Today, the First Circuit affirmed Judge Fusté’s decision in the Walmart case, Surprisingly, in the opinion Judge Lynch discussed PROMESA. Judge Lynch stated that “because this suit will not force Puerto Rico to pay any amount of money to Wal-Mart PR, section 405’s stay provision is inapposite.” Moreover, also said at page 30:

Under section 201, the Board must approve a Fiscal Plan that “provide[s] a method to achieve fiscal responsibility and access to the capital markets.” Id. § 201(b)(1). That Plan must, however, respect the Commonwealth’s “relative lawful priorities” that were in effect prior to PROMESA’s enactment. Id. § 201(b)(1)(N) (“A Fiscal Plan developed under this section shall . . . respect the relative lawful priorities or lawful liens, as may be applicable, in the constitution, other laws, or agreements . . . in effect prior to the date of enactment of this Act.”). Accordingly, PROMESA appears to grant no power to the Board to repeal or amend the Fiscal Sustainability Act, which continues to cap payments of court judgments at $3 million per year and continues to grant Puerto Rico discretion not to pay even that amount depending on the availability of funds that year. Nor does it appear to allow the Board to repeal or amend the Treasury guidelines, which “prioritize some government payment obligations over others” but make “no provision . . . to prioritize the payment of a court judgment ordering a tax refund.”

This could very well mean that the Constitutional priority of payment of public debt could survive any Title III Bankruptcy since section 314 requires the Bankruptcy plan to be consistent with the Fiscal Plan. We may find out if this is true sooner than later.