Opinion
No. 17 BK 3283-LTS (Jointly Administered) No. 17 BK 4780-LTS Adv. Proc. No. 19-00391-LTS
2023-05-03
IN RE: The FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as representative of The Commonwealth of Puerto Rico et al., Debtors. In re: The Financial Oversight and Management Board for Puerto Rico, as representative of Puerto Rico Electric Power Authority, Debtor. In re: The Financial Oversight and Management Board for Puerto Rico, as representative of Puerto Rico Power Electric Authority, Plaintiff/Counterclaim-Defendant, Puerto Rico Fiscal Agency and Financial Advisory Authority, the Official Committee of Unsecured Creditors of All Title III Debtors, Cortland Capital Market Services, Sola Ltd., Solus Opportunities Fund 5 LP, Ultra Master Ltd., Ultra NB LLC, Union De Trabajadores De La Industria Electrica Y Riego Inc., and Sistema De Retiro De Los Empleados De La Autoridad De Energia Electrica, Intervenor-Plaintiffs, v. U.S. Bank National Association, as Trustee, Defendant/Counterclaim-Plaintiff, The Ad Hoc Group of Prepa Bondholders, Assured Guaranty Corp., Assured Guaranty Municipal Corp., National Public Finance Guarantee Corporation, and Syncora Guarantee, Inc., Intervenor-Defendants/Counterclaim-Plaintiffs.
Ehud Barak, Margaret A. Dale, Martin J. Bienenstock, Proskauer Rose LLP, New York, NY, Hermann D. Bauer Alvarez, O'Neill & Borges, San Juan, PR, Luis F. Del Valle Emmanuelli, Legal Partners PSC, San Juan, PR, Paul V. Possinger, Proskauer Rose LLP, Chicago, IL, for Plaintiff/Counterclaim-Defendant The Financial Oversight and Management Board for Puerto Rico. Maria J. Diconza, Nancy A. Mitchell, Daniel S. Shamah, O'Melveny & Myers LLP, New York, NY, Peter Friedman, O'Melveny & Myers LLP, Washington, DC, Luis C. Marini Biaggi, Carolina Velaz Rivero, Marini Pietrantoni Muniz LLC, San Juan, PR, for Plaintiff Puerto Rico Fiscal Agency and Financial Advisory Authority. Elizabeth L. McKeen, O'Melveny & Myers LLP, Newport Beach, CA, John J. Rapisardi, O'Melveny & Meyers LLP, New York, NY, for Intervenor-Plaintiff Puerto Rico Fiscal Agency and Financial Advisory Authority. Nicholas Bassett, Paul Hastings LLP, Washington, DC, G. Alexander Bongartz, Luc A. Despins, Paul Hastings LLP, New York, NY, Juan J. Casillas, Cristina Fernandez, Juan C. Nieves Gonzalez, Casillas, Santiago & Torres, LLC, San Juan, PR, for Intervenor-Plaintiff Official Committee of Unsecured Creditors of all Title III Debtors. Rolando Emmanuelli Jimenez, Jessica Mendez Colberg, Bufete Emmanuelli, C.S.P., Ponce, PR, Zoe Negron Comas, San Juan, PR, Rafael Antonio Ortiz-Mendoza, Ortiz Mendoza & Farinacci Fernos, LLC, San Juan, PR, for Intervenor-Plaintiff Sistema de Retiro de los Empleados de la Autoridad de Energia Electrica, (SREAEE). Nayuan Zouairabani Trinidad, McConnel Valdes, San Juan, PR, for Intervenor-Plaintiff Cortland Capital Market Services LLC. Robert S. Berezin, Matthew S. Barr, Gabriel Morgan, Jonathan D. Polkes, Weil, Gotshal & Manges LLP, New York, NY, Alexandra C. Casellas Cabrera, Luis A. Oliver, Eric Perez Ochoa, Adsuar Muniz Goyco Seda & Perez Ochoa, San Juan, PR, for Intervenor-Defendant/Counterclaim-Plaintiff National Public Finance Guarantee Corporation. Heriberto J. Burgos Perez, Ricardo F. Casellas, Diana Perez Seda, Casellas Alcover & Burgos PSC, San Juan, PR, Thomas J. Curtin, Howard R. Hawkins, Jr., William J. Natbony, Casey J. Servais, Cadwalader, Wickersham & Taft LLP, New York, NY, Mark C. Ellenberg, Cadwalader, Wickersham & Taft LLP, Washington, DC, for Intervenor-Defendant/Counterclaim-Plaintiff Assured Guaranty Corp. Alice J. Byowitz, Amy Caton, Thomas Moers Mayer, Kramer Levin Naftalis & Frankel LLP, New York, NY, Manuel Fernandez Bared, Linette Figueroa Torres, Nayda Ivette Perez-Roman, Toro, Colon, Mullet, Rivera & Sifre, P.S.C., San Juan, PR, Matthew M. Madden, Gary A. Orseck, Kramer Levin Naftalis & Frankel LLP, Washington, DC, for Intervenor-Defendant/Counterclaim-Plaintiff Ad Hoc Group of PREPA Bondholders. Iris J. Cabrera Gomez, Eric A. Tulla, Rivera, Tulla & Ferrer, San Juan, PR, John T. Duffey, William Z. Pentelovitch, Jason M. Reed, Clark T. Whitmore, Maslon LLP, Minneapolis, MN, for Defendant/Counterclaim-Plaintiff U.S. Bank National Association, as Trustee. Carlos R. Rivera Ortiz, Reichard & Escalera, San Juan, PR, for Intervenor-Defendant/Counterclaim-Plaintiff Syncora Guarantee Inc.
Ehud Barak, Margaret A. Dale, Martin J. Bienenstock, Proskauer Rose LLP, New York, NY, Hermann D. Bauer Alvarez, O'Neill & Borges, San Juan, PR, Luis F. Del Valle Emmanuelli, Legal Partners PSC, San Juan, PR, Paul V. Possinger, Proskauer Rose LLP, Chicago, IL, for Plaintiff/Counterclaim-Defendant The Financial Oversight and Management Board for Puerto Rico.
Maria J. Diconza, Nancy A. Mitchell, Daniel S. Shamah, O'Melveny & Myers LLP, New York, NY, Peter Friedman, O'Melveny & Myers LLP, Washington, DC, Luis C. Marini Biaggi, Carolina Velaz Rivero, Marini Pietrantoni Muniz LLC, San Juan, PR, for Plaintiff Puerto Rico Fiscal Agency and Financial Advisory Authority.
Elizabeth L. McKeen, O'Melveny & Myers LLP, Newport Beach, CA, John J. Rapisardi, O'Melveny & Meyers LLP, New York, NY, for Intervenor-Plaintiff Puerto Rico Fiscal Agency and Financial Advisory Authority.
Nicholas Bassett, Paul Hastings LLP, Washington, DC, G. Alexander Bongartz, Luc A. Despins, Paul Hastings LLP, New York, NY, Juan J. Casillas, Cristina Fernandez, Juan C. Nieves Gonzalez, Casillas, Santiago & Torres, LLC, San Juan, PR, for Intervenor-Plaintiff Official Committee of Unsecured Creditors of all Title III Debtors.
Rolando Emmanuelli Jimenez, Jessica Mendez Colberg, Bufete Emmanuelli, C.S.P., Ponce, PR, Zoe Negron Comas, San Juan, PR, Rafael Antonio Ortiz-Mendoza, Ortiz Mendoza & Farinacci Fernos, LLC, San Juan, PR, for Intervenor-Plaintiff Sistema de Retiro de los Empleados de la Autoridad de Energia Electrica, (SREAEE).
Nayuan Zouairabani Trinidad, McConnel Valdes, San Juan, PR, for Intervenor-Plaintiff Cortland Capital Market Services LLC.
Robert S. Berezin, Matthew S. Barr, Gabriel Morgan, Jonathan D. Polkes, Weil, Gotshal & Manges LLP, New York, NY, Alexandra C. Casellas Cabrera, Luis A. Oliver, Eric Perez Ochoa, Adsuar Muniz Goyco Seda & Perez Ochoa, San Juan, PR, for Intervenor-Defendant/Counterclaim-Plaintiff National Public Finance Guarantee Corporation.
Heriberto J. Burgos Perez, Ricardo F. Casellas, Diana Perez Seda, Casellas Alcover & Burgos PSC, San Juan, PR, Thomas J. Curtin, Howard R. Hawkins, Jr., William J. Natbony, Casey J. Servais, Cadwalader, Wickersham & Taft LLP, New York, NY, Mark C. Ellenberg, Cadwalader, Wickersham & Taft LLP, Washington, DC, for Intervenor-Defendant/Counterclaim-Plaintiff Assured Guaranty Corp.
Alice J. Byowitz, Amy Caton, Thomas Moers Mayer, Kramer Levin Naftalis & Frankel LLP, New York, NY, Manuel Fernandez Bared, Linette Figueroa Torres, Nayda Ivette Perez-Roman, Toro, Colon, Mullet, Rivera & Sifre, P.S.C., San Juan, PR, Matthew M. Madden, Gary A. Orseck, Kramer Levin Naftalis & Frankel LLP, Washington, DC, for Intervenor-Defendant/Counterclaim-Plaintiff Ad Hoc Group of PREPA Bondholders.
Iris J. Cabrera Gomez, Eric A. Tulla, Rivera, Tulla & Ferrer, San Juan, PR, John T. Duffey, William Z. Pentelovitch, Jason M. Reed, Clark T. Whitmore, Maslon LLP, Minneapolis, MN, for Defendant/Counterclaim-Plaintiff U.S. Bank National Association, as Trustee.
Carlos R. Rivera Ortiz, Reichard & Escalera, San Juan, PR, for Intervenor-Defendant/Counterclaim-Plaintiff Syncora Guarantee Inc.
PROMESA
Title III
ORDER DENYING CERTIFICATION OF THE COURT'S MARCH 22, 2023 SUMMARY JUDGMENT ORDER FOR INTERLOCUTORY APPEAL
LAURA TAYLOR SWAIN, United States District Judge Before the Court is the Urgent Motion Requesting Certification of this Court's March 22, 2023 Summary Judgment Order for Immediate Appeal Pursuant to PROMESA § 306(e)(3)-(4) (Docket Entry No. 155) (the "BH Motion"), filed by the Bondholder Defendants, as well as the Intervenor-Plaintiff Official Committee of Unsecured Creditors’ (A) Partial Joinder in PREPA Bond Trustee's and PREPA Bondholders’ Urgent Motion Requesting Certification of this Court's March 22, 2023 Summary Judgment Order for Immediate Appeal Pursuant to PROMESA § 306(e)(3)-(4) and (B) Request for Certification of Such Order Pursuant to PROMESA § 306(e)(3)-(4) (Docket Entry No. 167) (the "UCC Motion" and, together with the BH Motion, the "Motions"), filed by the Committee (together with the Defendants, the "Movants").
Unless otherwise noted, all references herein to Docket Entry Nos. are references to Adversary Proceeding No. 19-00391.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Summary Judgment Order (as defined below).
In the Motions, the Defendants and the Committee seek certification of separate discrete holdings in the Court's the March 22, 2023 Opinion and Order Granting in Part and Denying in Part the Financial Oversight and Management Board for Puerto Rico's Motion for Summary Judgment and the Defendant's and Intervenor-Defendants’ Cross-Motion for Summary Judgment (Docket Entry No. 147) (the "Summary Judgment Order") for immediate appeal to the United States Court of Appeals for the First Circuit, pursuant to section 306(e)(3)(A) and (4) of PROMESA. The factual background underlying this adversary proceeding is set forth in the Summary Judgment Order, and the Court assumes readers’ familiarity with the order. (Summary Judgment Order at 14-19.)
PROMESA is codified at 48 U.S.C. § 2101 et seq. References herein to "PROMESA" section numbers are to the uncodified version of the legislation. References herein to the provisions of Title 11 of the United States Code (the "Bankruptcy Code") are to sections made applicable in these cases by section 301 of PROMESA. 48 U.S.C. § 2161.
The Court has subject matter jurisdiction of this action pursuant to section 306(a) of PROMESA. 48 U.S.C. § 2166(a). The Court has considered carefully all the parties’ submissions, and for the following reasons the Motions are denied.
The Court has also received and reviewed the following pleadings: Omnibus Objection of Fuel Line Lenders to Motions for Certification of Interlocutory Appeal (Docket Entry No. 170) (the "FLL Objection"); Opposition of Financial Oversight and Management Board for Puerto Rico to the PREPA Bond Trustee's and PREPA Bondholders’ Urgent Motion Requesting Certification of this Court's March 22, 2023, Summary Judgment Order for Immediate Appeal Pursuant to PROMESA § 306(e)(3)-(4) (Docket Entry No. 172) (the "FOMB Objection"); Response of the Puerto Rico Fiscal Agency and Financial Advisory Authority to the PREPA Bond Trustee's and PREPA Bondholders’ Urgent Motion Requesting Certification of this Court's March 22, 2023, Summary Judgment Order for Immediate Appeal Pursuant to PROMESA § 306(e)(3)-(4) (Docket Entry No. 173) (the "AAFAF Objection"); The PREPA Bond Trustee's and PREPA Bondholders’ Reply to the Objections to the Urgent Motion Requesting Certification of this Court's March 22, 2023 Summary Judgment Order for Immediate Appeal Pursuant to PROMESA § 306(e)(3)-(4) (Docket Entry No. 177) (the "BH Reply"); and the Intervenor-Plaintiff Official Committee of Unsecured Creditors’ Reply in Support of Request for Certification of March 22, 2023 Summary Judgment Order for Immediate Appeal Pursuant to PROMESA § 306(e)(3)-(4) (Docket Entry No. 178) (the "UCC Reply").
A. Applicable Law
Section 306(e)(3)(A) of PROMESA provides that the relevant United States Court of Appeals shall have jurisdiction to hear appeals of interlocutory orders or decrees entered in a proceeding under Title III of PROMESA if "the district court on its own motion or on the request of a party" certifies that:
(i) the order or decree involves a question of law as to which there is no controlling decision of the court of appeals for the circuit or of the Supreme Court of the United States, or involves a matter of public importance;
(ii) the order or decree involves a question of law requiring the resolution of conflicting decisions; or
(iii) an immediate appeal from the order or decree may materially advance the progress of the case or proceeding in which the appeal is taken.
48 U.S.C.A. § 2166(e)(3)(A) (Westlaw through P.L. 117-338 ). If the district court on its own motion or on the request of a party determines that a circumstance specified in clauses (i), (ii), or (iii) of section 306(e)(3)(A) of PROMESA exists, then the court shall make the certification described in section 306(e)(3). Id. § 2166(e)(4). Section 306(e)(3)(A) of PROMESA mirrors 28 U.S.C. section 158(d)(2), which governs direct appellate review of bankruptcy court decisions in proceedings under the Bankruptcy Code. Accordingly, throughout this Order, the Court will refer to the considerations to be taken into account under section 158(d)(2) and its PROMESA analogue interchangeably.
The Court is cognizant of the differences between 28 U.S.C. § 158(d)(2), the clearest antecedent to section 306(e)(3)(A) of PROMESA, and 28 U.S.C. § 1292(b), governing interlocutory appeal from district court orders; however, the Court finds the policy considerations underlying all three provisions to be consistent to the extent stated herein.
B. An Immediate Appeal Will Not "Materially Advance the Progress of the Case or Proceeding" (PROMESA § 306(e)(3)(A)(iii))
The Bondholders and the Committee each seek to appeal separate discrete holdings in the Summary Judgment Order, but the principal reason urged by both for the Court to certify the Summary Judgment Order for immediate appeal is that to do so would "materially advance the progress" of the adversary proceeding and PREPA's Title III Case. (See, e.g., BH Mot. ¶ 25; UCC Mot. ¶ 4.)
The Bondholders—seeking to appeal on numerous grounds—point to the approved Disclosure Statement, which states that: "[i]f this litigation is not resolved prior to the Confirmation Hearing, the Confirmation Hearing and Effective Date may be delayed," or "the Oversight Board may be required to establish an appropriate reserve to ensure adequate recoveries" for the Bondholders’ claim. (See BH Mot. ¶ 5 (quoting Disclosure Statement at 351).) The Committee—seeking to appeal the portion of the Summary Judgment Order holding that the Trust Agreement provides for recourse giving rise to an Unsecured Net Revenue Claim—echoes the Bondholders’ argument that the effective date of any confirmed plan of adjustment may be delayed. (UCC Mot. ¶¶ 7-8.) It is significant to the Court that the Oversight Board, whose interest in seeing a confirmed plan of adjustment become effective is no less keen, opposes the Motions despite the Court's rejection of its broadest theories with respect to recourse. (See, e.g., FOMB Obj. ¶¶ 5, 29-30.) The Oversight Board argues that any efficiencies projected by Movants are illusory, because the appeal will not likely be resolved before the Confirmation Hearing, the plan of adjustment—in the event it is confirmed—will very likely be appealed on other grounds, the plan's effectiveness will likely be delayed in any event while PREPA requests a rate increase from PREB that is required for plan implementation, and further asserts that only a few possible scenarios following reversal on appeal might render the plan unconfirmable. (FOMB Obj. ¶¶ 22, 28.) AAFAF echoes these responses, arguing that, "Piecemeal litigation of various appellate issues would only increase delay and inefficiency." (AAFAF Obj. ¶ 3; see also FOMB Obj. ¶ 19 ("This policy of limiting interlocutory appeals exists in major part to avoid ‘piecemeal review and its attendant delays and waste of time.’ " (quoting Katz v. Carte Blanche Corp., 496 F.2d 747, 764 (3d Cir. 1974) (interpreting 28 U.S.C. § 1292 )).)
The Court has not yet considered what would constitute an "appropriate reserve" under such circumstances.
The Court has already set briefing schedules for proceedings under section 502 of the Bankruptcy Code to estimate the Bondholders’ Net Unsecured Revenue Claim, and for further proceedings with respect to the Bondholders’ Counterclaim Complaint. (See Docket Entry Nos. 168, 176.) In direct contrast to its arguments that immediate appeal will speed the confirmation process, the UCC has requested a stay of those necessary proceedings, and the Bondholders separately submit that it would be "the most efficient course" to stay both the estimation and lien perfection proceedings. (UCC Mot. ¶ 7; BH Mot. ¶ 8.) The briefing schedule for the section 502 proceedings spans more than 45 days before oral argument and/or evidentiary proceedings, and estimation of the Unsecured Net Revenue Claim is crucial to the Court's consideration of the PREPA Plan; there is no realistic prospect of completing the estimation before the scheduled Confirmation Hearing if the section 502 briefing is stayed. As noted by the Fuel Line Lenders in their objection, although Movants argue that the appeals could proceed on a dual track with the estimation and other proceedings, immediate appeal of the Summary Judgment Order may cause significant complications in moving the case forward and hinder the Court's ability to provide the parties with further necessary guidance—something that has already proven necessary (see Docket Entry No. 168)—whether due to the appellate divestiture doctrine or simple prudential concerns. (FLL Obj. ¶ 9.) The Fuel Line Lenders note, as an example, the significant overlap between rulings in the Summary Judgment Order that would be subject to appeal and future anticipated motion practice related to counts in the Counterclaim Complaint that were not then formally under consideration. (FLL Obj. ¶ 9 n.4.) In the most extreme scenario, this could have the effect of a stay on the proceedings the Movants protest they do not seek, and require delay of the Confirmation Hearing.
The Committee states that the necessity of section 502 proceedings may be obviated by a reversal on appeal, but this is not necessarily so. (BH Mot. ¶ 7.) In their Reply, the Bondholders state, "there is no doubt that the Plan is unconfirmable if the Bondholders are secured by PREPA's revenues." (BH Reply ¶ 11 n.8.) The Committee and the Bondholders should not overlook the possibility that a reversal holding that the Bondholders have a secured claim on PREPA's net revenues would also require estimation as a contingent claim under section 502(c)(1) of the Bankruptcy Code.
Finally, the Committee argues that the Court of Appeals for the First Circuit may issue a decision on the appeal in advance of the Confirmation Hearing, currently set to begin on July 17, 2023, resulting in a "final resolution" of the security and recourse issues. (UCC Mot. ¶¶ 7, 9; UCC Reply ¶ 5; see also BH Reply ¶ 3, 8 (pointing to 45- and 37-day briefing schedules).) Although the First Circuit has addressed the many appeals from this Court with great efficiency, the Court is skeptical that the numerous intended cross-appeals with respect to "hundreds of pages of submissions, hours of argument, ... and many hours of careful consideration on the part of this Court" (see FLL Obj. ¶ 8 n.2 (quoting Flaherty v. Filardi, 2007 WL 1827841, at *3 (S.D.N.Y. June 26, 2007) ) could be addressed on the 45-day timeline in the Committee's example (UCC Mot. ¶ 9 & n.12)—even if the Court were to disregard the likelihood of subsequent rehearing requests and petitions to the Supreme Court. The Court is further skeptical that, should a decision be rendered in such a remarkably short period of time, that decision would finally resolve every ruling of this Court with which various parties are not entirely satisfied.
The achievable efficiencies and timelines Movants posit are sufficiently speculative that they fail to cross the threshold of plausibility. By awaiting the relatively brief time between now and the time for completion of the litigation of this adversary proceeding and appeal of any confirmed plan of confirmation—in the event that a plan is confirmed—Movants are merely in the same position as that of the general creditor body. Appeals will most efficiently be handled comprehensively—based upon final orders—and simultaneously, rather than piecemeal.
Accordingly, the Court concludes that certifying the Summary Judgment Order for immediate appeal will not materially advance the progress of the case.
C. The Summary Judgment Order Involves Neither a "Question of Law as to Which There is No Controlling Decision" or a "Matter of Public Importance" (PROMESA § 306(e)(3)(A)(i))
1. Question of Law as to Which There is No Controlling Decision
The Bondholders enumerate several holdings in the Summary Judgment Order, each of which they argue constitutes a "question of law as to which there is no controlling decision" under section 306(e)(3)(A)(i) of PROMESA. (See BH Mot. ¶ 34.)
The Committee joins only the Bondholders’ "material advancement" arguments and instead joins all of the objectors in opposing certification on the basis of lack of controlling authority. (UCC Obj. ¶ 4 n.8.)
Here, the panoply of holdings from the Summary Judgment Order that the Bondholders seek to challenge are predominantly the application of settled law to interpretation of the Trust Agreement that is the subject of the parties’ dispute. "[W]idespread unhappiness at the paucity of settled bankruptcy-law precedent" was a primary basis for the enactment of 28 U.S.C. section 158(d)(2). See Weber v. United States Trustee, 484 F.3d 154, 158 (2d Cir. 2007). Parsing each holding finely or phrasing the holdings artfully, matters that are not the subject of a controlling decision can always be shaped from Court orders, particularly wide-ranging orders in the area of bankruptcy jurisprudence. However, that does not render every such order proper for interlocutory appeal. Instead, where an order is "based on the plain language of Bankruptcy Code and settled case law in th[e] circuit" governing the key principles to be applied by the Court, the order is not properly subject to immediate appeal even though there is no direct precedent on the precise issue at hand. See, e.g., In re MF Glob. Holdings, Ltd., Case No. 11-15059 (MG), 2012 WL 1438262, at *1 (Bankr. S.D.N.Y. Apr. 25, 2012); see also In re Millennium Lab Holdings II, LLC, 543 B.R. 703, 709 (Bkrtcy.D.Del. 2016) ("Application of long-standing, settled law to the facts of a particular case is not a basis for direct appeal to the [circuit court].").
Even as framed by the Bondholders, most of the "pure" questions of law they seek to appeal are inextricably bound to the Court's interpretation of the single Trust Agreement and this singular dispute: "that a granting clause was an inoperative recital or preamble"; "that based on the Trust Agreement provisions future revenues are not the object of a lien"; "that the relevant measure of Defendants’ unsecured claim is the value only of their equitable remedies ...." (BH Mot. ¶ 34.) The holdings the Bondholders seek to appeal are dependent on the particular terms of the Trust Agreement, as interpreted by the Court in accordance with settled law, and involve the application by this Court of settled law to said interpretation. As such, the Summary Judgment Order is not properly subject to immediate appeal.
Accordingly, the Court concludes that certification of the Summary Judgment Order is not warranted on the basis of lack of controlling authority on a question or questions of law.
2. A Matter of Public Importance
Finally, the Bondholders argue that the Summary Judgment Order involves a "matter of public importance" within the meaning of section 306(e)(3)(A)(i) of PROMESA because "The Court's ruling that the Trust Agreement granted liens limited to certain funds could call into question the status of liens in municipal revenue bonds across the country with similar existing language." (BH Mot. ¶ 35.) The Bondholders have not supported this bare assertion with reference to examples of other agreements with the same language or structure or with more than a passing reference to secondary economic effects for support. (BH Reply ¶ 28.) Collier on Bankruptcy states, with respect to the Bankruptcy Code analogue to this portion of section 306(e)(3)(A)(i) of PROMESA: "The bar for certification under this standard should be set high. A ‘matter of public importance’ should transcend the litigants and involve a legal question the resolution of which will advance the cause of jurisprudence to a degree that is usually not the case." 1 Collier on Bankruptcy ¶ 5.06[4][b] (16th ed. 2023). The Bondholders have not supported their conclusory assertions of public importance with respect to the advancement of jurisprudence. Nor have they supported their assertion that the decision will affect a "large number of jobs or other vital interests in a community[.]" (BH Reply ¶ 26 (citing In re Qimonda AG, 470 B.R. 374, 386 (E.D. Va. 2012) ; 1 Collier ¶ 5.06[4][b]).)
The Committee joins only the Bondholders’ "material advancement" arguments and instead joins all of the objectors in opposing certification on this basis. (UCC Obj. ¶ 4 n.8.)
Moreover, the examples urged by the Bondholders do not lend support to their argument that market expectations would be upset by the Court's interpretation of the language of the Trust Agreement due to widespread prevalence of indentures with similar structure and language. In the Summary Judgment Order, the Court held that "a pledge that lacks ‘references to a lien or charge or other language indicating’ that it is meant to expand the scope of specific lien grants results in a mere ‘unsecured promise[ ] to deposit Revenues in the manner required by the’ agreement." (Summary Judgment Order at 36 (quoting In re Fin. Oversight & Mgmt. Bd. of P.R., 618 B.R. 619, 639 n.19 (D.P.R. 2020) ).) The Bondholders seek to support their argument with reference to examples of revenue bond indentures cited only in a footnote to the excluded Declaration of Robert A. Lamb. (BH Reply ¶ 28 n.14 (citing Docket Entry No. 91-4 ¶ 16 n.3); see also Summary Judgment Order at 66-68 (granting the Oversight Board's motion to exclude the Lamb Declaration).) However, upon a cursory glance, each cited example contains explicit language recognizing a lien on net revenues—language that is absent from the Trust Agreement—that was omitted from the Lamb Declaration footnote (Docket Entry No 91-4 ¶ 16 n.3). (See Illinois State Toll Highway Authority, Official Statement for Toll Highway Senior Revenue Bonds, Series 2021A at 5, Docket Entry No. 91-5 at 11 ("All Bonds issued under the Indenture, including the 2021A Bonds, are payable solely from and secured solely by a pledge of and lien on the Net Revenues of the Tollway System and certain other funds as provided in the Indenture." (emphasis added)); Official Statement for City of Cleveland, Ohio Public Power System Revenue Refunding Bonds Series 2018 at 3, Docket Entry No. 91-6 at 9 ("The [revenue bonds] are ... secured under the Indenture ... solely by a pledge of and first lien on the Net Revenues of Cleveland Public Power and the Special Funds established under the Indenture, as hereinafter described" (emphasis added)); Official Statement for The Port Authority of New York and New Jersey Consolidated Bonds Two Hundred Thirtieth Series at 101, Docket Entry No. 91-7 at 111 ("the net revenues of each of [Port Authority facility] are hereby irrevocably pledged to the payment of the debt service upon all Consolidated Bonds as the same may fall due, and shall be applied as provided in Section 5 hereof, and all Consolidated Bonds shall constitute a lien and charge thereon ." (emphasis added)).) The Bondholders’ citation to the First Circuit's Peaje decision to support its argument that a bare pledge creates a lien also conspicuously omits the First Circuit's citation to the same explicit language of lien creation—originating in the HTA bond resolutions—that occasioned the holding the Bondholders seek to challenge.
Although In re Jefferson County, cited by the Bondholders (BH Reply ¶ 18), addressed a lien on net revenues apparently granted through the language of a pledge, the indenture—read as a whole—included multiple explicit references to the lien as well as language indicating its application to net revenues of the system. See Case No. 11-05736 (Bankr. N.D. Ala. Nov. 9, 2011), ECF No. 26-3 § 12.10 ("[net] revenues of the System which are subject to the lien of this Indenture " (emphasis added)).
The Bondholders describe the First Circuit's holding in Peaje thusly:
Moreover, as Defendants will argue on appeal, case law is clear that a revenue pledge by itself creates a security interest. See, e.g., In re Financial Oversight & Mgmt. Bd. for P.R., 899 F.3d 1, 12 (1st Cir. 2018) (section 601 of HTA bond resolution contained pledging language "suggestive of lien creation").
(BH Mot. ¶ 20; see also BH Reply ¶ 18.) However, the First Circuit did not only cite to section 601 of the HTA resolution, it explicitly cited section 401:
Peaje is correct that the Resolution contains mandatory language suggestive of lien creation. See [HTA] 1968 Resolution, Art. IV, § 401 (funds held by the Fiscal Agent "shall be subject to a lien and charge in favor of the holders of the bonds issued and outstanding under this Resolution and for the further security of such holders until paid out or transferred as herein provided") ; id. Art. VI, § 601 (with some exceptions, "the principal, interest and premiums [of the bonds] are payable solely from Revenues and from any funds received by the Authority for that purpose from the Commonwealth which Revenues and funds are hereby pledged to the payment thereof").
Peaje Investments LLC v. Fin. Oversight & Mgmt. Bd. (In re Fin. Oversight & Mgmt. Bd.), 899 F.3d 1, 12 (1st Cir. 2018) (emphasis added). Section 401 of the HTA resolution contains "lien and charge" language identical to sections 401, 507, and 513 of the Trust Agreement, and the distinction between sections 401 and 601 of the HTA resolution was the basis for the holding cited in the Summary Judgment Order. (See Summary Judgment Order at 36 (quoting In re Fin. Oversight & Mgmt. Bd. of P.R., 618 B.R. 619, 639 n.19 (D.P.R. 2020) ); TA §§ 401, 507, 513.)
Accordingly, the Court is not persuaded by the Bondholders’ arguments that certification will address a matter of public importance within the meaning of section 306(e)(3)(A)(i) of PROMESA.
D. Conclusion
For the above stated reasons, the Motions are DENIED. This Order resolves Docket Entry Nos. 155 and 167.
SO ORDERED.