269 F. Supp. 3d 1
D.P.R.2017Background
- Defendant Pesquera filed a Notice of Automatic Stay under PROMESA § 2161, invoking the automatic stay incorporated from the Bankruptcy Code.
- PROMESA creates temporary and Title III automatic stays to manage Puerto Rico’s debt restructuring; filing a Title III petition (filed May 3, 2017) terminated the temporary stay and triggered the § 2161 stay.
- The central dispute: whether a § 1983 personal-capacity damages suit against a Commonwealth official "seeks to enforce a claim against the debtor" and thus falls within PROMESA’s automatic stay.
- Puerto Rico law (Law 9, P.R. Laws Ann. tit. 32, §§ 3085, 3087) lets a defendant-employee request Commonwealth defense/indemnification, but the Attorney General has discretion to accept or decline representation and payment of judgment.
- If the Attorney General declines representation, the suit proceeds against the official personally; the official (not plaintiffs) may seek review of the denial—showing liability is not necessarily enforcement against the Commonwealth.
- The Commonwealth is not a party here; plaintiffs sued Pesquera individually. The court found that the potential for indemnification does not convert a personal-capacity suit into an action "against the debtor."
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a personal-capacity § 1983 damages claim "seeks to enforce a claim against the debtor" under PROMESA § 2161/11 U.S.C. § 922 | Plaintiffs implicitly argue their suit proceeds and is not barred | Pesquera argues PROMESA stay applies because indemnification/defense make the suit effectively against the debtor | Court: No—the personal-capacity claim does not seek to enforce a claim against the debtor |
| Whether Commonwealth’s statutory defense/indemnification makes personal-capacity suits "against the debtor" | Plaintiffs: suit is against individual, not debtor | Defendant: indemnity/discretion to defend ties liability to the Commonwealth (debtor) | Court: No—Commonwealth’s potential indemnity/discretion does not convert claim into one against the debtor |
| Whether Attorney General’s discretion to decline defense means plaintiffs’ claims could avoid the stay | Plaintiffs: stay should not apply because claims might proceed without Commonwealth defense | Defendant: potential indemnification shows claim could implicate debtor | Court: The Attorney General’s discretion supports finding claims may proceed independently of the debtor; stay does not apply |
| Whether broad application of PROMESA stay risks constitutional or statutory overreach | Plaintiffs: not advanced here | Defendant: seeks broad stay application to protect debtor’s restructuring | Court: Warns against overbroad stay application; stays should be narrowly read to avoid transgressing PROMESA and constitutional limits |
Key Cases Cited
- Peaje Inv. LLC v. García-Padilla, 845 F.3d 505 (1st Cir. 2017) (discussing PROMESA’s purpose and framework)
- Atiles-Gabriel v. Commonwealth of P.R., 256 F. Supp. 3d 122 (D.P.R. 2017) (habeas petition not subject to PROMESA stay)
- Ayuso Figueroa v. Rivera Gonzalez, 229 P.R. Dec. 41 (P.R. 2005) (describing Puerto Rico Law 9 representation/indemnification procedure)