Villalobos-Santana v. PR Police Department

── Villalobos-Santana v. PR Police Department ── Case No.: 24-1776 Court: Court of Appeals for the First Circuit Date: April 02, 2026 Category: General 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 Effecti