number one eight one one zero eight really is capital master at all versus how w declaratory judgments establishing that they hold liens and other property rights into streams of income under act the three and under the so called  in a ruling likely to warm the hearts of catch twenty two fans everywhere the district court held that our claims were either too abstract for article three purposes or to concrete for purposes of section three zero five and with the course permission i'd like to start with the article three issue the title three court recognized that there were in her words quote clearly legal and factual disagreements and quote between the parties the court if the title three court were correct that these limitations are hardwired into the constitution of the united states then congress would be powerless to permit important legal issues to be resolved in an adversary proceeding in advance of a formal confirmation and that your honors would be a bitter pill to swallow is especially in complex reorganization cases like this one in which prompt guidance bankruptcy rules that have been adopted in promises that specifically anticipate that threshold issues like the establishment of a lien in particular will be and routinely are decided in advance of confirmation that happens time and time again in bankruptcy cases we've cited least a half a dozen cases including cases from this circuit in which precisely issues of this kind were resolved in advance of confirmation and that's a good thing that's a good thing because this is the ability one specifically adopted by the supreme court for cases or size we like this one so that these issues could be resolved now at a time when they will provide guidance to the parties so that they can formulate a which is what the case is before you understand we're not talking about what's good policy here i could argue the pros and cons of whether taking in a living getting an adversary proceeding in advance of confirmation is a good or bad idea i think it's a great idea but it doesn't matter whether i think it's a great idea the question presented is whether article three commands it as the only idea and that notion i suggest fitness for review and the usefulness of the judgment a judgment now on these threshold crucial questions of property ownership would be measurably serve the parties in formulating a consensual plan of adjustment the alternative if the constitution actually required one judge swain rule in this case the constitution actually required congress with lack of power to authorize the she was compelled by article three to do what she did i don't dispute that there is a measure of discretion invested in district courts under the declaratory judgment statute to decide whether to give that relief and you can weigh all kinds of factors and the district court is entitle to do that i completely agree but judge swain did not do that and by the way the oversight board didn't ask her to do that they didn't even brief the question of her discretion in the district court they come before you and they say as a fallback argument well if you don't like the article three position please just are firm on discretionary grounds precisely for the reasons judged her way or you just diverted to but the fact of the matter is judge swain for what she was compelled by article three of the constitution to dismiss is that she did not exercise discretion you could read the opinion all day long you'll find no suggestion of discretion and number two if we get back there under a discretionary regime we will argue reasons why the exercise of discretion warrants taking these questions up now and not waiting until confirmation where the consequences of getting it wrong is the oversight board in the commonwealth have to go back to the drawing board reformulate a plan of adjustment and start from scratch with a whole plethora of appeals bunched together coming to this core syria that is a bad idea that is not how  title three court the same court that will ultimately sue non confirmation has ruled on a brush old question of property interests on which the parties are shortly divided now there's no question of adversar this court sits the funds that we say belong to us are being diverted and consumed by the commonwealth for other purposes right now that is a concrete decision by the commonwealth and if the court rules as we believe the court should rule the district court that that money belongs to our clients and can be used for no other purpose but for the say we have a lien on is being diverted and consume it is not just some abstract issue as to which we like some guidance i understand the court's problem that could be said about almost any declaratory judgment that will help them conform their behavior to the agreement going forward we have an even stronger case because unlike the horizon case in which the court held that the current or a relief was appropriate under article three here we have ongoing behavior behavior that continues to this very day and will continue tomorrow unless and until the court issues a declaratory judgment that it is chosen that constitutes interference i think that's just good wrong that's not what interference means interference is ordinarily understood as coming into collusion in a way that hinders or it doesn't cause it to do that it does however provide some legal guidance that may persuade the commonwealth to do so now this is an important distinction let me just elaborate for a moment compelled to follow the decision by threat of contempt or other penalties it's still a judgment it still has article three standing that's what stuff will teaches us now the commonwealth it's true judge throw away may elect to follow the judge the judgment of the court but and this is the crucial point it is the intermediating and independent decision of the commonwealth that will ultimately change its conduct and in that crucial respect i respectfully suggest that the declaratory judgment is just like the decision this court recently issued in the proper case because in the proper case the court said that it's only direct versus the way for another court i realise the factual distinction but i'd like to see just the analogies quite strong because again we're talking about  capacity of the commonwealth to make its own judgment to not be directed coerced through threat of content to do otherwise the commonwealth we trust will pay attention to what the title three court says about the law that here after all is precisely what directs the title three quarters the do in section three fourteen recall that in section three fourteen of the commonwealth title three court is told that it may not confirm a plan that violates law and yet by dint of the three o five construction of the oversight board offers you this possibly do with three fourteen tells it to do because the moment it tells the parties that the law for bids a particular course of action would by virtue of simply pronouncing what the law is stand in violation of section three zero five that antagonism between their construction of three or five and the plain meaning of three fourteen cannot be reconciled except by virtue of a conception of interference that takes account of the difference between an injunction and a declaration now i see my time is almost in and so but fortunately i have only three sentences about the takings issue on the takings issue this case is absolutely manifestly a physical takings case and by virtue of absolutely dispositive black letter law from the circuit the finale doctrine on which the takings claim county was yes thank you the only thing i would say judge her weight is that although the parties are known and have made an issue of the so called exhaustion element you'll know the judge showing didn't actually adopt that rationale and we think she's right not to have short comments on the big picture and then get into the subject matter jurisdiction and discretion and taking the big picture the first part of premisses section three o five together with the section three fourteen b for creditors requiring relief prior to the confirmation hearing congress incorporated bankruptcy code section three sixty two d through premise of section three zero one eight under section three sixty two d creditors can request relief  from interfering with the commonwealth's assets in short appellants here have not availed themselves of the stress relief that congress provided if they're really worried that they are they have clarifying the party's respective rights and the restricted revenues and the governing law with which any plan of the justin must comply and quote they want this now well prior to any notice hearings on disclosure statements in plain co and the face of judge swain explaining in her opinion that the commonwealth and oversight board were developing a new physical plan to deal with hurricane maria and had no proposed plan  you're asking to establish their negotiating position that they get paid first and before the commonwealth expenses and all of your creditors in their complaint paragraph one seventy two appellants challenge that come of those payments for instance  recreation and lifestyle programs commonwealth children and adults claiming in their complaint paragraphs twenty seven twenty eight that the general obligation debt holders should be paid instead with those funds using the declaratory judgment appellants are asking that the federal district court do to kate their rights prior to confirmation rather than requesting stay relief so they can seek remedies from the puerto rico courts in the big picture the question is whether the device of declaratory relief can be used to change the chronology congress enacted and the mechanisms congress provided for state re in terms of the nitty gritty on this appeal first take up briefly the subject matter jurisdiction or three issues appellants argued this morning that bankruptcy will seven thousand one should govern and this is done all the time because issues can get resolved prior to confirmation well in the jurisprudence proffered to your honor's the two cases from large  recent the courts turning them down this is not common practice it's as those court showed it's not even allowed for many of the reasons your honour's alluded to in the first segment that there's been no notice to creditors who are affected by these rulings there's no disclosure statement explaining what its effect is on each constituency and that leads into the article three jurors prudence on the larry three judgments i want to emphasize that bankruptcy will seven thousand  is simply a rule that says to all the victims if you want certain types of relief you have to file a complaint if you're not within that rule then every other requests relief you ask for comes out of bankruptcy rule ninety fourteen which is contested matter and you requested by motion that's the only thing seven thousand one to seven thousand one does is a complaint or a motion by no means does seven thousand one or anything else in the rules say what relief you're entitled to as a matter of article three judicial power at any particular time so when the supreme court discussed the parameters that would have to surround the declaratory judgment act to make it within the article three judicial power in the white cough case they said the judicial power does not extend to abstract questions claims based on assumes potential invasions of rights rulings extending far beyond the particular case unwrite controversies nebulous controversies or conflicts and contingent controversies that come with the court must be able to see what legal e because in this case the lien they're talking about is that under the puerto rico constitution monies appropriated to various instrumentalities get clawed back if and only if the respect it or if we disagree with it but they are one declaratory judgment would not crack the surface for their own claims or for the putting together of an entire planet justin now on the discretion issue they say that we didn't raise it below we can't raise it here they cite first circuit cases that say if you didn't raise certain defenses below you can't reason a lot of people this isn't a defense this is a standard of review in the first circuit we don't have to say to judge discretion that i think appellants are missing is that the standards for declaratory judgment are inherently discretionary to some extent in their particular case we think it's clear when they're asking for abstract determinations i lien i have an equitable interest have a beneficial interest whatever that means that's just really abstract and you don't have to go any further say it can't be done with the article three you'd have to power but if they were serious requests teachings and experience and experience concerning the functions and extent of federal judicial power judge swaying did exercise discretion she explains in her opinion twice once she said this doesn't seem connected to any claim objection stay relief confirmation proceeding and then again she says it's abstract i don't know who it affects she was clearly explaining her reasoning it and you know fortunately i mean they're very clear about it we want this to help us to help our you go shooting position and see my time is doing too so i'm going to just quickly say that all of the cases they cite to show that this court has all the time apply declaratory judgment in the sense they want actually support her case in admiral dry wall which was the first circuit case some contractors wanted to impose an equitable lien against the general contractors money in the general contractor was in bankruptcy so they asked for a decline three judgment that they should get an extra lien they had a cause of action and a remedy here and they're not asserting a cause of action and asking her remedy they're saying please tell us what we've got and the same goes on with you know they talk about all reorganization cases do what they said well as i pointed out adelphia and if they didn't what the cases they lien on the fish to pay for the unpaid fish food that was a not exactly a large complicated reorganisation case but it was a cause of action under five of six asked for a remedy they didn't get it and  bstract exercise now i just want to point out quickly they have a footnote eleven in their first brief where they say well you know in the commonwealth  case there is a adversary proceeding involving phina and there are there's a declaratory judgment about who's money or certain tax streams what they don't say is that was done pursuant to a stipulation requiring a plan immediately after the ruling or the settlement because caffeine is an empty shell and just has debt and attack stream and whatever the ruling was that's what the people get under the plan so they were tried together now on three o five the city of detroit didn't consider the stuff a case in which these green court explained that the declaratory judgment is a milder form of relief several answers to that first three o five doesn't says you can interfere as long as you do it mildly it's just it's blanket against interference also it bans stays orders and decrees on the cardinal principle that simple answer to stuff all the stuff will says on its own is in franklin v massachusetts five o five us seventy eight in the briefing justice rehnquist was one of the judges who agreed that it clearly something that has no influence or power would not be unconstitutional against the president and then make a very important other point whatever else a cleric for a judgment doesn't doesn't do in terms of influence it may or may not have rescued time morning your honor snake please the court i represent the official committee of retired commonwealth employees nearly one hundred seventy thousand retired teachers police officers and other government workers who collectively have the largest claim in these proceedings i'd like to try to make four points in my brief time this morning first i'd like to pick up on chief judge howard's point that the declaratory judgment is appropriate when there's an effect on the real behavior of a parties and not when it's an arrow in the quiver that is this case the only concrete the only concrete relief that the plaintiffs seek is the segregation of the funds the judge found correctly that that was right and satisfy article three she found that barred by section three of five the remaining claims however are seeking only an abstract opinion the plane just did not seek relief from a say they did not seek any form of adequate protection they do not claim any other immediate access to funds what they are looking for is an abstract judgment that gives them a negotiating advantage that is not a right claim under article three section that does not mean of course that there aren't such cases where statutory liens or property interest can be determined this court sees them frequently the court is going to see one right after we s retired the employee retirement system days those are cases where parties are suffering immediate actual harm they are getting payment streams are not there you're getting a payment stream that they want to continue so it's like the press the case that your honour's heard and released the decision over the summer where they were somebody seeking relief from state to try to implement a receivership those are cases where there are actual actual relief sought and actual harm done again the only claims that do that here are the ones in counts three four five are the ones in one two nine and ten which the district court held fully right the remaining counts three four five and six however are seeking abstract declarations third section just as much as injunctions second that makes good sense because the language interfere means hinder impede metal that's clearly what a declaratory judgment does how do you know that in addition to the six circuit because the supreme court has told you over and over in the samuels case the court said declaratory judgments interfere with ongoing prosecutions in the tax injunction act cases where the statute forbids the courts from trying to restrain the collection of tax relief what the interfere with the collections of taxes and in mcnairy the court said declaration would throw state tax collection schemes into disarray there is no doubt that section three o five is designed for exactly what the plaintiffs are looking for the whole point is that the bankruptcy court should not be trying to tell order rico what how it should spend its money the point of the bankruptcy court is to funnel its decisions into confirmation of the plan as judge jury has suggested there is no plan of adjustment yet that's when the court should to take effect so section three o five bars the claims one to nine in ten that are actually right and then the fourth point which i'd like to make this morning is that the resolved you would have piecemeal appeals to this court and as a good judge for a suggested what you have is this these issues being resolved in bilateral negotiation where people like my clients who have the biggest claim are excused we don't have the right in this receding to say well actually that's settlements no good if the board decides to step down we don't have the right to raise arguments that say the board decides are worth pursuing and we don't have the right to do additional discovery what congress wanted congress designed this scheme to do was to get everybody together through the plan of adjustment and then have the bankruptcy court make these decisions i submit to you that the scheme that the plaintiffs would interpose is quite different and quite destructive  and then i guess i'd like to close with with mr robin suggestion that this is a catch twenty two with all respect i don't think it is what it is exactly the opposite congress specified quite properly here in section three zero five that the title should not be interfering with government operations that's the same in municipal bankruptcy as well this is an effort to get around that and to say well we're seeking just an abstract advisory opinion that will give good advice for later on i suggest that's not a cat that's an effort to circumvent the statute that congress thank you bankruptcy cases would be news to bankruptcy judge squire in chicago who issued the outboard marine case bankruptcy judge haynes in maine who issued the maine pride salmon case bankruptcy judge w like was living gated a sub contractors right to an equitable lien on undistributed property in a bankruptcy case precisely under the aegis of the rules we're invoking here second point dissipated by the commonwealth as we speak separates this from cases in which the relief is simply too abstract and i would just as the court rather than to go through it again it's in our brief to take a look at the rise in case and the case in each of those cases the court held there was article three jurors this court the first circuit held it was article three jurisdiction to decide a threshold legal issue that was if anything less  concrete conduct that was going on even as we speak then the case before us today are the relief we are seeking is not the least bit abstract our collateral is being dissipated and it belongs to us and all we want is our day in court to establish our property rights you heard no way to reconcile their conception of section three o five with the dictates of three fourteen which says up court cannot co plan that violates the law at the sea in the same breath they would have this court tell the court that under three o five it can't tell the commonwealth what even what the law is that is impossible to after case after case it provides guidance at a time when the parties are in stark disagreement there's all the adversary news you could imagine you've heard this morning we think we have a lean they say we don't it's a pure question of law it requires no hypothetical facts indeed it requires no facts at all it's a question of law it's right for determination it will provide guidance for confirmation an article three does not hardwired the requirement to make us wait to confirmation to have to have our day in court thank you rogers time this morning