Guillemard Gionorio v. Contreras Gomez

Page 153

322 F.Supp.2d 153

Andres GUILLEMARD GIONORIO, Plaintiff(s) v. Fermin M. CONTRERAS GOMEZ, et al., Defendant(s)

Jorge R. Urrutia Valles, et al., Plaintiff(s) v. Fermin M. Contreras Gomez, et al., Defendant(s).

CIVIL NO. 03-2317 (JAG).

CIVIL NO. 03-2390(JAG).

United States District Court, D. Puerto Rico.

June 4, 2004.

Joan Schlump-Peters, Nachman & Guillemard, San Juan, PR, Charles A. Cuprill-Hernandez, Charles A. Cuprill PSC, San Juan, PR, Joseph D. Steinfield, Prince, Lobel, Glovsky & Tye LLP, Boston, MA, for Plaintiffs.

Eduardo A. Vera-Ramirez, Guaynabo, PR, Ivonne Palerm-Cruz, Commonwealth Department of Justice, Federal Litigation Division, San Juan, PR, Ivette M. Berrios, Landron & Vera LLP, Guaynabo, PR, for Defendants.

OPINION AND ORDER

GARCIA-GREGORY, District Judge.

On February 19, 2004, defendants Fermin M. Contreras Gomez ("Contreras"), individually and as Insurance Commissioner of Puerto Rico, his wife Jane Doe, and the Conjugal Partnership constituted between them; and the Office of the Insurance Commissioner ("OIC"), moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss the complaint filed by plaintiffs Andres Guillemard-Gionorio ("Guillemard"), his wife Maria M. Noble-Fernandez, the Conjugal Partnership constituted between them, and Lone Star Insurance Producers, Inc. ("Lone Star")(collectively the "Lone Star Plaintiffs"); and Jorge R. Urrutia-Valles ("Urrutia"), his wife Carolyne J. Wiewal-Navas, the Conjugal Partnership constituted between, and Urrutia Valles, Inc. ("UVI")(collectively the "UVI Plaintiffs"), alleging political discrimination pursuant to 42 U.S.C. § 1983 (Docket No. 38). On March 12, 2004, plaintiffs opposed (Docket No. 41). For the reasons discussed below, the Court DENIES defendants' motion to dismiss.

FACTUAL BACKGROUND¹

A. The Lone Star Plaintiffs

In 1984, Guillemard and Noble, each of them holding an insurance agent's license issued in accordance with the Insurance Code of Puerto Rico, formed Lone Star and assigned to it their licenses. They have conducted business through Lone Star ever since, never receiving any complaints regarding their services or trustworthiness.

Lone Star first did business with a government agency in 1993, when it placed insurance for the Puerto Rico Ports Authority. In 1994, the Government of Puerto Rico determined that public authorities and government agencies should be represented by licensed insurance brokers for the purposes of obtaining insurance. Guillemard met with then Commissioner of Insurance Juan Garcia, who advised him to affiliate with an insurance broker and suggested doing so with Urrutia. Lone Star then entered into a consortium with UVI (the "consortium"), through which they successfully obtained insurance for the Puerto Rico Aqueducts and Sewer Authority, the Puerto Rico Electrical Power Agency, and the Puerto Rico Telephone Company. Lone Star and UVI shared commissions on premiums for insurance of the kind that plaintiffs were licensed to solicit. The OIC and the governmental agencies were aware at all times of the arrangement between Lone Star and UVI.

Beginning in late November 2001 and until December 17, 2001, David Castro-Anaya ("Castro"), an auditor for the OIC, reviewed Lone Star's transactions for the period between 1997 and 2001, including all documents pertaining to the insurance provided to the government agencies and the commissions shared with UVI. The Lone Star Plaintiffs gave their full cooperation to Castro, providing him with all the documents he requested and answering all his questions. Furthermore, Guillemard informed Castro that Lone Star had performed extensive work in connection with securing and servicing the government agencies' accounts, and sent him a letter detailing these efforts. On the last day of the audit, Castro informed Guillemard that he had found no irregularities and that he would send a final report in early 2002.

The consortium between Lone Star and UVI ended in 2000. Lone Star continues to serve its business and individual clients, but has not provided insurance services to any government agency since. The Lone Star Plaintiffs' licenses have been renewed twice since the 2001 audit.

In early 2003, Guillemard learned that the OIC had ordered several banks to provide financial information pertaining to Lone Star as well as all of Guillemard's and Noble's personal and business affairs. Guillemard also learned that Contreras had made disparaging remarks regarding his and Noble's political affiliation. On December 10, 2003, the Lone Star Plaintiffs filed this action. Contreras was served with summons on December 19, 2003.

On December 23, 2003, Contreras, without affording them with notice or an opportunity to be heard, issued an order declaring the Lone Star Plaintiffs as non-trustworthy and incompetent. Furthermore, the order purported to revoke their insurance agent licenses for a period of five years, prevent them from applying for any other license during the same five-year period, and impose a fine in the amount of two-million thirty-five thousand dollars ($2,035,000). The order would become effective on January 7, 2004. The order also informed the Lone Star Plaintiffs of their right to request a hearing within twenty days from the order, which would stay the imposition of the fine. The revocation of their licenses, however, would remain in effect pending a hearing and a final decision. The request for a TRO and preliminary injunctive relief claiming due process violations soon followed. The Lone Star plaintiffs timely requested a hearing before the OIC, which was to be held on March 2, 2004 (Docket No. 21 at 155). Contrary to counsel for defendants' representations at the preliminary injunction hearing, however, no such hearing has been afforded them to this date (Docket No. 43).

The Lone Star Plaintiffs are active members of the New Progressive Party, and have contributed their time and given their financial support to its candidates.

B. The UVI Plaintiffs

Urrutia has been involved in the insurance business in Puerto Rico since June 1974 and obtained his insurance broker license on October 27, 1980. In October 1983, Urrutia organized and incorporated UVI. On January 1984, UVI obtained licenses as an insurance broker and a broker for excess lines. On July 1, 2002, UVI sold its insurance portfolio to AON B & C, Inc. UVI's licenses remained in effect until August 12, 2002. Since July 2002, Urrutia holds the position of Executive Vice-President in charge of marketing for AON Risk Services of P.R., Inc. At this time, UVI is an inactive corporation.

Between 1984 and 2002, UVI provided insurance products and services to numerous clients, establishing an excellent reputation in the process. Urrutia has been recognized as an outstanding insurance broker with an excellent reputation, and was selected as insurance broker of the year in 1985 and 1994 by Professional Insurance Agents of Puerto Rico and the Caribbean, Inc.

In 1993, following a directive from the Secretary of the Treasury of Puerto Rico requiring all government agencies to engage brokers for the purpose of acquiring insurance, UVI submitted its qualifications and was selected as one of eight firms certified to provide such services. In 1994, UVI and Lone Star entered into a consortium (the "consortium"), which was fully disclosed to the Secretary of the Treasury and the OIC. From 1994 to approximately April 2001, Urrutia, acting on behalf of the consortium, negotiated insurance policies and provided related insurance services to several government agencies and public corporations.

In May 2001, after a change in government following the 2000 general elections, then Secretary of the Treasury Juan Flores Galarza ("Flores") announced an investigation of all insurance entities which had been providing insurance services to government agencies during the previous administration. Flores specifically named UVI as a target of the investigation for alleged favoritism in the awarding of insurance business. On or about November 2001, Contreras ordered an investigation of Lone Star's and UVI's operations and transactions from January 1997 through September 30, 2001. Specifically, the investigation targeted the consortium's transactions with government agencies and the revenues received by Lone Star as a result of those transactions. This was the first time UVI had been investigated since its inception in 1984. The investigation was conducted by Angela Rivera Soto, who received the full cooperation of the UVI Plaintiffs. The investigation ended on or about the last week of January 2002. The investigator stated that she did not find what she was looking for (Docket No. 21 at 142).

On December 23, 2003, Contreras, without affording them notice or a hearing, issued an order declaring the UVI Plaintiffs unreliable and incompetent to participate in the insurance business in Puerto Rico. Furthermore, the order purported to revoke their insurance broker licenses for a period of five years, prevent them from applying for any other license during the same five-year period, and impose a fine in the amount of two-million five-hundred sixty-seven thousand nine-hundred dollars ($2,567,900). The order would become effective on January 7, 2004. The order also informed the UVI Plaintiffs of their right to request a hearing within twenty days from the order, which would stay the imposition of the fine. The revocation of their licenses, however, would remain in effect pending a hearing and a final decision. Their complaint and request for a TRO and preliminary injunctive relief claiming due process violations soon followed. The UVI plaintiffs timely requested a hearing before the OIC, which was to be held on February 24, 2004 (Docket No. 21 at 155). Contrary to counsel for defendants' representations at the preliminary injunction hearing, however, no such hearing has been afforded them to this date (Docket No. 43).

The UVI Plaintiffs...