In the United States Court of Federal Claims

No. 17-970C

Filed: July 13, 2018

*******************************************

*

*

*

ALTAIR GLOBAL CREDIT OPPORTUNITIES *

FUND (A), LLC, ANDALUSIAN GLOBAL *

DESIGNATED ACTIVITY COMPANY, *

GLENDON OPPORTUNITIES FUND, L.P., *

MASON CAPITAL MASTER FUND LP, *

NOKOTA CAPITAL MASTER FUND, L.P., *

OAKTREE-FORREST MULTI-STRATEGY, LLC *

(SERIES B), OAKTREE OPPORTUNITIES *

FUND IX, L.P., OAKTREE OPPORTUNITIES *

FUND IX (PARALLEL 2), L.P., OAKTREE *

VALUE OPPORTUNITIES FUND, L.P., OCHER *

ROSE, L.L.C., and SV CREDIT, L.P., *

*

Plaintiffs, *

*

v. *

*

*

THE UNITED STATES, *

*

Defendant. *

*

*

*

*******************************************

Christopher John DiPompeo, Jones Day, Washington, D.C., Counsel for Plaintiffs.

Christopher James Carney, United States Department of Justice, Civil Division, Commercial 

Litigation Branch, Washington, D.C., Counsel for the Government. 

MEMORANDUM OPINION AND ORDER DENYING THE GOVERNMENT’S

MOTION TO DISMISS, PURSUANT TO RULE 12(b)(1) OF THE UNITED STATES 

COURT OF FEDERAL CLAIMS AND STAYING THIS CASE

U.S. CONST. art. IV, § 3; amend. V, 

Takings Clause; 28 U.S.C. § 1491 (Tucker 

Act); 48 U.S.C. §§ 2101–2241 (2012 & 

Supp. IV 2017) (Puerto Rico Oversight, 

Management, and Economic Stability Act 

(“PROMESA”)); Jones-Shafroth Act, Pub. 

L. No. 64-368, 39 Stat. 951 (1917), 

codified as amended at 48 U.S.C. §§ 731–

751; Small Business Job Protection Act, 

Pub. L. No. 104-188, 110 Stat. 1755 

(1996); H.R.J. 124, Pub. L. No. 87-121, 75 

Stat. 245 (1961) (imposing a debt limit on 

Puerto Rico); P.R. CONST. art. VI, §§ 2, 8; 

Employees Retirement System Enabling 

Act, P.R. LAWS ANN. tit. 3, §§ 761–788

(“Act 447”); Urgent Interest Fund Act, 

2006 P.R. Laws 91; Joint Resolution For 

Other Allocations For Fiscal Year 2017-

2018 (“Joint Resolution 188”); Law To 

Guarantee Payment To Our Pensioners 

And Establish A New Plan For Defined 

Contributions For Public Servants (“Act 

106-2017”); Rule of the United States 

Court of Federal Claims (“RCFC”)

12(b)(1) (Subject Matter Jurisdiction).
2

BRADEN, Chief Judge.

To facilitate review of this Memorandum Opinion And Order, the court has provided the 

following outline.

I. RELEVANT FACTUAL BACKGROUND.

A. Historical Background – 1917 To June 30, 2016.

B. On June 30, 2016, Congress Enacted The Puerto Rico Oversight, Management, 

And Economic Stability Act.

C. On June 25, 2017, The Legislature Of The Commonwealth Of Puerto Rico Enacted 

Joint Resolution 188.

D. On August 23, 2017, The Legislature Of The Commonwealth Of Puerto Rico 

Enacted Act 106-2017.

II. PROCEDURAL HISTORY.

III. DISCUSSION.

A. Jurisdiction.

B. Standing.

C. The United States Court Of Federal Claims Has Jurisdiction To Adjudicate The 

Takings Clause Claim Alleged In The October 31, 2017 Amended Complaint, 

Pursuant To RCFC 12(b)(1).

1. The Puerto Rico Oversight, Management, And Economic Stability Act Does 

Not Evidence Congress’ “Unambiguous Intention” To Withdraw Tucker Act 

Jurisdiction.

2. The Puerto Rico Oversight, Management, And Economic Stability Act Does 

Not Preempt The Tucker Act.

3. The Oversight Board Is An Entity Of The Federal Government.

IV. CONCLUSION.
3

I. RELEVANT FACTUAL BACKGROUND.

A. Historical Background – 1917 To June 30, 2016.1

On March 2, 1917, on the eve of the United States’ entry into World War I, President 

Woodrow Wilson signed the Jones-Shafroth Act, designating Puerto Rico as an unincorporated 

territory of the United States subject to federal statutes. See Pub. L. No. 64-368, 39 Stat. 951 § 9 

(1917). An unique feature of the Jones-Shafroth Act was that interest payments on bonds issued 

by Puerto Rico and its subdivisions were exempt from federal income, state, and local taxes, 

whether the purchasers resided in Puerto Rico or not. See id. § 3.

On May 15, 1951, the territorial government of Puerto Rico enacted the Employees 

Retirement System (“ERS”) Enabling Act, Act No. 447 (“Act No. 447”), to provide pensions and 

other benefits to certain governmental officers and employees of so-called public corporations and 

municipalities. See P.R. LAWS ANN. tit. 3, §§ 761, 763 (1951). The primary funding for these 

benefits were employer contributions that statutorily were designated as ERS’s “legal assets.” See

P.R. LAWS ANN. tit. 3, § 762. Puerto Rico, however, did not hold or own any interest in employer 

contributions paid to the ERS. See id. Any employer that failed to make timely contributions, 

however, faced a misdemeanor charge and, if payments were in arrears for more than 30 days, the 

ERS could assert a claim to and priority over any other entities holding outstanding debt. Id. §§ 

781a(e), (f), (g). In the event of non-payment, the ERS was authorized to garnish property tax 

revenues, if the delinquent party was a municipality or issue a certificate of debt for immediate 

payment, if the party was an agency, public corporation, or instrumentality of Puerto Rico. Id. §§ 

781a(g), (h). Employer contributions, however, were not sufficient to meet even the benefit costs

“for many years.” Am. Compl. ¶ 29. 

In 1952, the United States Congress (“Congress”) designated Puerto Rico as a 

Commonwealth (“Puerto Rico” or the “Commonwealth”) and required that the Legislature of 

Puerto Rico (“Legislature”) authorize a Constitution, subject to ratification by Congress. See, e.g., 

48 U.S.C. § 731c (authorizing the Legislature to call a constitutional convention); 48 U.S.C. § 

731d (requiring Congress to ratify Puerto Rico’s Constitution). 

In 1961, Congress removed the Commonwealth’s federally-mandated debt limit, on the 

condition that the Legislature amend Puerto Rico’s Constitution and placed a limit on any future 

debt incurred. See Pub. L. No. 87-121, 75 Stat. 245 (1961). That same year, the Commonwealth’s 

Constitution was amended. See P.R. CONST. art. VI § 8. Subsequently, however, a substantial 

amount of additional debt was incurred by Commonwealth municipalities that were permitted “to 

borrow between 5 percent and 10 percent of assessed value on their own, without including 

[C]ommonwealth debt in the calculation.” MARC D. JOFFE & JESSE MARTINEZ, ORIGINS OF THE 

PUERTO RICO FISCAL CRISIS 12 (2016).

In 1984, Congress enacted a law to prohibit the Commonwealth from declaring bankruptcy 

under Chapter 9, Title 11, United States Code. See Bankruptcy Amendments and Federal

Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 333 (1984). The Commonwealth’s 

 

1

 The relevant facts discussed herein primarily were derived from the October 31, 2017 

Amended Complaint (“Am. Compl. ¶¶ 23–82”) and Exhibits (“Am. Compl. Ex. A–C”).
4

Constitution, however, provided that “[t]he Secretary of the Treasury may be required to apply the 

available revenues[,] including surplus[,] to the payment of interest on the public debt and the 

amortization thereof in any case provided by Section 8 of this Article VI at the suit of any holder 

of bonds or notes issued in evidence thereof.” P.R. CONST. art. VI, § 2.

In 1996, Congress enacted a law to phase out the tax-exempt status of corporate income 

earned in Puerto Rico over a ten-year period. See Small Business Job Protection Act of 1996, Pub. 

L. No. 104-188, 110 Stat. 1755 (1996) (codified as amended at 26 U.S.C. § 936). At the end of 

that period, the Commonwealth was faced with debt that was significantly downgraded and placed 

on the “Credit Watch List.” See Press Release, Government Development Bank For Puerto Rico, 

Moody’s Downgrades Puerto Rico’s Credit And Keeps It On Its Watchlist (May 8, 2006), 

http://gdb.pr.gov/communications/PressReleases/cpMoodysdowngradesPRcreditMay8-06.pdf. 

To raise revenues, the Commonwealth issued Sales Tax Revenue Bonds, the proceeds of which 

were deposited into an “Urgent Interest Fund,” instead of the “General Fund.” See Urgent Interest 

Fund Act, 2006 P.R. Laws 91.

2

On January 31, 2008, pursuant to Act No. 447, as amended, the ERS Board of Trustees 

issued a Resolution (“January 31, 2008 ERS Bond Resolution”) authorizing the ERS to issue one 

or more series of new bonds as “special obligations of the System payable solely from Pledged 

Property without recourse against other assets of [ERS].” Am. Compl. Ex. A. (January 31, 2008 

ERS Bond Resolution) at VI-1. “Pledged Property” was defined therein as:

1. All ERS revenues, including employer contributions paid from the date 

the bond resolution came into effect “and any assets in lieu thereof or 

derived thereunder which are payable [to the ERS] pursuant to [the ERS 

Enabling Act].” 

2. The “right, title, and interest” of the ERS regarding the revenues, 

including the right to receive them. 

3. “Funds, accounts, and subaccounts held for the benefit of bondholders.” 

4. “Any and all other rights and personal property of every kind pledged 

and assigned by the ERS for additional security.” 

5. “Cash and non-cash proceeds, products, offspring, rents and profits 

from any of the Pledged Property [including], without limitation, those 

from the sale, exchange, transfer, collection, loss, damage, disposition,

substitution or replacement of [Pledged Property].” 

Am. Compl. Ex. A at VI-36 (January 31, 2008 ERS Bond Resolution).

 

2

“The General Fund is the primary operating fund of the Commonwealth.” 

COMMONWEALTH OF PUERTO RICO, FINANCIAL INFORMATION AND OPERATING DATA REPORT 4

(Government Development Bank For Puerto Rico 2015).
5

To ensure that adequate collateral existed to support the January 31, 2008 bonds, the

January 31, 2008 ERS Bond Resolution required that the security interests in or liens on “Pledged 

Property” were considered as “valid and binding as against all parties having claims . . . against 

the [ERS], irrespective of whether such parties have notice thereof.” Am. Compl. Ex. A at VI-8. 

“Pledged Property” also was to be “free and clear of any pledge, lien, charge, or encumbrance[.]” 

Am. Compl. Ex. A at VI-15. In addition, the ERS was required to pursue “all available legal 

remedies” to collect unpaid employer contributions. Am. Compl. Ex. A at VI-14, VI-16. But, the 

ERS also was required to continue to “make timely principal and interest payments” on bonds

purchased, pursuant to the January 31, 2008 ERS Bond Resolution, before any ERS funds were 

used for any other purpose. Am. Compl. Ex. A at VI-8, VI-14, VI-36.

The January 31, 2008 ERS Bond Resolution also provided that any bonds issued thereunder 

were not obligations of the Commonwealth, its agencies, or its instrumentalities. Am. Compl. Ex. 

A at VI-1. On the last business day of each month, the ERS was required to transfer “[e]mployer 

[c]ontributions” to a designated Fiscal Agent, i.e., the Bank of New York Mellon, for deposit into 

a “[r]evenue [a]ccount,” by the next business day. Am. Compl. Ex. A (Revenue Account) at 

VI-9. In turn, the Fiscal Agent was responsible for making timely interest and principal payments 

to bondholders. Am. Compl. Ex. A at VI-10. Any other funds in the “Revenue Account” were to 

be allocated in the following order: 

 first, to the Senior Bonds Debt Service Account;

 second, to the Senior Bonds Debt Service Reserve Account;

 third, to the Subordinated Bonds Debt Service Account;

 fourth, to the Subordinated Bonds Debt Service Reserve Account; 

 fifth, to pay Operating Expenses; and

 sixth, to the General Reserve Account. 

Am. Compl. Ex. A (Revenue Account) at VI-9. 

Thereafter, the ERS issued three series of bonds in the total amount of $2,947,648,342.65,

3

the proceeds of which were used to pay for benefits and costs to fulfill reserve requirements and 

current benefit obligations. Am. Compl. ¶ 33. 

 

3

 The ERS issued bonds on the following dates:

a. “Series A” Bonds in the amount of $1,588,810,799.60 on January 31, 

2008.

b. “Series B” Bonds in the amount of $1,058,634,613.05 on June 2, 2008.

c. “Series C” Bonds in the amount of $300,202,930.00 on June 30, 2008.

Am. Compl. ¶ 33. 

With the exception of the date of issuance and commencement of interest payments—

between March 1, 2008 and August 1, 2008—the material terms of the ERS bonds were identical. 

Compare $1,588,810,799.60 EMPLOYEES RETIREMENT SYSTEM OF THE COMMONWEALTH OF 

PUERTO RICO SENIOR PENSION FUNDING BONDS, SERIES A (2008), http://www.gdb.

pr.gov/pdfs/public_corp/PensionBondsOS-Jan08-final.pdf, with $1,058,634,613.05 EMPLOYEES 

RETIREMENT SYSTEM OF THE COMMONWEALTH OF PUERTO RICO SENIOR PENSION FUNDING 
6

On July 6, 2011, the Legislature amended the Employees Retirement System Enabling Act, 

authorizing the ERS Board of Trustees to raise additional capital by “tak[ing] on a loan from any 

financial institution of the Government of the Commonwealth of Puerto Rico or the Federal 

Government of the United States of America.” P.R. LAWS ANN. tit. 3, § 779d. 

On February 11, 2014, all bonds issued by the Commonwealth, including ERS bonds, were

rated as non-investment grade or “junk bonds.” Press Release, Fitch Ratings, Fitch Downgrades 

Puerto Rico GO and Related Debt Ratings to ‘BB’; Outlook Negative (Feb. 11, 2014), 

https://www.fitchratings.com/site/pr/820231. This triggered acceleration clauses requiring 

redemption of Commonwealth bonds within days that “would otherwise have been due in years.” 

Why Puerto Rico is in Trouble, THE ECONOMIST, May 12, 2016, https://www.economist.

com/the-economist-explains/2016/05/11/why-puerto-rico-is-in-trouble.

B. On June 30, 2016, Congress Enacted The Puerto Rico Oversight, 

Management, And Economic Stability Act.

On June 30, 2016, Congress enacted the Puerto Rico Oversight, Management, and 

Economic Stability Act (“PROMESA”), pursuant to Article IV, Section 3, of the United States 

Constitution. See 48 U.S.C. §§ 2101–2241 (2012 & Supp. IV 2017).4 Congress also emphasized

 

BONDS, SERIES B (2008), http://www.gdb.pr.gov/investors_resources/documents/2012-

04-09-FinalOS-POBSeriesB.pdf, and $300,202,930 EMPLOYEES RETIREMENT SYSTEM OF THE 

COMMONWEALTH OF PUERTO RICO SENIOR PENSION FUNDING BONDS, SERIES C (2008), 

http://www.gdb.pr.gov/investors_resources/documents/ERSSeniorPensionFundingBonds-Series

C_000.pdf. 

4 The enactment of PROMESA triggered an automatic stay of, inter alia, “the 

commencement or continuation . . . of a judicial, administrative, or other action or proceeding 

against the Government of Puerto Rico” and “any act to create, perfect, or enforce any lien against 

the property of the Government of Puerto Rico” with respect to any “bond . . . or other financial 

indebtedness . . . of which the issuer, obligor, or guarantor is the Government of Puerto Rico and 

the date of issuance or incurrence precedes June 30, 2016.” 48 U.S.C. §§ 2194(a)(1)(A)–(B), 

(b)(1), (4). On September 21, 2016, Plaintiffs, together with other ERS bond holders, filed a 

motion in the United States District Court for the District of Puerto Rico to lift the automatic stay, 

unless ERS and the Commonwealth provided adequate protection of Plaintiffs’ property interests. 

See Motion Of Certain Secured Creditors Of The Employees Retirement System Of The 

Government Of The Commonwealth Of Puerto Rico For Relief From The PROMESA Automatic 

Stay, Altair Global Credit Opportunities Fund (A), L.L.C., et al. v. Garcia-Padilla, No. 16-2696 

(D.P.R. Sept. 21, 2016). On November 2, 2016, the District Court for the District of Puerto Rico 

issued an opinion denying Plaintiffs’ September 21, 2016 Motion. See Peaje Investments LLC v. 

Garcia-Padilla, No. 16-2365, 2016 WL 6562426 (D.P.R. Nov. 2, 2016), aff’d in part, vacated in 

part, 845 F.3d 505 (1st Cir. 2017). On January 11, 2017 the United States Court of Appeals for 

the First Circuit issued an opinion vacating the United States District Court’s denial of Plaintiffs’ 

September 21, 2016 Motion and remanding the case. See Peaje Investments LLC v. GarcíaPadilla, 845 F.3d 505, 516 (1st Cir. 2017). Subsequently, in January 2017, Plaintiffs, the 

Commonwealth, ERS, and the Oversight board entered into a stipulation to settle Plaintiffs’ request 
7

that PROMESA would “prevail over any general or specific provisions of territory law, State law, 

or regulation that is inconsistent with this chapter.” 48 U.S.C. § 2103. Congress also specified 

that the primary purpose of PROMESA was to provide a method for a territory of the United States 

“to achieve fiscal responsibility and access to the capital markets.” 48 U.S.C. § 2121(a). To 

accomplish this objective, Congress established an Oversight Board to assist the Commonwealth, 

and its instrumentalities, to better manage public finances. See 48 U.S.C. §§ 2121(b)(2).5 

Congress determined that the number of Oversight Board members should be limited to 

seven individuals, appointed by the President, but selected from lists provided by Congress. See

48 U.S.C. § 2121(e). Only these presidentially-appointed Oversight Board members had voting 

rights; the Commonwealth’s Governor or designee was a “member,” but only in an ex officio

capacity. See 48 U.S.C. § 2121(e)(3). The sole authority to remove voting members, reappoint 

members to successive terms, and fill vacancies resided in the President. See 48 U.S.C. 

§ 2121(e)(5), (6). 

The most important responsibility of the Oversight Board was to provide a budget to “the 

President, the House of Representatives Committee on Natural Resources[,] and the Senate 

Committee on Energy and Natural Resources, the Governor, and the Legislature.” 48 U.S.C. 

§ 2127(a).6 Toward that end, Congress required the Commonwealth to submit an annual Fiscal 

Plan for approval by the Oversight Board. See 48 U.S.C. § 2141(a). The Fiscal Plan was required 

to estimate revenues and expenditures, based on current law or specific bills that require enactment 

in order to reasonably achieve the projections of the Fiscal Plan and “achieve fiscal responsibility 

and access to the capital markets.” 48 U.S.C. § 2141(b). If the Oversight Board determined that 

the Fiscal Plan was not satisfactory, the Governor of the Commonwealth was allowed to make 

other recommendations. See 48 U.S.C. § 2141(c)(3). If the Governor did not submit a satisfactory 

plan, the Oversight Board had the authority to present an alternative plan to the Governor, that 

would be “deemed approved by the Governor[.]” See 48 U.S.C. § 2141(e)(2). 

Congress also empowered the Oversight Board to “designate any territorial instrumentality 

as a covered territorial instrumentality[,] that is subject to the requirements of [PROMESA].” 48 

U.S.C. § 2121(d)(1). All Commonwealth instrumentalities were required to comply with the 

certified Fiscal Plan or provide the Oversight Board with a separate Instrumentality Fiscal Plan 

and ensure that the Legislature did not enact any new law that did not comply with the certified 

Fiscal Plan. See 48 U.S.C. §§ 2121, 2144. If the Oversight Board’s effort was unsuccessful, 

Congress authorized the Oversight Board to file a petition to restructure the debts of any

 

for adequate protection. See Order Approving Stipulation, Altair Global Credit Opportunities 

Fund (A), L.L.C., et al. v. Garcia-Padilla, No. 16-2696 (D.P.R. Jan. 17, 2017).

5 Congress authorized the Oversight Board to retain “federal employees,” and to use federal 

property. See 48 U.S.C. §§ 2122, 2123(b). In addition, the Oversight Board was responsible for

providing a budget for the Commonwealth to “the President, the House Committee on Natural 

Resources, and the Senate Committee on Energy and Natural Resources, the Governor, and the 

Legislature.” 48 U.S.C. § 2127(a). 

6 To accomplish this objective, Congress also authorized the Oversight Board to “secure 

directly from any department or agency of the United States information necessary to enable it to 

carry out this chapter[.]” See 48 U.S.C. § 2124(b)(1).
8

government instrumentality in a court-supervised adjustment process similar to Chapter 9 of the 

Bankruptcy Code. See 48 U.S.C. §§ 2146, 2164. The sole authority to file such a petition, as well 

as to modify or file an adjustment consistent with the Fiscal Plan, was delegated to the Oversight 

Board. See 48 U.S.C. §§ 2164(a), 2172, 2173, 2174(b)(7). In the event of a Title III filing, the 

Oversight Board was designated to be responsible for representing the debtor. See 48 U.S.C. 

§ 2175.

After the enactment of PROMESA, one of the Oversight Board’s “first actions was to 

instruct the Governor to provide a fiscal plan for the Commonwealth by October 14, 2016.” Am. 

Compl. ¶ 64. The Commonwealth’s “original October 14, 2016 [F]iscal [P]lan would have left 

intact the ERS and the system . . . for making pension payments.” Am. Compl. ¶ 65. On November 

23, 2016, however, the Oversight Board rejected the Governor’s proposed Fiscal Plan, concluding 

that the pension system and the ERS’ unfunded liabilities needed to be addressed further. Am. 

Compl. ¶ 65. By letters dated December 20, 2016 and January 18, 2017, the Oversight Board 

informed the Governor that the Commonwealth must consider new payment sources and 

mechanisms for pensions. Am. Compl. ¶ 65. 

As of “February 2017, the aggregate principal amount of the interest-bearing ERS bonds 

plus the accreted value of the zero coupon or capital appreciation ERS bonds”7 was approximately 

$3,156,000,000. Am. Compl. ¶ 36. All of these ERS bonds were secured by collateral defined as 

“Pledged Property” in the January 31, 2008 ERS Bond Resolution. Am. Compl. ¶ 40. On February 

28, 2017, the Commonwealth submitted a revised fiscal plan to increase employer contributions 

to the ERS to fund existing benefits in full. Am. Compl. ¶ 66. 

On March 13, 2017, the Commonwealth’s revised plan was approved by the Oversight 

Board, subject to an amendment, requiring additional legislative measures by June 30, 2017, to 

liquidate ERS assets, including the Pledged Property that serve as collateral for ERS bonds, and 

“transfer” the proceeds to the Commonwealth’s General Fund. Am. Compl. ¶ 67. 

On May 3, 2017, the Oversight Board filed a Title III petition for the Commonwealth. Am. 

Compl. ¶ 70. Subsequently, Chief Justice John Roberts appointed Judge Laura Swain, of the 

United States District Court for the Southern District of New York, as the presiding judge in the 

Title III proceedings in the District Court for the District of Puerto Rico, pursuant to PROMESA. 

See 48 U.S.C. § 2168(a) (“For cases in which the debtor is a territory, the Chief Justice of the 

United States shall designate a district court judge to sit by designation to conduct the case.”). On 

May 21, 2017, the Oversight Board filed a Title III petition for ERS. Am. Compl. ¶ 71.8

 

7

 The “accreted value” of capital appreciation ERS bonds refers to the “accrued portion of 

the face amount.” Am. Compl. ¶ 36 n.1.

8 The filing of the May 21, 2017 Petition triggered the automatic stay provisions of the 

Bankruptcy Code, that stayed, inter alia, “the commencement or continuation . . . of a judicial 

administrative, or other action or proceeding” and “any act to create, perfect, or enforce any lien 

against property[.]” See 11 U.S.C. § 362(a)(1), (4); 48 U.S.C. § 2161(a) (incorporating 11 

U.S.C. § 362 into PROMESA). On May 31, 2017, ERS bondholders, including Plaintiffs, filed a 

motion to lift the automatic stay or, in the alternative, for adequate protection. See Motion Of 

Certain Secured Creditors Of The Employees Retirement System Of The Government Of The 
9

On May 29, 2017, the Oversight Board sent a non-public letter to the Puerto Rico Fiscal 

Agency and Financial Advisory Authority (“AAFAF”) requesting that the Commonwealth’s 

revenue forecasts be revised. Am. Compl. ¶ 68. In response, the Commonwealth’s Fiscal Plan 

was amended to reflect an additional $734 million in revenue, “in part due to pension 

reimbursements from other agencies.” Am. Compl. ¶ 68. 

C. On June 25, 2017, The Legislature Of The Commonwealth Of Puerto Rico 

Enacted Joint Resolution 188.

On June 25, 2017, the Legislature enacted Joint Resolution For Other Allocations For 

Fiscal Year 2017-2018 (“Joint Resolution 188”), that was adopted by the Oversight Board “on 

behalf of the Governor on June 30, 2017.” Am. Compl. ¶ 71 n.18.9Joint Resolution 188 required 

the ERS10 to sell all assets and transfer the net proceeds into the Commonwealth’s Treasury 

Secretary’s account, as part of the General Fund for fiscal year 2017-2018, in order to make benefit 

payments to pensioners. See Joint Resolution 188 §§ 1–3. Joint Resolution 188 also provided that 

“the General Fund, through the pay-as-you-go system, shall assume any payments that the three 

Retirement Systems cannot make.” See Joint Resolution 188 § 4(1). In addition, the ERS was to 

“continue to meet [its] obligations . . . by contributing available funds and funds arising from the 

sale of [ERS] assets to the General Fund.” Joint Resolution 188 § 4(2). But, “[e]mployer 

contributions . . . to the [ERS were] eliminated.” Joint Resolution 188 § 4(3). 

 

Commonwealth Of Puerto Rico Request For Adequate Protection And For Relief From The 

Automatic Stay, In re The Financial Oversight And Management Board For Puerto Rico v. The 

Employees Retirement System Of The Government Of The Commonwealth Of Puerto Rico, No. 

17-3566, Dkt. No. 26 (D.P.R. May 31, 2017). On July 14, 2017, the parties entered into a joint 

stipulation as to adequate protection, stating that ERS would provide the ERS bondholders certain 

protections, including: (1) the payment of current interest due on the ERS bonds; and (2) monthly 

deposits of $18.5 million from June through October 2017 into a newly-created, segregated 

account. See Notice Of Filing Of Joint Stipulation, In re The Financial Oversight And 

Management Board For Puerto Rico v. The Employees Retirement System Of The Government Of 

The Commonwealth Of Puerto Rico, No. 17-3566, Dkt. No. 170 (D.P.R. July 14, 2017). On July 

17, 2017, the United States District Court for the District of Puerto Rico approved the July 14, 

2017 Joint Stipulation, but “retain[ed] jurisdiction over any and all matters arising from or related 

to the implementation or interpretation of the [July 14, 2017 Joint Stipulation] or th[e] Order.” 

Order Approving Joint Stipulation, In re The Financial Oversight And Management Board For 

Puerto Rico v. The Employees Retirement System Of The Government Of The Commonwealth Of 

Puerto Rico, No. 17-3566, Dkt. No. 171 (D.P.R. July 17, 2017).

9

See Am. Compl. Ex. B. (certified unofficial English translation of Joint Resolution 188). 

10

 Joint Resolution 188 listed the individual retirement systems that comprise the ERS as 

“the Central Government and Judiciary Retirement Systems and the Teachers’ Retirement 

System.” See Joint Resolution 188 (Statement of Legislative Intent).
10

D. On August 23, 2017, The Legislature Of The Commonwealth Of Puerto Rico 

Enacted Act 106-2017.

On August 23, 2017, the Legislature enacted a Law To Guarantee Payment To Our 

Pensioners And Establish A New Plan For Defined Contributions For Public Servants (“Act 106-

2017”). Act 106-2017 § 2.1.11 The purpose of Act 106-2017 was to “faithfully implement[] the 

Fiscal Plan certified by the Oversight Board,” “work within the parameters of PROMESA,” and 

“meet the requirements demanded by the Oversight Board,” based on “provisions on pension 

reform in the Fiscal Plan.” Act 106-2017 (Statement of Legislative Intent). Significant aspects of 

Act 106-2017 included: providing for the treatment and the payment terms of accumulated 

pensions and associated accounts; establishing a defined contribution program; creating a 

retirement board to replace existing boards; and providing transition rules. See Act 106-2017 §§ 

2.1–2.3, 3.1–3.9, 4.1–4.2, 5.1–5.3. Act 106-2017 also required the Commonwealth to assume any 

payments that the ERS could not make, contribute ERS assets to the Commonwealth, and allow

the Commonwealth, and Commonwealth public corporations and municipalities, to stop making 

contributions to the ERS. Act 106-2017 (Statement of Legislative Intent). Finally, Act 106-2017 

required the ERS Board of Trustees to dissolve by December 31, 2017 so that a new board could

be formed to dispose of ERS property. See Act 106-2017 §§ 4.2, 5.1–5.3.

II. PROCEDURAL HISTORY.

On July 19, 2017, Plaintiffs filed a Complaint in the United States Court of Federal Claims. 

ECF No. 1. On October 20, 2017, Plaintiffs filed an Unopposed Motion For Leave To File An 

Amended And Supplemented Complaint. ECF No. 8. On October 31, 2017, the court issued an 

Order granting Plaintiffs’ October 20, 2017 Unopposed Motion. ECF No. 9. The October 31,

2017 Amended Complaint alleged that “[t]he Oversight Board, working with and acting through 

the Commonwealth, designed and approved Act 106-2017 and directed and required the 

Commonwealth to enact it. Act 106-2017, in and of itself and in conjunction with Joint Resolution 

188 appropriated Plaintiffs’ property interest without just compensation, including the contractual 

right to receive principal and interest due to plaintiffs.” ECF No. 10 at ¶ 89. In the alternative, the 

October 31, 2017 Amended Complaint alleged that the Commonwealth acted “under the authority 

of the Federal Government,” because the Commonwealth was obligated to comply with the 

Oversight Board’s directives to enact Joint Resolution 188 and Act 106-2017. ECF No. 10 at 

¶ 92. 

On December 8, 2017, the Government filed a Motion To Dismiss, arguing that the court 

does not have jurisdiction to adjudicate Plaintiffs’ Takings Clause claim, because: (1) the 

Oversight Board is not part of the United States Government; (2) Congress authorized the United 

States District Court for the District of Puerto Rico with exclusive jurisdiction to adjudicate 

creditors’ claims against the Commonwealth and the Oversight Board; (3) the October 31, 2017 

Amended Complaint is barred by 28 U.S.C. § 1500; (4) Plaintiffs’ Takings Clause Claim is not 

ripe for adjudication; and, in the alternative, (5) Plaintiffs’ October 31, 2017 Amended Complaint 

fails to state a claim on which relief may be granted. ECF No. 14. 

 

11

 See Am. Compl. Ex. C. (certified unofficial English translation of Act 106-2017).
11

On January 26, 2018, Plaintiffs filed a Response In Opposition To The Government’s

December 8, 2017 Motion To Dismiss. ECF No. 21. On March 9, 2018, the Government filed a 

Reply. ECF No. 24. 

On June 11, 2018, the court convened an oral argument. ECF No. 29 (“TR 1–180”).

On July 6, 2018, the parties filed a Joint Submission summarizing proceedings pending in 

the United States District Court for the District of Puerto Rico concerning PROMESA. 

ECF No. 30.

III. DISCUSSION.

A. Jurisdiction.

Congress authorized the United States Court of Federal Claims to adjudicate “any claim 

against the United States founded either upon the Constitution, or any Act of Congress or any 

regulation of an executive department, or upon any express or implied contract with the United 

States, or for liquidated or unliquidated damages in cases not sounding in tort.” 28 U.S.C. 

§ 1491(a)(1) (the “Tucker Act”). The Tucker Act, however, is “a jurisdictional statute; it does not 

create any substantive right enforceable against the United States for money damages. . . . [T]he 

Act merely confers jurisdiction upon [the United States Court of Federal Claims] whenever the 

substantive right exists.” United States v. Testan, 424 U.S. 392, 398 (1976). 

To pursue a substantive right under the Tucker Act, a plaintiff must identify and plead an 

independent contractual relationship, constitutional provision, federal statute, and/or executive 

agency regulation that provides a substantive right to money damages. See Todd v. United States, 

386 F.3d 1091, 1094 (Fed. Cir. 2004) (“[J]urisdiction under the Tucker Act requires the litigant to 

identify a substantive right for money damages against the United States separate from the Tucker 

Act[.]”). Specifically, a complaint must allege a source of substantive law that “can fairly be 

interpreted as mandating compensation by the Federal Government.” Testan, 424 U.S. at 400. In 

addition, the United States Court of Appeals for the Federal Circuit has held that the “Takings 

Clause of the Fifth Amendment is a money-mandating source for purposes of Tucker Act 

jurisdiction.” Jan’s Helicopter Serv., Inc. v. F.A.A., 525 F.3d 1299, 1309 (Fed. Cir. 2008) (citing 

Moden v. United States, 404 F.3d 1335, 1341 (Fed. Cir. 2005)). 

The October 31, 2017 Amended Complaint alleges that the Oversight Board violated the 

Takings Clause of the Fifth Amendment by requiring the Legislature to enact Joint Resolution 188 

and Act 106-2017, that appropriated, without just compensation, Plaintiffs’ constitutionallyprotected property, i.e., “Pledged Property,” as defined in the January 31, 2008 ERS Bond 

Resolution, that served as collateral for ERS bonds that Plaintiffs purchased, including the right to 

receive timely payment of principal and interest. Am. Compl. ¶¶ 5, 84–93. Based on these 

allegations, the court has jurisdiction to adjudicate the constitutional claim alleged in the October 

31, 2017 Amended Complaint. See RCFC 12(b)(1); see also Lucas v. South Carolina Coastal 

Council, 505 U.S. 1003, 1010–14 (1992) (holding that plaintiff was entitled to compensation for a 

legislative taking).
12

B. Standing.

Standing is “the threshold question in every federal case, determining the power of the 

court to entertain the suit.” Warth v. Seldin, 422 U.S. 490, 498 (1975). The party invoking federal 

jurisdiction “bears the burden of establishing the[] elements [of standing].” Spokeo, Inc. v. Robins, 

136 S. Ct. 1540, 1547 (2016); see also Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992) (same). 

To meet this burden at the pleading stage, the complaint must “clearly . . . allege facts 

demonstrating each element.” Spokeo, 136 S. Ct. at 1547 (internal omission and quotation marks 

omitted); see also McKinney v. United States Dep’t of Treasury, 799 F.2d 1544, 1557 (Fed. Cir. 

1986) (“The facts alleged in the complaint, taken as true for purposes of a standing analysis, must 

be sufficient to show that a party has suffered, or is likely to suffer, an injury in fact.”). 

As a matter of law, to establish standing in the United States Court of Federal Claims,12 a 

complaint must allege sufficient facts to show that a plaintiff: 

(1) has suffered an “injury in fact” that is (a) concrete and particularized and (b) 

actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable 

to the challenged action of the defendant; and (3) it is likely, as opposed to merely 

speculative, that the injury will be redressed by a favorable decision. 

Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180–81 (2000); see also

Figueroa v. United States, 466 F.3d 1023, 1029 (Fed. Cir. 2006) (same). 

The October 31, 2017 Amended Complaint alleges that: (1) Plaintiffs have a “property 

interest” in the form of valid and enforceable liens on “Pledged Property” and the right to receive 

“timely payment of principal and interest” as defined in the January 31, 2008 ERS Bond 

Resolution, pursuant to which Plaintiffs purchased ERS bonds (Am. Compl. ¶ 85); and (2) 

Congress authorized the Oversight Board to design, approve, and direct the Legislature to enact 

Joint Resolution 188 and Act 106-2017, resulting in the appropriation of Plaintiff’s property, 

without just compensation. Am. Compl. ¶¶ 87–90. These allegations collectively, if established, 

show that Plaintiffs have suffered economic injury, in fact, that is concrete and actual, and is 

directly traceable to acts of the Oversight Board, established by Congress. The October 31, 2017 

Amended Complaint also requests: (1) “just compensation in an amount equal to the principal 

amount of the ERS Bonds, together with all interest accrued to the date of payment;” (2) attorney’s 

fees and costs; and (3) “further relief as the Court deems just and proper.” Am. Compl. at 26, 

¶¶ I–III (Prayer for Relief). Therefore, the alleged injury is “likely redressable by a favorable 

judicial decision.” Figueroa, 166 F.3d at 1029. 

 

12 The standing requirements of Article III of the United States Constitution also apply to 

the United States Court of Federal Claims. See Anderson v. United States, 344 F.3d 1343, 1350 

n.1 (Fed. Cir. 2003) (stating that the United States Court of Federal Claims, “though an Article I 

court, . . . applies the same standing requirements enforced by other federal courts created under 

Article III”) (internal citation omitted). 
13

For these reasons, the court has determined that the October 31, 2017 Amended Complaint 

properly has alleged each of the requisite elements to establish that Plaintiffs have standing to seek 

an adjudication of their Fifth Amendment Takings Clause claim.

C. The United States Court Of Federal Claims Has Jurisdiction To Adjudicate 

The Takings Clause Claim Alleged In The October 31, 2017 Amended 

Complaint, Pursuant To RCFC 12(b)(1).

1. The Puerto Rico Oversight, Management, And Economic Stability Act 

Does Not Evidence Congress’ “Unambiguous Intention” To Withdraw 

Tucker Act Jurisdiction. 

A claim for just compensation under the Takings Clause of the Fifth Amendment of the 

United States Constitution “must be brought in the [United States] Court of Federal Claims in the 

first instance, unless Congress has withdrawn the Tucker Act grant of jurisdiction in the relevant 

statutes.” E. Enters. v. Apfel, 524 U.S. 498, 520 (1998) (plurality opinion); see also Horne v. Dep’t 

of Agric., 569 U.S. 513, 527 (2013) (“A claim for just compensation under the Takings Clause 

must be brought to the [United States] Court of Federal Claims in the first instance, unless 

Congress has withdrawn the Tucker Act grant of jurisdiction in the relevant statute.”); Bowen v. 

Massachusetts, 487 U.S. 879, 910 n.48 (1988) (Tucker Act “jurisdiction is ‘exclusive’ . . . to the 

extent that Congress has not granted any other court authority to hear the claims that may be 

decided by the [United States Court of Federal Claims].”). Congress, however, may withdraw 

Tucker Act jurisdiction by enacting a statute that evidences Congress’ “unambiguous intention to 

withdraw the Tucker Act remedy[.]” Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1019 (1984). 

In Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), the United States Supreme Court 

held that the proper inquiry, “[i]n determining whether a Tucker Act remedy [i.e., “just 

compensation”] is available for claims arising out of a taking[,] . . . [is] whether Congress has[,]

in the [other] statute[,] withdrawn the Tucker Act grant of jurisdiction to the Court of Claims to 

hear a suit involving the statute founded . . . upon the Constitution.” Id. at 1017 (italics added) 

(internal quotation marks and corrections omitted). For this reason, the United States Court of 

Appeals for the Federal Circuit has held, “[w]ithdrawal of Tucker Act jurisdiction by implication 

is disfavored, . . . a court must find that the statute at issue . . . reflects an unambiguous 

congressional intent to displace the Tucker Act’s waiver of sovereign immunity.” Acceptance Ins. 

Cos. Inc. v. United States, 503 F.3d 1328, 1336 (Fed. Cir. 2007).

The Government contends, however, that Tucker Act jurisdiction is withdrawn by Section 

2126(a) of PROMESA, that provides:

Except as provided in section 2124(f)(2) of this title (relating to the issuance of an 

order enforcing a subpoena), and subchapter III (relating to adjustments of debts), 

any action against the Oversight Board, and any action otherwise arising out of this 

chapter, in whole or in part, shall be brought in a United States district court for the 

covered territory[.]

48 U.S.C. § 2126(a). 
14

The Government also argues that “[S]ection 2126(a) vests jurisdiction over ‘any action 

otherwise arising out of PROMESA, in whole or in part,’ in the [United States D]istrict [C]ourt”

for the District of Puerto Rico. ECF No. 24 at 8 (quoting 48 U.S.C. § 2126(a)). Moreover, as the 

United States Supreme Court has explained, “[r]ead naturally, the word ‘any’ has an expansive 

meaning, that is, ‘one or some indiscriminately of whatever kind.’” United States v. Gonzales, 

520 U.S. 1, 5 (1997) (quoting WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 97 (1976)). 

So, the Government reasons that it does not matter that PROMESA does not expressly mention 

the Tucker Act. ECF No. 24 at 9. And, the United States Supreme Court has held that statutory 

language designating that another court “shall have jurisdiction” over a particular category of cases 

can be sufficient to displace the Tucker Act. See Hinck v. United States, 550 U.S. 501, 506–08 

(2007).

Subsequently, in Horne v. Department of Agriculture, 569 U.S. 513 (2013), however, the 

United States Supreme Court provided additional guidance to federal trial courts in determining

“whether a statutory scheme displaces Tucker Act jurisdiction, i.e., the trial court “must examine 

the purpose of the statute, the entirety of its text, and the structure of review that it establishes.”

Id. at 527 (internal quotation marks and corrections omitted). 

Certainly, Section 2126(a) of PROMESA reflects Congress’ intent that the United States 

District Court for the District of Puerto Rico is the proper venue with jurisdiction to adjudicate: 

(1) “any action against the Oversight Board;” and (2) “any action otherwise arising out of this 

chapter, in whole or in part.” See 48 U.S.C. § 2126(a); see also United States Nat’l Bank of Oregon 

v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 454 (1993) (“A statute’s plain meaning must be 

enforced . . . and the meaning of a statute will typically heed the commands of its punctuation.”).

But, the plain language of Section 2126(a) of PROMESA does not express Congress’

“unambiguous intention” to withdraw Tucker Act jurisdiction. See Acceptance Ins., 503 F.3d at 

1336. In fact, there is nothing in the text of PROMESA that either refers to the Tucker Act or the 

Government’s waiver of sovereign immunity thereunder. See 48 U.S.C. §§ 2101–2241; see also

Monsanto, 467 U.S. at 1018–19 (holding that the absence of such provisions “cannot be construed 

to reflect an unambiguous intention to withdraw the Tucker Act remedy”). Nor does the legislative 

history mention the Tucker Act or that PROMESA should be construed to deny a plaintiff’s right 

guaranteed by the United States Constitution to seek an adjudication of a Takings Clause claim in 

the United States Court of Federal Claims. See H.R. Comm. on Natural Resources, Puerto Rico 

Oversight, Management, and Economic Stability Act, H.R. Rep. No. 114-602 (2016). Cf. Moda 

Health Plan, Inc. v. United States, 892 F.3d 1311 (holding that the legislative history of Congress’ 

appropriations bills for Fiscal Year 2015 and Fiscal Year 2016 “clearly indicated [Congress’] 

intent . . . to temporarily cap the payments required by the [Patient Protection and Affordable Care 

Act]”).

Nevertheless, the Government insists that a Takings Clause claim, based on actions taken 

by the Oversight Board, necessarily is a claim “arising out of” PROMESA.13 Gov’t Mot. at 27 

 

13 Section 2126(a) also is broader than 7 U.S.C. § 1506(d), the jurisdictional provision at 

issue in Acceptance Insurance. Compare 48 U.S.C. § 2126(a) (“any action against the [federal 

entity], and any action otherwise arising out of this chapter, in whole or in part, shall be brought 

in a United States district court”) (italics added), with 7 U.S.C. § 1506(d) (“The district courts of 
15

(citing Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975) (holding that an illegal exaction claim 

challenging the Social Security Act did not arise under the Takings Clause, because “not only is it 

Social Security benefits which appellees seek to recover, but it is the Social Security Act which 

provides both the standing and the substantive basis for the presentation of their constitutional 

contentions.”) (italics added)). Therefore, the Government concludes that the Takings Clause

claim alleged in the October 31, 2017 Amended Complaint must arise out of PROMESA. ECF 

No. 24 at 8. 

In this case, however, Plaintiffs’ “standing” is derived from Article III of the United States 

Constitution and the “substantive basis” of the claim alleged in the October 31, 2017 Amended 

Complaint is derived from the Takings Clause. 

Nor does the jurisdictional provision in Section 2166, governing bankruptcy proceedings 

filed under Title III of PROMESA, evidence that Congress unambiguously intended to withdraw 

Tucker Act jurisdiction in Section 2126(a). 

The text of Section 2166(a) of PROMESA provides:

The district courts shall have—

(1) except as provided in paragraph (2), original and exclusive jurisdiction of all 

cases under this subchapter; and

(2) except as provided in subsection (b), and notwithstanding any Act of Congress 

that confers exclusive jurisdiction on a court or courts other than the district 

courts, original but not exclusive jurisdiction of all civil proceedings arising 

under this subchapter, or arising in or related to cases under this subchapter.

48 U.S.C. § 2166(a).

The purpose of Section 2166(a) is to preempt other federal courts from exercising 

jurisdiction in cases arising under the bankruptcy provision of PROMESA, i.e., Title III. The fact 

that PROMESA does not include similar language in Section 2126(a) confirms that Congress did 

not unambiguously intend to withdraw Tucker Act jurisdiction for Takings Clause claims. See

Keene Corp. v. United States, 508 U.S. 200, 208 (1993) (“Where Congress includes particular 

language in one section of a statute but omits it in another, it is generally presumed that Congress 

acts intentionally and purposely in the disparate inclusion or exclusion.” (internal corrections

omitted) (quoting Russello v. United States, 464 U.S. 16, 23 (1983)). Therefore, the plain meaning 

of Section 2126(a) does not mandate Plaintiffs to adjudicate their Takings Clause claim in the 

United States District Court for the District of Puerto Rico. 

 

the United States . . . shall have exclusive original jurisdiction. . . of all suits brought by or against 

the [federal entity].”). And, the clause in Section 2126(a) of PROMESA providing that “any action 

otherwise arising out of this chapter, in whole or in part” necessarily includes any action filed 

against the United States. See Gonzales, 520 U.S. at 5 (1997) (“Read naturally, the word ‘any’ has 

an expansive meaning, that is, ‘one or some indiscriminately of whatever kind.’”) (quoting 

Webster's Third New International Dictionary 97 (1976)).
16

As an aside, the Government suggests that “it is improbable that Congress intended . . . to 

permit debt holders to seek dollar-for-dollar compensation against the United States in the [United 

States] Court of Federal Claims.” Gov’t Mot. at 26 (citing E. Enters., 524 U.S. at 517–19

(“Congress could not have contemplated that the [United States Department of the] Treasury 

would compensate coal operators for their liability under the [Coal Industry Retiree Health Benefit 

Act of 1992], for every dollar paid . . . would be presumed to generate a dollar of Tucker Act 

compensation.”) (internal quotation marks and alterations omitted)). The Government concludes 

this is so, because PROMESA does not authorize federal funds to pay the Commonwealth debt. 

See 48 U.S.C. § 2150(c). But, the Government mischaracterizes the October 31, 2017 Amended 

Complaint. Plaintiffs are not seeking to collect “dollar-for-dollar” payment from the United States 

for the Commonwealth’s debt. Instead, the October 31, 2017 Amended Complaint alleges that 

Plaintiffs are seeking “just compensation,” if their Takings Clause claim is adjudicated and 

determined to be valid. Am. Compl. ¶¶ 83–93.

For these reasons, the court has determined that PROMESA does not unambiguously 

withdraw Tucker Act jurisdiction to adjudicate the Takings Clause claim alleged in the October 

31, 2017 Amended Complaint. 

2. The Puerto Rico Oversight, Management, And Economic Stability Act 

Does Not Preempt The Tucker Act.

Congress may preempt Tucker Act jurisdiction by “a precisely drawn, detailed statute” that 

“assertedly impos[es] monetary liability on the United States [and] contains its own judicial 

remedies.” United States v. Bormes, 568 U.S. 6, 12–13 (2012) (italics added) (internal quotation 

marks and citation omitted). Only claims covered by such a remedial scheme are preempted. See 

Vereda, Ltda. v. United States, 271 F.3d 1367, 1375 (Fed. Cir. 2001) (“When such a specific and 

comprehensive scheme for administrative and judicial review is provided by Congress, . . . Tucker 

Act jurisdiction over the subject matter covered by the scheme is preempted.”) (italics added)

(internal quotation marks and citation omitted). Under these circumstances, the United States 

Supreme Court has held that a “specific remedial scheme establishes the exclusive framework for 

the liability of Congress created under the statute” and “displace[s]” the Tucker Act. See Bormes, 

568 U.S. at 12. 

The United States Supreme Court has “frequently repeated the view that, in the event of a 

taking, [a] compensation remedy is required by the Constitution.” First English Evangelical

Lutheran Church of Glendale v. Cnty. of L.A., 482 U.S. 304, 316 (1987). In other words, a taking 

“necessarily implicates the constitutional obligation to pay just compensation.” Id. at 315 

(quotation marks omitted); see also Tabb Lakes, Ltd. v. United States, 10 F.3d 796, 799–800 (Fed. 

Cir. 1993) (“There can be no dispute that the taking of private property for public use requires the

payment of compensation under the Constitution.”). The Tucker Act authorizes the court to 

adjudicate Takings Clause claims, but also provides the Constitutional remedy of “just 

compensation.” See U.S. CONST. amend. V, Takings Clause; see also First English Evangelical, 

482 U.S. at 314 (holding that the Fifth Amendment’s Takings Clause “is designed . . . to secure 

compensation in the event of otherwise proper interference amounting to a taking.”) (italics 

omitted).
17

In Hinck v. United States, 550 U.S. 501 (2007), the United States Supreme Court 

considered the remedial scheme provided by Taxpayer Bill of Rights 2, stating that “[t]he Tax 

Court shall have jurisdiction over any action brought by a taxpayer who meets the [statutory]

requirements . . . to determine whether the [Treasury] Secretary’s failure to abate interest under 

this section was an abuse of discretion, and may order an abatement, if such action is brought 

within 180 days after the date of the mailing of the Secretary's final determination not to abate 

such interest.” 26 U.S.C. § 6404(h)(1) (2006). The Court held that this statute preempted Tucker 

Act jurisdiction, because it was “a precisely drawn, detailed statute that, in a single sentence, 

provide[d] a forum for adjudication, a limited class of potential plaintiffs, a statute of limitations, 

a standard of review, and authorization for judicial relief.” Hinck, 550 U.S. at 506 (internal 

quotation marks omitted).14

In Horne v. Department of Agriculture, 569 U.S. 513 (2013), the United States Supreme 

Court considered whether the remedial scheme in the Agricultural Marketing Agreement Act of 

1937 (“AMAA”) was sufficiently “comprehensive” to preempt Tucker Act jurisdiction. Id. at 516. 

Under the AMAA, a plaintiff was entitled an administrative hearing to determine whether any 

order issued by the Secretary of the Department of Agriculture “or any provision of any such order 

or any obligation imposed in connection therewith is not in accordance with law and [to pray] for 

a modification thereof or to be exempted therefrom.” 7 U.S.C. § 608c(15)(A). The AMAA also 

specified that a plaintiff could seek review of that ruling in a federal district court. Horne, 569 

U.S. at 527 (“Once the Secretary issues a ruling, the federal district court where the ‘handler is an 

inhabitant, or has his principal place of business’ is ‘vested with jurisdiction . . . to review [the] 

ruling.’”). In light of these remedial safeguards, the United States Supreme Court concluded that, 

“[t]hese statutory provisions afford [plaintiffs] a ready avenue to bring a [T]akings [Clause] claim 

against the [federal government],” id. at 527, and preempted Tucker Act jurisdiction over 

petitioners’ Takings Clause claim. Id. at 527–28. But, the Court also observed that a plaintiff who 

did not have access to such a robust review process could still file a claim in the United States 

Court of Federal Claims for “just compensation.” Horne, 569 U.S. at 526 n.7.

In addition, the United States Court of Appeals for the Federal Circuit has considered 

whether a statutory “remedial scheme” preempted Tucker Act jurisdiction in two cases. In 

Marcum LLP v. United States, 753 F.3d 1380 (Fed. Cir. 2014), the statute at issue, the Criminal 

Justice Act (“CJA”), provided that “counsel for an indigent defendant may request expert services 

necessary for adequate representation.” Id. at 1381 (citing 18 U.S.C. § 3006A(e)(1)). The CJA 

also provided that “[c]ompensation to be paid to a person for services rendered by him to a 

person . . . shall not exceed $2,400, exclusive of reimbursement for expenses reasonably 

incurred[.]” 18 U.S.C. § 3006A(e)(3). If expenses exceeded $2,400, however, the United States 

District Court could certify those expenses, “as necessary to provide fair compensation for services 

of an unusual character or duration[.]” Id. In addition, the CJA provided that any certification of 

expenses also must be approved by the Chief Judge of the regional circuit. Id. Because the CJA 

set forth such “an explicit procedure for court-appointed service providers to collect compensation 

for their services,” the United States Court of Appeals for the Federal Circuit held that “the CJA 

 

14 The holding in Hinck, 550 U.S. at 506, was based on the remedial scheme set out in the 

Tax Payers Bill of Rights 2, not the phrase “shall have jurisdiction,” as the Government contends. 

ECF No. 24 at 9. 
18

is a self-executing remedial scheme for the review of fee awards” so that granting “jurisdiction 

under the Tucker Act on Fifth Amendment [T]akings [Clause] grounds[,] would undermine that 

Act’s express intent to limit the scope of review.” Marcum, 753 F.3d at 1384.

More recently, in Alpine PCS, Inc. v. United States, 878 F.3d 1086 (Fed. Cir. 2018),

petition for cert. docketed, No. 17-1507 (May 7, 2018), the United States Court of Appeals for the 

Federal Circuit considered whether the “remedial scheme” in the Communications Act of 1934 

preempted Tucker Act jurisdiction over a Takings Clause claim. Id. The remedial scheme at issue 

was implemented by Federal Communications Commission (“FCC”) regulations that afford “any 

person who is aggrieved or whose interests are adversely affected by a determination” to petition 

the Chief of the Telecommunications Bureau of the FCC. See 47 U.S.C. § 402(b)(6); see also 47 

C.F.R. § 1.925. If the Chief issued an adverse decision, the plaintiff could file an appeal to the 

Commission. See 47 C.F.R. § 1.115. If the Commission affirmed the Chief’s decision, the plaintiff 

could seek direct judicial review from the United States Court of Appeals for the District of 

Columbia. See 47 U.S.C. § 402(b). Under these circumstances, our appellate court held that “the 

Communications Act [of 1934] provides a comprehensive statutory scheme through which 

[appellant] . . . could challenge the alleged taking and receive a remedy that could have provided 

just compensation in this case, foreclosing jurisdiction under the Tucker Act.” Alpine PCS, 878 

F.3d at 1088.

Section 2126(a) of PROMESA, however, does not include a “comprehensive remedial 

scheme” sufficient to preempt Tucker Act jurisdiction. 

Section 2126(a) provides:

Except as provided in section 2124(f)(2) of this title (relating to the issuance of an 

order enforcing a subpoena), and subchapter III (relating to adjustments of debts), 

any action against the Oversight Board, and any action otherwise arising out of 

this chapter, in whole or in part, shall be brought in a United States district court 

for the covered territory or, for any covered territory that does not have a district 

court, in the United States District Court for the District of Hawaii.

48 U.S.C. § 2126(a) (italics added). 

Section 2126(a) contains no “judicial remedy” to adjudicate the constitutionally protected 

right that affords Plaintiffs the right to such an adjudication of their Takings Clause claim. See 

Bormes, 568 U.S. at 12 (“The Tucker Act is displaced, . . . when a law assertedly imposing 

monetary liability on the United States contains its own judicial remedies.”); see also Vereda, 271 

F.3d at 1375 (“When such a specific and comprehensive scheme for administrative and judicial 

review is provided by Congress, . . . Tucker Act jurisdiction over the subject matter covered by 

the scheme is preempted.”) (internal quotation marks omitted). At oral argument, the Government 

advised the court that Alpine PCS stands for the proposition that “a comprehensive remedial 

scheme [does not] need to be one that includes mone[tary damages].” TR at 94; see also TR at 

100 (“[I]n cases like Eastern Enterprise[s], and under Federal Circuit precedent, like Alpine PCS, 

if there [i]s complete relief available through a declaratory and injunctive mechanism, then it [i]s 

the case that monetary compensation [does not] ha[ve] to be available in th[e] Court [of Federal 

Claims].” (italics added)). It is true that the United States Court of Appeals for the Federal Circuit, 
19

in dicta, observed that “compensation in a form other than monetary damages can be 

constitutionally adequate,” but only because the FCC could “grant [the plaintiff] adequate relief, 

by eliminating the taking, providing compensation, or some combination.” Alpine PCS, 878 F.3d 

at 1096–97 (italics added). The court is aware of no case that holds that injunctive and declaratory 

relief alone equates with “just compensation,” required by the Takings Clause. The plurality 

opinion in Eastern Enterprises held that the Takings Clause was violated but where the plaintiff 

only requested injunctive and declaratory relief and the Court observed that “the nature of the

governmental action . . . [was] quite unusual.” Id. at 537 (plurality opinion). In this case, however,

Plaintiffs seek “just compensation,” equal to payment of the principal amount of the ERS Bonds[,] 

together with all interest accrued to the date of payment under the Fifth Amendment for the United 

States’ taking of their property.” Am. Compl. at 26.

Although Section 2126(a) contemplates “declaratory or injunctive relief against the 

Oversight Board, including relief permitting or requiring the obligation, borrowing, or expenditure 

of funds,” its terms do not provide for “just compensation,” as required by the United States 

Constitution, if a taking is established. See 48 U.S.C. § 2126(c). Thus, Section 2126(a) did not 

“assertedly impos[e] monetary liability on the United States,” or “contain[] its own judicial 

remedies” for awarding “just compensation.” See Bormes, 568 U.S. at 12–13. In sum, Section 

2126(a) does not include either a prerequisite “self-executing” judicial remedy or a monetary 

surrogate for “just compensation” and therefore cannot preempt the Tucker Act. Id. at 11.

In any event, assuming, arguendo, that PROMESA could be construed to preempt Tucker 

Act jurisdiction, such a construction implicates significant constitutional issues. See Blanchette v. 

Conn. Gen. Ins. Corps., 419 U.S. 102, 134 (1974) (“[W]hen one admissible construction will 

preserve a statute from unconstitutionality and another will condemn it, the former is favored even 

if language, and arguably the legislative history point somewhat more strongly in another way.”) 

(internal quotation marks, alterations, and citation omitted); see also id. (“There are clearly grave 

doubts about whether the Rail Act would be constitutional[,] if a Tucker Act remedy were not 

available as compensation for any unconstitutional erosion not compensated under the Act itself.”);

First English Evangelical, 482 U.S. at 315 (“[G]overnment action that works a taking of property 

rights necessarily implicates the ‘constitutional obligation to pay just compensation.’” (citation 

omitted)). Properly construed, however, the Tucker Act and PROMESA are capable of “coexistence,” affording Plaintiffs the right to seek adjudication against the United States for “just 

compensation” in the United States Court of Federal Claims and declaratory relief, if requested, in 

the United States District Court for the District of Puerto Rico. See Blanchette, 419 U.S. at 133–

34 (holding that, “since the Tucker Act and the Rail Act are capable of co-existence, it is the duty 

of the court, absent a clearly expressed congressional intention to the contrary, to reward each as 

effective.”) (internal quotation marks omitted). In fact, “[t]he jurisdictional scheme governing 

actions against the United States often requires . . . plaintiffs to file two actions in different courts[.] 

[A]n action seeking injunctive relief to set aside an agency action must proceed in district court, 

but a claim that the same agency action constitutes a taking of property requiring just compensation 

must proceed in the [United States Court of Federal Claims].” United States v. Tohono O’Odham 

Nation, 563 U.S. 307, 323 (2011) (Sotomayor, J., concurring); see also E. Enters., 524 U.S. at 521 

(“[T]he Declaratory Judgment Act allows individuals threatened with a taking to seek a declaration 
20

of the constitutionality of the disputed governmental action before potentially uncompensable 

damages are sustained[.]”) (italics added) (internal quotation marks and citation omitted)).

Therefore, without “a clearly expressed congressional intention to the contrary, [the court must]

reward each [statute] as effective.” Blanchette, 419 U.S. at 134.

For these reasons, the court has determined that PROMESA does not preempt Tucker Act 

jurisdiction, because it did not contain either a comprehensive remedial scheme or monetary relief

equivalent to “just compensation.”

3. The Oversight Board Is An Entity Of The Federal Government.

Congress authorized the United States Court of Federal Claims with jurisdiction to 

adjudicate claims filed against the United States that are “founded[,] either upon the Constitution, 

or any Act of Congress or any regulation of an executive department, or upon any express or 

implied contract with the United States, or for liquidated or unliquidated damages in cases not 

sounding in tort.” 28 U.S.C. § 1491(a)(1). The United States Supreme Court has held that the 

court’s “jurisdiction is confined to the rendition of money judgments in suits brought for that relief

against the United States[.]” See United States v. Sherwood, 312 U.S. 584, 588 (1941); see also 

Testan, 424 U.S. at 397–98 (“[T]he Court of Claims was established by Congress in 1855 [and] 

throughout its entire history . . . its jurisdiction has been limited to money claims against the United 

States Government[.]”) (internal quotation marks and corrections omitted).

The text of PROMESA provides that the Oversight Board is an entity of the 

Commonwealth, but specified that it “shall not be considered to be a department, agency, 

establishment, or instrumentality of the Federal Government.” 48 U.S.C. § 2121(c). Statements 

made by Congress during the passage of PROMESA, however, refer to the Oversight Board as a 

“federal oversight board.”15 In addition, the House Report on PROMESA directed the 

Congressional Budget Office to “treat the Oversight Board as a federal entity[,] because of the 

‘significant degree of federal control involved in [the Oversight Board’s] establishment and 

operations.’” H.R. Rep. No. 114-602 at 72. Although this legislative history is relevant in 

determining whether the Oversight Board is a federal entity, the court does not need to rely on 

legislative history, because established precedent is dispositive of this threshold issue.

In Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374 (1995), the United States Supreme 

Court agreed to decide whether the Rail Passenger Service Act of 1970, 45 U.S.C. § 541 (1988),

that states Amtrak “will not be an agency, instrumentality, authority, entity, or establishment of 

the United States Government,” was controlling in determining whether Amtrak was an entity of 

the federal government, where a constitutional claim was in issue. Id. at 374. Therein, the Court 

held that Congress can determine the status of an entity only “for purposes of matters that are 

 

15 See, e.g., 162 CONG. REC. S4699, S4700 (daily ed. June 29, 2016 (statement of Sen. 

Cornyn)); see also Discussion Draft, H. R., “Puerto Rico Oversight, Management, and Economic 

Stability Act (PROMESA)”: Hearing Before the H. Comm. on Natural Resources, 114th Cong. 56-

59 (2016) (statement of Rep. Pierluisi); 162 CONG. REC. S1848, S1849 (daily ed. Apr. 11, 2016) 

(statement of Sen. Inhofe); The Need for Establishment of a Puerto Rico Financial Stability and 

Economic Growth Authority Oversight Hearing Before the H. Comm. on Natural Resources, 114th 

Cong. 43 (2016) (statement of Rep. Pierluisi).
21

within Congress’s control[.]” Id. at 392. In other words, “it is not for Congress to make the final 

determination of Amtrak’s status as a Government entity for purposes of determining the 

constitutional rights of citizens affected by its actions.” Id. This principle was re-affirmed in Dep’t 

of Transp. v. Ass’n of Am. R.R.s, 135 S. Ct. 1225, 1233 (2015) (holding that, where a constitutional 

claim is at issue, “the practical reality of federal control and supervision prevails over Congress’ 

disclaimer.”). Therefore, when a constitutional claim is lodged against an alleged federal entity, 

the court must determine: (1) whether the entity was created by “special law;” (2) whether the 

entity was established “for the furtherance of governmental objectives;” and (3) whether the 

federal government “retaine[d] for itself permanent authority to appoint a majority of the 

directors.” See Lebron, 513 U.S. at 400.

Since the October 31, 2017 Amended Complaint alleges a claim under the Takings Clause 

of the Fifth Amendment of the United States Constitution, the court first must determine whether 

the Oversight Board was created by “special law.” Id. In Lebron, the Court held that the Railway 

Passenger Service Act of 1970 was a “special law,” because it decided the incorporation, structure,

powers, and procedures for Amtrak to achieve the purpose of the statute. Id. at 397 (“Amtrak was 

created by a special statute[.]”); see also Special Law, BLACK’S LAW DICTIONARY (10th ed. 2014) 

(“A statute that pertains to and affects a particular case, person, place, or thing, as opposed to the 

general public.”). 

On June 30, 2016, Congress enacted PROMESA to establish an Oversight Board, “to 

provide a method for a covered territory to achieve fiscal responsibility and access to the capital 

markets.” 48 U.S.C. § 2121(a). The structure and authority of the Oversight Board was set forth 

in great detail. See, e.g., 48 U.S.C. §§ 2121(e) (appointment of Oversight Board members),

2121(h) (adoption of bylaws for conducting business of the Oversight Board), 2123 (establishing 

an Executive Director and staff), 2124 (powers of the Oversight Board), 2141–2152 

(responsibilities of the Oversight Board), 2175 (role and capacity of the Oversight Board). These 

provisions demonstrate that PROMESA includes all of the hallmarks of a “special law,” i.e.,

structure, powers, and procedures to achieve the special purpose of providing a “method” for the 

Commonwealth “to achieve fiscal responsibility and access to the capital markets.” Id. § 2121(a). 

Therefore, the court has determined that PROMESA is a “special law” for purposes of 

determining whether the Oversight Board is a federal entity. See Lebron, 513 U.S. at 400.

In addition, the court must determine whether the Oversight Board was established “for the 

furtherance of governmental objectives.” Id. at 400. In Lebron, the “furtherance of governmental 

objectives” was evidenced by “the long history of corporations created and participated in by the 

United States for the achievement of governmental objectives.” Id. at 386–91. Specific examples

cited included government corporations established during the Great Depression, “primarily 

directed to stabilizing the economy and to making distress loans to farms, homeowners, banks, and 

other enterprises.” Id. at 388. The Reconstruction Finance Corporation also was cited, because it

“initially authorized to make loans to banks, insurance companies, railroads, land banks, and 

agricultural credit organizations, including loans secured by the assets of failed banks.” Id. 

Another example was the Federal Deposit Insurance Corporation, “established to hold and 

liquidate the assets of failed banks, and to insure bank deposits.” Id. 
22

The United States Constitution authorized Congress with the responsibility of “dispos[ing] 

of and mak[ing] all needful Rules and Regulations” for territories. U.S. CONST. art. IV, § 3, cl. 2; 

48 U.S.C. §§ 2121(b)(1)–(2). Because the United States Supreme Court struck down the 

Commonwealth’s attempt to enact debt-restructuring laws, to avoid dealing directly with its fiscal 

situation in Puerto Rico v. Franklin Cal. Tax-Free Tr., 136 S. Ct. 1938, 1942 (2016), Congress 

enacted PROMESA to establish the Oversight Board to achieve the “governmental objective” of 

providing “a method for a covered territory to achieve fiscal responsibility and access to the capital 

markets” by approving a fiscal plan and budget for the Commonwealth. See 48 U.S.C. § 2121(a); 

see also id. §§ 2141, 2142. The Oversight Board also was responsible for ensuring that the 

Commonwealth complied with the fiscal plan and made recommendations to ensure the 

Commonwealth’s financial stability and management responsibility. See id. §§ 2144–2145. The 

import of these directives by Congress were emphasized in PROMESA, as follows: “For so long 

as the Oversight Board remains in operation, no territorial government may, without the prior 

approval of the Oversight Board, issue debt or guarantee, exchange, modify, repurchase, redeem, 

or enter into similar transactions with respect to its debt.” Id. § 2147 (italics added).

Therefore, the court has determined that PROMESA was enacted by Congress for a 

“governmental objective,” i.e., stabilizing the Commonwealth’s fisc. See Lebron, 513 U.S. at 398 

(holding that “Amtrak is not merely in the temporary control of the Government . . . ; it is 

established and organized under federal law for the very purpose of pursuing federal governmental 

objectives[.]”). 

Next, the court must determine whether the United States “retaine[d] for itself permanent 

authority to appoint a majority of the directors.” Lebron, 513 U.S. at 400. The authorizing statute 

in Lebron required that six of Amtrak’s eight directors be appointed directly by the President, but

the statute restricts most of the President’s choices to persons suggested by certain 

organizations or persons having certain qualifications, those restrictions have been 

tailor-made by Congress for this entity alone. They do not in our view establish an 

absence of control by the Government as a whole, but rather constitute a restriction 

imposed by one of the political branches upon the other.

Id. at 397–98.

Likewise, PROMESA required that an Oversight Board be formed, “consist[ing] of seven 

members appointed by the President who meet the qualifications described in subsection (f)16 and 

 

16 This section provides:

An individual is eligible for appointment as a member of the Oversight Board only 

if the individual (1) has knowledge and expertise in finance, municipal bond 

markets, management, law, or the organization or operation of business or 

government; and (2) prior to appointment, an individual is not an officer, elected 

official, or employee of the territorial government, a candidate for elected office of 

the territorial government, or a former elected official of the territorial government.

48 U.S.C. §§ 2121(f)(1)–(2).
23

section 2129(a)17 of this title.” 48 U.S.C. § 2121(e)(1)(A). PROMESA also directed the President 

to select the seven members only lists of candidates recommended by Congress. See 48 U.S.C. 

§ 2121(e)(2). Although the Commonwealth’s Governor was a member of the Oversight Board, 

the Governor was a non-voting, ex officio member. See 48 U.S.C. § 2121(e)(3) (“The Governor, 

or the Governor’s designee, shall be an ex officio member of the Oversight Board without voting 

rights.”) (italics added). In addition, Oversight Board members were removable only by the 

President, “for cause.” See 48 U.S.C. § 2121(e)(5)(B). 

Therefore, the court has determined that, in PROMESA, Congress “retaine[d] for itself 

permanent authority to appoint a majority of the directors.” Lebron, 513 U.S. at 400.

The Government relies on the fact that the Oversight Board has wide discretion in the dayto-day operations of the Commonwealth and no federal officials sit ex officio, as evidence that the 

Oversight Board is not a “federal entity.” Gov’t Mot. at 21–23. Plaintiffs respond that the 

Government “does not explain how or why any of these aspects are more relevant to Federal 

control than the fact that the President has the exclusive power to appoint all the voting members 

[of the Oversight Board] and can remove them for cause.” Pl. Resp. at 12 (italics in original). The 

Government also asserts that the Oversight Board is not part of the United States Government, 

because the costs are paid for with Commonwealth funds. Gov’t Mot. at 21–22. The United States 

Supreme Court, however, has considered federal funding as only one of many indicia of federal 

control. See Ass’n Am. R.Rs., 135 S. Ct. at 1231–32 (discussing funding as one among other 

considerations to determine whether Amtrak is a federal entity). More importantly, federal control

is evident, because Congress retained the right to terminate the Oversight Board, if certain 

conditions are met. See 48 U.S.C. § 2149.18 Therefore, the Oversight Board does not exercise the 

 

17 This section provides:

Notwithstanding any ethics provision governing employees of the covered territory, 

all members and staff of the Oversight Board shall be subject to the Federal conflict 

of interest requirements[.]

48 U.S.C. § 2129(a). 

18 This Section provides that:

An Oversight Board shall terminate upon certification by the Oversight Board that

(1) the applicable territorial government has adequate access to short-term and 

long-term credit markets at reasonable interest rates to meet the borrowing needs 

of the territorial government; and

(2) for at least 4 consecutive fiscal years--

(A) the territorial government has developed its Budgets in accordance with 

modified accrual accounting standards; and
24

type of “temporary” control discussed in Lebron. 513 U.S. at 399 (holding that where company’s 

stock could temporarily come under federal ownership, and when “[t]he Government [was] 

exert[ing] its control . . . as a policymaker,” no federal control was evidenced). In this case, the 

Oversight Board was created and empowered by Congress not to make policy, but to dispose of 

and make all needful rules and regulations “to achieve fiscal responsibility and access to the capital 

markets.” 48 U.S.C. § 2121(a). 

The Government seeks to avoid the precedential effects of Lebron by arguing that

PROMESA was enacted, pursuant to Congress’ Article IV plenary authority over the territories. 

Gov’t Mot. at 18–21. In Lebron, the United States Supreme Court considered the source of 

Congress’ authority in enacting the Rail Passenger Service Act of 1970, but determined that the 

issue of federal control must be determined based on “practical reality.” See Ass’n Am. R.Rs., 135 

S. Ct. at 1233 (“Lebron teaches that, for purposes of [the entity’s] status as a federal actor or 

instrumentality under the Constitution, the practical reality of federal control and supervision 

prevails over Congress’ disclaimer of [the entity’s] governmental status.”). Certainly, Congress 

has authority to determine which constitutional provisions or federal law apply in the territories.

See Torres v. Puerto Rico, 442 U.S. 465 (1979) (holding that “the constitutional requirements of 

the Fourth Amendment apply to the Commonwealth.”). But, the United States Supreme Court has 

held that “fundamental” constitutional rights apply in the territories. See Dorr v. United States, 

195 U.S. 138, 146 (“Congress, in legislating for the territories, [is] subject to those fundamental 

limitations in favor of personal rights which are formulated in the Constitution and its 

amendments[.]”). Therefore, even though Congress has “broad latitude” in matters of territorial 

governance; that authority does not supplant the role of federal courts in protecting fundamental 

constitutional rights. See Puerto Rico v. Sanchez Valle, 136 S. Ct. 1863, 1876 (2016) (holding that 

Congress has no capacity “to rewrite its own foundational role”). 

As an aside, the Government adds that, because the United States Court of Federal Claims 

is a legislative, not constitutional, court Congress can determine whether the Oversight Board is a 

federal entity for purposes of the court’s jurisdiction. Gov’t Mot. at 15–18. The Government, 

however, confuses the issue of whether the Oversight Board is a federal entity for purposes of Fifth 

Amendment Takings Clause claim, that Lebron governs, with the separate issue of jurisdiction and 

venue, that the Tucker Act governs. In this case, the Takings Clause claim is alleged against the 

Oversight Board, as a federal entity; therefore, Congress authorized the United States Court of 

Federal Claims with jurisdiction to adjudicate that claim. See 28 U.S.C. § 1491. 

More importantly, the United States Constitution, Article I, Section 8, provides, in part, 

that “[t]he Congress shall have Power To . . . constitute Tribunals inferior to the Supreme Court.” 

U.S. CONST. art. I, § 8. Article III, Section 1 further provides that “[t]he judicial power of the 

United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress 

may from time to time ordain and establish.” U.S.CONST. art. III, § 1. Exercising its constitutional 

 

(B) the expenditures made by the territorial government during each fiscal year 

did not exceed the revenues of the territorial government during that year, as

determined in accordance with modified accrual accounting standards.

48 U.S.C. § 2149.
25

grant of power, Congress established the Court of Claims and its successor courts, with “limited 

jurisdiction,” as is the case with all other federal courts. There is nothing “specialized” about the 

court’s jurisdiction. See Glidden Co. v. United States, 370 U.S. 530, 582 (1962) (explaining that 

the Court of Claims was not a “tribunal” where “a substantial and integral part of whose business 

is nonjudicial”). Indeed, as the Supreme Court emphasized, “[t]he overwhelming majority of the 

Court of Claims’ business is composed of cases and controversies.” Id. at 583. That was true in 

1962, and remains so today.

For all of the aforesaid reasons, the court has determined the Takings Clause claim alleged 

in the October 31, 2017 Amended Complaint is not an action against the Oversight Board; instead, 

it is an action against the United States. See Acceptance Ins., 503 F.3d at 1337 (“A [T]akings 

[Clause] claim is properly brought against the United States, not against the agent whose actions 

give rise to the claim.”). 

* * *

On June 21, 2018, the United States Supreme Court issued a decision in Lucia v. S.E.C.,

138 S. Ct. 2044 (2018), that held certain administrative law judges (“ALJs”) were “Officers of the 

United States,” under Article II, Section 2, Clause 2, because they “hold a continuing office 

established by law.” Lucia, 138 S. Ct. at 2047; see also Freytag v. C.I.R., 501 U.S. 868, 881 (1991)

(holding that “[t]he office of special trial judge is established by [l]aw . . . and the duties, salary, 

and means of appointment for that office are specified by statute.”) (internal quotation marks 

omitted). In this case, Oversight Board members hold a continuing office established by Congress 

that specifies their “duties . . . and means of appointment.” Freytag, 501 U.S. at 881; see also 48 

U.S.C. §§ 2121–2129. Similarly to the ALJs in Lucia, Oversight Board members exercise 

“significant discretion” in carrying out their “important functions.” Lucia, 138 S. Ct. at 2053

(quoting Freytag, 501 U.S. at 882). Although the special trial judges in Freytag and the ALJs in 

Lucia were engaged in different and much more limited duties than those exercised by Oversight 

Board members, there is little doubt that the latter are also “federal civil officials ‘with 

responsibility for an ongoing statutory duty.’” Lucia, 138 S. Ct. at 2056 (Thomas, J., concurring) 

(quoting NLRB v. SW General, Inc., 137 S. Ct. 929, 946 (2017) (Thomas, J., concurring); see also 

Lion Raisins, Inc. v. United States, 416 F.3d 1356, 1362 (Fed. Cir. 2005) (“There is no question 

that the United States, in general, incurs takings liability for the acts of its agents. That is, a takings 

claim against the United States may be based on the acts of an agent of the United States.”) 

(internal quotation marks omitted).

The separate issue of whether the Oversight Board members’ manner of appointment 

violates Article III, Section 2, Clause 2, is presently pending before the United States District Court 

for the District of Puerto Rico in two separate lawsuits. See Objection And Motion Of Aurelius 

To Dismiss Title III Petition, In re The Financial Oversight and Management Board for Puerto 

Rico, No. 17-03283-LTS (D.P.R. Aug. 7, 2017), Dkt. No. 913; see also First Amended Adversary 

Complaint, Union de Trabajadores de la Industria Electrica y Riego v. Puerto Rico Elec. Power 

Auth., No. 17-228, Dkt. No. 75 (D.P.R. Nov. 10, 2017). In the event that the United States District 

Court for the District of Puerto Rico determines that it does, the “appropriate remedy” may render 

the actions of the Oversight Board alleged in the October 31, 2017 Amended Complaint unlawful 

and require restoration or restitution of the Pledged Property that served as collateral for the ERS 

bonds owned by Plaintiffs.
26

Therefore, the court has determined that the Government’s 28 U.S.C. § 1500 challenge and 

alternative motion to dismiss the October 31, 2017 Amended Complaint, pursuant to RCFC 

12(b)(6), are not ripe. Accordingly, the interests of justice require that this case be stayed, at least

until a decision and final judgment is entered in each of the above-referenced cases: In re The 

Financial Oversight and Management Board for Puerto Rico, No. 17-03283-LTS; and Union De 

Trabajadores De La Industria Electrica Y Riego v. Puerto Rico Electric Power Authority, No. 17-

228.19

IV. CONCLUSION.

For all of the aforesaid reasons, the Government’s December 8, 2017 Motion To Dismiss, 

pursuant to RCFC 12(b)(1), is denied. The above-captioned case is stayed at least until a decision 

and final judgment is entered in each of the above-referenced cases. In addition, the parties are 

directed to file a joint status report within thirty days after the United States District Court for the 

District of Puerto Rico issues a decision and final judgment in each of those cases.

IT IS SO ORDERED.

s/ Susan G. Braden

SUSAN G. BRADEN

Chief Judge

 

19 On July 6, 2018, at the request of the court, the parties filed a Joint Submission

summarizing proceedings currently pending in the United States District Court for the District of 

Puerto Rico concerning PROMESA. The court attached the July 6, 2018 Joint Submission to this 

Memorandum Opinion And Order to provide additional background and context for the decision 

to stay this case in deference to the jurisdiction of the United States District Court for the District 

of Puerto Rico over the cases cited above.
IN THE UNITED STATES COURT OF FEDERAL CLAIMS

-----------------------------------------------------------------X

ALTAIR GLOBAL CREDIT OPPORTUNITIES 

FUND (A), LLC, ANDALUSIAN GLOBAL 

DESIGNATED ACTIVITY COMPANY, GLENDON 

OPPORTUNITIES FUND, L.P., MASON CAPITAL 

MASTER FUND LP, NOKOTA CAPITAL MASTER 

FUND, L.P., OAKTREE-FORREST MULTISTRATEGY, LLC (SERIES B), OAKTREE 

OPPORTUNITIES FUND IX, L.P., OAKTREE 

OPPORTUNITIES FUND IX (PARALLEL 2), L.P., 

OAKTREE VALUE OPPORTUNITIES FUND, L.P., 

OCHER ROSE, L.L.C., AND SV CREDIT, L.P.,

Plaintiffs,

-againstTHE UNITED STATES OF AMERICA,

Defendant.

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. 17-970 

Chief Judge Braden

-----------------------------------------------------------------X

JOINT SUBMISSION OF PLAINTIFFS AND THE UNITED STATES
TABLE OF CONTENTS

Page 

i 

I. PROCEEDINGS INVOLVING PLAINTIFFS .........................................................................1

A. Altair Global Credit Opportunities Fund (A), L.L.C., et al. v. 

Garcia-Padilla, No. 16-cv-2696 (D.P.R. Sept. 21, 2016) .....................................................1

B. Altair Global Credit Opportunities Fund (A), L.L.C. v. 

Garcia-Padilla, No. 16-2433 (1st Cir. 2016) ........................................................................3

C. ERS Bondholders’ Adequate Protection Motion in ERS Title III Case, 

In re FOMB ex rel. ERS, No. 17-3566 ................................................................................6

D. Altair Global Credit Opportunities Fund (A), L.L.C., et al. v. 

United States, No. 17-970 (Fed. Cl. July 19, 2017) .............................................................8

E. FOMB ex rel. ERS v. Altair Global Credit Opportunities Fund (A), LLC, 

et al., Adv. Proc. No. 17-213 (D.P.R. July 21, 2017) ..........................................................8

F. Altair Global Credit Opportunities Fund (A), L.L.C., et al. v. 

Commonwealth of Puerto Rico et al., Adv. Proc. Nos. 17-219 and 17-220 

(D.P.R. July 27, 2017) .......................................................................................................11 

G. ERS Bondholders’ Adequate Protection Motion in ERS Title III Case and 

Commonwealth Title III Case, 

In re FOMB ex rel. ERS, No. 17-3566 

In re FOMB ex rel. Commonwealth of Puerto Rico, No. 17-3283 ....................................15 

II. PROCEEDINGS INVOLVING OTHER PARTIES ...............................................................16

A. The Puerto Rico Funds’ Motion in ERS Title III Case, 

In re FOMB ex rel. ERS, No 17-3566 ...............................................................................16 

B. Ambac Assurance Corp. v. Commonwealth of Puerto Rico, et al., 

Adv. Proc. No. 17-159 (D.P.R. June 8, 2018) ...................................................................16 

C. ACP Master LTD., et al. v. Commonwealth of Puerto Rico et al., 

Adv. Proc. No. 17-189 (D.P.R. June 28, 2017) .................................................................18 

D. The Appointments Clause Litigation:UTIER v. Puerto Rico Electric 

Power Authority, et al. (Adv. Proc. No. 17-228) and Aurelius' Motion to 

Dismiss Commonwealth Title III Petition 

(Dkt. No. 913 in Case No. 17-3283) ..................................................................................20

E. FOMB v. Hon. Ricardo Antonio Rosellό, Adv. Proc. No. 17-250 (D.P.R.) .....................24

F. Oversight Board’s Motion for Appointment of Chief Transformation 

Officer in PREPA Title III Case, In re FOMB ex rel. PREPA, No. 17-4780 ....................26

G. Pinto Lugo v. United States, Adv. Proc. No. 18-041 

(D.P.R. April 24, 2018) ......................................................................................................27

H. Assured Guaranty Corp. v. Commonwealth of Puerto Rico, 

Adv. Proc. No. 18-059 (D.P.R. May 23, 2018) .................................................................28
ii

I. Hermandad de Empleados del Fondo del Seguro del Estado v. United 

States, Adv. Proc. No. 18-066 (D.P.R. May 30, 2018) ......................................................29

J. Hon. Ricardo Antonio Rosselló et al. v. FOMB 

Adv. Proc. No. 18-080 (D.P.R.)....................................................................30
1

In accordance with this Court’s request, Plaintiffs and the United States provide the 

following joint submission.1

1. Plaintiffs allege that they are owners of secured bonds (the “ERS Bonds”) issued

by the Employees Retirement System of the Government of the Commonwealth of Puerto Rico 

(“ERS”) in 2008. 

2. On June 30, 2016, Congress passed the Puerto Rico Oversight, Management, and

Economic Stability Act (“PROMESA”), Pub. L. No. 114-187, 130 Stat. 549 (2016), codified at 48 

U.S.C. § 2101, et seq. A stated purpose of PROMESA is to “establish an Oversight Board to assist 

the Government of Puerto Rico, including instrumentalities, in managing its public finances, and 

for other purposes.” H.R. 5278, 114th Cong. (2016) (preamble). 

I. PROCEEDINGS INVOLVING PLAINTIFFS

A. Altair Global Credit Opportunities Fund (A), L.L.C., et al. v. García-Padilla, 

No. 16-cv-2696 (D.P.R. Sept. 21, 2016) 

3. PROMESA’s enactment, on June 30, 2016, triggered an interim stay of certain

creditor remedies against the Commonwealth and its instrumentalities. On September 21, 2016, 

Plaintiffs, together with other holders of the ERS Bonds (collectively, the “ERS Bondholders” or 

the “Bondholders”), filed a motion in the United States District Court for the District of Puerto 

1 The parties have endeavored to identify and summarize proceedings relating to the Puerto 

Rico restructuring actions that are germane to the Court’s request. However, there are numerous 

ongoing proceedings that we have not included. Because the United States is not a party to many 

of the district court actions described below, the Government can only represent what has been 

stated by the various parties in their publicly available filings, and cannot vouch for the accuracy 

of those parties’ statements. Although the parties have attempted to summarize the various filings 

at issue in these proceedings, the documents themselves—which are separately being provided to 

the Court—are the best reflection of their contents. This document has been prepared for 

informational purposes at the Court’s request and should not be regarded as an admission by either 

party. Furthermore, the filing of this document does not constitute a waiver of any argument that 

has or will be made by Plaintiffs or the United States.
2 

Rico to lift the initial PROMESA stay for “cause shown,” unless ERS and the Commonwealth 

provided adequate protection. Altair Global Credit Opportunities Fund (A), L.L.C., et al. v. 

García-Padilla, No. 16-cv-2696, Dkt. No. 1 (D.P.R. Sept. 21, 2016). PROMESA, 48 U.S.C. 

§ 2194(e) provides that a court shall grant relief from the stay for “cause shown,” and the ERS

Bondholders argued that they satisfied this requirement because they lacked adequate protection 

of their property interests. The Bondholders alleged that ERS and the Commonwealth had refused 

to provide adequate protection, and that the value of their liens would inevitably decline as a result 

of actions by ERS and the Commonwealth. 

4. On October 26, 2016, ERS opposed the motion. Altair Global Credit Opportunities

Fund (A), L.L.C., et al. v. García-Padilla, No. 16-cv-2696, Dkt. No. 52 (D.P.R. Oct. 26, 2016). 

ERS argued that the motion violated due process because Plaintiffs had filed a motion and not a 

complaint against ERS, and ERS was given little notice before a hearing was scheduled. ERS also 

argued that the Bondholders were adequately protected because reserve accounts held by the ERS 

Fiscal Agent had adequate funds to make principal and interest payments on the ERS Bonds during 

the PROMESA stay. ERS stated that “under the clear terms of the [ERS] Bond Resolution, the 

[ERS Bondholders] have valid and enforceable liens over hundreds of millions of dollars of ERS 

revenue, which will continue to grow.” Id. at 10. ERS also argued that the lack of adequate 

protection is not “cause” to lift the PROMESA stay and that the Fifth Amendment does not 

mandate lifting the stay where adequate protection has not been provided. The Commonwealth 

opposed the motion on the same grounds. Altair Global Credit Opportunities Fund (A), L.L.C., et 

al. v. García-Padilla, No. 16-cv-2696, Dkt. No. 53 (D.P.R. Oct. 26, 2016). 
3 

5. On October 28, 2016, the Financial Oversight & Management Board for Puerto

Rico (the “Oversight Board”) sought to intervene in the proceedings. On November 1, 2016 the 

district court (J. Besosa) denied the motion to intervene without prejudice. 

6. On November 2, 2016, the district court issued an opinion denying the ERS

Bondholder’s motion to lift the PROMESA automatic stay. While the district court held that a 

lack of adequate protection could satisfy PROMESA’s “cause” requirement, the court concluded 

that the Bondholders were adequately protected for the duration of the initial PROMESA stay. 

Peaje Invs. LLC v. Garcia-Padilla, No. 16-2365, 2016 U.S. Dist. LEXIS 153711, at *23-*25 

(D.P.R. Nov. 2, 2016). The court found that the Bondholders “pursuant to the terms of the 

applicable bond resolution, hold a security interest and lien in certain pledged property, including 

all future employer contributions,” which “continues indefinitely until ERS’s outstanding debt 

obligations have been satisfied in full.” Id. at *23-*24. The court went on to state that “nothing 

in the language of PROMESA or [a particular Commonwealth law at issue] diminishes or destroys 

this lien against the ERS employer contributions,” which “are a perpetual revenue stream . . . ” Id.

B. Altair Global Credit Opportunities Fund (A), L.L.C. v Garcia-Padilla, 

No. 16-2433 (1st Cir. 2016) 

7. On November 28, 2016, the ERS Bondholders appealed the district court’s order

denying their motion to lift the PROMESA automatic stay. On December 12, 2016 the ERS 

Bondholders filed their opening brief. The Bondholders argued that their lien on future employer 

contributions was not a suitable form of adequate protection because secured creditors are entitled 

to adequate protection in the form of a substitute of the most indubitable equivalence and payment 

tomorrow is not the equivalent of payment today. Opening Brief for Appellants, No. 16-2433 (1st 

Cir. Dec. 12, 2016). The Bondholders also argued that a promise of future payment does not 

constitute adequate protection where the secured creditor already has a lien on those very 
4 

payments. Id. Finally, the Bondholders noted that ERS and the Commonwealth had stated 

publicly that future employer contributions were uncertain. Id.

8. On December 23, 2016, ERS and the Commonwealth filed briefs arguing that the

appeal should be dismissed for lack of jurisdiction because the district court’s order was not final, 

or alternatively that the district court’s order should be affirmed. ERS and the Commonwealth 

challenged the district court’s finding that the lack of adequate protection could constitute “cause” 

to lift the PROMESA stay. They also argued that the ERS Bondholders were adequately protected 

because they had a lien of “indefinite duration” and had “access to the full revenue stream of the 

ERS.” Brief for Respondent-Appellee ERS at 30, No. 16-2433 (1st Cir. Dec. 23, 2016); Brief for 

Respondents-Appellees Garcia-Padilla, Zaragoza-Gomez, Cruz-Batista, and Villar-Prados, No. 

16-2433 (1st Cir. Dec. 23, 2016). 

9. The Oversight Board filed an amicus brief supporting affirmance and described the

ERS Bondholders’ lien as a “perpetual, replenishing revenue stream[].” Brief of Amicus Curiae 

Oversight Board in Support of Respondents-Appellees, No. 16-2433 (1st Cir. Dec. 23, 2016). 

10. After argument, the First Circuit vacated the district court’s denial of the

Bondholders’ motion and remanded the case. Peaje Invs. LLC v. García-Padilla, 845 F.3d 505, 

509 (1st Cir. 2017). The court first found that it had jurisdiction over the appeal because the district 

court’s denial of the motion to lift the automatic stay was a final decision. The court next held that 

“the lack of adequate protection for creditors constitutes cause to lift the PROMESA stay,” 

reasoning that even “prior to the enactment of the current bankruptcy stay provision, the Supreme 

Court had recognized that creditors are constitutionally entitled to protection to the extent of the 

value of their property.” Id. at 511-512. The First Circuit also observed that it “doubt[ed] the 
5 

constitutionality” of any action that would “expend every penny of [the ERS Bondholders’] 

collateral, leaving the debt entirely unsecured.” Id. 

11. The court held that the Bondholders were entitled to a hearing on the question of

adequate protection based on statements by ERS regarding the uncertainty of future employer 

contributions. Id. at 514. The court noted that ERS attempted to avoid such a hearing “by citing 

a joint stipulation filed in the district court reflecting ERS’s representation that the allegedly 

diverted employer contributions are currently being held in an operating account.” Id. The First 

Circuit observed that “[t]he parties, however, dispute whether the Altair Movants’ lien extends to 

this account. If it does not, the Altair Movants face the prospect of being left with a mere unsecured 

claim.” Id. “Because the district court made no finding as to whether the Altair Movants’ lien 

extends to the operating account, and the parties have not briefed the issue on appeal,” the First 

Circuit “decline[d] to address this question in the first instance.” Id.

12. The First Circuit also held that the district court applied an overly technical standard

in denying the Oversight Board’s motion for intervention. Id. at 515. The court remanded for the 

district court to apply the correct standard and noted that PROMESA appears to grant the Board 

the right to intervene. Id. at 516. 

13. Following the First Circuit’s decision, the ERS Bondholders, the Commonwealth,

ERS, and the Oversight Board entered into a stipulation in January 2017 to settle the Bondholders’ 

request for adequate protection. The parties retained all rights, remedies, and claims. See Order 

Approving Stipulation, No. 16-cv-2696, Dkt No. 83 (D.P.R. Jan. 17, 2017). The parties entered 

into another stipulation in April 2017. Joint Stipulation and Order, No. 16-cv-2696, Dkt No. 86 

(Apr. 11, 2017). That stipulation also noted that the parties retained all rights, remedies, and 
6 

claims, and noted that nothing in the stipulation or order operated to waive whatever rights the 

parties have pursuant to Title III of PROMESA, if a Title III proceeding were to be commenced.

C. ERS Bondholders’ Adequate Protection Motion in ERS Title III Case, 

In re FOMB ex rel. ERS, No 17-3566 

14. On May 3, 2017, the Oversight Board filed a Title III petition for the

Commonwealth. Chief Justice Roberts then exercised his authority under PROMESA to designate 

the Honorable Laura Taylor Swain, United States District Judge for the Southern District of New 

York, as the presiding judge in the Commonwealth’s Title III case in the United States District 

Court for the District of Puerto Rico. 

15. On May 21, 2017, the Oversight Board filed a Title III petition for ERS. The filing

of that petition triggered the automatic stay provisions of the Bankruptcy Code. 11 U.S.C. § 362; 

48 U.S.C. § 2161(a) (incorporating 11 U.S.C. § 362 into PROMESA). 

16. On May 31, 2017, the ERS Bondholders filed a motion in ERS’s Title III case

seeking to lift the automatic stay or, in the alternative, for adequate protection. The ERS 

Bondholders alleged that ERS had refused to provide adequate protection upon the Bondholders’ 

request. In re FOMB ex rel. ERS, No 17-3566, Dkt. No. 26 (D.P.R. May 31, 2017).2

 The ERS 

Bondholders argued that they hold constitutionally-protected liens in property of ERS, that those 

liens remained valid and enforceable after ERS’s Title III filing, and that those liens were not 

adequately protected.

17. The Oversight Board opposed the motion. In re FOMB ex rel. ERS, No 17-3566,

Dkt. No. 98 (D.P.R. June 21, 2017). The Board argued that the Bondholders’ liens were not 

2 The docket entries filed in the PROMESA Title III cases can be obtained through the 

United States Bankruptcy Court for the District of Puerto Rico electronic filing system via PACER 

at https://ecf.prb.uscourts.gov/. 
7 

perfected because the relevant Uniform Commercial Code financing statements were defective 

and, in any event, that § 552 of the Bankruptcy Code retroactively terminated the Bondholders’ 

prepetition liens.3 The Board also argued that the automatic stay should nonetheless remain in 

effect because the Bondholders’ property interests were adequately protected.

18. The ERS Bondholders filed a reply brief. In re FOMB ex rel. ERS, No 17-3566,

Dkt. No. 127 (D.P.R. June 25, 2017). The Bondholders argued that they have valid liens that were 

perfected by the filing of financing statements in 2008, 2015, and 2016. The Bondholders also 

argued that § 552 is inapplicable to their lien and that they were entitled to adequate protection 

because, based upon statements made by Commonwealth officials, it appeared that their property 

interests were diminishing in value.

19. The court heard argument on the motion on June 28, 2017.

20. On July 14, 2017, the parties entered into a stipulation as to adequate protection.

In re FOMB ex rel. ERS, No 17-3566, Dkt. No. 170 (D.P.R. July 14, 2017). The joint stipulation 

stated that ERS would provide the ERS Bondholders with certain protections, including (1) the 

payment of current interest due on the ERS Bonds from a segregated account established pursuant 

to a prior stipulation entered on January 17, 2017 (see supra ¶ 13), and (2) monthly deposits of 

$18.5 million from June through October 2017 into a newly-created segregated account. The 

stipulation also required that ERS file an adversary proceeding regarding “the validity, priority, 

3 Section 552(a) of the Bankruptcy Code provides a general rule that “property acquired by 

the estate or by the debtor after the commencement of the case is not subject to any lien resulting 

from any security agreement entered into by the debtor before the commencement of the case.” 

11 U.S.C. § 552(a). But § 552(b)(1) provides an exception that where a prepetition lien extends 

to “property of the debtor acquired before the commencement of the case and to proceeds, 

products, offspring, or profits of such property,” then the lien also “extends to such proceeds, 

products, offspring, or profits acquired by the estate after the commencement of the case to the 

extent provided by such security agreement and by applicable nonbankruptcy law.” Id. § 552(b)(1).
8 

extent and enforceability of the prepetition and postpetition liens and security interest asserted by 

the Bondholders with respect to the ERS Bonds” and permitted the Bondholders to file a 

counterclaim respecting the same. In re FOMB ex rel. ERS, No 17-3566, Dkt. No. 170 (D.P.R. 

July 14, 2017) at 3. 

21. On July 17, 2017, the Court approved the stipulation and resolved the ERS

Bondholders’ motion, while “retain[ing] jurisdiction over any and all matters arising from or 

related to the implementation or interpretation of the Stipulation or th[e] Order.” In re FOMB ex 

rel. ERS, No 17-3566, Dkt. No. 171 (D.P.R. July 17, 2017). 

D. Altair Global Credit Opportunities Fund (A), LLC, et al. v. United States, 

No. 17-970 (Fed. Cl. July 19, 2017) 

22. On July 19, 2017, Plaintiffs commenced the current action against the United States

in this Court for just compensation under the Fifth Amendment. 

E. FOMB ex rel. ERS v. Altair Global Credit Opportunities Fund (A), LLC, et 

al., Adv. Proc. No. 17-213 (D.P.R. July 21, 2017) 

23. On July 21, 2017, the Oversight Board initiated an adversary proceeding on behalf

of ERS. FOMB ex rel. ERS v. Altair Global Credit Opportunities Fund (A), LLC, et al., Adv. Proc. 

No. 17-213, Dkt. No. 1 (D.P.R. July 21, 2017). The parties filed cross motions for summary 

judgment. 

24. The Oversight Board raised a number of arguments in its motion. FOMB ex rel.

ERS v. Altair Global Credit Opportunities Fund (A), LLC, et al., Adv. Proc. No. 17-213, Dkt. No. 

91 (D.P.R. Nov. 3, 2017). First, the Board argued that the ERS Bondholders’ liens were never 

perfected because the UCC financing statements filed by ERS were defective, and therefore any 

purported security interests were invalid and unenforceable against ERS pursuant to § 544(a) of 

the Bankruptcy Code, which was made applicable to the Title III proceedings by PROMESA. 
9 

Second, assuming the Bondholders hold perfected liens, the Board argued that those liens do not 

cover employee loans or funds received by ERS on account of employee loans. Third, the Board 

argued that even if the ERS Bondholders held perfected liens prior to ERS’s Title III petition date, 

§ 552 of the Bankruptcy Code (made applicable to Title III proceedings by PROMESA) terminated

those liens and prevented them from attaching to any ERS property obtained after the petition date. 

The Board also argued that no exception to § 552 was applicable. Fourth, the Oversight Board 

argued that ERS had complied with its obligations under the stipulation entered on January 17, 

2017 (see supra ¶ 13). 

25. The ERS Bondholders opposed the Oversight Board’s motion. FOMB ex rel. ERS

v. Altair Global Credit Opportunities Fund (A), LLC, et al., Adv. Proc. No. 17-213, Dkt. No. 120

(D.P.R. Nov. 15, 2017). First, the Bondholders argued that they hold perfected liens and security 

interests in ERS property because the relevant financing statements are valid and did not lapse. 

The Bondholders further argued that even if unperfected, their liens are valid because no other 

creditor has an interest in the collateral and ERS cannot use § 544 of the Bankruptcy Code to avoid 

the liens.4

 Second, the Bondholders argued that they have a valid, perfected, and enforceable lien 

on employee loans. Third, the ERS Bondholders argued that § 544 and § 552 of the Bankruptcy 

Code does not terminate or otherwise limit their valid liens and, if either provision were interpreted

to do so, it would trigger Takings Clause issues. Fourth, the Bondholders argued that ERS violated 

the January 2017 stipulation (see supra ¶ 13).

4 Section 544(a) of the Bankruptcy Code vests trustees and debtors in possession with the 

power to avoid an unperfected, but otherwise valid security interest when another creditor could 

possess an interest that is superior to that of the unperfected creditor, whether or not such a superior 

creditor actually exists. 11 U.S.C. § 544(a). 
10 

26. On November 22, 2017, the Oversight Board reinforced its arguments in reply, and

the parties raised similar arguments in the ERS Bondholders’ motion for summary judgment. 

FOMB ex rel. ERS v. Altair Global Credit Opportunities Fund (A), LLC, et al., Adv. Proc. No. 17-

213, Dkt. Nos. 94, 115, 149, 150 (D.P.R.). The court heard oral argument on the parties’ motions 

on December 13, 2017. 

27. On March 12, 2018, the court ordered supplemental briefing on certain issues. The

parties filed supplemental briefs and reply briefs on March 21, 2018, and March 23, 2018. 

28. In their supplemental briefs (No. 17-213, Dkt. Nos. 199, 206), the ERS

Bondholders addressed three issues. First, they argued that under § 544 of the Bankruptcy Code, 

no hypothetical creditor could possess a judicial lien on any assets of the ERS because of Puerto 

Rico Act 66-2014, which prohibits creditors from acquiring liens on property of Commonwealthrelated entities. Second, the Bondholders argued that employers are obligated to make 

contributions in amounts necessary to meet the actuarial needs of ERS that are not contingent on 

changes in an employer’s workforce. Third, the Bondholders argued that ERS receives employer 

contributions on account of employee loans that are subject to the Bondholders’ liens.

29. ERS also filed supplemental briefs on March 21, 2018 (No. 17-213, Dkt. Nos. 198,

205). First, ERS argued that a hypothetical judgment creditor could possess a judicial lien under 

§ 544 because Act 66 is not applicable to ERS. Second, ERS argued that, “even without the

application Bankruptcy Code section 544, under the UCC, the [Oversight Board] as a ‘lien 

creditor’ has priority over the Bondholders’ unperfected security interest, rendering the 

Bondholders, at best, unsecured claimants and voiding their security interest pursuant to 

Bankruptcy Code section 506(d).” Third, ERS argued that changes in the number of employees 

or how much employees earned could change the amount of employer contributions remitted to 
11 

ERS from one month to the next. ERS also noted that employer contributions varied and were not 

fixed. Fourth, ERS stated that it does not know whether any employer contributions deposited in 

the ERS general operational account were ever used to fund employee loans and argued that the 

ERS Bondholders were not entitled to additional discovery regarding employee loans. 

30. The Official Committee of Retired Employees of the Commonwealth (“Retiree

Committee”) filed briefs (No. 17-213, Dkt. Nos. 196, 204) raising arguments similar to ERS. 

31. On April 9, 2018, the ERS Bondholders filed a short informative motion to bring

the court’s attention to statements made by Governor Rosselló after the close of supplemental 

briefing. FOMB ex rel. ERS v. Altair Global Credit Opportunities Fund (A), LLC, et al., Adv. 

Proc. No. 17-213, Dkt. No. 211 (D.P.R. Apr. 9, 2018). ERS responded to that motion on April 11, 

2018. FOMB ex rel. ERS v. Altair Global Credit Opportunities Fund (A), LLC, et al., Adv. Proc. 

No. 17-213, Dkt. No. 213 (D.P.R. Apr. 11, 2018). 

32. The court has taken no action since the close of supplemental briefing.

F. Altair Global Credit Opportunities Fund (A), LLC, et al. v. Commonwealth 

of Puerto Rico et al., Adv. Proc. Nos. 17-219 and 17-220 (D.P.R. July 27, 

2017) 

33. On July 27, 2017, the ERS Bondholders initiated an adversary proceeding against

ERS, the Commonwealth and Commonwealth officials, the Puerto Rico Fiscal Agency and

Financial Advisory Authority (“AAFAF”), 5 and the Oversight Board. Altair Global Credit 

Opportunities Fund (A), LLC, et al. v. Commonwealth of Puerto Rico et al., Adv. Proc. No. 17-

219, Dkt. No. 1 (D.P.R. July 27, 2017). The operative amended complaint (No. 17-219, Dkt. No. 

5 AAFAF is an entity created pursuant to the Puerto Rico Fiscal Agency and Financial 

Advisory Authority Act, P.R. Act No. 2-2017, for the purpose of acting as fiscal agent, financial 

advisor, and reporting agent of the Commonwealth, its agencies, instrumentalities, subdivisions, 

public corporations, and municipalities. 
12 

39), filed November 8, 2017, seeks declaratory relief related to Joint Resolution 188 and Act 106-

2017 (the “Post-Petition Legislation”). It does not seek monetary damages (aside from attorneys’ 

fees and litigation costs) from any defendant. The amended complaint includes eight counts. It 

alleges that the Post-Petition Legislation violated the automatic stay in ERS’s Title III case (Count 

I), and is thus void ab initio such that ERS continues to exist, receiving employer contributions on 

which the ERS Bondholders retain liens (Count II). In the event the Post-Petition Legislation is 

not void, the complaint alleges that under the Uniform Commercial Code, the liens follow the 

collateral into the Commonwealth’s coffers (Count III). Alternatively, if the Post-Petition 

Legislation is found to eliminate the ERS Bondholders’ liens, the complaint alleges that the 

legislation unjustly enriched the Commonwealth (Count IV), took the ERS Bondholders’ “private 

property” not “for public use” and “without just compensation” in violation of the Fifth 

Amendment (Counts V-VII), and violated the Contracts Clauses of the United States and Puerto 

Rico Constitutions (Count VIII). 

34. The prayer for relief seeks an order (a) enforcing the automatic stay and declaring

that the Post-Petition Legislation were void ab initio, (b) determining that Plaintiffs hold a secured 

claim to the full extent of their allowed claims against ERS and the Commonwealth, (c) declaring 

that Plaintiffs’ lien continues in any Pledged Property transferred to the Commonwealth from ERS 

and any transfer without Plaintiffs’ consent will result in an unjust enrichment of the 

Commonwealth at Plaintiffs’ expense, (d) declaring that the transfer from ERS to the 

Commonwealth pursuant to the Post-Petition Legislation was not for a “public use” under the 

Takings Clause and constitutes an unconstitutional taking of private property without just 

compensation under the Takings Clause, (e) declaring that any award of just compensation cannot 
13 

be impaired by a PROMESA plan of adjustment, and (f) declaring that the Post-Petition 

Legislation violates the Contracts Clause.

35. The Oversight Board, joined by AAFAF on behalf of the Commonwealth, the

Commonwealth’s Governor and Treasury Secretary (“Government Defendants”), and a limited 

intervenor, the Retiree Committee, moved to dismiss the Bondholders’ complaint in its entirety. 

Altair Global Credit Opportunities Fund (A), LLC, et al. v. Commonwealth of Puerto Rico et al., 

Adv. Proc. No. 17-219, Dkt. Nos. 41, 43, 44 (D.P.R.). First, the Oversight Board challenged the 

Bondholders’ lien-based claims (Counts II and III), including their takings claims (Counts V-VII), 

on the ground that the Bondholders failed to allege perfected security interests in ERS’s employer 

contributions. Second, the Board, along with the Retiree Committee, argued that § 305 of 

PROMESA bars the ERS Bondholders’ claim for violation of the automatic stay because it 

prohibits the Title III court from interfering with a debtor’s property or revenues and, in any event, 

that the Post-Petition Legislation fits into an exception to the automatic stay for actions to enforce 

a governmental unit’s regulatory power. Third, the Board opposed the Bondholders’ takings 

claims on the grounds that the Post-Petition Legislation is for a “public use,” and that the takings 

claims were essentially interference with contract claims. The Board also alleged that the 

Bondholders failed to establish a valid property interest because they have not demonstrated that 

they have a legally cognizable, unavoidable lien. The Board also alleged that, with respect to the 

takings claim, the Bondholders seek an advisory opinion because the Bondholders do not yet know 

what the Oversight Board’s plan of adjustment might ultimately propose, and whether they will be 

compensated under that plan. The Board also alleged that the Bondholders lacked standing 

because only ERS has standing to pursue claims that ERS was harmed. The Retiree Committee 

argued that the ERS Bondholders must first pursue their takings claim in the Court of Federal 
14 

Claims or pursue an inverse condemnation remedy in Puerto Rico’s Commonwealth courts. 

Fourth, the Oversight Board and Retiree Committee also argued that the Bondholders fail to state 

a Contracts Clause claim because the Post-Petition Legislation did not substantially impair their 

contractual relationship with ERS, and that the Bondholders’ unjust enrichment claim fails for 

various reasons. Fifth, the Government Defendants argued that the entire complaint must be 

dismissed because ERS’s issuance of the underlying bonds was ultra vires. 

36. The ERS Bondholders opposed dismissal on all counts. Altair Global Credit

Opportunities Fund (A), LLC, et al. v. Commonwealth of Puerto Rico et al., Adv. Proc. No. 17-

219, Dkt. No. 50 (D.P.R. Dec. 20, 2017). First, the Bondholders argued that Counts II and III of 

the amended complaint adequately allege perfected security interests, and that the parties had 

agreed to litigate the validity and enforceability of the Bondholders’ liens in a separate adversary 

proceeding that was still pending (see supra Part I.E). Second, the Bondholders argued that the 

automatic stay (Count I) covers the Post-Petition Legislation, which does not fall into the claimed 

exception for administrative or judicial actions. The Bondholders also argued that § 305 does not 

bar the automatic stay claim, because (among other things) undoing the Commonwealth and 

Oversight Board’s interference with ERS’s property and revenues does not itself “interfere with” 

ERS’s property or revenues. Third, the Bondholders argued that they have viable takings claims. 

They argued that they hold valid, perfected liens that were taken by the Post-Petition Legislation 

not for a public use. The Bondholders also argued that it was proper for them to pursue declaratory 

relief for the alleged taking in federal district court, rather than pursuing just compensation in 

Puerto Rico commonwealth court, because under the standard in Eastern Enterprises v. Apfel, 524 

U.S. 498, 521-22 (1998) (plurality op.), it was clear that Puerto Rico did not intend to pay just 

compensation when it enacted the Post-Petition Legislation. Fourth, the Bondholders argued that 
15 

they had viable unjust enrichment claims and Contracts Clause claims. Fifth, the Bondholders 

argued that, as a matter of Puerto Rico law, ERS’s bond issuance was authorized and not ultra 

vires.

37. The Oversight Board, Government Defendants, and Retiree Committee all filed

reply briefs further contesting the viability of the ERS Bondholders’ claims. Altair Global Credit 

Opportunities Fund (A), LLC, et al. v. Commonwealth of Puerto Rico et al., Adv. Proc. No. 17-

219, Dkt. Nos. 59, 61, 62 (D.P.R.) 

38. On February 2, 2018, the court issued an order stating that it had “not scheduled

oral argument in connection with the Motions to Dismiss as it is taking the manner on submission,” 

and noted that it would schedule argument if it later “determine[d] that it is necessary.” Altair 

Global Credit Opportunities Fund (A), LLC, et al. v. Commonwealth of Puerto Rico et al., Adv. 

Proc. No. 17-219, Dkt. No. 65. 

39. The court has not yet taken further action.

G. ERS Bondholders’ Adequate Protection Motion in ERS Title III Case and 

Commonwealth Title III Case, 

In re FOMB ex rel. ERS, No 17-3566 

In re FOMB ex rel. Commonwealth of Puerto Rico, No 17-3283 

40. On July 3, 2018, the ERS Bondholders filed a motion in both ERS’s and the

Commonwealth’s Title III cases seeking to lift the automatic stay in the complete absence of 

adequate protection. In re FOMB ex rel. ERS, No 17-3566, Dkt. No. 289 (D.P.R. July 3, 2018); 

In re FOMB ex rel. Commonwealth of Puerto Rico, No 17-3283, Dkt. No. 3418 (D.P.R. July 3, 

2018). The Bondholders had been receiving certain protections pursuant to a court order, but they 

noted that there would soon be no funds to make monthly transfers to the ERS Fiscal Agent. They 

argued that ERS and the Commonwealth had not responded to their request to provide adequate 

protection and the court should lift the automatic stay in those circumstances. 
16 

41. The Oversight Board’s opposition to the motion is due on July 10, 2018, and the

Court is expected to hear argument on July 25, 2018. 

II. PROCEEDINGS INVOLVING OTHER PARTIES

A. The Puerto Rico Funds’ Motion in ERS Title III Case, 

In re FOMB ex rel. ERS, No 17-3566 

42. On November 28, 2017, certain ERS Bondholders (not including the Plaintiffs

here) filed a motion in the ERS Title III case. In re FOMB ex rel. ERS, No 17-3566, Dkt. No. 221 

(D.P.R. Nov. 28, 2017). The motion argued that the court should condition the automatic stay on 

the continuation of the interim ERS Bondholder protections set forth in the order entered on July 

17, 2017. See supra ¶ 20-21. In the alternative, the motion argued that the court should enforce 

its July 17, 2017 order and enjoin the Commonwealth from ending adequate protection payments, 

arguing that such payments were required by the stipulation until the court resolved the parties’ 

summary judgment motions in the declaratory judgment action (see supra I.E).

43. The court heard argument regarding the motion on December 20, 2017. On

December 28, 2017, the court granted the motion in part. It interpreted the stipulation and required 

ERS to transfer funds to the Fiscal Agent for purposes of distributing interest payments to all ERS 

Bondholders, and to continue doing so until the earlier of (1) the court’s resolution of the 

declaratory judgment action or (2) the exhaustion of ERS funds. In re FOMB ex rel. ERS, No 17-

3566, Dkt. No. 248 (D.P.R. Dec. 28, 2017). 

B. Ambac Assurance Corp. v. Commonwealth of Puerto Rico, et al., 

Adv. Proc. No. 17-159 (D.P.R. June 8, 2018) 

44. On June 8, 2017, Ambac Assurance Corp., a bond insurer for bonds issued by the

Puerto Rico Highways and Transportation Authority (“HTA”), filed an adversary complaint 

against the Commonwealth and certain Commonwealth officials, AAFAF, the Oversight Board 
17 

and its members, and HTA. On July 7, 2017, Ambac filed an amended adversary complaint 

(a) seeking declaratory and injunctive relief holding that the fiscal plan and certain legislation 

violated the Contracts Clause of the U.S. Constitution, effected a taking in violation of the Fifth 

Amendment, and violated the Due Process Clause, (b) alleging that the fiscal plan and certain 

legislation violated PROMESA and the Bankruptcy Code, (c) alleging that certain orders denied 

access to the courts, and (c) seeking dismissal of HTA’s Title III petition. Ambac v. 

Commonwealth of Puerto Rico, Adv. Proc. No. 17-bk-159, Dkt. No. 35. 

45. On July 28, 2017, the defendants filed a motion to dismiss arguing that (a) Ambac

lacked standing to pursue its claims; (b) PROMESA deprived the court of jurisdiction to entertain 

challenges to the Board’s decision to certify fiscal plans; (c) certain claims were not ripe, and 

(d) Ambac failed to state claims under the Contracts Clause, the Takings Clause, the Due Process 

Clause, PROMESA and the Bankruptcy Code. Ambac v. Commonwealth of Puerto Rico, Adv. 

Proc. No. 17-bk-159, Dkt. No. 48. 

46. On September 12, 2017, Ambac filed an opposition brief in which it challenged

each of the points raised by the defendants, arguing that (a) the Court possessed jurisdiction to 

entertain all the claims, and (b) Ambac had stated viable claims under the Contracts Clause, the 

Takings Clause, the Due Process Clause, PROMESA, and the Bankruptcy Code. Ambac v. 

Commonwealth of Puerto Rico, Adv. Proc. No. 17-bk-159, Dkt. No. 74. 

47. On October 31, 2017, the defendants filed a reply brief, in which they reemphasized

the arguments made in their motion to dismiss. Ambac v. Commonwealth of Puerto Rico, Adv. 

Proc. No. 17-bk-159, Dkt. No. 100. 

48. On November 21, 2017, Judge Swain heard argument on the motion to dismiss.
18 

49. On February 27, 2018, Judge Swain dismissed the Ambac case. The court held that

Ambac had standing, but that it lacked subject matter jurisdiction to entertain challenges to the 

certification of the fiscal plan. The court dismissed the Takings Clause and Due Process Clause 

claims on the ground that they were not ripe in the absence of a final plan of adjustment. And it 

dismissed claims under the Contracts Clause, PROMESA, and the Bankruptcy Code on the merits. 

Ambac v. Commonwealth of Puerto Rico, Adv. Proc. No. 17-bk-159, Dkt. No. 156. 

50. On March 9, 2018, Ambac appealed the dismissal to the First Circuit (1st Cir. No.

18-1214). Briefing is ongoing. 

C. ACP Master LTD., et al. v. Commonwealth of Puerto Rico et al., 

Adv. Proc. No. 17-189 (D.P.R. June 28, 2017) 

51. On June 28, 2017, the ad hoc group of General Obligation bondholders (the “GO

Bondholders) filed an adversary complaint against the Commonwealth and the Oversight Board 

seeking declarations that certain tax revenues are restricted funds that cannot be used by the 

Commonwealth for any purpose other than to satisfy “constitutional debt”; the Commonwealth 

lacks an equitable or beneficial interest in the property; the GO Bondholders have a statutory lien 

on the property; the property are special revenues under the Bankruptcy Code; and the 

Commonwealth’s diversion of revenues without just compensation is an unlawful taking. The 

complaint also seeks declaratory and injunctive relief enjoining the defendants from allegedly 

continuing to divert restricted revenues, and directing the defendants to segregate and preserve the 

restricted revenues for payment of “constitutional debt.” ACP Master LTD., et al. v. 

Commonwealth of Puerto Rico et al., Adv. Proc. No. 17-bk-189, Dkt. No. 1. 

52. On August 21, 2017, the defendants filed a motion to dismiss. The Defendants

argued that (a) § 305 of PROMESA deprived the Court of jurisdiction to interfere with the 

Commonwealth’s property without the Oversight Board’s consent or unless in accordance with a 
19 

plan of adjustment, (b) the GO Bondholders failed to state a claim for a Fifth Amendment taking 

because the GO bonds are unsecured and GO Bondholders have no property rights for Fifth and 

Fourteenth Amendment purposes, (c) the tax revenues are not restricted funds under Puerto Rico 

law, (d) the GO Bondholders do not have a statutory lien or a lien on special revenues, (e) the GO 

Bondholders have no right to segregation of any assets of the Commonwealth, and (f) certain 

claims were preempted. ACP Master LTD., et al. v. Commonwealth of Puerto Rico et al., Adv. 

Proc. No. 17-bk-189, Dkt. No. 35. 

53. On October 17, 2017, the GO Bondholders filed an opposition to the defendants’

motion to dismiss. The GO Bondholders argued that (a) their claims were justiciable and § 305 

did not bar the court’s review, (b) the complaint stated a valid Takings Clause claim, (c) the 

revenues are restricted under Puerto Rico law, (d) they have statutory liens on the tax revenues, 

(e) they stated claims for relief concerning the segregation and preservation of restricted revenues, 

and (f) the claims were not preempted. ACP Master LTD., et al. v. Commonwealth of Puerto Rico 

et al., Adv. Proc. No. 17-bk-189, Dkt. No. 67. 

54. On November 13, 2017, the defendants filed a reply brief, in which they

reemphasized the arguments made in their motion to dismiss. ACP Master LTD., et al. v. 

Commonwealth of Puerto Rico et al., Adv. Proc. No. 17-bk-189, Dkt. No. 78. 

55. On January 30, 2018, Judge Swain dismissed the complaint in its entirety, holding

that certain counts sought advisory opinions and therefore were outside the court’s jurisdiction. 

The court dismissed the takings claim as not ripe for adjudication in the absence of a final plan of 

adjustment that will determine the amount creditors will receive for their asserted property rights. 

The court also held that several counts failed to state a claim upon which relief could be granted 

because § 305 of PROMESA restricted the court’s ability to enter certain types of relief related to 
20 

the Commonwealth’s exercise of its governmental powers or its use of its revenue. ACP Master 

LTD., et al. v. Commonwealth of Puerto Rico et al., Adv. Proc. No. 17-bk-189, Dkt. No. 124. 

56. On March 9, 2018, the GO Bondholders appealed the dismissal to the First Circuit

(1st Cir. No. 18-1108). Briefing is ongoing. On May 25, 2018, Plaintiffs filed an amicus brief in 

support of certain of the arguments asserted by the GO Bondholders. 

D. The Appointments Clause Litigation: UTIER v. Puerto Rico Electric Power 

Authority, et al. (Adv. Proc. No. 17-228) and Aurelius’ Motion to Dismiss 

Commonwealth Title III Petition (Dkt. No. 913 in Case No. 17-3283) 

57. On August 6, 2017, the Union de Trabajadores de la Industria Electrica y Riego

(“UTIER”), the principal labor union representing employees of the Puerto Rico Electric Power 

Authority (“PREPA”), commenced an adversary proceeding against the Oversight Board, its board 

members, and PREPA. UTIER v. PREPA, Adv. Proc. No. 17-bk-228, Dkt. No. 1 (the “UTIER 

Adversary Proceeding”). UTIER subsequently amended its complaint on November 10, 2017. 

UTIER v. PREPA, Adv. Proc. No. 17-bk-228, Dkt. No. 75. The amended complaint alleged that 

the Oversight Board’s members were appointed in a manner that violates the Appointments Clause 

of the U.S. Constitution, see U.S. Const., art. II, § 2, cl. 2, because the Oversight Board’s members 

“exercise[d] significant authority pursuant to the laws of the United States,” and are thus “Officers 

of the United States” within the meaning of the Appointments Clause. Id. ¶89. 

58. On August 7, 2017, Aurelius Investment, LLC, Aurelius Opportunities Fund, LLC,

and Lex Claims, LLC, who claim to be holders of Puerto Rico bonds, (collectively, “Aurelius”) 

filed a motion to dismiss the Commonwealth’s Title III petition (the “Aurelius Motion”). In re 

FOMB ex rel. Commonwealth of Puerto Rico, No. 17-bk-3283, Dkt. No. 913 (D.P.R.). The 

Aurelius motion, like the UTIER Adversary Proceeding, argued that PROMESA’s scheme for 

appointment of the Oversight Board’s members violates the Appointments Clause because the 
21 

members are “Officers of the United States” within the meaning of the Appointments Clause, and 

that the scheme violates principles of separation-of-powers because PROMESA requires the 

President to select the board members from a slate of candidates proposed by members of 

Congress. 

59. The Aurelius Motion proceeded more quickly than the UTIER Adversary

Proceeding: On November 3, 2017, several parties, including the Oversight Board and AAFAF 

on behalf of the Commonwealth, filed objections to the Aurelius Motion. See In re FOMB ex rel. 

Commonwealth of Puerto Rico, No. 17-bk-3283, Dkt. Nos. 1610 (AFSCME), 1622 (Oversight 

Board), 1629 (Retiree Committee), 1631 (UCC), 1638 (COFINA Senior Bondholders), and 1640 

(AAFAF). The objections primarily argued that the Appointments Clause does not apply to the 

Oversight Board because Congress enacted PROMESA pursuant to the Territories Clause of 

Article IV of the U.S. Constitution, see U.S. Const., art. IV, § 3, cl. 2, and because the Oversight 

Board is part of the territorial government in accordance with PROMESA § 101(c). As such, the 

objections argued that the Oversight Board’s members are not federal officers, subject to the 

Appointments Clause, but instead territorial officers. An ad hoc group of GO Bondholders 

submitted a statement in support of Aurelius’s motion. See In re FOMB ex rel. Commonwealth of 

Puerto Rico, No. 17-bk-3283, Dkt. No. 1627. 

60. On November 17, 2017, Aurelius filed a reply in support of its motion to dismiss.

In re FOMB ex rel. Commonwealth of Puerto Rico, No. 17-bk-3283, Dkt. No. 1833. Aurelius 

argued that the Appointments Clause does apply when Congress acts pursuant to the Territories 

Clause because “the Appointments Clause has always been understood to apply to territorial 

officers” when they are appointed by the Federal Government, id. at 14. Aurelius also reiterated 

its argument that the Board members are “officers of the United States” within the meaning of the 
22 

Appointments Clause. Id. at 19. Aurelius also argued that if PROMESA violates the 

Appointments Clause, the proper remedy is to sever the offending provisions and allow the

President to appoint new Board members, subject to Senate approval. 

61. Meanwhile, the UTIER Adversary Proceeding continued: On November 20, 2017,

the Oversight Board and AAFAF on behalf of the Commonwealth filed motions to dismiss 

UTIER’s adversary complaint. See UTIER v. PREPA, Adv. Proc. No. 17-bk-228, Dkt. Nos. 88 

(Oversight Board) and 96 (AAFAF). Intervenors AFSCME and the UCC also each filed full or 

partial joinders to the Oversight Board’s motion to dismiss. UTIER v. PREPA, Adv. Proc. No. 17-

bk-228, Dkt. Nos. 89 (UCC); 95 (AFSCME). Then, on December 1, 2017, UTIER filed its 

omnibus opposition to the motions to dismiss the UTIER Adversary Proceeding. UTIER v. 

PREPA, Adv. Proc. No. 17-bk-228, Dkt. No. 100 (UTIER). Finally, on December 22 and 23, the 

Oversight Board, AAFAF on behalf of the Commonwealth, AFSCME, and the UCC, filed replies 

in support of their motions to dismiss the UTIER Adversary Proceeding. UTIER v. PREPA, Adv. 

Proc. No. 17-bk-228, Dkt. No. 103 (UCC), 104 (Oversight Board); 106 (AFSCME); 108 

(AAFAF). The arguments in these filings were substantially similar to the arguments raised in the 

briefs regarding the Aurelius Motion. 

62. The United States weighed in on both cases on December 6, 2017, filing a

memorandum of law in support of the constitutionality of PROMESA in both the Aurelius Motion 

and the UTIER Adversary Proceeding. In re FOMB ex rel. Commonwealth of Puerto Rico, No. 

17-bk-3283, Dkt. No. 1929; UTIER v. PREPA, Adv. Proc. No. 17-bk-228, Dkt. No. 101. The 

United States argued that the Appointments Clause does not apply to the appointment of territorial 

officers, that the Oversight Board’s members are territorial officers rather than federal officers, 

and that PROMESA’s scheme does not violate the U.S. Constitution’s separation-of-powers 
23 

requirements. Specifically, as to the Appointments Clause challenge, the United States argued that 

“Supreme Court precedent and more than two centuries of evolving territorial governance 

demonstrate that Congress’s plenary authority to create a territorial entity under the Territory 

Clause . . . is not constrained by the Appointments Clause” (U.S. brief at 8), and that “history 

shows that Congress has adopted various territorial governance structures”—including those for 

Puerto Rico—“pursuant to its Article IV authority without regard to the Appointments Clause” 

(id. at 12). 

63. On December 22 and 23, 2017, the Oversight Board, Aurelius and UTIER filed

replies to the United States’ memorandum. In re FOMB ex rel. Commonwealth of Puerto Rico, 

No. 17-bk-3283, Dkt. No. 2159 (Oversight Board), 2169 (Aurelius); UTIER v. PREPA, Adv. Proc. 

No. 17-bk-228, Dkt. No. 107 (UTIER). The Oversight Board agreed with the United States that 

the Appointments Clause does not apply to territorial officers because Congress is not bound by 

the U.S. Constitution’s separation-of-powers constraints when it legislates for the territories. 

Aurelius and UTIER reiterated their arguments that the Appointments Clause applies whether or 

not Congress legislates with respect to a territory or the Oversight Board members are territorial 

officers because “the historical evidence is overwhelming that, ever since the founding, principal 

territorial officials have been appointed by the President and confirmed by the Senate as required 

by the Appointments Clause.” In re FOMB ex rel. Commonwealth of Puerto Rico, No. 17-bk3283, Dkt. No. 2169, at 8 (Aurelius Brief). Aurelius and UTIER also reiterated their arguments 

that the Board members are “officers of the United States” within the meaning of the Appointments 

Clause. Id. at 10. 
24 

64. On January 2, 2018, Aurelius filed a sur-reply in response to the Oversight Board’s

reply to the United States’ memorandum, which largely reiterated its arguments. In re FOMB ex 

rel. Commonwealth of Puerto Rico, No. 17-bk-3283, Dkt. No. 2198. 

65. On January 10, 2018, Judge Swain held a joint hearing on the Aurelius Motion and

the motions to dismiss the UTIER Adversary Proceeding. At the conclusion of the hearing, Judge 

Swain took both matters under advisement. The cases are still pending.

E. FOMB v. Hon. Ricardo Antonio Rosselló, Adv. Proc. No. 17-250 (D.P.R.) 

66. On August 28, 2017, the Oversight Board commenced an adversary proceeding

against the Governor of Puerto Rico seeking declaratory and injunctive relief pursuant to 

PROMESA. FOMB v. Hon. Ricardo Antonio Rosselló, Adv. Proc. No. 17-250, Dkt. No. 1 (D.P.R. 

Aug. 28, 2017). As alleged in the complaint, the Oversight Board, pursuant to its powers set forth 

in PROMESA, certified a fiscal plan for the Commonwealth on March 13, 2017, which included 

labor-reform amendments to the fiscal plan, including furloughs, and pension-reform amendments. 

The Oversight Board alleged that it had “required these two amendments to achieve sufficient 

liquidity and budgetary savings that the [Oversight Board] determined were necessary to make the 

fiscal plan compliant with PROMESA.” Id. at 3. The Board also alleged that the Governor refused 

to implement the amendments in the fiscal plan and failed to notify and provide explanation to the 

Oversight Board, the President, and other federal officials of that decision as required by 

PROMESA. Thereafter, according to the complaint, the Governor informed the President and 

Congressional leaders that he would not implement the plan amendments because they were not 

mandatory parts of the fiscal plan, but were merely recommendations.

67. In the complaint, the Board alleged that “[o]nce certified by the [Oversight Board]

in its sole discretion, the Governor must comply with the fiscal plan.” Id. at 4. Accordingly, the 
25 

Oversight Board sought a declaration that (i) the plan amendments were “mandatory parts of the 

Commonwealth Fiscal Plan certified by the [Oversight Board] pursuant to PROMESA § 201” and 

(ii) the “Governor must enforce and comply with all aspects of the Commonwealth Fiscal Plan,” 

including the labor-reform and pension-reform amendments. Id. at 4-5. The Oversight Board also 

sought an injunction prohibiting the Governor from refusing to comply the fiscal plan. 

68. The Oversight Board relied on a number of PROMESA provisions in its complaint.

For example, the complaint alleged that under § 201 of PROMESA, the Oversight Board has the 

sole authority to certify a proposed fiscal plan when the Board determines, in its sole discretion, 

that such plan complies with the requirements of § 201(b) of PROMESA. Id. at ¶ 59. The 

complaint also alleged that § 104(k) of PROMESA permits the Oversight Board to “seek judicial 

enforcement of its authority to carry out its responsibilities” under PROMESA, including its 

responsibility, exclusive authority, and sole discretion to certify a fiscal plan. Id. at ¶ 68. And the 

complaint alleged that § 108 of PROMESA provides that neither the Governor nor the Legislature 

of the Commonwealth “may enact, implement, or enforce any statute, resolution, policy, or rule 

that would impair or defeat the purposes of [PROMESA], as determined by the Oversight Board.” 

Id. at ¶ 67 

69. Shortly after Hurricane Maria hit Puerto Rico, the Oversight Board published a

press release in which the Board stated that, due to the devastation caused by the hurricane, it was 

“postponing any discussion of furloughs until next fiscal year and it [was] withdrawing its related 

lawsuit.” Press Release, Oversight Board Urges Maximum Support for Puerto Rico with Trump 

Administration Officials Congress (Sept. 30, 2017), available at https://oversightboard.pr 

.gov/documents/. On October 4, 2017, the Oversight Board filed a notice of voluntary dismissal 

and the court entered an order dismissing the adversary proceeding. 
26 

F. Oversight Board’s Motion for Appointment of Chief Transformation 

Officer in PREPA Title III Case, In re FOMB ex rel;. PREPA, No. 17-4780 

70. On July 2, 2017, the Oversight Board filed a Title III petition for PREPA, an

instrumentality of the Commonwealth that generates and distributes substantially all of the electric 

power in Puerto Rico. On October 26, 2017, one month after Hurricane Maria, the Board filed a 

motion requesting appointment of a chief transformation officer (“CTO”) to coordinate and 

oversee PREPA’s disaster response and recovery process. In re FOMB ex re. PREPA, No. 17-

4780, Dkt. No. 361 (D.P.R. Oct. 26, 2017). Pursuant to the relief sought in the motion, the CTO 

would report directly to the Oversight Board. The Oversight Board argued that appointment of 

the CTO was appropriate because PROMESA empowered it to take any action necessary on behalf 

of PREPA to effectuate a successful restructuring. 

71. A number of parties objected, including AAFAF on behalf of the Commonwealth,

the Ad Hoc Group of PREPA Bondholders, and an agent for fuel-line lenders to PREPA. In re 

FOMB ex re. PREPA, No. 17-4780, Dkt. Nos. 377, 380, 381 (D.P.R.). The parties argued that 

PROMESA does not grant the Oversight Board absolute authority over the Commonwealth and 

its instrumentalities (like PREPA) and does not authorize the Board to manage PREPA’s 

operations and financial decisions. 

72. On November 8, 2017, the Board filed a reply in support of its motion. In re FOMB

ex re. PREPA, No. 17-4780, Dkt. No. 414 (D.P.R.). AAFAF filed a surreply in response to the 

Board’s reply on November 12, 2017. In re FOMB ex re. PREPA, No. 17-4780, Dkt. No. 447 

(D.P.R.). 

73. The court heard argument on the motion on November 13, 2017.

74. On November 16, 2017, the court issued an opinion and order denying the

Oversight Board’s motion to appoint the CTO. In re FOMB ex re. PREPA, No. 17-4780, Dkt. No. 
27 

471 (D.P.R. Nov. 16, 2017). The court held that no provision in PROMESA, as well as no 

provision of Commonwealth law, expressly authorized the Oversight Board to appoint a CTO. 

The court cited multiple provisions in PROMESA where responsibilities relating to Puerto Rico’s 

restructuring—for example the development of fiscal plans or certified budgets—rests with the 

Commonwealth in the first instance. The Oversight Board’s powers only arise if the 

Commonwealth’s proposals or actions fail to comply with PROMESA’s objectives. The court 

noted that the Oversight Board had not asserted that PREPA was non-compliant with a certified 

fiscal plan or budget. The Court further observed that “the degree of unilateral power that 

Congress has granted to the FOMB stands in contrast to the powers Congress granted to the District 

of Columbia Financial Control Board. . . .” Id. at 13. The Court explained, “the D.C. Board was 

empowered, for example, to essentially declare significantly inconsistent legislative acts null and 

void unilaterally, and to pre-review every contract the D.C. government proposed to execute.” Id. 

However, Judge Swain noted, “in drafting PROMESA section 204, Congress declined to include 

such provisions.” Id. 

G. Pinto Lugo v. United States, Adv. Proc. No. 18-041 (D.P.R. April 24, 2018) 

75. On April 28, 2018, a nonprofit organization, a group of labor unions, and one

individual bondholder sued the United States, the Oversight Board, and Governor Ricardo 

Rosselló Nevares, seeking a declaratory judgment that PROMESA violates the Declaration of 

Independence, the First Amendment, the Fifth Amendment, the Fourteenth Amendment, the U.N. 

Charter, the U.N. Declaration of Human Rights, and the International Covenant on Civil and 

Political Rights. Pinto Lugo v. United States, No. 18-041, Dkt. No. 1 (D.P.R. April 24, 2018). 

76. In the alternative, the complaint sought the removal of two members of the

Oversight Board on the basis that they have conflicts of interest stemming from their professional 
28 

relationship to a company involved in the issuance of certain Puerto Rico bonds. The complaint 

further requested that the court stay any fiscal plans adopted pursuant to PROMESA while a 

forensic audit is performed on the Commonwealth’s finances, bar the government of Puerto Rico 

from disposing of the Puerto Rico Electrical Power Authority without complying with certain 

provisions in the Constitution of Puerto Rico, and require the United States to assume “any and all 

liabilities it should be compelled to assume over the public debt of the government of Puerto Rico 

and the illegal and unconstitutional imposition of the FOMB over the Plaintiffs, Puerto Rico, and 

its residents.” Id. at 6-7. 

77. Defendants have not yet filed a responsive pleading

H. Assured Guaranty Corp. v. Commonwealth of Puerto Rico, 

Adv. Proc. No. 18-059 (D.P.R. May 23, 2018) 

78. On May 23, 2018, Assured Guaranty Corp., Assured Guaranty Municipal Corp.,

and Federal Guaranty Insurance Company initiated an adversary proceeding seeking declaratory 

relief against the Commonwealth, the Oversight Board, and AAFAF. Assured Guaranty Corp. v. 

Commonwealth of Puerto Rico, Adv. Proc. No. 18-059, Dkt. No. 1 (D.P.R. May 23, 2018). 

79. The complaint alleges that the revised Commonwealth fiscal plan, developed and

certified by the Oversight Board, violates PROMESA and the United States Constitution. 

Specifically, the complaint alleges that the fiscal plan (i) fails “to respect the relative lawful 

priorities and lawful liens” pursuant to Commonwealth law as required by § 201(b)(1)(N) of 

PROMESA; (ii) fails to prevent the transfer of one agency’s assets to another agency as required 

by § 201(b)(1)(M) of PROMESA; (iii) fails “to identify expenses for essential public services” as 

required by § 201(b)(1)(B) of PROMESA; and (iv) violates § 303 of PROMESA (prohibiting 

moratorium laws that impose a non-consensual moratorium on payments of principal and interest 

on creditors), § 407 of PROMESA (creating liability for the transfer of any property of an 
29 

instrumentality of the Commonwealth in violation of applicable law under which a creditor 

possesses a valid pledge, lien, or security interest in such property), and § 928 of the Bankruptcy 

Code (requiring postpetition special revenues remain subject to any lien created before the 

commencement of the municipal bankruptcy proceeding). The complaint also alleges that the 

revised fiscal plan violates the Contracts Clause, the Takings Clause, and Due Process Clause of 

the United States Constitution. Ultimately, the complaint seeks a declaration that the revised fiscal 

plan is unlawful and unconstitutional and cannot be used as a basis for any plan of adjustment. 

80. On June 25, 2018, the defendants filed a motion to stay all litigation related to the

adversary complaint, pending resolution of another case in the First Circuit. Assured Guaranty 

Corp. v. Commonwealth of Puerto Rico, Adv. Proc. No. 18-059, Dkt. No. 14 (D.P.R. June 25, 

2018). The defendants argued that the claims in the adversary complaint are substantially similar 

to claims asserted in a separate adversary proceeding commenced by separate parties—Ambac 

Assurance Corp. v. Commonwealth of Puerto Rico, et al., Adv. Proc. No. 17-00159 (D.P.R.). The 

court had previously granted a motion to dismiss that proceeding and an appeal is in progress. 

81. The court has not ruled on the motion to stay. Objections are due on July 9, 2018,

and replies are due on July 16, 2018. 

I. Hermandad de Empleados del Fondo del Seguro del Estado v. United 

States, Adv. Proc. No. 18-066 (D.P.R. May 30, 2018)

82. On May 30, 2018, a group of Puerto Rican labor unions sued the United States, the

Oversight Board, the Commonwealth, and Governor Ricardo Rosselló Nevares for violations of 

union members’ right to vote under the Declaration of Independence, the Preamble of the 

Constitution, the 13th and 15th Amendments, and various international human rights instruments. 

Hermandad de Empleados del Fondo del Seguro del Estado v. United States, Adv. Proc. No. 18-

066, Dkt. No. 1 (D.P.R. May 30, 2018) 
30 

83. The complaint makes allegations about the history of the United States’ presence

in Puerto Rico, beginning with what plaintiffs call an “illegal[] inva[sion]” in 1898 (¶ 1), 

continuing with the imposition of a “colonial system” exacerbated by the “ignominious” Insular 

Cases (¶¶ 2-4), and culminating in the passage of PROMESA, which plaintiffs allege allowed the 

Oversight Board to “certif[y] and impose[] a Fiscal Plan as the ‘blueprint’ that the 

Commonwealth[] . . . shall follow in the next five fiscal years,” and to “certif[y] and impose[] the 

Commonwealth’s FY18 budget against the political will of the Legislature of Puerto Rico” (¶ 9). 

Id. The complaint requests a declaration that all of the Oversight Board’s acts are “unconstitutional 

and null,” and requests an order enjoining the defendants from continuing the Title III cases or 

taking other actions pursuant to “power or authority provided by PROMESA.” Id. at 55. 

84. Defendants have not yet filed a responsive pleading.

J. Hon. Ricardo Antonio Rosselló et al. v. FOMB, 

Adv. Proc. No. 18-080 (D.P.R.) 

85. On July 5, 2018, the Governor of Puerto Rico and AAFAF filed an adversary

complaint against the Oversight Board. Hon. Ricardo Antonio Rosselló et al. v. FOMB, Adv. Proc. 

No. 18-080, No. 17-03283, Dkt. No. 3435 (D.P.R.). The complaint seeks (a) a declaratory 

judgment that the Oversight Board cannot mandate implementation of rejected policy 

recommendations through enforcement of the board fiscal plan, (b) a declaratory judgment that 

the Oversight Board cannot mandate the implementation of rejected policy recommendations 

through the Board-certified budget, and (c) an injunction prohibiting the defendants from 

implementing and enforcing the Oversight Board’s rejected policy recommendations in the board 

fiscal plan and board budget.

86. According to the complaint, the plaintiffs “seek declaratory and injunctive relief to

foil the Oversight Board’s unlawful attempts to usurp the Commonwealth of Puerto Rico’s 
31 

political and governmental powers and right to home rule.” Complaint at 2. The complaint 

contends that, “over the past several months, the Oversight Board has used the fiscal plan and 

budget certification processes contemplated by [PROMESA], in an attempt to impose its policy 

preferences on Puerto Rico’s people, micromanage every aspect of budget expenditures, and 

exercise legislative power the Board does not have, all over the objections of Puerto Rico’s elected 

Government.” Id. The complaint says the Oversight Board’s efforts “exceed its lawful powers and 

should be enjoined by this Court.” Id.

87. The complaint acknowledges that “PROMESA granted the Oversight Board

authority to establish parameters to bring fiscal responsibility to Puerto Rico and monitor Puerto 

Rico’s progress, such as the power to approve and certify proposed fiscal plans and budgets for 

both the Commonwealth and territorial instrumentalities.” Id. at 3. The complaint also states that 

the Oversight Board “has authority to monitor and review government actions for compliance with 

certified fiscal plans and budgets.” Id.

88. The Oversight Board has not yet filed a responsive pleading.
32 

Respectfully submitted on July 6, 2018. 

Counsel for Plaintiffs

By: Christopher J. DiPompeo

Christopher J. DiPompeo 

Counsel of Record 

JONES DAY

51 Louisiana Ave. N.W.

Washington, DC 20001 

Tel. (202) 879-3939 

Fax: (202) 626-1700 

cdipompeo@jonesday.com 

Of Counsel: 

Bruce Bennett 

JONES DAY 

555 South Flower Street, 50th Floor 

Los Angeles, California 90071 

Tel. (213) 489-3939 

Fax: (213) 243-2539 

bbennett@jonesday.com 

Benjamin Rosenblum 

JONES DAY

250 Vesey Street

New York, NY 10281 

Tel. (212) 326-3939 

Fax: (212) 755-7306 

brosenblum@jonesday.com 

Donald B. Ayer 

Geoffrey S. Stewart

Beth Heifetz

Victoria Dorfman

Sparkle Sooknanan 

JONES DAY

51 Louisiana Ave. N.W.

Washington, DC 20001 

Tel. (202) 879-3939 

Fax: (202) 626-1700 

dbayer@jonesday.com 

gstewart@jonesday.com

bheifetz@jonesday.com 

vdorfman@jonesday.com 

ssooknanan@jonesday.com 

Kamaile A.N. Turčan

JONES DAY

51 Louisiana Ave. N.W.

Washington, DC 20001 

Tel. (202) 879-3939 

Fax: (202) 626-1700 

kturcan@jonesday.com 

*Admitted in Hawai’i

Not admitted in DC

(supervised by a licensed 

DC Bar member)
33 

Counsel for the United States

Respectfully submitted,

THOMAS G. WARD

Deputy Assistant Attorney General

MICHAEL RAAB 

Acting Deputy Assistant Attorney General

ROBERT E. KIRSCHMAN, JR.

Director

/s Kenneth M. Dintzer 

KENNETH M. DINTZER

Deputy Director

/s Christopher J. Carney 

CHRISTOPHER J. CARNEY

Senior Litigation Counsel 

Commercial Litigation Branch

Civil Division

United States Department of Justice

PO Box 480 

Ben Franklin Station 

Washington, DC 20044 

Telephone: (202) 305-7597 

Facsimile: (202) 307-0972 

E-mail: chris.carney@usdoj.gov