IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE COMMONWEALTH OF PUERTO RICO, Debtor.
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; PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY; RICARDO ROSSELLO NEVARES, in his official capacity as Governor of the Commonwealth of Puerto Rico; GERARDO JOSE PORTELA FRANCO, in his official capacity as Executive Director of the Puerto Rico Fiscal Agency and Financial Advisory Authority; RAUL MALDONADO GAUTIER, in his official capacity as Secretary of Treasury of the Commonwealth of Puerto Rico, Defendants, Appellees, ASSURED GUARANTY CORP.; ASSURED GUARANTY MUNICIPAL CORP.; NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION, Plaintiffs, Appellees, OFFICIAL COMMITTEE OF UNSECURED CREDITORS, Movant, Appellant.
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
PUERTO RICO [Hon. Laura Taylor Swain, U.S. District
Despins, with whom James B. Worthington, James T. Grogan III,
William K. Whitner, Eric D. Stolze, Paul Hastings LLP, Juan
J. Casillas Ayala, Diana M. Batlle-Barasorda, Alberto J. E.
Añeses Negrón, Ericka C. Montull-Novoa, and
Casillas, Santiago & Torres LLC were on brief, for
Gregory Silbert, with whom Marcia L. Goldstein, Jonathan D.
Polkes, Salvatore A. Romanello, Kelly Diblasi, Gabriel A.
Morgan, Weil, Gotshal & Manges LLP, Eric
Pérez-Ochoa, Alexandra C. Casellas-Cabrera, Lourdes A.
Arroyo-Portela, Adsuar Muñiz Goyco Seda,
Pérez-Ochoa, PSC, Howard R. Hawkins, Jr., Mark C.
Ellenberg, Ellen M. Halstead, Cadwalader, Wickersham &
Taft LLP, Heriberto J. Burgos-Pérez, Ricardo F.
Casellas-Sánchez, Diana Pérez-Seda, and
Casellas Alcover & Burgos P.S.C. were on brief, for
Timothy W. Mungovan, with whom John E. Roberts, Martin J.
Bienenstock, Stephen L. Ratner, Mark D. Harris, and Proskauer
Rose LLP were on brief, for defendants-appellees the
Financial Oversight and Management Board for Puerto Rico and
the Commonwealth of Puerto Rico, by and through its
representative the Financial Oversight and Management Board
for Puerto Rico.
Howard, Chief Judge, Torruella and Kayatta, Circuit Judges.
HOWARD, CHIEF JUDGE.
case, the able district court judge followed the guidance
provided in a prior opinion of ours. Unfettered by the
constraints that bound the district court, we now chart a
Official Committee of Unsecured Creditors ("UCC")
appeals from the district court's denial of its motion to
intervene in an adversary proceeding arising within the
Commonwealth's debt adjustment case under Title III of
the Puerto Rico Oversight, Management, and Economic Stability
Act ("PROMESA"), see 48 U.S.C.
§§ 2161-2177. Because we hold that 11 U.S.C. §
1109(b), a provision of the Bankruptcy Code expressly
incorporated by PROMESA, provides an "unconditional
right to intervene" within the meaning of Fed.R.Civ.P.
24(a)(1), we reverse the order denying intervention and
remand for further proceedings consistent with this opinion.
enacted PROMESA in June 2016 to address an ongoing financial
crisis in the Commonwealth of Puerto Rico
("Commonwealth"). Peaje Invs. LLC
v. García-Padilla, 845 F.3d 505, 509
(1st Cir. 2017). The statute created a Financial Oversight
and Management Board ("Board") to "help Puerto
Rico 'achieve fiscal responsibility and access to the
capital markets.'" Id. at 515 (quoting 48
U.S.C. § 2121(a)). Among other things, PROMESA empowered
the Board to oversee the development of an annual
"Fiscal Plan" estimating the government's
revenues and expenditures. 48 U.S.C. § 2141.
also gave the Board the ability to commence quasi-bankruptcy
proceedings to restructure the Commonwealth's debt under
a part of the statute often referred to as "Title
III." See id. § 2164(a). Title III
expressly incorporates large swaths of the Bankruptcy Code,
as well as the entirety of the Federal Rules of Bankruptcy
Procedure. See id. §§ 2161(a), 2170. On
May 3, 2017, the Board commenced Title III proceedings on
behalf of the Commonwealth, thus triggering these provisions.
It subsequently commenced Title III cases for certain
Commonwealth instrumentalities. The district court ordered
that all of the Title III cases be jointly administered.
same day that the Title III petition was filed,
Plaintiffs-Appellees Assured Guaranty Corp., Assured Guaranty
Municipal Corp., and National Public Finance Guarantee
Corporation (together, the "plaintiffs"), companies
that insure certain Puerto Rico bonds, initiated an adversary
proceeding within the larger Title III case. The plaintiffs
alleged that the Commonwealth's Fiscal Plan (approved by
the Board), as well as a recently enacted Commonwealth
statute implementing that plan, violated both PROMESA and the
United States Constitution. The plaintiffs sought declaratory
relief, an injunction prohibiting the Commonwealth and the
Board from implementing the Fiscal Plan, and a stay of the
confirmation of any plan of adjustment in the Title III case.
was appointed in June 2017. Such a creditors' committee,
the duties and powers of which are outlined by statute,
see 11 U.S.C. § 1103(c), is intended to serve
as "the primary negotiating bod[y] for the formulation
of the plan of reorganization" representing the
interests of the "class of creditors . . . from which
[it was] selected." H.R. Rep. No. 95-595, at 401 (1977),
reprinted in 1978 U.S.C.C.A.N. 5963, 6357. A
creditors' committee is "arguably the one party in
interest that, for all practical purposes, typically
represents stakeholders with the most interest in
the outcome of virtually every proceeding."
Collier ¶ 1109.04[d][ii]; see also
Phar-Mor, Inc. v. Coopers &
Lybrand, 22 F.3d 1228, 1240 (3d Cir. 1994) (noting that
bankruptcy statutes have "relieved" courts "of
most administrative matters" such that "the
responsibility for monitoring the operations of the debtor
and its compliance with appropriate bankruptcy procedures has
fallen largely to the creditors' committee").
its appointment, the UCC filed a motion seeking "leave
to intervene" in the adversary proceeding "under
Bankruptcy Rule 7024." The relevant rule simply provides
that Fed.R.Civ.P. 24 "applies in adversary
proceedings." Fed.R.Bankr.P. 7024. Rule 24 states, in
pertinent part, that "the court must permit anyone to
intervene who . . . is given an unconditional right to
intervene by a federal statute." Fed.R.Civ.P. 24(a)(1).
The UCC's leading argument in district court was that 11
U.S.C. § 1109(b), one of the many subsections of the
Bankruptcy Code made applicable in Title III proceedings,
conferred such an "unconditional right." The
statute provides that any "party in interest, "
specifically defined to include "a creditors'
committee, " "may raise and may appear and be heard
on any issue in ...