United States Court of Appeals For the First Circuit
No. 24-1776
JIMMY VILLALOBOS-SANTANA; JIMMY COLÓN-RODRÍGUEZ,
Plaintiffs, Appellants,
v.
PUERTO RICO POLICE DEPARTMENT,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
[Hon. Aida M. Delgado-Colón, U.S. District Judge]
Before
Barron, Chief Judge, Thompson and Aframe, Circuit Judges.
John E. Mudd, with whom Law Offices John E. Mudd was on brief, for appellants.
Luis R. Román-Negrón, with whom Omar Andino-Figueroa, Puerto Rico Department of Justice, and Roman Negron Law PSC were on brief, for appellee.
April 2, 2026 BARRON, Chief Judge. The United States District Court
for the District of Puerto Rico permanently stayed the claims that
two individuals brought against their former employer, the Puerto
Rico Police Department. It also "permanently enjoined" the
plaintiffs from "continuing" their actions to recover on those
claims. The District Court did so because it concluded that the
claims had been discharged under Puerto Rico's financial
reorganization plan, which was confirmed pursuant to the Puerto
Rico Oversight, Management, and Economic Stability Act
("PROMESA"). The plaintiffs -- Jimmy Villalobos-Santana and Jimmy
Colón-Rodríguez -- contend that the District Court erred in so
ruling. We affirm, although on different grounds than those on
which the District Court relied.
I.
In response to a fiscal crisis in Puerto Rico, Congress
enacted PROMESA in 2016. See Puerto Rico Oversight, Management,
and Economic Stability Act, Pub. L. No. 114–187, 130 Stat. 549
(2016) (codified in scattered sections of 48 U.S.C.). That law
authorized, among other things, the Commonwealth to file for
reorganization in a specially designated court. See 48 U.S.C.
§§ 2162, 2164, 2166, 2168. This court is commonly referred to as
the "Title III" court, in reference to the title in PROMESA
providing for Puerto Rico's reorganization and for the specially
designated court's jurisdiction. See Puerto Rico Oversight,
- 2 - Management, and Economic Stability Act, Pub. L. No. 114-187, § 1,
130 Stat. 549, 549-50 (2016); In re Fin. Oversight & Mgmt. Bd. for
P.R., 77 F.4th 49, 56 (1st Cir. 2023). PROMESA incorporates
various provisions of the Bankruptcy Code, including -- as will
become relevant -- 11 U.S.C. §§ 105, 503(b), 507(a)(2), and 944.
See 48 U.S.C. § 2161.
In May 2017, the Commonwealth of Puerto Rico filed for
reorganization under PROMESA. See In re Fin. Oversight & Mgmt.
Bd. for P.R., 77 F.4th at 56. Thereafter, on February 15, 2018,
the Title III court set a deadline that was subsequently extended
to June 29, 2018, for filing pre-petition "proof of claims"
against Puerto Rico (the "pre-petition bar date").
Then, on January 18, 2022, after accounting for the
claims that had been filed by the deadline (as well as other
financial matters), the Title III court finalized and confirmed
Puerto Rico's reorganization plan, the so-called Plan of
Adjustment ("Plan"). The Plan provides that as of the "Effective
Date" -- which was March 15, 2022 -- Puerto Rico is "discharged
and released" from all claims and "debts that arose, in whole or
in part, prior to the Effective Date" if they had not otherwise
been provided for in the Plan. The Plan also provides that, as of
the Effective Date, individuals and entities possessing discharged
claims "are permanently enjoined[] from . . . commencing or
continuing" actions to recover on those claims.
- 3 - The Plan gave individuals and entities holding claims
that constitute "administrative expenses" ninety additional days
from the Effective Date to file proof of those claims to
potentially receive compensation from Puerto Rico. That deadline
was initially June 13, 2022, and was extended at least once for a
certain subset of claims that could qualify as administrative
expenses ("administrative claims bar date"). The Plan also
provided that if individuals or entities holding such
administrative expense claims failed to file proof of them by the
administrative claims bar date, they -- like the rest of the
pre-Effective Date claimants -- would be "forever barred,
estopped, and enjoined from asserting such" claims.
While these reorganization proceedings were ongoing, on
July 4, 2021, Villalobos-Santana and Colón-Rodríguez (together,
"plaintiffs") filed the suit that gives rise to this appeal. It
names as the defendant the Puerto Rico Police Department ("the
Department").1 The operative complaint alleges violations of 42
U.S.C. § 2000 et seq., based on the Department having illegally
retaliated against them for filing complaints against the
The plaintiffs and the Department both list additional 1
defendants on the cover pages of their briefs to this Court, but the plaintiffs' operative complaint only identifies the Department as a defendant.
- 4 - Department with the U.S. Equal Employment Opportunity Commission
("EEOC").
The alleged facts underlying the claims are as follows.
A supervisor discriminated against Villalobos because of
his age, and after Villalobos filed a complaint about this age
discrimination with the EEOC, the Department began "a pattern of
retaliation" against him. This retaliation included eliminating
some of his "off-duty days," withdrawing "his authority as to
subordinates," disarming him "for no reason," and "plac[ing] [him]
in the most dangerous shift while he was unarmed."
Subsequently, Colón provided testimony in support of
Villalobos's complaints against the supervisor. After providing
this testimony, the Department began retaliating against Colón
too. This retaliation included changing his shift to "a much more
dangerous period of time," failing to give him certain required
days off without "any reason," and "filing a false administrative
complaint" against him.
For more than two years after the Title III court
confirmed the Plan, the Department litigated in the plaintiffs'
case like any other case -- discovery began, the plaintiffs
survived a summary judgment motion, and the District Court
calendared a pre-trial conference.
Then, on May 6, 2024, before the trial in the District
Court had begun, the Department filed a "Notice of Injunction."
- 5 - In that filing, the Department contended that the plaintiffs had
not filed proof of their claims against it in the Title III court
before the Plan's pre-petition bar date and also had not filed a
claim for administrative expenses by the administrative claims bar
date. Accordingly, the Department contended that the claims had
been discharged under the Plan, thereby requiring that they be
permanently stayed and enjoined from going forward. The Department
filed the Notice of Injunction after the District Court partially
denied summary judgment and began moving the parties toward trial.
In opposing the Notice of Injunction, the plaintiffs
countered that, "[i]t is a princip[le] of bankruptcy that claims
that occur after the filing of the petition are not covered by the
stay or the proceedings." Thus, they contended, their claims
against the Department should not have been discharged based on no
proof of claim having been timely filed because the "causes of
action" in their case arose after Puerto Rico filed its
reorganization petition. And, they also argued, their claims could
not have been discharged as unclaimed "administrative expenses"
because their claims did not qualify as such. Accordingly, they
argued, the District Court had no basis to permanently stay or
enjoin their claims against the Department. The plaintiffs also
argued that the District Court should apply judicial estoppel to
bar the Department from attempting to permanently stay and enjoin
their claims. In support of this request, they argued that the
- 6 - Department acted inconsistently by litigating the case for years
and then -- only after failing to have the case
dismissed -- attempting to have the claims enjoined and stayed on
the grounds that the Plan barred the claims.
On June 5, 2024, the District Court granted the
Department's request set forth in their Notice of Injunction. It
therefore (1) permanently stayed the case and (2) permanently
enjoined the plaintiffs "from continuing with any such
claims . . . unless and until the [Title III court] modifies the
injunction." The District Court explained that the Plan provides
that (1) Puerto Rico is "discharged and released" from all claims
and debts that "arose, in whole or in part, prior to the Effective
Date" and (2) that individuals and entities possessing such
discharged claims "are permanently enjoined" from "commencing or
continuing" actions to recover on those claims. The District Court
then noted that the claims at issue must have arisen at least in
part before the Effective Date because the complaint had been filed
before the Effective Date, and that, as such, the claims were
discharged under the Plan because no timely proof of claim had
been filed for those claims. The District Court did not address
the plaintiffs' judicial estoppel argument in this ruling.
Subsequently, the plaintiffs filed a motion to alter the
District Court's judgment under Fed. R. Civ. P. 59(e), noting that
the District Court committed a legal error by not "mention[ing]"
- 7 - or applying judicial estoppel and ignoring "the position of the
leading Treatise on Bankruptcy" that post-petition debts should
not be dischargeable. The District Court denied the plaintiffs'
motion, reasoning that the plaintiffs "do not challenge this
Court’s reading and interpretation of the Title III Court’s
rulings, including the Plan and the Confirmation Order, [] or 48
U.S.C. §§ 2101-2241." It also noted that the plaintiffs' judicial
estoppel and treatise arguments were not "meaningful[ly]
discuss[ed]."
In its rulings, the District Court did not directly
address the plaintiffs' contention that post-petition claims
should not be discharged because bankruptcy law principles suggest
such a discharge is improper. Nor did the District Court address
the plaintiffs' argument that their claims against the Department
failed to qualify under the Plan as claims for administrative
expenses.
This timely appeal followed.
II.
The plaintiffs' lead argument to us is that, under
section 301 of PROMESA -- which, as we have noted, incorporates 11
U.S.C. § 944 of the Bankruptcy Code -- the District Court erred in
determining that, because they did not file proof of their claims
with the Title III court by the Plan's pre-petition bar date of
June 29, 2018, their claims had been discharged by the Plan upon
- 8 - its Effective Date of March 15, 2022. They contend, based on this
argument, that the District Court erred in permanently staying
their claims and enjoining them from continuing their actions to
recover those claims.
The plaintiffs' argument depends on the following chain
of reasoning. In their case, almost all the conduct for which the
retaliation claims seek relief arose after Puerto Rico filed its
petition for reorganization. That matters because section 301 of
PROMESA incorporates 11 U.S.C. § 944 of the Bankruptcy Code, and
a bankruptcy treatise asserts that this provision of the Bankruptcy
Code must be interpreted to mean "that only prepetition debts are
discharged." See Collier on Bankruptcy ¶ 944.03[2][b] (Richard
Levin & Henry J. Sommer eds., 16th ed. 2020) (emphasis added).
Moreover, their retaliation claims "do not qualify as" claims for
"administrative expense[s]." Thus, it follows that if we were to
agree with the District Court that their claims against the
Department were discharged, then, the plaintiffs argue, they
"would be barred from receiving any compensation, which is not an
equitable result."
Notably, though, in pressing this argument, the
plaintiffs do not dispute that if their claims qualify as
administrative expenses, then they could have filed proof of them
with the Title III court before the administrative claims bar date
had passed. They also do not dispute that, under the Plan, such
- 9 - administrative expense claims are discharged upon the Plan's
confirmation if no proof of them has been timely filed with the
Title III court.
Thus, because we may affirm the ruling below on any
ground manifest in the record, see Peguero-Moronta v. Santiago,
464 F.3d 29, 34 (1st Cir. 2006), we begin and end our analysis of
the plaintiffs' first ground for challenging the ruling below by
explaining why the Department is right that the claims at issue
here qualify as "administrative expense" claims and so were
discharged upon the Plan's confirmation. This is so because, if
the claims were discharged, then there would be no reason to vacate
the District Court's stay and injunction order (save, of course,
if the plaintiffs' judicial estoppel argument were to have merit).2
Save for their argument addressed below about judicial 2
estoppel, the plaintiffs make no argument to us that, insofar as their claims do qualify as administrative expenses, the injunction and stay may not be affirmed on that basis. Necessarily, therefore, the plaintiffs do not argue to us that we cannot affirm the injunction and stay on the ground on which we affirm because the administrative claims bar date is subject to a "for cause" exception, 11 U.S.C. § 503(a); 48 U.S.C. § 2161(a), which could have affected the District Court's decision of whether to issue an injunction and stay at all. We conclude that any such argument for overturning the injunction and stay is therefore waived. In finding this waiver, we note that the plaintiffs fail to make any such argument to us even though -- at the time that they appealed to this Court -- the plaintiffs were on notice that (1) their claims might be considered claims for administrative expenses subject to the Plan and PROMESA and (2) the Department was asking us to affirm the injunction and stay based on those claims being of that kind. The Department clearly raised that possibility in
- 10 - See 11 U.S.C. § 524(a)(2)(noting that, under federal law, a
bankruptcy court's "discharge . . . operates as an injunction
against the commencement or continuation of an action . . . to
collect" on a discharged claim); see also 48 U.S.C. § 2161(a)
(incorporating 11 U.S.C. § 524(a)(2) into PROMESA).
A.
Under PROMESA, by virtue of its incorporation of
§§ 503(b) and 507(a)(2) of the Bankruptcy Code, see 48 U.S.C.
§ 2161(a), an administrative expense must be paid by debtors to
creditors and claimants "earlier than other categories of expenses
in a Title III case," In re Fin. Oversight & Mgmt. Bd. for P.R.,
92 F.4th 355, 359 (1st Cir. 2024). The Bankruptcy Code prioritizes
a claim for payment of an administrative expense in this way to
encourage third parties to do business with entities undergoing
Chapter 11 reorganization. The notion is that third parties
"clearly will not do so unless their claims for payment will be
paid ahead of the pre-petition debts and liabilities of the
debtor." In re Mammoth Mart, Inc., 536 F.2d 950, 954 (1st Cir.
1976).
its Notice of Injunction. Indeed, the plaintiffs even responded in their opposition to the Notice of Injunction that their claims could not be considered claims for administrative expenses, and they have maintained that position in their appeal to us despite the Department arguing otherwise in urging us to affirm the injunction and stay.
- 11 - We understand a similar rationale to underlie the
prioritization of administrative expense claims under PROMESA.
There is a similar need in that context to encourage third parties
to do business with Puerto Rico while it undergoes reorganization.
See In re Fin. Oversight & Mgmt. Bd. for P.R., 77 F.4th at 39
("Indeed, it is unlikely that any postpetition third party would
contract with Puerto Rico's instrumentalities or risk default on
their obligations.").
At the same time, the Bankruptcy Code provides that, so
long as there is notice, see 11 U.S.C. § 944(c)(2), bankruptcy
courts have the power to discharge "all debts as of the time
when . . . the [reorganization] plan is confirmed," id.
§ 944(b)(1) (emphasis added); see also id. § 1141(d) (same in the
Chapter 11 context). Thus, while § 503 -- which, again, PROMESA
incorporates -- provides that "[a]n entity may timely file a
request for payment of an administrative expense, or may tardily
file such request if permitted by the court for cause," id.
§ 503(a), "administrative expense claims not timely filed by [a
reorganization plan's] bar date" may be discharged, Ellis v.
Westinghouse Elec. Co., 11 F.4th 221, 230 (3d Cir. 2021); see also
In re Eagle-Picher Indus., Inc., 447 F.3d 461, 465 (6th Cir. 2006)
("[Section 503] does permit the parties to establish a bar date by
which time all administrative expenses must be asserted against
the debtor or face discharge.").
- 12 - We see no reason to conclude that PROMESA operates any
differently. Indeed, here, when interested parties were notified
of the Plan's Effective Date, that notice explicitly stated that,
under the Plan, "fail[ure]" to file proof of an administrative
expense claim by the "Administrative Deadline" would mean an
individual or entity "[would] be forever barred, estopped, and
enjoined from asserting such Administrative Expense Claim" against
Puerto Rico. Thus, we conclude that, under PROMESA, an
administrative expense claim (following proper notice or actual
knowledge) that is not timely filed under the Plan is discharged.
What, then, is an "administrative expense" under
PROMESA? "The definition of administrative expense in a [PROMESA]
case comes from section 503(b) of the Bankruptcy Code, which
PROMESA incorporates." In re Fin. Oversight & Mgmt. Bd. for P.R.,
92 F.4th at 359 (citation modified). Section 503(b), in turn,
defines administrative expenses as "the actual, necessary costs
and expenses of preserving the estate." 11 U.S.C. § 503(b).
Notably, however, the Bankruptcy Code's administrative
expense prioritization provisions have "been interpreted as
providing general protection to claimants that are injured by" the
debtor's ongoing operations during Chapter 11 reorganization,
"even though their claims did not arise from transactions that
were necessary to preserve or rehabilitate the estate." In re
Mammoth Mart, 536 F.2d at 954. For example, the Supreme Court in
- 13 - Reading Co. v. Brown, 391 U.S. 471 (1968), held that a tort
claim -- based on a debtor's receiver, acting within the scope of
its authority, negligently causing a fire that destroyed property
owned by the plaintiffs in that case -- could be considered an
administrative expense. Id. at 473, 485.
The Supreme Court reasoned that such claims arising from
the negligence of a debtor or its agents working on behalf of the
entity could be considered "costs ordinarily incident to operation
of a business." Id. at 483. The Court therefore held that "tort
claims arising during a[] [bankruptcy] arrangement" could be
treated as "actual and necessary expenses of the arrangement."
Id. at 482.
This Court later applied Reading's expansive definition
of administrative expenses to include civil compensatory fines
assessed against a debtor undergoing Chapter 11 reorganization who
had violated a temporary injunction. See In re Charlesbank
Laundry, Inc., 755 F.2d 200, 202-03 (1st Cir. 1985). We thus have
not treated Reading's expansive understanding of "administrative
expenses" to be limited to claims seeking payment for unlawful
conduct by the debtor that was merely negligent rather than
intentional. See id. at 203 ("If fairness dictates that a tort
claim based on negligence should be paid ahead of
pre-reorganization claims, then, a fortiori, an intentional act
which violates the law and damages others should be so treated.");
- 14 - see also In re Munce's Superior Petroleum Prods., Inc., 736 F.3d
567, 573 (1st Cir. 2013)(concluding that "fines for noncompliance
post-petition with state environmental law can be granted
administrative expense priority").
Other circuit courts have similarly applied Reading's
broad definition of administrative expenses. They have understood
that definition to include payments sought in employment
relationship-based claims. And they have done so notwithstanding
that the claims sought payment for allegedly unlawful conduct on
the part of the debtor that was intentional rather than, as in
Reading itself, merely negligent. See, e.g., Ellis, 11 F.4th at
230 (holding that age "discrimination claims are 'actual and
necessary' administrative expenses"); Sanchez v. Nw. Airlines,
Inc., 659 F.3d 671, 679 (8th Cir. 2011) (holding that
discrimination claims based on the Americans with Disabilities Act
can be considered administrative expenses).
We have not had occasion to address what constitutes an
"administrative expense" under PROMESA for purposes of
post-petition dischargeability. Nor have we had had occasion to
address whether PROMESA adopts Reading's expansive interpretation
of what constitutes an administrative expense. But we see no
reason to construe PROMESA as having adopted a narrower definition
of administrative expenses than does the Bankruptcy Code provision
that PROMESA directly incorporates. See Holmes v. Sec. Inv. Prot.
- 15 - Corp., 503 U.S. 258, 268 (1992) (noting that because Congress "used
the same words" in a new statute that it did in an older statute,
courts "can only assume [Congress] intended [those words] to have
the same meaning that courts had already given them."). So, we
conclude that a claim for payment that would qualify as a claim
for an administrative expense under the Bankruptcy Code based on
Reading also qualifies as such a claim under PROMESA.
B.
Against this background, "[w]e see no reason why the
claim[s] of plaintiffs in this case do[] not fall within both the
letter and the spirit of Reading." In re Charlesbank Laundry, 755
F.2d at 202. Puerto Rico maintained its police force, including
by employing the plaintiffs, while it was undergoing
reorganization under PROMESA. And in the process of maintaining
this police force, the plaintiffs claim that Puerto Rico, through
its Police Department, unlawfully retaliated against them. The
plaintiffs allege a harm stemming from their employment
relationship with the Puerto Rican government, and as such, that
harm is a "cost[] ordinarily incident to operation of" the Puerto
Rican government. Reading, 391 U.S. at 483.
This conclusion accords with the approaches taken by
other circuits. For example, in Ellis, 11 F.4th 221, the Third
Circuit held that age discrimination claims could be considered
administrative expenses, while noting that "[w]ithout the
- 16 - assurance that any valid employment discrimination claim would be
paid in full, workers may leave based on fear that their rights
will not be fully protected." Id.; see also Sanchez, 659 F.3d at
679 (concluding that the plaintiff's Americans with Disabilities
Act claim could constitute an administrative expense because "[i]t
ar[ose] out of the regular employment relationship between the
debtor and its employee, and involve[d] . . . a breach of a
statutory duty not to discriminate" and that "[w]ithout th[at]
relationship, the debtor could not continue to function and meet
its obligations to customers").
We therefore conclude that the claims brought against
the Department in this case constitute claims for "administrative
expenses" under § 503(b), as incorporated into PROMESA. It follows
that these "administrative expense" claims were discharged, given
that the plaintiffs do not dispute that they did not timely file
them before the administrative claims bar date. Accordingly, we
reject the plaintiffs' first ground for challenging the ruling
below that, as, per the Plan's provisions, the plaintiffs are
"forever barred, estopped, and enjoined from asserting such
Administrative Expense Claim[s]" against Puerto Rico.3
3 During oral argument, the plaintiffs argued that they were not given sufficient notice by the Department that their retaliation claims could be subject to the Plan's deadlines for submitting proof of administrative expense claims. But the
- 17 - C.
The plaintiffs' alternative ground for challenging the
ruling below is that the District Court erred by not applying
judicial estoppel to bar the Department from seeking the permanent
stay and permanent injunction on the ground that the claims had
been discharged under the Plan. The plaintiffs reasoned that the
Department did not file the Notice of Injunction until years after
the plaintiffs had filed their complaint in the District Court and
that, in consequence, by continuing to litigate the merits of the
claims, the Department was "telling the District Court that [the
Plan] did not apply to the case." That being so, the plaintiffs
contend that the Department cannot now argue that the Plan
discharged the claims because that position is "clearly
inconsistent" with the Department's eventual request in its Notice
of Injunction, given that the request depends on the claims against
the Department having been discharged.
plaintiffs failed to make this notice argument to this Court in their briefs, so they are waived. See Sparkle Hill, Inc. v. Interstate Mat Corp., 788 F.3d 25, 29 (1st Cir. 2015). The plaintiffs attempted to argue otherwise by pointing to certain language in their opening brief. But the sentence containing that language appears in their brief's section addressing judicial estoppel, and the brief cites no caselaw and makes no legal arguments about notice. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)("[I]ssues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived.").
- 18 - The plaintiffs do not identify, however, any affirmative
assertion by the Department that the Plan did not apply to the
plaintiffs' claims. Indeed, as the Department points out, it
consistently stated in its filings -- its motion to dismiss, its
answer to the plaintiffs' complaint, and its summary judgment
motion -- that it made them "without waiving any right, objection
or defense arising from the Title III of [PROMESA], the
Commonwealth’s Petition under said Title or under this case." The
plaintiffs do not, however, acknowledge those representations by
the Department in nonetheless contending that the Department took
a directly inconsistent position in asserting the argument that it
appears had been consistently reserved. So, in that sense, the
plaintiffs fail to explain how we have here the kind of "mutually
exclusive," "directly inconsistent" positions that are required
for a litigant to be judicially estopped from taking a certain
position based on it having earlier taken a different one. Alt.
Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 33 (1st Cir.
2004); see also id. at 34 (concluding that it is "totally
inconsistent" to disclaim at the motion to dismiss phase reliance
on a "breach of contract theory based on an alleged parol
agreement" and then, at summary judgment, assert that the "breach
of contract claim" relates to "a permanent oral agreement" outside
of the written agreement at issue in the case (citation modified)).
- 19 - Insofar as the plaintiffs mean to contend that (the
consistent reservation notwithstanding) the Department nonetheless
told the District Court that the Plan did not apply to the
Plaintiffs' claims against it by not earlier affirmatively
asserting that the Plan stood in the way of the claims, they fail
to cite any authority for the proposition that a party disclaims
any argument that it does not make when it first could. Nor do
they cite any authority that such silence amounts to a waiver of
the contention. Nor, finally, do the Plaintiffs do so in a case
in which -- as is the case here -- the party against whom judicial
estoppel is asserted repeatedly reserved the defense that they are
alleged to have affirmatively disclaimed. We thus fail to see on
what basis we could conclude that the plaintiffs have sufficiently
shown that the District Court abused its discretion -- on the
arguments before it -- in declining to apply judicial estoppel to
keep the Department from making the argument in question at a later
time. See Alt. Sys. Concepts, 374 F.3d at 30 (noting that the
applicable standard of review for judicial estoppel determinations
is "abuse of discretion"). Accordingly, we must reject this ground
for disturbing the judgment at issue as well.4
4 We note that we have no reason to address here -- and so do not address -- the question of whether the plaintiffs may successfully file a claim for administrative expenses in the Title III court on "for cause" grounds pursuant to 11 U.S.C. § 503(a).
- 20 - III.
For the foregoing reasons, the District Court's judgment
is affirmed.
—Concurring Dubitante Opinion Follows—
We also need not decide whether, because we conclude that the plaintiffs' claims are claims for administrative expenses under PROMESA and so have been discharged, we lack jurisdiction to address their assertion of judicial estoppel. Because we conclude that the judicial estoppel argument is without merit, we may address it pursuant to the doctrine of hypothetical jurisdiction. See Johansen v. Liberty Mut. Grp., 118 F.4th 142, 148 (1st Cir. 2024) ("Where a case poses a question of statutory, not Article III, jurisdiction and where a decision on the merits will favor the party challenging the court's jurisdiction, we may assume that we have jurisdiction to reach the merits of an appeal." (citation modified)).
- 21 - THOMPSON, Circuit Judge, concurring dubitante. The
majority's likely right that the Title III bankruptcy court is now
the only forum for Jimmy Villalobos-Santana and Jimmy
Colón-Rodríguez's civil rights case, which we today hold is an
"administrative expense" for PROMESA purposes.5 But admittedly,
"I am worried about where the law is in this area and where it
might go," so I write dubitante to express my concerns. Rosenthal
v. Bloomingdales.com, LLC, 101 F.4th 90, 98 (1st Cir. 2024)
(Thompson, J., concurring dubitante).
To be more specific: I respectfully disagree with the
majority's judicial estoppel analysis, so I cannot join Part II-C.
Unlike the majority, I see no reason to reach the estoppel analysis
on the merits because (as I'll explain more fully below) PROMESA
seems to require cases covered by the Plan to be permanently
enjoined and discharged; a party cannot prevent that result using
judicial estoppel. See 11 U.S.C. § 524(a)(2); 48 U.S.C. § 2161(a)
(incorporating 11 U.S.C. § 524(a)(2) into PROMESA). Yet that leads
me to functionally the same conclusion as the majority -- that
estoppel can't help Villalobos -- thus the concurrence.
But I also think it's necessary to spell out in layman's
terms (1) why, if I were to look past that threshold PROMESA
5Going forward, I'll just focus on Villalobos (whose name I shorten based on Spanish naming customs), but my analysis applies equally to Colón.
- 22 - question (as the majority does), I would find PRPD's litigation
conduct estoppel-worthy and (2) what this bankruptcy case means
for civil rights litigants like Villalobos. On both fronts, I
have some concerns.
I
In the spring of 2024, Villalobos was on the precipice
of exercising his right to a jury trial after three long years of
litigation. He first filed a complaint against PRPD in 2021,
alleging that the department discriminated against him based on
his age and then retaliated against him when he tried to do
something about it. PRPD filed an answer soon afterwards.
Naturally, both parties then conducted discovery in 2022 and 2023.
Villalobos next survived a contested motion for summary judgment
earlier in 2024. And after all that, the district court put a
pretrial conference on the calendar for May 29, 2024, and
Villalobos's long-due day in court thus seemed imminent.
But on May 6, 2024, PRPD moved to stay and enjoin the
litigation permanently. Why? Long story short: years ago, the
Commonwealth of Puerto Rico was in a financial crisis. See In re
Fin. Oversight & Mgmt. Bd. for P.R., 92 F.4th 355, 358-59 (1st
Cir. 2024). In 2016, Congress passed a statute (PROMESA) that
created both a financial oversight board endowed with serious
powers to get Puerto Rico back on a good fiscal track and a special
court (what we call "the Title III court") to oversee Puerto Rico's
- 23 - debt reorganization. Id. So the board spent years in court
putting together a bankruptcy plan. And in January 2022, the Title
III court approved a plan that would "discharge and release"
(essentially, wipe out) almost all outstanding claims against the
Commonwealth (and its subsidiaries, like PRPD) two months later
(on March 15, 2022) and also enjoin litigants from pursuing those
claims anymore as of that March 15 date.6
So, in its May 2024 motion, PRPD -- for the first
time -- said that Villalobos's civil rights claim had been
discharged by the Plan more than two years earlier. PRPD didn't
advise Villalobos or the district court about the possibility of
discharge back in 2021, when Villalobos filed the operative
complaint and the Plan was pending. PRPD said nothing to the
district court or Villalobos back in January 2022, when the Title
III court approved the Plan. PRPD notified neither Villalobos nor
the district court in March 2022, as the deadline to file a claim
in the bankruptcy court approached -- despite the fact that
failure to file a claim would mean that Villalobos was "forever
barred, estopped, and enjoined" from further pursuing his case.7
6I say "almost all," because as the majority rightly explains, some "administrative expenses" could ultimately be filed without leave of court until January 2023. 7 Again, some claims could ultimately be filed until January 2023. But PRPD (in its May 2024 filing) didn't seem to think
- 24 - (More on that ominous-sounding language later.) And PRPD didn't
raise the Plan's discharge as a bar to Villalobos's claim back
when it filed its summary judgment papers in 2023. Instead, it
only took the discharge sword out from its scabbard after the
district court denied PRPD summary judgment, scheduled a pretrial
conference, and ordered a joint pretrial memorandum to be
submitted -- i.e., once trial was imminent. But by then -- again,
May 2024 -- the deadline to file claims in bankruptcy court had
long passed.8
Villalobos cried foul on PRPD's strategy. He invoked a
doctrine called "judicial estoppel," which allows the judge to
halt dubious litigation tactics -- particularly parties taking
inconsistent positions in the course of a case -- to protect the
integrity of the judicial process. Villalobos argued that PRPD
talked out of both sides of its mouth by seeking to end the case
on the merits several times, never mentioning PROMESA discharge,
but then, after failing to secure pretrial dismissal, suddenly
whipping out the PROMESA discharge argument despite the Plan having
gone into effect years ago.
Villalobos's claim was one of those; it pinned the deadline at March 15, 2022, making its delay in raising the issue even more troubling. 8 It had long passed no matter if you think that the deadline was March 2022 (as PRPD originally contended) or January 2023.
- 25 - The district court didn't buy Villalobos's estoppel
argument, so it granted PRPD's motion, teeing up our appellate
task.
II
I'll start with a point that the majority sets aside.
In its appellate brief, PRPD argues that "the defense of discharge
in bankruptcy has been characterized as an absolute, nonwaivable
defense." It's a technical argument but a noteworthy one involving
"the balancing act of considering the importance of providing
judicial redress for civil rights violations without thwarting any
of PROMESA's critical debt-restructuring goals." Víctor J.
Salgado & Assocs. v. Cestero-Lopategui, 34 F.4th 49, 56 (1st Cir.
2022) (Thompson, J., concurring). And it's the sole ground that
I would use to resolve the estoppel question, unlike the majority.
Here's how I see it. A bankruptcy "discharge" is an
order that releases a debtor (here, Puerto Rico and through it,
PRPD) from personal liability to creditors and claimants like
Villalobos. After the discharge, there's simply no obligation to
pay those creditors and claimants anymore and the case against the
debtor must stop. See, e.g., Ellis v. Westinghouse Elec. Co., 11
F.4th 221, 226 (3rd Cir. 2021) (explaining how under a discharge,
"the creditor cannot pursue the claim further and the debtor is
released from the liability"). We today conclude that the Plan
discharged Villalobos's claim because it was an "administrative
- 26 - expense." And PROMESA establishes that a discharge "operates as
an injunction against the commencement or continuation of an
action . . . whether or not discharge of such debt is waived." 11
U.S.C. § 524(a)(2) (emphasis mine); see 48 U.S.C. § 2161(a)
(incorporating 11 U.S.C. § 524(a)(2) into PROMESA). So the
question becomes (as PRPD suggests) whether judicial estoppel can
halt a discharge defense.
The answer, I believe, is no. "Estoppel theories may
not be used to circumvent the effect of the discharge and the
discharge injunction." In re Gurrola, 328 B.R. 158, 172 (B.A.P.
9th Cir. 2005) (cleaned up). The reason why? The Bankruptcy Code
(and PROMESA, through its incorporation of 11 U.S.C. § 524(a)(2))
seems to require cases covered by the Plan to be discharged no
matter what -- even if the party seeking the discharge raised that
discharge defense later than is preferable and would have otherwise
"waived" it by our typical litigation standards. 11 U.S.C.
§ 524(a)(2); 48 U.S.C. § 2161(a); see In re Meadows, 428 B.R. 894,
904-07 (Bankr. N.D. Ga. 2010) (providing a helpful history of
§ 524(a)). The Ninth Circuit Bankruptcy Appellate Panel has
explained how the statute's use of the term "waived" also
implicates estoppel:
Estoppel theories are equitable theories typically based on conduct. The usual argument is that the person to be estopped has done, or omitted to do, something that makes it inappropriate for them to rely on a right
- 27 - that otherwise is available. This, in a functional sense, is merely one variety of waiver.
In re Gurrola, 328 B.R. at 172. As far as I can tell, other courts
to address the question of estoppel's applicability to a discharge
seem to reach the same answer. See In re Kimmel, 378 B.R. 630,
638 (B.A.P. 9th Cir. 2007), aff'd, 302 F. App'x 518 (9th Cir. 2008)
(same); In re Couture, No. 22-35479, 2023 WL 6058491, at *2 (9th
Cir. Sep. 18, 2023) (same); see also In re Hamilton, 540 F.3d 367,
373 (6th Cir. 2008) (holding, similarly, that "a debtor need not
raise his discharge in bankruptcy as an affirmative defense,
because thanks to § 524(a) such an affirmative defense is
unnecessary and has been since 1970" (cleaned up)).
Villalobos's estoppel theory fits neatly within that
paradigm. Essentially, he says PRPD must "be estopped" from
raising its discharge defense because it "has done . . . something
that makes it inappropriate for [PRPD] to rely on a right that
otherwise is available." In re Gurrola, 328 B.R. at 172. That
"something" was litigating for years without telling Villalobos or
the district court about the discharge's effect on his case, making
it "inappropriate" to raise discharge so late in the game -- a
classic waiver-style argument, and thus one probably foreclosed by
§ 524(a)(2). Id.
- 28 - So I would end the analysis there, holding that
Villalobos couldn't invoke estoppel to prevent the PROMESA
discharge.
III
The majority does not decide that threshold question.
Instead, based on the hypothetical jurisdiction doctrine, it
addresses the merits of Villalobos's estoppel argument because it
concludes that the argument "is without merit." I respectfully
disagree: if I were to set aside my threshold concerns, I think
Villalobos is right on the merits of the estoppel question.
Judicial estoppel's "primary utility is to safeguard the
integrity of the courts by preventing parties from improperly
manipulating the machinery of the judicial system." Alt. Sys.
Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 33 (1st Cir. 2004).
As I explained above, PRPD sat on its hands about the discharge's
consequence until it was far too late for Villalobos to get into
bankruptcy court by ordinary means. That is precisely the sort of
improper manipulation of the judicial system that estoppel should
protect against (again, assuming it's applicable). See id. In
that respect, I agree with Villalobos: that PRPD "magically
remembered" (his words) how the Plan applied to Villalobos's case
only after the discharge date had long passed -- and, again, once
trial was imminent -- shows that PRPD was likely "playing false
[presumably meaning fast] and loose with the Court" (also his
- 29 - words). See New Hampshire v. Maine, 532 U.S. 742, 749-50 (2001)
(explaining that the doctrine's "purpose is to protect the
integrity of the judicial process" and collecting cases for that
proposition (cleaned up)).
To reach the opposite conclusion relative to the
estoppel issue, the majority relies on two main facts: (1) that
PRPD never made a specific affirmative statement that the Plan
didn't apply and (2) that PRPD generally reserved PROMESA defenses
in its various filings over the years. I don't find either point
dispositive.
As to the first, I agree that the prototypical judicial
estoppel case most often seems to involve directly contradictory
statements. But remember, "there is no mechanical test for
determining [judicial estoppel's] applicability" and "each case
tends to turn on its own facts." Alt. Sys. Concepts, 374 F.3d at
33 (cleaned up); see also New Hampshire, 532 U.S. at 750
(explaining that "courts have observed that the circumstances
under which judicial estoppel may appropriately be invoked are
probably not reducible to any general formulation of principle"
(cleaned up)). And here, PRPD, aware of the PROMESA restructuring
and its likely impact on any and all Commonwealth debt, remained
mute for years. It then deployed PROMESA only long past the
discharge deadline -- once it seemed that Villalobos couldn't file
his claim in the bankruptcy court by the administrative bar date
- 30 - and would thus likely be deprived of the right to pursue his claim
in any forum.9 So in these unique circumstances, the lack of a
directly contrary statement shouldn't be decisive for the estoppel
analysis.
As to the second, the rote statement that PRPD included
at the beginning of some filings -- that it just acted "without
waiving any right, objection or defense arising from the Title III
of Puerto Rico Oversight, Management and Economic Stability Act
('PROMESA'), 48 U.S.C. §§ 2101 et seq." -- doesn't strike me as
sufficient. That unspecific preservation of rights hardly let on
that discharge was imminent, that the case needn't go on, and that
neither judicial nor party resources needed to be expended further.
PRPD even included that generalization in its summary judgment
motion -- filed after the PROMESA deadline had passed, when
discharge had effectively rendered the district court's
proceedings a nullity. Yet there's nary a mention of the discharge
(or PROMESA, after the first paragraph) in that motion. So PRPD's
repeated inclusion of that vague statement in past filings turns
out only to be further evidence of the impropriety of its "Heads
I win, tails you lose" approach.
9 Except, of course, if the Title III court decided in its discretion to accept his filing late, which I discuss more below.
- 31 - And to re-emphasize, the majority also neglects how
PRPD -- either intentionally or through wanton
negligence -- wasted scarce judicial and party resources for years
by sleeping on this defense until trial was imminent, and until
its litigating opponent was presumably long locked out of
bankruptcy court. See New Hampshire, 532 U.S. at 750. More than
eighty-five percent of the docket entries in this case occurred
after the PROMESA deadline that PRPD thought applied: March 15,
2022.10 That included discovery, a settlement conference, and
PRPD's summary judgment motion, all of which could have been
avoided if PRPD timely notified the court and Villalobos of
PROMESA's consequences for this case. And even under the January
2023 filing deadline, more than seventy percent of the docket
action came afterward. At either moment PRPD could have invoked
the discharge defense, yet it marched onwards in the district court
all the same -- at least until it conveniently decided it was done
with doing so and Villalobos seemed to be sufficiently shut out of
the Title III court. Gamesmanship might be viewed as inevitable
and, unfortunately, an acknowledged part of litigation, but this
I say "that PRPD thought applied" because, in holding that 10
Villalobos's case is an "administrative claim," it seems that the actual deadline could have been as late as January 2023, as I've indicated in past footnotes.
- 32 - (in my view) is more than that -- it is something that amounts to
a direct "perversion of the judicial process." Id. (cleaned up).
Civil rights claims have proven to be hard to bring as
it is. See, e.g., Clemente Props., Inc. v. Pierluisi-Urrutia, 165
F.4th 1, 7 (1st Cir. 2026) (noting the "obstacle course of
doctrinal immunities designed to protect governments and officials
from lawsuits"). The field "is riddled with doctrines, rules, and
mechanisms that make claims . . . nearly impossible to bring
successfully." Tempest v. Remblad, No. 1:20-cv-00523-MSM-LDA,
2025 WL 2322442, at *10 (D.R.I. Aug. 12, 2025), appeal docketed,
No. 25-1823 (1st Cir. Sep. 3, 2025). So when governments and
officials get cagey (to describe it politely) with litigation
tactics in these already-tough-to-bring cases, I respectfully see
no reason to give such a litigant the benefit of the
jurisprudential doubt in the way that the majority today has.
IV
Estoppel aside, I turn now to the main issue we address
above -- whether Villalobos's claim is an "administrative
expense." I appreciate the majority's careful approach and don't
see an error. But given the "byzantine" nature of bankruptcy law,
the majority's discussion is naturally filled with terms of art
that may not be clear to most people, including experienced civil
- 33 - rights litigators.11 Guallini-Indij v. Banco Popular De P.R.,
No. 23-1705, 2026 WL 607314, at *2 (1st Cir. Mar. 4, 2026).
Two things are important to clarify. First, today's
opinion classifies Villalobos's civil rights claim as an
"administrative expense." Second, at times, the majority
emphasizes how Villalobos is "forever barred, estopped, and
enjoined from asserting such Administrative Expense Claim."
Neither is (in my view) quite what it sounds like at first. That's
to say, this result might be beneficial for Villalobos (and
similarly situated plaintiffs) in some ways.
As to the administrative expense point: I realize that
at face, it seems odd to reduce an alleged violation of civil
rights to something as mundane-sounding as an "administrative
expense." But in bankruptcy terms, that categorization has
advantages. As the majority explains (quoting one of our past
decisions), "[t]his category of expenses is paid by debtors to
creditors earlier than other categories of expenses in a Title III
case." In re Fin. Oversight & Mgmt. Bd. for P.R., 92 F.4th at
359. There's at least one other possible benefit, which leads
right into my next point of clarification.
Among those possibly unfamiliar terms: "administrative 11
expenses," "discharged claims," "pre-petition debts," "post- petition debts," "Chapter 11 reorganization," and "prioritization."
- 34 - As to the "forever barred" language that the majority
uses, I don't think it's as fatal as it sounds.12 Going just an
inch further than the majority to hopefully provide some clarity,13
I see no reason why Villalobos cannot still pursue his
administrative expense claim in the bankruptcy court.14 Ellis, 11
12 To be clear: the majority correctly quotes the PROMESA documents. My point is one of emphasis, not substance. 13 The majority says it has "no reason to address" this issue. But I see a big reason: Villalobos (incorrectly) says in his appellate brief that if PRPD isn't estopped, he can't file a claim in the bankruptcy court and so he will necessarily be paid nothing. Explaining why that's not right because of the majority's reasoning is, in my view, an important part of our job. See Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803) ("It is emphatically the province and duty of the judicial department to say what the law is. Those who apply the rule to particular cases, must of necessity expound and interpret that rule."). 14 The majority's Footnote 2, which discusses a potential waiver issue connecting the district court's decision to 11 U.S.C. § 503(a), is not to the contrary. While the footnote rightly observes that Villalobos doesn't cite § 503(a) as a reason to reverse the district court's stay and injunction, I think there's a few important reasons why. First, as far as I can tell, the only § 503(a) connection to Villalobos's case is that he can (after today's ruling) pursue his claim as an administrative expense in the Title III court if (1) he files there and (2) the Title III court permits the late filing under the "for cause" exception laid out in § 503(a). But it's the Title III court's job, not the district court's, to make that "for cause" determination, and it's an entirely separate analysis from what we're thinking about today; in other words, I don't see how § 503(a), a statute about the bankruptcy court's discretion that hasn't yet been invoked, could offer an independent basis to reverse the district court's decision today. Consequently, Villalobos surely needn't argue about § 503(a) in the district court (and before us) to preserve a "for cause"
- 35 - F.4th at 239 & n.12. The Bankruptcy Code establishes that a party
"may timely file a request for payment of an administrative
expense, or," as relevant for Villalobos, "may tardily file such
request if permitted by the court for cause." 11 U.S.C. § 503(a)
(emphasis mine). PROMESA incorporated all of § 503.15 See 48
U.S.C. § 2161(a) (explaining that § 503 is a section "applicable
to cases under this subchapter"); In re Fin. Oversight & Mgmt. Bd.
for P.R., 7 F.4th 31, 37 (1st Cir. 2021) ("Congress incorporated
numerous provisions of the Bankruptcy Code into Title III of
PROMESA, including § 503 in its entirety."). That naturally
includes this subsection about late filings, too.
So Villalobos (if he has not already done so following
oral argument) might want to go to the bankruptcy court, file a
claim, and petition the court to accept his late filing "for
cause." 11 U.S.C. § 503(a). True, it's of course within the Title
III court's sound discretion whether to accept it, but the court
argument in a separate bankruptcy proceeding that (as I understand) hasn't started yet. And if there's any doubt about Footnote 2's implications, Footnote 4 later makes clear that the majority's not touching anything related to § 503(a) in the main opinion. 15In contrast, PROMESA incorporated only specific subsections of other parts of the Bankruptcy Code. See 48 U.S.C. § 2161(a) (incorporating, for instance, 11 U.S.C. §§ 347(b), 350(b), and 364(c)-(f)). We must assume those differences matter, given our background presumption "that the legislature says what it means and means what it says." Henson v. Santander Consumer USA Inc., 582 U.S. 79, 89 (2017) (cleaned up).
- 36 - might well do so given (1) PRPD's litigation strategy here,
described above, and (2) the fact that it wasn't clear before today
that Villalobos had an "administrative expense" claim. See Pioneer
Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380,
387 (1993) ("There is, of course, a range of possible explanations
for a party's failure to comply with a court-ordered filing
deadline.").
Yet I will say that today's result certainly isn't all
good for Villalobos. After litigating for years, he's possibly
lost out on his day in court before a jury of his peers, despite
it being almost within his grasp. And due to PRPD's litigation
conduct, a claim that years of litigating had proven trial-worthy
will now -- assuming Villalobos even files his claim in the
bankruptcy court -- hang in the balance based on the Title III
court's discretionary "for cause" determination.
Of special note, the loss of Villalobos's Seventh
Amendment civil jury trial right isn't to be taken lightly. See
Perttu v. Richards, 605 U.S. 460, 467 (2025) ("The right to trial
by jury is of such importance and occupies so firm a place in our
history and jurisprudence that any seeming curtailment of the right
has always been and should be scrutinized with the utmost care."
(cleaned up)). If nothing else, Puerto Rico's bankruptcy has
- 37 - possibly caused Villalobos to lose out on that sacrosanct right.16
"The result may be severe, but that is [the] price for a debtor's
fresh start." Ellis, 11 F.4th at 239. For Villalobos, it is a
high price indeed.
* * * *
For those reasons, I concur dubitante.
16I say "possibly" because, in at least one other non-PROMESA case, it seems a bankruptcy claimant was still able to get before a jury. See In re Highcrest Mgmt. Co., 30 B.R. 776, 778–79 (Bankr. S.D.N.Y. 1983) (lifting the automatic stay to permit a jury trial to proceed in the district court); 28 U.S.C. § 157(e); see also Ellis, 11 F.4th at 238 (noting but declining to wade "into the morass" of the Seventh Amendment questions posed by a similar administrative expense holding). Whether Villalobos can pursue this path is another tricky question of constitutional and statutory law for the capable Title III court.
- 38 -