324 F. Supp. 3d 519
M.D. Penn.2018Background
- The Pennsylvania Professional Liability Joint Underwriting Association (JUA) is a nonprofit insurer-of-last-resort created by statute to provide medical malpractice coverage; it is funded by private premiums and governed by a member-elected board.
- Act 85 (2017) initially required a $200 million transfer from the JUA to the Commonwealth; the JUA did not transfer and separately challenged Act 85.
- Act 44 (Oct. 30, 2017) repealed Act 85, made statutory findings characterizing the JUA and its surplus as Commonwealth property, and commanded the JUA to transfer $200 million to the General Fund by Dec. 1, 2017, with a sunset/abolition backstop and a no-liability clause.
- The JUA sued, alleging violations of the Fifth Amendment Takings Clause, substantive due process, the Contract Clause, and the doctrine of unconstitutional conditions; the Commonwealth defendants moved for summary judgment.
- The court found the dispositive issue to be the Takings Clause: whether the JUA and its surplus are private property that cannot be taken without just compensation.
- On cross-motions for summary judgment, the court held that the JUA is a private entity, its surplus is private property, Act 44 effects a per se taking for public use without any compensation, and entered declaratory and permanent injunctive relief enjoining enforcement of Act 44.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the JUA is a private entity able to bring a § 1983 Takings claim | JUA: It operates as a private insurer, funded by private premiums, governed by a member-elected board, and bears private risk; thus it can assert constitutional claims | Commonwealth: JUA is a creature/instrumentality of the State (political subdivision/public entity); state creation and statutory supervision preclude a § 1983 suit | JUA is a private entity as a matter of law; political-subdivision or Lebron-style government-entity doctrines do not apply here |
| Whether the JUA's surplus funds are private property protected by the Takings Clause | JUA: Surplus consists of private premiums and investment income; Pennsylvania law allows a nonprofit to set aside funds for its nonprofit purposes, so surplus is private property | Commonwealth: Surplus is public (collected under statute and earmarked), or valueless/excess such that taking requires no compensation; state could dissolve JUA and escheat assets | Surplus is private property; it is not public money and is not valueless merely because JUA lacks a present plan for the funds |
| Whether Act 44 effects a taking for public use without just compensation | JUA: Act 44 commandeers $200M for the General Fund with no compensation — a categorical (per se) physical taking for public use | Commonwealth: Taking is permissible because funds are public or excess; statute and findings establish instrumentality status and authority to transfer funds | Act 44 effectuates a per se taking of private property for public use and provides no compensation; unconstitutional under the Fifth Amendment |
| Whether equitable relief (permanent injunction) is appropriate | JUA: Monetary relief barred by sovereign immunity; irreparable constitutional injury requires equitable relief enjoining enforcement | Commonwealth: Suggests monetary remedies or state-court remedies might suffice; harm to budget interests outweighs injunction | Permanent injunctive and declaratory relief granted: irreparable harm shown, legal remedies inadequate, balance of equities and public interest favor injunction |
Key Cases Cited
- Gonzaga Univ. v. Doe, 536 U.S. 273 (2002) (§ 1983 vindicates rights secured by federal law)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment burden-shifting principles)
- Anderson v. Liberty Lobby, 477 U.S. 242 (1986) (summary judgment and genuine dispute standard)
- Murr v. Wisconsin, 137 S. Ct. 1933 (2017) (takings doctrine and incorporation to the states)
- Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998) (government taking of identified funds can implicate the Takings Clause)
- Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980) (takings principles applied to money held by private trustee)
- Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374 (1995) (when a corporation is the government itself for constitutional purposes)
- Marion & Rye Valley Ry. Co. v. United States, 270 U.S. 280 (1926) (no Fifth Amendment recovery when nothing of value was taken)
- Brown v. Legal Found. of Wash., 538 U.S. 216 (2003) (compensation measured by loss to owner, not gain to government)
- eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006) (four-factor equitable test for permanent injunction)
- Asociacion de Subscripcion Conjunta del Seguro de Responsabilidad Obligatorio v. Flores Galarza, 484 F.3d 1 (1st Cir. 2007) (state-created joint underwriting association held private for § 1983 purposes)
- Tex. Catastrophe Prop. Ins. Ass'n v. Morales, 975 F.2d 1178 (5th Cir. 1992) (state-created insurer treated as private where funds used for private claims)