Calero-Toledo v. Pearson Yacht Leasing Co.

Background

A yacht leasing company rented a pleasure yacht to two Puerto Rican residents. Authorities found marijuana on the yacht in early May 1972 and, on July 11, 1972, seized the vessel under Puerto Rico statutes that authorize seizure and forfeiture of conveyances used to transport controlled substances. The lessees had registered the yacht and received notice within ten days, but the owner was not given prior notice or a hearing and learned of the forfeiture only later when trying to repossess the boat.

Reasoning

The Court first held that Puerto Rico’s laws could be treated as "State statutes" for purposes of convening a three-judge court. On the merits, the Court applied the Fuentes factors and concluded that postponing a hearing until after seizure did not violate due process because the statutes serve important public interests, prompt action can be necessary (a boat can be moved or hidden), and seizures are made by government officials rather than private parties. The Court also reviewed historical and prior decisions and held that forfeiture statutes may apply to an owner who was unaware of a lessee’s illegal use, noting that the company voluntarily entrusted the yacht to the lessees and had not shown it took all reasonable steps to prevent misuse.

Real world impact

The Supreme Court reversed the district court and allowed enforcement of the Puerto Rican seizure-and-forfeiture rules in these circumstances. The decision confirms that governments can seize vessels used in drug activity without a pre-seizure owner hearing and that innocent owners who voluntarily give possession may still face forfeiture. The opinion drew a partial dissent arguing the long delay before seizure and the lack of compensation for wholly innocent owners raised serious constitutional concerns.