to a refund – the Reserve would contain more than the
amount needed for reimbursement to the extent that any of the
privately insured owners had avoided payment of the compulsory
insurance premium by presenting a Certificate of Compliance. Such
owners would not be entitled to a refund, but the Reserve would
include enough to reimburse them based on their private insurance
status.
14
The record does not contain the 2002 Settlement. Therefore, it
is not clear whether the JUA is suing for more than they agreed to
in the settlement. Because the record does not permit us to answer
this question, and because Flores Galarza does not raise the issue,
we do not address it.

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 The JUA requested relief in the form of a declaratory

judgment that Flores Galarza "infringed upon the rights guaranteed

under the Takings Clause and the Fourteenth Amendment's Due Process

Clause" by temporarily withholding the insurance premiums and

permanently taking the interest generated by those premiums, the

Overstated Reserve Funds, and the Out-of-Pocket Funds. Because the

JUA does not argue that Flores Galarza's taking of property

violated its substantive or procedural due process rights under the

Fourteenth Amendment, the JUA appears to invoke the Fourteenth

Amendment only for purposes of bringing a Fifth Amendment Takings

claim against Flores Galarza. See Chi., Burlington & Quincy R.R.

Co. v. City of Chi., 166 U.S. 226, 239 (1897) (holding that the

Takings Clause of the Fifth Amendment is applicable to the states

through the Fourteenth Amendment). Our Fourteenth Amendment

inquiry is therefore limited to the JUA's takings claim.

The JUA also sought injunctive relief enjoining Flores

Galarza, in his official capacity, from "engaging in violations of

JUA's [constitutional] rights," that is, from withholding any more

insurance premiums.15 In addition, it sought to enjoin him from

"[a]ttempting to enforce or impose upon JUA the terms and

conditions of [the 2002 Amendment] . . . inasmuch as they amount to

15
The JUA conceded at oral argument that the Secretary resumed
transfer of the insurance premiums following the filing of this
action in February 2003, thereby "correct[ing]" the "situation
which caused this problem . . . for the time being."

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an unconstitutional taking," that is, from requiring the JUA to

transfer funds accumulating in the Reserve to the Secretary every

two years (which funds must be retained by the Secretary for an

additional five years before lapsing to the general fund),16 and

from retaining interest income accruing on the Reserve funds as

well as any excess Reserve funds, i.e., the Overstated Reserve

Funds that are not actually owed to third parties (which funds

shall lapse immediately to the general fund). Finally, the JUA

sought from Flores Galarza, in his personal capacity, approximately

$38 million in damages: $10 million in Overstated Reserve Funds,

$13.6 million in Out-of-Pocket Funds, and $14.2 million in lost

interest as a result of Flores Galarza's taking of the insurance

premiums.

Flores Galarza filed a motion for judgment on the

pleadings pursuant to Fed. R. Civ. P. 12(c), arguing that: the JUA

lacked standing to sue Flores Galarza in any capacity; Eleventh

Amendment immunity barred the JUA from suing Flores Galarza in his

official capacity; and the doctrine of qualified immunity barred

the JUA from suing Flores Galarza in his personal capacity. The

district court denied Flores Galarza's motion, holding that the JUA

16
While the JUA seeks to enjoin the Secretary from enforcing the
terms of the 2002 Amendment, which requires the JUA to transfer
funds in the Reserve to the Secretary every two years, the JUA does
not challenge the general provisions of Puerto Rico's Insurance
Code, P.R. Laws Ann. tit. 26, §§ 2601-2607, which require that any
premiums not claimed within seven years must be paid to the
Insurance Commissioner.

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was not an arm of the state and therefore was not precluded from

suing Flores Galarza;17 that Flores Galarza was not entitled to

Eleventh Amendment immunity because the declaratory and injunctive

relief sought by the JUA was prospective, as was the JUA's claimed

right to "money allegedly unconstitutionally attached" by Flores

Galarza, i.e., "the insurance premiums for the compulsory liability

insurance [and] . . . certain funds belonging to JUA"; and that

Flores Galarza was not entitled to qualified immunity because the

JUA alleged a constitutional violation that was well established at

the time of the alleged conduct. Flores Galarza filed a motion for

reconsideration that was also denied. This interlocutory appeal

followed.

III.

We address in this section various preliminary issues,

including the JUA's standing and the rationale supporting

interlocutory review. We raised two issues sua sponte, mindful of

our obligation to consider the basis of appellate jurisdiction,

even if the parties have assumed its existence. See Espinal-

Dominguez v. Puerto Rico, 352 F.3d 490, 495 (1st Cir. 2003). After

17
The court denied Flores Galarza's arm-of-the-state claim without
prejudice, noting that Flores Galarza could "present the issue
again via summary disposition[,] providing evidence as to whether
the state bore legal liability for the entities['] debts or the
risk that the damages will be paid from the public treasury."
Instead of moving for summary judgment or providing any new
evidence, Flores Galarza filed this interlocutory appeal because of
the court's immunity rulings.

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oral argument, we asked the parties to submit supplemental briefs

addressing the following questions: (1) whether the JUA's claim

meets the prudential ripeness requirements of the Supreme Court's

jurisprudence on takings, and (2) whether the res judicata doctrine

bars our review. As we discuss below, neither of those doctrines

precludes our jurisdiction. Nor do we find any other

jurisdictional barriers to this interlocutory appeal.

A. Availability of Interlocutory Review

Generally speaking, appeals are permitted only from final

judgments of the district court. 28 U.S.C. § 1291. There are,

however, several exceptions. "Chief among these is the so-called

collateral order doctrine," by which "an order may be appealed

immediately if it 'finally determine[s] claims of right separable

from, and collateral to, rights asserted in the action, too

important to be denied review and too independent of the cause

itself to require that appellate consideration be deferred until

the whole case is adjudicated.'" Espinal-Dominguez, 352 F.3d at

495 (quoting Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541,

546 (1949)).

Orders denying claims of Eleventh Amendment immunity and

qualified immunity, to the extent they turn on issues of law, fall

within the ambit of this exception, and are thus immediately

appealable to this Court. See P.R. Aqueduct & Sewer Auth. v.

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Metcalf & Eddy, Inc., 506 U.S. 139, 143 (1993) ("[O]rders denying

individual officials' claims of . . . qualified immunity are among

those that fall within the ambit of [the collateral order

doctrine]. . . . [W]e agree[] that the same rationale ought to

apply to claims of Eleventh Amendment immunity made by States and

state entities possessing a claim to share in that immunity.")

(citations and footnote omitted); Pagán v. Calderón, 448 F.3d 16,

26 (1st Cir. 2006) (stating that denial of qualified immunity is an

appealable final decision). Flores Galarza claims that, even on

the facts construed in the light most favorable to the JUA, he is

entitled to Eleventh Amendment immunity in his official capacity

and qualified immunity in his personal capacity as a matter of law.

The district court's denial of these claims thus falls within the

collateral order doctrine.

B. Ripeness

A plaintiff frequently must scale "two independent

prudential hurdles" before bringing a takings claim against state

entities in federal court. Suitum v. Tahoe Reg'l Planning Agency,

520 U.S. 725, 733-34 (1997). The Supreme Court explained in

Williamson County Reg'l Planning Comm'n v. Hamilton Bank of Johnson

City, 473 U.S. 172, 194 (1985), that such a plaintiff must

demonstrate that he has both received a final decision from the

state on the use of his property and "sought 'compensation through

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the procedures the State has provided for doing so,'" Suitum, 520

U.S. at 734 (quoting Williamson County, 473 U.S. at 194).

The plaintiff in Williamson County had alleged that the

application of various zoning laws and regulations to its property

in Tennessee amounted to a taking of that property. The Supreme

Court held that the claim was not ripe because the plaintiff had

"not yet obtained a final decision regarding the application of the

zoning ordinance and subdivision regulations to its property, nor

utilized the procedures Tennessee provides for obtaining just

compensation." 473 U.S. at 186. The Court noted that the Board of

Zoning Appeals had the power to approve variances to the zoning

ordinance, and the Planning Commission could grant variances from

the subdivision regulations. The plaintiff, however, had not

sought such variances, and thus, "respondent has not yet obtained

a final decision regarding how it will be allowed to develop its

property." Id. at 190.

The Court held that the claim also was not ripe for a

second reason: the plaintiff had not sought recovery through the

state's inverse condemnation procedure, under which a property

owner may seek just compensation for an alleged taking of property

effected by restrictive zoning laws or development regulations.

Id. at 196. The Court explained that, because the Fifth Amendment

proscribes not the taking of property, but takings without just

compensation, "[if] the government has provided an adequate process

-20-
for obtaining compensation, and if resort to that process 'yield[s]

just compensation,' then the property owner 'has no claim against

the Government' for a taking." Id. at 194-95 (alteration in

original) (quoting Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1013

n.21 (1984)). Because the plaintiff in Williamson County "ha[d]

not shown that the inverse condemnation procedure is unavailable or

inadequate," the takings claim was premature "until it has utilized

that procedure," id. at 197. Cf. González-Álvarez v. Rivero-

Cubano, 426 F.3d 422, 427 (1st Cir. 2005) (finding no Williamson

County ripeness barriers where plaintiffs claimed that cancellation

of their milk production quotas violated the Takings Clause: "Since

in this case, the state has always clearly denied that any

compensation would be due and there is no state remedy available

for seeking compensation, the second hurdle falls away.").

For multiple reasons, the Williamson County prudential

ripeness concerns are inapposite here. First, to the extent that

the JUA is making a facial statutory challenge, its takings claim

need not be brought first to a Commonwealth body, either

administrative or judicial. See Suitum, 520 U.S. at 736 n.10

("'[F]acial' challenges to regulation are generally ripe the moment

the challenged regulation or ordinance is passed, but face an

'uphill battle,' since it is difficult to demonstrate that '"mere

enactment"' of a piece of legislation 'deprived [the owner] of

economically viable use of [his] property.'") (citations omitted);

-21-
Yee v. City of Escondido, 503 U.S. 519, 534 (1992) (finding

petitioners' facial challenge ripe because it "does not depend on

the extent to which petitioners are deprived of the economic use of

their particular pieces of property or the extent to which these

particular petitioners are compensated"); Quicken Loans, Inc. v.

Wood, 449 F.3d 944, 953 (9th Cir. 2006) (finding that a facial

takings claim was ripe when the challenged statutes were enacted);

Pharm. Care Mgmt. Ass'n v. Rowe, 429 F.3d 294, 307 (1st Cir. 2005)

("[A] facial challenge is usually ripe 'the moment the challenged

regulation or ordinance is passed,'" but "'face[s] an uphill

battle.'" (alterations in original)(citations omitted)). The JUA

arguably has stated two facial challenges: (1) that Law 253 effects

a taking in failing to provide for the transfer to the JUA of

interest earned on its money during the time the Commonwealth holds

the funds; and (2) that the 2002 Amendment effects a taking by

requiring transfer to the Commonwealth of the excess reserve funds,

some of which belong to the JUA, and by explicitly "taking" the

interest on those funds to use for Commonwealth operations.

More significantly, however, the Williamson County

requirements are not fully applicable to the type of taking alleged

here. The Court in Suitum noted that Williamson County identified

"two independent prudential hurdles to a regulatory takings claim

brought against a state entity in federal court." 520 U.S. at 733-

34 (emphasis added). This is not a regulatory takings case. The

-22-
JUA has alleged a physical taking – "a direct government

appropriation . . . of private property," Lingle v. Chevron U.S.A.

Inc., 544 U.S. 528, 537 (2005) – and the analysis for such a claim

differs from that of a regulatory taking. See infra at Section

V(A)(2). We previously have held that the finality prong of

Williamson County is inapplicable to physical takings and that only

the "just compensation" prong remains. See Pascoag Reservoir & Dam

LLC v. Rhode Island, 337 F.3d 87, 91-92 (1st Cir. 2003) ("In a

physical taking case, the final decision requirement is relieved or

assumed . . . . However, . . . '[c]ompensation must first be

sought from the state if adequate procedures are available.'")

(citations omitted).

Even if both Williamson County prerequisites applied,

however, they would not foreclose our jurisdiction. The case law

addressing the first "hurdle" focuses on whether the administrative

body responsible for applying the challenged regulations has

completed discretionary review of the plaintiff's particular

situation. Here, there is no pending administrative process that

could, through a variance, waiver or other discretionary decision,

modify the statute's impact on the JUA.18

18
The Court in Williamson County emphasized the distinction between
the finality requirement it was describing and the need to exhaust
remedies, which is not a prerequisite to a suit brought under §
1983. The Court explained:

While the policies underlying the two concepts often
overlap, the finality requirement is concerned with

-23-
 Nor does the second "hurdle" – the need to seek

compensation through procedures provided by the state – pose a

barrier here. See Suitum, 520 U.S. at 734 ("The second hurdle

stems from the Fifth Amendment's proviso that only takings without

whether the initial decisionmaker has arrived at a
definitive position on the issue that inflicts an actual,
concrete injury; the exhaustion requirement generally
refers to administrative and judicial procedures by which
an injured party may seek review of an adverse decision
and obtain a remedy if the decision is found to be
unlawful or otherwise inappropriate. . . .
The difference is best illustrated by comparing the
procedure for seeking a variance with the procedures
that, under Patsy[v. Florida Board of Regents, 457 U.S.
496 (1982)], respondent would not be required to exhaust.
While it appears that the State provides procedures by
which an aggrieved property owner may seek a declaratory
judgment regarding the validity of zoning and planning
actions taken by county authorities, respondent would not
be required to resort to those procedures before bringing
its § 1983 action, because those procedures clearly are
remedial. Similarly, respondent would not be required to
appeal the Commission's rejection of the preliminary plat
to the Board of Zoning Appeals, because the Board was
empowered, at most, to review that rejection, not to
participate in the Commission's decisionmaking.
Resort to those procedures would result in a
judgment whether the Commission's actions violated any of
respondent's rights. In contrast, resort to the
procedure for obtaining variances would result in a
conclusive determination by the Commission whether it
would allow respondent to develop the subdivision in the
manner respondent proposed. The Commission's refusal to
approve the preliminary plat does not determine that
issue; it . . . leaves open the possibility that
respondent may develop the subdivision according to its
plat after obtaining the variances. In short, the
Commission's denial of approval does not conclusively
determine whether respondent will be denied all
reasonable beneficial use of its property, and therefore
is not a final, reviewable decision.

473 U.S. at 193-94 (citations omitted).

-24-
'just compensation' infringe that Amendment; 'if a State provides

an adequate procedure for seeking just compensation, the property

owner cannot claim a violation of the Just Compensation Clause

until it has used the procedure and been denied just

compensation.'" (quoting Williamson County, 473 U.S. at 195)).

Most commonly in regulatory takings cases – which typically involve

land-use regulation – such a procedure is a state inverse

condemnation proceeding.19 See, e.g., Williamson County, 473 U.S.

at 196; Urban Developers LLC v. City of Jackson, 468 F.3d 281, 295

(5th Cir. 2006); SFW Arecibo, Ltd. v. Rodríguez, 415 F.3d 135, 139

(1st Cir. 2005) (noting that "[a]dequate procedures for seeking

just compensation are available under Puerto Rico law," and

19
The Supreme Court explained the "important legal and practical
differences between an inverse condemnation suit and a condemnation
proceeding" as follows:

Although a landowner's action to recover just
compensation for a taking by physical intrusion has come
to be referred to as "inverse" or "reverse" condemnation,
the simple terms "condemn" and "condemnation" are not
commonly used to describe such an action. Rather, a
"condemnation" proceeding is commonly understood to be an
action brought by a condemning authority such as the
Government in the exercise of its power of eminent
domain. . . .

. . . .

. . . The phrase "inverse condemnation" appears to
be one that was coined simply as a shorthand description
of the manner in which a landowner recovers just
compensation for a taking of his property when
condemnation proceedings have not been instituted.

United States v. Clarke, 445 U.S. 253, 255-57 (1980).

-25-
referring specifically to an inverse condemnation remedy). For

takings claims asserted against the federal government, the

applicable procedure is a claim brought under the Tucker Act.

Williamson County, 473 U.S. at 195 ("[T]aking claims against the

Federal Government are premature until the property owner has

availed itself of the process provided by the Tucker Act."

(citation omitted)); see also Student Loan Mktg. Ass'n v. Riley,

104 F.3d 397, 401 (D.C. Cir. 1997) ("Normally a taking claim

against the federal government must be brought as a suit for money

damages (i.e., the 'just compensation' that the Constitution

assures) under the Tucker Act . . . .") (citing 28 U.S.C. § 1491).

The key component of this prong of Williamson County is

the availability of a process that is particularly aimed at

providing compensation when government action effects a taking.

See, e.g., McNamara v. City of Rittman, 473 F.3d 633, 638 (6th Cir.

2007) (noting that "the critical inquiry" after Williamson County

is whether the state has "'reasonable, certain[] and adequate'"

compensation procedures, and identifying mandamus as the vehicle

available to Ohio landowners who were not provided the required

"appropriation proceeding") (citations omitted).20 In our view,

20
Under Ohio law, a government actor seeking to take property must
bring a statutory "appropriation proceeding" against the landowner.
Coles v. Granville, 448 F.3d 853, 865 (6th Cir. 2006). Because
Ohio has no "inverse condemnation or other direct, statutory cause
of action for plaintiffs seeking just compensation for a taking,"
the state's courts over time concluded that property owners who
believe a taking has occurred without the statutory process could

-26-
such procedures do not include litigation of a state takings claim

or any general remedial cause of action under state law. Rather,

the Supreme Court must have had in mind only those procedures

specifically designed by the state to avoid constitutional injury

in the first instance by providing a means for a plaintiff to

obtain compensation for the government's taking of property.

An inverse condemnation cause of action is a classic

example of such a particularized procedure; it gives a property

owner aggrieved by government conduct the opportunity to obtain

compensation, thereby avoiding an unconstitutional taking.

Requiring plaintiffs to avail themselves of such a procedure before

bringing a federal takings claim protects the state's opportunity

to use the scheme it designed specifically to avoid constitutional

injury. By contrast, requiring plaintiffs to invoke any generally

available state procedure that might provide a remedy for an

uncompensated taking before bringing a federal claim would

"transform[] Williamson County's finality rule into a rule of

exhaustion," Washlefske v. Winston, 234 F.3d 179, 183 (4th Cir.

2000).

This result would be in diametric opposition
to a foundational decision of modern § 1983
jurisprudence, Monroe v. Pape, which held that

initiate a mandamus action "to force the government actor into the
correct appropriation proceeding." Id. In Ohio, therefore,
mandamus as a vehicle to obtain an appropriation proceeding
effectively substitutes for the more common inverse condemnation
process.

-27-
 "[t]he federal remedy is supplementary to the
State remedy, and the latter need not be first
sought and refused before the federal one is
invoked."

Id. (quoting Monroe v. Pape, 365 U.S. 167, 183 (1961)). See also

Liberty Mut. Ins. Co. v. Brown, 380 F.3d 793, 797-98 (5th Cir.

2004) (noting that "the exhaustion of state administrative remedies

is not an independent federal law prerequisite to a federal takings

claim," but that plaintiff was obliged to seek compensation in an

inverse condemnation action).

The holding in Williamson County that a federal takings

claim is not ripe until the plaintiff has sought compensation

through state procedures has drawn substantial criticism, including

from Chief Justice Rehnquist in his concurring opinion in San Remo

Hotel v. City of San Francisco, 545 U.S. 323 (2005), because of the

risk that preclusion law will result in barring "litigants who go

to state court to seek compensation . . . [from] assert[ing] their

federal takings claims in federal court," id. at 351. See also,

e.g., J. David Brenner, You Can Check Out But You Can Never Leave:

The Story of San Remo Hotel – the Supreme Court Relegates Federal

Takings Claims to State Courts Under A Rule Intended to Ripen the

Claims for Federal Review, 33 B.C. Envtl. Aff. L. Rev. 247 (2006);

Scott Keller, Judicial Jurisdiction Stripping Masquerading as

Ripeness: Eliminating the Williamson County State Litigation

Requirements for Regulatory Takings Claims, 85 Tex. L. Rev. 199

(2006) ("Judicial Jurisdiction Stripping"). The risk of preclusion

-28-
becomes a reality when, in the course of ruling on the plaintiff's

compensation claim, the state court reaches federal constitutional

issues. See San Remo Hotel, 545 U.S. at 342-43; see also Torromeo

v. Town of Fremont, 438 F.3d 113, 117 (1st Cir. 2006) (affirming

res judicata dismissal of federal takings claim where claim "was

actually litigated to a final judgment on the merits in the state

court") (emphasis in original). At least some of the commentary

assumes that federal takings plaintiffs would need to pursue an

available state takings claim, among other procedures, to meet the

Williamson County requirements – which almost inevitably would lead

to an overlap with federal principles. See, e.g., Judicial

Jurisdiction Stripping, supra at 204-05.

We consider a state takings claim to be remedial in

nature, however, and not a "procedure[] the State has provided for

[seeking compensation]," Williamson County, 473 U.S. at 194. See

id. at 194 n.13 (contrasting review procedures with "procedures

that allow a property owner to obtain compensation for a taking").

A takings claim seeks damages for the unconstitutional taking of

property without due compensation. By contrast – as discussed

above – an inverse condemnation proceeding is designed to enable

plaintiffs to obtain compensation – which, if granted, would avoid

the alleged constitutional violation that the takings claim is

intended to remedy. This is a subtle, but important distinction.

As with more general remedial provisions, requiring a state takings

-29-
claim as a prerequisite to a federal takings claim effectively

would impose an exhaustion requirement – which the Supreme Court

explicitly said it did not do in Williamson County. Moreover,

although we have not done a survey, we suspect that, like Puerto

Rico, most state constitutions have takings provisions. See P.R.

Const. Art. II, §9. We thus think it likely that the Supreme Court

would have made explicit reference to a state takings claim if it

deemed such a cause of action a relevant "procedure" for purposes

of the second prong of Williamson County.21

21
In his concurrence, our colleague notes that the Supreme Court
addressed exhaustion in the context of the finality requirement
but did not suggest a similar limitation on the state litigation
prong. Although the Court's primary discussion of exhaustion
occurred with respect to finality, it reiterated that review
procedures need not be exhausted when explaining the need for "a
property owner [to] utilize procedures for obtaining compensation."
473 U.S. at 194 n.13.
We note, in addition, that at least some of the cases
identified in the concurrence as rejecting our limitation on the
litigation requirement are not wholly in conflict with our view
that Williamson County requires resort to a procedure akin to
inverse condemnation. For example, in Villager Pond, Inc. v. Town
of Darien, 56 F.3d 375 (2d Cir. 1995), the court relied on a
Connecticut state court decision that had held that the state's
takings clause "may be used as the basis of an inverse condemnation
action to recover compensation for property taken from private
individuals, even in the absence of a separate statutory remedy."
Id. at 380. See also id. at 381 ("The inverse condemnation
requirement of Williamson applies whenever compensation is sought
for land that is taken . . . ."). Similarly, in Austin v. City &
County of Honolulu, 840 F.2d 678, 681 (9th Cir. 1987), the court
noted that, "[u]ntil the state courts establish that landowners may
not obtain just compensation through an inverse condemnation action
under any circumstances [including under the state constitution's
takings provision], Hawaii procedures are adequate within the terms
of Williamson County and [plaintiff's] failure to use them cannot
be excused." Our view does not exclude the possibility that a
state explicitly could create a non-statutory inverse condemnation

-30-
 Here, no Commonwealth administrative process or cause of

action has been identified through which a claimant is expected to

seek compensation in the unusual circumstance of an alleged

unconstitutional taking arising from the government's appropriation

of funds. Cf. González-Álvarez, 426 F.3d at 427 (noting the lack

of an available state process for seeking compensation for

cancellation of milk production quotas); SFW Arecibo, 415 F.3d at

139 (noting Puerto Rico's inverse condemnation procedure for land-

based takings claims).

Indeed, another line of cases suggests the

inapplicability of the Williamson County prerequisites to a taking

that involves the direct appropriation of funds. In Eastern

Enterprises v. Apfel, 524 U.S. 498 (1998) (plurality opinion), the

Supreme Court considered a challenge to the Coal Act, which

established a mechanism for funding health care benefits for coal

industry retirees. Id. at 504. Under the Act, private coal

operators were required to contribute to the payment of premiums to

procedure. Cf. Southview Assocs., Ltd. v. Bongartz, 980 F.2d 84,
99 (2d Cir. 1992) (rejecting the "contention that only a statutory
compensation scheme can suffice"). We disagree with the Ninth
Circuit's implication, however, that a federal takings claim is
unripe if a plaintiff has not litigated a state claim where the
state has not specifically utilized its takings clause to establish
a compensatory process (and no other compensatory process has been
identified).
As our discussion and the difference of opinion among our own
panel members indicate, there is substantial tension among the
various doctrines at issue in this context – ripeness, exhaustion
and preclusion – and further guidance from the Supreme Court seems
necessary to resolve the uncertainties.

-31-
fund such benefits. One such operator, Eastern, brought suit

claiming that the Act, either on its face or as applied, violated

substantive due process and constituted a taking of its property in

violation of the Fifth Amendment. The Supreme Court considered

whether the takings claim needed to be asserted first under the

Tucker Act, which, as noted above, usually must be a preliminary

step in a takings action against the federal government.

The plurality observed that Eastern was not seeking

compensation from the government; it was requesting declaratory and

injunctive relief against enforcement of the act by the

Commissioner of Social Security. The Justices noted conflicting

lower court precedent on whether a claim for equitable relief under

the Takings Clause, even without a request for damages, must be

brought first under the Tucker Act. Id. at 520-21. The plurality

rejected such a prerequisite, stating that "Congress could not have

contemplated that the Treasury would compensate coal operators for

their liability under the Act, for '[e]very dollar paid pursuant to

a statute would be presumed to generate a dollar of Tucker Act

compensation.'" Id. at 521 (quoting In re Chateaugay Corp., 53

F.3d 478, 493 (2d Cir. 1995)). The Court plurality continued:

Accordingly, the "presumption of Tucker Act
availability must be reversed where the
challenged statute, rather than burdening real
or physical property, requires a direct
transfer of funds" mandated by the Government.
[In re Chateaugay, 53 F.3d at 493.] In that
situation, a claim for compensation "would
entail an utterly pointless set of

-32-
 activities." Student Loan Marketing Ass'n v.
Riley, 104 F.3d 397, 401 [(D.C. Cir. 1997)].
Instead, . . . the Declaratory Judgment Act
"allows individuals threatened with a taking
to seek a declaration of the constitutionality
of the disputed governmental action before
potentially uncompensable damages are
sustained."

Id. (citation omitted). Five members of the Court went on to

conclude that the Coal Act's application to Eastern was

unconstitutional, but Justice Kennedy relied on due process, rather

than takings, principles. See id. at 537, 539.

This case differs from Apfel because, among other

distinctions, it does not involve the federal government and the

Tucker Act. Nonetheless, the nature of the claim – that Puerto

Rico's Secretary of the Treasury improperly withheld money

belonging to the JUA so that it may be used for public purposes –

strikes us as equivalent to the complaints about the "direct

transfer of funds" at issue in Apfel and the decisions it cites.

Application of the Williamson County prerequisites here similarly

could only "'entail an utterly pointless set of activities.'" For

that reason, and the others we have noted, we conclude that

Williamson County's prudential factors do not prevent our review of

the JUA's takings claim.

C. Standing

Flores Galarza challenges the JUA's statutory standing,

arguing that the JUA, as a "state-created entity," lacks standing

to "challenge actions taken by the state that created it [because]

-33-
it is [not] absolutely clear from the enabling statute that such

access was expressly intended by the state legislature." The JUA

contends that, while it was "created via an official act of the

state," the JUA is not an "arm of the state [with] no

constitutional rights to assert against the state which created

it."22

Flores Galarza's argument is precluded by our case law.

In Arroyo-Melecio, we stated that, while "[t]he JUA is under some

direction by the commonwealth," it is "private in nature" and is

therefore "not an agency of the commonwealth." 398 F.3d at 62. A

private corporation may allege a constitutional violation under §

1983. See Ill. Clean Energy Cmty. Found. v. Filan, 392 F.3d 934,

936-37 (7th Cir. 2004) (holding that state-created foundation was

not a state agency and therefore could sue the state for taking its

property); Advocates for the Arts v. Thomson, 532 F.2d 792, 794

(1st Cir. 1976) ("That [plaintiff] is a corporation has no bearing

on its standing to assert violations of the first and fourteenth

22
Neither Flores Galarza nor the JUA addresses the threshold
question of whether we may consider Flores Galarza's standing
challenge in this interlocutory appeal. Although not all circuits
agree, see, e.g., Triad Assocs., Inc. v. Robinson, 10 F.3d 492, 496
n.2 (7th Cir. 1993) ("[T]hat we have jurisdiction to review the
district court's denial of qualified immunity is not sufficient to
confer on us jurisdiction to review [standing challenges] presented
to the district court." (citation omitted)), we previously have
held that appellate jurisdiction extends to issues of standing on
interlocutory appeal of a denial of immunity. See Pagán, 448 F.3d
at 26-27. We therefore may review Flores Galarza's challenge to
the JUA's standing.

-34-
amendments under 42 U.S.C. [§] 1983."). The JUA is therefore a

proper plaintiff in this case.

D. Res Judicata

In his supplemental brief, Flores Galarza asserts that

the JUA seeks "exactly the same remedy that it previously sought"

– and failed to receive – in the Commonwealth court, and argues

that the doctrine of res judicata bars the federal court from

reaching a different outcome on identical claims involving the same

parties. In response, the JUA emphasizes that both of the

Commonwealth court's rulings – the Partial Judgment issued in July

2003 and the Judgment issued in September 2003 – were "without

prejudice," and it argues that, under Puerto Rico law, a judgment

without prejudice is not an adjudication on the merits that would

trigger res judicata consequences. See Pueblo Int'l, Inc. v. Cruz,

17 P.R. Offic. Trans. 275 (1986) (Hernandez Denton, J., concurring

and dissenting) (citing Fresh-O-Baking Co. v. Molinos de P.R., 103

D.P.R. 509, 514 (1975)).

We do not reach the substantive res judicata question,

however, because we conclude that it is outside the limited sphere

of this interlocutory appeal. Although we have not previously held

explicitly that res judicata, unlike standing, may not be reviewed

along with immunity issues, we intimated as much in Nieves-Márquez

-35-
v. Puerto Rico, 353 F.3d 108, 123 (1st Cir. 2003), where we

considered the scope of an interlocutory appeal from the denial of

a motion to dismiss based on Eleventh Amendment immunity. We cited

there the Supreme Court's decision in Swint v. Chambers County

Comm'n, 514 U.S. 35 (1995), where the Court held that a court of

appeals does not have discretion to exercise pendent appellate

jurisdiction in an interlocutory appeal from a denial of qualified

immunity unless "the otherwise unappealable issue is []

'inextricably intertwined' with the issue on collateral order

appeal." 353 F.3d at 123 (quoting Swint, 514 U.S. at 48-51). We

concluded that the question whether a cause of action for damages

exists is "inextricably intertwined with the issue of Eleventh

Amendment immunity" and therefore could be addressed in an

interlocutory appeal. Id.

In so ruling, however, we noted the Third Circuit's

decision in Bell Atlantic-Pennsylvania, Inc. v. Pennsylvania Public

Utilities Commission, 273 F.3d 337, 343-45 (3d Cir. 2001), on the

"very different issue[]" of whether denial of a motion to dismiss

on res judicata grounds was immediately appealable under the

collateral order doctrine. The Third Circuit held that it was not,

and we observed that, "[l]ike the Third Circuit, we agree that not

every issue raised by the denial of a pre-trial motion to dismiss

may be reached on collateral order appeal; indeed most may not be."

353 F.3d at 124. We construe that observation as an endorsement of

-36-
the Third Circuit's refusal to address res judicata in an

interlocutory appeal. Moreover, we find a similar perspective in

the Supreme Court's decision in Digital Equipment Corp. v. Desktop

Direct, Inc., 511 U.S. 863 (1994). In that case, the Court listed

preclusion among a collection of claims that arguably relate to a

"right not to stand trial" and therefore could plausibly warrant

interlocutory appellate review. See id. at 873. The Court,

however, cautioned that such claims must be viewed "with

skepticism, if not a jaundiced eye," to avoid emasculating

Congress's final decision rule. Id. at 871-73. Consistent with

this precedent, we conclude that res judicata is not properly

addressed at this stage of the case. See, e.g., Timpanogos Tribe

v. Conway, 286 F.3d 1195, 1200 (10th Cir. 2002) (finding no basis

to review pendent res judicata claim with Eleventh Amendment

interlocutory claim); Garramone v. Romo, 94 F.3d 1446, 1452 (10th

Cir. 1996) (holding that district court's res judicata ruling could

not be reviewed in interlocutory appeal on immunity issues). See

generally 15A Charles Alan Wright, Arthur R. Miller & Edward H.

Cooper, Federal Practice and Procedure § 3911.4 at 424-26 (2d ed.

1992) ("[C]ollateral order appeal is not automatically available to

review . . . rejection of an argument that repetitious litigation

is barred by res judicata . . . .").

IV.

A. Summary of Claims

-37-
 Before turning to an analysis of the Eleventh Amendment

immunity and qualified immunity claims, we pause to summarize the

varied claims for relief made by the JUA. We do so because we must

be clear about the precise nature of those claims in conducting the

immunity analyses. As noted above, the JUA seeks three kinds of

relief. First, the JUA seeks a declaratory judgment against Flores

Galarza in his official capacity, declaring that he violated the

JUA's constitutional rights by:

(1) withholding $173 million in insurance premiums for

an extended period so that the funds could be used to ease the

Commonwealth's cash flow problems, before transferring a large

portion of those premiums to the JUA pursuant to the 2002

Settlement; and

(2) permanently appropriating: (a) $14.2 million in

interest on lost or forgone investments as a result of Flores

Galarza's taking of the insurance premiums; (b) $10 million in

Overstated Reserve Funds that do not belong to third parties and

therefore should have been deducted from the $73 million retained

by Flores Galarza; and (c) $13.6 million in Out-of-Pocket Funds

that the JUA was forced to pay to third parties from its own funds

and therefore should have been deducted from the $73 million

retained by Flores Galarza.23

23
Flores Galarza helpfully summarizes the alleged permanent
appropriations as follows:

-38-
 Second, the JUA seeks injunctive relief from Flores

Galarza in his official capacity, enjoining him from:

(1) withholding any more insurance premiums; and

(2) enforcing the terms of the 2002 Amendment, that

is, from requiring the JUA to transfer Reserve funds to the

Secretary every two years, and from retaining interest income

earned on the Reserve funds and any Overstated Reserve Funds (i.e.,

funds included in the Reserve that are not actually owed to third

parties).

Third, the JUA seeks approximately $38 million in damages

from Flores Galarza in his personal capacity, that is: (1) $14.2

million in lost interest as a result of Flores Galarza's taking of

the insurance premiums; (2) $10 million in Overstated Reserve

Funds; and (3) $13.6 million in Out-of-Pocket Funds. These items

of damage mirror the items identified in the permanent

appropriation portion of the demand for declaratory relief.

B. Standard of Review

The JUA claims that when the Reserve Account was
retained, the [Secretary] took its property without just
compensation because it withheld the [Overstated Reserve
Funds], and did not allow the [Out-of-Pocket Funds] to be
debited from the Reserve Account. The JUA also claims
that it is entitled to just compensation for the period
of time during which the [Secretary] withheld the
transfers of the premiums without transmitting these to
the JUA.

-39-
 Where a district court's denial of Eleventh Amendment

immunity and qualified immunity turns upon purely legal questions,

our review is de novo. See Rodríguez-Marín v. Rivera-González, 438

F.3d 72, 84 (1st Cir. 2006) (reviewing de novo denial of qualified

immunity); Redondo Constr. Corp. v. P.R. Highway & Transp. Auth.,

357 F.3d 124, 126 (1st Cir. 2004) (reviewing de novo denial of

Eleventh Amendment immunity). "The standard for evaluating a Rule

12(c) motion for judgment on the pleadings is essentially the same

as that for deciding a Rule 12(b)(6) motion. '[T]he trial court

must accept all of the nonmovant's well-pleaded factual averments

as true, and draw all reasonable inferences in his favor.'" Pasdon

v. City of Peabody, 417 F.3d 225, 226 (1st Cir. 2005) (quoting

Rivera-Gomez v. de Castro, 843 F.2d 631, 635 (1st Cir. 1998)).

"Judgment on the pleadings under Rule 12(c) may not be entered

unless it appears beyond a doubt that the nonmoving party can prove

no set of facts in support of her claim which would entitle her to

relief." Feliciano v. Rhode Island, 160 F.3d 780, 788 (1st Cir.

1998).

C. Eleventh Amendment Immunity

Flores Galarza argues that the Eleventh Amendment bars

the JUA's suit against him in his official capacity.24 He

24
The Eleventh Amendment states that "[t]he Judicial power of the
United States shall not be construed to extend to any suit in law
or equity, commenced or prosecuted against one of the United States
by Citizens of another State, or by Citizens or Subjects of any

-40-
emphasizes that the JUA seeks damages of $10 million in Overstated

Reserve Funds, $13.6 million in Out-of-Pocket Funds, and $14.2

million in lost interest during the period in which the insurance

premiums were retained, all of which "[are] clearly retrospective

in nature." Flores Galarza misapprehends the JUA's argument.

While the complaint is not a model of clarity on this point,25 the

JUA explained in its argument to us and to the district court that

Foreign State." U.S. Const. amend. XI. "[N]otwithstanding its
plain language," the Eleventh Amendment "prohibit[s federal courts]
from hearing most suits brought against a state by citizens of that
or any other state." Metcalf & Eddy, Inc. v. P.R. Aqueduct & Sewer
Auth., 991 F.2d 935, 938 (1st Cir. 1993). "[D]espite the absence
of any express reference," the Eleventh Amendment "pertains to
Puerto Rico in the same manner, and to the same extent, as if
Puerto Rico were a State." De Leon Lopez v. Corporacion Insular de
Seguros, 931 F.2d 116, 121 (1st Cir. 1991).
25
The complaint states that the "JUA respectfully requests that
this Honorable Court order the Secretary of the Treasury to pay the
JUA the amount of $38,321,556.83 in order to return to JUA its
private property and to compensate JUA for the opportunity cost it
has suffered due to the Secretary of the Treasury's violations of
JUA's constitutional rights." However, the complaint does not
state whether the JUA's request is directed at Flores Galarza in
his official capacity, his personal capacity, or both. The JUA's
request that Flores Galarza "return [] its private property," on
the one hand, and "compensate" the JUA, on the other, contributes
to this confusion, suggesting that the JUA seeks the return of
certain funds in the Commonwealth Treasury from Flores Galarza in
his official capacity, and seeks damages from Flores Galarza in his
personal capacity. As the JUA indicated in its brief to the
district court, and as it made clear at oral argument before us,
the JUA seeks damages for the taking of the funds at issue from
Flores Galarza in his personal capacity – the JUA is "not asking to
have any money returned to it" by the Commonwealth. Given the
complaint's lack of precision, we understand Flores Galarza's
misapprehension of the nature of the JUA's claims.

-41-
it is not seeking damages from Flores Galarza in his official

capacity.

The JUA states that, while it "seeks damages against Mr.

Flores-Galarza in his personal capacity," it seeks only prospective

injunctive relief from Flores Galarza in his official capacity –

"enjoin[ing him] from continuing to engage in the unconstitutional

conduct." (Emphasis added.) At oral argument before us, the JUA

stated that it merely seeks to compel the transfer of compulsory

liability insurance premiums in the future – a remedy that it

argues "is clearly a prospective one." The JUA further argues that

"[t]he fact that funds would have to be transferred [in the future]

as a result of the injunction requested does not create an Eleventh

Amendment bar to the issuance of the injunction" because these

funds do not constitute damages, but rather "belong to the JUA and

are held by [the Secretary] in a fiduciary capacity."

In many instances, a suit against a state official is a

suit against the state, thereby triggering Eleventh Amendment

immunity. See Muirhead v. Mecham, 427 F.3d 14, 18 (1st Cir. 2005)

("[A] suit, although nominally aimed at an official, will be

considered one against the sovereign 'if the judgment sought would

expend itself on the public treasury or domain, or interfere with

the public administration, or if the effect of the judgment would

be to restrain the Government from acting, or to compel it to

-42-
act.'" (quoting Dugan v. Rank, 372 U.S. 609, 620 (1963)). While

the Eleventh Amendment prohibits a party from bringing suit against

a state in federal court, see De Leon Lopez, 931 F.2d at 121, it

does not prohibit a party from bringing suit against a state

officer in federal court for prospective declaratory or injunctive

relief under federal law.26 Ex parte Young, 209 U.S. 123, 155

(1908). See generally Erwin Chemerinsky, Federal Jurisdiction

§ 7.5, at 424 (4th ed. 2003) (distinguishing prospective injunctive

relief against a state officer, which the Eleventh Amendment does

not forbid, from "retroactive relief – damages to compensate past

injuries," which the Eleventh Amendment does forbid).

In Ex parte Young, the Supreme Court created an exception

to Eleventh Amendment immunity "for suits challenging the

constitutionality of a state official's action, on the theory that

since the state cannot authorize such an unconstitutional action,

the officer is 'stripped of his official or representative

character and . . . subjected in his person to the consequences of

his individual conduct.'" Parents for Quality Educ. With

Integration, Inc. v. Indiana, 977 F.2d 1207, 1209 (7th Cir. 1992)

26
As we noted in Díaz-Fonseca v. Puerto Rico, 451 F.3d 13 (1st Cir.
2006), "[Ex parte Young] does not allow injunctive relief against
state officials for violation of state law . . . because '[a]
federal court's grant of relief against state officials on the
basis of state law, whether prospective or retroactive, does not
vindicate the supreme authority of federal law.'" Id. at 43
(quoting Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89,
106 (1984)).

-43-
(quoting Pennhurst, 465 U.S. at 102). Ex parte Young thus "allows

a way around the bar to federal jurisdiction . . . in cases where

prospective declaratory or injunctive relief is sought under

federal law." Mills v. Maine, 118 F.3d 37, 54 (1st Cir. 1997).

Here, the JUA seeks a declaration that the taking of insurance

premiums by Flores Galarza in his official capacity violates the

Constitution and an injunction enjoining Flores Galarza from

enforcing the terms of the 2002 Amendment – that is, from requiring

the JUA to transfer Reserve funds every two years and from

retaining either the interest earned on those funds or any excess

Reserve funds not owed to traditionally insured vehicle owners or

their insurers. We agree with the district court that these

requests are for prospective declaratory and injunctive relief that

is not barred by the Eleventh Amendment.27 Therefore, the district

court's denial of Eleventh Amendment immunity to Flores Galarza in

his official capacity was correct.

D. Official- Versus Personal-Capacity Suits

27
In addition to finding that "[the JUA's] request for injunctive
and declaratory relief is prospective," the district court found
that "the retention of money allegedly unconstitutionally attached
is equitable and subject to injunctive relief exempt from the
Eleventh Amendment bar." To the extent that this latter statement
may be understood as affording the JUA the right to sue Flores
Galarza in his official capacity for damages, we reject this
proposition. As discussed above, the JUA does not make this
argument and, therefore, neither we nor the district court need
reach it. Because we otherwise arrive at the same result as the
district court on Eleventh Amendment immunity, any potential error
on the part of the district court in its analysis was harmless.

-44-
 The JUA argues that Flores Galarza, in his personal

capacity, temporarily withheld approximately $173 million in

compulsory liability insurance premiums for an "unreasonable

period[] of time," and, in so doing, appropriated $14.2 million in

interest generated by those premiums. The JUA also argues that

Flores Galarza personally appropriated $10 million in Overstated

Reserve Funds and $13.6 million in Out-of-Pocket Funds.

However, the JUA does not seek to hold Flores Galarza

personally liable for the full $173 million in withheld insurance

premiums, most of which was subsequently paid to the JUA pursuant

to the 2002 Settlement, nor does the JUA seek to hold Flores

Galarza personally liable for the full $73 million in Reserve funds

retained by Flores Galarza after the 2002 Settlement. Instead, the

JUA seeks to hold Flores Galarza personally liable for interest

lost on the $173 million plus two portions of the $73 million

Reserve – i.e., the Overstated Reserve Funds and Out-of-Pocket

Reserve Funds. The total amount sought by the JUA is approximately

$38 million, that is, roughly $14.2 million in lost interest, $10

million in Overstated Reserve Funds, and $13.6 million in Out-of-

Pocket Funds. Flores Galarza contends that he is not liable in his

personal capacity based on qualified immunity.

Before analyzing whether Flores Galarza is entitled to

qualified immunity, we pause to note the unusual nature of this

personal-capacity suit. We are troubled by the notion that the

-45-
personal-capacity claim against Flores Galarza, by which the JUA

seeks enormous personal damages from him, is really a subterfuge

for an official-capacity suit that seeks payment from the

Commonwealth Treasury. Certainly the line between personal assets

and the Commonwealth fisc seems indistinct. The JUA has sued the

Secretary of the Treasury; the JUA claims that the Secretary

temporarily withheld and permanently appropriated the JUA's funds

for the benefit of the Commonwealth; and some of the damages sought

by the JUA correspond to funds accumulated in the general fund

pursuant to the 2002 Amendment. "'[W]hen the action is in essence

one for the recovery of money from the state, the state is the

real, substantial party in interest and is entitled to invoke its

sovereign immunity from suit. . . .'" Metcalf, 991 F.2d at 939

(quoting Ford Motor Co. v. Dep't of Treasury, 323 U.S. 459, 464

(1945), overruled on other grounds by Lapides v. Bd. of Regents of

Univ. Syst. of Ga., 535 U.S. 613 (2002)). There is a plausible

view of this case that the demand for damages from Flores Galarza

is, in essence, a demand for the recovery of money from the

Commonwealth.

In considering that possibility, we have looked closely

at Hafer v. Melo, 502 U.S. 21 (1991), a case in which the Supreme

Court tried to clarify the distinction between official- and

personal-capacity suits. There, the plaintiffs sued the auditor

general of Pennsylvania, Hafer, after she fired them from their

-46-
jobs, alleging that they were fired for personal reasons in

violation of the First Amendment; they sought monetary damages from

Hafer personally. The claims against Hafer had nothing to do with

her handling of funds in the state treasury, nor did the damages

sought bear any relationship to funds accumulated in the state

treasury. Id. at 23.

However, the principles set forth in Hafer make the

factual distinctions between this case and Hafer seemingly

irrelevant. There, the Court said that "the phrase 'acting in

their official capacities' is best understood as a reference to the

capacity in which the state officer is sued, not the capacity in

which the officer inflicts the alleged injury." Id. at 26. Even

earlier, the Supreme Court had suggested that in determining

whether a suit involves a personal- or official-capacity claim, we

should be guided by the complaint or, if not clearly specified in

the complaint, by the "[t]he course of proceedings." Kentucky v.

Graham, 473 U.S. 159, 167 n.14 (1985).

Here, the complaint, in combination with the course of

proceedings, see supra note 25, establishes that Flores Galarza is

being sued for damages in his personal capacity. If the JUA wishes

to seek a personal judgment against Flores Galarza in a ruinous and

probably uncollectible amount for actions that he took as the

-47-
Commonwealth Treasurer to serve the interests of the Commonwealth,

they are entitled to do that. See generally Chemerinsky, supra,

§ 7.5.2, at 430 ("[T]he fact that a government officer is acting in

the scope of official duties is not enough to bar a suit as being

in 'official capacity'."). If such a judgment might induce the

Commonwealth to indemnify Flores Galarza from the Commonwealth

Treasury to spare him from ruin, that likelihood is irrelevant to

the personal-capacity determination. See Berman Enters., Inc. v.

Jorling, 3 F.3d 602, 606 (2d Cir. 1993) ("Whether or not a state

would choose to reimburse an official for damages for

constitutional harm he caused in his individual capacity is a

matter of no concern to a federal court."). See generally

Chemerinsky, supra, § 7.5.2, at 423 ("State indemnification

policies are irrelevant for Eleventh Amendment analysis and do not

prevent federal court relief against individual officers.").28 In

short, in a suit "against an officer for money damages when the

relief would come from the officer's own pocket, there is no

Eleventh Amendment bar even though the conduct was part of the

28
As we noted in Díaz-Fonseca, the Commonwealth "generally
indemnifies its officials for suits against them in their personal
capacities." 451 F.3d at 37 n.26 (citing P.R. Laws Ann. tit. 32,
§ 3085 ("Every official . . . of the Commonwealth of Puerto Rico
who is sued for damages in his personal capacity, when the cause of
action is based on alleged violations of the plaintiff's civil
rights, due to acts or omissions committed in good faith, in the
course of his employment and within the scope of his functions, may
request the Commonwealth of Puerto Rico to provide him with legal
representation, and to subsequently assume the payment of any
judgment that may be entered against his person.")).

-48-
officer's official duties. In such a suit, the officer could claim

absolute or qualified immunity as a defense." Id. at 429. We

turn, therefore, to Flores Galarza's qualified immunity defense.

V.

Our starting point is the principle that "government

officials performing discretionary functions generally are shielded

from liability for civil damages insofar as their conduct does not

violate clearly established statutory or constitutional rights of

which a reasonable person would have known." Harlow v. Fitzgerald,

457 U.S. 800, 818 (1982). We have used a three-prong analysis for

evaluating qualified immunity claims. Thus, we must determine:

(1) whether the claimant has alleged the
deprivation of an actual constitutional right; (2)
whether the right was clearly established at the
time of the alleged action or inaction; and (3) if
both of these questions are answered in the
affirmative, whether an objectively reasonable
official would have believed that the action taken
violated that clearly established constitutional
right.

Wilson v. City of Boston, 421 F.3d 45, 52 (1st Cir. 2005).

A. First Prong: Alleged Deprivation of Constitutional Right

Here we ask whether the facts, "[t]aken in the light most

favorable to the party asserting the injury . . . show the

officer's conduct violated a constitutional right[.]" Saucier v.

Katz, 533 U.S. 194, 201 (2001). As we have noted, "[t]he first

prong inquiry at this 12(b)(6) stage is unlikely to be very

specific, given that federal civil practice is based on notice

-49-
pleading, where great specificity is not required, and that there

is no heightened pleading requirement for civil rights cases."

Riverdale Mills Corp. v. Pimpare, 392 F.3d 55, 61 (1st Cir. 2004)

(citations omitted). The JUA argues that Flores Galarza took its

private property without compensation in violation of the Fifth and

Fourteenth Amendments, by physically appropriating the insurance

premiums, the interest lost as a result of the withholding of those

premiums, the Overstated Reserve Funds, and the Out-of-Pocket

Funds. This alleged violation of its constitutionally protected

property rights, the JUA argues, is thus sufficient to satisfy the

first prong of the qualified immunity analysis. Flores Galarza

argues that the JUA fails to allege a taking of its property in

satisfaction of the first prong of the qualified immunity analysis

for two reasons: first, the JUA is a state-created entity, which,

like the state itself, lacks the capacity to allege a taking under

§ 1983; and second, the complaint does not allege the elements of

a successful takings claim.

1. Capacity to Allege Constitutional Deprivation

Flores Galarza's argument that the JUA, as a state-

created entity, "simply does not enjoy constitutional rights" and

thus is "wholly incapable" of setting forth a violation of

constitutionally protected property rights, is his standing

challenge recast in qualified immunity terms. We have already

-50-
rejected this standing argument. The JUA has the capacity to

allege an unconstitutional taking of its property.

2. Elements of a Takings Violation

The Takings Clause of the Fifth Amendment provides that

"private property [shall not] be taken for public use, without just

compensation." U.S. Const. amend. V. Takings claims involve a

two-step inquiry. "To make a cognizable claim of a taking in

violation of the Fifth Amendment, the plaintiffs must first show

that they possess a recognized property interest which may be

protected by the Fifth Amendment. The plaintiffs must point to

credible sources for their claimed property interest . . . 'such as

state law-rules or understandings that secure certain benefits and

that support claims of entitlement to those benefits.'" Wash.

Legal Found. v. Mass. Bar Found., 993 F.2d 962, 973 (1st Cir. 1993)

(quoting Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972)); see

also Parella v. Ret. Bd. of R.I. Employees' Ret. Sys., 173 F.3d 46,

58 (1st Cir. 1999) ("[P]laintiffs must first establish an

independent property right before they can argue that the state has

taken that right without just compensation.").

Assuming that the plaintiff can establish a

constitutionally protected property interest, the plaintiff must

next show that the challenged action "cause[d] an illegal taking of

th[at] interest[]." Wash. Legal Found., 993 F.2d at 974. The

Supreme Court has recognized two types of takings: physical

-51-
takings and regulatory takings. See Brown v. Legal Found. of

Wash., 538 U.S. 216, 233 (2003). As already noted, the JUA asserts

a physical taking, and we therefore confine our analysis to that

strand of takings law.29

"A physical taking occurs either when there is a

condemnation or a physical appropriation of property." Philip

Morris, Inc. v. Reilly, 312 F.3d 24, 33 (1st Cir. 2002) (en banc).

Physical takings challenges "involve[] the straightforward

application of per se rules," which means that "[w]hen the

government physically takes possession of an interest in property

for some public purpose, it has a categorical duty to compensate

the former owner." Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l

Planning Agency, 535 U.S. 302, 322 (2002); see also Lingle v.

Chevron U.S.A. Inc., 544 U.S. 528, 537 (2005) ("The paradigmatic

taking requiring just compensation is a direct government

appropriation or physical invasion of private property.").

"Temporary [physical] takings . . . are not different in kind from

permanent takings, for which the Constitution clearly requires

compensation." First English Evangelical Lutheran Church v. County

of L.A., 482 U.S. 304, 318 (1987) (quotation marks omitted).

29
Regulatory takings challenges involve a multiple-factor test that
was set forth in Penn Central Transportation Co. v. City of New
York, 438 U.S. 104 (1978). We note that Flores Galarza's brief
incorrectly invokes regulatory takings principles in response to
the JUA's physical takings argument.

-52-
 For purposes of satisfying the first prong of the

qualified immunity analysis, the JUA need not prove the taking of

a constitutionally protected property interest; it need only allege

such a taking. See Saucier, 533 U.S. at 201 (stating that the

first prong of the qualified immunity analysis is satisfied where

a constitutional right "would have been violated were the

allegations established"); Mihos v. Swift, 358 F.3d 91, 98 (1st

Cir. 2004) ("For a plaintiff to overcome a qualified immunity

defense, he must show that his allegations, if true, establish a

constitutional violation . . . ."). In accordance with our two-

step approach to takings claims, the JUA must first allege a

constitutionally protected property right to the funds in dispute.

The JUA argues that, pursuant to Law 253 and the 2002 Amendment,

"[t]he premiums collected and withheld by [Flores Galarza]," the

"interest derived from the withheld premiums," and the Overstated

Reserve Funds and Out-of-Pocket Funds – "are the private property

of the [JUA]." Second, the JUA must allege a taking of that

property. The JUA argues that Flores Galarza's appropriation of

the funds in dispute is equivalent to a "permanent physical

occupation and a per se taking for which just compensation must be

paid."

Flores Galarza, on the other hand, argues that the JUA's

takings claim fails both prongs of the takings analysis. According

to Flores Galarza, "the JUA cannot establish that it has a

-53-
recognizable property interest" in any of the funds in dispute or

that Flores Galarza's appropriation of these funds constitutes a

taking.

Taking all facts in the light most favorable to the party

asserting the injury, as we must at this threshold stage of the

qualified immunity analysis, Saucier, 533 U.S. at 201, we find that

the JUA alleges the taking of a constitutionally protected property

interest in most, but not all, of the funds in dispute under Law

253 and the 2002 Amendment.

3. The Insurance Premiums

a. The Earned Premiums

The JUA argues that "the premiums collected and withheld

by the [Secretary] are the private property of the [JUA]" under the

plain language of Law 253. According to the JUA, although the

premiums pass through Flores Galarza's hands before reaching the

JUA, the premiums are never funds of the Commonwealth. To the

contrary, the JUA argues, given that the JUA's responsibility for

the compulsory insurance comes into effect at the time the premiums

are paid to the Secretary of the Treasury, "the premium has to

belong to the [JUA] at that time." Flores Galarza, the JUA argues,

is thus merely a fiduciary who holds the premiums for the benefit

of the JUA, as demonstrated by the 2002 Amendment's reference to

the Secretary of the Treasury's "collection service performed in

favor of the [JUA]." P.R. Laws Ann. tit. 26, § 8055(c). Flores

-54-
Galarza, on the other hand, contends that Law 253 "does not entitle

JUA to ownership of the collected premiums until they are

transferred to it by [Flores Galarza]." Therefore, Flores Galarza

argues, because Law 253 does not state "when" the Secretary must

transfer the insurance premiums to the JUA, his retention of the

$173 million in premiums was not a withholding of private property

– it was merely a "temporary retention or delay" in the transfer of

funds which did not yet belong to the JUA.

In our view, Law 253 supports the JUA's claim of a

property right to that portion of the insurance premiums not owed

to privately insured motorists or their insurers ("Earned

Premiums"30). Law 253 created the JUA for "[t]he main purpose of

. . . provid[ing] the compulsory liability insurance to the

applicants for said insurance that have been rejected by private

insurers." Id. § 8055(b). As an insurer, the JUA is entitled to

the Earned Premiums. Law 253 gives the JUA the power to hold

property, and provides that the JUA "shall receive" premiums from

the Secretary and that the Secretary "shall transfer" these

premiums to the JUA. While the Secretary collects the insurance

premiums and holds them for some unspecified amount of time before

30
By "Earned Premiums," we mean the compulsory liability insurance
premiums paid by vehicle owners who are obtaining the required
coverage through the JUA rather than from a private insurer. We do
not use this term in its strict definitional sense, that is, "[t]he
portion of an insurance premium applicable to the coverage period
that has already expired." Black's Law Dictionary (8th ed. 2004).

-55-
relinquishing them to the JUA, the Secretary is not an insurer – he

is merely the custodian of these funds. As a custodian, the

Secretary has no entitlement to the premiums, and his woefully

undeveloped argument that the premiums do not vest in the JUA until

the Secretary transfers them does not convince us otherwise. Cf.

Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 162

(1980) ("[T]he State's having mandated the accrual of interest does

not mean the State or its designate is entitled to assume ownership

of the interest."). The JUA has successfully alleged an

entitlement to the Earned Premiums under Law 253, and therefore a

property interest in those funds. See id. at 161 (recognizing

interest earned on private funds as property entitled to protection

under Fifth Amendment); see also Brown, 538 U.S. at 235; Phillips

v. Wash. Legal Found., 524 U.S. 156, 170-72 (1998).

We thus proceed to the second step of the takings

analysis (i.e., whether the property was taken). The JUA argues

that Flores Galarza's withholding of the Earned Premiums

constituted a "permanent physical occupation and a per se taking

for which just compensation must be paid." Specifically, the JUA

contends that Flores Galarza physically took, albeit temporarily,

$173 million of its insurance premiums, before transferring a large

portion of those premiums to the JUA pursuant to the 2002

Settlement. The JUA's assertion of a property right in the Earned

Premiums, together with its allegation of a physical appropriation

-56-
of those funds, is sufficient to allege the taking of a

constitutionally protected property interest in those premiums

under the first prong of the qualified immunity analysis. See

Webb's, 449 U.S. at 164-65 (holding that taking of interest earned

on private funds was a taking).

b. Reserve Fund: the Duplicate Premiums

While the JUA's alleged property right to the Earned

Premiums is supported by Law 253, the same cannot be said for the

JUA's alleged property right to the duplicate premiums paid by

those already covered by privately obtained insurance policies

("Duplicate Premiums"). These premiums, Flores Galarza argues,

"constitute a double payment for the same insurance," and,

therefore, do not belong to the JUA, but rather belong to privately

insured motorists or their insurers who are entitled to

reimbursement. We agree.

Based on the law in effect at the time the premiums were

withheld, the JUA was obliged to return the Duplicate Premiums to

those requesting reimbursement. If no claim was made to these

premiums after seven years, that money would lapse to the general

fund of the Commonwealth Treasury. See P.R. Laws Ann. tit. 26, §§

2603, 2606-2607. Thus, even if no one claimed the Duplicate

Premiums within the requisite seven years, these funds became the

property of the Commonwealth – not the JUA. Just as the Secretary

is a custodian of the Earned Premiums for the benefit of the JUA,

-57-
the JUA is a custodian of the Duplicate Premiums for the benefit of

either those entitled to reimbursement or, if the premiums go

unclaimed, the Commonwealth.

The 2002 Amendment, which requires the JUA to transfer

the Duplicate Premiums to the Secretary after just two years,

explicitly recognizes the JUA's lack of a property right to the

Duplicate Premiums. The "Statement of Motives" section of the 2002

Amendment states that

during the existence of the Association,
certain funds have been accumulated that do
not belong to it . . . [which] results from
the fact that a great number of [privately
insured] consumers . . . pay the corresponding
[compulsory liability insurance] premium . . .
when they obtain the motor vehicle license for
the first time or when they renew it, but they
do not request the Association to reimburse
the money as is their right.

(Emphasis added.)

Although claiming a right to all of the insurance

premiums, the JUA concedes that a portion of the premiums collected

by the Secretary (i.e., the Duplicate Premiums placed in the

Reserve) "may belong to third parties: either motor vehicle owners

with private insurance or private insurers who reimbursed their

insureds." The JUA consequently admits that a large portion of

the $73 million Reserve is the property of others. Given the lack

of support for the JUA's claimed property right to the Duplicate

Premiums, the JUA fails to allege a taking of this portion of the

premiums under the first prong of the qualified immunity analysis.

-58-
 c. Reserve Fund: the Overstated Funds

Our determination that the JUA has not alleged a property

interest in the Duplicate Premiums does not extend to the remainder

of the Reserve Fund – the "Overstated Reserve Funds" – which

consists of the cushion set aside by the JUA to ensure that the

Reserve was large enough to meet all of the requests for

reimbursement by insurers who purchased private insurance. As

noted earlier, the $73 million Reserve held back by the

Commonwealth allegedly contained approximately $10 million in

excess funds – money that, as it turned out, was not needed for

reimbursement because fewer individuals than estimated had

purchased their own policies, which meant, in turn, that less of

the Reserve than anticipated constituted Duplicate Premiums.

According to the JUA, "since the [Overstated Reserve

Funds] came from the [JUA] and do not, in fact, belong to others,

they should have been accounted for as income for the [JUA]."

Flores Galarza contends that since these funds are merely portions

of the Reserve, which, in turn, "is merely an accounting tool" for

allocating the Duplicate Premiums, "the JUA has no proprietary

interest[] in the[se] moneys."

The "Statement of Motives" section of the 2002 Amendment,

which was in place prior to Flores Galarza's appropriation of the

Overstated Reserve Funds in November 2002, explicitly provides that

the $73 million Reserve consists of funds "that do not belong to it

-59-
[the JUA]" as the result of the double payment of insurance

premiums by some drivers. The 2002 Amendment therefore requires

the JUA to immediately transfer to the Secretary "the funds known

in its annual statement as 'Funds Retained by the Insurer Belonging

to Others'" – that is, the $73 million Reserve – and to continue

doing so every two years. There is, however, no carve-out for the

"cushion" portion of the Reserve that consists of Overstated Funds.

In fact, the 2002 Amendment provides that the Reserve funds

transferred to the Secretary necessarily include any "reserve

excess," and that this reserve excess "may be used as resources in

the General Fund." P.R. Laws Ann. tit. 26, § 8055(l).

The JUA argues, in essence, that to the extent the

Amendment directs the transfer of the Overstated Reserve Funds to

the Commonwealth, the provision effects a taking of the JUA's

property. Under Law 253, the JUA is obliged to insure drivers who

might otherwise be uninsurable; the premiums for that insurance are

initially collected by the Secretary. The JUA argues that all of

those collected funds, other than the Duplicate Premiums,

constitute the "Earned Premiums" and thus belong to it. Indeed,

the Insurance Commissioner's adjustment of the Reserve percentage

in 2001 to more accurately reflect the percentage of traditionally

insured vehicle owners indicates the Commonwealth's recognition

that the JUA is entitled to any funds above the amount representing

Duplicate Premiums. Notably, the Amendment identifies the funds to

-60-
be transferred to the Commonwealth every two years as funds

"Belonging to Others." Presumably, any such funds that do not

belong to others belong to the JUA. We therefore conclude that the

JUA has alleged the taking of a constitutionally protected property

interest in the Overstated Reserve Funds.

4. The Out-of-Pocket Funds

When Flores Galarza stopped transferring insurance

premiums to the JUA in 2000 in order to meet the cash-flow needs of

the Commonwealth, the JUA had to reimburse privately insured

drivers and their insurers out of its own pocket. While the JUA

presumably recouped some of its costs pursuant to the 2002

Settlement, the JUA alleges that there was still $13.6 million

outstanding – an amount which the JUA argues should have been set

off against the $73 million retained by Flores Galarza. The JUA

alleges that the $13.6 million in Out-of-Pocket Funds "used to

reimburse insurance premiums from January to September 2002 [is]

the private property of the [JUA]."

The parties do not dispute that the Out-of-Pocket funds

used by the JUA to reimburse third parties belonged to the JUA.

Accordingly, the JUA alleges a property right in the Out-of-Pocket

Funds. Turning to the second step of the takings analysis, the JUA

alleges that Flores Galarza physically appropriated $13.6 million

in Out-of-Pocket Funds from the JUA by retaining the full $73

million in Reserve funds. At this stage of the qualified immunity

-61-
analysis, the JUA's assertion of a property right to the Out-of-

Pocket Funds, together with its allegation of a physical invasion

of those funds, is sufficient to allege the taking of a

constitutionally protected property interest in those funds.

5. The Interest

Our determination that the JUA alleges a property right

to the Earned Premiums, the Overstated Reserve Funds and the Out-

of-Pocket Funds compels a similar conclusion with respect to the

interest lost as a result of the withholding of those monies. In

Phillips, the Supreme Court held that interest income generated by

client funds in IOLTA accounts was the private property of the

client under the common law rule that "interest follows principal."

524 U.S. at 165-72; see also Webb's, 449 U.S. at 162 ("The usual

and general rule is that any interest . . . follows the principal

and is to be allocated to those who are ultimately to be the owners

of that principal."). The fact that the Secretary is authorized to

hold the Earned Premiums for some time before turning them over to

the JUA is of no consequence. See Webb's, 449 U.S. at 162 ("That

lack of immediate right . . . does not automatically bar a claimant

ultimately determined to be entitled to all or a share of the fund

from claiming a proper share of the interest, the fruit of the

fund's use, that is realized in the interim."). By alleging a

property right in the Earned Premiums, the Overstated Reserve Funds

-62-
and the Out-of-Pocket Funds, the JUA also has alleged a property

right in the resulting lost interest.31

Turning to the second step of the takings analysis with

respect to interest, the JUA alleges that by temporarily

withholding the Earned Premiums, Flores Galarza physically took

$14.2 million in interest generated by them. See Parella, 173 F.3d

at 59 n.10 (stating that in order to demonstrate a taking of

interest, "plaintiffs have the burden of proving that they had a

constitutional right both to the principal (i.e., withheld

benefits) and to the interest on that principal"). The JUA's

assertion of a property right in the interest generated by the

Earned Premiums, together with its allegation of a physical taking

of that interest, is sufficient to allege the unconstitutional

taking of that interest under the first prong of the qualified

immunity analysis. See Brown, 538 U.S. at 235; Webb's, 449 U.S. at

164-65.32

31
It follows, of course, that the JUA does not possess a property
right to the interest lost as a result of the withholding of the
Duplicate Premiums, which we have held do not belong to the JUA.
See Parella v. Ret. Bd. of R.I. Employees' Ret. Sys., 173 F.3d 46,
62 (1st Cir. 1999) (holding that defendant's refusal to pay
interest on withheld benefits was not a taking because plaintiffs
did not demonstrate property right to benefits).
32
The allegation that Flores Galarza took the interest on the full
amount of the $173 million in Earned Premiums that was withheld
covers at least a portion of the interest generated by the
Overstated Reserve Funds and the Out-of-Pocket Funds, which were
part of that $173 million total. It appears that the $14.2 million
in claimed interest also includes the interest on the Overstated
Reserve and Out-of-Pocket Funds that were retained after the

-63-
 6. Summary of Analysis of the First Prong of the
Qualified Immunity Doctrine

The JUA has successfully alleged that Flores Galarza

committed a constitutional violation by taking its Earned Premiums,

Overstated Reserve Funds, Out-of-Pocket Funds, and the interest

generated thereon. The JUA has failed to allege a taking of the

Duplicate Premiums or the interest generated thereon. Therefore,

as we turn to the second prong of the qualified immunity analysis

(i.e., whether the impermissibility of the taking was clearly

established at the time of the violation), we exclude from our

analysis the Duplicate Premiums and the related interest.

B. Second Prong: Constitutional Right was "Clearly Established" at
Time of Violation

"The second question [of the qualified immunity analysis]

deals with fair warning; it asks whether the law was clearly

established at the time of the constitutional violation." Savard

v. Rhode Island, 338 F.3d 23, 27 (1st Cir. 2003) (en banc). This

requirement ensures that "officers are on notice that their conduct

is unlawful" before subjecting them to suit. Saucier, 533 U.S. at

206. One way of determining whether a constitutional right was

clearly established at the time of the alleged violation "is to ask

whether existing case law gave the defendants fair warning that

their conduct violated the plaintiff's constitutional rights."

Settlement. Such interest also is embraced within our conclusion
that the JUA adequately alleged an unconstitutional taking of the
interest.

-64-
Suboh v. Dist. Attorney's Office of Suffolk, 298 F.3d 81, 93 (1st

Cir. 2002). In conducting this inquiry, "[t]he court must canvass

controlling authority in its own jurisdiction and, if none exists,

attempt to fathom whether there is a consensus of persuasive

authority elsewhere." Savard, 338 F.3d at 28.

Significantly, "[t]his inquiry 'must be undertaken in

light of the specific context of the case, not as a broad general

proposition.'" Wilson, 421 F.3d at 56 (quoting Saucier, 533 U.S.

at 201). As we have noted, "[c]ourts must be careful not to permit

an artful pleader to convert the doctrine of qualified immunity

into a hollow safeguard simply by alleging a violation of an

exceedingly nebulous right."33 Limone v. Condon, 372 F.3d 39, 46

(1st Cir. 2004).

On the other hand, "[t]his exploration is not limited to

cases directly on point . . . . '[O]fficials can still be on

notice that their conduct violates established law even in novel

factual circumstances' . . . ." Savard, 338 F.3d at 28 (quoting

Hope v. Pelzer, 536 U.S. 730, 741 (2002)). In striking this

balance, we have noted that

the relevant legal rights and obligations must be
particularized enough that a reasonable official can be
expected to extrapolate from them and conclude that a
certain course of conduct will violate the law.

33
We note that, given the required specificity, "the bases for
the[] determinations [under the second and third prongs of the
qualified immunity analysis] often overlap." Savard, 338 F.3d at
27.

-65-
 Consequently, if the operative legal principles are
clearly established only at a level of generality so high
that officials cannot fairly anticipate the legal
consequences of specific actions, then the requisite
notice is lacking. The bottom line is that the qualified
immunity defense prevails unless the unlawfulness of the
challenged conduct is "apparent."

Savard, 338 F.3d at 28 (citation omitted) (quoting Anderson v.

Creighton, 483 U.S. 635, 640 (1987)).

The JUA argues that "[t]he contours of the Takings Clause

. . . are very straightforward in the case where the government

takes property from an individual for public use," as alleged here.

Relying upon cases which hold that uncompensated physical

appropriations of private property – including interest – are

unconstitutional under the Fifth Amendment, the JUA contends that

its "right to be justly compensated for the taking of its property"

was "clearly established" at the time of the challenged conduct.

Not surprisingly, Flores Galarza disagrees. While "it

[i]s clearly established that the taking of a property interest

without just compensation [i]s unconstitutional," he argues that

this proposition is too broad to satisfy the second prong of the

qualified immunity analysis. "The property rights claimed by the

JUA," Flores Galarza contends, "cannot be easily read into the law

enabling the JUA and the Compulsory Liability Insurance," and,

therefore, are not clearly established. We now test that

proposition.

-66-
 1. The Earned Premiums and Interest34

We already have concluded that the JUA, under Law 253,

alleges a property interest in the Earned Premiums and the interest

generated by those premiums. Because Law 253 was on the books at

the time Flores Galarza withheld the Earned Premiums and interest,

we conclude that the JUA's alleged property interest in those funds

was clearly established. Flores Galarza essentially acknowledged

as much (at least with respect to the Earned Premiums) by returning

the Earned Premiums to the JUA pursuant to the 2002 Settlement.

The law was not so clear, however, that Flores Galarza's

alleged withholding of the Earned Premiums and interest was a

taking. Law 253 does not establish when the Secretary must

transfer the premiums to the JUA. As noted by Flores Galarza,

[t]he compulsory insurance law is completely
devoid of a timetable that controls the
transfer of the premiums collected by the
Secretary of the Treasury to the JUA. The
statute simply states that the transfers must
be made. However, when these transfers must
be made is an entirely different question.
The JUA has never pointed to any substantive

34
The JUA does not explicitly allege a separate property right in
the interest on the Overstated Reserve and Out-of-Pocket Funds,
presumably because such an allegation is largely subsumed within
its interest allegation concerning the Earned Premiums. See supra
note 32. We therefore address interest in this section and the
next only in the context of the Earned Premiums. To the extent
interest on the Overstated Reserve and Out-of-Pocket Funds is not
covered by that discussion – i.e., for interest accruing on those
funds after the Settlement amount was transferred to the JUA – our
discussion of the principal amounts suffices to dispose of the
interest.

-67-
 source that establishes its entitlement to a
prompt transfer of the premiums.

(Citation omitted.) Under the second prong of the qualified

immunity analysis, it is not enough for the JUA to argue that

Flores Galarza physically took the Earned Premiums to which the JUA

was entitled under Law 253. Here, the JUA must demonstrate that

Law 253 entitled the JUA to the Earned Premiums within a specified

amount of time, such that the unlawfulness of Flores Galarza's

temporary withholding of the premiums was "apparent." This it

cannot do. Indeed, even if we imported into Law 253 a requirement

that the Secretary transfer the premiums to the JUA within a

reasonable period of time, that reasonableness requirement would be

too indefinite to allow us to conclude that the alleged taking was

clearly established. The unlawfulness of Flores Galarza's

temporary withholding of the Earned Premiums, therefore, was not

"apparent" under the statute. The right to interest inescapably is

tied to the JUA's entitlement to the premiums and therefore also

was not clearly established.

2. The Overstated Reserve Funds

The lack of clarity is even more apparent with respect to

the Overstated Reserve Funds, which was the portion of the Reserve

in excess of the amount necessary to reimburse insureds or insurers

who already had paid for coverage. Certainly after enactment of

the 2002 Amendment to the compulsory insurance law, which

specifically required the JUA to transfer to the Secretary all

-68-
funds held in the Reserve as of December 31, 2001, the law did not

clearly establish that the JUA had a property right in the $10

million of Overstated Reserve Funds or, indeed, that withholding

any of the designated Reserve of $73 million was an

unconstitutional taking. Whether, and how much, of that $10

million is in fact "excess" remains a matter of debate.

Although the Secretary began withholding the Overstated

Reserve Funds in 2000, along with the Earned and Duplicate

Premiums, the alleged $10 million excess was undifferentiated from

the balance of the Earned Premiums. As noted earlier, the JUA

essentially claims that the $10 million should be considered Earned

Premiums in which it holds a property right, and as such that money

is encompassed within our prior discussion. Therefore, the law was

not clearly established either before or after the 2002 Amendment

that the Secretary's retention of the Overstated Reserve Funds was

an unconstitutional taking.

3. The Out-of-Pocket Funds

The JUA argues that it has a clearly established right to

the $13.6 million in Out-of-Pocket Funds, which Flores Galarza

allegedly should have deducted from the $73 million Reserve he took

on behalf of the Commonwealth. Since it is undisputed that the

Out-of-Pocket funds belong to the JUA, the JUA's alleged property

right in the Out-of-Pocket Funds is clearly established. It also

was clearly established that the physical taking of property,

-69-
without compensation, violated the Constitution. See Tahoe-Sierra,

535 U.S. at 322-23 (noting that the Supreme Court's "jurisprudence

involving condemnations and physical takings is as old as the

Republic"). We therefore conclude that Flores Galarza's alleged

physical taking of the Out-of-Pocket Funds alleged a violation of

clearly established law.35

4. Summary of Analysis of the Second Prong of the
Qualified Immunity Doctrine

The JUA has successfully alleged that Flores Galarza's

taking of the Out-of-Pocket Funds violated clearly established

constitutional law. The JUA has failed to allege a clearly

established violation of law with respect to the Earned Premiums,

the interest generated by those premiums, or the Overstated Reserve

Funds. Therefore, as we turn to the third prong of the qualified

immunity analysis (whether a reasonable officer would have believed

that the alleged conduct violated clearly established law), we

focus only on the alleged taking of the Out-of-Pocket Funds.

C. Third Prong: Reasonable Official Would Believe that Action
Violated Clearly Established Right

35
While we note that the law was "clearly established," we take no
position on whether Flores Galarza's alleged appropriation of the
Out-of-Pocket Funds was, in fact, a taking without compensation.
"The inquiry into qualified immunity is separate and distinct from
the inquiry into the merits." Camilo-Robles v. Hoyos, 151 F.3d 1,
7 (1st Cir. 1998).

-70-
 "The final prong of the qualified immunity analysis,

often the most difficult one for the plaintiff to prevail upon, is

'whether an objectively reasonable official would have believed

that the action taken violated that clearly established

constitutional right.'" Wilson, 421 F.3d at 57-58 (quoting

Starlight Sugar, Inc. v. Soto, 253 F.3d 137, 141 (1st Cir. 2001)).

The qualified immunity inquiry recognizes that "[i]t is not always

evident at the time an official takes an action that a clearly

established right is involved. For example, the factual situation

might be ambiguous or the application of the legal standard to the

precise facts at issue might be difficult." Riverdale Mills Corp.

v. Pimpare, 392 F.3d 55, 61 (1st Cir. 2004). So long as an

"officer's mistake as to what the law requires is reasonable,"

Saucier, 533 U.S. at 205, the officer will be entitled to qualified

immunity.

The JUA argues that "[t]he fact that the [JUA's] property

was taken without any compensation whatsoever – and actually, to a

very large cost to the [JUA] – would have alerted any reasonable

official that he was violating [the JUA's] rights under the Takings

Clause." We disagree.

After the Secretary discontinued the transfer of premiums

in 2000, the JUA was forced to pay out a total of $13.6 million of

its own funds to third parties seeking reimbursement. The 2002

Amendment was subsequently enacted, which required the JUA to pay

-71-
to the Secretary $73 million in Reserve funds. One month later,

pursuant to the 2002 Settlement, Flores Galarza made a "massive

transfer of all the funds [he] had retained since [he] stopped

making the transfers," but he held back the $73 million in Reserve

funds that the JUA was required to pay the Secretary under the 2002

Amendment. As Flores Galarza argues, a reasonable officer in these

circumstances would have believed that he "had a law mandate,

stemming from the [2002 Amendment], to retain for use by the

Department of Treasury the Reserve Fund recognized by JUA as of

December 31, 2001. Any officer in his shoes would have acted as he

did in immediately retaining the full Reserve Fund amount without

any compensation" to the JUA. Nothing in the 2002 Amendment

suggests that funds owed to the JUA had to be deducted from the $73

million Reserve, and that the failure to do so would constitute a

taking. As Flores Galarza argues, "money [is] fungible in nature."

Thus, a reasonable officer could have believed that the 2002

Amendment required "the JUA [] to replenish the Reserve Fund" and

then debit the Out-of-Pocket Funds "from this 'new' Reserve Fund

. . . and not from the [$73 million] Reserve allocation recognized

as of December 31, 2001." In that way, the JUA would be made whole

with respect to the Out-of-Pocket Funds. Because a reasonable

officer would not have believed that retaining $13.6 million in

Out-of-Pocket Funds violated the JUA's clearly established rights,

-72-
we conclude that Flores Galarza is entitled to qualified immunity

on this claim.

VI.

We summarize the essential points of our analysis. The

JUA has standing to sue Flores Galarza under 42 U.S.C. § 1983, and

the Supreme Court's prudential ripeness requirements for takings

claims pose no barrier to our consideration of the case. We may

not, however, address res judicata issues in this interlocutory

appeal. Flores Galarza is amenable to suit in his official

capacity under the Eleventh Amendment because the JUA seeks

prospective declaratory and injunctive relief against him in that

capacity, namely: a declaration that his taking of insurance

premiums, interest, and other funds to alleviate the cash-flow

problems of the Commonwealth violates the Constitution; and an

injunction enjoining him from withholding insurance premiums and

from enforcing the terms of the 2002 Amendment to the extent they

amount to an unconstitutional taking. Notwithstanding the

indistinct line between official- and personal-capacity suits

against government officials, we conclude that the JUA seeks to

hold Flores Galarza liable in his personal capacity for damages.

We conclude, however, that he is immune from such liability.

Specifically, because the law was not clearly established that

Flores Galarza effected an unconstitutional taking of the withheld

insurance premiums, the interest generated by those premiums, or

-73-
the Overstated Reserve Funds, he is entitled to qualified immunity

on these claims. Additionally, because a reasonable officer would

not have believed that the failure to reimburse the JUA for the

Out-of-Pocket Funds violated the JUA's rights, qualified immunity

forecloses a damages remedy against him on that claim as well.

In conclusion, we affirm the district court's decision

that the JUA has standing to sue Flores Galarza, and that Flores

Galarza is amenable to suit in his official capacity under the

Eleventh Amendment. We reverse the district court's decision that

Flores Galarza is not entitled to qualified immunity from suit in

his personal capacity. Each party shall bear its own costs of

appeal.

So ordered.

- Concurring Opinion Follows -

-74-
 HOWARD, Circuit Judge, concurring in the judgment. One

part of this appeal concerns a takings claim under the Fifth and

Fourteenth Amendments of the federal Constitution against Juan

Flores Galarza, a state official acting in his individual capacity,

for withholding millions of dollars from the JUA, a state-created

pool of insurers. The lead opinion concludes that a viable takings

claim may exist against state officials acting in their individual

capacities, but that Flores Galarza is entitled to qualified

immunity because his withholding funds was reasonable in light of

the unique circumstances present. Ante at 67-69. I am not

entirely convinced that federal takings claims may ever properly

lie against state officials acting in their individual capacities.

Cf. Monell v. N.Y City Dep't of Social Servs., 436 U.S. 658, 687

(1978) ("It beggars reason to suppose that Congress would have

exempted municipalities from suit [in enacting 42 U.S.C. § 1983],

insisting instead that compensation for a taking come from an

officer in his individual capacity rather than from the government

unit that had the benefit of the property taken."); Langdon v. J.J.

Swain, 29 Fed. Appx. 171, 172 (4th Cir. 2002) ("[T]akings actions

sound in tort against governmental entities rather than individual

state employees in their individual capacities."). But we should

not be resolving this difficult question here because the JUA's

individual capacity claim against Flores Galarza is not ripe under

-75-
Williamson County Regional Planning Commission v. Hamilton Bank of

Johnson City, 473 U.S. 172, 195 (1985).

In Williamson County, the Supreme Court held that a

federal takings claim is not ripe until the claimant has met two

preconditions. See 473 U.S. at 186, 194-95. First, in regulatory

takings cases, the claimant must show that the government entity

charged with enforcing the regulation at issue has rendered a final

decision on the regulation's meaning ("the finality requirement").

See id. at 186; Pascoag Reservoir & Dam, LLC v. Rhode Island, 337

F.3d 87, 91 (1st Cir. 2003) (stating that the finality requirement

does not apply in physical takings cases). Second, in regulatory

and physical takings cases, the claimant must pursue compensation

for the alleged taking through state processes, so long as the

state provides a "reasonable, certain and adequate provision for

obtaining compensation" ("the litigation requirement"). Williamson

County, 473 U.S. at 194-95; Pascoag, 337 F.3d at 92. The

litigation requirement follows from the principle that no federal

takings violation occurs until "just compensation" has been denied

by the state. See Suitum v. Tahoe Reg'l Planning Agency, 520 U.S.

725, 733 (1997).

My disagreement with the lead opinion's treatment of the

ripeness issue concerns its application of the litigation

-76-
requirement.36 According to the lead opinion, claimants must avail

themselves only of state process to recover compensation if the

state has adopted a process "particularly aimed at providing

compensation when government action effects a taking" and that

"such [process does] not include litigation of a state takings

claim [under the state constitution] or any general remedial cause

of action under state law." Ante at 26 & 28. Based on this

reasoning, the JUA's claim against Flores Galarza is deemed ripe

because Puerto Rico does not offer a specific administrative

process or cause of action to seek "compensation in the unusual

circumstance of an alleged unconstitutional taking arising from the

government's appropriation of funds." Id. at 29.

There is no support in Supreme Court precedent for the

conclusion that claimants are relieved of the litigation

requirement unless the state has adopted specific processes

(presumably by way of statute) through which such compensation may

be recovered. Indeed, Williamson County suggests just the

opposite. The Williamson County Court derived the litigation rule

from procedural due process cases holding that a plaintiff does not

have a due process claim "unless or until the state fails to

provide an adequate remedy for the property loss." Id. at 195

(citing Hudson v. Palmer, 468 U.S. 517, 532 n.12 (1984)). In the

36
The finality requirement does not apply because the JUA seeks
compensation for a physical, rather than a regulatory, taking.
Pascoag, 337 F.3d at 91.

-77-
due process context, the Court has held that common-law remedies

available in state-court actions are adequate. Hudson, 468 U.S.

534-35. Yet the causes of action recognized as adequate in Hudson

are exactly the sort of "general remedial causes of action under

state law" that the lead opinion deems insufficient here. Ante at

26.

Several other federal courts have rejected my colleagues'

limitation on the litigation requirement. The Second Circuit has

held that a federal takings claim was not ripe under Williamson

County because the claimant had not brought a state-court action

seeking recovery under the takings clause of the Connecticut

Constitution. Villager Pond, Inc. v. Town of Darien, 56 F.3d 375,

379-80 (2d Cir. 1995); see also Southview Assocs. v. Bongartz, 980

F.2d 84, 100 (2d Cir. 1992) (concluding that takings case was not

ripe because plaintiff did not bring claim under Vermont

Constitution's takings clause seeking compensation).37 Similarly,

the Ninth Circuit ordered dismissal of a federal takings claim as

not ripe where the claimant did not bring an action for recovery

under the Hawaii Constitution's takings clause. Austin v. City &

County of Honolulu, 840 F.2d 678, 681 (9th Cir. 1988). And the

Fifth Circuit rejected a takings claim on ripeness grounds where

37
Indeed, in Southview, 980 F.2d at 100, the court explicitly
rejected the argument that Williamson County's litigation
requirement mandated the claimant to pursue state processes only if
the state provided a specific statutory avenue of relief.

-78-
the claimant could have, but did not, bring a state-court nuisance

action to obtain compensation. See Samaad v. City of Dallas, 940

F.2d 925, 935 (5th Cir. 1991); accord Wiltzius v. Town of New

Milford, 453 F. Supp. 2d 421, 431 (D. Conn. 2006) (takings claim

not ripe because claimant did not bring state court action under

state constitution to seek compensation); Franco v. Dist. of

Columbia, 456 F. Supp. 2d 35, 42 (D.D.C. 2006) (takings claim not

ripe where claimant failed to bring contract action in state court

to obtain compensation); Bender v. City of Clearwater, 2006 WL

1046944, at *23 (M.D. Fla. Apr. 19, 2006) ("Plaintiff must look to

state remedies for compensation for the alleged taking, whether

that remedy is titled 'an inverse condemnation' claim or something

else, such as a suit for damages or trespass, before he can pursue

his takings claim in federal court."). These cases amply

demonstrate that adequate state process under the litigation

requirement encompasses more than just those state processes

"particularly aimed at providing compensation" for a government

taking.38 Ante at 26.

38
I understand that the lead opinion seeks to limit the litigation
requirement because of its concern that preclusion principles will
prevent takings claims from being litigated in federal court, if
claimants must pursue state remedies in state court. See ante at
28. This was the view of four Justices of the Supreme Court in San
Remo Hotel v. City & County of San Francisco, 545 U.S. 323, 349
(Rehnquist C.J., concurring) who proposed revisiting the litigation
requirement. The majority, however, disagreed, concluding that "it
is hardly a radical notion to recognize that . . . a significant
number of plaintiffs will necessarily litigate their federal
takings claims in state courts." Id. at 347. As the Court has

-79-
 In light of this understanding of the litigation

requirement, the remaining question is whether Puerto Rico provides

"an adequate procedure" for the JUA to seek compensation. The

burden of proving that no adequate state process is available rests

with the JUA. See Liberty Mut. Ins. Co. v. La. Dep't of Ins., 62

F.3d 115, 117 (5th Cir. 1995). It is not enough to show only that

the adequacy of state process remains unsure and undeveloped; it

must be shown to be unavailable. See Culebras Enters. Corp. v.

Rivera Rios, 813 F.2d 506, 513-15 (1st Cir. 1987) (holding that

taking claimant was required to seek compensation from the Puerto

Rico courts even though the Puerto Rico Supreme Court had never

awarded damages in an inverse condemnation action); accord, e.g.,

rejected this concern as a basis for revisiting the litigation
requirement, it does not serve as an adequate basis for
substantially limiting it in this circuit.

The lead opinion also supports its limiting construction of
the litigation requirement by suggesting that requiring claimants
to pursue state constitutional takings claims or other general
causes of action would require claimants to exhaust state remedies,
which is inconsistent with Supreme Court caselaw interpreting 42
U.S.C. § 1983. E.g., Pasty v. Fla. Bd. of Regents, 457 U.S. 496
(1982) The Williamson County Court accepted this argument for
purposes of the finality requirement, by holding that a claimant
need not exhaust judicial review after a state agency has
definitively interpreted a regulation. 473 U.S. at 192-93. But
the Court did not endorse a similar limiting principle for the
litigation requirement. Moreover, Washlefske v. Winston, 234 F.3d
179, 183 (9th Cir. 2000), relied on by the lead opinion for its
exhaustion analysis, states that exhaustion is not required to meet
the finality requirement; it says nothing about the scope of the
litigation requirement.

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Villager Pond, 56 F.3d at 380; S. Pac. Transp. Co. v. City of Los

Angeles, 922 F.2d 498, 505 n.8 (9th Cir. 1990).

Puerto Rico's Constitution includes a takings provision,

See P.R. Const. Art. II, § 9, and Flores Galarza suggests that the

JUA could seek compensation through a mandamus action. It is not

entirely clear that the JUA could obtain the compensation that it

seeks through either an action under the Commonwealth's

Constitution or some other cause of action. But it has not been

shown that such relief is unavailable either. In these

circumstances, the JUA was required to pursue its state-law

remedies before turning to the federal Constitution for relief.

E.g., Southview Assocs., 980 F.2d at 100. Because the JUA did not

pursue compensation through the state system, its federal claim

against Flores Galarza, in his individual capacity, should have

been dismissed on ripeness grounds.39

39
I agree that, to the extent the JUA is pursuing facial challenges
to Puerto Rico statutes, the litigation requirement is not
implicated. San Remo, 545 U.S. 345-46.

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