No. 20-1855

VÍCTOR J. SALGADO & ASSOCIATES INC., as 100% Stockholder of Víctor J. Salgado & Associates, Inc.; VÍCTOR J. SALGADO-MICHEO, in his capacity and as Stockholder of Víctor J. Salgado & Associates, Inc.; ANA SALGADO-SALGADO, in her capacity and as Stockholder of Víctor J. Salgado & Associates, Inc.,

Plaintiffs, Appellees,

v.

RAFAEL CESTERO-LOPATEGUI; JUAN A. MOLDES-RODRÍGUEZ; ALEXANDER ADAMS; JAVIER RIVERA RÍOS,

Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Gustavo A. Gelpí, U.S. District Judge]

Before

Lynch, Thompson, and Kayatta, Circuit Judges.

Carlos Lugol-Fiol, with whom Fernando Figueroa-Santiago, Solicitor General of Puerto Rico, and Isaías Sánchez-Báez, Former Solicitor General of Puerto Rico, were on brief, for appellants. Damian R. LaPlaca for appellees.

May 12, 2022 LYNCH, Circuit Judge. This is an appeal from the denial of the automatic stay under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"), 48 U.S.C. §§ 2101-2241,1 sought by Puerto Rico government officials in this 42 U.S.C. § 1983 civil rights action against them. Defendants- appellants are government officials whose defense has been assumed by the Commonwealth of Puerto Rico pursuant to P.R. Laws Ann. tit. 32, §§ 3085-3092a, the Commonwealth's legal representation and indemnification statute commonly referred to as "Law 9."

We reverse the district court's denial of defendants' motion for entry of the automatic stay under 11 U.S.C. § 922, incorporated into PROMESA through 48 U.S.C. § 2161(a), and order entry of the stay.

I.

On September 17, 2019, plaintiffs-appellees (Víctor J. Salgado & Associates, Inc., Víctor J. Salgado-Micheo, and Ana Salgado-Salgado), who owned and operated the Integrand Assurance Company, sued defendants in their personal capacities under Section 1983 in the United States District Court for the District

1 In 2016, Congress passed PROMESA in response to the government debt crisis in Puerto Rico. See Union De Trabajadores De La Industria Eléctrica Y Riego v. FOMB (In re FOMB), 7 F.4th 31, 35 (1st Cir. 2021). "Title III of PROMESA made many sections of the Bankruptcy Code [including the automatic stay] applicable in restructuring proceedings for Puerto Rico and its instrumentalities." Id.

- 2 - of Puerto Rico. Defendants-appellants Rafael Cestero-Lopategui, Alexander Adams, and Javier Rivera-Ríos are officers or employees of the Puerto Rico Office of the Insurance Commissioner ("PROIC"). Defendant-appellant Juan A. Moldes-Rodríguez was contracted by PROIC to perform duties as the rehabilitator, and then liquidator, of the Integrand Assurance Company.2 Plaintiffs allege that the government officials violated their First Amendment rights, the Equal Protection Clause, and the Due Process Clause. Plaintiffs further allege a civil conspiracy by the officials to deprive them of their constitutional rights, a failure to prevent wrongful acts, and violations of Commonwealth statutory law. Plaintiffs request declaratory relief, injunctive relief "[p]ermanently enjoin[ing] co-defendants from continuing to use the color of state law to deny Plaintiffs their Constitutional and legal rights," compensatory damages in the amount of $30 million, and additional punitive damages.

The defendant government officials then petitioned the Commonwealth Secretary of Justice ("Secretary") for legal r