Hernandez-Castrodad v. Steidel-Figueroa

Summarized by Amir Shachmurove , Brown Rudnick LLP
4 weeks 1 day ago

Case Type:

Business

Case Status:

Affirmed

Citation:

23-1872 (1st Circuit, Jul 01,2026) Published

Tag(s):

Ruling:

Confronted by owners characterizing an administrative fee deducted from interest accrued on the principal value of just compensation owed by a Puerto Rican agency, and the lack of notice of accrual, as two takings, the U.S. Court of Appeals for the First Circuit (Circuit) affirmed the trial court's grant of summary judgment on their fee claim, as such request was violative of PROMESA's automatic stay laws, an hitherto "unaddressed" issue, and affirmed dismissal of their interest claim, as neither had alleged any prior attempt to attain that asset and thus lacked the requisite standing.

Procedural context:

Having received a final judgment of over $2 million dollars in eminent domain proceedings initiated by the Commonwealth of Puerto Rico (PR), and received all just compensation by January 2019, Jose Ernesto Hernandez-Castrodad and Iris Marta Marcado (Appellants) sought a return of the value of the interest that had accumulated after the relevant agency--the Puerto Rico Highway and Transportation Authority (PRHTA)--deposited their estimated and awarded compensation with the court up until those deposits' withdrawal. So determined, in September 2020, this duo launched a purported class action against Sigfrido Steidel-Figueroa (Steidel), in his capacity as the Administrator of the Administration of Tribunals of the Commonwealth of Puerto Rico (OAT), the judicial agency statutorily which both takes a cut of any interest accruing while said funds are charges an administrative fee for any expenses and liabilities incurred for services rendered in administering those interest deposits, on behalf of all such deposits' owners. This lawsuit was premised on the theories that OAT's cut of accrued interest (Interest Claim) and its administrative assessments (Administrative Fee Claim) were unjust takings. The U.S. District Court for the District of Puerto Rico (DC) originally dismissed the Appellants' complaint after a sua sponte determination that they lacked the requisite standing. In response to their motion for reconsideration, the DC decided the Administrative Fee Claim should have survived, but cabined the requested relief to only prospective injunctive relief from future fees due to the Eleventh Amendment's bar on retrospective demands for payment. Subsequently, the DC granted summary judgment in Steidel's favor (and on his motion), finding the fee to be reasonable and thus not a taking and unrebutted by any contrary evidence. Appellants appealed the DC's judgments as to their Administrative Fee and Interest Claims. That is, they appealed its grant of summary judgment in favor of Steidel as to their Administrative Fee Claim and its dismissal of their Interest Claim. Separately, because the DC had not addressed any PROMESA-related developments, and the Appellants neither filed a proof of claim nor sought relief from the automatic stay, the Circuit directed the parties to show cause why the that statutory prohibition did not, in fact, apply.

Facts:

Local proceedings get the narrative dibs here. In 2011, PR initiated eminent domain proceedings against the Appellants in the Puerto Rico Court of First Instance (PR Court). (This tribunal is composed of PR's superior and municipal courts.) In 2018, the PR Court issued a final judgment ordering the PRHTA to pay the appellants $2,414,251.10 in "just compensation. That judgment had another financial aspect: $15,255.47 of "simple legal interest" was to be paid "per semester," a sum that represented the interest accrued on the principal value of the just compensation award between the time the Appellants' land was taken and when PRHTA was ordered to pay. Consistent with this ruling, the Appellants received varying payments between January 2012 and January 2019, and had accordingly been given "all just compensation owed from the 2018 final judgment" by the latter date. Sensing an opportunity, the Appellants thereafter targeted Steidel and OAR for return of all fees that OAR had charged (i.e. the Administrative Fee Claim) and all the interest generated by such parties as themselves that OAR had retained, payment streams to which OAR was entitled under PR law. They did this in the common way: by launching a purported class action on September 2020 in the DC. Then, and later, the Appellants (and, seemingly, the DC) overlooked a seminal event with direct implications for any party's entitlement to funds from a PR governmental agency: the May 2017 filing of a petition under Title III of PROMESA by Puerto Rico. The Title III court had set June 29, 2018, as the deadline for filing a prepetition proof of claim against PR. That deadline came and went without the submission of a proof, informal or otherwise, by the Appellants. On January 18, 2022, this court confirmed PR's Title III Plan, with an effective date of March 15, 2022. With nary a peep from the Appellants, both dates passed.

Judge(s):

O. Rogeriee Thompson; David J. Barron; and Stephen G. Breyer

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