Demanda Confiscaciones octubre 2011

8/4/2019 Demanda Confiscaciones octubre 2011

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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

UNIVERSAL INSURANCE COMPANY;MAPFRE PRAICO INSURANCE

COMPANY; COOPERATIVA DE

SEGUROS MULTIPLES DE PUERTORICO

Plaintiffs

v.

COMMONWEALTH OF PUERTO RICO;DEPARTMENT OF JUSTICE OF THE

COMMONWEALTH OF PUERTO RICO;GUILLERMO SOMOZA COLOMBANI in

his official capacity as SECRETARY OF

JUSTICE

Defendants

CIVIL NO.

DECLARATORY JUDGMENTPERMANENT INJUNCTION

COMPLAINT FOR DECLARATORY JUDGMENT

AND PERMANENT INJUNCTION

TO THE HONORABLE COURT:

COME NOW Universal Insurance Company, MAPFRE PRAICO Insurance Company

and Cooperativa de Seguros Multiples de Puerto Rico, through the undersigned attorneys, and

very respectfully Allege and Pray as follows:

NATURE OF THE ACTION

1. On July 12, 2011 Law Number 93 of July 13, 1988 known as Ley Uniforme deConfiscaciones (hereinafter Asset Forfeiture Law of 1988) was repealed. Said law

was substituted by a bill introduced by the President of the Senate of the

Case 3:11-cv-01968-GAG Document 1 Filed 09/30/11 Page 1 of 15


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Commonwealth of Puerto Rico, Senator Thomas Rivera Schatz, (P. del S. 897),

entitled Ley de Confiscaciones de 2011, (hereinafter Asset Forfeiture Law of

2011).

2. Contrary to federal law where assets are first seized and later subject to forfeiture inadministrative, civil or criminal proceedings, both the Asset Forfeiture Law of 1988

and the Asset Forfeiture Law of 2011 provide for the seizure and forfeiture of the

assets without any due process.

3. It is after the asset is forfeited that a rightful claimant is allowed to sue theCommonwealth in order to challenge a forfeiture that has already occurred.

4. Under the Asset Forfeiture Law of 2011, insurance companies, such as the appearing parties, are no longer allowed to appear on their own behalf in order to challenge

forfeitures. Instead they are now forced to appear only in representation of the

owners of the assets. This constitutes an impermissible barrier to the rights

guaranteed by the Constitution of the United States of America.

JURISDICTION

5. This Court has jurisdiction to entertain this action pursuant to 28 U.S.C. Section 1331as the district courts have original jurisdiction of all civil actions arising under the

laws or treaties of the United States.

6. Venue is proper in this judicial district pursuant to 28 U.S.C. Section 1391 (a) because the defendants have their principal place of business in this District and

because all the actions and events that give rise to the claims and causes of action set

forth herein have occurred in this District.



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7. The parties confront an actual controversy, justiciable in nature, which respect towhich the plaintiffs seek relief by this Court.

8. Plaintiffs do not seek monetary compensation for which reason the present action isnot barred by the Eleventh Amendment to the Constitution of the United States.

THE PARTIES

9. Plaintiff Universal Insurance Company (Universal) provides insurance services inthe Commonwealth of Puerto Rico. Universal was created pursuant to the Laws of the

Commonwealth of Puerto Rico and is licensed by the Office of Commissioner of

Insurance of Puerto Rico. Universal issues insurance policies to cover a number of

risks, including asset forfeiture.

10. Plaintiff MAPFRE PRAICO Insurance Company, (MAPFRE) is a domesticcorporation organized and registered pursuant to the Laws of the Commonwealth of

Puerto Rico. It has been licensed by the Office of Commissioner of Insurance of

Puerto Rico to operate as a property and casualty insurance carrier in Puerto Rico.

MAPFRE issues insurance policies to cover a number of risks, among them, asset

forfeiture.

11. Plaintiff Cooperativa de Seguros Multiples de Puerto Rico (Multiples) providesinsurance services in the Commonwealth of Puerto Rico. Multiples was created

pursuant to the Laws of the Commonwealth of Puerto Rico and is licensed by the

Office of Commissioner of Insurance of Puerto Rico to operate as a property and

casualty insurance carrier in Puerto Rico. Multiples issues insurance policies to cover

a number of risks, including asset forfeiture.



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12. The Commonwealth of Puerto Rico is a corporate sole and political structure thatgoverns over the Island of Puerto Rico ( a territory of the United States), pursuant to

the authority vested by the Congress of the United States of America. As such, the

Commonwealth is subject to federal laws (except for certain internal revenue laws

and others that the Congress has chosen not to extend to the territory) and the

Constitution of the United States of America.

13. The Department of Justice is a Department of the Commonwealth of Puerto Rico andits Secretary a member of the Constitutional Cabinet. The Secretary of Justice is the

head of the Department of Justice, executes the mandates of the Asset Forfeiture Law

of 2011 and presides over the Junta de Confiscaciones (Asset Forfeiture Board).

The Secretary of Justice is also an indispensable party whenever the constitutionality

of a law of the Commonwealth of Puerto Rico is challenged in court.

THE FACTS

14. The appearing plaintiffs provide insurance coverage to banks and financialinstitutions that finance the purchase of motor vehicles by the general public.

15. Among the risks covered by the appearing plaintiffs is the risk of asset forfeiture.16. When an insured vehicle is seized and then forfeited in the Commonwealth of Puerto

Rico, payment is made to the policy holder (usually a bank or a financial institution)

by the plaintiffs. Under the laws of Puerto Rico the insurance company has a right of

subrogation. That is, that the insurer is placed in the same legal position as the bank

or financial institution that financed the vehicle and is entitled to recover the balance

owed to the bank by the proprietor.



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17. The law in Puerto Rico recognizes a lien that a lender can place over a financed motorvehicle. Said lien is recorded in the license and title of the vehicle and provides public

notice of the existence of a debt guaranteed by the vehicle. The rights over the motor

vehicle resulting from this lien supersede the rights of any other claimant.

18. In forfeiture actions instituted by the United States, the owners, lien holders and anyother entity or individual with a claim are notified. Usually a motor vehicle seized by

federal authorities is not forfeited unless equity will result. Accordingly, the rights of

lien holders are immediately recognized by federal authorities. In the event that a

forfeiture action is filed, the liens of innocent third parties are recognized as a matter

of course.

19. Under the Asset Forfeiture Law of 1988, when a vehicle was seized and forfeited,claimants were forced to file an action to challenge the forfeiture. Persons or entities

notified of the forfeiture had thirty (30) days to challenge the forfeiture decree.

Financial institutions, insurance companies and other claimants had the right to

challenge the forfeiture through the filing of an action in court. Insurance companies

either provided legal assistance to the lien holders or subrogated in their interest when

payment was made to the lien holder pursuant to the terms of the insurance policy,

which terms, are contained in policy forms that have been approved for use by the

Office of the Commissioner of Insurance of Puerto Rico.

20. Although the vehicles were seized and forfeited without affording any prior dueprocess to the owner or claimants, the Asset Forfeiture Law of 1988 guaranteed after-

the-fact due process.



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21. The new asset forfeiture law, Asset Forfeiture Law of 2011, affords no due process tofinancial institutions and insurance companies, neither before nor after the seizure and

forfeiture. Under the new law, in the event there is forfeiture over a motor vehicle

covered by an asset forfeiture insurance policy, the insurance company can only file a

complaint in court challenging the forfeiture on behalf of the owner of the vehicle. In

addition, the insurance company has to post bond in order to be able to challenge the

forfeiture.

22. The Asset Forfeiture Law of 2011 does not recognize, in the case of the forfeiture ofmotor vehicles, the right of insurance companies to appear on their own behalf as

innocent third parties.

23. In addition, the Asset Forfeiture Law of 2011 requires that a hearing to show standingbe held. At said hearing the owner must show that he or she had legal possession,

domain and control of the vehicle. If such a showing is not made the forfeiture is

dismissed.

24. Since the herein appearing plaintiffs do not comply with such requirements, they aredenied standing to challenge the illegal government taking as innocent third parties

with an interest in the vehicle.

25. Furthermore, since the vast majority of the forfeiture actions involve vehicle ownersthat are charged with a crime, the hearing to show standing would require such

owners to allow the insurance companies to act in their behalf and, then, waive their

Fifth Amendment rights, by appearing in a standing hearing to admit possession and

control of the vehicle at the time of the offense.



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26. Additionally, the Asset Forfeiture Law of 2011 contains a retroactivity clause. As aconsequence of the retroactivity clause, the Department of Justice of the

Commonwealth of Puerto Rico has been filing motions to dismiss the complaints

filed by the plaintiffs under the Asset Forfeiture Law of 1988 to recover the vehicles

insured by them.

27. Asset forfeiture laws are penal in nature. Since forfeiture actions are quasi-criminal procedures, all the Fourth Amendment and Fifth Amendment protections are

applicable. Also, States are expressly forbidden from implementing ex post facto

criminal laws by Article 1 Section 10 of the United States Constitution. Hence, the

implementation of a retroactivity clause violates rights guaranteed by the Constitution

of the United States.

28. In contrast with the Asset Forfeiture Law of 1988, which placed the burden of proofin the government to show that the asset is subject to forfeiture, the Asset Forfeiture

Law of 2011 shifts the burden of proof from the Commonwealth of Puerto Rico to the

owner of the property. This presumption is asub silentio admission of a taking, since

it transfers ownership of the property from the owner to the government, without any

prior due process.

29. Also, the Asset Forfeiture Law of 2011 requires that innocent claimants, such as theappearing plaintiffs, place a bond in order to contest the forfeiture. This is also

unconstitutional because plaintiffs, as innocent third parties with registered rights and

liens should not have to post bond to recover and protest an illegal taking by the

government, done in spite of plaintiffs recorded rights and despite the governments

knowledge of such rights.



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30. The Asset Forfeiture Law of 2011 fails to recognize the fact that the rights of theappearing plaintiffs are completely independent from the rights of the owner of the

asset. Regardless of whether the owner of the asset may have used the same in

violation of law, the property rights of the plaintiffs must be recognized and due

process must be granted before a taking.

31. Due process that depends on the appearance in court of the owner of the asset andhis/her incriminatory testimony in a hearing to show standing is a violation of due

process. Under the Constitution of the United States no one may be divested of a

property interest without due process.

32. Due to the approval of the Asset Forfeiture Law of 2011 the plaintiffs are divestedfrom their property interest, without due process. At the present, the Commonwealth

of Puerto Rico has moved to dismiss many of the civil actions filed by the plaintiffs to

challenge forfeitures in actions which were pending in court at the time of approval of

the Asset Forfeiture Law of 2011. The attempt to dismiss these actions is based on

the retroactivity clause and the failure of the new law to provide due process to the

plaintiffs. None of these motions to dismiss has been yet ruled upon by any of the

Courts in Puerto Rico.

33. Insurance coverage is provided through insurance policy forms or endorsements thatare approved for use in Puerto Rico by the Office of the Commissioner of Insurance.

34. At the time the Asset Forfeiture Law of 2011 was enacted, plaintiffs were using andhad issued and had in effect more than Four Hundred Thousand (400,000) policies or

endorsements covering asset forfeiture, based on prior approval by the Office of the



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Commissioner of Insurance and the legal warranties existing at the time under the

Asset Forfeiture Law of 1988.

35. These policies and endorsements are valid contracts regulated by law that createduties and obligations between the insurance company and the insured. The Asset

Forfeiture Law of 2011, materially and adversely alters the rights of the plaintiff

insurance companies, since they are now forced to afford coverage while they are

precluded from exercising their subrogation rights, as per the terms of their issued

policies.

FIRST CAUSE OF ACTION: DECLARATORY JUDGMENT UNDER THE FIFTH

AMENDMENT TO THE CONSTITUTION OF THE UNITED STATES

36. Plaintiffs hereby incorporate the preceding paragraphs 1-35 in their entirety.37. Plaintiffs seek a declaratory judgment rendering unconstitutional the Asset Forfeiture

Law of 2011 under the Fifth Amendment to the Constitution of the United States.

38. Minimal due process constitutional requirements in forfeiture cases entail notice tointerested parties; a hearing to determine whether the claimants interest in the

property should be protected from government action; and time for the interested

parties to appeal the courts ruling.

39. Absent exigent circumstances, procedural due process requires pre-seizure notice andan opportunity to be heard.

40. The Fifth Amendment to the Constitution of the United States provides in part thatNo person shallbe deprived of life, liberty or property, without due process of law;

nor shall private property be taken for public use, without just compensation. The

Asset Forfeiture Law of 2011 denies these basic principles when it denies the



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appearing plaintiffs the right to be notified of the seizure and forfeiture and the right

to claim the property seized on their own behalf.

41. Due to the fact that the plaintiffs have subrogation rights over certain assets seizedand forfeited by the Commonwealth of Puerto Rico, they have property rights

protected by the Constitution of the United States. In addition, plaintiffs have

payment obligations that under current policy terms, and as contractually agreed with

insured, entail the right to directly initiate judicial proceedings to challenge any

forfeiture over insured assets. Unavoidably, insurance companies are interested

parties whose property rights are affected in any forfeiture process.

42. Federal asset forfeiture laws guarantee constitutional rights of all property owners andthat of claimants. In so doing, they follow strict constitutional principles requiring

notice to claimants and the opportunity to be heard. Such is the case of 21 U.S.C.

Section 881, which complies with all constitutional requirements of due process.

Furthermore, in recognition of the rights of lien holders, the United States Department

of Justice has established expedited procedures governing the settlement and payment

of perfected liens.

43. Asset forfeiture laws are penal in nature since by design, they are enacted to punish acriminal conduct. Frequently, the seizure of an asset is related to a criminal action

against its owner. Requiring an owner or individual with possession of the asset to

testify in the procedure challenging the forfeiture, in itself, violates the Fifth

Amendment to the Constitution of the United States. Furthermore, plaintiffs rights

as claimants, as per the Asset Forfeiture Law of 2011, depend on persuading the

owner of the vehicle to waive his or her constitutional rights, an impermissible



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constitutional impingement on, both, the rights of the owner and the property rights of

the appearing plaintiffs. Under the new law, persons are therefore asked to waive

their right to exercise one constitutional right in order to protect another.

44. Federal asset forfeiture law mandates that only in cases in which a lender hasknowledge of the criminal activity that served as ground of the seizure, the lender will

forfeit its property rights. In contrast, the Asset Forfeiture Law of 2011 requires the

lender to present a defense on behalf of the owner of the vehicle, instead of allowing

the lender to appear and defend its interest as an innocent third party. Hence, no due

process is guaranteed to the owner of the vehiclewho would have to enter

incriminatory testimony to defend his/her right-- nor to the lender, who is barred from

appearing in the proceedings to defend its own interests as an innocent third party,

without knowledge of the criminal activity.

45. Plaintiffs rights under the Fifth Amendment to the Constitution of the United Statesare wrongfully affected by the Asset Forfeiture Law of 2011, because it fails to

recognize the property interests of third parties such as insurance companies and it

also denies the insurance companies the right to receive due notice and opportunity to

be heard and defend their property rights. The Asset Forfeiture Law of 2011 must be

declared invalid under the Constitution of the United States.

SECOND CAUSE OF ACTION: DECLARATORY JUDGMENT UNDER

ARTICLE 1, SECTION 10 OF THE CONSTITUTION OF THE UNITED STATES

46. Plaintiffs hereby incorporate the preceding paragraphs 1-45 in their entirety.



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47. Plaintiffs also seek a declaratory judgment rendering unconstitutional the AssetForfeiture Law of 2011 under Article I Section 10 of the Constitution of the United

States.

48. The Asset Forfeiture Law of 2011 became effective as of July 12, 2011. By its ownterms it provides that all forfeiture procedures initiated under Law Number 93 of July

13, 1998 as amended will be controlled by the provisions of the newly enacted Law

of 2011. It further states that it shall have retroactive effect upon its approval.

49. Article I, Section 10 of the Constitution of the United States provides in part [N]ostate shallpass any Bill of Attainder, ex post fact, or law impairing the Obligation

of Contracts The retroactive clause of the Asset Forfeiture Law of 2011 violates

this constitutional principle.

50. Plaintiffs had collectively issued and had in force more than 250,000 endorsementsand/or policies covering asset forfeiture risks as of July 12, 2011 when the Asset

Forfeiture Law of 2011 was enacted with retroactive effect. These endorsements are

contained in forms that are approved for use by the Office of the Commissioner of

Insurance of Puerto Rico.

51. Insurance policies are contracts regulated by law. Policy forms cannot be used oramended unless the same have been approved by the Office of the Commissioner of

Insurance of Puerto Rico.

52. Plaintiffs insurance contracts insuring against forfeiture risks affect a variety ofpolicy holders ranking from financial institutions, commercial groups or individuals

who insure their properties such as automobiles.



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53. These contracts that were in effect at the time the Asset Forfeiture Law of 2011 wasapproved provide for the right of the insurance company to receive notice of the

forfeiture process as an obligation of the insured which generally may be another

third party such as a financial institution.

54. Insurance policies further provide for the right of the insurance company to initiate a judicial proceeding to challenge any given forfeiture case. Payment of policy

benefits in many of these cases depends on the ability of the insurance company to

effectively receive notice and participate in judicial proceedings to challenge the

validity of the forfeiture process.

55. Since the Forfeiture Law of 2011 was approved, the Department of Justice has movedto dismiss many of the outstanding cases that were filed while the Forfeiture Law of

1998 was in effect, claiming the insurance companies no longer have standing to sue

in any given forfeiture case, unless they do so on behalf of the property owner.

56. These actions and new procedural scheme created by the Forfeiture Law of 2011directly go against clearly established policy terms that were in effect as valid

contracts as of July 12, 2011. The ability of the insurance companies to protect their

property rights in forfeiture procedures, by directly initiating judicial procedures to

challenge forfeitures is part of the risk bearing function the insurance companies

assume when a forfeiture risk is written along with other policy terms. By

subtracting the ability to challenge forfeiture procedures as envisioned in policy

forms, the Asset Forfeiture Law of 2011 materially and unfairly impairs the bilateral

character of the insurance contract, since insurance carriers may still be compelled to



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pay a loss, but are curtailed in their exercise of contractual options to mitigate such

loss.

57. The new Asset Forfeiture Law of 2011 unduly alters the contractual terms of policies by retroactively imposing obligations upon insurers that are impossible to be

complied with because of the passage of time or because in order to comply with the

new requirements, it would cause the insurers to act against the terms of their

approved policy forms.

58. By its own literal terms, and its plain effect on existing insurance policies that areregulated by law, and existing judicial procedures as of July 12, 2011, the Asset

Forfeiture Law of 2011 violates Article I, Section 10 of the United States Constitution

and must be repealed.

THIRD CAUSE OF ACTION: PERMANENT INJUNCTION

59. Plaintiffs hereby incorporate the preceding paragraphs 1-58 in their entirety.60. Plaintiffs request that the defendants be permanently enjoined from violating their

constitutional right to a due process.

61. In particular, Plaintiffs request that the defendants be enjoined from prohibitingplaintiffs to appear on their own behalf, as claimants, in all asset forfeiture actions

where they have an interest or where they represent the interest of an insured financial

institution.

62. Plaintiffs also demand that the defendants be enjoined from forcing plaintiffs topresent defenses on behalf of the owner of the property and that they be instructed to

limit their review to the knowledge that the claimant had of the criminal activity that

served as basis for the seizure and forfeiture.



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63. Plaintiffs finally demand that defendants be enjoined from enforcing the AssetForfeiture Law of 2011 in all aspects that it violates rights guaranteed by the

Constitution of The United States of America.

WHEREFORE, in view of the above, the appearing defendants request a Declaratory

Judgment and a Permanent Injunction pursuant to the terms herein set forth.

RESPECTFULLY SUBMITTED, this 30th

day of September, 2011.

CARLO & PRATS, P.S.C.

1509 Lpez Landrn-10th Floor

San Juan, Puerto Rico 00911

Tel: (787) 721-6010Fax: (787) 766-6219

S/ OSVALDO CARLO LINARES

USDC/PR 126602

Email: [email protected]

S/ROBERTO L. PRATS PALERM

USDC/PR 210509Email: [email protected]

S/LYDIA M. RAMOSUSDC/PR 214104

E-mail: [email protected]


Demanda Confiscaciones octubre 2011

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