In re: the Financial Oversight v. the Financial Oversight

United States Court of Appeals
For the First Circuit
No. 25-1993
IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO
RICO, as Representative for the Commonwealth of Puerto Rico; THE
FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as
Representative for the Employees Retirement System of the
Government of the Commonwealth of Puerto Rico; THE FINANCIAL
OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as
Representative for the Puerto Rico Highways and Transportation
Authority; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR
PUERTO RICO, as Representative for the Puerto Rico Electric
Power Authority (PREPA); THE FINANCIAL OVERSIGHT AND MANAGEMENT
BOARD FOR PUERTO RICO, as Representative of the Puerto Rico
Public Buildings Authority,
Debtors,
JONATHAN HERNÁNDEZ ZORRILLA; YADIRA CARRASQUILLO GONZÁLEZ,
Movants, Appellees,
v.
THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as
Representative for the Commonwealth of Puerto Rico,
Debtor, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Laura Taylor Swain,* U.S. District Judge]
* Of the Southern District of New York, sitting by
designation.

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Before
Montecalvo, Howard, and Kayatta,
Circuit Judges.
Lucas Kowalczyk, with whom Timothy W. Mungovan, John E.
Roberts, Adam L. Deming, Brian S. Rosen, Mark D. Harris, and
Proskauer Rose LLP were on brief, for appellant.
Steven P. Lausell Recurt, with whom Inter-American University
of PR Legal Aid Clinic, Fermín L. Arraiza-Navas, Annette
Martínez-Orabona, and American Civil Liberties Union Puerto Rico
Chapter were on brief, for appellees.
June 12, 2026

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KAYATTA, Circuit Judge. With the confirmation of its
Plan of Adjustment under Title III of PROMESA, the Commonwealth of
Puerto Rico (the "Commonwealth") received a broad discharge of
various claims and an injunction barring the pursuit of those
discharged claims. The issue raised in this appeal is whether
that discharge and injunction apply to claims against officers or
employees of the Commonwealth in their personal capacities. As we
will explain, we agree with the Title III court that the
Commonwealth's discharge does not apply to personal-capacity
claims and that such claims are therefore not subject to any
injunction impeding their prosecution.
I.
Congress enacted PROMESA (short for the Puerto Rico
Oversight, Management, and Economic Stability Act) in 2016 in
response to the "fiscal emergency" in Puerto Rico. 48 U.S.C.
§ 2194(m); see also id. §§ 2101–2241 (codifying PROMESA). PROMESA
seeks to "facilitate restructuring of [the Commonwealth's] public
debt, ensure its future access to capital markets, and provide for
its long-term economic stability." Pierluisi v. Fin. Oversight &
Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R.), 37
F.4th 746, 750 (1st Cir. 2022). To those ends, PROMESA created "a
modified version of the municipal bankruptcy code" in Title III of
its provisions, established the Financial Oversight and Management
Board (the "Board"), and "authorized the Board to place the

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Commonwealth and its instrumentalities into bankruptcy proceedings
and to develop a plan of adjustment for restructuring the
Commonwealth's debts." Fin. Oversight & Mgmt. Bd. for P.R. v.
Federacion de Maestros de P.R., Inc. (In re Fin. Oversight & Mgmt.
Bd. for P.R.), 32 F.4th 67, 74–75 (1st Cir. 2022); see 48 U.S.C.
§ 2121(a), (b)(1), (c)(1); id. §§ 2161–2178.
Beginning in May 2017, the Board commenced Title III
restructuring cases on behalf of the Commonwealth and several of
its instrumentalities. See 48 U.S.C. § 2164(a). Upon initiation
of those restructuring cases, certain claims against the
Commonwealth and its relevant instrumentalities were automatically
stayed pending resolution of those proceedings. 11 U.S.C. §§ 362,
922 (automatically staying certain claims upon initiation of a
bankruptcy petition); 48 U.S.C. § 2161(a) (incorporating
Sections 362 and 922 of the Bankruptcy Code into PROMESA).
II.
A.
The events giving rise to appellees' claims occurred a
year later, while those restructuring cases were making their way
through the Title III court. According to their complaints, on
May 1, 2018, appellees Hernández Zorrilla and Carrasquillo
González attended a demonstration in San Juan, Puerto Rico. There,
they allege, members of the Puerto Rico Police Bureau (PRPB) used
"physical aggression, threats and assault" against them, including

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tear gas and, in the case of Hernández Zorrilla, rubber bullets or
"similar ammunition." In re Fin. Oversight & Mgmt. Bd. for P.R.,
802 F. Supp. 3d 350, 355 (D.P.R. 2025) (quoting complaints).
In April 2019, appellees each filed suit in the U.S.
District Court for the District of Puerto Rico, alleging that the
PRPB officers' conduct and certain policies of the PRPB violated
their rights under the First, Fourth, and Fourteenth Amendments to
the U.S. Constitution and various sections of the Puerto Rico
Constitution and Puerto Rico Civil Code. The suits named as
defendants the then-Governor of Puerto Rico and other officials
and employees of the Commonwealth, including employees of the PRPB.
In addition to seeking declaratory and injunctive relief, the suits
sought monetary damages from defendants in their personal
capacities. The suits were consolidated in 2021.
According to the Board, the Commonwealth assumed
financial responsibility for defending these suits under a
Commonwealth law known as Law 9. Law 9 allows certain employees
and officials sued in their personal capacities to ask the
Commonwealth to "provide [them] with legal representation, and to
subsequently assume the payment of any judgment" entered against
them. P.R. Laws Ann. tit. 32, § 3085. The Board concedes that,
subject to limited exceptions, the decisions to defend and to
indemnify under Law 9 are both discretionary. The Commonwealth's
agreement to defend an employee or official does not necessarily

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mean it will also indemnify that employee or official; rather, the
Commonwealth makes its indemnification decision only "after
considering the findings of the court or which arise from the
evidence presented" in the case. Id. § 3087.
B.
Back in the Title III court, in January 2022 -- after
years of mediation and negotiation -- the court confirmed a Plan
of Adjustment for the Commonwealth and two of its instrumentalities
(the "Commonwealth Plan" or the "Plan"). In re Fin Oversight &
Mgmt. Bd. for P.R., 636 B.R. 1, 56–244 (D.P.R. 2022) [hereinafter
Comm. Plan]; see Federacion de Maestros, 32 F.4th at 75. The
Title III court entered a Confirmation Order, In re Fin. Oversight
& Mgmt. Bd. for P.R., 636 B.R. at 1 [hereinafter Conf. Order], and
issued Findings of Fact and Conclusions of Law, In re Fin.
Oversight & Mgmt. Bd. for P.R., 637 B.R. 223 (D.P.R. 2022)
[hereinafter FFCL], which were "incorporated [into the
Confirmation Order] as though set forth in full" therein, Conf.
Order ¶ 3.1 The confirmed Commonwealth Plan went into effect on
1 In addition to being published in the Bankruptcy Reporter,
the Commonwealth Plan, Confirmation Order, and Findings of Fact
and Conclusions of Law are all available to the public online for
free. Commonwealth of Puerto Rico, Kroll Restructuring Admin.,
https://cases.ra.kroll.com/puertorico/Home-DocketInfo
[https://perma.cc/FL4A-KMZC] (last visited June 10, 2026). When
citing to these documents, for ease of reference and for
consistency with the Title III court's treatment, we point to the
numbered sections and paragraphs contained therein rather than

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March 15, 2022, discharging certain claims against the
Commonwealth and enjoining the pursuit of discharged claims. See
id. ¶¶ 56, 59.
The district court stayed appellees' case pending a
determination by the Title III court as to whether the confirmed
Commonwealth Plan discharged their claims and thus left them
subject to the injunction barring the pursuit of discharged claims.
On September 30, 2025, the Title III court issued an Opinion and
Order concluding that appellees' personal-capacity claims against
Commonwealth officials and employees are not barred by the
confirmed Commonwealth Plan and that appellees were therefore free
to proceed with their suit.2 In re Fin. Oversight & Mgmt. Bd.,
802 F. Supp. 3d at 355. The Board timely appealed.
III.
We turn now to the Board's claims on appeal, reviewing
the Title III court's factual findings for clear error and its
legal conclusions de novo. Federacion de Maestros, 32 F.4th at
76.
The Board asserts that the Title III court erred in
finding that the confirmed Commonwealth Plan does not discharge or
page numbers, which vary between the Bankruptcy Reporter and the
publicly available documents.
2 The Board consented to permitting the nonmonetary claims
for injunctive and declaratory relief to proceed.

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call for enjoining proceedings against Commonwealth employees or
officials in their personal capacities. According to the Board,
this was error because, under this court's decision in Víctor J.
Salgado & Associates Inc. v. Cestero-Lopategui, 34 F.4th 49 (1st
Cir. 2022), the personal-capacity claims are "indirect claims"
against the Commonwealth. In the Board's view, the only relevant
question is whether these personal-capacity claims function as
claims against the Commonwealth. If they do, the Board argues,
then they have been discharged.
We disagree. The question is not simply whether these
suits press claims against the Commonwealth. The question is
whether these particular claims fall within the subset of claims
discharged by the confirmed Commonwealth Plan. And as we will
explain, even assuming appellees' suits do function as indirect
claims against the Commonwealth, these suits -- as maintained
against officers or employees in their personal capacities -- are
not within that group of claims that the Commonwealth Plan
discharges.
A.
We begin with our decision in Salgado, then explain why
the outcome of that case does not control the outcome of this one.
PROMESA incorporates two provisions of the Bankruptcy
Code to automatically stay certain actions during Title III
restructuring proceedings, so as to give the Commonwealth "a

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limited period of time during which it can focus its resources on
negotiating a voluntary resolution with its creditors." 48 U.S.C.
§ 2194(n)(2); see also id. § 2161(a) (incorporating Sections 362
and 922 of the Bankruptcy Code into PROMESA).3 The first provision,
Section 362, automatically stays "action[s] or proceeding[s]
against the debtor." 11 U.S.C. § 362(a)(1). "[I]n addition to"
actions stayed by Section 362, the second provision, Section 922,
also stays "action[s] or proceeding[s] against an officer or
inhabitant of the debtor that seek[] to enforce a claim against
the debtor." Id. § 922(a)(1).
In Salgado, we confronted the question of whether
personal-capacity suits against Commonwealth officials were
"action[s] or proceeding[s] against an officer" of the
Commonwealth "that seek[] to enforce a claim against the debtor"
within the meaning of Section 922. See 34 F.4th at 53. We reasoned
that the "very existence" of Section 922 "makes clear that for
automatic stay purposes, an action can seek to enforce a claim
against a governmental debtor even if it only does so indirectly."
Id. at 53–54. Otherwise, "Section 922 would have little if any
role at all because actions brought directly against the debtor
are already stayed by Section 362." Id. at 53. We concluded that
3 The automatic stay created by these provisions preceded,
and was replaced by, the permanent injunction in the confirmed
Commonwealth Plan. 11 U.S.C. § 362(c)(2)(C); Comm. Plan § 92.25.

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the personal-capacity suits at issue, in which the Commonwealth
was already footing the defense bill under Law 9 and faced pressure
to indemnify based on the considerable damages sought, fell within
Section 922 because, as a practical matter, they targeted the
Commonwealth's fisc. Id. at 54–56. The permissive, rather than
mandatory, nature of indemnification under Law 9 did not demand a
different result because the Bankruptcy Code (in a provision
incorporated into PROMESA) defines claims broadly, to include
"contingent" and "disputed" "right[s] to payment." Id. at 54
(alteration in original) (quoting 11 U.S.C. § 101(5)); see 48
U.S.C. § 2161(a).
The Board argues Salgado's holding forces our hand here.
The Board sees no relevant distinction between the stay and the
confirmed Commonwealth Plan's discharge provisions, arguing that
"[t]he scope of the stay and the scope of the discharge both rise
or fall" with the definition of "claim." But, by focusing on the
text of the Commonwealth Plan and Confirmation Order, the Board's
own arguments implicitly recognize that there is more to the
analysis. It cannot be that any claim that was automatically
stayed must necessarily also have been discharged; if that were
so, then most of the years-long process of negotiating the shape
and scope of the resolution of the various and numerous claims
against the Commonwealth under the Commonwealth Plan would have
been for naught. And it makes sense that the automatic stay and

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the discharge would not be coextensive because they carry
drastically different consequences: While the former only pauses
a claim to give the Commonwealth "a limited period of time" to
focus on "negotiating" with its creditors, 48 U.S.C. § 2194(n)(2),
the latter "forever waive[s] and discharge[s]" a claim, Conf.
Order. ¶ 56(b).
Salgado addressed a claim that, while facially against
an employee, also functioned as an indirect claim against the
debtor. 34 F.4th at 53–54. So the court had to decide, in the
absence of any agreement between the parties, how to apply the
automatic stay provisions to such a claim. Here, we have the same
dual-faced claim, but the question now is what the confirmed
Commonwealth Plan, not Section 922 of the Bankruptcy Code, says
about the treatment of that claim.4 To answer that question, we
look -- as the Board does -- to the language of that Plan.
B.
1.
Three documents govern the scope of the discharge
effected by the confirmed Commonwealth Plan: (1) the Commonwealth
Plan itself, (2) the Title III court's Confirmation Order, and
(3) the Findings of Fact and Conclusions of Law incorporated into
4 For this reason, we reject the Board's argument that
deciding personal-capacity claims are not discharged by the
Commonwealth Plan would give the term "claim" different meanings
at different points in the Title III process.

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the Confirmation Order. The Commonwealth Plan and Confirmation
Order are "construed in a manner consistent with each other so as
to effect the purpose of each," but insofar as they conflict, the
Confirmation Order prevails. Conf. Order ¶ 84.
The Confirmation Order discharges and releases "all
Claims or Causes of Action against the Debtors and Reorganized
Debtors that arose, in whole or in part, prior to the Effective
Date," "[e]xcept as expressly provided in the Plan or [Confirmation
Order]." Id. ¶ 56(a). It precludes "all Entities . . . from
asserting any and all Claims against the Debtors and Reorganized
Debtors, and each of their respective employees, officials,
Assets, property, rights, remedies, Claims, or Causes of Action of
any nature whatsoever," again "[e]xcept as expressly provided in
the Plan or [Confirmation Order]."5 Id. ¶ 56(b). The Confirmation
Order serves as a "judicial determination . . . of the discharge
and release of all such Claims, Causes of Action or debt of or
against the Debtors and the Reorganized Debtors pursuant to
sections 524 and 944 of the Bankruptcy Code." Id. And it
permanently enjoins "all Entities" holding discharged claims from
5 The reference to "employees" and "officials" appears in
the Confirmation Order but not in the mirroring provision of the
Commonwealth Plan itself, which instead reads "and each of their
respective Assets, property and rights, remedies, Claims or Causes
of Action or liabilities of any nature whatsoever." Comm. Plan
§ 92.2(b). Given this discrepancy, we lean on the language of the
Confirmation Order as the document that prevails in case of
conflict. See Conf. Order ¶ 84.

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"commencing or continuing, directly or indirectly, . . . any
action or other proceeding" on a discharged claim, again "[e]xcept
as otherwise expressly provided." Id. ¶ 59.
This discharge language is broad. But it includes
exceptions, most notably that its reach may be limited "as
expressly provided in the Plan or [Confirmation Order]." Id.
¶ 56(a)—(b); see also id. ¶ 59. And the Confirmation Order's
incorporated Findings of Fact and Conclusions of Law expressly
state that "[t]he Plan does not provide for non-consensual third-
party releases." FFCL ¶ 238. "Except as explicitly agreed to by
the creditors in their respective plan support agreements, the
Plan does not release any claims of a creditor of the Debtors, in
its capacity as such, against a party that is not a Debtor." Id.
2.
The Board's argument relies on three textual hooks in
the confirmed Commonwealth Plan: (1) the discharge of "all Claims
or Causes of Action against the Debtors"; (2) the prohibition on
asserting claims against Commonwealth "employees" and "officials";
and (3) the injunction against "commencing or continuing, directly
or indirectly," any action or proceeding on a discharged claim.
Together, the Board argues, this language forecloses "indirect
efforts to recover from the Commonwealth through lawsuits against
its 'employees' or 'officials' -- whether current or former, and
regardless of capacity."

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The problem for the Board is that its textual analysis
is incomplete. All of the broad language upon which the Board
relies does indeed appear in the confirmed Commonwealth Plan. But
in each case, that broad language is preceded and cabined by the
aforementioned exception: "[e]xcept as expressly provided" in
other provisions of the Commonwealth Plan or Confirmation Order.6
Conf. Order ¶¶ 56(a)—(b), 59. Accordingly, a determination that
these personal-capacity claims fall within the broad umbrella cast
by the language to which the Board points is only the first step
of the analysis and does not answer the dispositive question of
whether other express provisions of the confirmed Commonwealth
Plan exclude these claims from discharge.7
As the Board concedes, the confirmed Commonwealth Plan
"plainly does not" discharge claims against third parties. Indeed,
that Plan expressly states that it "does not provide for non-
consensual third-party releases," meaning that it "does not
release any claims of a creditor of the Debtors . . . against a
6 In its reply brief, the Board argues that Section 944 of
the Bankruptcy Code governs the scope of claims discharged and
discharges "all debts." 11 U.S.C. § 944(b). But Section 944(b)
contains its own limiting language: it excludes from discharge
"any debt . . . excepted from discharge by the plan or order
confirming the plan." Id. § 944(c)(1).
7 The Board briefly argues that its reading aligns with the
goals of PROMESA, while a contrary reading would invite evasion of
the protections set forth in the confirmed Commonwealth Plan. But
the Board does not contend that PROMESA's broad goals should
override the clear text of that Plan.

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party that is not a Debtor." FFCL ¶ 238. But while the Board
argues strenuously that the personal-capacity claims at issue are
indirect claims against the Commonwealth rather than direct claims
against the named defendants, it points to no authority -- nor
offers any reasoning of its own -- to support the proposition that
those categories are mutually exclusive. In short, the Board
presents no rationale as to why a determination that these suits
press indirect claims against the Commonwealth means that they
somehow cease to also press direct claims against third parties.
It is true that the confirmed Commonwealth Plan's
prohibition against asserting claims against Commonwealth
"employees" and "officials" does not specify whether it applies
only to official-capacity suits or also to personal-capacity
suits. Conf. Order. ¶ 56(b). And without other textual or
interpretive guidance, that lack of specificity might have led, as
the Board claims it does, to the conclusion that all suits against
employees and officials, regardless of capacity, are discharged.
But three countervailing considerations point us in the other
direction.
First, these personal-capacity claims are precisely the
types of claims that circuit precedent establishes would require
a third-party release to discharge. Second, the Supreme Court, in
a post-Salgado decision, has emphasized that, in the analogous
context of corporate bankruptcy, releasing claims against third

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parties involves exercising a "radically different power" than
releasing claims against the debtor -- a power with which
bankruptcy courts are "not endow[ed]." Harrington v. Purdue Pharma
L.P., 603 U.S. 204, 218, 220–21 (2024) (quotation marks omitted).
And finally, we are mindful that, when concluding that the
confirmed Commonwealth Plan does not discharge personal-capacity
claims, the Title III court was interpreting its own Confirmation
Order, and its conclusions are therefore entitled to deference.
See Brown v. Harrington (In re Brown), 55 F.4th 945, 950 (1st Cir.
2022). We explain these considerations in turn.
a.
We first explain why discharging these personal-capacity
claims would amount to a non-consensual third-party release.8
"A non-consensual third-party release is the
'involuntary extinguishment of a non-debtor, third-party's claim
against another non-debtor, third-party.'" Fin. Oversight & Mgmt.
Bd. for P.R. v. Cooperativa de Ahorro y Credito Abraham Rosa (In
re Fin. Oversight & Mgmt. Bd. for P.R.), 79 F.4th 95, 114 (1st
Cir. 2023) (quoting Eamonn O'Hagan, On a "Related" Point:
Rethinking Whether Bankruptcy Courts Can "Order" the Involuntary
8 The Board, in addition to conceding that the Commonwealth
Plan does not contain third-party releases, also does not argue
that appellees otherwise consented to having their claims against
these defendants in their personal capacities released. Any such
release would therefore be a non-consensual one.

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Release of Non-Debtor, Third-Party Claims, 23 Am. Bankr. Inst. L.
Rev. 531, 531 (2015)). Such releases prevent nondebtors (such as
appellees here) from "prosecuting claims against other
nondebtors," "primarily individuals associated with the debtors."
Id. at 115 (quoting Elizabeth D. Lauzon, Annotation, Validity of
Non-Debtor Releases in Bankruptcy Restructuring Plans, 18 A.L.R.
Fed. 3d Art. 2 § 2 (2016)).
In Cooperativa, we had occasion to clarify the nature of
third-party releases and provided the following as an example of
such a release:
For example, sometimes a debtor corporation's
reorganization plan may include language
releasing that corporation's non-debtor
directors from liability to the corporation's
creditors (or to non-creditor third parties)
for claims arising from their management of
the corporation, because that liability could
otherwise adversely impact the estate and
threaten the distribution of assets as set out
in the plan (if, say, the debtor-corporation
would be required to indemnify its directors
against such claims).
Id. This example is a near point-for-point match for this case.
If releasing claims against a debtor-corporation's directors in
the face of a mandatory indemnification scheme amounts to a third-
party release, then so too must releasing claims against a
governmental debtor's officers in the face of a permissive
indemnification scheme like Law 9. And since the parties and the
Title III court all agree that the confirmed Commonwealth Plan

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does not contain non-consensual third-party releases, that Plan
cannot release these personal-capacity claims against Commonwealth
employees and officials.
b.
Nor is it clear, under recent Supreme Court precedent,
whether the Title III court could have approved the Commonwealth
Plan if it did include non-consensual third-party releases.
In the time between our decision in Salgado and the
Title III court's decision in appellees' case, the Supreme Court
issued Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024). In
Purdue, the Court confronted the question of whether a bankruptcy
court in Chapter 11 proceedings could release claims against the
owners of a debtor-corporation (who had not themselves filed for
bankruptcy) without the consent of those holding such claims. Id.
at 209, 211–12, 215.
The Court held that the bankruptcy court could not. Id.
at 227. It characterized the "power to discharge the debts
of . . . nondebtor[s]," like the corporation's owners, "without
the consent of affected nondebtor claimants" as a "'radically
different' power" than discharging the debts of the debtor. Id.
at 218 (quoting Epic Sys. Corp. v. Lewis, 584 U.S. 497, 513
(2018)). And the Court concluded that "a bankruptcy court's powers
are not limitless and do not endow it with the power to extinguish
without their consent claims held by nondebtors . . . against

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other nondebtors." Id. at 220–21. It is true that Purdue
interpreted the Bankruptcy Code and that, while PROMESA
incorporates many provisions of that Code, it also has many
differences. That being said, the Board identifies no relevant
provision of PROMESA granting discharge powers to the Title III
court greater than those granted to bankruptcy courts under the
Bankruptcy Code. So the Purdue Court's discussion of the limits
of a bankruptcy court's power to non-consensually extinguish
claims held by nondebtors against nondebtors at the very least
colors our reading of the discharge terms in this case. Cf. Cuevas
v. United States, 778 F.3d 267, 272–73 (1st Cir. 2015) ("[F]ederal
appellate courts are bound by the Supreme Court's considered dicta
almost as firmly as by the Court's outright holdings, particularly
when, as here, a dictum is of recent vintage and not enfeebled by
any subsequent statement." (quoting McCoy v. Mass. Inst. of Tech.,
950 F.2d 13, 19 (1st Cir. 1991))).
The Supreme Court's treatment of derivative claims
points in the same direction. See Purdue, 603 U.S. at 219–20.
Such claims, although asserted by third-party plaintiffs against
other third parties, can nevertheless be settled in bankruptcy
proceedings. Id. at 219; id. at 261 (Kavanaugh, J., dissenting).
The Purdue dissent argued that settling such claims extinguishes
the named plaintiffs' derivative claims without their
consent -- and thus suggests a more expansive view of a bankruptcy

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court's power to extinguish third-party claims. Id. at 261
(Kavanaugh, J., dissenting). The majority dismissed this argument
as containing a "glaring flaw" -- "[i]n a derivative action, the
named plaintiff is only a nominal plaintiff. The substantive claim
belongs to the corporation." Id. at 219 (majority opinion)
(quotation marks omitted). And that is precisely "why a bankruptcy
court may resolve derivative claims": "because those claims belong
to the debtor's estate." Id.
The Court's distinction between derivative claims
nominally held by third parties but substantively belonging to a
debtor-corporation and claims that truly belong to third parties
is analogous to the distinction between official-capacity and
personal-capacity suits against government officials. Official-
capacity suits are "only nominally against the official and in
fact [are] against the official's office and thus the sovereign
itself." Lewis v. Clarke, 581 U.S. 155, 162 (2017). In personal-
capacity suits, in contrast, "the real party in interest is the
individual, not the sovereign," id. at 163, and any ensuing
judgment is "against the individual defendant, rather than against
the entity that employs him," Kentucky v. Graham, 473 U.S. 159,
167–68 (1985).
In sum, the Purdue Court, interpretating the Bankruptcy
Code, distinguished between (1) claims nominally held by third
parties, which can be settled in the ordinary course of bankruptcy

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proceedings because they substantively belong to the debtor, and
(2) claims truly belonging to third parties, which cannot be so
resolved.9 Along similar lines, we now distinguish, in the context
of Title III proceedings, between discharging (1) official-
capacity claims, which are only nominally against third parties;
and (2) personal-capacity claims, in which the named nondebtor
defendant is the true party in interest. Discharging the former
is akin to the rather prosaic discharge of a claim against the
debtor -- while discharging the latter would represent at best a
radical exercise untethered from any obvious source of authority.
c.
We turn finally to the deference due to the Title III
court's determination that the confirmed Commonwealth Plan does
not release personal-capacity claims. Reaching that decision
required the Title III court to "interpret[] its own order of
confirmation." Monarch Life Ins. Co. v. Ropes & Gray, 65 F.3d
973, 983 (1st Cir. 1995). As we have observed in the bankruptcy
context, "[e]ven though our interpretation of the confirmation
order essentially presents a question of law," which usually
engenders de novo review, "customary appellate deference is
appropriate in these circumstances." Id.; see also Brown, 55 F.4th
9 The Purdue Court held open the possibility that such claims
could be discharged through a consensual third-party release, 603
U.S. at 226, but there is no such consensual release at issue here.
See supra note 8.

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at 950 ("[W]e owe deference to the Bankruptcy Court's
interpretation of its own order . . . ." (citing Monarch Life, 65
F.3d at 983 & n.12)); La Liga de Ciudades de P.R. v. Fin. Oversight
& Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R.),
110 F.4th 295, 321 (1st Cir. 2024) ("A court asked to construe the
scope and meaning of its own order is no doubt a persuasive
authority."); Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151
n.4 (2009) (noting that "[n]umerous Courts of Appeals have held
that a bankruptcy court's interpretation of its own confirmation
order is entitled to substantial deference" but finding it
unnecessary to "determine the proper standard of review" for such
an interpretation).
Notably, it is only in the Title III court's own
Confirmation Order -- the document to which such deference
extends -- that the language regarding "employees" and "officials"
appears. The Title III court held that this language (and the use
of the term "indirectly"), rather than evincing an intent to
discharge personal-capacity suits, simply "recognize[s] that the
effect of the discharge cannot be circumvented by the legal fiction
of official capacity lawsuits." In re Fin. Oversight & Mgmt. Bd.,
802 F. Supp. 3d at 361 n.10. The Title III court, which "was
directly engaged in the give-and-take of the confirmation
proceedings," Monarch Life, 65 F.3d at 983, undoubtedly had a

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strong vantage point from which to discern which claims the
confirmed Commonwealth Plan sought to discharge.
The Board nevertheless faults the Title III court's
interpretation for, in the Board's view, rendering the terms
"employees" and "officials" superfluous (insofar as they mean the
same thing as "indirectly") and adding language to the confirmed
Commonwealth Plan that limits its reach to only official-capacity
suits. But the court's interpretation does not rely on adding
language, since the confirmed Commonwealth Plan already explicitly
states that it does not include third-party releases -- and the
Board's surplusage argument, whatever its merits in a vacuum,
cannot override that plain text. Ultimately, the Board's
criticisms are insufficiently persuasive to overcome the deference
due to the Title III court's interpretation of its own Confirmation
Order. Nor do those criticisms sufficiently undermine our own
conclusion that discharging personal-capacity claims would
constitute a non-consensual third-party release, thereby running
afoul of the Plan's plain language and diverging from the Supreme
Court's reasoning in Purdue.
In sum, we are persuaded by the Title III court's
interpretation of its own order, particularly where our own
analysis points to the same result.

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IV.
For the foregoing reasons, we affirm the decision of the
Title III court in full.

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