As we know, there are several bond insurers and other bondholders who have sued PR in Federal Court challenging the constitutionality of the island’s Moratorium law and several of Governor García Padilla’s executive orders, which are being presided by Judge Francisco Besosa. These cases are:
Brigade Leveraged Capital Structures Fund, Ltd. v. García Padilla, 16-1610. Plaintiff, a group of GDB bondholders, claim that the PR Moratorium Act, the new GDB liquidation procedure and the Governor’s Executive Orders are unconstitutional and also preempted by the Bankruptcy Code. Also, Brigade filed a motion seeking a recognition that its case was not stayed under PROMESA and in the alternative, that the stay be lifted. There is no prayer for money payment;
National Public Finance Guarantee Corporation v. García Padilla, 16-2101. The complaint seeks to declare the Moratorium law unconstitutional. National filed for summary judgment the after the Supreme Court affirmed the invalidation of the PR Recovery Act in Franklin California v. Commonwealth. There is no prayer for money payment;
Trigo v. García Padilla, 16-2257. Plaintiffs, a group of PR bondholders, filed a complaint claiming that the Moratorium law and the new GDB liquidation process violate the PR and US Constitutions. There is no prayer for money payment;
Lex Claims LLC v. García Padilla, 16-2374. Plaintiffs are a group of GO bondholders that claim, among other things, that PR violated section 204(c)(3) of PROMESA and although claim that the PROMESA stay does not apply to them, they also see the lifting of the stay. There is no prayer for money payment;
Assured Guarantee Corp. v. García Padilla, 16-2384. Plaintiffs filed a request under section 405 of PROMESA for the lifting of the stay. Its tendered complaint has a cause of action for damages pursuant to section 407(a) of PROMESA, which is probably why they sought the lifting of the stay before filing.
All these cases are presided by Judge Besosa and it is a good idea that all the cases be decided by one judge, since that way the issue of to what cases the stay applies will have one uniform treatment. Already Judge Besosa has consolidated the first three cases as to the application of the PROMESA stay. Likely there will be a decision by August. What many in the press do not realize is that the PROMESA stay does not work like the stay in Bankruptcy (11 U.S.C. § 362). If within 45-days of the filing of the request for the lifting of the stay the parties have to be notified and the Judge has to hold an evidentiary hearing and determine whether to maintain the stay. If this is not done within the 45-day period, the stay is lifted. Hence, the stay is the exception, not the rule in PROMESA. See, section 405(f) of PROMESA.
Moreover, having one judge decide these issues will help the First Circuit to handle any appeals, since pursuant to section 106(d) of PROMESA, they must be handled in an expedited form. This way, all parties will have a fast, clear and efficient way to handle these issues.
There is one case dealing with the stay (except for the complaint filed by Ambac where it has acquiesced to the stay against the PR Highway Transportation Authority), which is not before Judge Besosa, to wit, Peajes Investment LLC v. García Padilla, 16-2365. Plaintiffs are beneficial holders of Capital Appreciation Bonds of the PR Highway Transportation Authority seeking to invalidate the Moratorium law and several Executive Orders of the Governor. There is prayer damages pursuant to section 407 and also for funds to be transferred to the Trustee for payment of bonds. This is probably the reason why this case is not before Judge Besosa. Judge Aida Delgado has the case and ordered defendants to answer the petition within 14 days of being served and it expires on August 5, 2016.