United States Court of Appeals For the First Circuit
No. 24-1642
POWER RENTAL OP CO, LLC,
Plaintiff, Appellee,
v.
VIRGIN ISLANDS WATER AND POWER AUTHORITY,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
[Hon. María Antongiorgi-Jordán, U.S. District Judge]
Before
Gelpí and Kayatta, Circuit Judges, and Smith,* District Judge.
Carlos A. García-Pérez, with whom Sanchez-Medina, Gonzalez, Quesada, Lage, Gomez & Machado, LLP was on brief, for appellant. Herman G. Colberg-Guerra, with whom Pietrantoni Méndez & Álvarez LLC was on brief, for appellee.
June 11, 2025
* Of the District of Rhode Island, sitting by designation. SMITH, District Judge. This case arises from a writ
issued by the U.S. District Court for the District of Puerto Rico
and served upon a bank account of Appellant Virgin Islands Water
and Power Authority ("WAPA") at a FirstBank branch in Puerto Rico.
WAPA filed an emergency motion to quash the writ in which it
challenged the District of Puerto Rico's jurisdiction to issue the
writ. The district court denied the motion. It found that the
separate entity rule -- which states that every individual bank
branch is considered a separate entity for jurisdictional purposes
-- did not apply, and it accordingly had jurisdiction to issue the
writ. Now, WAPA again challenges the district court's
jurisdiction. We agree with the district court's conclusion that
the separate entity rule does not apply. We therefore affirm the
district court's order.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Appellee Power Rental Op Co, LLC ("Power Rental") is a
limited liability company with its headquarters and principal
place of business in Florida. Power Rental provides water- and
energy-related services and rents related equipment and systems to
customers. WAPA is a municipal corporation existing under the
laws of the U.S. Virgin Islands. It provides water and power to
residential and commercial customers in the Virgin Islands.
In February 2012, General Electric International ("GE")
and WAPA entered into an agreement (the "Rental Agreement") for GE
- 2 - to provide WAPA with water- and energy-related services and rental
equipment in exchange for monthly payments. In 2013, Power Rental
acquired GE and assumed ownership of the Rental Agreement. By
2019, WAPA owed Power Rental $14,291,986.00 under the Rental
Agreement. Power Rental agreed to reduce the amount owed to
$9,310,971.00 in exchange for WAPA issuing a promissory note (the
"Note") for the reduced amount. The Note, which is governed by
New York law, also provides:
[WAPA] hereby irrevocably and unconditionally agrees that, to the extent permitted by Applicable Law, (i) should any proceeding be brought against [WAPA] or its assets (other than [WAPA]'s electric system and equipment, its electric distribution assets, and assets protected by diplomatic and consular privileges legislation analogous to the 1976 Sovereign Immunities Act of the United States (the "Protected Assets")) in any jurisdiction in connection with this Note, no claim of immunity from such proceedings shall be claimed by or on behalf of [WAPA] on behalf of itself or any of its assets (other than Protected Assets); [and] (ii) it waives any right of immunity which it or any of its assets (other than Protected Assets) now has or may in the future have in any jurisdiction in connection with any such proceedings . . . .
In June 2020, WAPA defaulted on the Note. Power Rental
then sued in Florida state court alleging breach of the Note,
services rendered, and quantum meruit. Power Rental also filed an
ex parte motion for pre-judgment writs of garnishment. The state
court granted these writs. WAPA removed the case to the Middle
- 3 - District of Florida, where the court issued a number of orders.
Most relevant are: (1) a July 2021 order granting WAPA's motion to
dissolve the Florida state court-issued pre-judgment writs of
garnishment; (2) another July 2021 order granting in part Power
Rental's motion for summary judgment; and (3) a June 2023 order
granting Power Rental's motion for an order directing WAPA to
complete a fact information sheet.
First, the Middle District of Florida ruled on WAPA's
motion to dissolve the pre-judgment writs of garnishment issued by
the Florida state court. See Power Rental Op Co, LLC v. V.I. Water
& Power Auth., No. 20-cv-1015, 2021 WL 9881137 (M.D. Fla. July 6,
2021). WAPA argued that the Florida state court lacked
jurisdiction to issue the writs because WAPA did not have bank
accounts located in Florida. See id. at *1. The Middle District
of Florida framed the issue as "whether trial courts must have in
rem jurisdiction over assets to issue a prejudgment writ of
garnishment, and what is the situs/location of a bank account in
light of modern banking practices." Id. at *2. The court examined
Florida state and Middle District of Florida precedent, as well as
the Florida state garnishment statute. See id. at *2-8. It
concluded that Florida state courts "must have in rem jurisdiction
over bank accounts to garnish them" and that "the Florida
garnishment statute does not apply extraterritorially to out-of-
state bank accounts." Id. at *8. Because Power Rental did not
- 4 - demonstrate that WAPA's accounts were in Florida, the Middle
District of Florida found that the Florida state court did not
have in rem jurisdiction over WAPA's accounts and dissolved the
writs of garnishment. See id. at *9. The court also noted that
Power Rental submitted documents suggesting that WAPA maintained
accounts in Puerto Rico, but not in Florida. See id.
Also in July 2021, the Middle District of Florida granted
Power Rental's motion for summary judgment on its claim that WAPA
breached the Note. See Power Rental Op Co., LLC v. V.I. Water &
Power Auth., 548 F. Supp. 3d 1193, 1202 (M.D. Fla. 2021). The
court found that WAPA's sovereign immunity arguments failed
because Virgin Islands immunities law does not preclude judgments
against WAPA or preclude WAPA from using its assets to satisfy
such judgments. Id. at 1201. The court also disagreed with WAPA's
argument that Power Rental's claims were barred due to material
breach. In so holding, it reasoned that under New York law (which
applies substantively to the Note), WAPA waived all defenses under
the terms of the Note. See id. The court therefore entered
summary judgment in favor of Power Rental in the amount of
$6,519,743.57, as well as an additional $349,279.32 in attorney's
fees. Power Rental Op Co., LLC v. V.I. Water & Power Auth., No.
20-cv-1015, 2021 WL 5457070, at *2 (M.D. Fla. Oct. 13, 2021).
Following the grant of summary judgment, Power Rental
sought an order from the Middle District of Florida directing WAPA
- 5 - to complete a "Fact Information Sheet" under federal and Florida
civil procedure rules. See Power Rental Op Co, LLC v. V.I. Water
& Power Auth., No. 20-cv-1015, 2023 WL 4187095, at *1 (M.D. Fla.
May 31, 2023), report and recommendation adopted, 2023 WL 4181246
(M.D. Fla. June 26, 2023). WAPA argued that its assets were immune
from collection and that it had no assets in Florida, so it should
not be compelled to complete the information sheet. See id. The
Middle District of Florida found that WAPA waived any statutory
exemption defense from post-judgment execution proceedings by the
terms of the Note and ordered WAPA to complete the sheet. See id.
at *2-3.
WAPA filed an appeal on January 25, 2022, but the
Eleventh Circuit issued an Order of Voluntary Dismissal following
WAPA's corresponding motion. See Power Rental OP CP, LLC v. V.I.
Water & Power Auth., No. 21-13986-JJ, 2022 WL 482169 (11th Cir.
Jan. 25, 2022).
On February 23, 2024, Power Rental registered the
judgment obtained in the Middle District of Florida with the U.S.
District Court for the District of Puerto Rico. See Power Rental
Op Co, LLC v. V.I. Water & Power Auth., No. 24-mc-70, 2024 WL
2805162, at *1 (D.P.R. May 31, 2024). The District Court of Puerto
Rico granted Power Rental's Motion for Execution of Judgment and
issued a Writ of Execution (the "Writ"). See id. The U.S. Marshal
served the Writ on FirstBank in Puerto Rico on April 16, 2024,
- 6 - resulting in the levy of approximately $6.9 million of WAPA's funds
in bank accounts with FirstBank's branches in the Virgin Islands.
On April 18, 2024, WAPA filed an Emergency Motion to
Quash Writ of Execution of Judgment. See id. WAPA argued that
the Writ was unlawful because the funds in its FirstBank Virgin
Islands account were entirely exempt from a writ of execution under
V.I. Code Ann. tit. 30, § 111 ("Section 111"),1 which precludes
execution of judgments against WAPA upon its assets. See id. at
*4. WAPA argued further that Power Rental's registration of the
judgment in Puerto Rico did not grant the Puerto Rico court
authority to levy a Virgin Islands account, which is outside of
the District of Puerto Rico's jurisdiction. See id. at *7. Power
Rental responded that the Writ should not be quashed because the
Middle District of Florida had already resolved these issues, the
Note waived the funds' statutory exemption from execution, and
there was no jurisdictional bar to the Puerto Rico court levying
funds in FirstBank's Virgin Islands branch. See id. at *4-10.
On May 31, 2024, the District of Puerto Rico denied
WAPA's Emergency Motion to Quash Writ of Execution of Judgment
1 V.I. Code Ann. tit. 30, § 111 provides, in relevant part: (a) All property including funds of [WAPA] shall be exempt from levy and sale by virtue of an execution, and no execution or other judicial process shall issue against the same nor shall any judgment against [WAPA] be a charge or lien upon its property . . . .
- 7 - (the "Order"). See id. at *10. The court found that the issue of
whether the Writ was unlawful under Section 111 had already been
litigated before the Middle District of Florida, which held that
WAPA waived its statutory exemption from post-judgment execution
proceedings. See id. at *4. The court declined to revisit this
issue because of the law of the case doctrine. See id. at *4-6.
The court then addressed the jurisdictional issue "given the
accessibility of modern bank accounts across state lines." Id. at
*7. The court examined whether the "separate entity rule" should
apply such that the District of Puerto Rico would need jurisdiction
over the FirstBank branch holding WAPA's funds -- not just any
FirstBank branch -- to issue the Writ. See id. The court,
predicting how the Supreme Court of Puerto Rico would decide the
issue, reasoned:
[I]n this era of computerized banking, accessing funds or wire transfers can be done online, instantaneously, and worldwide, especially within the same bank. Rather than physically sitting in a bank vault, modern banking has rendered money to be entirely intangible. This development in technology has caused the location of a specific branch to be immaterial when trying to access one's funds. Simply put, "the basis and rationale of the separate entities rule appears to be based on an antiquated view of the banking system that predates modern computerized banking."
Id. at *9 (quoting Boland Marine & Indus., LLC v. Bouchard Transp.
Co., 20-cv-66, 2020 WL 10051743, at *6 (W.D. Tex. Feb. 28, 2020),
- 8 - report and recommendation adopted, 2020 WL 10051738 (W.D. Tex.
Mar. 26, 2020)). In support of its finding that the separate
entity rule was outdated and should not apply, the court noted
that FirstBank Puerto Rico easily froze WAPA's account, despite
that it was first opened in the Virgin Islands. See id. Therefore,
the court found that it had jurisdiction to issue the Writ. Id.
WAPA's timely appeal of the Order followed.
II. ANALYSIS
A. Jurisdiction and the Separate Entity Rule
WAPA first argues that the Order should be reversed,
and the Writ quashed, because WAPA's levied Virgin Islands account
is outside of the District of Puerto Rico's jurisdiction. WAPA
urges us to adopt the separate entity rule to reach this
conclusion. According to WAPA, the separate entity rule states
that every bank account has a particular situs. That situs is the
location of the branch that actually holds the debtor's funds.
Under the rule, each branch is a separate entity, and funds can
only be seized by serving a writ at the branch actually holding
the funds of the debtor. See Marisco, Ltd. v. Am. Sam. Gov't, 889
F. Supp. 2d 1244, 1249-50 (D. Haw. 2012). Thus, WAPA contends,
courts may not reach assets held in bank branches outside of their
jurisdiction to satisfy judgments.
WAPA explains that to establish an account's branch
location, courts may look to deposit slips, account opening
- 9 - documents, or other information showing accounts' locations.
WAPA's (1) dealings in setting up the account; (2) depositing funds
into the account electronically or by paper; (3) giving
instructions to FirstBank regarding the account; (4) receiving
advice regarding the account; and (5) directing transactions from
the account, all took place at branches in the Virgin Islands, not
in Puerto Rico. Thus, WAPA claims that its FirstBank accounts are
located in FirstBank Virgin Islands, not FirstBank Puerto Rico.
Power Rental responds that the separate entity rule has
not been adopted in Puerto Rico and has been increasingly rejected
as outdated in other jurisdictions. Power Rental argues that
WAPA's invocation of the rule is obsolete and incongruent with
modern banking operations, given that the rule was originally
intended to prevent both undue interference in banking
transactions and potential multiple liabilities across different
jurisdictions. Power Rental relies on the fact that FirstBank's
Puerto Rico headquarters was able to comply with the Writ without
any problems as evidence that compliance with the Writ did not
cause interference of the sort the separate entity rule originally
was intended to combat.
Power Rental also points out that the Middle District
of Florida previously stated that WAPA had wired over $5 million
to Power Rental from accounts at FirstBank and other banks in
Puerto Rico. Power Rental states that it was therefore already
- 10 - settled that WAPA had accounts at FirstBank in Puerto Rico, so
Power Rental enforced the Writ in Puerto Rico after having evidence
that WAPA had accounts and funds in Puerto Rico. Power Rental's
ability to easily attach funds from FirstBank Puerto Rico is
compatible with the theory that WAPA had funds in Puerto Rico, not
only in the Virgin Islands. But according to WAPA, the fact that
funds may have been wired from a Puerto Rico branch does not change
the fact that the situs of the funds and bank account is the Virgin
Islands for purposes of jurisdiction and execution of the Writ.
We review the district court's Order as it concerns the
application of the separate entity rule de novo. See Am. Trucking
Ass'ns v. Alviti, 14 F.4th 76, 86 (1st Cir. 2021) ("We review de
novo the denial of a motion to quash to the extent that it turns
on purely legal questions, and for abuse of discretion
otherwise."). Under Federal Rule of Civil Procedure 69(a)(1), the
district court must execute the Writ in accordance with Puerto
Rico's local procedural rules. See Whitfield v. Municipality of
Farjardo, 564 F.3d 40, 43 n.2 (1st Cir. 2009) ("Puerto Rico is
deemed the functional equivalent of a state for the purposes of
Rule 69(a)."). But because Puerto Rico's corresponding rule of
civil procedure, Rule 51.10 of the Rules of Civil Procedure of
Puerto Rico, is silent regarding the jurisdictional issue here and
there is no authoritative case law from Puerto Rico as to whether
the separate entity rule applies, we must predict whether the
- 11 - Supreme Court of Puerto Rico would find jurisdiction in this case.
See Candelario del Moral v. UBS Fin. Servs. Inc. of P.R., 699 F.3d
93, 104 (1st Cir. 2012). As explained below, we agree that the
Supreme Court of Puerto Rico would not apply the separate entity
rule, and the District of Puerto Rico had jurisdiction to issue
the Writ.
The separate entity rule derives from New York
jurisprudence from the 1930s. See Bluebird Undergarment Corp. v.
Gomez, 249 N.Y.S. 319, 321 (City Ct. 1931). It has been used in
determining courts' jurisdiction over bank accounts across state
and foreign borders. See Marisco, 889 F. Supp. 2d at 1249–50.
The rule provides "that foreign branches of a bank are not subject
to execution through process on an in-state office or branch of
the bank." Id. at 1247. The rule is titled "the separate entity
rule" because it treats each bank branch as a separate entity for
purposes of attachment, meaning a court must have jurisdiction
over the bank branch that actually holds the subject funds -- and
not merely over any branch -- to attach the funds. See id. at
1249-50.
As the district court accurately explained, however,
through developments in technology, modern banking has evolved
such that "the location of a specific branch [is] immaterial when
trying to access one's funds" because "accessing funds or wire
transfers can be done online, instantaneously, and worldwide,
- 12 - especially within the same bank." Power Rental, 2024 WL 2805162,
at *9. Indeed, that was the case here, as FirstBank Puerto Rico
instantly and easily froze WAPA's accounts in response to the Writ,
despite that WAPA opened the account in the Virgin Islands (and
despite all the other account-related interactions that WAPA had
with FirstBank within the Virgin Islands).
As Power Rental points out, multiple states have
rejected the separate entity rule as antiquated, choosing instead
to align their jurisdictional precedent with the realities of
modern banking. See, e.g., Boland Marine, 2020 WL 10051743, at *6
(collecting cases across jurisdictions to support the proposition
that "a growing number of other courts appear to be rejecting the
rule as outdated and instead finding that a bank account is located
anywhere the account holder has access to it"). Still, WAPA is
correct to point out that some jurisdictions, including the Second
Circuit and the Middle District of Florida in an underlying order
here, continue to apply the separate entity rule. For example, in
Motorola Credit Corp. v. Uzan, the Southern District of New York
reasoned that the separate entity rule applied such that service
of an injunction on assets held by a foreign bank branch was not
effective. 978 F. Supp. 2d 205, 210-11 (S.D.N.Y. 2013). But the
Motorola court was concerned with the implications of such service
given that the branch was located in a foreign country. See id.
at 213. So too, in Shaheen Sports, Inc. v. Asia Ins. Co., the
- 13 - Southern District of New York considered banks' unique concerns
raised by multiple claims across international borders. Nos.
98-cv-5951, 11-cv-920, 2012 WL 919664, at *8 (S.D.N.Y. Mar. 14,
2012). Here, though, FirstBank and its branches in both the Virgin
Islands and Puerto Rico are located within the United States,
meaning the foreign law concerns that may justify modern
application of the separate entity rule are not implicated. For
this reason, and because we discern no alternative reasons for a
modern separate entity rule, we think that the district court
correctly predicted that the Supreme Court of Puerto Rico would
follow the trend plotted by most other jurisdictions and reject
the separate entity rule in this case as obsolete.2 We conclude
that the District of Puerto Rico had jurisdiction to execute the
Writ at FirstBank's Puerto Rico branches.
B. Public Policy Arising from Section 111
WAPA next contends that public policy weighs in favor of
quashing the Writ. WAPA points to the Virgin Islands' and other
states' recognition that property owned by a municipal corporation
and used for public purposes must be safeguarded from judicial
process to protect the public and government. WAPA specifically
points to the public property protections enshrined in Section
2 Because we affirm that the district court had jurisdiction on this basis, we do not reach WAPA's arguments concerning any additional, separate bases for exerting jurisdiction.
- 14 - 111. It argues that it could not waive these protections because
they are rights enacted by the Virgin Islands legislature for the
benefit of the health, safety, and welfare of the Virgin Islands'
people. Section 111 represents the Virgin Islands' recognition
that maintaining the operation of a utility tasked with providing
for the public's most vital needs outweighs the rights of
individual claimants. Accordingly, WAPA contends, the waiver of
WAPA's statutory exemption from execution in the Note is void for
reasons of public policy, rendering the Order authorizing the Writ
unenforceable. It argues that upholding such an order would result
in a manifest injustice, so the law of the case doctrine does not
apply.
In its July 2021 order granting Power Rental's motion
for summary judgment, the Middle District of Florida found that
WAPA's sovereign immunity arguments, including its arguments
arising under Section 111, failed because Virgin Islands
immunities law does not preclude judgments against WAPA or preclude
WAPA from using its assets to satisfy such judgments. Power
Rental, 548 F. Supp. 3d at 1201. The Middle District of Florida
also found that WAPA waived all defenses under the terms of the
Note. Id. Then, in its order directing WAPA to complete a "Fact
Information Sheet," the Middle District of Florida found that WAPA
waived any statutory exemption defense from post-judgment
execution proceedings by the terms of the Note. See Power Rental,
- 15 - 2023 WL 4187095, at *2. Thus, multiple rulings in this case have
already held that WAPA has waived its statutory immunity defenses,
including any defense arising under Section 111. And although
WAPA appealed the case to the Eleventh Circuit, it chose to dismiss
its appeal voluntarily rather than challenge these findings on the
merits. Power Rental argues that these prior rulings govern under
the law of the case doctrine. See United States v. Vigneau, 337
F.3d 62, 67 (1st Cir. 2003). The district court agreed.
The multiple prior rulings by the Middle District of
Florida, combined with WAPA's voluntary dismissal of that appeal,
confer convincing force to the argument that law of the case
applied before the District of Puerto Rico on the immunity issue.
See Negrón-Almeda v. Santiago, 579 F.3d 45, 51 (1st Cir. 2009)
("[When the order became final, it] became appealable and the
plaintiffs' failure to challenge it fits within the law of the
case doctrine."); see also Cacho Pérez v. Hatton Gotay, 195 D.P.R.
1, 8-9 (2016) (discussing law of the case doctrine under Puerto
Rico law). WAPA has not shown that this issue is exempt from the
law of the case doctrine. Accordingly, we need not address whether
Section 111 immunizes WAPA's assets in this instance.
III. CONCLUSION
We need go no further. For the foregoing reasons, we
conclude that the District of Puerto Rico had jurisdiction to issue
- 16 - and execute the Writ. Therefore, the district court's Order is
affirmed.
So Ordered.
- 17 -