United States Court of Appeals
For the First Circuit
No. 23-1872
JOSÉ ERNESTO HERNÁNDEZ-CASTRODAD; IRIS MARTA MARCANO; CONJUGAL
PARTNERSHIP HERNÁNDEZ-MARCANO,
Plaintiffs, Appellants,
v.
HON. SIGFRIDO STEIDEL-FIGUEROA, in his official capacity as
Administrator of the Administration of Tribunals of the
Commonwealth of Puerto Rico (OAT),
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Silvia Carreño-Coll, U.S. District Judge]
Before
Barron, Chief Judge,
Breyer,* Associate Justice,
and Thompson, Circuit Judge.
Eduardo Vera Ramirez, with whom Julio C. Alejandro-Serrano
and Landron & Vera, LLP were on brief, for appellants.
Juan A. Marqués-Díaz and Nayuán Zouairabani-Trinidad, with
whom Isabel Torres-Sastre and McConnell Valdés LLC were on brief,
for appellee.
* Hon. Stephen G. Breyer, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
July 1, 2026
THOMPSON, Circuit Judge. Appellants José Ernesto
Hernández-Castrodad and Iris Marta Marcano (collectively
"appellants") once had their land taken by the Commonwealth of
Puerto Rico. As constitutionally required, the Commonwealth paid
appellants over two million dollars in just compensation for that
property. But appellants say a second taking of their property
occurred when that money changed hands.
They point the finger at the
middleman -- defendant-appellee the honorable Sigfrido
Steidel-Figueroa ("Steidel") -- whose lack of efficient and
transparent processes (they say) failed to notify them of interest
that accrued on their money, and for deducting a 15% administrative
fee from that accrued interest. Appellants claim that both
practices contravene their constitutional protections against
takings of private property without just compensation or due
process.
Appellants sued Steidel in his official capacity as the
Administrator of the Administration of Tribunals of the
Commonwealth of Puerto Rico (known as "OAT" based on its Spanish
name), seeking declaratory and equitable relief (in various forms)
from these alleged takings and deprivations without due process.
The United States District Court for the District of Puerto Rico
dismissed the bulk of appellants' claims. And, later, it awarded
summary judgment to Steidel on the only claim that survived
- 3 -dismissal, reasoning that the deduction of the 15% administrative
fee did not amount to a taking. Appellants filed this appeal
asking us to consider both the dismissal and entry of summary
judgment.
But the complex legal questions appellants pose face an
equally formidable jurisdictional hurdle heretofore unaddressed.
That is, whether any filings or orders in the district court were
subject to the automatic stay provisions of Title III of the Puerto
Rico Oversight, Management, and Economic Stability Act
("PROMESA"), or whether this case can proceed after the
Commonwealth's Title III Plan's discharge. After untangling
appellants' efforts to sidestep PROMESA's ramifications, we
dismiss appellants' appeal of their claim decided on summary
judgment and affirm the district court's dismissal.
I
To efficiently elucidate the happenings-below and the
parties' appellate arguments, we'll start by explaining the
statutory and regulatory scheme behind appellants' admonishments.
From time to time, and for various reasons, litigants deposit funds
with the Puerto Rico Court of First Instance for future
disbursement.1 As relevant here, when the Commonwealth initiates
Courts in the Commonwealth of Puerto Rico are not unique in
1
this regard. See generally Goldstein v. Cox, 396 U.S. 471, 472 &
n.1 (1970).
- 4 -a condemnation proceeding, it estimates the amount of just
compensation owed and deposits that amount with the court.2 See
E.L.A. v. Registrador, 11 P.R. Offic. Trans. 152, 155 (1981). The
court keeps these funds in interest-bearing accounts pending
disbursement. See P.R. Laws Ann. tit. 7 § 253. And, pursuant to
judicial regulation, interest owned by third parties "shall be
delivered to the owners, through the procedure provided by the
[Administrative Director of the Courts], once custody and
management by the Judicial Branch ends."
In this scheme, OAT takes a cut of the interest that
accrued while the funds were in its possession. Specifically,
Puerto Rico law authorizes the OAT Administrator to, "if delegated
on him," "determine the reasonable share of [interest on "other
funds"3] that may be deposited in . . . special accounts to cover
expenses and other liabilities incurred by [the Judicial] Branch
for services rendered in the receiving, accounting, control,
custody and delivery of these deposits." P.R. Laws Ann. tit. 7
§ 253b. Pursuant to that statutory authorization, the judiciary
promulgated a regulatory framework governing the interest on other
2"Just compensation" comes from the text of the Fifth
Amendment, U.S. Const. amend. V, and generally means "the full
monetary equivalent of the property taken." United States v.
Reynolds, 397 U.S. 14, 16 (1970).
3Judiciary regulations define "other funds" as "[m]oney in
the custody of the Judicial Branch belonging to private
individuals."
- 5 -funds that states that "[t]he Judicial Branch shall retain a
reasonable amount in interests accrued on Other Funds deposited."
Discerning what is "reasonable" is not always an easy
task. See generally CBS, Inc. v. FCC, 453 U.S. 367, 398 (1981)
(White, J., dissenting) ("What is 'reasonable' access and what are
'reasonable' amounts of time . . . are matters about which fair
minds could easily differ."). So, OAT hired an outside accounting
firm to conduct a cost study and calculate how much the judiciary
spent on managing "other funds" so that OAT could impose a fee to
"recover administrative costs." The accounting firm ultimately
landed on "15% of the total interest earned by each beneficiary"
per quarter.4
So, to summarize the scheme we're working with: funds
deposited with courts on behalf of third parties get placed into
interest-bearing accounts where interest accrues until
4 Appellants only relied on the cost study report when
opposing Steidel's motion for summary judgment. On appeal, it remains unclear whether OAT actually adopted the firm's
recommendation to take 15% of the accrued interest quarterly if
OAT deducts 15% at the time of disbursement. Neither the parties'
arguments nor the district court's decisions rely on any specific
version of the administrative fee, and neither will our forthcoming analysis. Furthermore, Steidel submitted an "Informative Motion"
following oral argument stating that no administrative fee has
been collected from appellants' accrued interest, which had
reached a total of $1,939.76 as of March 2026. Our appellate review concentrates solely on the factual record presented in the
district court, and we will not be considering any evidence
introduced in Steidel's motion. See, e.g., Rosaura Bldg. Corp. v.
Mun. of Mayagüez, 778 F.3d 55, 64 (1st Cir. 2015).
- 6 -disbursement, and OAT charges a 15% administrative fee from the
accrued interest for managing the funds.
II
A
In late 2011, eminent domain proceedings began against
appellants in the Puerto Rico Court of First Instance. A 2018
final judgment in those proceedings ordered the Puerto Rico Highway
and Transportation Authority ("PRHTA") to pay appellants
$2,414,251.10 in just compensation. That final judgment included
"the simple legal interest per semester" of $15,255.47 from PRHTA
representing interest accrued on the principal value of the just
compensation award between the time appellants' land was taken and
when PRHTA was ordered to pay. Appellants received payments of
varying amounts between January 2012 and January 2019, and all
just compensation owed to appellants from the 2018 final judgment
has been paid. Therefore, the only interest at issue (and what we
will be referring to as "the interest" from here on out) is the
interest that accumulated after PRHTA made various deposits of
appellants' estimated and awarded just compensation with the court
up until appellants withdrew those deposits. Only this interest
is subject to OAT's administrative fee. See P.R. Laws Ann. tit.
7 § 253b.
- 7 -B
In September 2020, appellants filed a class action
complaint against Steidel in his official capacity as the OAT
Administrator.5 The complaint alleged that Steidel retained
interest generated by monies belonging to third parties,
constituting "an unconstitutional taking of private property
without just compensation." (All involved refer to this as
appellants' "interest" claim, and we'll be using that label, too.)
The complaint also alleged that Steidel deducts an administrative
fee for managing these funds, constituting "another form of
unconstitutional taking." (Similarly, this has been dubbed
appellants' "administrative fee" claim, and we'll be borrowing
this label, too.) To remedy these alleged wrongs, appellants asked
the district court to issue a series of declaratory judgments and
to grant injunctive relief.
Steidel responded with a motion to dismiss, which the
district court granted over appellants' objections. The court's
holding rested on a sua sponte determination that appellants lacked
standing.6 It reasoned that, because appellants had failed to
5The district court never reached the issue of class
certification and, due to our forthcoming resolution, neither will we. See Narrigan v. Goldberg, 170 F.4th 14, 17 (1st Cir. 2026)
(limiting review to named plaintiff's appeal where a class was not certified below).
6 Per constitutional demand, a plaintiff must establish
standing through a tripartite showing: "that she has suffered an
injury in fact, that her injury is fairly traceable to the disputed
- 8 -allege that they requested disbursement of their interest, they
necessarily failed to allege an injury in fact, as required.
Additionally, the court viewed appellants' claims as "akin to a
generalized grievance," giving it further reason to find that
appellants lacked standing. Sans standing, the court granted
Steidel's motion and dismissed the case accordingly.
But, after appellants moved for reconsideration, the
court had a change of heart and decided that one of appellants'
claims "should have survived Steidel's motion to dismiss." That
sole surviving claim was part of the administrative fee claim,7
which the court resurrected because appellants had plausibly
alleged that Steidel "is deducting unreasonable administrative
fees." In reinstating this claim, the court carefully cabined
appellants' requested relief to only prospective injunctive relief
from future administrative fees because the Eleventh Amendment
barred any retrospective demands for payment. In sum, the court
held at that juncture appellants' "only surviving claim is that
Steidel has violated the Takings Clause by deducting an
administrative fee from their accrued interest."
conduct, and that the relief sought promises to redress the injury sustained." Osediacz v. City of Cranston, 414 F.3d 136, 139 (1st
Cir. 2005) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992)).
7 The court briefly revived the due process portion of
appellants' administrative fee claim before dismissing it on the
merits.
- 9 -That "only surviving claim" later succumbed to Steidel's
motion for summary judgment. The court granted summary judgment
in Steidel's favor because it found that the administrative fee
was reasonable (and thus, legally speaking, not a taking) given
the benefits provided by the judiciary, and because appellants did
not submit any evidence to rebut the fee's reasonableness. The
court also pointed out that appellants dedicated most of their
summary judgment briefing to a due process claim that had already
been dismissed, and thus no longer at issue. Appellants moved the
court to alter or amend this judgment and requested an opportunity
for supplemental discovery, but the court denied that motion and
informed appellants "the discovery ship has sailed."
III
While the story just told played out, in May 2017 the
Commonwealth of Puerto Rico filed a petition under Title III of
PROMESA, 48 U.S.C. §§ 2161 et seq., to restructure its debts in a
specially designated court (commonly referred to as the
"Title III" court), see Villalobos-Santana v. P.R. Police Dep't,
171 F.4th 544, 546 (1st Cir. 2026). The Title III court later set
a June 29, 2018, deadline for filing prepetition proof of claims
against the Commonwealth. See id. And, on January 18, 2022, the
Title III court confirmed the Commonwealth's Title III Plan, with
an effective date of March 15, 2022. See id.; see generally In re
Fin. Oversight & Mgmt. Bd. for P.R., 636 B.R. 1 (D.P.R. 2022).
- 10 -Under 48 U.S.C. § 2161(a), the automatic stay
provisions, 11 U.S.C. §§ 362 and 922, and the bankruptcy discharge
provisions, 11 U.S.C. §§ 944 and 524(a)(1)-(2), of the Bankruptcy
Code are incorporated into PROMESA. Generally speaking (we'll be
getting into some of the details shortly), for our court to have
jurisdiction over this appeal, the underlying action cannot have
been filed in violation of the automatic stay, see HealthproMed
Found., Inc. v. Dep't of Health & Hum. Servs., 982 F.3d 15, 19-20
(1st Cir. 2020), and cannot have been discharged by the
Commonwealth's Plan and Confirmation Order, see Díaz-Santiago v.
Sánchez-Acosta, No. 24-1256, 2025 WL 2670236, at *2 (1st Cir. July
23, 2025); In re Fin. Oversight & Mgmt. Bd. for P.R., 650 B.R.
286, 295-96 (D.P.R. 2022).
These PROMESA-related developments went unaddressed in
the district court proceedings. Appellants did not file a proof
of claim or seek relief from the automatic stay in the Title III
court.8 So, we directed the parties to show cause as to
(1) "whether any filings or orders in the district court case at
issue in this appeal were subject to the automatic stay provisions"
The parties were directed to state whether any proof of
8
claim or administrative expense claim had been filed with the
Title III court, or whether any party sought or received a
retroactive lift of the automatic stay. Appellants did not respond to this inquiry, but Steidel reports that nothing was filed with
the Title III court. Thus, we proceed based on that uncontested
representation.
- 11 -and (2) "whether any aspect of this appeal can proceed in light of
the Commonwealth's Title III Plan's discharge (§ 92.2) and
discharge injunction (§ 92.3) provisions, or any other Plan
provisions."
The parties duly responded. Appellants succinctly
replied to our first question: "The answer to that question is
no." As for our second question regarding the Commonwealth's
Title III Plan's discharge, appellants stated that they were
mounting a Fifth Amendment challenge, and they believed our
precedent "made clear that a Fifth Amendment claim, such as this
case, cannot be discharged in Tittle [sic] III bankruptcy without
the just compensation." See In re Fin. Oversight & Mgmt. Bd. for
P.R., 41 F.4th 29, 37 (1st Cir. 2022). Indeed, we previously
affirmed the Title III court's order wherein it confirmed the Plan
and found that the Fifth Amendment prohibited the Commonwealth
from paying claimants less than just compensation on their
prepetition takings claims. Id. at 46. But we also acknowledged
the difference between "what makes the denial of just compensation
substantively unlawful [and] what may make a claim for just
compensation procedurally inactionable or waivable by the
claimant" (i.e., when a claim is time-barred or when a claim is
settled for less than full value). Id. at 45.
After receiving the parties' show-cause responses, we
further directed each party to "fully brief all issues pertaining
- 12 -to jurisdiction," because our capacity to review aspects of
appellants' case remained unclear. For example, we requested
briefing on whether the Title III Plan's modification of the
automatic stay to permit holders of eminent domain and inverse
condemnation claims to pursue and receive payment from the Clerk
of the Court of First Instance applied to any of appellants'
claims. And we asked the parties how the Plan's definition of
"Allowed" claims should be considered given that "the holder of an
Eminent Domain/Inverse Condemnation Claim" "must be paid in full
to the extent they are Allowed Claims for just compensation." In
re Fin. Oversight & Mgmt. Bd. for P.R., 636 B.R. at 168-69; see
also id. at 82 (defining "Allowed" and "Allowed Claim"). (As
Steidel points out in his brief, our prior decision did not comment
on the difference between allowed and not allowed eminent
domain/inverse condemnation claims.) Again, the parties' answers
to these questions would help us determine whether we may review
appellants' claims.
We now turn to appellants' briefing, particularly their
responses to the jurisdictional questions posed. Here, appellants
assert that they are only arguing that Steidel "has provided no
proceeding, no information and no disclosure of the amounts of
interests that were accrued on their accounts and the legal and
accounting basis for the deduction of a 15% service fee upon those
monies." Similarly, appellants also argue that the PROMESA
- 13 -provisions need not apply because "[t]his is not a claim for
interest against the underlying agencies," but that "[t]his claim
centers on the disbursement procedures ordered by the
Administrator and followed by each clerk of each first instance
regional courts [sic] when third party deposits were received and
disbursed." Steidel disagrees in part, arguing that appellants'
administrative fee claim was filed in violation of the automatic
stay and is subject to the Plan's discharge. (We say "in part"
because Steidel does not dispute appellants' position on their
interest claim.)
IV
After due consideration of the parties' arguments and
PROMESA's automatic stay provisions, appellants' appeal of their
administrative fee claim decided on summary judgment ends here.
PROMESA's automatic stay comes from two sections of the
Bankruptcy Code expressly incorporated into the first section of
Title III, which again are 11 U.S.C. §§ 362 and 922. See 48 U.S.C.
§ 2161(a). Section 362 is the general stay provision which stays
"the commencement or continuation . . . of a
judicial . . . proceeding against the debtor . . . to recover a
claim against the debtor that arose before the commencement of the
case under this title." 11 U.S.C. § 362(a)(1). Section 362 also
stays "any act to obtain possession of property of the estate or
of property from the estate." Id. § 362(a)(3). Section 922
- 14 -applies "in addition to the stay provided by section 362" and stays
"the commencement or continuation . . . of a judicial,
administrative, or other action or proceeding against an officer
or inhabitant of the debtor that seeks to enforce a claim against
the debtor." Id. § 922(a)(1). We've previously described § 922's
purpose as "plug[ging] a hole left open by Section 362" by
including actions against officers, Colón-Torres v.
Negrón-Fernández, 997 F.3d 63, 69 n.5 (1st Cir. 2021), but
importantly, "both sections apply only to suits in which the
ultimate objective of enforcement is a claim against the debtor,"
id. at 69 (citation modified).
In the PROMESA context, there is no "estate." In re
Fin. Oversight & Mgmt. Bd. For P.R., 939 F.3d 340, 349 (1st Cir.
2019). So the statute directs us to swap instances of "property
of the estate" that appear in the incorporated Bankruptcy Code
provisions for "property of the debtor," with the debtor being the
Commonwealth. See id. (quoting 11 U.S.C. § 902(1)). "The
practical ramification of the foregoing is that the reach of the
automatic stay is broader in the PROMESA and municipal bankruptcy
contexts than it is in the run-of-the-mill bankruptcy case." Id.
But the Title III court must grant relief from this broad automatic
stay on request and if the movant makes the requisite showing.
See 11 U.S.C. § 362(d); see also HealthproMed Found., Inc., 982
F.3d at 20.
- 15 -Appellants contend that PROMESA's automatic stay
provisions do not apply because they are not seeking to enforce a
"claim" against the Commonwealth. That is so, they argue, because
"[t]he deposits and the interest they accrue are vested" not with
the Commonwealth, but instead "upon each plaintiff" whose money
has been deposited. But Puerto Rico law authorizes OAT to deduct
an administrative fee from interest accrued on other funds in its
possession. See P.R. Laws Ann. tit. 7 § 253b. And Steidel has
consistently claimed "a direct, legal, and equitable interest on
the Administrative Fee object of the Fee Claim" by virtue of Puerto
Rico law and the judiciary's regulations. (Emphasis omitted.)
At one point in their appellate briefing, appellants
assert "the Government is not vested with any proprietary interest
over the money itself." But they do not dispute that the
government, after deducting the administrative fee, would keep it.
And appellants fail to explain why, given the provisions of Puerto
Rico law described above, the government lacks a proprietary
interest in the administrative fee specifically. Therefore, as
Steidel contends, the judiciary arguably has a proprietary
interest in the administrative fee.
In this instance, the request for the administrative fee
that would be deducted pursuant to Puerto Rico law is, in our
opinion, properly construed as a demand for the "property of the
debtor" and, as such, falls within the scope of the automatic stay.
- 16 -See In re Fin. Oversight & Mgmt. Bd. for P.R., 939 F.3d at 349;
see also In re City of Stockton, 499 B.R. 802, 807 (Bankr. E.D.
Cal. 2013) ("The City's money is property of the debtor within the
meaning of § 362(a)(3).").9 Because appellants filed their
administrative fee claim in federal court in violation of the
automatic stay, it is void and without legal effect. See
HealthproMed Found., Inc, 982 F.3d at 19; In re Fin. Oversight &
Mgmt. Bd. for P.R., 494 F. Supp. 3d 95, 104 (D.P.R. 2020) (citing
In re Soares, 107 F.3d 969, 976 (1st Cir. 1997)). Our court lacks
jurisdiction to review the merits of such void actions. See
HealthproMed Found., Inc, 982 F.3d at 19.10
For the reasons stated, we dismiss this portion of
appellants' appeal.
9 On September 21, 2022, the Title III court determined that
claims against entities included in a list filed in the Title III
proceedings are claims against the Commonwealth. In re Fin.
Oversight & Mgmt. Bd. for P.R., 650 B.R. 286, 292 (D.P.R. 2022)
(citing the "Central Government Entities List" at Title III docket entry 2828 which includes OAT); see also Cruz v. Puerto Rico, 558
F. Supp. 2d 165, 176 (D.P.R. 2007) (explaining that "[OAT] is not
separately incorporated but is an integral part or an arm of the
Puerto Rico Supreme Court, which in turn is an arm of the
Commonwealth" for Eleventh Amendment purposes).
10Our inability to reach the merits of the administrative fee
claim should not be read as endorsing the practice of retaining
any percentage of a litigant's just compensation award.
Furthermore, we do not decide whether appellants' administrative
fee claim is subject to the Title III Plan's discharge.
- 17 -V
We adopt a different approach for appellants' interest
claim. Whether the automatic stay or discharge provisions apply
is a question of jurisdiction. See HealthproMed Found., Inc, 982
F.3d at 19 (citing Preiser v. Newkirk, 422 U.S. 395, 401 (1975)).
But given the arguments that appellants raise, their interest claim
has separate jurisdictional problems of its own. Because "we can
address jurisdictional issues in any order we choose," Acheson
Hotels, LLC v. Laufer, 601 U.S. 1, 4 (2023), we turn to those
arguments first.
We review the district court's dismissal under Federal
Rule of Civil Procedure 12(b)(6) de novo. Zhou v. Desktop Metal,
Inc., 120 F.4th 278, 287 (1st Cir. 2024). In doing so, we accept
the complaint's well-pleaded factual allegations as true and draw
all reasonable inferences in appellants' favor. Id. We will
affirm "if the complaint fails to allege facts sufficient to
demonstrate a plausible entitlement to relief." Id. (citation
modified).
In the proceedings below, the district court rested its
conclusion, at least in part, on its understanding that appellants
had alleged an injury arising not just from OAT's retention of the
accrued interest, but from the retention of that interest without
providing a transparent and manageable process for retrieving it.
The district court observed that, because appellants did not
- 18 -challenge the relevant Puerto Rico law or judicial regulations,
their challenge amounted to essentially an "objection
[to] . . . the supposedly opaque and unmanageable process -- or
lack thereof -- [for] calculating and disbursing [interest]
funds." From that premise, the district court reasoned that,
absent an allegation that appellants had sought to obtain the
interest, their injury was "abstract and hypothetical" and
resembled a "generalized grievance," in that appellants were
seeking "essentially a mandamus from the Court that the OAT
implement a clearer and more accessible system of notice,
calculation and disbursement."
In challenging the district court's conclusion that they
lacked standing, appellants fail to engage with that latter and
critical aspect of the district court's reasoning. Instead,
appellants simply contend that "[t]heir interest in the accrued
interest is not conjectural, contingent, or speculative." But
that proposition appears to have been conceded by Steidel below
(that the accrued interest is appellants' property) and accepted
by the district court. And appellants continue to press their
point that they "are entitled [to] but not provided a meaningful
procedure to petition for the payment of the interest" without
explaining why they have standing to challenge the adequacy of
those procedures absent an allegation that they requested the
interest be disbursed. Thus, appellants have not met their burden
- 19 -to show that the district court erred in concluding that they lack
standing. See McInnis-Misenor v. Me. Med. Ctr., 319 F.3d 63, 67
(1st Cir. 2003) ("The party invoking federal jurisdiction bears
the burden to establish standing."); see also In re Savage, 169
F.4th 45, 58 (1st Cir. 2026) (applying the "prophylactic rule"
that "[a] party who fails to develop an argument as to why a
particular order is erroneous waives their ability to do so").11
VI
For the reasons given above, we dismiss appellants'
appeal from the entry of summary judgment and affirm the district
court's dismissal. The parties shall bear their own costs.
11 Now seems as good a time as any to mention the fact that
appellants do not develop any argument as to why the district court erred with respect to their due process claims specifically. We're not in the business of making arguments on a party's behalf, which means appellants have waived their due process claims for lack of
development. See, e.g., Alaniz v. Bay Promo, LLC, 143 F.4th 18,
31-32 (1st Cir. 2025).
- 20 -