PROMESA Stay Voidness for OAT Administrative-Fee Takings Claims; Standing Requires a Concrete Attempt to Obtain Court-Held Interest

Case: Hernandez-Castrodad v. Steidel-Figueroa (No. 23-1872)  |  Court: United States Court of Appeals for the First Circuit  |  Date: July 1, 2026

1. Introduction

This appeal arose from a Puerto Rico eminent domain proceeding in which the Commonwealth paid more than $2 million in just compensation for appellants’ land. The dispute here concerns what happened after those monies were deposited with and later disbursed through the Puerto Rico Court of First Instance: (i) whether the Administration of Tribunals (OAT) failed to notify and disburse to appellants interest that accrued while the deposits sat in court-managed accounts; and (ii) whether OAT’s deduction of a 15% “administrative fee” from that accrued interest constituted an unconstitutional taking and/or violated due process.

The defendant, Hon. Sigfrido Steidel-Figueroa, was sued in his official capacity as OAT Administrator for declaratory and injunctive relief. The district court dismissed most claims and later granted summary judgment on the sole surviving claim (the takings challenge to the administrative fee). On appeal, the First Circuit confronted a threshold problem the parties had not litigated below: the effect of PROMESA Title III’s automatic stay and the Commonwealth’s confirmed plan.

Parties and posture

• Plaintiffs/Appellants: José Ernesto Hernández-Castrodad; Iris Marta Marcano; and their conjugal partnership.
• Defendant/Appellee: Hon. Sigfrido Steidel-Figueroa (OAT Administrator), sued officially.
• Disposition: Appeal from summary judgment dismissed (PROMESA stay); dismissal of remaining claims affirmed (standing/waiver).

2. Summary of the Opinion

The court expressly cautioned that its inability to reach the merits “should not be read as endorsing the practice of retaining any percentage of a litigant’s just compensation award,” and it did not decide whether the administrative-fee claim was discharged by the Title III plan.

3. Analysis

3.1 Precedents Cited

A. Takings and just compensation background

• United States v. Reynolds, 397 U.S. 14 (1970): Cited for the definition of “just compensation” as “the full monetary equivalent of the property taken.” The case supplies constitutional context, but the panel did not reach the merits of whether OAT’s fee or interest practices constituted a taking.

B. Standing doctrine (injury in fact; generalized grievances)

• Osediacz v. City of Cranston, 414 F.3d 136 (1st Cir. 2005), and Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992): Cited for the tripartite standing requirements (injury, traceability, redressability). The district court relied on this framework to find no injury in fact absent a request for interest disbursement; the First Circuit affirmed on waiver grounds because appellants did not engage that reasoning.
• McInnis-Misenor v. Me. Med. Ctr., 319 F.3d 63 (1st Cir. 2003): Used to emphasize that the party invoking federal jurisdiction bears the burden to establish standing—relevant to appellants’ failure to show error in the dismissal.

C. Appellate waiver and argument development

• In re Savage, 169 F.4th 45 (1st Cir. 2026): Invoked for the “prophylactic rule” that undeveloped appellate arguments are waived; central to affirming dismissal of the interest claim.
• Alaniz v. Bay Promo, LLC, 143 F.4th 18 (1st Cir. 2025): Cited to underscore that courts do not make arguments for parties—used to deem due process arguments waived for lack of development.

D. PROMESA/Bankruptcy automatic stay, voidness, and jurisdiction

• HealthproMed Found., Inc. v. Dep't of Health & Hum. Servs., 982 F.3d 15 (1st Cir. 2020): Key authority for the proposition that actions taken in violation of the automatic stay are void and that appellate courts lack jurisdiction to review merits of void proceedings.
• In re Soares, 107 F.3d 969 (1st Cir. 1997): Cited (via district-court PROMESA caselaw) for the First Circuit’s traditional approach that stay-violative actions are void.
• Colón-Torres v. Negrón-Fernández, 997 F.3d 63 (1st Cir. 2021): Explained § 922’s purpose—“plug[ging] a hole” by covering suits against officers—but also emphasized that both §§ 362 and 922 apply only where the “ultimate objective” is enforcement of a claim against the debtor. The panel used this lens to characterize the administrative-fee challenge as seeking debtor property.
• In re Fin. Oversight & Mgmt. Bd. For P.R., 939 F.3d 340 (1st Cir. 2019): Critical for PROMESA-specific stay analysis—there is no “estate” in PROMESA, and “property of the estate” is read as “property of the debtor,” making the stay’s reach broader.
• In re City of Stockton, 499 B.R. 802 (Bankr. E.D. Cal. 2013): Used by analogy for the proposition that municipal money constitutes “property of the debtor” under § 362(a)(3).
• Preiser v. Newkirk, 422 U.S. 395 (1975): Cited for the general point that jurisdictional questions can be dispositive.
• Acheson Hotels, LLC v. Laufer, 601 U.S. 1 (2023): Cited for the principle that a court may address jurisdictional issues in any order; the panel used this to dispose of the interest-claim appeal on non-PROMESA grounds.

E. PROMESA plan confirmation/discharge context (raised but not decided)

• Villalobos-Santana v. P.R. Police Dep't, 171 F.4th 544 (1st Cir. 2026): Cited for background on the Commonwealth’s Title III filing and claims bar date/plan effective date.
• In re Fin. Oversight & Mgmt. Bd. for P.R., 636 B.R. 1 (D.P.R. 2022): Cited as the confirmation decision and for plan treatment of eminent domain/inverse condemnation claims (e.g., the plan’s “Allowed” claim concept).
• In re Fin. Oversight & Mgmt. Bd. for P.R., 41 F.4th 29 (1st Cir. 2022): Cited for the Fifth Amendment constraint on paying less than just compensation on prepetition takings claims, while distinguishing substantive unlawfulness from procedural inactionability/waiver. The panel referenced this to frame (but not resolve) discharge questions.
• Díaz-Santiago v. Sánchez-Acosta, No. 24-1256, 2025 WL 2670236 (1st Cir. July 23, 2025), and In re Fin. Oversight & Mgmt. Bd. for P.R., 650 B.R. 286 (D.P.R. 2022): Cited for the proposition that plan discharge/discharge injunction can be jurisdictionally relevant; also for the Title III court’s determination that claims against certain listed entities are claims against the Commonwealth, including OAT.

F. Ancillary citations

• Goldstein v. Cox, 396 U.S. 471 (1970): Noted generally that court-managed deposits are not unique to Puerto Rico.
• E.L.A. v. Registrador, 11 P.R. Offic. Trans. 152 (1981): Cited for the condemnation-deposit mechanism in Puerto Rico practice.
• CBS, Inc. v. FCC, 453 U.S. 367 (1981) (White, J., dissenting): Quoted for the difficulty of applying “reasonableness” standards—relevant to the administrative-fee framing below, though the panel did not reach reasonableness merits.
• Narrigan v. Goldberg, 170 F.4th 14 (1st Cir. 2026): Cited to limit appellate review in uncertified class contexts.
• Zhou v. Desktop Metal, Inc., 120 F.4th 278 (1st Cir. 2024): Cited for de novo review standards for Rule 12(b)(6) dismissals.
• Rosaura Bldg. Corp. v. Mun. of Mayagüez, 778 F.3d 55 (1st Cir. 2015): Cited for the rule that appellate review is confined to the district-court record.
• Cruz v. Puerto Rico, 558 F. Supp. 2d 165 (D.P.R. 2007): Cited for Eleventh Amendment “arm of the Commonwealth” analysis regarding OAT.

3.2 Legal Reasoning

A. The administrative-fee claim: why the automatic stay applied

The decisive move in the opinion is characterizing what the administrative-fee lawsuit was trying to accomplish. Under Puerto Rico law, OAT is authorized to retain “a reasonable share” of interest on “other funds” to cover services and costs. The panel treated the challenged 15% retention as a governmental proprietary interest: after deduction, the government “would keep it,” and appellants did not meaningfully rebut that proposition.

That characterization mattered because PROMESA incorporates Bankruptcy Code stays:

• 11 U.S.C. § 362(a)(1) stays actions “against the debtor” to recover prepetition claims;
• 11 U.S.C. § 362(a)(3) stays acts to obtain possession of “property of the debtor” (PROMESA’s “debtor” being the Commonwealth);
• 11 U.S.C. § 922(a)(1) extends the stay to actions against officers that seek to enforce a claim against the debtor.

The First Circuit emphasized PROMESA’s doctrinal twist: there is no bankruptcy “estate,” so “property of the estate” becomes “property of the debtor,” expanding the stay’s reach in municipal/PROMESA contexts. Because the administrative-fee claim effectively sought to prevent retention of money the Commonwealth claims by statute and regulation (i.e., “property of the debtor”), filing the claim without obtaining stay relief rendered the federal action void.

Once voidness attached, jurisdiction fell away: appellate courts cannot review merits of void proceedings. Accordingly, the court dismissed the appeal as to the claim resolved on summary judgment—without endorsing or rejecting the fee on constitutional grounds.

B. The interest claim: standing framed as a challenge to procedures, and waiver on appeal

For the separate “interest” claim, the district court had viewed appellants’ grievance as chiefly procedural: not merely that interest existed, but that OAT’s process for “notice, calculation and disbursement” was opaque or effectively nonexistent. The district court deemed injury “abstract and hypothetical” because the complaint did not allege appellants actually sought disbursement of the interest and then encountered denial, delay, or procedural barriers.

On appeal, appellants largely asserted that the interest was “vested” and non-speculative—an issue the panel read as essentially conceded below. Critically, appellants did not address why they had standing to challenge administrative procedures without alleging they tried to use them. Applying the First Circuit’s waiver doctrine, the panel held appellants failed to carry their burden to show district-court error and affirmed dismissal.

3.3 Impact

A. Litigation against Puerto Rico instrumentalities during/after Title III

• Practical rule: If the relief sought would restrain or recapture monies the Commonwealth (or a listed “central government entity,” such as OAT) claims as its own—here, an administrative fee carved out of interest—plaintiffs should assume PROMESA’s stay is implicated and seek stay relief in the Title III court before filing or prosecuting federal litigation.
• High stakes of noncompliance: The opinion reinforces that violating the stay can make the entire action void, depriving federal courts of jurisdiction and foreclosing merits review after years of litigation.

B. Standing for procedural challenges in funds-disbursement contexts

• Plaintiffs challenging “opaque” disbursement regimes should plead concrete facts showing an attempted invocation of the process (e.g., a request for disbursement, a denial, inability to obtain information, or specific obstacles), rather than relying solely on the existence of accrued funds.
• The decision also underscores that failing to engage the district court’s dispositive reasoning on appeal can be fatal even when underlying constitutional theories are substantial.

C. Substantive takings questions left open

The panel’s disposition is jurisdictional/procedural. It leaves unresolved (and expressly disclaims endorsing) whether retaining a percentage of interest associated with court-held deposits originating in condemnation proceedings could amount to a taking, and it does not decide plan-discharge effects on the administrative-fee claim.

4. Complex Concepts Simplified

• Takings Clause / Just compensation: Government generally must pay the full monetary equivalent when it takes private property for public use. Here, the constitutional merits were not reached because the administrative-fee claim was void under the bankruptcy stay.
• Automatic stay: A legal “pause button” that stops lawsuits and collection efforts once a bankruptcy (or PROMESA Title III) case begins. Actions taken in violation of the stay are treated as having no legal effect.
• Void vs. voidable: “Void” means legally nonexistent from the start; courts cannot cure it by later rulings unless proper bankruptcy-court relief is obtained.
• Standing (injury in fact): Federal courts require a concrete, personal injury—not merely disagreement with government policy. When the complaint targets inadequate procedures, courts often look for allegations that the plaintiff actually tried to use the procedures and suffered a real-world impediment.
• Waiver on appeal: Appellate courts generally will not consider arguments that are not meaningfully developed or that fail to confront the lower court’s reasoning.
• Eleventh Amendment (background here): Limits retrospective monetary relief against states/arms of the state in federal court; the district court used it to confine surviving relief to prospective injunctions.

5. Conclusion

Hernandez-Castrodad v. Steidel-Figueroa establishes a sharply practical precedent for PROMESA-era litigation: when a plaintiff’s requested relief would interfere with funds the Commonwealth claims as its own—such as OAT’s statutorily authorized administrative fee—PROMESA’s automatic stay can render the entire federal action void, eliminating federal jurisdiction and foreclosing merits review.

The decision also reinforces a pleading-and-briefing lesson in public-law disputes over governmental procedures: to establish standing (and to preserve appellate review), plaintiffs must allege and argue concrete, case-specific injury—often by showing an actual attempt to obtain the disputed benefit and a resulting barrier—rather than resting on the abstract existence of an entitlement.