Schiff v. Internal Revenue Services et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
PETER DAVID SCHIFF,
Plaintiff,
v.
INTERNAL REVENUE SERVICE, et al.,
Defendants.
CIVIL NO.: 24-1511 (CVR)
REPORT AND RECOMMENDATION
I. 	PROCEDURAL B ACKGROUND
On June 5, 2025, plaintiff Peter David Schiff (“Plaintiff”) filed a Second Amended
Complaint (the “complaint”), alleging various claims against the Office of the Commissioner of
Financial Institutions of Puerto Rico (“OCIF” as per its Spanish acronym), Natalia Zequeira Díaz
(“Commissioner Zequeira Díaz”) in her individual and official capacity as an OCIF Commissioner,
and Wigberto Lugo Mender (“Mr. Lugo”) in his official capacity an OCIF Trustee (collectively, the
“Defendants”), among others. ECF No. 121. Specifically, Plaintiff brings claims against Defendants
under 42 U.S.C. § 1983 (“Section 1983”), 42 U.S.C. § 1985(3) (“Section 1985(3)”), and an
independent claim under Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics,
403 U.S. 388 (1971) (“Bivens”), and claims for tortious interference with business relations, and
defamation under Article 1536 of the Puerto Rico Civil Code of 2020, 31 L.P.R.A. § 10801.1 Id. at
4-6.
1 In the alternative of the Bivens claim, Plaintiff also brings a claim for violation of his due process rights and unlawful
seizure of property under the Fifth Amendment. ECF No. 121 at 6.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 1 of 33

2
On July 30, 2025, defendant Mr. Lugo filed a motion to dismiss Plaintiff’s complaint
pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). ECF No. 164. On August 13,
2025, defendants OCIF and Commissioner Zequeira Díaz filed a motion to dismiss Plaintiff’s
complaint on the same grounds. ECF No. 195. Plaintiff responded to both motions to dismiss. ECF
Nos. 181, 209. OCIF, Commissioner Zequeira Díaz, and Mr. Lugo replied. ECF Nos. 226, 227.
These motions to dismiss share common issues; thus, this Report and Recommendation addresses
both. For the reasons that follow, it is recommended that Defendants’ motions to dismiss (ECF Nos.
164, 195) be GRANTED.
II. 	S UMMARY OF ALLEGATIONS OF THE COMPLAINT
Plaintiff owned a financial institution called Euro Pacific International Bank ("the Bank").
ECF No. 121 at 3, ¶ 1. The Bank was subject to scrutiny by the Internal Revenue Service (“IRS”)
and OCIF as part of a joint tax enforcement investigation called "Operation Atlantis" conducted by
the Joint Chiefs of Global Tax Enforcement (known as “J5”). Id. J5 combats transnational tax crime
through gathering information, sharing intelligence, conducting operations, and building the
capacity of tax crime enforcement. ECF No. 10 at ¶ 2(b)(viii). The J5 consists of five individual
members, all named defendants in this case: the IRS, Mr. Will Day, Mr. Eric Ferron, Mr. Niels
Obbink, and Mr. Simon York (the “J5 Defendants”).2 Id. at 3.
“Operation Atlantis” was initiated when Plaintiff arranged for the sale of the Bank's stock to
a company called Qenta for $17.5 million. ECF No. 121 at ¶ 3. OCIF blocked the sale on May 16,
2022, at the request of the J5 Defendants. Id. Instead, OCIF approved an asset sale to Qenta for
$1.25 million after the Bank entered receivership. Id. Plaintiff’s offer to inject $7 million in capital
2 This allegation and that of the previous sentence do not appear in the complaint but rather appear in the First
Amended Complaint. ECF No. 10. They are provided as context for the reader and are not essential to the conclusion
of this Report and Recommendation. However, nothing in the Motions to Dismiss or related filings suggest that the
role and membership of the J5 is contested.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 2 of 33

3
was rejected by the OCIF Commissioner, who assured Plaintiff that the Bank’s capital level, though
below the statutory required minimum, was sufficient for the bank to operate prior to the completion
of the sale to Qenta. Id. As of June 5, 2025, OCIF’s appointed Trustee had not completed the Bank’s
liquidation. Id. at 5.
On June 30, 2022, Mr. Jim Lee, at the time the IRS Chief of Criminal Investigations, made
statements during a press conference in Puerto Rico to announce the investigation into the Bank. Id.
¶ 2; Id. at 5. All J5 Defendants and OCIF representatives were present. Id. In this press conference,
it was implied that Plaintiff was involved in illegal tax evasion and money laundering. Id. Plaintiff
found out in April of 2024, after receiving information from the IRS, that the J5 Defendants agreed
to leak confidential investigation information to the media, specifically to defendant reporters Mr.
Matthew Goldstein, Ms. Charlotte Grieve, and Mr. Nick McKenzie, who then disseminated the
allegations of tax evasion and money laundering regarding Plaintiff and the Bank, despite knowing
these claims were unsubstantiated. Id. at ¶¶ 5-6. As result of these false statements and as result of
the delay in completing the Bank’s liquidation, Plaintiff's reputation was damaged, and Plaintiff
suffered significant financial harm. Id. at ¶ 3; Id. at 5-6.
III. 	ANALYSIS
Plaintiff’s complaint includes claims against OCIF, Commissioner Zequeira Díaz in both
her official and personal capacity, and Mr. Lugo in his official capacity. ECF No. 121 at 4-6.
Specifically, Plaintiff argues that Defendants violated his Fourth and Fifth Amendment rights and
claims damages under Section 1983, conspired to violate his civil rights and claims damages under
Section 1985(3), that Defendants unlawfully seized his property in violation of his Fifth Amendment
right under Bivens, tortiously interfered with Plaintiff’s business relations, and for defamation. Id.
Defendants’ advance several arguments in favor of dismissal under Rules 12(b)(1) and 12(b)(6).
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 3 of 33

4
The Court first addresses Defendants’ Rule 12(b)(1) arguments that Defendants are immune from
suit under the Eleventh Amendment. After analyzing whether the Court has subject matter
jurisdiction, Defendants’ remaining arguments for dismissal under Rule 12(b)(6) for failure to state
sufficient facts upon which relief can be granted are addressed.3
A. 12(b)(1) Legal Standard
Pursuant to Federal Rule of Civil Procedure 12(b)(1) (“Rule 12(b)(1)”), a defendant may
move to dismiss an action for lack of subject matter jurisdiction. “As courts of limited jurisdiction,
federal courts have the duty to construe their jurisdictional grants narrowly.” Fina Air, Inc. v. United
States, 555 F. Supp. 2d 321, 323 (D.P.R. 2008) (citing Alicea Rivera v. SIMED, 12 F. Supp. 2d 243,
245 (D.P.R. 1998)). Since federal courts have limited jurisdiction, the party asserting jurisdiction
has the burden of demonstrating the existence of federal jurisdiction. See Murphy v. United States,
45 F. 3d 520, 522 (1st Cir. 1995); Droz-Serrano v. Caribbean Records Inc., 270 F. Supp. 2d 217
(D.P.R. 2003).
Challenges to subject matter jurisdiction through a Rule 12(b)(1) motion may constitute
either a facial or factual challenge. Valentín v. Hospital Bella Vista, 254 F.3d 358, 363 (1st Cir.
2001); Mercado Arocho v. United States, 455 F. Supp. 2d 15, 18 (D.P.R. 2006); Rivera de León
v. Maxon Engineering Servs., Inc., 283 F. Supp. 2d 550, 554 (D.P.R. 2003). To decide whether
a 12(b)(1) motion is a facial or factual challenge, a court must determine whether the motion
disputes the complaint's allegations regarding subject matter jurisdiction. Torres-Negrón v. J & N
Records, LLC, 504 F.3d 151, 162 fn.8 (1st Cir. 2007). If the 12(b)(1) motion does not dispute subject
3 In addition to their sovereign immunity arguments, Defendants argue that Plaintiff waived all related claims when he
executed a Consent Order whereby all regulatory matters were resolved, that Plaintiff’s claims are untimely, as the one-
year statute of limitations for actions under all three under 42 U.S.C. §§ 1983, 1985(3), and Bivens has expired, and
lastly that Plaintiff’s claims should be dismissed under Rule 12(b)(6) for failure to state a claim. See generally ECF Nos.
164, 195. OCIF and the Commissioner also move to dismiss for lack of standing and on abstention grounds. ECF No.
195 at 21-23, 31-34.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 4 of 33

5
matter allegations, then it challenges only the facial sufficiency of the complaint. Id. If the 12(b)(1)
motion disputes the subject matter allegations, then it challenges the factual basis for subject matter
jurisdiction. Id.
Under a facial challenge, the moving party challenges jurisdiction based on the allegations
in the complaint. See Valentín, 254 F.3d at 363; Mercado Arocho, 455 F. Supp. 2d at 18; Rivera de
León, 283 F. Supp. 2d at 554. Thus, “the court must consider all the allegations in the complaint as
true, and will not look beyond the face of the complaint to determine jurisdiction.” Mercado Arocho,
455 F. Supp. 2d at 18. A facial attack only requires a court to examine the complaint and determine
whether the plaintiff “has sufficiently alleged a basis of subject matter jurisdiction.” Torres-Negrón,
504 F.3d at 162 (quoting Scarfo v. Ginsburg, 175 F.3d 957, 960 (11th Cir. 1999)); see, e.g., Fina
Air Inc., 555 F. Supp. 2d at 325–28 (examining a facial attack and applying the standard articulated
in Torres-Negrón).
On the other hand, under a factual challenge, “the allegations have no presumptive
truthfulness, and the court ... has discretion to allow affidavits, documents, and even a limited
evidentiary hearing to resolve disputed jurisdictional facts.” Mercado Arocho, 455 F. Supp. 2d at
18 (citations omitted). The analysis changes depending on whether the challenged facts would also
decide issues relating to the merits of the case. Torres-Negrón, 504 F.3d at 163. If the challenged
facts do involve the merits of the case, the court must use a summary judgment standard and dismiss
“‘only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail
as a matter of law.’” Id. (quoting Trentacosta v. Frontier Pac. Aircraft Indus., Inc., 813 F.2d 1553,
1558 (9th Cir. 1987)). If the challenged facts do not involve the merits of the case, then the court is
free to consider evidence and decide the question of its subject matter jurisdiction over the case. Id.
“When a court is confronted with motions to dismiss under both Rules 12(b)(1) and 12(b)(6),
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 5 of 33

6
it ordinarily ought to decide the former before broaching the latter.” Deniz v. Municipality of
Guaynabo, 285 F.3d 142, 149 (1st Cir. 2002); see also, Dynamic Image Technologies Inc. v. U.S.,
221 F.3d 34, 37 (1st Cir. 2000) (as general matter, courts should give Rule 12(b)(1) motions
precedence); Bell v. Hood, 327 U.S. 678, 682 (1946) (“Whether the complaint states a cause of
action on which relief could be granted is a question of law [which] must be decided after and not
before the court has assumed jurisdiction over the controversy.”).
B. Eleventh Amendment Immunity
Section 1983 provides that:
Every person who, under color of any statute, ordinance, regulation, custom,
or usage, of any State or Territory ... subjects, or causes to be subjected, any
citizen of the United States or other person within the jurisdiction thereof to
the deprivation of any rights, privileges, or immunities secured by the
Constitution and laws, shall be liable to the party injured in an action at law,
suit in equity, or other proper proceeding for redress.
42 U.S.C. § 1983. As such, Section 1983 creates “a private right of action for violations of federally
protected rights.” Ondina-Gordo v. Banco Santander, S.A., 542 F. Supp. 3d 129, 131 (D.P.R. 2021)
(quoting Marrero-Gutiérrez v. Molina, 491 F.3d 1, 5 (1st Cir. 2007)). Section 1983 does not itself
establish any substantive rights “but provides a venue for vindicating federal rights elsewhere
conferred.” Marrero-Sáez v. Municipality of Aibonito, 668 F. Supp. 2d. 327, 332 (D.P.R. 2009)
(citing Graham v. M.S. Connor, 490 U.S. 386, 393-94 (1989)); see also Cruz–Erazo v. Rivera–
Montañez, 212 F.3d 617, 621 (1st Cir. 2000)).
Here, Plaintiff's Section 1983 claim is predicated on Defendants’ alleged deprivation of
Plaintiff’s property without due process, in violation of his Fourth and Fifth Amendment rights.
However, if Defendants enjoy immunity under the Eleventh Amendment, any liability under Section
1983 would be abrogated. “Congress, in passing § 1983, had no intention to disturb the States’
Eleventh Amendment immunity,” and thus, Section 1983 “does not provide a federal forum for
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 6 of 33

7
litigants who seek a remedy against a State for alleged deprivations of civil liberties.” Will v.
Michigan Dept. of State Police, 491 U.S. 58, 66 (1989). Moreover, “a state agency [with Eleventh
Amendment immunity] ... may [also not] be sued for damages in a section 1983 action.” Wang v.
N.H. Bd. of Registration in Med., 55 F.3d 698, 700 (1st Cir. 1995) (citing Johnson v. Rodríguez, 943
F.2d 104, 108 (1st Cir. 1991)); see also Negrón-Almeda v. Santiago, 528 F.3d 15, 19 (1st Cir.
2008) (“This is so because Section 1983 did not abrogate an unconsenting state's Eleventh
Amendment immunity from being sued in damages in federal court.”) (quoting Vicenty-Martell v.
Estado Libre Asociado De P.R., 48 F.Supp.2d 81, 92 (D.P.R. 1999)). The Court thus reviews
whether Defendants possess immunity under the Eleventh Amendment.
The Eleventh Amendment of the United States’ Constitution states: “[t]he Judicial power of
the United States shall not be construed to extend to any suit in law or equity, commenced or
prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects
of any Foreign State.” U.S. Const. Amend. XI. In other words, absent a specific exception such as
those outlined below, the state cannot be sued by a private party in federal court.4 See Puerto Rico
Aqueduct and Sewer Authority v. Metcalf & Eddy, Inc., 506 U.S. 139, 146 (1993). The state's
interests in asserting Eleventh Amendment immunity are to protect its public treasury and its dignity
as a sovereign in not being hauled into federal court. Fed. Mar. Comm'n v. S.C. State Ports
Auth., 535 U.S. 743, 760 (2002). “[T]he amendment's raiment unravels if any one of four
circumstances eventuates: a state may randomly consent to suit in a federal forum; a state may waive
4 The Commonwealth of Puerto Rico has expressly waived Puerto Rico's sovereign immunity and established liability
caps in certain circumstances. P.R. Laws Ann. tit. 32, § 3077. OCIF and Commissioner Zequeira Díaz argue that “Article
6(a) explicitly protects actions performed in accordance with the law, and Article 6(b) extends immunity to discretionary
functions, even in cases of alleged abuse of discretion.” ECF No. 195 at 7. However, this is not a case in which the
Commonwealth has waived immunity, as subsection (a) covers actions for damages up to the sum of $75,000, and
subsection (b) covers actions to recover real or personal property or an interest therein. Therefore, an extended analysis
is required.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 7 of 33

8
its own immunity by statute or the like; Congress may sometimes abrogate state immunity (so long
as it speaks clearly and acts in furtherance of particular powers); or under certain circumstances
other constitutional imperatives may take precedence over the Eleventh Amendment's federal-court
bar.” Metcalf & Eddy, Inc. v. Puerto Rico Aqueduct and Sewer Authority, 991 F.2d 935, 938 (1st
Cir. 1993).
The Commonwealth of Puerto Rico (the “Commonwealth”) qualifies as a state for Eleventh
Amendment purposes. See e.g. Borrás-Borrero v. Corporación del Fondo del Seguro del Estado,
958 F.3d 26, 33 (1st Cir. 2020). Moreover, “an administrative arm of the state is treated as the state
itself for the purpose of the Eleventh Amendment, and it thus shares the same immunity.” Vaquería
Tres Monjitas, Inc. v. Irizarry, 587 F.3d 464, 477 (1st Cir. 2009) (citing Hafer v. Melo, 502 U.S. 21,
25 (1991)); see also Rodríguez Velézquez v. Autoridad Metropolitana de Autobuses, 502 F.Supp.2d
200, 206 (D.P.R. 2007) (Eleventh Amendment immunity extends “to governmental entities which
are deemed an arm or alter ego of the state.”); Fresenius Medical Care Cardiovascular Resources,
Inc. v. Puerto Rico and Caribbean Cardiovascular Center Corp., 322 F.3d 56 (1st Cir. 2003).
1. 	Claims Against OCIF
OCIF asserts that it is immune from suit as an arm of the state. ECF No. 195 at 7-11.
However, it is the “entity asserting Eleventh Amendment immunity, [that] bears the burden of
showing it is an arm of the state.” Fresenius, 322 F.3d at 61. In determining whether an entity
satisfied its burden, courts examine the following:
whether the state has indicated an intention—either explicitly by statute or
implicitly through the structure of the entity—that the entity share the
state's sovereign immunity. If no explicit indication exists, the court must
consider the structural indicators of the state's intention. If these point in
different directions, the court must proceed to the second stage and consider
whether the state's treasury would be at risk in the event of an adverse
judgment.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 8 of 33

9
Irizarry-Mora v. Univ. of Puerto Rico, 647 F.3d 9, 12 (1st Cir. 2011) (quoting Redondo Constr.
Corp. v. P.R. Highway & Transp. Auth., 357 F.3d 124, 126 (1st Cir. 2004)) (citation omitted). The
first step “pays deference to the state's dignitary interest in extending or withholding Eleventh
Amendment 	immunity 	from 	an 	entity” 	by 	examining 	“how 	the 	state 	has 	structured 	the
entity.” Fresenius, 322 F.3d at 65. This examination requires consideration of a broad range of
structural indicators, which “include how state law characterizes the entity, the nature of the
functions performed by the entity, the entity's overall fiscal relationship to the Commonwealth (as
opposed to whether the Commonwealth is liable for any judgment in the particular case at hand),
and how much control the state exercises over the operations of the entity.” Grajales v. P.R. Ports
Authority, 831 F.3d 11, 18 (1st Cir. 2016) (citing Fresenius, 322 F.3d at 68). Therefore, we look to
the enabling act that creates OCIF, P.R. Laws Ann. tit. 7, § 2001 et seq., (the “Act”) for clues as to
the Commonwealth’s desire for OCIF to share in its sovereign immunity, keeping in mind that an
entity’s entitlement to immunity “poses an essentially functional inquiry, not easily amenable to
bright-line answers or mechanical solutions.” Metcalf & Eddy, Inc., 991 F.2d at 939.
a. 	The Commonwealth’s Characterization of OCIF
The Act’s statutory framework explicitly grants the Commissioner, as well as all its
personnel, immunity when acting in good faith:
No 	member, 	official, 	functionary 	or 	employee 	of 	the 	Board 	or 	the
Commissioner, or official, functionary or employee in the Office of the
Commissioner, shall be liable in a civil suit for damages, for any act or
omission in good faith, in the performance of the duties of his office.
P.R. Laws Ann. Tit. 7, § 2016. It is logical to assume that if the Act gives immunity to the officials,
it would extend the same to the office itself. However, the Act “does not by its terms structure
[OCIF] to be an arm of the [Commonwealth].” Fresenius, 322 F.3d at 68. “We thus need to
determine what signals the Act nevertheless sends.” Miya Water Projects Netherlands B.V. v.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 9 of 33

10
Financial Oversight and Management Board for Puerto Rico, 2023 WL 10554818, at *21 (D.P.R.
Dec. 12, 2023). We look first to Puerto Rico law’s characterization of OCIF. The statutory purpose
of OCIF is defined as such:
The Office of the Commissioner of Financial Institutions shall be deemed as an
agency of public law and order for the sole purpose that it may compile and verify
information that shall be obtained from and that shall be made available by the
traditional agencies of public law and order of the Government of Puerto Rico on the
criminal record of those persons of whom there is a need to evaluate said record for
the discharge of the duties imposed by this Act, and other acts and regulations. In
case that said information is in custody of state, federal or foreign agencies of public
law and order, the Office of the Commissioner of Financial Institutions shall also be
recognized as such by the Government of Puerto Rico before said agencies, so that
the information may 	be requested directly from the body in question. The
information obtained, through the inherent power herein granted shall be given by
the 	Office 	of 	the 	Commissioner 	of 	Financial 	Institutions 	that 	degree 	of
confidentiality given to said information by the investigative and public law and
order agency that has furnished the same.
P.R. Laws Ann. Tit. 7, § 2003. In other words, OCIF’s “primary responsibility is to supervise and
regulate Puerto Rico’s financial sector to ensure its safety and soundness, as well as to oversee a
strict adherence to all applicable laws and regulations.” de Pueyo v. RG Premier Bank of Puerto
Rico, 2013 WL 6097549, at *4 (D.P.R. Nov. 20, 2013); Bautista Cayman Asset Co. v. Centro
Cardiovascular de Manatí III, C.S.P., 2023 WL 11052520, at *3 (D.P.R. Apr. 12, 2024) (OCIF is
“the government agency charged with licensing mortgage servicers in Puerto Rico.”). This
description of OCIF’s function does point towards it being “a government-created entity that is
subject to gubernatorial control, exercises some governmental functions, and is charged with serving
the Commonwealth's general welfare.” Grajales, 831 F.3d at 23 (citing Royal Caribbean Corp. v.
Puerto Rico Ports Authority, 973 F.2d 8, 11–12 (1st Cir. 1992) (finding that a description of
promoting the “general welfare” and “increas[ing] commerce and prosperity…for the benefit of the
people of Puerto Rico” suggested that the entity at issue was an arm of the Commonwealth).
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 10 of 33

11
The context of OCIF’s creation provides some additional clues. OCIF was created after “the
government's supervisory structure and [ ] manpower” at the time was found to be insufficient to
handle Puerto Rico's economic development, which “increased the complexity of financial
businesses,” requiring the government to “upgrade its capacity to control it.” P.R. Laws Ann. Tit. 7,
at 2-3 (“Statement of Motives”). OCIF, thus, was bestowed with the “responsibility to ensure that
the interests of those who are tied to these industries, be they depositors, creditors, shareholders or
other types of associates, are protected.” Id. at 2. Accordingly, OCIF has “the function of regulating
the laws whose supervision has been turned over to it, to equip it with the needed agility and
flexibility to honor its commitments to everyone's satisfaction.” Id. at 3. This characterization of the
Act appears to signal that OCIF is intertwined with the Commonwealth.
The Act does not describe OCIF specifically as a separate and apart entity with its own legal
existence. Nor does the Act refer to OCIF as part of the government or as a government
instrumentality. See Puerto Rico Ports Authority v. Federal Maritime Com’n, 531 F.3d 868, 875
(D.C. App. 2008) (finding that references to “government instrumentality” or “government-
controlled corporation” made clear that the entity had not been established “as a local or non-
governmental entity” and “plainly demonstrate [ ] Puerto Rico's intent to create a governmental
instrumentality of the Commonwealth.”).The Act does, however, refer to OCIF in comparison to
other government agencies. P.R. Laws Ann. Tit. 7, § 2006 (“The Commissioner may fix for any
personnel that must have special competence and knowledge for the investigation of financial
institutions a salary higher than that earned by personnel on an equal or similar level in other
government agencies.”) (emphasis added). The language used in OCIF’s enabling act is very
different from the language typically used when an entity has been deemed to not be an arm of the
Commonwealth. See e.g., Granjales, 831 F.3d at 16 (the enabling act characterized the entity at
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 11 of 33

12
issue as a “public corporation” with a “legal existence and personality separate and apart from those
of the Government and any officials thereof…”) (citing P.R. Laws Ann. tit. 23 § 333(b)); Fresenius,
322 F.3d at 68 (the enabling act characterized the entity at issue as one “independent and separate
from any other agency or instrumentality of the Government of the Commonwealth of Puerto
Rico.”) (citing P.R. Laws Ann. tit 24 § 343a); Pastrana–Torres v. Corporación de P.R. para la
Difusión PÚBLICA, 460 F.3d 124, 126-27 (1st Cir. 2006) (finding that the enabling act’s reference
to the entity as a “public corporation” and “an instrumentality of the Commonwealth of Puerto Rico
... with a juridical personality that is independent and separate from any other entity, agency,
department or instrumentality of the Government of Puerto Rico” suggested that the public
corporation at issue was not an arm). Nevertheless, language like “government instrumentality”
should not be treated as “dispositive on arm-of-the-state questions,” and “we must read these
references in the context of the Act’s full characterization of [OCIF].” Grajales, 831 F.3d at 22
(quoting 	Pastrana-Torres, 	460 	F.3d 	at 	126 	fn. 	2) 	(citing 	Fresenius, 	322 	F.3d 	at 	68–
69; Royal Caribbean, 973 F.2d at 11–12; Metcalf & Eddy, 991 F.2d at 941–42). Thus, the Court
turns to the Act’s other structural indicators.
b. 	Functions Performed by OCIF
The next structural indicator is the nature of the functions performed by the entity. The
legislative intent of the Enabling Act makes it clear that OCIF was not created to have a commercial
function but a public function to promote the general welfare of the Commonwealth. See Royal
Caribbean, 973 F.2d at 12 (finding that public objectives to promote the general welfare and
increase commerce and prosperity make the entity’s activities more governmental and less
proprietary). However, entities have been found to be not immune despite similar statutory
authorities. See e.g., Durning, 950 F.2d at 1421 (Development Authority is not immune despite a
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 12 of 33

13
statutory purpose to redress “critical shortage of adequate housing” and “to promote economic
welfare”); Ainsworth, 818 F.2d at 1038 (Puerto Rico Tourism Company not necessarily immune
despite a statute declaring it an “instrumentality of the Government” with the purpose of
“promot[ing] tourism and overs[eeing] gambling”); Riefkohl v. Alvarado, 749 F.Supp. 374, 375
(D.P.R. 1990) (Puerto Rico Electric Power Authority not immune, despite statute declaring it a
“governmental instrumentality” with the purpose of “promot[ing] the general welfare and
increas[ing] commerce and prosperity”).
A closer look at the Act’s other provisions, however, show that OCIF’s operations are mostly
governmental, as opposed to proprietary. As previously outlined, OCIF was created to control and
supervise the financial institutions that operate and do business in the Commonwealth. P.R. Laws
Ann. Tit. 7, § 2003. In carrying out that purpose, OCIF both promulgates and enforces regulations,
issues administrative determinations, issues opinions, and grants permits authorized by law or
regulations Id. at §§ 2008, 2010. The Commissioner also “designate[s] an official of the Office of
the Commissioner to give support and advise the prosecutor of the Department of Justice who has
the task of prosecuting a criminal procedure for a violation of the laws, regulations or orders under
the administration of the Office of the Commissioner.” Id. at § 2010(a)(4). The Act also allows for
judicial review of resolutions and orders issued by the Commissioner in the Court of First Instance
of the Commonwealth of Puerto Rico, San Juan Part, after service of the Commissioner’s
reconsideration and final decision. Id. at § 2016. The Commissioner may issue cease and desist
orders and may “[r]esort to the Court of First Instance of Puerto Rico to request that any cease or
desist order issued by him is put into effect.” Id. at § 2010(a)(11). Furthermore, the Commissioner
may investigate “matters that affect any branch of the banking, financial and securities industry”
and in doing say he may “[t]ake oaths and statements, call witnesses, compel their attendance, hear
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 13 of 33

14
evidence and require the submission of books, papers, correspondence, notes, agreements, or other
documents or registers that the Commissioner may consider as relevant and substantial to the
investigation.” Id. at § 2010(a)(12)(i)-(ii). In the case of contempt or refusal to obey a summons
issued:
…the Court of First Instance by petition of the Commissioner may issue an
order requiring the person to appear before the Commissioner or the official
designated by him, to produce documentary evidence, or to furnish evidence
in connection with the matter in dispute or under investigation or study.
Noncompliance of the court’s order may be sanctioned by it as contempt of
court. The Court of First Instance shall give preference to the course and
dispatch of the Commissioner’s petition.
Id. at § 2010(a)(12)(iii). If complying with a summons or answering any dispute or investigation
exposes a person to potential removal or suspension from his employment, the Commissioner can
guarantee that “the information to be furnished shall not be used against him in any administrative
procedure,” and can even “arrange with the Secretary of Justice to grant civil or criminal immunity
when [the Commissioner’s] investigation requires the person to answer the questions or turn over
the evidence required by the Commissioner.” Id. at § 2010(a)(12)(iv). The Financial Board of OCIF
has the same rights related to investigations. Id. at § 2009a.
These operations are not proprietary; they are classic governmental agency functions. In P.R.
Ports Auth. v. M/V Manhattan Prince, the court found that the Puerto Rico Ports Authority’s
(“PRPA”) regulation of a certain class of ship pilots was one of PRPA’s governmental functions,
because although the PRPA had “the duty to examine the qualifications of a pilot before issuing a
license, it does not train pilots,” the PRPA had “no control over pilot ship assignments,” and finally,
the “[t]he PRPA derive[d] no revenue from the compulsory pilot system.” P.R. Ports Auth. v. M/V
Manhattan Prince, 897 F.2d 1, 12 (1st Cir. 1990). This is in contrast to the court’s finding in
Royal Caribbean, whereby the PRPA’s “dock-operating activities” were one of PRPA’s proprietary
functions. Royal Caribbean, 973 F.2d at 10 (describing “dock-operating activities” as one of
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 14 of 33

15
PRPA's proprietary functions). Cf., e.g., Ainsworth, 818 F.2d at 1038 (Puerto Rico Tourism
Company's “activities as a purchaser and supplier of slot machines are not alien to a proprietary
function”); Paul N. Howard Co. v. Puerto Rico Aqueduct Sewer Authority, 744 F.2d 880, 886 (1st
Cir. 1984) (government corporation “established to provide drinking water and sewage facilities ...
not normally immune”), cert. denied, 469 U.S. 1191 (1985); City of Long Beach v. American
President Lines, Ltd., 223 F.2d 853, 856 (9th Cir. 1955) (proprietary activity where government
maintained harbor and charged fees to users). Here, there is no proprietary activity. OCIF addresses
matters of statewide concern, and the state exercises centralized governmental control over the
entity. This factor weighs in favor of OCIF being an arm of the state.
c. 	Commonwealth 	of 	Puerto 	Rico’s 	Control 	over 	OCIF’s
Operations
The Act creates an advisory body to the OCIF, called the Financial Board (the “Board”),
which is composed of nine members representing the public sector, including the Commissioner. In
assessing a state’s control over an entity’s operations, courts have considered whether the
Commonwealth appoints members of the Board or can veto their actions, how enabling legislation
characterized the OCIF, “whether the [Board]’s functions are readily classifiable as state functions
or local or non-governmental functions,” and whether Puerto Rico officials may remove Board
members or monitor the Board's activities. Irizarry-Mora, 647 F.3d at 13 fn. 3; see also Fresenius,
322 F.3d at 71–72. Also relevant is whether the entity can sue and be sued, whether it makes its own
contracts, and whether it may acquire, use and dispose of property as it deems necessary to carry
out its activities. Royal Caribbean, 973 F.2d at 10-11. Here, OCIF is under the direction of
Commissioner Zequeira Díaz, who is appointed by the Governor of Puerto Rico with consent of the
Puerto Rico Senate. P.R. Laws Ann. Tit. 7, § 2005. The Commissioner “answer[s] directly to the
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 15 of 33

16
Governor,” and “[i]n the performance of [her] functions, the Commissioner shall answer directly to
the Secretary of the Treasury.” Id. Further, the members of the Board are appointed by the Governor:
the Secretary of the Treasury, who shall act as the Chairperson of the Board,
the Secretary of Economic Development and Commerce, the Secretary of
Consumer Affairs, the President of the Economic Development Bank for
Puerto Rico, the Chairperson of the Planning Board, the Executive Director
of the Puerto Rico Fiscal Agency and Financial Advisory Authority, the
Executive President of the Public Corporation for the Supervision and
Insurance of Cooperatives of Puerto Rico and the Insurance Commissioner.
Id. at § 2008. This is indicative of state control. See e.g., Univ. of R.I. v. A.W. Chesterton Co., 2 F.3d
1200, 1207 (1st Cir. 1993) (noting that appointment of ten of thirteen board members by the
governor with consent of Senate is “a legislative design most courts routinely view as evidence of
an entity's lack of independence from State control”). The Board plays a significant role in OCIF’s
functions, as the Board is responsible for “fixing, regulating, raising or lowering, by Regulations,
and for the necessary term, the interest rates and/or maximum fees applicable to certain financial
transactions within the framework of any sector, line or economic activity in the country not covered
by special statutes.” P.R. Laws Ann. Tit. 7, § 2009a. These functions are clearly classifiable as
governmental functions. Irizarry-Mora, 647 F.3d at 13 fn. 3; see also Fresenius, 322 F.3d at 71–72.
In addition to appointing the members of the Board, it appears that the Governor has control
over the removal of such members as well. When the Commissioner has “sufficient grounds to
believe that any member of the board of directors or officials of a financial institution supervised by
the Office of the Commissioner has committed a violation of any law,” or has “managed the affairs
of said business inadequately,” the Commissioner can “direct” that such member or official be
removed from office. P.R. Laws Ann. Tit. 7, § 2011. This language can be interpreted to mean that
the Commissioner removes such members. The Commissioner “answer[s] directly to the Governor,”
thus, the Commonwealth – and particularly the Governor of Puerto Rico – exercises a meaningful
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 16 of 33

17
degree of control and supervision over OCIF. Id. at § 2005. These elements are important as to the
issue of state control over an entity. Fresenius, 322 F.3d 56, 71–72.
Lastly, OCIF has the power to “[e]nter into contracts or agreements with persons or public
or private institutions to perform investigations, studies or any other analysis to implement the
purposes of this act.” P.R. Laws Ann. Tit. 7, § 2010(a)(5). The Commissioner may also “[g]rant
contracts or cooperative agreements with other jurisdictions to, among other things, perform joint
examinations 	and 	share 	confidential 	information 	compiled 	in 	said 	financial 	institution’s
examinations…” Id. at § 2010(a)(15)(i). The Act is not explicit as to whether OCIF can sue and be
sued; however, the Act does give the Commissioner the power to “[f]ile any legal remedies, actions,
or procedures necessary or convenient for the implementation of the purposes of this or any other
act or regulation…” Id. at § 2010(a)(4). The ability to sue and be sued and enter into contracts points
against immunity; however, this factor is not dispositive. See e.g., Culebras Enters. Corp. v.
Rios, 813 F.2d 506, 517 (1st Cir.1987) (Puerto Rico conservation authority is “alter ego”
notwithstanding its power to sue and be sued where the agency would not have the funds to satisfy
a judgment and that such would have to be satisfied from the general budget of Puerto
Rico); 	Kashani v. Purdue Univ., 813 F.2d 843, 846 (7th Cir.) (lack of other funding “ensures
ultimate fiscal reliance on state”). This takes us to the final factor, whether a judgment against OCIF
would be paid from the Commonwealth.
d. 	OCIF’s Fiscal Relationship to the Commonwealth
Overall, there are factors supporting immunity and factors mitigating against immunity.
However, “when there is ambiguity from the structure about whether an entity is an arm of the state,
the 	primary 	focus 	is 	on 	the 	risk 	to 	the 	state 	treasury.” Irizarry-Mora, 	647 	F.3d 	at
13 (citing Fresenius, 322 F.3d at 66). This factor is generally dispositive. Hess v. Port Auth. Trans-
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 17 of 33

18
Hudson Corp., 513 U.S. 30, 48–49 (1994). When assessing the risk to the state treasury, the
“dispositive question concerns the risk that the damages will be paid from the public treasury" and
"[t]his analysis focuses on whether the state has legally or practically obligated itself to pay the
entity's indebtedness" in the pending action.” Irizarry-Mora, 647 F.3d at 18 (citing Fresenius, 322
F.3d at 65, 68). If the state has obligated itself to pay, then the entity may claim sovereign immunity.
Id. However, Fresenius instructs us to look at the overall fiscal relationship and not only narrowly
at whether the Commonwealth would be liable for damages in this action. Fresenius, 322 F.3d at
62, fn. 5-6, 65 fn. 7, 68. In conducting this analysis, courts must consider:
[W]hether the agency has the funding power to enable it to satisfy judgments
without direct state participation or guarantees, whether and to what extent
the entity receives state funding and support (i.e., the “relative size” of the
Commonwealth's contribution to PRPA's budget, whether the state has
immunized itself from responsibility for the agency's acts or omissions, and
whether the Commonwealth bears legal liability for the entity's debts[.]
Grajales, 831 F.3d at 24 (internal citations omitted) (quotations omitted).
Here, it does not appear that OCIF “enjoy[s] a great deal of fiscal independence from the
Commonwealth.” Granjales, 831 F.3d at 16 (citing Royal Caribbean, 973 F.2d at 10–12). OCIF’s
operational funds are established in the annual Joint Resolution approved by the Puerto Rico
Legislature where the Commonwealth of Puerto Rico’s budget is established. Id. The Act outlines
the appropriation of funds, stating that:
(a) The funds of the “Fund for the Investigation and Examination of Financial
Institutions and Gambling Casinos”, created by Act No. 20, approved April
9, 	1976 	as 	amended, 	are 	hereby 	appropriated 	to 	the 	Office 	of 	the
Commissioner to carry out the purposes of this act. The appropriations
budgeted for the 1985-86 Fiscal Year are also transferred to the Bureaus of
Banks, and Financial Institutions and Securities.
(b) In subsequent years, the funds needed for the administration of this act
shall be consigned in the General Expense Budget for the Government of the
Commonwealth of Puerto Rico Joint Resolution.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 18 of 33

19
P.R. Laws Ann. Tit. 7, § 2018. Thus, virtually all of OCIF’s funds come from the Commonwealth.
This demonstrates fiscal entwinement or dependence. See Metcalf & Eddy, 991 F.2d at 940–41, fn.
5.
Further, the income generated by OCIF is directed by law to be used by other entities or for
other purposes, not to “pay the entity's indebtedness in the pending action.” Royal Caribbean, 973
F.2d at 10–12 (quoting P.R. Laws Ann. tit. 23 § 333(b)); Irizarry-Mora, 647 F.3d at 18. OCIF is
authorized to charge for certain services and impose fines. Id. at § 2010 and 2020. Article 21(c) of
the Act, however, specifically provides that all penalties imposed by OCIF for violations of the
enabling act and regulations are to be deposited into a special fund called “Fund for Consumer
Education in Financial Matters and Training of the Personnel of the Office of the Commissioner of
Financial Institutions” and used for the purposes the fund was created, i.e., “in order to provide
financial assistance geared toward the education of the general public in financial matters and to
train the personnel of the Office of the Commissioner of Financial Institutions for the purposes
provided herein.” Id. at § 2021. On the other hand, the fees that are to be deposited into the Fund
for the Investigation and Examination of Financial Institutions and gaming casinos are “shared with
other supervisory agencies of financial institutions or with other organizations affiliated to or
representing one or more supervisory agencies…” Id. at § 2021(a)(19)(A) and (B). Therefore, the
Act does not indicate that the revenue it raises is sufficient to cover litigation expenses, as it has a
defined purpose for its use.
Accordingly, 	“virtually 	all 	the 	funds 	needed 	for 	[its] 	operation” 	come 	from 	the
Commonwealth according to Section 18 of the Act. Fresenius, 322 F.3d at 72; see also In re San
Juan Dupont Plaza Hotel Fire Litig., 888 F.2d 940, 943–44 (1st Cir. 1989) (noting that, according
to the record, “roughly 70-75 percent of the funds available to the [entity at issue] are provided by
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 19 of 33

20
taxpayers of the Commonwealth”); Irizarry–Mora v. Univ. of P.R., 647 F.3d 9, 16 (1st Cir.
2011) (finding entity at issue to be an arm of the Commonwealth where “more than sixty percent of
[the entity's] funding c[ame] from the government” and where the general mission of the entity was
such that the Commonwealth would do what was necessary to “ensure the [entity's] financial
viability”). Seeing as OCIF’s budget is established and approved by the Commonwealth and the
state has “practically obligated itself to pay [OCIF’s] indebtedness” in any pending legal action,
OCIF may claim sovereign immunity. Grajales, 831 F.3d at 18. Accordingly, all claims for
monetary damages against OCIF are therefore barred.
2. 	Claims Against Commissioner Zequeira Díaz and Mr. Lugo in Their
Official Capacity
Plaintiff also advances claims against Commissioner Zequeira Díaz and Mr. Lugo in their
official capacities as Commissioner and Trustee/Receiver of OCIF. Specifically, Plaintiff challenges
Commissioner Zequeira Díaz’s rejection of a stock sale, her initiation of the liquidation of the Bank,
and her participation in a press conference to notify the public of her official actions against the
Bank. ECF No. 121 at ¶¶ 2-3. However, these actions were taken as part of Commissioner Zequeira
Díaz’s statutory authority as Commissioner to “maintain adequate insurance against all damages
that the Commissioner deems necessary and convenient for the protection of the depositors and the
public,” “controlling and supervising the financial institutions that operate or do business in the
Commonwealth of Puerto Rico,” and “contributing to the orderly development of the financial
institutions.” See P.R. Laws Ann. tit. 7, §§ 2003, 2005, 2009. Personal-capacity suits seek to impose
personal liability upon a government official for actions he takes under color of state law. Kentucky
v. Graham, 473 U.S. 159, 165 (1985). However, official-capacity suits “generally represent only
another way of pleading an action against an entity of which an officer is an agent.” Id. Accordingly,
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 20 of 33

21
the Eleventh Amendment bars Section 1983 suits for monetary damages against states and
individuals acting in their official capacity. See e.g., Johnson v. Rodriguez, 943 F.2d 104, 108 (1st
Cir. 1991); Will v. Michigan Dep't of State Police, 491 U.S. 58, 71 (1989) (“We hold that neither a
State nor its officials acting in their official capacities are ‘persons’ under § 1983.”). The same is
true for Section 1985 claims. See Kifor v. Massachusetts, 2023 WL 4402669, at *1 (1st Cir. 2023).
Thus, Eleventh Amendment immunity extends to Commissioner Zequeira as a state official acting
in her official capacity.
The claims against Mr. Lugo also arise from actions taken in his official capacity as
Trustee/Receiver of OCIF, that is, his investigation into the Bank’s operations and administration
of the Bank’s liquidation. ECF No. 164 at 11. Mr. Lugo’s administration and managing of the
liquidation process is explicitly part of OCIF’s regulatory powers:
If as a result of an audit, examination or inspection, or of a report submitted
by an examiner, it is shown that a financial institution lacks a solid financial
and economic status or that it is operated or administered in such a way that
the general public or persons and entities that have funds or shares in its
custody are in danger of being defrauded, and in absence of a specific
provision in the law to regulate the financial institution in question and which
likewise empowers it, the Commissioner may assume the direction and
administration of the financial institution, and promptly appoint a trustee
who, in the case of insured financial institutions can be its insuring entity.
The Commissioner shall hold a hearing before issuing an order to place a
financial institution under his/her direction, or that of a trustee. Nevertheless,
the Commissioner may issue a provisional order appointing a receiver
without having to hold a hearing, when in his/her judgment, the financial
institution’s status is of such a nature that it is causing or may cause
irreparable damage to its interests, or those of the persons and entities with
funds or assets in the institution.
….
Said receivership shall terminate upon the total liquidation of the financial
institution, if it were necessary, or when the operations thereof, as certified
by the trustee in the Commissioner’s judgment, allow the return of the
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 21 of 33

22
administration of the institution to the duly elected and appointed officers and
officials, under the circumstances stipulated by the Commissioner.5
Id. at § 2010(b). As such, Mr. Lugo is also immune from the claims against him in his official
capacity6.
In sum, it is recommended that Defendants’ motion to dismiss all of Plaintiff’s claims for
monetary damages under Section 1983 against Defendants, in their official capacities, on Eleventh
Amendment grounds be GRANTED. Accordingly, Plaintiff’s Section 1983 claims for monetary
relief against Defendants in their official capacity should be DISMISSED WITH PREJUDICE.
C. Waiver of Claims
In the alternative, if the Court finds that Defendants do not enjoy sovereign immunity under
the Eleventh Amendment, OCIF and Commissioner Zequeira Díaz argue that the claims should still
be dismissed as Plaintiff “explicitly waived and released all claims against OCIF and Commissioner
Zequeira Díaz” when he executed a Consent Order specifically barring Plaintiff from “asserting
claims related to the investigation, regulatory actions, and liquidation” of the Bank. ECF No. 195 at
14; ECF No. 195-1. Plaintiff argues that the waiver applied only to the bank as a corporate entity
and its directors in their official capacity, not to the Plaintiff’s personal claims as an individual and
5 The complaint contends that the Bank had sufficient finances to operate through its sale to Qenta. ECF No. 121 at ¶
3. However, the complaint also references the fact that the Bank was below the statutory minimum capital level. Id.
Taking the allegations in the complaint as true, the actions of Mr. Lugo were within the regulatory powers of OCIF
since the Bank “lack[ed] a solid financial and economic status”. 7 L.P.R.A. § 2010(b).
6 Plaintiff argues that, even as his claims for monetary damages are barred, pursuant to Ex Parte Young he may still
claim for injunctive relief. The doctrine of Ex Parte Young permits federal courts to enjoin state officials from
prospectively violating the constitution. Ex Parte Young, 209 U.S. 123 (1908). Plaintiff contends that as the liquidation
of the Bank is ongoing, an injunction could cure the ongoing constitutional violation. This contention is without merit.
Schiff runs afoul of “the commonsense principle that a litigant cannot freely reinvent his case as he goes along.” Negrón-
Almeda v. Santiago, 528 F.3d 15, 24 (1st Cir, 2008) (holding that a plaintiff bringing a Section 1983 action cannot later
argue that his complaint held a “implied cause of action under Ex Parte Young”). Since the complaint fails to make a
claim for injunctive relief Plaintiff cannot properly invoke the Ex Parte Young doctrine now. Similarly, Plaintiff’s
argument that Commissioner Zequeira Díaz and Mr. Lugo acted in an ultra vires manner is likewise tardy. There are no
facts in the complaint suggesting that the Defendants acted in an ultra vires manner or that they served their personal
interest over that of OCIF. See Martin v. Wood, 772 F.3d 192, 196 (4th Cir. 2014). A fair reading of the complaint
indicates that the suit is one against OCIF, an arm of Puerto Rico for which monetary damages, the only damages
specifically requested in the complaint, are barred.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 22 of 33

23
shareholder.7 ECF No. 209 at 3-4. However, the Consent Order does not support Plaintiff’s
argument. The Consent Order reads in relevant part:
Euro Pacific [the Bank], its directors and officers, do hereby release and
forever 	discharge 	the 	OCFI 	[OCIF’s 	English-language 	acronym], 	its
attorneys, insurers, assignees, transferors, transferees, principals, partners,
officers, 	directors, 	employees, 	agents 	servants, 	subsidiaries, 	parent
corporations, affiliates, successors, stockholders, agents and representatives,
including the Trustee (the “Releasee(s)”), from any and all claims, demands,
damages, debts, liabilities, obligations, contracts agreements, causes of
action, suits, of whatever nature, character or description, that Euro Pacific
may have or may hereafter have or claim to have against each other
Releasee(s) arising out of or related to the facts or allegations made in any of
the papers or pleadings filed in the Complaint and any conduct, including
actions and omissions, to enforce the Complaint.[8]
ECF No. 195-1 at 10, ¶ 18. Plaintiff is a director of the Bank. ECF No. 209 at 3. See also Arturet-
Velez v. R.J. Reynolds Tobacco Co., 429 F.3d 10, 13 n. 2 (1st Cir. 2005) (noting that, when
considering a motion to dismiss, concessions made in opposition to said motion are proper for a
Court to consider). Thus, by the clear terms of the clause, he released and discharged OCIF, the
Commissioner as an officer of OCIF and Mr. Lugo as Trustee. ECF No. 195-1 at 12. Moreover,
Plaintiff’s allegations and causes of action in the complaint arise out of the investigation into and
liquidation of the Bank. See generally ECF No. 121. Because Plaintiff relinquished all rights to
pursue legal actions, including damages, causes of action of any nature, including actions and
omissions arising out of the liquidation of the Bank, the Court lacks subject matter jurisdiction on
these grounds in addition to sovereign immunity grounds.
7 Plaintiff also argues that he signed the order under duress due “to OCIF’s actions, the financial collapse of his bank,
and the defamatory press conference.” ECF No. 209 at 3. In other words, Plaintiff argues that his agreement to the
Consent Order was procured through misrepresentation and concealment by Defendants. Id However, Plaintiff’s
complaint does not allege duress in executing the Consent Agreement, nor does it provide any additional information
or evidence to prove undue influence. See generally ECF No. 121. Furthermore, the Consent Order clearly states that
Plaintiff discussed the same with his attorneys, that he voluntarily consents to the entry of the Liquidation Order, and
that he was not induced in any way to execute the same. ECF No. 195-1 at 12.
8 The Complaint against the Bank filed by OCIF on June 30, 2022 for noncompliance with minimum regulatory
capitalization requirements.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 23 of 33

24
D. Failure to State a Claim
After dismissal on sovereign immunity or waiver grounds as to defendants OCIF,
Commissioner Zequeira Díaz in her official capacity, and Mr. Lugo in his official capacity, all that
remains is the claims against Commissioner Zequeira Díaz in her personal capacity. For the
following reasons, Plaintiff fails to state a claim for which relief may be granted as to the remaining
claims against Commissioner Zequeira Díaz.9
1. 	12(b)(6) Legal Standard
A defendant may move to dismiss an action pursuant to Rule 12(b)(6) for “failure to state a
claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In order to survive a motion to
dismiss under Rule 12(b)(6), a complaint must allege “a plausible entitlement to relief.”
Rodríguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 95 (1st Cir. 2007) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 559 (2007)). “Plausible, of course, means something more than merely
possible, and gauging a pleaded situation’s plausibility is a ‘context-specific’ job that compels us
‘to draw on’ our ‘judicial experience and common sense.’” Schatz, 669 F.3d at 55 (quoting Ashcroft
v. Iqbal, 556 U.S. 662, 679 (2009)).
Such a task requires a two-pronged analysis. “First, the court must sift through the averments
in the complaint, separating conclusory legal allegations (which may be disregarded) from
allegations of fact (which must be credited).” Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49,
53 (1st Cir. 2013). “Similarly, a court does not accept as true allegations that while not stating
ultimate legal conclusions, are nevertheless so threadbare or speculative that they fail to cross the
line between the conclusory and the factual.” Air Sunshine, Inc. v. Carl, 663 F.3d 27, 33 (1st Cir.
2011) (internal quotations omitted). In short, “to avoid dismissal, the plaintiff must provide the
9 Such claims, if they were brought against Mr. Lugo in his personal capacity, would fail for the same reasons.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 24 of 33

25
grounds upon which his claim rests through factual allegations sufficient ‘to raise a right to relief
above the speculative level.’” Torres v. Bella Vista Hosp., Inc., 523 F. Supp. 2d 123, 133 (D.P.R.
2007) (quoting Twombly, 550 U.S. at 555, 570).
“Second, the court must consider whether the winnowed residue of factual allegations gives
rise to a plausible claim of relief.” Air Sunshine, Inc., 663 F.3d at 33. In making this determination
under Rule 12(b)(6), the court must limit its focus to the allegations of the complaint and “accept as
true ‘all well-pleaded factual averments and indulg[e] all reasonable inferences in the plaintiff’s
favor.’” Doyle v. Hasbro, Inc., 103 F.3d 186, 190 (1st Cir. 1996) (quoting Aulson v. Blanchard, 83
F.3d 1, 3 (1st Cir. 1996)). In addition to the complaint, the court can consider “(a) ‘implications
from documents’ attached to or fairly ‘incorporated into the complaint,’ (b) ‘facts’ susceptible to
‘judicial notice,’ and (c) ‘concessions’ in plaintiff’s ‘response to the motion to dismiss.’” Schatz v.
Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012) (quoting Arturet-Vélez v. R.J.
Reynolds Tobacco Co., 429 F.3d 10, 13 n.2 (1st Cir. 2005)). “We appropriately draw on our ‘judicial
experience and common sense’ in evaluating a complaint, but we may not disregard factual
allegations ‘even if it strikes a savvy judge that actual proof of those facts is improbable.’” Manning
v. Boston Medical Center Corp., 725 F.3d 34, 43 (1st Cir. 2013). Although all inferences must be
made in plaintiff’s favor, the court need not accept “bald assertions, unsupportable conclusions,
periphrastic circumlocutions, and the like.” Aulson, 83 F.3d at 3. Dismissal under Rule 12(b)(6) is
appropriate only if the facts alleged, taken as true, do not warrant recovery. Id.
2. 	Section 1983
To state a claim pursuant to Section 1983, “a plaintiff must allege (1) the violation of a right
protected by the Constitution or the laws of the United States and (2) that the perpetrator of the
violation was acting under color of law.” Cruz-Erazo v. Rivera-Montañez, 212 F.3d 617, 621 (1st
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 25 of 33

26
Cir. 2000). The first prong has two aspects: (1) there must have been an actual deprivation of the
plaintiff's federally protected rights; and (2) there must have been a causal connection between the
defendant's conduct and the deprivation of the plaintiff's federal rights. Gutiérrez–Rodríguez v.
Cartagena, 882 F.2d 553, 559 (1st Cir. 1989). Showing a causal connection requires that the
plaintiff establish: (1) for each defendant, that the defendant's own actions deprived the plaintiff of
his/her protected rights; and (2) that the defendant's conduct was intentional, grossly negligent, or
amounted to a reckless or callous indifference to the plaintiff's constitutional rights. Monell v. Dep't
of Soc. Servs., 436 U.S. 658, n. 58 (1978); Gutiérrez–Rodriguez, 882 F.2d at 562; Figueroa v.
Aponte–Roque, 864 F.2d 947, 953 (1st Cir. 1989); Simmons v. Dickhaut, 804 F.2d 182, 185 (1st Cir.
1986).
Taking Plaintiff’s well-pleaded facts as true but disregarding legal conclusions, Plaintiff has
not met the plausibility threshold. The factual allegations in the complaint are vague and devoid of
any detail as to Commissioner Zequeira Díaz that would make a remedy plausible under Section
§1983, as they do not show that Commissioner Zequeira Díaz violated any of Plaintiff’s
constitutional rights or that she was acting under color of law. See generally ECF No. 121. Plaintiff’s
only Section 1983 allegations as to Commissioner Zequeira Díaz are that she rejected a stock sale
and initiated liquidation proceedings for the Bank even though the Bank allegedly had funds to
operate through the sale to Qenta. ECF No. 121 at ¶ 3. Other than this allegation, Plaintiff’s
complaint does not allow its reader to ascertain any action that is contrary to OCIF’s laws and
regulations, nor does Plaintiff’s complaint state how the process followed by the OCIF violated his
constitutional rights. The complaint’s statement that OCIF representatives “falsely implied illegal
activity” fails to describe the nature of the illegal activity alleged and is therefore conclusory. Such
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 26 of 33

27
conclusory statements cannot support a section 1983 claim. Therefore, Plaintiff fails to state a claim
under Section 1983.10
3. 	Section 1985(3)
Section 1985(3) allows suits against those who conspire to deprive others of equal protection
of the laws, or of the equal privileges and immunities under the law. 42 U.S.C. § 1985(3). To bring
a Section 1985(3) claim, a plaintiff must plead “(1) a conspiracy; (2) a conspiratorial purpose to
deprive the plaintiff of the equal protection of the laws; (3) an overt act in furtherance of the
conspiracy, and, lastly, (4) either an injury to person or property or a deprivation of a constitutionally
protected right.” Soto Padró v. Public Building Authority, 675 F3d 1, 4 (1st Cir. 2012) (citations
omitted). Furthermore, the first element of a Section 1985 claim requires showing racial, or
otherwise class-based, “invidiously discriminatory animus behind the conspirators' action.” Id.
The factual allegations in the complaint are insufficient to state a claim for relief under
Section 1985(3). Plaintiff alleges that “IRS/J5 agents leaked confidential information to media
defendants (specifically to Defendants Mathew Goldstein, Charlotte Grieve, and Nick McKenzie,),
who published damaging and unsubstantiated allegations of tax evasion and money laundering,
regarding Plaintiff and the bank, despite knowing these claims were unsubstantiated.” ECF No. 121
at 4, ¶ 4. However, "[a] complaint containing only conclusory, vague, or general allegations of
conspiracy to deprive a person of constitutional rights cannot withstand a motion to dismiss.”
Martínez-Machicote v. Ramos-Rodríguez, 553 F. Supp. 2d 45, 49-50 (2007). Plaintiff’s complaint
fails to plead “in some detail, through reference to material facts, the relationship or nature of the
cooperation between the state actors and the private individuals, including how the conspiracy was
made or ‘hatched.’” Rosado v. Sabat, 204 F. Supp. 252 (citing Slotnick v. Staviskey, 560 F.3d 31, at
10 As explained below, Plaintiff’s section 1983 claim is also barred because the pertinent statute of limitations has
elapsed.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 27 of 33

28
33 (1st Cir. 1977)). “For conspiracy purposes, simply alleging that defendants acted jointly and in
concert and under color of law is insufficient.” Id. at 267 (citing McGillicuddy v. Clements, 746 F.2d
76 (1st Cir. 1984)). Plaintiff does not provide this information for the Court. Plaintiff does not
mention Commissioner Zequeira Díaz by name in his facts regarding the alleged conspiracy.
Instead, Plaintiff’s allegations are vague and conclusory, which is not sufficient to pass muster under
the 12(b)(6) pleading standard. Even more fatal, Plaintiff does not allege that the conspiracy was
motivated by “some racial, or perhaps otherwise class-based, invidiously discriminatory animus.”
Griffin v. Breckenridge, 403 U.S. 88, 102 (1971). Plaintiff’s only reference to this element is that he
is a member of a protected class, which, is insufficient. See Bell Atl. Corp. v. Twombly, supra at 557;
Bray v. Alexandria Women’s Health Clinic, 506 U.S. 263, 268-69 (1993). Therefore, in addition to
the Section 1983 claim, it is recommended that the Section 1985(3) claim against Commissioner
Zequeira Díaz in her personal capacity be dismissed.
Even if Schiff had stated Section 1983 and 1985(3) claims, those claims are nevertheless
barred by the applicable statute of limitations. Section 1983 and Section 1985(3) claims are subject
to a one-year statute of limitations in Puerto Rico. See Acevedo-Pérez v. United States, 768 F.3d 51,
56 (1st Cir. 2014) (“However, it is well-established that § 1983 claims borrow the forum state's
statute of limitations…In Puerto Rico, the applicable limitations period is one year.”); Huertas-
González v. Univ. of P.R., 520 F. Supp. 2d 304, 313 (DPR 2007) (same for Section 1985(3) claims).
The statute of limitations begins to run “when the plaintiff knows, or has reason to know of the
injury on which the action is based.” Vélez Vélez v. PRHTA, 795 F3d 230, 235 (1st Cir. 2015).
In this case, the statute of limitations began in May of 2022, when OCIF allegedly blocked
a bank sale transaction, or alternatively, in June of 2022, when the press conference occurred.
Plaintiff does not dispute that Puerto Rico law establishes a one-year prescription period for the
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 28 of 33

29
claims in this case. Instead, Plaintiff argues that the statute of limitations should be tolled because
Plaintiff did not find out about the conspiracy until April of 2024 after receiving the information
from the IRS. ECF No. 121 at 4, ¶ 5. Taking Plaintiff’s allegations as true, that he did not know of
the alleged conspiracy, i.e., the injury on which the action is based, until receipt of these documents,
the statute of limitations would be tolled if the Section 1983 and Section 1985(3) claims were to
survive. Plaintiff also includes an allegation of fraudulent concealment, i.e., that Defendants
“withheld and delayed [the aforementioned] key evidence and documents…after a contested FOIA
process.” ECF No. 121 at 4, ¶ 6. To toll a statute of limitations on this basis, a plaintiff must plausibly
allege: (1) wrongful concealment of material facts by the defendant; (2) that the concealment
prevented the plaintiff from discovering the cause of action within the limitations period; and (3)
that the plaintiff exercised due diligence in trying to discover the facts. Berkson v. Del Monte Corp.,
743 F.2d 53, 55–56 (1st Cir. 1984). Plaintiff’s complaint does not meet any of these elements, nor
do the allegations specifically allege that OCIF, Commissioner Zequeira Díaz, or Mr. Lugo took
any acts to conceal any material facts. Therefore, this attempt to toll the statute of limitations would
fail. Lastly, Plaintiff contains an allegation of continuing harm to Plaintiff’s reputation, finances,
and business opportunities. ECF No. 121 at 4, ¶ 8. Defendants argue that the continuing violation
doctrine does not apply because “[t]he doctrine applies to ongoing, systemic acts rather than discrete
events.” ECF No. 195 at 19. Indeed, a “continuing violation is occasioned by continual unlawful
acts, not by continual ill effects from an original violation,” and Plaintiff’s complaint does not allege
any unlawful acts that continue to this day. McMillan V. Rodriguez-Negron, 511 F.Supp.3d 75, 83
(1st Cir. 2020) (quoting Bonilla v. Trebol Motors Corp., 913 F. Supp. 655, 659 (D.P.R. 1995)).
Therefore, the continuing violation doctrine does not apply.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 29 of 33

30
4. 	Bivens
A claim under Bivens can only be brought against individual federal officers. Ziglar v.
Abbasi, 582 U.S. 120, 134-35 (2017); Hernandez v. Mesa, 589 U.S. 93 (2020). Commissioner
Zequeira Díaz is not a federal officer, but a state actor acting as part of her statutory authority as
Commissioner of a state agency. Moreover, her involvement with federal agencies, for example, the
IRS, does not alter that conclusion. See Pagán-González v. Moreno, 919 F.3d 582, 590 (1st Cir.
2019) (“Cooperation with federal authorities does not convert a state official into a federal actor.”).
Therefore, this claim is misplaced.11
5. 	Tortious Interference
A cause of action for tortious interference with a contractual relationship arises under Article
1536 of the Puerto Rico Civil Code.12 Gen. Office Prod. Corp. v. A.M. Capen’s Sons, Inc., 115 P.R.
Dec. 553, 558 (1984). In order to prevail on a tortious interference claim, a plaintiff must establish
“(1) that a contract exists, (2) that the defendant interfered with that contract, (3) fault on the part of
the defendant, (4) damage to the plaintiff, and (5) a nexus between the defendant's fault and the
plaintiff's damage.” Alpha Biomedical & Diagnostic Corp. v. Philips Med. Sys. Netherland BV, 828
F. Supp. 2d 425, 433 (D.P.R. 2011); New Comm Wireless Servs. v. SprintCom, Inc., 287 F.3d 1, 9
(1st Cir.2002); Gen. Office Prods. Corp., 115 PR Dec. at 558.
11 In his complaint, Plaintiff makes a perfunctory reference to claims for violation of his due process rights and unlawful
seizure of property under the Fifth Amendment. ECF No. 121 at 6. The Court should also dismiss such claims under the
Fifth Amendment, as the Fifth Amendment applies to “actions of the federal government, not those of private
individuals.” Chain v. P.R. Fed. Affairs Admin. (PFRAA), 2016 U.S. Dist. LEXIS 45575, *22 (D.P.R. Mar. 31, 2016)
(citing Gerena v. Puerto Rico Legal Services, Inc., 697 F.2d 447, 449 (1st Cir. 1983). Here, dismissal is warranted as
OCIF and its Commissioner and Trustee are all state, not federal actors. Martínez-Rivera v. Sánchez-Ramos, 498 F.3d
3, 8-9 (1st Cir. 2007) (affirming dismissal of Fifth Amendment claim because defendants were state, not federal actors).
12 Article 1802 of the Puerto Rico Civil Code of 1930, Puerto Rico’s previous tort statute, was replaced by Article 1536
when the new Puerto Rico Civil Code was enacted in November 2020. PR Laws Ann. tit. 31 § 10801. However, Articles
1802 and 1536 have provisions that “are extremely similar and thus can be used interchangeably.” Orellano-Laureano
v. Instituto Médico del Norte, Inc., 2023 WL 4532418, at *6 n.5 (D.P.R. July 13, 2023). Courts in this district accordingly
apply caselaw analyzing Article 1802 to claims arising under Article 1536. See e.g., Dumanian v. FirstBank P.R., 2024
WL 197429, at *3 n.4 (D.P.R. 2024).
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 30 of 33

31
Plaintiff’s complaint does not contain any allegations regarding the existence of a contract.
The complaint does discuss a “$17.5 million sale to Qenta” that was allegedly lost; however, it does
not identify any contractual terms or obligations binding the parties. See Gen. Office Prods. Corp.
v. A.M. Capen’s Sons, Inc., 780 F.2d 1077, 1081 (1st Cir. 1986) (“If what is affected is… 	a
profitable financial relationship where there is no contract, the action does not lie…”); Dolphin Int’l,
Inc. v. Ryder Truck Lines, Inc., 27 P.R. Offic. Trans. 869, 882-83 (1991) (there is no tortious
interference claim if what is affected is a “mere expectancy or a profitable financial relationship.”)
(internal citation omitted); Future Development of Puerto Rico v. E.L.A., 276 F.Supp.2d 228, 242
(D.P.R. 2003) (dismissing a tortious interference action that alleged “a general loss of business
opportunity”). Moreover, the Act that governs the operations of international financial institutions
such as the Bank in Puerto Rico, Act No. 273-2012, as amended, otherwise known as the
“International Financial Center Regulatory Act,” provides that any sale or transfer of stock, interest
or participation in the capital of an international financial institution “shall be null ab initio if the
written authorization of the Commissioner has not been obtained.” P.R. Laws Ann. tit. 7, § 3089.
As the existence of a contract is “indispensable” in a tortious interference claim, Plaintiff’s claim
should be dismissed. Dolphin Int’l, Inc., 27 P.R. Offic. Trans. at 869.
6. 	Defamation
Plaintiff’s last cause of action against Defendants is for defamation. “In Puerto Rico the tort
of defamation can be either intentional or negligent, depending on whether the defamed is a private
or public figure, and can come in the form of slander or libel.” Segarra Jiménez v. Banco Popular,
Inc., 421 F.Supp.2d 452, 458 (D.P.R. 2006). “Libel is defamation that comes in the written
form.” Id. (citing Sociedad de Gananciales v. El Vocero de P.R., 135 D.P.R. 122, 126 (1994)).
“Slander, on the other hand, takes place when the defamation is oral and, as with libel, all other
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 31 of 33

32
elements of the defamation claim must be present.” Segarra Jiménez v. Banco Popular, Inc., 421
F.Supp.2d at 458 (citing Ojeda v. El Vocero de P.R., 137 D.P.R. 315, 326 (1994)). “In order for a
private figure, such as plaintiff … to prove defamation under Puerto Rico law, whether it be libel
(written) or slander (oral), she must prove the following: (1) that the alleged defamatory statements
are false; (2) that the defamatory statements (written or spoken) were negligently made to another;
and (3) that the plaintiff suffered damages.” Luis Santiago v. Santiago, 731 F.Supp.2d 202, 209
(D.P.R. 2010) (quoting Díaz Rodríguez v. Torres Martir, 394 F.Supp.2d 389, 392 (D.P.R. 2005)).
Plaintiff’s complaint states that its defamation claim is against all defendants; however, none of
OCIF, Commissioner Zequeira Díaz or Mr. Lugo are mentioned specifically nor are there facts
mentioning any specific statements made by the same, written or spoken. Plaintiff does discuss a
June 30, 2022 press conference; however, Plaintiff does not attribute or specify any statements made
by Defendants at this press conference. Even making all reasonable inferences in Plaintiff’s favor,
his complaint does not sufficiently allege the elements of a defamation claim for either libel or
slander against Defendants.13
IV. 	CONCLUSION14
For the aforementioned reasons, it is recommended that OCIF, Commissioner Zequeira Díaz
and Mr. Lugo’s requests to dismiss the claims against them under Rules 12(b)(1) and 12(b)(6) (ECF
Nos. 164, 195) be GRANTED.
13 If Plaintiff is considered a public figure, his defamation would require an even higher showing of actual malice.
Pendleton v. City of Haverhill, 156 F.3d 57, 67 (1st Cir. 1998); Lluberes v. Uncommon Prods., LLC, 663 F.3d 6, 13 (1st
Cir. 2011). As Plaintiff does not meet the lower standard of negligence, his complaint cannot support a showing of
actual malice.
14 Commissioner Zequeira Díaz also argues that the claims against her personal capacity are barred by qualified
immunity. In light of the conclusions of this Report and Recommendation finding that all claims against
Commissioner Zequeira Díaz should be dismissed on other grounds, an analysis of whether she is entitled to qualified
immunity is unnecessary.
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 32 of 33

33
The parties have fourteen (14) days to file any objections to this report and recommendation
unless otherwise ordered by the court. Failure to file the same within the specified time waives the
right to object to this report and recommendation. Fed. R. Civ. P. 72(b)(2); Fed. R. Civ. P.
6(c)(1)(B); D.P.R. Civ. R. 72(d); see also 28 U.S.C. § 636(b)(1); Henley Drilling Co. v. McGee, 36
F.3d 143, 150–51 (1st Cir. 1994); United States v. Valencia, 792 F.2d 4 (1st Cir. 1986).
IT IS SO RECOMMENDED.
In San Juan, Puerto Rico, this 12th day of February, 2026.
s/Marcos E. López
U.S. Magistrate Judge
Case 3:24-cv-01511-CVR Document 251 Filed 02/12/26 Page 33 of 33