244 F.3d 241 (1st Cir. 2001)
ARECIBO COMMUNITY HEALTH CARE, INC., Plaintiff, Appellee,v.COMMONWEALTH OF PUERTO RICO, DEPARTMENT OF HEALTH AND THE ADMINISTRATION OF HEALTH SERVICES, Defendants, Appellants,CARLOS E. RODRIGUEZ-QUESADA, Trustee - Appellee.
No. 00-1774
United States Court of Appeals For the First Circuit
Heard March 6, 2001Decided April 5, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
[Hon. Salvador E. Casellas, U.S. District Judge]
Richard H. Fallon, Jr., with whom Edgardo Munoz, John M. Garca and Garca & Fernandez, were on brief, for appellants.
Carlos E. Rodrguez-Quesada, with whom Igor J. Domnguez Law Offices and Johnny Rivera-Gonzalez, were on brief, for appellee.
Before Torruella, Chief Judge, Coffin, Senior Circuit Judge, and Campbell, Senior Circuit Judge.
TORRUELLA, Chief Judge.


1
Section 106(b) of the Bankruptcy Code, 11 U.S.C § 106(b), provides that the filing of a proof of claim in federal bankruptcy court by "[a] governmental unit . . . is deemed [to be a] waiv[er of] sovereign immunity with respect to a claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which the claim of such governmental unit arose."


2
The central issue presented by this appeal is whether this provision violates the Eleventh Amendment1 when it is applied to a state or a state-like political entity. See Jusino Mercado v.Commonwealth of Puerto Rico, 214 F.3d 34, 39 (1st Cir. 2000) (a "phalanx of cases" holds that Puerto Rico should be treated like the states for Eleventh Amendment purposes); Metcalf & Eddy v. Puerto Rico Aqueduct & Sewer Auth., 945 F.2d 10, 11 n.1 (1st Cir. 1991),rev'd on other grounds, 506 U.S. 139 (1993) ("Puerto Rico is to be treated as a state for Eleventh Amendment purposes."). We answer this question in the affirmative and rule that the application of § 106(b) to the Commonwealth of Puerto Rico by virtue of its having filed a proof of claim in the bankruptcy court violates the Eleventh Amendment. We thus reverse the decision of the district court in this respect. See In re Arecibo Cmty. Health Care, Inc., 233 B.R. 625 (D.P.R. 1999).

Procedural Background

3
The bankruptcy court in this case dismissed this adversary action against appellant Commonwealth of Puerto Rico on the same basis as is alleged before us, that is, that such an action was barred by the Eleventh Amendment. On appeal, the district court reversed the ruling of the bankruptcy court and remanded the matter for further proceedings. Id.


4
This is an interlocutory appeal from the decision of the district court. Appellate jurisdiction exists by virtue of 28 U.S.C. § 1291. See Puerto Rico Aqueduct and Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 144-45 (1993).

The Facts

5
In March 1984, instrumentalities of the Commonwealth of Puerto Rico, the Puerto Rico Department of Health (the "Department") and the Administration of Health Facilities ("AFASS"), executed a series of contracts with a private entity, Arecibo Community Health Care, Inc. ("ACHI"), for the administration of the Arecibo Regional Hospital, a government-owned hospital in Arecibo, Puerto Rico. The last of these contracts was terminated in 1991.


6
On June 30, 1991, the Department filed a breach of contract suit against ACHI for matters arising from the aforementioned circumstances in the Superior Court of Puerto Rico, Arecibo Part. Thereafter, on July 2, 1991, ACHI filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code. The bankruptcy court determined that the contract in dispute had been terminated prior to the filing of the petition, whereupon the Department and AFASS proceeded to file a proof of an unsecured claim for services paid to, and not rendered by, ACHI. The claim was for the amount of $1,650,449.16.


7
Subsequently, the bankruptcy proceeding was converted to one under Chapter 7 and a trustee appointed. The trustee commenced an adversary action against the Department and AFASS asserting various claims allegedly arising out of the same contract and operative facts as were the subject of the action filed by the Department in the Puerto Rico courts and the proof of claim filed in federal bankruptcy court. The trustee sought to recover the sum of $8,204,494.48, interest accrued since 1991, attorneys' fees and litigation costs. It is this adversary action by the trustee that raises the issue presented by this appeal.


8
In their Answer to the Complaint the appellants specifically preserved their Eleventh Amendment immunity defense. Thereafter they moved to dismiss the action on this ground. The bankruptcy court concluded that the holding in Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 54 (1996) (Congress may not abrogate the State's Eleventh Amendment immunity pursuant to its Article I powers), required such an outcome and concluded that both sections 106(a)2 and (b) were invalid as applied to appellants. The bankruptcy court reasoned that if Congress could not abrogate the States' Eleventh Amendment sovereign immunity under Seminole Tribe, it could not do so here with what amounts to a conditional waiver. It thus ruled that appellants could not be deemed to have waived their Eleventh Amendment immunity by reason of their filing a proof of claim in this case.


9
The district court agreed with the bankruptcy court as to the invalidity of § 106(a), but resolved that this incapacity did not carry over to § 106(b) because the waiver resulting thereunder was "premise[d] . . . upon an affirmative action by the state to take advantage of, and participate in, the bankruptcy process." Arecibo Cmty. Health Care, 233 B.R. at 630. Appellants requested that the district court reconsider its ruling. While this request was pending, the Supreme Court decided College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S. 666 (1999) (Congress lacks power under Article I to deem that a state has waived its Eleventh Amendment immunity by engaging in interstate commerce.). The district court, without comment, declined to reconsider its ruling that § 106(b) was valid.

Discussion

10
In Seminole Tribe, the Supreme Court identified the two premises upon which the Eleventh Amendment stands as:


11
[F]irst, that each State is a sovereign entity in our federal system; and second, that "[i]t is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent."


12
517 U.S. at 54 & n.7 (internal quotations omitted). A third premise could very well be added after College Savings Bank: although a State can waive its Eleventh Amendment immunity from suit, the "test for determining whether a State has waived its immunity from federal court jurisdiction is a stringent one." College Sav. Bank, 527 U.S. at 675 (internal quotations omitted).


13
In College Savings Bank, the Court was presented with a theory of "constructive waiver" of sovereign immunity based on the State of Florida's conduct in engaging in interstate marketing and other federally-regulated activities. As a result of this conduct a suit was filed against the State in federal court by a private party alleging false advertising practices under the Lanham Act, 15 U.S.C. § 1125(a). Under the Trademark Remedy Clarification Act, an amendment to the Lanham Act, Congress had unequivocally legislated to the effect that state agencies engaging in false representations in commerce "shall not be immune, under the Eleventh Amendment . . . or any other doctrine of sovereign immunity, from suit in Federal court by any person, including any governmental or nongovernmental entity." 15 U.S.C. § 1122(b).


14
In passing upon the validity of this provision the Court stated:


15
There is a fundamental difference between a State's expressing unequivocally that it waives its immunity, and Congress's expressing unequivocally its intention that if the State takes certain action it shall be deemed to have waived that immunity. In the latter situation, the most that can be said with certainty is that the State has been put on notice that Congress intends to subject it to suits brought by individuals. That is very far from concluding that the State has made an "altogether voluntary" decision to waive its immunity.


16
College Sav. Bank, 473 U.S. at 680-81 (internal quotes omitted). Applying what we have previously dubbed as the third premise of Eleventh Amendment doctrine, a stringent testing of allegations that a State has waived its sovereign immunity, the Court found the "constructive waiver" theory defective because it contravened the settled principle that these waivers must be voluntarily and unequivocally declared by the State, see id. at 680-81, and further, because "[r]ecognizing a congressional power to exact constructive waivers of sovereign immunity through the exercise of Article I powers [in contrast to its Fourteenth Amendment power] would . . . permit Congress to circumvent the antiabrogation holding of Seminole Tribe," id. at 683.


17
Lastly, the Court rejected the notion that a State might be deemed to have waived its immunity voluntarily in cases where its action was free from coercion, stating:


18
Nor do we think that the constitutionally grounded principle of state sovereign immunity is any less robust where, as here, the asserted basis for constructive waiver is conduct that the State realistically could choose to abandon . . . . Permitting abrogation or constructive waiver of the constitutional right only when [that condition is satisfied] would of course limit the evil - but it is hard to say that limitation has any more support in text or tradition than, say, limiting abrogation or constructive waiver to the last Friday of the month.


19
Id. at 684.


20
The validity of Section 106(b), already under serious doubt after Seminole Tribe, see In re Creative Goldsmiths of Washington, D.C., Inc., 119 F.3d 1140, 1147 (4th Cir. 1997), is clearly undermined by the holding in College Savings Bank. Section 106(b) of the Bankruptcy Code is Congress's attempt, under its Article I powers, to construe a State's commercial activity as a waiver of its sovereign immunity. This is precisely that which is prohibited by College Savings Bank. We can see no principled reason to distinguish the legislation in this case, or to sustain its constitutionality, in the face of the Supreme Court's recent decision regarding sovereign immunity.3


21
We thus rule that § 106(b) of the Bankruptcy Code violates the Eleventh Amendment of the Constitution and that the adversary proceeding instituted against the Commonwealth of Puerto Rico in bankruptcy court should be dismissed.4 The decision of the district court is reversed and this matter is remanded for action consistent with this opinion.


22
We have considered all other issues and arguments presented by appellees and find them either without merit or unnecessary to decide in view of our decision.


23
No costs imposed.



Notes:


1
 U.S. Const., amend. XI:
The 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.
In Edelman v. Jordan, 415 U.S. 651, 662-63 (1974), the Supreme Court ruled that, notwithstanding its literal language to the contrary, the Eleventh Amendment's prohibition extends to suits instituted in federal courts against a State by its own citizens.


2
 Section 106(a) provides for the blanket abrogation of sovereign immunity under circumstances not relevant to this appeal. The district court's decision regarding this clause was not appealed and is thus not before us.


3
 Like College Savings Bank, this is not "a case in which the State has affirmatively invoked [the federal court's] jurisdiction." 527 U.S. at 675. As previously indicated, the Department filed its breach of contract claim in the Commonwealth court, but later needed to file a proof of claim in federal court because ACHI filed for bankruptcy protection.


4
 We note that our ruling does not affect appellee's ability to defend against the Commonwealth's proof of claim. See Gardner v. New Jersey, 329 U.S. 565, 574 (1947) ("When the State becomes the actor and files a claim against the fund it waives any immunity which it otherwise might have had respecting the adjudication of the claim."). The Supreme Court reaffirmed Gardner in College Savings Bank. See 527 U.S. at 681 n.3.


