Welcome to your weekly Title III update for November 27, 2017. This Thanksgiving week very little transpired in the case.

Judge Houser was not amused by the parties discussion of what documents, or lack thereof, were provided during mediation during the oral arguments of Rule 2004 discovery. She filed a notice of breach of confidentiality and promptly Judge Swain issued an order that what goes on in mediation cannot be discussed in the main case. If a party still thinks it must make reference to something that happened during mediation, it must first request to file a motion under seal. I foresee this will happen with some frequency.

Judge Dein issued an order that if any party wanted to file a Rule 2004 motion, it would be “limited to no more than 20 targeted requests” which the Board had to answer. After the Board filed its opposition, the parties have to meet to see if they can come to agreements. Since the party is given up to 20 requests, there can be more than one motion. I foresee this happening with frequency.

The issue of the mediation and the Rule 2004 motions are closely linked. Several parties are seeking information on how the information used to prepare the Fiscal Plan and its economic models therein. Movants made a valid point that this information is vital to understand the future plan of adjustment which must be consistent with the fiscal plan. Hence, if you don’t understand how the Fiscal Plan is made, you will not be able to understand the Plan of Adjustment. The Board insisted it was providing the documentation in a special data room for those who were involved in the mediation but movants denied this.

Since the days of Alejandro García Padilla, the Government of Puerto Rico has resisted being open as to its finances. Since its first meeting, the Board has resisted being open as to where the Fiscal Plan assumptions and data come from, what they were and how its economic models worked and were devised. These actions by the Government of Puerto Rico and the Board are clearly against PROMESA.

Section 201(b)(1)(F) states that the Fiscal Plan must “improve fiscal governance, accountability, and internal controls.” In addition, section 405(m)(1) states as a finding of Congress that “[a] combination of severe economic decline, and, at times, accumulated operating deficits, lack of financial transparency, management inefficiencies, and excessive borrowing has created a fiscal emergency in Puerto Rico.” Clearly, Congress believed that transparency and accountability are of great importance but neither the Board nor the Government of Puerto Rico have heeded this admonishment. By denying these requests to do discovery, the Court has only helped the Board and the Government of Puerto Rico to perpetuate its lack of transparency.

Also closely related is the UCC request to conduct discovery as to the validity of the debt. The UCC has repeatedly pointed out the conflicts of interest of the Board as to the issuance of debt but the Court has preferred to allow it to take point, albeit with input from the Committee. Again, the Court has given the Board the benefit of the doubt but it seems to me that eventually, it will have to come out, and that will unfortunately likely be later rather than sooner.

This lack of transparency is critical not only to the Title III litigation but the entire PROMESA scheme. If Congress has found that lack of financial transparency was a factor in the island’s fiscal emergency, why has the Board gotten away with obfuscation of the truth? Given this lack of transparency, why has Congress not acted? Why can the  Board get away with telling the Court and all of those us who attended the hearing that there would be no money for debt service in the next 5 years without the corresponding documentation to support it? What is the Board’s agenda that requires that it have no transparency? Questions, questions.

The Mellon Bank interpleader as to COFINA is moving along with summary judgments, etc. It is an open question if the Court will decide the issues via motion, have a trial and or postpone decision until the Commonwealth v. COFINA case is decided. Having mentioned this case, the Court has allowed motions to intervene by all COFINA bond representatives, AFFAF and the GO Bondholders in this case. This is important since Judge Swain had denied intervention to the GO Bondholders and others in the Mellon Bank Interpleader.

The Commonwealth v. COFINA controversy will determine the ownership of the COFINA funds. If the funds belong to the COFINA bondholders, there will be less money for all other bondholders. On the other hand, if the SUT funds belong to the Commonwealth, will it have unfettered use of them? Will GO Bondholders have dibs on them or, as the Board claims, do they not have priority over these funds? This litigation may decide around $36 billion of the $72 billion of Puerto Rican debt when finished. Let’s see how Judge Swain plays it out.

I took a look at the PREPA Ad Hoc appeal, docketed on November 6, 2017, and it still does not have a briefing schedule. Neither party has requested expedited consideration of the matter although PROMESA requires that matters be expedited by the Courts.

A new adversary proceeding was filed that claims that Plaintiffs are owed “for services provided in furtherance of the Commonwealth’s Medicaid program,” a grant jointly supported by the federal government and the Commonwealth.  They also state that this debt is non-dischargeable and that the debts are otherwise unimpaired by PROMESA or the Commonwealth’s filing of Title III proceedings under such Act. Since one of my clients is involved in this, I will not comment as to the merits but those interested should read section 7 and 304 of PROMESA. Suffice it to say there are millions of dollars in judgments that plaintiffs have not been able to collect in state court.

On related matters, allegedly PREPA had stopped paying Whitefish due to Arc American, Inc. having sent it a letter claiming it had not been paid. On November 22, 2017, Whitefish, a Montana corporation with its principal place of business in that state, sued Arc, a Florida corporation, in the 11^th Judicial District Court at Flathead County in Montana for several causes of action and an injunction, even though their contract calls for disputes to be arbitrated. It is a very weird procedure and it is doubtful Montana courts have long arm jurisdiction over Arc.  The case could easily be moved to federal court. To add to the confusion, PREPA paid Whitefish $2.7 million for work already done, so it is questionable whether the Montana litigation will continue.

This summary is merely what I believe are the more salient motions and decisions in the cases. I receive an average of 20 filings each day so it would be impossible to summarize everything. If you have legal interest in these cases, I urge you to hire an attorney to represent you.

Welcome to your weekly Title III update for November 20, 2017. This week several motions and incidents of great importance have occurred. Aside from the blockbuster and, to me, surprising decision by Judge Swain to deny the Board’s unilateral appointment of Noel Zamot as PREPA CTO and essentially put the Government of Governor Rosselló on equal footing with the Board, other interesting things transpired. Even still, it remains to be seen if the Board will appeal Judge Swain’s ruling.

The Board filed a motion essentially stating that the COFINA and Commonwealth agents exceed its authority in the Commonwealth v. COFINA dispute. It states at page 2 of its motion:

“[B]oth the COFINA Agent and Commonwealth Agent have exceeded the scope of their respective agencies by making claims and seeking relief that go beyond the narrow issue for which they were appointed to resolve—the Commonwealth-COFINA Dispute. The Oversight Board thus seeks an order confirming the scope of the tasks it expressly assigned to its Agents, so the Agents can answer the single question posed to them, through litigation or authorized settlement, and the Oversight Board can then use that answer to carry out its duty to restructure the debts of the Commonwealth and COFINA.”

As to the Commonwealth Agent, to wit the UCC, the Board objects to Count III that states “the Commonwealth Agent hereby indicates its intent to breach, revoke, and/or reject that unsecured promise” that sales and use tax (“SUT”) “revenues would be transferred to COFINA in the future.”

As to the COFINA agent, the objections are to these causes of action:

“Count II: Declaration that the “Commonwealth’s misappropriation of the Pledged Sales Tax and/or Dedicated Sales Tax” constitutes a violation of the U.S. and Puerto Rico Constitutions.

Count III: Declaration that the “Commonwealth’s misappropriation of the Pledged Sales Tax and/or Dedicated Sales Tax through the Compliance Law” constitutes a violation of PROMESA.

Count VII: Permanent Injunctive Relief against the Commonwealth, preventing the Commonwealth from “interfering” with the Funds.

Count VIII: Declaration that “the GO Bonds, PBA Bonds and Other Debt Issued in Violation of the Debt Limit” Are Not Entitled to Priority under the Constitution.” (Board motion pages 6-8)

The Board motion also argues that the interveners’ motions exceed the scope of the intervention. These objections are much more numerous than the COFINA and Commonwealth Agent objections. The motion specifically objected to several causes of action by Ambac, COFINA Senior Bondholders, Mutual Fund Group/Mutual Fund Group and National.

Irrespective of the merit of these objections, and some are quite meritorious, it is clear that the Board wants to tightly control the Commonwealth v. COFINA litigation. To what extent it will be allowed by Judge Swain, we will soon find out.

Related to the Commonwealth v. COFINA dispute, several motions to strike claims were filed this week. Ambac filed a motion to strike the UCC’s causes of action (claim 12 and 13) claiming COFINA is unconstitutional – which I believe is the strongest claim — and the avoidance claims (claims 4-11). As you can see, Ambac wants to strike the bulk of the UCC’s claims against COFINA. Another party trying to control the scope of inquiry in the Commonwealth v. COFINA dispute.

Judge Hausser, in charge of the mediation team, made some remarks during the November 13, hearing but recognized that “no major breakthroughs had been achieved.” As to the UCC’s motion to conduct discovery as to the legality of PR debt, Judge Dein denied it without prejudice and conditioned any new motion on the UCC confirming:

1. “that it has entered into a mutually agreeable nondisclosure agreement with the investigator appointed by the Oversight Board (the “Investigator”) or has been unable to do so despite its good faith efforts;
2. that it has submitted targeted discovery requests for information from the Financial Institutions to the Investigator; and
3. that the Investigator has failed to seek this information from the Financial Institutions within a reasonable time or has otherwise been unable to obtain this information within a reasonable time.”

The clear message to the Board and its investigator is to take the UCC’s views seriously.

The QTCB Noteholder Group filed a motion requesting that the UCC’s Eight Cause of Action against COFINA be stricken. This cause of action claims “that any security interest of COFINA is subordinate to the rights of the Oversight Board as trustee.”

Also, the GO Ad Hoc Committee filed a motion to strike the following in the Commonwealth v. COFINA litigation:

“a. The Second, Third, Fourth, Seventh, and Eighth Causes of Action asserted in the Amended Answer, Defenses, and Counterclaims of the Appointed Agent of the Puerto Rico Sales Tax Financing Corporation (COFINA) (Dkt. No. 75 ¶¶ 73-102, 117-128);

b. The Third Counterclaim asserted in the Mutual Fund Group’s and Puerto Rico Funds’ Answer and Counterclaims (Dkt. No. 88 ¶¶ 73-80);

c. The Second, Third, and Fourth Causes of Action asserted in the Answer, Affirmative Defenses, and Counterclaims of National Public Finance Guarantee Corporation (Dkt. No. 93-1 ¶¶ 70-102);

d. The First, Second, Third, Fourth, Fifth, Sixth, and Seventh Counterclaims for Relief asserted in Intervenor-Defendant and Counterclaimant Ambac Assurance Corporation’s Answer and Affirmative Defenses to the Unsecured Creditor Committee’s Amended Complaint and Counterclaims Against the Commonwealth (Dkt. No. 94 ¶¶ 56-111); and

e. The Second, Third, Fourth, Fifth, Sixth, Seventh, Tenth, Fourteenth, Fifteenth, Seventeenth, Eighteenth, Nineteenth, Twentieth, and Twenty-first Causes of Action asserted in the Answer in Intervention and Counter and Crossclaims of the COFINA Senior Bondholders’ Coalition (Dkt. No. 90 ¶¶ 69-122, 137-141, 161-175, 182-207)”

Clearly, the Commonwealth v. COFINA controversy is much larger than it seems.

Judge Dein heard argument on several motions for Rule 2004 discovery. She granted Siemens right to request documents and take on deposition on “whether or not the funds identified in the Motion are being held in an escrow account.”

The former representative of the Puerto Rico Government to the Board, Mr. Elías Sánchez, had filed a motion to strike his mention in the UCC request to conduct discovery on the Whitefish contract. Although the UCC amended its motion to reflect the fact that he denied any involvement, Mr. Sánchez insisted in striking any mention of himself. As I predicted, Judge Swain denied the motion to strike.

The UCC and PREPA reached written stipulation on the inquiry as to Whitefish. Maybe at some time we will know the truth behind this scandal.

Aurelius filed a reply to motion to dismiss by the Board and to the Board’s objection to the lifting of the stay. These issues which surround the Constitutionality of the appointment of the Board members is in full fledged briefing schedule. In December, the Solicitor General of the US will file his opposition to Aurelius and Utier and oral arguments are to be held in January 10, 2018. The issue is likely to reach the US Supreme Court.

The Official Committee of Retired Employees of Puerto Rico was allowed to intervene in a limited fashion in the adversary proceeding of the ERS v. Altarir where the validity of certain liens is being challenged.

Lastly, the American Federation of State, County and Municipal Employees filed a reply to Utier’s opposition to their intervention in its constitutional challenge of the Board appointments.

This summary is merely what I believe are the more salient motions and decisions in the cases. I receive an average of 20 filings each day so it would be impossible to summarize everything. If you have legal interest in these cases, I urge you to hire an attorney to represent you.

Welcome to your weekly Title III update for November 13, 2017. This week and last several motions and incidents of great importance have occurred.

Today, Judge Swain heard oral arguments regarding the Board’s urgent motion to appoint a Chief Transformation Officer for PREPA. After arguments, Judge Swain not only ruled against the Board from the bench, but made important findings in favor of a limited view of the Board’s power. She said nowhere in Title I, II or III of PROMESA was there basis for the appointment of Mr. Zamot. She insisted that PROMESA required that the Puerto Rican Government act first and then the Board could react.

Judge Swain also denied that the Board could impose the recommendations it made in the Fiscal Plan if the Government rejected the recommendations, which puts into question the Board’s power to impose furloughs or pension reductions. Judge Swain mentioned that in the DC Board statute, there was the power to appoint an emergency manager and that this was not included in PROMESA. Moreover, Section 204 of PROMESA does not give the Board power to review all contracts, as it previously claimed. She also mentioned that Section 108(a) does not give the Board power to conduct day-to-day management of recovery efforts. Important, the Board cannot unilaterally borrow money in the name of the Government of Puerto Rico and any feasible Plan of Adjustment must take into account the Government of Puerto Rico. Both the Board and Puerto Rican Government are partners to achieve the dual goals of PROMESA.

All this essentially puts Governor Rosselló and his administration on equal footing with the Board. One cannot do things without the other. It remains to be seen if the Board will appeal this decision or if it will simply seek these prerogatives from Congress.

Finally, I want to make clear that I do not support the Board. I think it has exercised its powers to the detriment of Puerto Rico. It was my professional opinion that PROMESA, as written, gave the Board the powers it was invoking and as is the case in every piece of ongoing litigation, the Judge had the last word unless her decision is appealed. Let’s see how this new balancing of powers works out for Puerto Rico.

Last week, the Asociación de Profesoras y Profesores del Recinto Universitario de Mayagüez, Inc., a professorial association of employees of UPR Mayagüez Campus, filed an amended complaint challenging the UPR fiscal plan as unconstitutional. The problem with the complaint is that the professors lack standing since the reduction in funds to the UPR does not necessarily entail injury to them. Without standing, this challenge will likely fail.

The QTCB Noteholder Group filed a notice of intervention in the Commonwealth v. COFINA dispute to request that the UCC’s Eight Cause of Action be stricken. This cause of action claims “that any security interest of COFINA is subordinate to the rights of the Oversight Board as trustee.” COFINA creditors have been filing answers to the complaint aside from what the COFINA agent has done so Judge Swain will have many arguments to sift through.

Two weeks ago, the UCC filed a motion to conduct discovery on the Whitefish contract and quickly several bondholders joined the request. Both PREPA and Whitefish were willing to provide the documents they would provide to Congress. After a short delay, they came to a stipulation to provide documents to the UCC. As the stipulation was filed, the Court cancelled the November 13 afternoon hearing. There will be a hearing on November 15, however, for the myriad other Rule 2004 requests for discovery that have been pending for a while. These requests include requests by bondholders on information as to the financial condition of the Commonwealth. On November 15, Judge Dein will hear further argument in the Siemens Transportation, National Public Finance Guarantee Corp., Ambac Assurance, UCC and GO, Assured Guaranty & Mutual Fund Group Rule 2004 motions. It will be interesting to see whom and to what extent Judge Dein will allow to conduct discovery.

Also, on November 6, the Board announced its policy on the Puerto Rican Government review. PROMESA gave the Board this power but it was only during its October 31 meeting that it decided to utilize this power. Extremely convenient, given the Whitefish contract controversy. The document states:

“This Policy applies to any contract that is proposed to be entered into by the Commonwealth or any covered instrumentality. As used in this Policy, “contracts” also applies to grants and sub-grants. This Policy applies to all contracts in which the Commonwealth or any covered instrumentality is a counterparty, including those with the federal government, state governments, private parties, and nonprofit organizations.”

So much for the Board recognizing the limitations of section 204(d)(2) of PROMESA or the democratically elected government of Puerto Rico.

In addition, Ambac Assurance objected to the Board’s request for an extension to the period to determine whether to reject or adopt unexpired contracts. Understandable, but it is unlikely Judge Swain will not grant the extension.

The saga of Elías Sánchez v. the UCC continues. The UCC amended its motion for Whitefish discovery to acknowledge that Mr. Sánchez denied the allegations but refused to withdraw its statement that former Governor Acevedo Vilá in his radio show claimed Mr. Sánchez was involved in the Whitefish contract. Mr. Sánchez filed a reply but it is unlikely Judge Swain will strike a statement of fact that Mr. Acevedo Vilá made the claim.

The US Government, although asking to be heard via motion, was absent from today’s hearing, putting into question its support of the Board.

The Board also took off the gloves with AFFAF in another issue. AFFAF requested leave to intervene in the Utier challenge to the constitutionality of the Board appointment. The Board objected but said at page 4:

“Defendants support AAFAF’s intervention as a party in interest pursuant to 11 U.S.C. § 1109 (“Section 1109”), consistent with Dkt. 75 in 17-ap-189, and Dkt. 38 in 17-ap-219. Under Section 1109, AAFAF “may raise and may appear and be heard” on issues in this adversary proceeding, including the Motion to Dismiss the complaint. Accordingly, AAFAF should be permitted to file briefs stating its position on issues raised in this adversary proceeding and subject to such notice or other requirements as the court may impose, and be heard at arguments concerning issues raised in this adversary proceeding. AAFAF does not have the right, and should not be afforded the right, to control, appeal, or settle causes of action.”

In other words, AFFAF can state its position and be heard but nothing more. Sort of a permanent Amicus Curiae. Again the Board brushes aside the Government of Puerto Rico. And speaking of the Utier complaint, the union filed an amended complaint cutting 25 pages of its previous motion. It seems that a review of the Aurelius complaint was persuasive.

This summary is merely what I believe are the more salient motions and decisions in the cases. I receive an average of 20 filings each day so it would be impossible to summarize everything. If you have legal interest in these cases, I urge you to hire an attorney to represent you.

Welcome to your weekly Title III update for November 6, 2017. This week several motions and incidents of great importance have occurred.

Whitefish continues to dominate in the news and in the Court. The UCC filed a motion requesting leave to conduct Bankruptcy Rule 2004 on the Whitefish contract. The motion, which is a superb summary of all the facts and allegations surrounding the Whitefish contract, states that at page 15:

“The only way to address these concerns through the lens of the stakeholders in these Title III Cases is through discovery under Bankruptcy Rule 2004. As the official committee appointed to represent all of the unsecured creditors in PREPA’s title III case, no party stands better suited to investigate and evaluate these issues than the Committee.”

The UCC mentioned that former Governor Aníbal Acevedo Vilá, during one of his daily radio shows, alleged that Elías Sánchez, former Governor Rosselló representative before the Board, was involved with Whitefish, as an example of possible corruption or wrongdoing. Mr. Sánchez was not amused and filed a motion to strike the statement and included a statement, under penalty of perjury, stating he does not represent Whitefish or any of its principals nor have any contracts with PREPA. Judge Swain issued an order that the UCC “shall file an opposition, if any, by November 7, 2017. Mr. Sánchez shall file a reply by November 9, 2017 at 1:00 p.m.” Never a dull moment in Puerto Rican politics!

Related to the Whitefish contract and PREPA, much to my surprise, several parties filed objections to the Board’s request to appoint Mr. Zamot as the Chief Transformation Officer. For example, the Ad Hoc Group of PREPA Bondholders filed a motion claiming that PROMESA does not explicitly allow the Board to appoint Mr. Zamot. The Ad Hoc Group, however, retained an expert that evaluated the grid and found that:

“While Hurricane Maria undeniably inflicted substantial damage, ample evidence demonstrates that the vast majority of the assets of the PREPA generation, transmission, and distribution system are substantially intact and could be restored expeditiously if appropriate and competent measures were implemented.” (page 1 of the motion)

The Ad Hoc Group’s motion details the decades of mismanagement of PREPA and specifically, the mismanagement of the corporation under the Rosselló administration. For example, the motion mentions that “on October 31, AAFAF publicly presented a liquidity update that showed that PREPA has had, and was projected to have, over $500 million from July 7 through September 22; by October 20, PREPA’s liquidity balance had decreased only to $471 million.” (Page 5) Moreover, the Ad Hoc Bondhholders filed a declaration by Derek HasBrouck (required reading for all residents of Puerto Rico), which excoriates PREPA for lack of preparedness and total mismanagement in the Hurricane María emergency. Although these bondholders do not support Zamot saying he has no experience in electrical grids, they renew their call for a receiver that would respond to a court (not Judge Swain) to manage PREPA. Fat chance that will happen unless the First Circuit reverses Judge Swain’s decision on the Ad Hoc bondholders’ request.

National filed a short motion objecting to the permanent appointment of Mr. Zamot but stated it “supports the entry of an appropriately tailored order, pursuant to section 105 of the Bankruptcy Code (made applicable to this Title III case by section 301 of PROMESA), authorizing Mr. Zamot to oversee the immediate repairs to the island’s electric power grid on an interim basis for a period of 120 days. Given the extenuating circumstances on the island, such limited relief is both warranted and urgent. National respectfully requests, however, that the Court deny the remainder of the relief requested or, alternatively, defer consideration of it until a later date.” (Page 8)

The Puerto Rican Energy Commission, supposedly PREPA’s regulator, filed a motion saying it took no position as to the Board’s motion but requested from the Court that it “(a) state explicitly that any approval of the CTO Motion does not preempt the Commission’s authority; and, regardless of how this Court rules on the CTO Motion, (b) direct counsel for FOMB and the Commission to develop, for this Court’s approval, a set of protocols ensuring that the actions of each entity are coordinated and mutually supportive, and not in conflict.” (Page 1) No idea how Judge Swain or the Board will handle this.

Obviously, AFFAF, representing PREPA, opposes the Zamot designation, repeating that PROMESA does not authorize the Board to do what it wants done. However, it seems to me its explanation of what the Board may or may not do pursuant to Section 305 of PROMESA ignores the fact that it clearly states that the Court cannot interfere with the local government’s power unless the Board agrees. Since the Board does agree with this interference with local authority, I fail to see how Judge Swain will not find for the Board. Also in disagreement was Scotiabank de Puerto Rico (“Scotiabank”), as administrative agent for PREPA’s “Fuel Line Lenders”. The motion repeats that the Board does not have the authority to appoint Zamot but without that authority it has ample authority to oversee PREPA’s recovery efforts. Scotiabank stated:

“To the extent the Oversight Board wishes to engage a CTO or other individuals to fulfill its statutory oversight role, the Fuel Line Lenders have no objection. In particular, if the Oversight Board has concluded that a CTO will add value in supervising the power restoration process (including through review and approval of contracts), the engagement should go forward on that basis.

The appointment of a long-term chief executive to take over PREPA’s management is completely different. As noted, the Oversight Board has no authority to supplant PREPA’s management. But if PREPA itself were to supplement its senior leadership, the utility would need to undertake an organized process to attract the best available individuals. A standard approach would be to engage an independent search firm (such as Russell Reynolds, which identified candidates to serve on PREPA’s board of directors) to search for individuals, inside or outside PREPA, with significant knowledge of the utility industry and experience managing a large utility such as PREPA. Scotiabank, as agent for the Fuel Line Lenders, stands ready and willing to participate in any such process along with PREPA, the Commonwealth, the Oversight Board, and other stakeholders.” (Page 10)

It is clear to me that creditors do not believe PREPA is capable of bringing electricity to Puerto Rico in a quick fashion, but they also do not trust the Board to be in complete control of the agency. Moreover, as Puerto Rico’s representative to the Board has said, if this remedy is granted, what would prevent the Board from appointing a CTO for the Government of Puerto Rico? Time will tell.

In addition, the PREPA Board of Directors filed a short objection and the U.S. Bank National Association, in its capacity as successor trustee under the PREPA Trust Agreement dated as of January 1, 1974, joined the Ad Hoc Bondholders motion.

Also on Friday November 3, several parties filed objections to Aurelius motion to dismiss the Title III filing for violating the appointments clause. Donald J. Verrilli issued a strong defense of the Board’s appointment, which it is to be expected as he was President Obama’s Solicitor General when PROMESA was enacted. Aurelius will reply soon and oral arguments are to be held in January 2018. If, however, President Trump’s Solicitor General decides not to support the PROMESA appointment process, which is unlikely, Mr. Verrilli will have an uphill battle. The Official Committee of Retired Employees of the Commonwealth of Puerto Rico also filed a motion in opposition to the Aurelius motion to dismiss, giving reasons why supposedly Congress has the authority to limit presidential power to appoint in territories. This has not been the practice in the past, however.

On the other hand, the American Federation of State, County and Municipal Employees, who also filed an objection to the Aurelius request for dismissal of the Title III proceeding, claims that it “opposes dismissing this Title III case based on the Appointments Clause unless, at a minimum, the offensive doctrine of territorial incorporation is completely overruled.” What does that doctrine have to do with Presidential powers is beyond me, but there it is. Obviously, this argument is made because the only one who can reverse the doctrine of territorial incorporation is the Supreme Court of the United States. I find this motion lacking but lets see what Judge Swain decides next year. In an interesting twist, the American Federation of State, County and Municipal Employees filed a motion to intervene in the Utier request for declaration of unconstitutionality of Board appointments to seek the dismissal of the complaint. It seems this group believes it is better off in a bankruptcy proceeding. Also, the GO bondholders joined the Aurelius request for dismissal in a short motion.

In addition, Judge Swain issued an order, pretty much agreed upon by the parties after extensive negotiations, granting Bettina Whyte, the COFINA agent:

“The protections of 48 U.S.C. § 2125 (“Immunity Protections”) shall apply to the COFINA Agent, the Commonwealth Agent (together with the COFINA Agent, the “Agents”) and their respective professionals and employees with respect to all actions of the COFINA Agent or Commonwealth Agent, as applicable, taken in good faith to carry out their duties under the Stipulation and Order; provided, however, that the foregoing shall not prohibit the Oversight Board or any other party in interest from asserting that a claim, counterclaim or defense asserted by an Agent in the Commonwealth-COFINA Dispute, or any other action of an Agent, is outside of the scope of the authority delegated by the Oversight Board to the Agents or otherwise set forth in the Stipulation and Order (a “Scope Objection”), and if the Court enters an order that (i) sustains a Scope Objection or (ii) otherwise rules that the Agents do not have the authority to take an action or litigate a claim, counterclaim or defense (a “Scope Order”), then the Immunity Protections shall not apply to any further actions by the Agents, their professionals or employees to continue to litigate such claim, counterclaim or defense, except that the Immunity Protections shall apply to any appeal of a Scope Order and to any actions taken in mediation with respect to such claim, counterclaim or defense prior to appeals being exhausted.” (Page 2-3)

In addition, the order states that COFINA will pay Ms. Whyte’s fees from the account it has with BPPR and if there is not enough money, then from the NY Mellon Bank account. Loss for AFFAF.

The UCC filed on Friday, November 3, an informative motion as to the issues of Rule 2004 discovery and informed Judge Dein, “The Creditors’ Committee’s position has not changed, and the Creditors’ Committee respectfully requests a ruling on its pending Bankruptcy Rule 2004 Motion after oral argument on November 15, 2017.” (Page 1) In addition, the UCC stated that John Couriel’s investigation on behalf of the Board is different from the one it seeks to conduct:

“[T]his investigation as intended not to identify culpable third parties or potential claims but instead “sole[ly] [] to find facts” related to, among other things, “the factors contributing to Puerto Rico’s fiscal crisis” and its debt issuance.5 However interesting this effort may be in developing a historical record of the financial foibles of various Commonwealth actors, the Creditors’ Committee’s interest is rather different. Because it represents the interests of creditors holding billions of dollars in claims that will be satisfied only partially, its intent is in determining whether claims exist that might benefit these creditors. Mr. Couriel is not pursuing that end.” (page 2 of the motion)

If Judge Dein recommends the UCC proceed, this will throw a monkey wrench into the Board’s plans of total control of the Title III proceeding. In the HTA case, the parties also failed to reach an agreement as to Siemens’ request for Rule 2004 discovery.

On the subject of Rule 2004 discovery, an Omnibus motion by different creditors and debtors was filed, essentially stating that no agreement has been reached. Also, the UCC partially joined National’s request for Rule 2004 discovery. All these issues will be discussed during the November 15 hearing.

The Board also opposed the Aurelius motion to lift the stay and the UCC requested leave to argue during the hearings on several motions to dismiss adversary proceedings. The UCC also opposed bondholders’ request for a 90 day stay in the case, as did the Board.

Finally, the Board had a meeting on Tuesday, October 31. I attended the meeting and quite a bit of new information came out. The Board wants a new fiscal plan for the Commonwealth to be provided by December, with a projected approval for February. As to the fiscal plan, Ms. Jaresko and members of the Board warned the Government that with a population reduction since the hurricane of 15% (gasp!) and a projected 40% plus reduction in income, it had to consider what essential services it could provide. This is nothing more than an even more aggressive employment and pension reduction. During the meeting, Ms. Jaresko announced, upon the suggestion of the settlement team, that all stakeholders have an opportunity to comment on the new fiscal plan. Also, the Board will now review any contract of the Commonwealth and its instrumentalities of $10 million or more before it can be approved. The Board will also review, at random, contracts that have been granted, including the Whitefish contract, in particular. Considering that after María the Puerto Rican government has granted 1,600 contracts, this is a herculean task.

This summary is merely what I believe are the more salient motions and decisions in the cases. I receive an average of 20 filings each day so it would be impossible to summarize everything. If you have legal interest in these cases, I urge you to hire an attorney to represent you.