Non-Debtor Contractors Lack “Person Aggrieved” Standing to Appeal Title III Stay Orders Absent Direct, Creditor-Protective Pecuniary Harm

1. Introduction

This appeal arose from Puerto Rico’s ongoing fiscal restructuring under PROMESA. PREPA, a Title III debtor, retained ownership of its transmission and distribution system while delegating operation and maintenance to LUMA under a long-term Operation and Maintenance Agreement (OMA). A central OMA term required pursuit and regulatory approval of a “Liability Waiver” limiting customer remedies for service interruptions and related harms.

After LUMA invoked that waiver to deny large numbers of consumer claims, Puerto Rico’s consumer protection agency (DACO) sued LUMA, PREPA, and PREB in Commonwealth court (later heard by the Supreme Court of Puerto Rico via certification), seeking a declaration that the waiver and PREB’s approval were unconstitutional under Puerto Rico’s Constitution.

LUMA—without PREPA or the Oversight Board (the debtor’s representative)—moved in the Title III court to enforce PROMESA’s incorporated automatic stay to halt DACO’s suit. The Title III court denied relief (invoking the police power exception). LUMA appealed, but the First Circuit dismissed for lack of appellate jurisdiction because LUMA lacked statutory standing to appeal under the “person aggrieved” doctrine.

Key issue: Whether a non-debtor private contractor (even if allegedly a post-petition creditor via indemnification rights) has “person aggrieved” standing to appeal a Title III court’s refusal to apply the automatic stay to a governmental enforcement action, where the contractor’s claimed injuries are indirect and do not implicate the stay’s creditor-protective function of preventing unequal treatment.

2. Summary of the Opinion

The First Circuit did not reach the merits (including whether DACO’s suit fell within the police power exception). Instead, it held that LUMA lacked appellate standing under the narrow bankruptcy standard requiring that an appellant be a “person aggrieved,” i.e., directly and adversely affected in a pecuniary sense by the order appealed from.

The court reasoned that LUMA’s asserted harms—loss of the liability waiver, increased exposure to consumer litigation, diminished contract value, and impaired contract rights—flowed not directly from the Title III court’s refusal to stay the DACO action, but from the subsequent decision of the Supreme Court of Puerto Rico holding the waiver unconstitutional. At most, the Title III ruling affected timing (when the constitutional challenge would be adjudicated), which LUMA did not successfully frame as a direct pecuniary injury sufficient for “person aggrieved” standing.

Even crediting LUMA’s asserted status as a PREPA creditor (via indemnification), the court held that the risk of collecting from a Title III debtor with limited resources is not the sort of creditor harm the automatic stay exists to prevent—because it does not create unequal treatment among creditors. Accordingly, the appeal was dismissed for lack of appellate jurisdiction.

3. Analysis

3.1. The Precedents Cited and How They Shaped the Outcome

The opinion is principally a standing/jurisdiction decision, and its cited precedents serve three functions: (i) framing PROMESA/Title III’s bankruptcy analogues; (ii) defining the “person aggrieved” standard; and (iii) clarifying the automatic stay’s purposes vis-à-vis creditors.

A. PROMESA and Title III framing

• Pierluisi v. Fin. Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R.), 37 F.4th 746 (1st Cir. 2022): Cited for background on Puerto Rico’s fiscal emergency and PROMESA’s structure; it supplies contextual authority, not the dispositive rule.
• Fin. Oversight & Mgmt. Bd. for P.R. v. Federacion de Maestros de P.R., Inc. (In re Fin. Oversight & Mgmt. Bd. for P.R.), 32 F.4th 67 (1st Cir. 2022): Quoted for PROMESA creating a “modified version of the municipal bankruptcy code” and for situating Title III proceedings.
• Union de Trabajadores de la Industria Eléctrica y Riego v. Fin. Oversight & Mgmt. Bd. (In re Fin. Oversight & Mgmt. Bd. for P.R.), 7 F.4th 31 (1st Cir. 2021): Cited regarding PREPA’s role and the T&D system and to explain the automatic stay’s operation in the PREPA context.
• Fin. Oversight & Mgmt. Bd. for P.R. v. Ad Hoc Grp. of PREPA Bondholders (In re Fin. Oversight & Mgmt. Bd. for P.R.), 899 F.3d 13 (1st Cir. 2018): Used to explain the Title III court nomenclature and procedural posture.
• Zorrilla v. Fin. Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R.), 178 F.4th 747 (1st Cir. 2026): Important for the court’s acknowledgement that PROMESA incorporates much of the Bankruptcy Code but also differs—opening the theoretical possibility of a different standing rule in Title III—before the court holds LUMA waived any argument for a more forgiving standard.

B. The “person aggrieved” appellate standing doctrine

• Neira Rivera v. Scotiabank de P.R. (In re Neira Rivera), 14 F.4th 60 (1st Cir. 2021): Central authority placing the burden on the appellant and reiterating that “person aggrieved” is more stringent than Article III standing and requires a direct and adverse pecuniary effect.
• In re El San Juan Hotel, 809 F.2d 151 (1st Cir. 1987): Foundational First Circuit case articulating the need to cabin appellate review in bankruptcy due to “myriad” affected parties. The opinion also supplies the common formulation: an order that “diminishes his property, increases his burdens, or impairs his rights” must do so directly and pecuniarily.
• Spenlinhauer v. O'Donnell, 261 F.3d 113 (1st Cir. 2001): Used through Neira Rivera to anchor the “directly and adversely” pecuniary standard.
• Microsystems Software, Inc. v. Scandinavia Online AB, 226 F.3d 35 (1st Cir. 2000): Supplies the jurisdictional endpoint: if standing is absent, the appellate court’s role is only to memorialize the fact and terminate.
• Sea Shore Corp. v. Sullivan, 158 F.3d 51 (1st Cir. 1998): Cited for the proposition that absence of standing eliminates jurisdiction to decide the merits.
• United States v. Otero, 155 F.4th 78 (1st Cir. 2025): Invoked to reinforce judicial restraint: the court declines to decide more than necessary (e.g., whether LUMA had standing to enforce the stay below).

C. Creditor interests and the automatic stay

• FDIC v. Shearson-American Express, Inc., 996 F.2d 493 (1st Cir. 1993): Provides (in dictum) skepticism about a creditor’s standing to challenge an alleged stay violation—highlighting the general notion that the stay primarily protects the estate.
• Spookyworld, Inc. v. Town of Berlin (In re Spookyworld, Inc.), 346 F.3d 1 (1st Cir. 2003): Important counterweight recognizing that the stay also protects creditors by preventing some from gaining priority over others (equal treatment).
• Lee v. McCardle (In re Peeples), 880 F.3d 1207 (10th Cir. 2018): Heavily relied upon for the rationale that allowing a creditor to appeal when the trustee/representative chooses not to could subvert estate administration. The First Circuit uses it to frame the debate and, more importantly, to emphasize that even if creditors benefit, they must show the kind of harm the stay addresses.
• Magnoni v. Globe Inv. & Loan Co. (In re Globe Inv. & Loan Co.), 867 F.2d 556 (9th Cir. 1989): Supports the distinction between being a creditor in name and being harmed in a creditor capacity; appellants must show the stay-related creditor harm, not some other interest.
• St. Paul Fire & Marine Ins. Co. v. Labuzan, 579 F.3d 533 (5th Cir. 2009): Cited for the proposition that the stay’s purpose includes protecting creditors consistent with “equal treatment,” while also being distinguished as largely addressing § 362(k) damages (a different mechanism).

D. Ancillary authorities reinforcing causation limits and mootness mechanics

• Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969 (1st Cir. 1997): Not a standing case, but key for explaining why the later Puerto Rico Supreme Court ruling did not moot the appeal: actions in violation of the stay are generally void, subject to retroactive relief (annulment).
• Bostock v. Clayton Cnty., 590 U.S. 644 (2020): Used to caution that “but-for” causation is a sweeping concept; the “person aggrieved” standard requires more than “but-for” linkage.

3.2. Legal Reasoning

A. The controlling standing rule and waiver in PROMESA Title III

The court applies the bankruptcy appellate standing test—“person aggrieved”—as a statutory (prudential) limitation on who may appeal from bankruptcy-like orders. Although PROMESA is not identical to the Bankruptcy Code, the court emphasizes that both parties agreed the narrower standard applies; LUMA waived any argument for a more permissive PROMESA-specific approach (citing Zorrilla to acknowledge the theoretical possibility).

B. What “directly and adversely” means in this posture

The court draws a sharp line between (i) an order that itself changes legal rights or imposes a pecuniary burden, and (ii) an order that merely allows other litigation to proceed, where the alleged economic harms arise from that later litigation’s outcome.

On this view, LUMA’s claimed harms (loss of waiver; exposure to tort suits; diminished contract value) are not caused “directly” by the Title III court’s refusal to stay; they are caused by the Supreme Court of Puerto Rico’s constitutional ruling in Departamento de Asuntos del Consumidor v. Luma Energy, LLC, 2025 TSPR 126. The “direct” effect of the Title III order is principally temporal: having to litigate now rather than later, and receiving a merits decision now rather than after restructuring.

C. Creditor-based standing requires the kind of creditor harm the stay is designed to prevent

LUMA tried to recast itself as a post-petition PREPA creditor through OMA indemnification, arguing that losing the waiver forces it to seek indemnification from an insolvent debtor. The court accepts for sake of argument that LUMA might be a creditor, but holds that the asserted risk—collecting from a resource-constrained Title III debtor—does not implicate the stay’s creditor-protective function.

The key doctrinal move is to define the stay’s creditor-protective purpose as preventing unequal treatment among creditors (priority races), relying on Spookyworld and out-of-circuit support including Peeples and St. Paul Fire. LUMA did not show the Title III order would put it on unequal footing compared to any other PREPA creditor; rather, its asserted injury is identical in kind to what all creditors face (claims against an estate with limited resources).

D. Institutional allocation: the Board, not third parties, represents the debtor’s estate interests

The opinion underscores PROMESA’s structural premise that the Oversight Board is the debtor’s representative (akin to a trustee), and thus the party ordinarily positioned to litigate estate-protective uses of the stay. The Board’s later alignment with LUMA on the stay’s merits could not cure standing defects because the Board neither sought relief below nor appealed. That institutional point reinforces why the “person aggrieved” doctrine is “stringent”: to avoid appellate litigation by indirect stakeholders in a system with many affected parties.

3.3. Impact

A. Practical effects in PROMESA/Title III litigation

• Narrows who can appeal stay determinations: Non-debtor counterparties cannot reliably appeal adverse stay rulings absent a direct, order-imposed pecuniary impact (as opposed to downstream consequences of permitted litigation).
• Reinforces the Board’s gatekeeping role: If a stay dispute is truly estate-protective, the Oversight Board’s decision to litigate (or not) will often be determinative; third parties may be unable to substitute themselves as appellate champions.
• Limits “stay-as-shield” strategies for contractors: Entities doing business with Title III debtors—especially those seeking to preserve contractual protections like liability limitations—will face heightened difficulty using Title III stay enforcement to block Commonwealth regulatory or constitutional litigation when the debtor/Board does not actively pursue appellate review.

B. Doctrinal effects on standing and causation

• “But-for” causation is insufficient: The decision makes explicit that “person aggrieved” requires more than showing the order enabled later harm; the harm must flow directly from the order.
• Creditor standing is function-specific: Even if a party is a “creditor,” it must show injury in its creditor capacity and of the type bankruptcy law aims to prevent (unequal treatment), not simply that it faces collection risk.

C. Interaction with the police power exception (left unresolved here)

While the Title III court had held DACO’s suit fell within the police power exception, the First Circuit’s jurisdictional dismissal leaves that merits question undecided at the appellate level. The practical effect is that governmental units may face fewer appellate challenges to adverse stay determinations when the debtor’s representative does not appeal and third parties cannot establish “person aggrieved” standing.

4. Complex Concepts Simplified

Automatic stay (11 U.S.C. § 362(a), incorporated by PROMESA)

The automatic stay is a statutory “pause button” that stops many actions against the debtor or debtor property once a bankruptcy-like case begins. It protects (i) the debtor and estate from piecemeal collection and (ii) creditors from a race that lets some creditors get paid first.

Police power exception (11 U.S.C. § 362(b)(4))

Even if the stay would otherwise apply, governmental actions to enforce police or regulatory powers (e.g., consumer protection enforcement) may continue. The Title III court relied on this exception; the First Circuit did not reach the question.

“Person aggrieved” appellate standing

In bankruptcy-related appeals, it is not enough to be affected in some general way. The appellant must show that the specific order being appealed directly caused a concrete financial harm (or directly impaired a pecuniary right). This is narrower than ordinary Article III standing.

Direct vs. indirect harm

“Direct” harm comes from the order itself (e.g., an order that reduces a creditor’s distribution, disallows a claim, or imposes payment). “Indirect” harm is downstream—here, the alleged economic damage came from another court’s later constitutional ruling, not from the order refusing to stay the case.

Void actions and retroactive stay relief

Under In re Soares, actions taken in violation of the stay are generally treated as void, though a court may retroactively lift (annul) the stay to validate them. This is why the later Puerto Rico Supreme Court decision did not automatically moot the appeal.

5. Conclusion

The First Circuit’s decision establishes a clear, practical limit in PROMESA Title III litigation: a non-debtor contractor cannot appeal a Title III court’s refusal to enforce the automatic stay unless it can satisfy the bankruptcy “person aggrieved” standard—showing a direct, pecuniary injury caused by the order itself and (if relying on creditor status) the kind of creditor harm the stay is meant to prevent, principally unequal treatment among creditors.

By characterizing LUMA’s injuries as indirect (stemming from the Supreme Court of Puerto Rico’s constitutional invalidation of the waiver), and by emphasizing the Oversight Board’s exclusive representative role for the debtor’s estate, the court reinforces both the narrow gateway to appellate review in restructuring cases and the institutional centrality of the debtor’s representative in deciding whether and how the automatic stay will be litigated on appeal.