United States Court of Appeals For the First Circuit
No. 24-1822
BELIA ARLENE-OCASIO; EFRAÍN COLÓN-DAMIANI,
Plaintiffs, Appellees,
v.
COMISIÓN ESTATAL DE ELECCIONES; JORGE RIVERA RUEDA, in the official capacity as Acting President of the Comisión Estatal de Elecciones,*
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
[Hon. Pedro A. Delgado-Hernández, U.S. District Judge]
Before
Gelpí, Hamilton,** and Aframe, Circuit Judges.
Omar J. Andino Figueroa, with whom Luis R. Román-Negrón, Román Negrón Law, PSC, and Fernando Figueroa-Santiago, Solicitor General of Puerto Rico, were on brief, for appellants.
Ryanne E. Perio, with whom George W. Shuster, Jr., Thomas B. Davis, Wilmer Cutler Pickering Hale and Dorr LLP, Fermín L. Arraiza-Navas, American Civil Liberties Union Foundation of Puerto
* Pursuant to Fed. R. App. 43(c)(2), Jorge Rivera Rueda has been substituted for Jessika Padilla as President of the Comisión Estatal De Elecciones. ** Of the Seventh Circuit, sitting by designation. Rico, Adriel I. Cepeda Derieux, Victoria Ochoa, Theresa J. Lee, Sophia Lin Lakin, and American Civil Liberties Union Foundation were on brief, for appellees.
April 1, 2026 AFRAME, Circuit Judge. Following a favorable judgment
against the Comisión Estatal de Elecciones ("CEE") and the
President of CEE in his official capacity (collectively,
"Defendants") under 42 U.S.C. § 1983, Plaintiffs Belia
Arlene-Ocasio and Efraín Colón-Damiani obtained an award of almost
$65,000 in attorneys' fees under 42 U.S.C. § 1988. Defendants
subsequently filed a "Notice of Injunction" with the district
court, asserting that Plaintiffs were enjoined from collecting
their fee award under Puerto Rico's financial reorganization plan,
which was confirmed pursuant to the Puerto Rico Oversight,
Management, and Economic Stability Act ("PROMESA"). The district
court rejected Defendants' contention, concluding that the fee
award was unrelated to Puerto Rico's debt restructuring. We
reverse.
I.
A.
In 2016, Congress enacted PROMESA to address Puerto
Rico's financial crisis. Pub. L. No. 114-187, 130 Stat. 549 (2016)
(codified at 48 U.S.C. §§ 2101-2241). Title III of PROMESA created
a debt restructuring process "akin to municipal debt restructuring
under Chapter 9 of the bankruptcy code." In re Fin. Oversight &
Mgmt. Bd. for P.R., 899 F.3d 13, 18 (1st Cir. 2018). On May 3,
2017, Puerto Rico filed a debt restructuring petition under Title
III ("the Title III petition"). Municipality of San Juan v. Puerto
- 3 - Rico, 919 F.3d 565, 571 (1st Cir. 2019). After nearly five years,
on January 18, 2022, the court charged with overseeing the Title
III proceedings (the "Title III Court") issued a Confirmation Order
ratifying Puerto Rico's Plan of Adjustment (together, the
"Confirmed Plan") to restructure its debt. See In re Fin.
Oversight & Mgmt. Bd. for P.R., 636 B.R. 1 (D.P.R. 2022). The
Confirmed Plan took effect on March 15, 2022 (the "Effective
Date"). In re Fin. Oversight & Mgmt. Bd. for P.R., 32 F.4th 67,
74 (1st Cir. 2022).
Under the Confirmed Plan, all claims, causes of action,
and debts against Puerto Rico that arose prior to the Effective
Date, and that were not otherwise addressed by the Plan, were
"discharge[d] and release[d] . . . pursuant to sections 524 and
944 of the Bankruptcy Code." In re Fin. Oversight & Mgmt. Bd. for
P.R., 636 B.R. at 38, 232; see also 11 U.S.C. § 944(b)(1);
11 U.S.C. § 524(a)(1). The Confirmed Plan likewise enjoined those
holding discharged claims from continuing any action against
Puerto Rico and its instrumentalities, including the collection or
recovery of any judgment or award. See In re Fin. Oversight &
Mgmt. Bd. for P.R., 636 B.R. at 41-42, 234-35; see also 11 U.S.C.
§ 524(a)(2).
For a claim to be addressed by the Title III proceedings,
claimants were generally required to file a "proof of claim" with
the Title III Court by a specific "bar date," or deadline. In re
- 4 - Fin. Oversight & Mgmt. Bd. for P.R., 636 B.R. at 82, 87. Such
deadlines "ensure that the promise of a fresh start is not
illusory, as claims not filed and addressed in the bankruptcy
cannot be asserted later against the reorganized debtor." Ellis
v. Westinghouse Elec. Co., LLC, 11 F.4th 221, 232 (3d Cir. 2021).
As is relevant here, holders of a particular type of claim called
an "administrative expense" were required to file proof of their
claim within ninety days of the Confirmed Plan's Effective Date on
March 15, 2022.1 In re Fin. Oversight & Mgmt. Bd. for P.R., 636
B.R. at 32, 81. Administrative expenses are claims against the
debtor that arise after the debtor files its petition for
bankruptcy and that constitute the "actual, necessary costs and
expenses of preserving the estate." 11 U.S.C. §§ 503(b)(1)(A),
507(a)(2); see also In re Fin. Oversight & Mgmt. Bd. for P.R., 7
F.4th 31, 38 (1st Cir. 2021) (noting that Congress incorporated
§§ 503 and 507(a)(2) into PROMESA under 48 U.S.C. § 2161(a)).
Under the Confirmed Plan, administrative expenses that were not
1 The June 13, 2022, bar date for administrative expenses was subsequently extended to January 18, 2023, for select claims. See In re Fin. Oversight & Mgmt. Bd. for P.R., 781 F. Supp. 3d 1, 5 (D.P.R. 2025). Separately, we note that while we use the term "proof of claim," the Confirmed Plan uses both "proof of claim" and "request for payment." See, e.g., In re Fin. Oversight & Mgmt. Bd. for P.R., 636 B.R. at 32, 98; see also Ellis, 11 F.4th at 233 n.6 ("To be technical, a claimant files a 'request for payment' rather than a 'proof of claim' for an administrative expense claim."); 11 U.S.C. § 503(a) ("An entity may timely file a request for payment of an administrative expense . . . .").
- 5 - filed by the bar date are considered "forever barred"; that is,
the claimant may not recover from the debtor and the debtor is
discharged of any further obligation to the claimant. In re Fin.
Oversight & Mgmt. Bd. for P.R., 636 B.R. at 32, 81.
B.
In August 2020, around three years after Puerto Rico
filed its Title III petition, but over a year before the Confirmed
Plan's Effective Date, Plaintiffs sued Defendants under 42 U.S.C.
§ 1983, raising constitutional claims about voting procedures for
the 2020 general election. The Complaint alleged that, given the
health risks caused by COVID-19, Puerto Rico's voting policies and
restrictions on early and absentee voting constituted an unlawful
burden on the right to vote for those exceeding sixty years of
age, in violation of the First and Fourteenth Amendments to the
Constitution. On September 11, 2020, Defendants filed an Answer
noting, inter alia, that they appeared "without waiving any right
or defense arising from Title III of [PROMESA]."
That same day, the district court granted Plaintiffs a
preliminary injunction that allowed voters over sixty to vote early
by mail. Twelve days later, the court issued a permanent
injunction. On November 2, 2020, following the entry of final
judgment, Plaintiffs moved for fees and costs under 42 U.S.C.
§ 1988, seeking approximately $67,680 in fees and $2,932 in costs.
- 6 - The district court waited roughly three years, until
December 26, 2023, to rule on the motion, ultimately awarding
Plaintiffs $64,415 in attorneys' fees and no costs. On January
23, 2024, Defendants filed a motion for reconsideration, arguing
for a downward revision of the award.
While that motion was pending, Defendants filed a
"Notice of Injunction," in which they asserted that under the
Confirmed Plan, Plaintiffs were barred from collecting the fee
award. Defendants asserted that Plaintiffs' claim was a
post-petition monetary award against Puerto Rico and implied that
Plaintiffs failed to file proof of their claim before the
administrative expense bar date. Defendants requested that the
court "take notice of the injunction," which they said "stay[ed]
the instant case and depriv[ed] [the district court] of
jurisdiction." Prior to filing the Notice of Injunction,
Defendants had not provided direct notice to Plaintiffs about the
Confirmed Plan or the administrative expense bar date.
On July 31, 2024, the district court denied Defendants'
"request to stay the collection of . . . attorneys['] fees." The
court concluded that because this was not "a Title III case" but
"a post-petition case unrelated to Puerto Rico's bankruptcy case,"
it was "not persuaded that the [C]onfirmed [P]lan's injunction on
claims and administrative bar date applie[d]." Defendants timely
appealed.
- 7 - II.
Defendants contend that the district court wrongly
concluded that Plaintiffs' claim for fees was "unrelated to Puerto
Rico's bankruptcy case" and thus not subject to discharge under
the Confirmed Plan. Defendants' argument is straightforward and
ultimately persuasive: the claim for fees runs against Puerto
Rico; it arose after the Title III petition was filed but before
the Confirmed Plan's Effective Date; Plaintiffs failed to file
proof of their claim by the administrative expense bar date; and
therefore, under the Confirmed Plan, Plaintiffs' claim is
discharged and enjoined.
Plaintiffs do not dispute that their claim for fees is
against Puerto Rico and that they did not file proof of their claim
before the administrative expense bar date. Plaintiffs
nonetheless offer four arguments to support the district court's
conclusion that the fee award is exempt from discharge. First,
they contend that Defendants waived the discharge argument by not
raising it in a timely fashion before the district court. Second,
they argue that their claim for fees did not "arise" until after
the Confirmed Plan took effect and thus is not subject to discharge
under the Plan. Third, they assert that even if their claim did
arise before the Confirmed Plan took effect, the claim is an
"obligation[] arising under [f]ederal police or regulatory laws"
and is thereby exempt from discharge under 48 U.S.C. § 2164(h) of
- 8 - PROMESA. Finally, they posit that because Defendants allegedly
failed to provide them with adequate notice of the administrative
expense bar date, their claim is not subject to discharge as a
matter of due process. We address these contentions in the order
presented, ultimately concluding that none is convincing.
Plaintiffs first claim that Defendants waived any
argument that their fee award has been discharged. They assert
that Defendants waited nearly two years, while the Confirmed Plan
was in effect and the motion for fees was pending, to raise the
discharge argument in a "Notice of Injunction." They add that
Defendants not only waited to file their Notice until after the
district court had granted Plaintiffs' motion for fees, but also
until after Defendants themselves had filed a reconsideration
motion contesting the fee award on the merits. Plaintiffs further
contend that the Notice's discharge arguments were perfunctory and
undeveloped. In support of their waiver contention, Plaintiffs
cite several of this Court's cases deeming an argument waived that
was not timely raised before the district court.
While raise-or-waive is the general rule in this
circuit, there are circumstances here that preclude its
application. Under 11 U.S.C. § 524(a)(1) and (2), which are
incorporated into PROMESA, see 48 U.S.C. § 2161(a), a discharge
"voids any judgment" and "operates as an injunction . . . whether
- 9 - or not discharge of such debt is waived," 11 U.S.C. § 524(a)(1)-(2)
(emphasis added). As the plain text of § 524(a) demonstrates,
discharge applies "automatically" and independent of any action
(or inaction) by the debtor; thus it cannot be waived. See 4
Collier on Bankruptcy ¶524.02 (16th ed. 2026); see also In re
Gurrola, 328 B.R. 158, 165-70 (9th Cir. BAP 2005) (describing the
history of § 524(a) to demonstrate that the provision renders
discharge "an absolute, nonwaivable defense" as opposed to "an
affirmative defense that could be lost if not raised"). Plaintiffs
have provided no basis to disregard § 524(a)'s plain language
precluding waiver of discharge. We therefore reject Plaintiffs'
waiver argument.
Plaintiffs next offer a timing argument. They contend
that their claim for fees is nondischargeable because it arose
after the Confirmed Plan took effect. As Plaintiffs note, the
discharge provision applies specifically to claims that "arose, in
whole or in part, prior to the Effective Date" of the Confirmed
Plan. In re Fin. Oversight & Mgmt. Bd. for P.R., 636 B.R. at 38,
231 (emphasis added). While Plaintiffs do not dispute that the
underlying constitutional violation, their corresponding § 1983
action, and the filing of their motion for fees all occurred more
than a year before the Confirmed Plan's Effective Date, they argue
that their claim for fees ultimately did not "arise" until the
- 10 - district court granted their motion, which was almost two years
after the Confirmed Plan's Effective Date. Plaintiffs assert that
their claim is consequently "a post-Effective Date claim" and
should not be "subject to the Title III [p]roceedings' claims
resolution process."
Plaintiffs' argument is premised on an assertion that in
bankruptcy, a claim against a debtor for fees arises only when the
claim is reduced to judgment. Plaintiffs ground this proposition
in § 1988's fee-shifting language, which provides that "the court,
in its discretion, may allow the prevailing party . . . a
reasonable attorney's fee as part of the costs." 42 U.S.C.
§ 1988(b). Relying on this language, Plaintiffs contend that
because a fee award under § 1988 is discretionary, a claim for
fees does not arise until the court exercises its authority to
order the award.
We disagree. For starters, under the Confirmed Plan and
the Bankruptcy Code as incorporated by PROMESA, a claim is
cognizable, and subject to discharge, regardless of whether it has
been reduced to judgment. See In re Fin. Oversight & Mgmt. Bd.
for P.R., 636 B.R. at 37–38, 89-90 (discharging "all Claims or
Causes of Action against the Debtors and Reorganized Debtors that
arose, in whole or in part, prior to the Effective Date," and
expressly defining the term "claim" as "[a]ny right to payment or
performance, whether or not such right is reduced to judgment");
- 11 - see also 11 U.S.C. §§ 944(b)(1), 101(12), 101(5) (establishing
that "the debtor is discharged from all debts as of the time when
. . . the plan is confirmed," and defining the term "debt" as
"liability on a claim," and the term "claim" as a "right to
payment, whether or not such right is reduced to judgment").
Moreover, to determine when a claim arises in the
specific circumstance of fee awards, we have traditionally looked,
not to judgments, but the timing of the underlying violation or
transaction for which the fees were incurred. See, e.g., In re
Hemingway Transp., Inc., 954 F.2d 1, 7 (1st Cir. 1992) (looking to
whether attorneys' fees were incurred for the purposes of the
post-petition operation of the debtor); In re Munce's Superior
Petroleum Prods., Inc., 736 F.3d 567, 568, 572 (1st Cir. 2013)
(looking to whether the fines and attorneys' fees were "directly
attributable to post-petition violations"); see also 5 Collier on
Bankruptcy ¶553.03 ("[I]f the creditor incurs the attorney's fees
[post-petition] in connection with exercising or protecting a
[pre-petition] claim that included a right to recover attorney's
fees, the fees will be [pre-petition] in nature . . . . [If] the
claim for attorney's fees arises from the debtor's [post-petition]
misconduct . . . the claim for the fees would be [post-petition]
in nature rather than a [pre-petition] claim."); cf. In re Mammoth
Mart, Inc., 536 F.2d 950, 955 (1st Cir. 1976) (looking to when the
"debtor-in-possession's actions themselves . . . [gave] rise to a
- 12 - legal liability" to determine when a claim arises in the analogous
context of debtor misconduct).
Finally, we note that Plaintiffs' argument is at odds
with the animating objectives of bankruptcy. Under Plaintiffs'
theory, were a court to wait until after a plan of adjustment has
taken effect to rule on a claim for fees, the claim would go
unaddressed by the bankruptcy proceedings. Such an outcome would
prevent the bankruptcy proceedings from achieving the "broadest
possible relief in the bankruptcy court and [from] ensur[ing] that
virtually all obligations to pay money [would] be amenable to
treatment in bankruptcy." In re Hemingway Transp., Inc., 954 F.2d
at 8 (citation modified); see also O'Loghlin v. Cnty. of Orange,
229 F.3d 871, 874 (9th Cir. 2000) (similar). Moreover, it would
leave the reorganized debtor "saddle[d] . . . with significant and
unexpected liabilities . . . hobbling from the start its prospects
for a successful, long-term reorganization." Ellis, 11 F.4th at
237; see also Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367
(2007) ("The principal purpose of the Bankruptcy Code is to grant
a fresh start to the honest but unfortunate debtor." (citation
modified)).
Here, the events for which the district court awarded
Plaintiffs fees occurred well before the Confirmed Plan's
Effective Date. That the district court, independent of any
actions by the parties, waited almost two years after the Confirmed
- 13 - Plan took effect to rule on the motion is not a basis for
circumventing the Title III proceedings. To find otherwise would
not just stray from precedent; it would also undermine the very
purpose of the proceedings -- orderly resolution of a debtor's
assets and successful reorganization. For these reasons, we reject
Plaintiffs' timing argument.
C.
Plaintiffs next assert that, even if their timing
argument fails, their claim for attorneys' fees remains
nondischargeable under 48 U.S.C. § 2164(h), which bars the
discharge of all "obligations arising under [f]ederal police or
regulatory laws." 48 U.S.C. § 2164(h). The provision reads as
follows:
This chapter may not be construed to permit the discharge of obligations arising under Federal police or regulatory laws, including laws relating to the environment, public health or safety, or territorial laws implementing such Federal legal provisions. This includes compliance obligations, requirements under consent decrees or judicial orders, and obligations to pay associated administrative, civil, or other penalties.
Id. (emphasis added).
To qualify for the statutory exception, Plaintiffs
contend that their claim for attorneys' fees is a nondischargeable
"obligation" that arises from their initial § 1983 action
challenging Defendants' voting procedures for the 2020 general
- 14 - election under the First and Fourteenth Amendments. However,
rather than argue that the claim is an "obligation[] arising under"
these Amendments, see 48 U.S.C. § 2164(h), Plaintiffs argue that
their claim arises from § 1983, the authorizing statute that
granted Plaintiffs a cause of action to bring their voting rights
action, and § 1988, the corresponding fee-shifting statute.
Specifically, Plaintiffs posit that the two statutes constitute
"[f]ederal police or regulatory laws" under § 2164(h), citing the
statutes' historical origins, the statutory scheme under which the
laws are codified, and the fact that, at least in the case of
§ 1983, the statute has been relied on "to address various matters
of public health or safety." We are not persuaded.
Section 2164(h)'s purpose is to prevent the debtor from
using bankruptcy to avoid obligations required by federal police
and regulatory laws. In this context, the term "police and
regulatory laws" connotes federal legislation and regulation that
create obligations to provide for public health and safety. See
48 U.S.C. § 2164(h) (citing as examples "laws relating to the
environment, public health or safety"); Municipality of San Juan,
919 F.3d at 577 (citing "the Medicaid Act" as one example of such
laws); see also Medtronic, Inc. v. Lohr, 518 U.S. 470, 475 (1996)
(defining police powers more generally as the "latitude . . . to
legislate as to the protection of the lives, limbs, health,
comfort, and quiet of all persons" and noting "the Federal
- 15 - Government has played an increasingly significant role in the
protection of the health of our people" (quoting Metro. Life Ins.
v. Massachusetts, 471 U.S. 724, 756 (1985))).
But § 1983 and § 1988 do not create substantive rights
or obligations. See, e.g., Anderson v. Warner, 451 F.3d 1063,
1067 (9th Cir. 2006); Maine v. Thiboutot, 448 U.S. 1, 11 (1980)
(describing § 1988 as "part of the § 1983 remedy"). Section 1983
creates a cause of action for private parties to challenge the
deprivation of federal rights by persons operating under the color
of state law. See 42 U.S.C. § 1983. And § 1988 enables a
prevailing plaintiff in such an action to collect fees subject to
the discretion of the court. See id. § 1988. In this sense,
§ 1983 and § 1988 are not "[f]ederal police or regulatory laws"
under § 2164(h) but merely authorizing statutes -- vehicles for
enforcing a state actor's compliance with federal law, but not the
source of obligations with which the state actor must comply.
Plaintiffs' focus on § 1983 and § 1988 is therefore misplaced. In
so relying, Plaintiffs have failed to establish a valid basis for
finding their claim nondischargeable under § 2164(h).
D.
Finally, we address Plaintiffs' argument that they
should be exempt from discharge because Defendants failed to
provide them with constitutionally adequate notice of the
administrative expense bar date. Specifically, Plaintiffs argue
- 16 - that because they were "known" to the debtor, as opposed to
"unknown" or conjectural, Defendants should have, as a matter of
due process, directly notified them of the administrative expense
bar date.2 Plaintiffs identify two grounds for this contention.
First, they argue that this conclusion follows from In re Arch
Wireless, Inc., 534 F.3d 76, 79 (1st Cir. 2008). Second, they
argue that the Federal Rules of Bankruptcy Procedure, which were
incorporated into PROMESA, see 48 U.S.C. § 2170, require such
notice. We consider these arguments in turn.
In Arch Wireless, this Court assessed facts similar to
those presented here. That case involved a Chapter 11 corporate
bankruptcy, in which a creditor held a "pre-confirmation" claim
but had not filed an appearance in the bankruptcy proceedings.
534 F.3d at 79-80. The debtor meanwhile had published notice of
the bankruptcy proceedings in major national newspapers but had
not provided the creditor with formal notice "of the bar date, the
confirmation hearing, or the contents of the confirmation plan."
Id. at 79-80, 82. The Court considered whether, in the context of
a Chapter 11 corporate bankruptcy, a debtor's failure to provide
2 We note that in making this argument, Plaintiffs do not dispute that their claim for fees and costs qualifies as an administrative expense under 11 U.S.C. § 503(a).
- 17 - direct notice of "specific key dates" to a "known" creditor exempts
the creditor's claim from discharge.3 Id. at 82-87.
The relevant statutory provisions at issue in Arch
Wireless did not specify the type of notice debtors must provide.
See 534 F.3d at 82-83 ("The discharge injunction provisions in the
Code are written unequivocally . . . without reference to the
notice provided to the claimants." (citing 11 U.S.C. §§ 524,
1141(d)). Notwithstanding the statutory silence, the Court held
that the creditor did not receive constitutionally adequate notice
of key dates in the proceedings and, as a result, the creditor's
claim was not discharged. Id. at 83-84, 87. The Court explained
that it was not enough for the creditor to have "general awareness
of a pending Chapter 11 reorganization proceeding." Id. at 87.
To "satisfy the requirements of due process and render the
discharge injunction applicable to the creditor's claims," the
debtor was required to provide known creditors with direct notice
of the key events in the bankruptcy proceedings. Id. at 83-84,
87.
3 The Court defined "known" creditors as the subset of creditors whose claims are "reasonably ascertainable" to a debtor. Arch Wireless, 534 F.3d at 81 (quoting Tulsa Prof'l Collection Servs. Inc. v. Pope, 485 U.S. 478, 490 (1988)). It defined "unknown" creditors as the remaining creditors whose claims are "conjectural or future [oriented]." Id. at 80 (quoting Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 317 (1950)). The Court noted that when a creditor is "unknown," general publication notice satisfies due process. Id.
- 18 - Plaintiffs argue that Arch Wireless controls here. They
contend that like the creditor in Arch Wireless, they are known
claimants and, as a matter of due process, Defendants were required
to provide them direct notice of the key dates in the Title III
proceedings, including the administrative expense bar date.
Because they did not receive such notice, they argue, their claim
for fees should not be discharged.
Core to Plaintiffs' thesis is a presumption that once a
claimant is deemed "known," heightened notice requirements
automatically follow. This contention, however, overreads Arch
Wireless. As noted above, that decision held that in the context
of a Chapter 11 corporate bankruptcy, where there is no statutory
notice provision, a debtor must provide a known creditor with
formal notice of specific deadlines as a matter of due process.
See 534 F.3d at 83-84, 87. But the Court's analysis did not end
there. The decision also made clear that "the contours of [the]
constitutional due process analysis" are "closely tied to the
statutory framework," id. at 84-85, 87, and that "[notice]
requirements may vary as between creditors" under different
bankruptcy provisions so long as "the statute itself puts creditors
on notice of this variance," id. at 86. As the Court explained,
"[t]he statutory notice requirement . . . informs the reasonable
expectations of creditors," and a "creditor's 'right to assume'
- 19 - that a particular level of notice will be given is based upon the
notice provisions in the applicable statute." Id. at 84-85, 87.
Unlike the statutory discharge provisions at issue in
Arch Wireless, which were written "without reference to the notice
provided to the claimants," 534 F.3d at 82, the statutory provision
governing discharge here, 11 U.S.C. § 944, includes an express
notice provision. Section 944, which was incorporated into PROMESA
under 48 U.S.C. § 2161(a), discharges a debtor from all debts "owed
to an entity" unless the entity "had neither notice nor actual
knowledge of the case" before confirmation of the plan. 11 U.S.C.
§ 944(b), (c)(2) (emphasis added).
We understand the phrase "of the case" as used in
§ 944(c)(2) to refer to the bankruptcy proceedings overall. See
H.R. Rep. No. 94-686, 94th Cong., 1st Sess. 34 (1975) ("[I]f [a
creditor] knew of either the petition or the plan, either through
timely notice from the court or the petitioner, or through his
actual knowledge, then his claim is discharged. Otherwise it is
not."); see also Arch Wireless, 534 F.3d at 86 (interpreting the
words "knowledge of the case" to mean "general knowledge of the
proceedings" (emphasis added)). Section 944(c)(2) thus
establishes that once a claimant receives notice or gains actual
knowledge of the bankruptcy proceedings, the burden of inquiry
shifts to the claimant to identify and comply with specific filing
- 20 - deadlines. See Arch Wireless, 534 F.3d at 86 (describing the
clause as instituting a "burden-shift" to the claimant).
In arguing that they received constitutionally deficient
notice, Plaintiffs make no attempt to square Arch Wireless's
instruction that "[t]he statutory notice requirement shapes the
contours of [the] constitutional due process analysis," id. at
84-85, with the text of § 944(c)(2). Nor do they acknowledge Arch
Wireless's analysis of a different bankruptcy provision, 11 U.S.C.
§ 523(a)(3), that shares the same "notice or actual knowledge of
the case" language as § 944(c)(2). See id. at 86. Rather than
find § 523(a)(3) constitutionally inadequate, Arch Wireless made
clear that "because the statute itself warns that 'actual knowledge
of the case' will be enough to permit the discharge injunction to
operate against their claims," creditors with such knowledge "do
not have a 'right to assume'" anything more. Id. (emphasis added)
(quoting In re Medaglia, 52 F.3d 451, 456-57 (2d Cir. 1995)).
Indeed, Arch Wireless specifically described the language of
§ 523(a)(3) as working a "statutory burden-shift" that directs the
creditor "to actively participate once he [or she] has general
knowledge of the [bankruptcy] proceedings." Id. We see no reason
to adopt a different analysis in the present case.
Here, Plaintiffs had actual knowledge of the Title III
proceedings. Defendants specifically referenced the proceedings
in their Answer to Plaintiffs' Complaint as well as in other case
- 21 - filings. Under § 944, as well as our reasoning in Arch Wireless,
it thus follows that Plaintiffs did not "have the 'right to assume'
that" they would receive formal notice of the bar date. Arch
Wireless, 534 F.3d at 86 (quoting In re Medaglia, 52 F.3d at 457–
58). To the contrary, they had a responsibility to "actively
participate" in the proceedings by identifying the bar date for
themselves. Id.
To the extent Plaintiffs address § 944's notice
provision, they do not dispute the provision's meaning or its
application in this case. They nonetheless make two arguments as
to why the provision is not dispositive. Neither is persuasive.
First, they contend that while "a creditor who had
neither notice nor actual knowledge [of the case] may be exempted
under § 944(c) . . . exemptions [to discharge] are not limited to
creditors who had neither notice nor actual knowledge [of the
case]." Put differently, just because § 944(c)(2) sets out one
particular form of notice owed to the claimant, this does not
preclude a court from imposing other notice requirements. We
disagree.
Plaintiffs are essentially asking for a more rigorous
notice requirement than Congress saw fit to provide. This is wrong
in two respects. To start, generally where "Congress has
enumerated a set of express exceptions," we do not assume that
"Congress intended to make . . . other exceptions than those
- 22 - specified." Sony BMG Music Ent. v. Tenenbaum, 660 F.3d 487, 499
(1st Cir. 2011); see also Hillman v. Maretta, 569 U.S. 483, 496
(2013) (similar).
Apart from that, "[i]t is an 'elementary canon of
construction that a statute should [not] be interpreted so as . . .
to render one part inoperative.'" South Carolina v. Catawba Indian
Tribe, Inc., 476 U.S. 498, 510 n.22 (1986) (quoting Colautti v.
Franklin, 439 U.S. 379, 392 (1979)). Here, were we to accept
Plaintiffs' proposed notice requirement, it would in certain
instances nullify § 944(c)(2). Consider an example: a known
claimant has notice or actual knowledge of the overall bankruptcy
proceedings consistent with § 944(c)(2) but has not received
formal notice of the bar date, as Plaintiffs contend is required.
Under the plain language of § 944(c)(2), the claim would be
discharged. But not so under Plaintiffs' proposed notice
requirement. Applying Plaintiffs' unenumerated notice requirement
would thus require courts, in certain instances, to revive claims
that Congress expressly wanted discharged.
Ultimately, "our task [is] to enforce the statute as
Congress wrote it" and not "in a way that would frustrate
Congress's unmistakable purpose." Aguilar v. U.S. Immigr. &
Customs Enf't, 510 F.3d 1, 10 (1st Cir. 2007). Here, Congress has
established a clear exception to discharge under
§ 944(c)(2) -- lack of notice or actual knowledge of the
- 23 - bankruptcy case. Plaintiffs, for their part, have identified no
basis for reading additional exceptions into the statute. For
these reasons, we reject Plaintiff's proposed interpretation of
§ 944.
Plaintiffs separately attempt to bypass the plain text
of § 944(c)(2) by arguing that it "is not the sole source of
authority on the notice requirements for a debtor under PROMESA."
Plaintiffs assert that the Federal Rules of Bankruptcy Procedure,
which are incorporated into PROMESA under 48 U.S.C. § 2170, put
"the burden on the debtor to list its known creditors and
personally notify them of specific key dates in the proceeding."
They further note that Arch Wireless relied on the Rules as a
separate source of authority.
Plaintiffs are correct that the Rules require that known
creditors receive formal notice of specific events in the
bankruptcy proceedings. See generally Fed. R. Bankr. P.
2002(a)(7), 2002(f), 3017(d); see also Arch Wireless, 534 F.3d at
82. However, as Arch Wireless notes, the "Rules themselves do not
provide an exception to the discharge injunction when notice rules
are violated." 534 F.3d at 83. Moreover, to the extent Arch
Wireless relied on the Rules as a source of authority, it did so
in lieu of any clear statutory notice requirement. See id. at 84.
By contrast, here, as discussed above, there is a statutory notice
requirement in § 944(c)(2) of the Bankruptcy Code. See 11 U.S.C.
- 24 - § 944(c)(2). Insofar as this statutory notice requirement under
the Code differs from the notice requirements set forth under the
Rules, such conflict must be resolved to favor the Code. See,
e.g., In re Edmonston, 107 F.3d 74, 76 n.2 (1st Cir. 1997); In re
Smith, 999 F.3d 452, 456 (6th Cir. 2021); In re Jastrem, 253 F.3d
438, 441-42 (9th Cir. 2001). We therefore reject Plaintiffs'
contention that the Rules serve as a separate legal ground upon
which to impose a heightened notice requirement.
In sum, § 944(c)(2) specifies the "particular level of
notice" to which a claimant is entitled. Arch Wireless, 534 F.3d
at 87. The provision establishes that once a claimant has "notice"
or "actual knowledge of the" bankruptcy proceedings, its claim may
be discharged under the Confirmed Plan. 11 U.S.C. § 944(c)(2).
Here, Plaintiffs had such knowledge. We therefore reject
Plaintiffs' contention that the fee award should be exempted from
discharge on the ground that Defendants failed to provide direct
notice of the administrative expense bar date.4
4 Because Plaintiffs' claim is discharged, we do not address Defendants' contention that the district court erred in calculating Plaintiffs' attorneys' fees. Likewise, we requested supplemental briefing on whether Plaintiffs' motion for attorneys' fees and costs was void on the ground that it was filed in violation of the automatic stay that was instituted following the Title III petition. See 48 U.S.C. § 2161(a) (incorporating 11 U.S.C. §§ 362(a) and 922(a)). Defendants contend that Plaintiffs' motion was in express violation of the automatic stay and that the motion and any relief awarded are void. As our disposition resolves this matter in favor of Defendants, we bypass whether the motion for fees and costs was void because of the automatic stay. See
- 25 - III.
To conclude, Plaintiffs' claim for attorneys' fees under
§ 1988 is a post-petition claim against Puerto Rico. Despite
having actual knowledge of the Title III proceedings, Plaintiffs
do not dispute that they failed to file proof of their claim by
the administrative expense bar date. Pursuant to the Confirmed
Plan and § 944 of the Bankruptcy Code, Plaintiffs' claim is
therefore discharged. On that basis, we reverse the district
court's order denying the application of the discharge injunction
to the fee award.5
Díaz-Báez v. Alicea-Vasallo, 22 F.4th 11, 17 n.3 (1st Cir. 2021); Johansen v. Liberty Mut. Grp., 118 F.4th 142, 148 (1st Cir. 2024). 5 The Bankruptcy Code, as adopted by PROMESA, permits Plaintiffs to file a belated "request for payment of an administrative expense" in the Title III proceedings and ask the Title III Court to accept the late filing "for cause." 11 U.S.C. § 503(a); see also Ellis, 11 F.4th at 239 n.12. We offer no view on how any such filing should be resolved.
- 26 -