Weekly Update – January 16, 2018

Welcome to your weekly Title III update for January 16, 2018.  I am presenting this on Tuesday since Monday was Martin Luther King. Proceedings this week were dominated by the January 10 hearing on the Aurelius and Utier’s constitutional challenge, but a few more important things happened.

As you may know from my report on the oral argument of January 10, Judge Swain took under advisement both the Aurelius challenge and the UCC’s request for reconsideration. She also denied the reconsideration but granted the UCC a chance to amend the complaint in order to make the constitutional challenge to the transfer of the SUT to COFINA. The UCC filed its amended complaint and memorandum quickly, but predictably, Ambac and other objected. Essentially, the constitutional challenge to the SUT transfer, if successful, would leave COFINA, a Puerto Rican corporation which has no income except the SUT contribution, holding the bag of the $17.6 billion debt. That way, COFINA bondholders would get zero but the Commonwealth would not owe a penny. On the other hand, if COFINA is unconstitutional, the obligation, to wit, the bonds, would be inexistent and since the Commonwealth took the money, it would owe the majority of the COFINA debt. Under this scenario, even as unsecured creditors, COFINA bondholders could claim against the Commonwealth, instead of a penniless entity.

In the previous update, I mentioned that attorney Gregorio Igartua filed a request to present an amicus curiae brief, in which he argued that Puerto Rico is an incorporated territory, which is what AFFAF should have done. Unfortunately, Judge Swain denied Mr. Igartua’s request. Oh, well.

Last week, AFFAF, on behalf of HTA, filed a motion to extend deadlines to oppose Adrián Mercado Jiménez’ request for the payment of $16,448 allegedly owed to him pursuant to a settlement agreement dated December 9, 2016. Allegedly, “HTA is continuing to analyze the Motion and it remains HTA’s hope that the parties can reach a consensual resolution of the Motion. Considering that HTA and AFFAF’s lawyers charge over $1,000 an hour, sixteen hours of work on this issue equals what is owed. Apparently, AFFAF does not want to pay and/or wants a reduction on the debt and therefore procrastinates payment. Not the best way to spend the limited resources of the Commonwealth if you ask me.

Utier, aside from its adversary proceeding challenging the Board’s appointment, also filed another case, 17-229, where it challenges the PREPA Fiscal Plan, etc., claiming, inter alia, that the Board’s actions violate the contracts clause of the US Constitution. For all its claims during the Aurelius argument that the Board was a part of the Puerto Rico government, the Board claimed as follows:

 “The FOMB is authorized by PROMESA to certify fiscal plans and budgets and to commence Title III cases, see PROMESA §§ 201(e), 202(e), 304(a), but the FOMB has not legislated here. Moreover, the FOMB has acted pursuant to a federal, not a Commonwealth, statute.” (underlining added)

As my Native American ancestors would say, the Board speaks with a forked tongue.

Finally, this past week the Board made some moves on the Commonwealth. Governor Rosselló was supposed to present the Fiscal Plans on January 10, but the Board sent him a letter telling him his request for extension had been granted and they were now due on January 24. But the Governor insisted he was ready to present the plans and the Board extended the deadline. If this was true, why didn’t the Government file the plan?

In addition, the Board informed the Governor that the law approved by the legislature over his veto, Act 119, was not in compliance with the Fiscal Plan or the budget. The Board, contrary to most of what the press said, ordered to correct the inconsistencies or to explain to the Board’s satisfaction.

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.