caso doral

Puerto Rico Bonds and the Courts

During the presentation to bondholders by Puerto Rico, Mr. James Millstein stated that without restructuring any litigation involving bonds would take at least 5 years. I beg to differ. Bond litigation will commence with the exception of $3.9 billion, which I will discuss later, in the Federal District Court for the District of Puerto Rico or in the Court of First Instance in San Juan. Since I litigate in both, I think I am in a better position to describe what could happen.


At the get go, the immense majority of issues in any PR Bond litigation will of interpreting bond documents, including the Constitution of Puerto Rico. I cannot think of many factual issues that would require discovery, except maybe to determine the actual available resources of the Commonwealth. In any event, these can be disposed of as I discuss infra.


If different cases are filed in the PR Federal District Court, pursuant to the Rule 42 of the Federal Rules of Civil Procedure, if cases “involve a common question of law or fact, the court may:

(1) Join for hearing or trial any or all matters at issue in the actions;

(2) consolidate the actions; or

(3) issue any other orders to avoid unnecessary cost or delay.” The actual procedure to do it in PR is described in Local Rule 42.


Now lets go to certain examples. In Franklin California v. Commonwealth, the PR Recovery Act case, the complaint was filed on June 28, 2014. The District Court issued the injunction declaring the law unconstitutional on February 6, 2015. No discovery was done. Defendants appealed to the First Circuit and the Court, recognizing the importance of the issues, expedited matters and issue its opinion on July 6, 2015. Defendants’ requested certiorari to the Supreme Court, which obliged and the case will be decided on or before June 30, 2016, two years after the case was filed.


More recently, Wal-Mart sued the Commonwealth of PR for constitutional violations in December of 2015, discovery ensued, there was a 4-day hearing in February and we are waiting for a decision from Judge Fusté. Fast indeed.


But what about state court? First, the same Rule of Consolidation of Cases exists in state court, to wit, Rule 38 of the Puerto Rico Rules of Civil Procedure. Moreover, PR has a set of Rules for the Litigation of Complex Cases, and they provide for the consolidation of all cases of the same nature with one judge. Hence, there will not be multiple judges deciding issues.


Two examples show how fast it cases can proceed in PR. In January of 2014, the Teachers Union sued the Commonwealth for Constitutional violations. After discovery and an evidentiary hearing, the PR Supreme Court decided the case in a intrajurisdictional certification in April of 2014. In the Doral v. ELA case, the complaint was filed in July of 2014, the case went three times to the Supreme Court for intrajurisdictional appeal, which was not granted, the Supreme Court ordered the case to move quickly, went twice in interlocutory appeals to the Appellate Court, there was discovery and a four-day hearing, which Doral won. Defendants’ appealed to the Appellate Court, which overruled the Court of First Instance on February 25, 2015 and the Supreme Court of PR denied certiorari on February 27, 2015. As we can see, the Courts in PR can move very quickly indeed.


There is, however, a $400 million issue by the Highway Authority in 2013 and a $3.5 billion issue of GO’s that are governed by NY law and to which NY courts will have jurisdiction as per bond documents. The bond documents, however, do not require that the cases be filed in NY and gives the parties the flexibility to file in San Juan. Also, the same situation of simply interpreting legal documents applies to these two bond issues. Moreover, if bondholders have cases in Federal District Court in PR and NY, any party may seek for the Judicial Panel for Multidistrict Litigation to consolidate for discovery, etc., the cases in one Court. If the cases are pending in Federal and State or Commonwealth Court, this cannot occur, however. Nevertheless, I have no doubt that NY Federal or Supreme Court’s would decide the issues in these cases in a very swift manner as their counterparts in PR have done.








Como indique anteriormente, Doral solicitó el 9 de enero de 2015 una certificación intrajurisidiccional al Tribunal Supremo de P.R. (TSPR) para que viera directamente los asuntos apelativos del caso. El 12 de enero de 2015, el TSPR denegó la solicitud. Afortunadamente para Doral, ese mismo día el Tribunal Apelativo emitió una orden calendarizando el proceso apelativo. Le concedió a Doral 5 días (que se vencen el 19 de enero) para “que exprese su anuencia u objeción al contenido de la transcripción de la prueba oral presentada por la parte apelante (ELA).” Se le concedieron 10 días a partir de la aprobación de esta prueba oral para que el ELA presente su escrito suplementario y 20 días desde ese momento a Doral para presentar sus escritos.

En cuanto a la apelación presentada por Doral, este tendrá 10 días a partir de la aprobación de la prueba oral (19 de enero) para presentar su escrito suplementario y el ELA 20 días para replicar. Todo estos términos culminarán, a menos que se pida otra prórroga, el 18 de febrero de 2015.

Si examinamos el Reglamento del Tribunal Apelativo (en específico Reglas 21-22), este especifica 30 días para el escrito suplementario y 30 días para la oposición a la Apelación. Por ende, aunque el TSPR no expidió la certificación intrajurisdiccional, el Tribunal Apelativo, consciente de la importancia de decidir el caso con prontitud, ha dado los pasos necesarios para así hacerlo. Espero una determinación no más tarde de junio o julio.


As I said before, on January 9, 2015 Doral requested an intrajurisdiccitional certification from the P.R. Supreme Court (TSPR) so it would directly entertain the appellate issues in its case. On January 12 2015, the TSPR denied the request. Fortunately for Doral, on that same day, the Appellate Court issued an order setting the Schedule of the Appeals. It gave Doral 5 days (due on January 19) to express itself whether it accepts or objects to the transcript of the oral evidence presented by the ELA. The Government was granted 10 days from the aproval of the transcript for it to present its supplementary brief and 20 days from that date to Doral to present its objections to the appeal.

As to the appeal presented by Doral, it will have 10 days from the approval of the transcript (January 19) to present its supplementary brief and ELA will have 20 days to reply. Unless an extension is obtained, these deadlines will end on February 18 2015.

If we examine the Appellate Court’s regulations (specifically Rules 21-22), these call for 30 days for the supplementary brief and 30 days of the opposition to the appeal. Therefore, although the TSPR did not issue the intrajurisdictional certification, the Appellate Court, conscious of the importance of deciding swiftly this case, has taken the necessary steps to do so. I expect a decision no later tan June or July.