Monday, October 18, 2021

Government says Promesa’s stay is ‘least effective’ in US history

By on October 28, 2016

SAN JUAN – Burdened by the large number of creditor lawsuits, the government of Puerto Rico said Friday Promesa’s stay “may be the least effective stay on  litigation in American history.”

The comment was made in a motion filed Friday as the government awaits federal Judge Francisco Besosa’s ruling on whether the stay should be lifted in four consolidated cases from litigants challenging the constitutionality of the Puerto Rico Emergency Moratorium & Financial Rehabilitation Act.

In the motion, the government asked the court to deny the plaintiffs’ requests to lift the stay, contending they are trying to gain a tactical advantage in future negotiations.

“The Commonwealth of Puerto Rico has been denied the benefit of the litigation stay that Congress and the president believed would be critical to both the implementation of the Puerto Rico Oversight, Management, and Economic Stability Act (“Promesa”) and the Commonwealth’s ability to address its financial crisis,” the government said.

Instead of receiving the “immediate—but temporary—stay that is essential to stabilize its fiscal crisis the Commonwealth and its officials have been subjected to constant litigation over the application of the Promesa stay,” according the government’s filing.

oversight-board-1st-meetingIn the two months since Aug. 22, when the court ruled that the Promesa stay applied in the four cases, the commonwealth had to devote its attention and resources to prepare for evidentiary hearings, filing no fewer than 44 briefs in federal court, and addressing claims across 14 different cases.  

“The results, as the Commonwealth attempted to show during the September 22 hearing, are a massive disruption to the Commonwealth’s efforts to deal with its existing financial emergency and a serious impediment to the Commonwealth’s ability to fulfill its obligations under Promesa,” the government said.

Still there is no end in sight, creditors are filing new cases and existing plaintiffs are trying to narrow and re-cast their collection actions to circumvent the statutory litigation stay.

“In the absence of intervention by this Court, the Commonwealth will have to devote even more time and resources to addressing the new and pending cases. At present, the Promesa stay may be the least effective litigation stay in American history,” the government said.

The Financial Oversight & Management Board recently opted to intervene to support the stay on behalf of the government.

The board agrees that “the Commonwealth’s limited resources are better spent working with the Oversight board and helping the Oversight Board begin its monumental tasks of negotiating fiscal plans and ensuring that Puerto Rico regains access to capital markets, rather than litigating the four cases, the other eight related cases the Commonwealth is currently defending, and the additional cases that will likely follow in the event the stay is lifted.”

As the board observed, it doesn’t appear that any of the plaintiffs would suffer “irreparable or even material harm” during the pendency of the stay, the government said.

“In fact, these plaintiffs are merely trying to gain an early tactical advantage for themselves in the inevitable negotiations and restructuring proceedings that will take place under Promesa, without regard for the prejudicial impact on the Commonwealth of this prolonged litigation. The burdens of this litigation, and the litigation about this litigation, are threatening the entire Promesa process,” the government said.

Unless the court exercises its authority to give the government the “breathing room” it needs under Promesa, the situation will only worsen, the government added.

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