Fiscal Board Seeks Reconsideration of Besosa’s Ruling
SAN JUAN — On Wednesday, the Puerto Rico Financial Oversight & Management Board asked U.S. District Court Judge Francisco Besosa to reconsider his ruling in which he denies the panel’s request to intervene in three consolidated cases whose plaintiffs are seeking a lift of Promesa’s stay on liability claims.
The board says Besosa made at least “three manifest errors of law” in declining to allow it to intervene in the cases, which will be evaluated during a hearing Thursday.
The hearing involves a lawsuit filed by Altair Global Credit Opportunities Fund and some 30 hedge funds against the commonwealth’s Employees Retirement System. The Altair case wants employees’ retirement contributions to be put in a separate account to meet certain debt payments.
The Altair case was consolidated with lawsuits filed by Peaje Investments and Assured Guaranty Corp., which are trying to stop the government from diverting funds from the Highways & Transportation Authority (HTA) for uses other than meeting debt obligations.
On Oct. 28, the Oversight Board sought to intervene in each of the consolidated actions and attached to its motion a copy of its opposition to each of the plaintiffs’ motions to lift Promesa’s legal stay.
Besosa denied the board’s motions to intervene, contending that it failed to comply with Federal Rules of Civil Procedure because it didn’t attach to its motion a pleading addressing the substantive merits of its petition.
The board says Besosa’s ruling is incorrect for three reasons. First, the oversight board did, in fact, include with its intervention motion a pleading that satisfies the rules, the document states.
“The Court appears to have taken the view that the Oversight Board’s pleading should have addressed the substantive merits of the parties’ constitutional claims, but that interpretation cannot possibly be correct because none of the Plaintiffs in these actions has filed a complaint yet. The Plaintiffs in Peaje Investments and in Assured Guaranty each attached a proposed complaint to their motion papers, but those complaints will not be filed unless and until the Court lifts the Promesa stay,” the board argues.
The plaintiffs in Altair Global Credit Opportunities Fund didn’t even attach a proposed complaint to their motion papers. They conceded that they will not file a complaint until the Court lifts the Promesa stay, the petition says.
The board also argues that the court erred because even if plaintiffs had filed complaints, the panel wasn’t required to take a position on the plaintiffs’ constitutional claims. “Courts routinely allow parties to intervene and to seek relief or take positions that are unrelated to the merits of the underlying litigation… Thus, here, it would be entirely appropriate for the Oversight Board to intervene in these actions solely for the purpose of opposing the Plaintiffs’ lift stay motions or seeking a stay of the actions pursuant to Section 212(b)(1) of PROMESA and the Court’s inherent power to control its docket,” the board states.
The oversight board cites as a third error, that requiring it to respond to the merits of these actions would undermine clear congressional intent. “The Promesa stay was intended (among other reasons) to allow the Oversight Board the opportunity to establish its foundational structure and begin its monumental task of ensuring Puerto Rico regains access to capital markets,” the board stresses.
“In accordance with express Congressional intent, the Oversight Board sought to intervene in the actions on behalf of the Commonwealth to protect the Oversight Board’s and the Commonwealth’s right to the breathing spell provided by the Promesa stay so that they can concentrate on fiscal plans and capital market strategy instead of on multiple litigations,” it further concludes.