Peaje Investments LLC v. Garcia-Padilla et al

Filing 70

MEMORANDUM AND ORDER re 67 Motion to Intervene. The Court DENIES without prejudice the Oversight Board's motion to intervene in these consolidated cases. Signed by Judge Francisco A. Besosa on 11/01/2016. (brc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
PEAJE INVESTMENTS LLC,
Plaintiff,
v.
ALEJANDRO
al.,

Civil No. 16-2365 (FAB)

GARCIA-PADILLA,

et

Defendants.
ASSURED GUARANTY CORP., et als.,
Plaintiffs,
v.

Civil No. 16-2384 (FAB)

COMMONWEALTH OF PUERTO RICO, et
al.,
Defendants.
ALTAIR
GLOBAL
CREDIT
OPPORTUNITIES FUND (A), LLC, et
al.,
Movants,
v.
ALEJANDRO
al.,

Civil No. 16-2696 (FAB)

GARCIA-PADILLA,

et

Respondents.

MEMORANDUM AND ORDER
BESOSA, District Judge.
Before the Court is the Financial Oversight and Management
Board for Puerto Rico (the “Oversight Board” or the “Board”)’s
motion to intervene in these consolidated cases pursuant to section

Civil Nos. 16-2365, 16-2384, 16-2696 (FAB)

2

212(a) of the Puerto Rico Oversight, Management, and Economic
Stability Act (“PROMESA”) and Federal Rule of Civil Procedure 24(a)
(“Rule

24(a)”).

(Civil

No.

16-2365,

Docket

No.

67;

Civil

No. 16-2384, Docket No. 51; Civil No. 16-2696, Docket No. 56.) For
the reasons discussed below, the Court DENIES WITHOUT PREJUDICE the
Oversight Board’s motion.
BACKGROUND
On June 30, 2016, the United States enacted PROMESA to address
the dire fiscal emergency in Puerto Rico.
designed

to

establish

“[a]

comprehensive

The legislation was
approach

to

[Puerto

Rico’s] fiscal, management and structural problems and adjustments
. . . involving independent oversight and a Federal statutory
authority for the Government of Puerto Rico to restructure debts in
a fair and orderly process.”

PROMESA, § 405(m)(4).

PROMESA

establishes the seven member Oversight Board for Puerto Rico.
§§ 101(b)(1), (e)(1)(A).

Id.

All members of the Oversight Board were

appointed on August 31, 2016.
Also among PROMESA’s provisions is an automatic stay, among
other things, of all liability-related litigation against the
Commonwealth

of

Puerto

Rico,

which

“was

or

could

have

been”

commenced before the law’s enactment, “or to recover a Liability
Claim against the government of Puerto Rico that arose before the
enactment of [the] Act.” PROMESA § 405(b)(1). Plaintiffs in these
consolidated actions do not dispute that PROMESA’s automatic stay
is applicable to their claims. The parties, however, disagree over

Civil Nos. 16-2365, 16-2384, 16-2696 (FAB)

3

whether there is “cause” to grant plaintiffs relief from the stay
pursuant to section 405(e)(2).

On October 28, 2016, the Oversight

Board filed identical motions to intervene in these three cases
which included identical substantive oppositions to plaintiffs’
requests to vacate the stay.
DISCUSSION
The Oversight Board argues that it is entitled to intervene as
of right in these consolidated actions pursuant to Rule 24(a) and
section 212 of PROMESA.
The Board, in its attached opposition to the plaintiffs’
motion for relief from stay, also includes a set of requirements
that it seeks to have the Court enforce against the Commonwealth.
A.

Procedural Deficiency pursuant to Rule 24(c)
Although the Oversight Board’s motion to intervene indicates

its opposition to vacate the stay in these cases, it is not
“accompanied by a pleading that sets out the claim or defense for
which intervention is sought,” as required by the Federal Rules.
Fed. R. Civ. P. 24(c).

Rather, the Board merely states that it is

“not at this time taking any position on the merits of the parties’
claims and defenses in the pending challenges to the Moratorium Act
and related Executive Orders.”

(Civil No. 16-2365, Docket No. 67

at p. 8; Civil No. 16-2384, Docket No. 51 at p. 8; Civil No. 162696, Docket No. 56 at p. 8.)
The

First

Circuit

Court

of

Appeals

has

indicated

that

Rule 24(c)’s requirements are mandatory and that a party’s failure

Civil Nos. 16-2365, 16-2384, 16-2696 (FAB)

4

to meet them warrants dismissal of its motion.

See Public Service

Company of New Hampshire v. Patch, 136 F.3d 197, 205 n. 6 (1st Cir.
1998).

Given the procedural deficiency in the Oversight Board’s

motion to intervene, the Court is obligated to deny that motion.
B.

The Oversight Board’s Requested Requirements
In its attached opposition to the plaintiffs’ motions for

relief

from

requirements

stay,
that

the
it

Oversight

believes

Board

“will

includes

alleviate

a

some

set
of

of
the

Plaintiffs’ concerns and . . . bring about much needed transparency
and facilitate negotiation with creditors and of required fiscal
plans.”

(Civil No. 16-2365, Docket No. 67 at p. 19; Civil No. 16-

2384, Docket No. 51 at p. 19; Civil No. 16-2696, Docket No. 56 at
p. 19.)

The

Board, which urges the Court to enforce these

requirements against the Commonwealth, makes the following specific
requests:
*The Commonwealth must account for (i) all funds that are
subject to creditors’ security interests (“Security Interest
Funds”) and over which it has exercised control pursuant to the
Moratorium Act and Executive Orders (“Intercepted Funds”),
(ii) future revenues and expenditures, and (iii) all transfers to
and from the GDB since April 6, 2016;
*Any reserve funds held by creditors pursuant to their bond
indentures and other governing documents should be available for
debt service payments as they become due and as is provided for in
the governing agreements, provided, however, that creditors must
account for any payments made out of reserve funds;
*The Commonwealth must immediately begin rolling production of
information requested by the Oversight Board on October 5 and 20,
2016, with such production to be completed no later than
October 30, 2016;

Civil Nos. 16-2365, 16-2384, 16-2696 (FAB)

5

*The Commonwealth must provide the Oversight Board the
guidelines and procedures and priorities for payments it is using
to make disbursements by October 30, 2016;
*The Commonwealth may continue to use the Security Interest
Funds (including the Intercepted Funds) for “essential services”
and for categories of other government expenses;
*The Oversight Board must be given immediate unfettered access
to the Commonwealth’s financial officials and advisors; and
*The Commonwealth must provide to the Oversight Board an
information sharing protocol that will establish, among other
things, procedures and timetables for requesting and producing
information,
sharing
information
and
maintaining
its
confidentiality as appropriate, and resolving any disputes.
Id. at pp. 19-20.

PROMESA explicitly authorizes the Oversight

Board to require, “in its sole discretion, the Governor to submit
to the Oversight Board such budgets and monthly or quarterly
reports regarding a covered territorial instrumentality as the
Oversight

Board

§ 101(d)(1)(B).
whether

written

determines

to

be

necessary.”

PROMESA

The Board also has “the right to secure copies,
or

electronic,

of

such

records,

documents,

information, data, or metadata from the territorial government
necessary

to

enable

the

Oversight

responsibilities under this Act.”

Board

to

carry

Id. § 104(c)(2).

out

its

Moreover, the

Board is empowered to “seek judicial enforcement of its authority
to carry out its responsibilities under this Act.”

Id. § 104(k).

In light of these provisions, the Oversight Board has the
authority to make the type of requests included in its requirements
list and to seek legal redress from the Court in the event that the
Commonwealth does not directly comply with those requests.

Based

Civil Nos. 16-2365, 16-2384, 16-2696 (FAB)

6

on the information before the Court, however, it is not evident
that the Commonwealth has not complied with the Board’s requests
yet.

Although the Oversight Board provides copies of various

letters - sent to the Governor - seeking production of certain
financial
necessarily

information

and

demonstrate

reports,
that

the

these

documents

Commonwealth

do

has

not
been

non-compliant. It is not clear that judicial intervention pursuant
to PROMESA § 104(k) is therefore warranted at this time.

Should

the Board be faced with resistance or non-compliance on the part of
the Commonwealth, the Court will consider any request by the Board
“to seek judicial enforcement of its authority to carry out its
responsibilities” pursuant to PROMESA.
CONCLUSION
For the reasons discussed above, the Court DENIES WITHOUT
PREJUDICE the Oversight Board’s motion to intervene in these
consolidated cases.

(Civil No. 16-2365, Docket No. 67; Civil

No. 16-2384, Docket No. 51; Civil No. 16-2696, Docket No. 56.)
IT IS SO ORDERED.
San Juan, Puerto Rico, November 1, 2016.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE