Plaintiffs Belia Arlene-Ocasio and Efraín Colón-Damiani sued the Comisión Estatal de Elecciones (CEE) and its acting president under 42 U.S.C. § 1983, alleging that Puerto Rico's voting restrictions during the 2020 election violated the First and Fourteenth Amendments. They obtained a permanent injunction and later moved for attorneys' fees under 42 U.S.C. § 1988, receiving an award of approximately $64,415. At the time of the lawsuit, Puerto Rico was undergoing a debt restructuring process under the federal PROMESA statute, which had been confirmed in January 2022 and took effect in March 2022. The Confirmed Plan discharged all claims arising prior to its effective date that were not addressed through the bankruptcy process. The Defendants filed a 'Notice of Injunction' asserting that the Plaintiffs' fee claim was discharged because it arose before the Effective Date and the Plaintiffs had not filed a proof of claim by the administrative expense bar date. The district court denied this request, concluding the fee award was unrelated to the bankruptcy case, prompting this appeal.
The First Circuit, writing through Circuit Judge Aframe, reversed the district court, holding that the fee award was a discharged claim. The court addressed four arguments raised by the Plaintiffs. First, the court rejected the waiver argument, stating that the discharge injunction under 11 U.S.C. § 524 is automatic and non-waivable, regardless of whether the debtor raises it. Second, the court addressed the timing of the claim. The Plaintiffs argued the claim arose only when the district court granted the fee award, which was after the plan's effective date. The court disagreed, applying bankruptcy principles that a claim arises when the underlying violation or transaction occurs, not when it is reduced to judgment. Since the constitutional violations and the fee motion occurred before the Effective Date, the claim was pre-petition. Third, the court rejected the argument that the fees were exempt from discharge under 48 U.S.C. § 2164(h) as obligations arising under federal police or regulatory laws. The court clarified that § 1983 and § 1988 are authorizing statutes for private enforcement, not substantive police or regulatory laws that create obligations for the state to comply with. Finally, the court addressed the due process notice argument. While acknowledging the precedent in In re Arch Wireless, the court distinguished it based on the specific statutory framework of PROMESA. Under 11 U.S.C. § 944(c)(2), once a claimant has actual knowledge of the bankruptcy case, the burden shifts to them to identify and comply with filing deadlines. Since the Plaintiffs had actual knowledge of the Title III proceedings, they were required to actively participate and could not claim a right to direct notice of the specific bar date.
The Plaintiffs are permanently enjoined from collecting the $64,415 in attorneys' fees against the CEE until the debt restructuring process is fully resolved. The decision clarifies that fee awards in civil rights cases against Puerto Rico are subject to PROMESA discharge if the underlying conduct occurred before the plan's effective date. While the claim is discharged in the district court, the court noted that Plaintiffs may still attempt to file a belated request for payment of an administrative expense in the Title III Court for cause, though the outcome of such a filing remains an open question.
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