Puerto Rico’s bankruptcy judge rejected two requests for a stay on enacting the Plan of Adjustment on March 15 but one of those parties had already taken steps to secure a stay from a higher court.
U.S. District Court Judge Laura Taylor Swain on Thursday issued her opinion and order
The teachers’ associations filed a notice of appeal on Jan. 28 with the U.S. Court of Appeals for the First Circuit, which oversees Swain’s court. The First Circuit court did not respond to a request for comment on whether they would grant a stay by the time of publication.
According to one of the lawyers representing the teachers’ groups, the First Circuit had granted their motion for expedited consideration of their appeal of the Plan of Adjustment. Attorney Jessica Méndez Colberg said the court had set a schedule for their opening brief to be submitted this past Tuesday, with responses due on March 15 and the teachers’ reply to responses due on March 22.
“We are working on the motion for stay as we speak,” Méndez Colberg said Thursday morning before Swain released her decision. The issues were fully briefed for Swain by Feb. 15. “Since it’s been 16 days already and [Swain’s] court has not issued its determination, we cannot wait any longer.”
The teachers’ associations appealing are Federación de Puerto Rico; Grupo Magisterial Educadores(as) por la Democracia, Unidad, Cambio, Militancia y Organización Sindical; and Unión Nacional de Educadores y Trabajadores de la Educación.
The teachers’ groups have said the local law passed to support the Plan of Adjustment bars the Puerto Rico Oversight Board from freezing the defined benefit pension amounts for teachers. The board contends if the teachers prevail, the plan would not be affordable.
In her ruling against the teachers and credit unions, Swain said a 1987 court ruling said there are four key issues in deciding whether to grant a stay pending appeal: “[W]hether the stay applicant has made a strong showing that [it] is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.”
Swain said all four factors pointed to denying the stay requests.
Regarding the
The associations’ argument that the Plan of Adjustment "cannot preempt otherwise valid Commonwealth laws misconceives the role of section 4 of [the Puerto Rico Oversight, Management, and Economic Stability Act], which provides that the ‘provisions of this chapter shall prevail over any general or specific provisions of territory law, state law, or regulation that is inconsistent with this chapter,’” Swain wrote.
On the first factor, the credit unions had argued, among other things, the discharge of Puerto Rico’s debts to them “is inequitable due to the commonwealth’s alleged ‘dishonesty, fraud and disregard of [its] fiduciary duties.’”
Swain responded that she had earlier rejected the credit unions’ arguments the plan was proposed in bad faith and the plan’s discharge of liabilities is precluded by the Puerto Rico government’s “allegedly inequitable and fraudulent conduct.”
On the second factor on whether denying a stay would subject the appellants to “irreparable injury,” Swain said their “grievances are clearly remediable through payment of money and therefore do not, in and of themselves, support a finding or irreparable harm arising from implementation of the plan.”
On the third factor, Swain said a delay in enacting the plan could possibly lead to the plan’s disintegration. She noted that nearly five years has passed since Puerto Rico, through the board, petitioned for bankruptcy. “The debtors, the other creditors, and the people of Puerto Rico have suffered long enough,” she said.
In the last few weeks, the board has filed an appeal of the Plan of Adjustment, saying
On Thursday one of the inverse condemnation claimants, Finca Matilda, said in this case “Finca Matilda meets the conditions for payment in full upon the effective date of the plan.” According to Finca Matilda, “the fact that the Plan [of Adjustment] preserves the Oversight Board’s right to appeal or that it contemplates an alternative scenario, does not tantamount to a stay on appeal.”
The plan covers several hundred million dollars in eminent domain and inverse condemnation claims.
The board did not immediately respond to a request for comment on the Finca Matilda filing.
