IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE COMMONWEALTH OF PUERTO RICO; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO RICO HIGHWAYS AND TRANSPORTATION AUTHORITY; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO RICO ELECTRIC POWER AUTHORITY (PREPA); THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO RICO SALES TAX FINANCING CORPORATION, a/k/a Cofina; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, ASREPRESENTATIVE FOR THE EMPLOYEES RETIREMENT SYSTEM OF THE GOVERNMENT OF THE COMMONWEALTH OF PUERTO RICO, Debtors,
THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE COMMONWEALTH OF PUERTO RICO; THEFINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, ASREPRESENTATIVE FOR THE PUERTO RICO HIGHWAYS AND TRANSPORTATIONAUTHORITY; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FORPUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO RICO ELECTRIC POWER AUTHORITY (PREPA), Debtors, Appellees, AUTONOMOUS MUNICIPALITY OF PONCE (AMP), Movant, Appellant, THE PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY, Movant, Appellee.
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
PUERTO RICO [Hon. Laura Taylor Swain, [*] U.S. District
Fernandez-Nadal for appellant Autonomous Municipality of
E. Roberts, with whom Timothy W. Mungovan, Martin J.
Bienenstock, Steven L. Ratner, Jeffrey W. Levitan, Mark D.
Harris, and Proskauer Rose LLP were on brief for the
Financial Oversight and Management Board for Puerto Rico, as
Representative for the Commonwealth of Puerto Rico; the
Financial Oversight and Management Board for Puerto Rico, as
Representative for the Puerto Rico Highways and
Transportation Authority; the Financial Oversight and
Management Board for Puerto Rico, as Representative for the
Puerto Rico Electric Power Authority (PREPA).
Lynch, Lipez, and Thompson, Circuit Judges.
appeal primarily concerns whether the Title III court abused
its discretion in refusing to lift the automatic stay in
PROMESA, 48 U.S.C. § 2161(a) (incorporating 11 U.S.C.
§ 362), to allow the Municipality of Ponce to secure
specific performance by the Commonwealth of Puerto Rico of
public works projects required under a Puerto Rico
Commonwealth court judgment. The Title III court plainly did
not abuse its discretion. In essence, Ponce seeks priority
over the claims of other communities and creditors of the
Commonwealth. Ponce has not shown cause why its claim
warrants this priority. We affirm.
describe the relevant statutory context, the events
surrounding Ponce's prepetition judgment, and facts of
the instant case.
PROMESA's Automatic Stay
Puerto Rico Oversight, Management, and Economic Stability Act
("PROMESA"), 48 U.S.C. §§
2101–2241, created the Financial Oversight and
Management Board ("FOMB") and, under its Title III,
empowered the Board to restructure the debt of the
Commonwealth of Puerto Rico through "quasi-bankruptcy
proceedings." Assured Guaranty Corp.
v. Fin. Oversight Mgmt. Bd. for P.R., 872
F.3d 57, 59 (1st Cir. 2017). PROMESA automatically stays any
action to recover on a prepetition claim or "the
enforcement, against the debtor or against property of the
estate, of a judgment obtained before the commencement of the
[Title III case]." 48 U.S.C. § 2161(a)
(incorporating 11 U.S.C. § 362(a)(1), (2)). PROMESA
defines a "claim" in several ways, including as a
"right to payment" and separately as a "right
to an equitable remedy for breach of performance if such
breach gives rise to a right to payment." Id.
(incorporating 11 U.S.C. § 101(5)).
Ponce's Prepetition Judgment It Now Seeks To
October 28, 1992, Ponce, the Commonwealth, the Puerto Rico
Electric Power Authority ("PREPA"), and the Puerto
Rico Highways and Transportation Authority
("PRHTA") agreed to develop municipal projects in
Ponce. These projects included installing sewer and
transmission lines, building various medical, police, and
educational facilities, modernizing local housing, and
improving several highways. Within a year, the Commonwealth,
PREPA, and PRHTA ("the debtors") withdrew from the
agreement. In response, Ponce brought suit in Commonwealth
court on October 28, 1993. The suit resulted in a June 24,
1996 judgment that required the debtors to fulfill their
commitments under the original agreement and deferred
determining monetary damages until after they completed the
municipal projects. The Commonwealth court also appointed a
monitor to supervise and audit the projects' progress. In
December 2004, Ponce and the debtors settled the issue of
damages for $34 million, of which a significant portion
remains unpaid. That portion is not at issue: The parties
agree the stay applies to it.
3, 2017, the Commonwealth filed a petition for debt
adjustment relief under Title III of PROMESA. PRHTA and PREPA
filed similar Title III petitions on May 21 and July 3, 2017,
respectively. Filing these petitions initiated the automatic
stay at issue here, see 11 U.S.C. § 362(a), and
transferred exclusive jurisdiction over the debtors'
property to the Title III court, see 48 U.S.C.
parties agree that most of the projects required by the 1992
Agreement have been completed and this case concerns a subset
of uncompleted projects. As of September 2019, the two
highway projects required by the judgment and funded by the
Federal Highway Administration's Puerto Rico Highway
Program, 23 U.S.C. § 165(b), continued to progress, as
they did not involve use of the debtors' property. Due to
the stay however, the court-appointed monitor, who is paid
out of the debtors' property, is not auditing these
projects. So the projects are proceeding and Ponce is
complaining only that its monitor is not monitoring the
progress on these two projects. Ponce conceded that funding the
monitor for the two highway projects would cost the PRHTA
between $90, 000 and $150, 000 per year.
another project, Ponce alleges PREPA could complete an
outstanding project to replace overhead electrical lines with
underground alternatives for only $700, 000. PREPA has stated
that its "resources are both extremely limited and fully
committed to the restoration and repairs of its electric
system." It further stated that its efforts focus on
preparing the Commonwealth "for the uncertainty for
another hurricane season."
outstanding projects covered by Ponce's request to lift
the stay include channeling the Río Matilde in Ponce
and rehabilitating a lighthouse -- a project which does not
affect the safety of the surrounding navigable waters.
Procedural History of ...