PROMESA Didn’t Enjoin Damages Suit Against Puerto Rico Government Official

September 12, 2017

The district courts in Puerto Rico are not allowing the island commonwealth to hide behind PROMESA when it comes to ordinary lawsuits involving government administration.

The Puerto Rico Oversight, Management, and Economic Stability Act was adopted for the island to restructure debt akin to a chapter 9 municipal bankruptcy. In 48 U.S.C. § 2161(a), PROMESA contains an automatic stay by incorporating Section 922(a) of the Bankruptcy Code. The section automatically enjoins a suit against a government “officer” that “seeks to enforce a claim against” the government.

Previously, district courts in Puerto Rico have held that PROMESA’s automatic stay does not enjoin petitions for habeas corpus or suits for injunctive relief under the Individuals with Disabilities Education Improvement Act, or IDEA, 20 U.S.C. § 1400, et seq. However, a district judge “reluctantly” held that proceedings to recover costs and attorneys’ fees under IDEA are automatically stayed by PROMESA. To read ABI’s coverage on this issue, click here and here.

On Aug. 29, District Judge Gustavo A. Gelphi held that a civil rights lawsuit under 42 U.S.C. § 1983 against Puerto Rico’s superintendent of police was not subject to the automatic stay. The suit sought $2 million in compensatory and punitive damages for a police shooting that had been claimed to be “a reckless and grossly negligent use of excessive force.”

Although the plaintiff was not suing the commonwealth government, only individuals, the superintended contended that the suit was automatically enjoined because he has a contingent right for indemnification and defense paid by the government. Judge Gelphi rejected the argument and held the automatic stay does not apply, ostensibly because the suit did not seek to enforce a claim against the government.

Quoting a recent decision, Judge Gelphi said that an “‘overbroad application of the automatic stay would risk transgressing PROMESA’s statutory framework and the boundaries of the Constitution.’”

Footnote: The day before, Judge Gelphi had denied the superintendent’s motion for summary judgment seeking dismissal of the complaint.

Previous Article
The Puerto Rico “Bankruptcy”: A Cheat Sheet
The Puerto Rico “Bankruptcy”: A Cheat Sheet

Title III and PROMESA proceedings in Puerto Rico will shape future municipal restructurings.

Next Flipbook
How Did the Puerto Rico Debt Crisis Happen?
How Did the Puerto Rico Debt Crisis Happen?

As is often the case with public debt, there was no single reason why Puerto Rico ended up in a fiscal crisis.

×

Get insolvency information from the source. Subscribe to the ABI InSider!

First Name
Last Name
!
Thank you!
Error - something went wrong!