Opinion ID: 4530983
Heading Depth: 2
Heading Rank: 2

Heading: The SIFC's Amenability to Suit

Text: Before we reach the merits of the Section 1983 claim, we must first discuss two preliminary arguments that could potentially insulate the SIFC from suit altogether. First, the SIFC asserts that it can benefit from the Commonwealth's Eleventh Amendment immunity because it is an arm - 10 - of the state. Fresenius Med. Care Cardiovascular Res., Inc. v. P.R. and Caribbean Cardiovascular Ctr. Corp., 322 F.3d 56, 61 (1st Cir. 2003) (finding that whether a public entity is entitled to Eleventh Amendment immunity is an inquiry into whether it is an arm of the state). Indeed, Puerto Rico is treated as a state for Eleventh Amendment purposes, id., and the district court dismissed the claims against the SIFC based on its entitlement to protection under the Commonwealth's immunity. Nevertheless, determining whether the SIFC is entitled to Eleventh Amendment immunity is not straightforward: in separate cases, the District of Puerto Rico has decided the issue in both directions. Compare Joubert-Vazquez v. Alvarez-Rubio, 820 F. Supp. 2d 289, 298-300 (D.P.R. 2011) (finding that the SIFC was not entitled to Eleventh Amendment immunity), with Borrás-Borrero v. State Ins. Fund Corp., CIVIL 16-1114CCC, 2017 WL 1088284, at  (D.P.R. March 22, 2017) (finding that the SIFC was entitled to Eleventh Amendment immunity) (citing Order, Bisbal-Bultron v. State Ins. Fund Corp., CIVIL 10-01555CCC, ECF No. 80, at -3 (D.P.R. May 6, 2014)). But it is well-established under First Circuit precedent that federal courts may resolve a case on the merits in favor of a state without first resolving any Eleventh Amendment issues the state raises. Brait Builders Corp. v. Mass., Div. of Capital Asset Mgmt., 644 F.3d 5, 11 (1st Cir. 2011) (citing Parella v. Ret. Bd. of R.I. Emps.' Ret. Sys., 173 F.3d 46, 53-57 - 11 - (1st Cir. 1999)). As a result, we may defer thorny Eleventh Amendment questions in cases in which it is perfectly clear that the state entity will prevail on the merits. Dávila v. Corporación de P.R. para la Difusión Pública, 498 F.3d 9, 14 (1st Cir. 2007) (citing Parella, 173 F.3d at 53-57). Because we comfortably conclude that Borrás's Section 1983 claims lack substantive merit, we decline to address whether the SIFC may assert the Commonwealth's Eleventh Amendment immunity. Second, the Puerto Rico Oversight, Management, and Economic Stabilization Act (PROMESA), enacted to help the Commonwealth navigate its public debt crisis, included an automatic stay of ongoing litigation that could result in the Commonwealth incurring liability. See 48 U.S.C. § 2194(b). While the SIFC references the stay and argues that we should interpret PROMESA to strengthen its Eleventh Amendment immunity argument, the SIFC does not argue that this action should be stayed under PROMESA. Both Borrás and the Individual Defendants similarly do not argue that the PROMESA stay prevents us from addressing the claims against the SIFC on the merits. While we are not bound by the parties' collective failure to discuss applicable law, we are generally reluctant to venture beyond the ambit of the parties' arguments to decide an issue without full briefing. See Whyte v. Conn. Mut. Life Ins. Co., 818 - 12 - F.2d 1005, 1011 n.20 (1st Cir. 1987) (declining to address an issue not raised by the parties unless at a minimum . . . not raising the issue would result in a gross miscarriage of justice). That reluctance is particularly warranted where, as here, the underlying legal issue is not clear-cut: it is not obvious that the Commonwealth should be considered an obligor[] or guarantor of liability incurred by the SIFC, a prerequisite for the stay to apply. 48 U.S.C. § 2194(a)(1)(A). Furthermore, though we do not decide the issue, we are skeptical that the PROMESA stay's prohibition of the commencement or continuation, including the issuance or employment of process, of a judicial . . . action, 48 U.S.C. § 2194(b)(1), requires the automatic implementation of the stay in lieu of dismissal on the merits. Cf. In re Pecan Groves of Ariz., 951 F.2d 242, 245 (9th Cir. 1991) (finding that creditors were unable to attack purported violations of an automatic bankruptcy stay under 11 U.S.C. § 362 because the stay was intended to benefit the debtor). Because the parties do not argue that the PROMESA stay applies to this litigation, and because the implementation of the stay is not clear-cut, we bypass this argument and proceed to the merits of Borrás's claims.