Background
Appellants’ land was taken through eminent domain proceedings initiated in 2011. A 2018 final judgment ordered the Puerto Rico Highway and Transportation Authority to pay appellants $2,414,251.10 in just compensation. The Commonwealth deposited estimated compensation with the Puerto Rico Court of First Instance, where funds were placed in interest-bearing accounts pending disbursement. Over time, interest accrued on these deposits.
The Administration of Tribunals (OAT) retained the accrued interest and charged a 15% administrative fee to cover expenses for managing the deposits. Appellants filed suit in September 2020, challenging both OAT’s retention of interest and the administrative fee as unconstitutional takings without just compensation and violations of due process. They sought declaratory and injunctive relief.
The district court initially dismissed all claims for lack of standing. Upon reconsideration, it allowed one claim to survive—the administrative fee claim—and later granted summary judgment to Steidel, finding the fee was reasonable. Appellants appealed both the dismissal and summary judgment.
The Court’s Holding
The First Circuit dismissed the appeal on jurisdictional grounds. The court found that the Commonwealth of Puerto Rico’s Title III petition under PROMESA (filed in May 2017) triggered automatic stay provisions that bar litigation against the Commonwealth and its entities without relief from the stay. Because appellants filed their administrative fee claim in federal court without seeking relief from the automatic stay in the Title III court, the claim was filed in violation of the stay and is void. The court lacked jurisdiction to review the merits of such void actions.
The court reasoned that a request for an administrative fee to be deducted from appellants’ funds constitutes a demand for “property of the debtor” (the Commonwealth) under PROMESA’s incorporation of bankruptcy stay provisions. Even though appellants argued they were challenging only administrative procedures rather than making a claim against the Commonwealth, the practical effect of their relief would require the Commonwealth to refrain from collecting the fee—thus falling within the automatic stay’s scope.
Regarding the interest claim, the court affirmed the district court’s dismissal based on standing defects. Appellants failed to adequately allege injury in fact because they did not allege they had requested disbursement of the interest. The court found their challenge to the lack of transparent procedures for accessing interest was too abstract and resembled a generalized grievance, similar to seeking mandamus to require OAT to implement clearer notice and calculation systems.
Key Takeaways
- PROMESA’s automatic stay provisions bar all litigation against Commonwealth entities without relief from the Title III court, including procedural or administrative challenges to how public funds are managed
- A claim for an administrative fee deducted from a litigant’s funds falls within “property of the debtor” and triggers the automatic stay, even if framed as challenging procedures rather than seeking payment
- Appellants lacked standing to challenge interest retention procedures without alleging they had requested disbursement of the interest
- Claimants seeking to challenge Commonwealth practices must navigate the PROMESA Title III process rather than filing in federal district court
Why It Matters
This decision significantly impacts litigants challenging Puerto Rico government actions. It clarifies that PROMESA’s automatic stay applies broadly to all claims that would require Commonwealth payment or property disposition, regardless of whether they are characterized as procedural or administrative challenges. Claimants must obtain relief from the stay in the specialized Title III court before pursuing federal litigation, creating an additional jurisdictional hurdle.
The decision also establishes stringent standing requirements for challenging administrative procedures related to just compensation and other government-held funds. Litigants must allege concrete steps taken to claim their funds, not merely object to the opacity or inaccessibility of the procedures for doing so. The ruling thus limits challenges to government fund management practices to those who have affirmatively sought to access their funds and been denied.