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Judge Swain asks for moderation of professionals who work for Puerto Rico fiscal board

By on March 7, 2018

SAN JUAN – An omnibus hearing over Puerto Rico bankruptcy matters Wednesday proceeded smoothly as U.S. District Court Judge Laura Taylor Swain gave the green light to the fee examiner’s report, and agreements were reached involving government property leases.

The hearing began with Martin Bienenstock, a representative for the island’s Financial Oversight and Management Board, announcing that the Puerto Rico Electric Power Authority (Prepa) expects its revenue to rise this month and will postpone a possible second request for emergency financing for after April. At that time, the utility may request a $550 million loan.

In February, the power company obtained a $300 million loan from the commonwealth at a 5% interest rate. While the utility had initially said the loan was going to be depleted by the end of March, a report from Prepa obtained by Caribbean Business stated that the $300 million will not cover fuel expenses but only payroll expenses for the next three months.

Meanwhile, attorney Katherine Stadler presented the fee examiner’s report, which recommended the approval of 30 interim fee applications.

Leases at core of U.S. District Court omnibus hearing over Puerto Rico bankruptcy

In the first report, some $75 million in fees were requested, with requested expenses totaling $2 million. The fee payments for 10 other firms was deferred to the April omnibus hearing. Judge Swain ended up approving $48 million in fees.

Professionals representing or working directly on behalf of the fiscal oversight board collectively filed 12 of the fee applications. Of those, the applications of Proskauer Rose, McKinsey and Co., O’Neill & Borges and Andrew Wolfe were deferred to the April 25 hearing.

Fee Examiner Brady Williamson raised concerns about the high number of professionals attending meetings, hearings and mediation sessions, vagueness in the explanation of the work carried out, duplication of work and differing fees between local and U.S. attorneys.

Going forward, Stadler said that only up to two lawyers attending meetings or hearings will be paid. Attendance of additional lawyers would have to be justified. She also stressed the need for clarity in providing details about the work done. The fee examiner will not disclose the work performed by any lawyer that is bound by a confidentiality agreement.

Judge Swain noted that lawyers speaking at hearings should be required to travel if they need to but that the rest can listen to the hearings through remote services provided by the court.

“People in Puerto Rico cannot afford the billions of dollars in fees,” Judge Swain said.

Williamson, on the other hand, asked for a court order to be able to examine fees for professional work done before the cases under the Promesa law’s Title III were filed.

Judge Swain did not have to spend much time listening to a motion filed by the American Federation of State, County and Municipal Employees and the American Federation of Teachers, which wanted an order allowing the processing of employment arbitration and grievance proceedings that were stayed by the Title III bankruptcy process. The unions were able to reach an agreement with the government, which had initially opposed allowing the processing of the grievances citing concerns about their impact on the government’s fiscal plan.

As part of the stipulation, the commonwealth agreed to allow arbitration and grievance proceedings to move forward to a final resolution and will not seek to have them stayed. Most of the claims arose before the government filed for bankruptcy.

Puerto Rico fiscal board says federal law gives it purview over power utility restructuring

Notwithstanding, the commonwealth said it believes certain categories of actions would have an impact on the fiscal plan or the Title III cases. These include challenges to the constitutionality of a law or where a remedy would be inconsistent with the fiscal plan. Those cases will continue under a stay but lawyers for the plaintiffs can seek to have it lifted.

The Service Employees International Union and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) objected the stipulation. To that, Judge Swain said she wanted to see if the parties reached an agreement on the matter.

“This agreement is very important to us. It has been an arduous struggle to defend workers who claim they were unjustly treated by their employer,” Annette Gonzalez, president of the United Public Servants union.

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On the other hand, a lawyer for Puerto Rico’s Fiscal Agency and Financial Advisory Authority announced an agreement had been reached in a dispute in which PBA (Public Buildings Authority) Funds, a creditor group, was seeking an order to force the government to pay a number of unexpired leases. These rent fees back bonds issued by the Public Buildings Authority. The government, in opposing the order, said PBA Funds had no standing to force rental fees owed to the Public Buildings Authority.

On the other hand, Judge Swain allowed the government to assume the lease of the property where the Police has its shooting range. She rejected a request filed by Javier Mandry, who has a dispute over the land’s ownership. The Police is leasing the shooting range for $1 per year. Lawyers for the government said allowing the Police to continue the lease does not prevent Mandry for going to court to ascertain his claim that he owes the property.

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