1 

# In the United States Court of Federal Claims

No. 22-725C (Filed: June 5, 2023)

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

JONATHAN DINH et al.

,

Plaintiffs

,

v.

THE UNITED STATES,

Defendant

.

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

Roger J. Marzulla

, Marzulla Law, LLC, Washington DC, with whom

w as Nancie G. Marzulla

, for plaintiffs. Gregory H. Bevel

, Rochelle McCullough, LLP, Dallas TX, and Rafael Gonzalez

, Godreau & Gonzalez Law, LLC, San Juan PR, of counsel.

Nathanael B. Yale

, Senior Trial Counsel, United States Department of Justice, Civil Division, Commercial Litigation Branch, Washington, DC,

with whom were L. Misha Preheim

, Assistant Director

, Patricia M. McCarthy , Director, and Brian M. Boynton

, Principal Deputy Assistant Attorney General, for defendant.

OPINION

BRUGGINK, Judge

.

This is a n action a gainst the United States, seeking just compensation under the Fifth Amendment for the alleged taking of plaintiffs’ private
property. Plaintiffs in this case are owners of First Subordinated Secured

Bonds issued by Corporación del Fondo de Interés Apremian te (“COFINA”),2 an instrumentality of the Commonwealth of Puerto Rico. 1 Plaintiffs allege

that their property interests as COFINA bondholders were taken without just compensation as a “direct and intended result” of Congress’s enactment of

the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”). See Second Am . Compl. (“Compl. ”) 2 ¶ 31. Pending is defendant’s motion to dismiss for lack of jurisdiction, or, in the alternative, for failure to state a claim upon which relief can be granted. The motion has been fully briefed, and oral argument was held on April 13, 2023. For the reasons set out below, we grant defendant’s motion to dismiss under Rule 12(b)(6) of the Rules of the United States Court of Federal Claims (“RCFC”).

BACKGROUND

Enacted on June 30, 2016, PROMESA is a statute that authorizes an Oversight Board established under the Act to initiate bankruptcy proceedings— also referred to as Title III proceedings

— for a territory or territorial instrumentality . PROMESA established an Oversight Board for

Puerto Rico on the same date

, created as “an entity within the territorial government”; PROMESA expressly states that an Oversight Board “shall not be considered to be a department, agency, establishment, or instrumentali ty
of the Federal Government .” 48 U.S.C. § 2121(c) (2018). As other COFINA

related cases make clear, th e Oversight Board for Puerto Rico then took a series of discretionary actions, which resulted in the restructuring of

COFINA’s debts. Those actions included designating COFINA as an instrumentality covered by PROMESA, issuing a restructuring certification for COFINA, and then filing a Title III petition on behalf of COFINA in the

United States District Court for the District of Puerto Rico. The Oversight

Board also represented COFINA during the Title III case and submitted a plan of adjustment for COFINA’s debts, which would allow junior COFINA

bondholders (such as plaintiffs) to make a 56.41% recovery on the repayment of principal and interest on their bonds. See In re Fin. Oversight & Mgmt. Bd. for P.R. , 361 F. Supp. 3d 203, 233 (D.P.R. 2019), aff’d , 987 F.3d 173, 177 (1 st Cir. 2021). The district court

— also referred to as the “Title III

1 As owners of First Subordinated Secured Bonds issued by COFINA

, plaintiffs are in effect junior COFINA bondholders. Plaintiffs refer to First

Subordinated Secured Bonds as “COFINA bonds” throughout their complaint.

2 After filing the original complaint on June 29, 2022, see ECF No. 1, plaintiffs amended the ir complaint twice. Unless otherwise noted, the “complaint” from hereon will refer to the second amended complaint filed on November 1, 2022. See ECF No. 9.3 court”

— confirmed the plan of adjustment on February 5, 2019.

Plaintiffs’ complaint, however, skips over the actions of the Oversight

Board and makes only an oblique reference to the Title III court for having

“rebuffed the COFINA Bondholders’ challenge” to the curtailment of their property interests. See Compl. ¶ 30. Pushing both the Oversight Board and

the Title III court into the barely acknowledged background , plaintiffs take

aim instead at an act of Congress

. T he crux of plaintiffs’ claim lies in the allegation that the United States is liable for just compensation because Congress’s enactment of PROMESA caused the taking of their property

. See Compl. ¶ 31 (“As a direct and intended result of Congress’s enactmen t of [PROMESA], COFINA Bondholders lost a significant portion of the principal and interest each COFINA Bondholder was entitled to and the fair market value of the pledged revenues, their security interests and liens on COFINA funds, as well as other compe nsable property rights.”); id . at ¶ 35 ( “ B ut for Congress’s enactment of [PROMESA], Plaintiffs would have received the payments of principal and interest they were entitled to under the terms of their COFINA bonds and would have retained a security interes t . . . that they could have executed in the event of default.” ). Plaintiffs

characterize the alleged taking as a “legislative taking ,” which they define as “Congress’s enactment of a statute that impairs or destroys the property rights of a targeted group of owners.” Pls.’ Resp. at 21.

As we will see, plaintiffs’ claim cannot succeed on the merits without demonstrating sufficient federal action to warrant liability in the United

States

— hence plaintiffs’ consistent assertion that Congress intended PROMESA to result in the taking of their property without just compensation. And yet, as plaintiffs conceded at oral argument, they suffered no actual injury on the day that Congress enacted PROMESA . To be able to point to injury, their claim req uires moving further along the timeline of

events. See Oral Ar g. at 46:00 to 46:42 (plaintiffs conceding that their claim would not have been “ripe” in 2016 because “money hadn’t actually been taken yet”)

. As we explain below, however, t he fact that the ac tual injury occurred at a later date is fatal for plaintiffs because it means that the alleged taking was completed through the discretionary actions of a non

- federal entity. Unsurprisingly, this dilemma has left plaintiffs reluctant to place precisely the date of taking in either their complaint or their brief; at most, they s uggest that the alleged taking occurred somewhere during the date

range of June 30, 2016

, to February 5, 2019. S ee Pls.’ Resp. at 17 ; id . at 18 (“But the issue of whether COFINA Bondholders owned their bonds on the date of taking

— whether that be the date PROMESA was passed or the date it was implemented to deprive them of their property or some date in

between

— cannot be used to dismiss this case.”).4 In short, plaintiffs’ claim attempts to navigat e two opposing currents

. It has to rely on su fficient federal action as the prime motive force, while simultaneously incorporating events and act ors hav ing nothing to do with the

United States , an attempted course adjustment which has the potential for causing shipwreck

. We are satisfied that no degree of navigational skill can salvage the effort

.

I. The Creation of COFINA

In 2006, the Commonwealth of Puerto Rico was in the midst of a fi scal

crisis : having consistently spe nt more than it received in taxes and other

revenues, Puerto Rico faced decreased direct access to the credit markets

because of the Puerto Rican Constitution’s limits on sovereign debt

. 3 In re Fin. Oversight & Mgmt. Bd. f or P .R. , 987 F.3 d 173, 177 (1 st Cir. 2021)

. The Legislative Assembly of Puerto Rico passed Act 91 on May 13, 2006, as a response to the crisis. Id

. The Act created COFINA

, “a public corporation and instrumentality of the Commonwealth of Puerto Rico” that was “independent and separate” from the Commonwealth. S ee P.R. L aws Ann.

t it. 13 § 11(a). The stated purpose of COFINA was to “issue[] bonds and utilize[e] other financing m echanisms” to pay the Commonwealth’s outstanding debts as well as future operating expenses. See id . § 11(b).

The bonds that COFINA issued were different in kind from the general obligation (“GO”) bonds issued by Puerto Rico

. See In re Fin. Oversight , 987 F.3d at 177 ; Am. Jur. 2d Ed. § 295 (“General obligation bonds issued by states and governmental units are, by definition, payable from and secured by a pledge of the issuer’s taxing power. . . . The full faith and credit of the issuer is pledged for repayment of general obligation bonds, and the promise to pay is unconditional.”). That is, COFINA bonds were payable from and secured by specifi c collateral, not by a pledge of the full faith, credit and taxing power of Puerto Rico

. See P.R. Laws Ann. tit. 13 § 13(d) (providing that the “full faith, credit and taxing power of the Commonwealth of Puerto Rico shall not be pledged” for the COFINA bon ds).

Specifically, Act 91 required a portion of sales and use tax revenues (“SUT revenues”) to be deposited directly in the Dedicated Sales Tax Fund

3 Because the allegations in this case almost wholly involve acts of legislatures and courts, the factual background blurs into the controlling law

. W e therefore cite cases and statutes where the cited material supplements but is not inconsistent with plaintiffs’ statement of facts in the complaint.5 (“DSTF”) each year

. The DSTF was the “ property of COFINA ,” which was “[not] available to the Commonwealth of Puerto Rico

. ” Id . at § 12. COFINA

had to use the DSTF exclusively for the purposes specified in § 13, including the repayment of principal and interest on the COFINA bonds as they became

due. See i d . at § 1 3(a)(3)

. Moreover, Act 91 authorized COFINA to “pledge

and otherwise encumber all o r part of [the DSTF]” for the repayment of principal and interest on the bonds. Id. at §13(b). That pledge was “valid and binding as of the time it i s made without the need for a pub lic or notarized

document.” Id.

COFINA subsequently made such a pledge in the Sales Tax Revenue Bond Resolution (“Bond Resolution” ) , the borrowing contract among COFINA, the COFINA bondholders, and the Bank of New York Mellon as

trustee. The Bond Resolution , as amended and restated on June 10, 2009, gave the bondholders a security interest in : “ (1) the DSTF, (2) all COFINA Revenues, as defi ned in the Bond Resolution, (3) all right, title, and interest of COFINA in and to COFINA Revenues, and all rights to receive the same, and (4) funds, deposits, accounts, and subaccounts held by the Trustee.” Compl. ¶ 15. COFINA bondholders thus had automa tically perfected liens

which they could execute in the event of a default i n the payments of principal and interest. See i d . at ¶ 12.

Between 2009 and 2011, COFINA issued a series of bonds that bore interest rates between 3.63% and 7.48% and matured between August 1, 2017, and August 1, 2050. Id. at ¶ 13. Although plaintiffs here do not specify when they purchased their bonds, they allege that they were “at all material

times the owners of a sub stantial quantity of COFINA bonds,” where the “material times” refers to the date range from June 30, 2016

, to February 5,

2019. See id . ¶¶ 1

- 8 ; Pls.’ Resp. at 17.

By May 2017, there was $9.81 billion in aggregate principal amount of COFINA bonds outstanding, consisting of $7.39 billion principal amount of current interest bonds and $1.50 billion principal amount of capital appreciation bonds. Compl. ¶ 13. Puerto Rico regularly transferred the statutorily required portion of SUT revenues to the DSTF, so that by May 2017, the DSTF held over $600 million as security for the repayment of

COFINA bonds ’ principal and interest

. Id

. at ¶ 12; Pls’ Resp. at 3.

II. The Passage of PROMESA

Despite these new measures, Puerto Rico’s financial crisis worsened so that by 2013, Puerto Rico’s three public utilit y companies (power, water, and highways) were more than $20 billion in debt. Compl. ¶ 16; see also6 Puerto Rico v. Franklin Cal. Tax

- Free Tr

. , 5 7 9 U.S. 115, 118 (2016)

. Puerto
Rican instrumentalities, however, could not access the federal municipal bankruptcy process under Chapter 9 of the Bankruptcy Code. See Franklin

Cal . at 130. Their exclusion from federal bankruptcy protections dated back to 1984, when Congress amended the Bankruptcy Code’s definition of a

“State” to exclude Puerto Rico “for the purpose of defining who may be a debtor under chapter 9 of this title.” See 11 U.S.C. § 101(52) (2018)

. The amendment precluded Puerto Rico

— as well as any o ther United States territory

— from authorizing its municipalities to file a Chapter 9 petition, which effectively barred access to federal bankruptcy proceedings for Puerto

Rican instrumentalities

. See 11 U.S.C. § 109 (c)(2) (requiring “States” to authorize their municipalities to seek relief before a municipality may file a Chapter 9 petition) ; id . at § 101(40) (defining a “municipality” as a “political subdivision or public agency or instrumentality of a State”).

As a res ult, Puerto Rico passed the Puerto Rico Corporation Debt Enforcement and Recovery Act (“Recovery Act”) in 2014

, providing a non

federal path for its instrumentalities to restructure their debts

. The Recovery Act could not be enforced, however, because it was pre

- empted by federal

law

. Franklin Cal ., 549 U.S. at 12 5 (“[The Bankruptcy Code] precludes Puerto Rico from authorizing its municipalities to seek relief under Chapter

9 , b ut it does not remove Puerto Rico from the reach of Chapter 9’s pre

emption provision.”).

Ultimately

, on June 30, 2016, Congress enacted P ROMESA pursuant to its plenary power over the territories , s ee 48 U.S.C. § 2121(b)(2), making

it possible for territories and their instrumentalities to adjust their debts in bankruptcy proceedings

. 4 PROMESA, however, is not simply an extension of the Bankruptcy Code to the territories. The implementation of PROMESA first of all requires the establishment of an Oversight Board, the purpose of

which is to “provide a method for a covered territory to ac hieve fiscal responsibility and access to the capital markets

. ” See § 2121(a)

. Title I thus

sets out the organization of an Oversight Board, while Title II and Title III

outline its responsibilities

— which include the approval of fiscal plans and budgets fo r a territory or territorial instrumentality

, as well as duties related

4 PROMESA specifically established an Oversight Board for Puerto Rico on

the date of its enactment. See § 2121(b)(1). Nevertheless, the language of PROMESA is general and also applies to territories other than Puerto Rico once an Oversight Board is established for such a territory. See § 2121(c)(1) (“An Oversight Board established under this section shall be created as an entity within the territorial government for which it is established in accordance with this title . . . .”).7 to the adjustment of debt s

. See § § 2141, 2142 , 2146

.

As the portion of PROMESA that deals specifically with the adjustment of debts, Title III incorporates many sections of the Bankruptcy

Code. See § 2161(a). But differences exist. For instance, the Bankruptcy Code requires a municipality to be insolvent to qualify as a debtor

. See 11

U. S.C. § 109(c)(3). Title III, however, does not require a debtor to be

insolvent

. See 48 U.S.C. § 2162. Where the entity in question is a territorial instrumentality rather than a territory , all that Title III requires is that it : (1)

be “covered” under PROMESA ; (2) have a restructuring certification issued by an Oversight Board ; and (3) desire to effect a plan to adjust its debts. See

id

. Indeed, the first two requirements are unique to Title III since they cannot
be met unless the Oversi ght Board chooses to act, a determination it makes

“in its sole discretion

. ” See § § 2121(d)(1)(A)

, 2146(a)

. Title III , moreover, does not authorize a debtor to directly file a petition for bankruptcy , unlike the Bankruptcy Code

— the Oversight Board must file a petition on behalf of

a debtor. See 48 U.S.C. § 2164(a) ; 11 U.S.C. §§ 301, 901

. The filing of the petition by the Oversight Board commences a voluntary case under Title III

, after which the Oversight Board continues to serve as the “representative of the debtor” and submits or modifies any plans of adjustment for the debtor.

See 48 U.S.C. § 2175.

Title III also has its own provisions with respect to jurisdiction and

venue

. First, Title III provides district courts with “original and exclusive jurisdiction of all cases under [Title III], ” and “original but not exclusive jurisdiction of all civil proceedings arising under [Title III], or arising in or related to cases under [Title III].” § 2166(a). Where a covered territor ial instrumentality is the debtor , venue is proper in the district court for the territory in which the instrumentality is located. § 2167(a)(2). However, only the designated district court judge may conduct a Title III case, see § 2168,

s o that the distri ct court hearing a Title III case is also referred to as the “Title III court” in judicial opinions.

To confirm a plan of adjustment submitted by an Oversight Board, the

Title III court must determine if the plan meets the requirements of § 2174 (b)

. Among other requirements, the plan must comply with applicable provisions

of the Bankruptcy Code and with T itle III of PROMESA , and the debtor must not be “prohibited by law from taking any action necessary to carry out the plan.” See § 2174(b)

. An appeal of the Title III court’s decision is taken “in the same manner as appeals in civil proceedings generally are taken to the courts of appeals from the district court.” § 2166(e).

III. The Adjustment of COFINA’s Debts U nder Title III8 On September 30, 2016, the Oversight Board for Puerto Rico designated COFINA as a “covered entity” subject to the requirements of

PROMESA and eligible to qualify as a debtor under Title III

. In re Fin. Oversight , 361 F. Supp. 3d at 219

. For the Oversight Board to even begin formulating a Title III plan, however, there was an important threshold question that had to be resolved: whether COFINA or the Commonwealth had superior rights to the SUT revenues transferred to the DSTF

. Id. at 220.

The answer would determine which entity had possession of funds allegedly exceeding $600 million by May 2017 to pay its debts

.

A dispute over the DSTF was set off in the lawsuit that GO

bondholders filed on July 20, 2016, shortly after the Commonwealth defaulted on payments to GO bondholders pursuant to Executive Order 30. See Lex Claims, LLC v. Garcia

- Padilla , 236 F. Supp. 3d 504, 512 (D.P.R. 2017), rev’d in part , 853 F.3d 549 (1 st Cir. 2017) (holding tha t PROMESA’s stay applies to litigation seeking declaratory and injunctive relief). In their complaint

— amended in November 2016 to include new causes of action relating to COFINA

— GO bondholders asked the court to declare the default unlawful and grant injun ctive relief, including an order that COFINA transfer

the SUT revenues it held to the Commonwealth. Id . Specifically, they alleged that the Commonwealth’s obligation to pay GO bondholders was a “constitutional debt,” and that the Puerto Rican constitution required using

SUT revenues first to satisfy GO bond obligations, not COFINA bond obligations. Id . at 509

- 510. B ecause the First Circuit held that PROMESA’s automatic stay provision applied, however, the constitutional issue that the

GO bondholders raised was not resolved by the First Circuit’s decision in April 2017. 5 See Lex Claims

, LLC v. Fin. Oversight & Mgmt. Bd.

, 853 F.3d 549, 55 1 (1 st Cir. 2017)

.

Against this backdrop, the Oversight Board determined that the best

way to resolve the dispute over the allocation of the DSTF was for it to file

5 On April 29, 2017, t he fate of the DSTF became more uncertain with the Puerto Rico Legislative Assembly’s enactment of Act No. 2 46 , which

a llowed COFINA’s SUT revenues to be used to pay Puerto Rico’s general

debts under certain circumstances

. See Compl. ¶ 29; Fiscal Plan Compliance Act, Act 26

- 2017 (Apr. 29, 2017) (“[T]he E xecutive B ranch is hereby empowered to use COFINA funds occasionally, only as the last resort, and subject to the filing of a sworn certification with the Legislative Assembly.”)

. Although unclear on the details, plaintiffs allege that on May 3, 2017, “[w]ithin days” of the enactment of Act No. 246, COFINA defaulted on its obligations to COFINA bondholders. See Compl. ¶ 29.9 a Title III petition for both the Commonwealth and COFINA and afford the parties “additional time and breathing room to seek to resolve the impasse under the supervision of the Title III court.” In re Fin. Oversight , 361 F. Supp. 3d at 223. Thus, on May 3, 2017, the Oversight Board issued a restructuring certifi cate and filed a Title III petition on behalf of the

Commonwealth

. Id . at 220. Likewise, on May 5, 2017, the Oversight Board issued a restructuring certification and filed a Title III petition on behalf of

COFINA

. Id

. The two Title III cases were then comb ined for procedural purposes only.

Upon the commencement of these cases, the Title III court requested that the Oversight Board work with interested creditor parties to formulate a procedure for resolving the Commonwealth

- COFINA dispute. Id . at 224.

The Title III court approved such a procedure on August 10, 2017 , which provided for the appointment of a gents independen t from the Oversight

Board to litigate, mediate, and/or settle the dispute

. Id

. The n, on June 7, 2018, agents appointed to represent th e Commonwealth and COFINA announced

the terms of an “ Agreement in Principle ” at the end of arm’s

- length negotiations

. Id . at 225. The central component of the Agreement divided the disputed SUT revenues by allocating 53.65% to COFINA and 46.35% to the

Comm onwealth. 6 Id

.

In July 2018, the Oversight Board began working on a plan of adjustment for COFINA’s debts using the framework of the Agreement. Id

. at 225

- 26. The Oversight Board first certified the “Title III Plan of Adjustment of Puerto Rico Sales Tax Corporation” on October 19, 2018

, which it then amended three times

. Id . at 228

- 29

. After the Oversight Board

certified the Third Amended Plan (“the Plan”), the Title III court heard arguments on all o bjections to the Plan and confirmed it on February 5, 2019. Its upshot was that s enior COFINA bondholders would make a 93.01% recovery on their bonds while j unior COFINA b ondholders would make a 56.41% recovery , or about fifty

- five cents on the dollar in new COFINA bonds relative to the par value of their original bonds

. Id . at 23 3; see also In re Fin. Oversight , 987 F.3d at 179.

6 Plaintiffs allege in their complaint that they were “no t parties [to t he
agreement that resolved the Commonwealth

- COFINA dispute ]” and that they were “unaware of this agreement until it was submitted to the federal district court for approval.” Compl. ¶ 30. Nevertheless, they acknowledge

that “some COFINA Bond holders challenged this secret agreement that drastically curtailed their bond rights and security for repayment ,” and that

the Title III court “rebuffed the COFINA Bondholders’ challenge to this agreement.” See id

.10 The Title III court mad e the following conclusions of law as it

confirmed the Plan . First, the Plan fully complie d w ith applicable provisions of the Bankruptcy Code, including the provision about creditors voting to accept or reject the p lan. T he court found that “[a]ll classes of creditors entitled to vote to accept or reject the Plan have voted to accept the Plan in

a ccordance with the requirements set forth

. . . . ” Id . at 240. Second, the Plan fully complie d with Title III of PROMESA. Id . at 240. Third, COFINA, the debtor, was not prohibited by law from taking any action necessary to carry out the plan. Id

.

Addressing j unior COFINA bondholders’ argument that the Plan and Settlement Agreement effected a taking without just compensation in

violation of the Fifth Amendment , the Title III court applied the three

- factor test for regulatory takings under Penn Central Transp

. Co. v. City of New

York , 438 U.S. 104 (1978) and rejected the challenge. 7 Id . at 244. First, the

court held that the Plan w ould not result in the total destruction of the value of bondholders’ property. Id . at 244. Second, the court held that the Plan

would interfere only with “bondholders’ subjective investment expectations,” rather than “ reasonable expectations ”

— which must ta ke

account of the claims in the Commonwealth

- COFINA dispute that the Plan

propo sed to resolve. Id

. Third, the court held that Plan was a “quintessential example” of a “public program adjusting the benefits and burdens of economic life to promote the common go od.” Id

. Moreover, e ven in the event that the Plan resulted in a taking, the court was “satisfied that the value to be received by bondholders as a result of the settlement of the Commonwealth

COFINA dispute and under the Plan constitutes just compensation.” Id

. As

the court noted, the alternative to the Plan was “protracted litigation in the Adversary Proceeding, which could lead to an all

- or

- nothing recovery for

either the Commonwealth or COFINA.” Id . at 246.

7 The test for regulatory takings under Penn Central is “an essentially ad hoc, factual” inquiry that looks to the following three factors as having particular significance: (1) “[t]he economic impact of the regulation on the claimant”; (2) “the extent to which the regulation has interfered wit h distinct

investment

- backed expectations”; (3) “the character of the governmental

action.” Penn Central , 438 U.S. at 124. The Court held in Penn Central that a taking is more readily found “when the interference with property can be characterized as a physical invasion by government than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the co mmon good.” Id . (internal citation omitted).11 Once confirmed, the Plan was implemented on February 12, 2019,

an d an appeal followed. In re Fin. Oversight , 987 F.3d at 180. The First

Circuit affirmed the confirmation of the plan, dismissing the appeal as equitably moot. Id . at 177 (“No party sought to stay the Title III court’s order approving the Plan, which has been fully implemented for nearly two years and given rise to transactions involving billions of dollars and likely tens of thousands of individuals.”).

Plaintiffs filed the present suit as a class action 8 on June 29, 2022

, naming Jonathan Dinh and Dwight Jereczek as Representative Plaintiffs

who se claims are “typical of the claims of all other members of the COFINA Bondholders class as described in this Complaint.” ECF No. 1. They amended the complaint twice, first on October 31, 2022, and again on November 1, 2022, adding eight named Representative Plaintiffs to the original complaint. See ECF No. 8, 9. The descriptions of all Representative

Plaintiffs are identical ; they assert the same takings claim “on behalf of all persons and entities that owned [First Subordinated Secured] COFINA bonds between June 30, 2016, and February 5, 2019, excluding persons or entities that voted for or consented to the alteration of their COFINA bond rights.”

See Compl. ¶ 8. Plaintiffs allege that “[a]s a direct and intended result of Congress’s enactment of [PROMESA], COFINA Bondholders lost a significant portion of the principal and interest each COFINA Bondholder was entitled to and the fair market value of the pledged revenues, their security interests and liens on COFINA funds, as well as other compensable property rights.” Id . at ¶ 31.

Defendan t filed its motion to dismiss on December 7, 2022. It makes four arguments regarding this court’s asserted lack of subject matter jurisdict ion and five arguments asserting plaintiffs’ failure to state a claim upon which relief may be granted.

DISCUSSION

I. This Court Has Subject Matter Jurisdiction over Plaintiffs’ Takings Claim U nder the Tucker Act.

Because s ubject matter jurisdiction is a “threshold requirement for a court’s power to exercise jurisdiction over a case

, ” Dow Jones & Co., Inc. v.

Ablaise Ltd ., 606 F.3d 1338, 1348 (Fed. Cir. 2010), we first determine

8 Plaintiffs’ motion to certify the class under RCFC 23(c) was filed on May 1, 2023. Consideration of the motion was stayed until resolution of the pending motion to dismiss.12 whether we have subject matter jurisdiction to hear plaintiffs’ takings claim. In doing so, we “accept as true all undisputed facts asserted in the plaintiff’s complaint and draw all reasonable inferences in favor of the plaintiff.” Trusted Integration, Inc. v. United States , 659 F.3d 1159, 1163 (Fed. Cir. 2011).

The subject matter jurisdiction of this court is defined by the Tucker Act, which grants jurisdiction to this court to “render judgment upon any

claim against the United States founded either upon the Constitution, or any act of Congress or any regulation of an executive department.” 28 U.S.C. §1491(a)(1) (2018)

. Although t he Tucker Act constitutes an unequivocal waiver of sovereign immunity , it does not create a substantive right for monetary relief against the United States

. See United States v. White Mountain Apache Tribe , 537 U.S. 465, 472 (2003)

. Thus, to support this

court’s subject matter jurisdiction, t here must be a separate source of law that

“ can fairly be interpreted as mandating compensation by the F ederal

G overnment for the damage sustained

. ” Id. (quoting United States v. Testan

, 424 U.S. 392, 400 (1976))

. W here a money

- mandating source exists, this

court has exclusive jurisdiction to award compensation in excess of $10,000, because concurrent jurisdiction of district courts under the Little Tucker Act is limited to claims “not exceeding $10,000 in amount.” See 28 U.S.C. § 1346(a)(2).

Here, a money

- mandating source undoubtedly exists : t he text of the

Fifth Amendment mandates just compensation when the government takes private property for public use. U.S. Const. amend. V (“[N]or shall property be taken for public use, without just compensation.” ). Notwithstanding the presumption of Tucke r Act jurisdiction under the Takings Clause, however,

defendant asserts that this court lacks subject matter jurisdiction over plaintiffs’ takings claim for four reasons

. We reject all four

.

A. Plaintiffs Allege a Taking Effected by an Act of Congress,

Which This Court Has Jurisdiction to Hear Under the Tucker

Act.

Defendant’s first argument is based on what it takes to be the “true nature” of plaintiffs’ takings claim as opposed to what plaintiffs have ple a d ed in their complaint. That is, d efendant argues that this court lacks jurisdiction because “properly framed, the acts that purportedly took plaintiffs’ property interests include a series of discretionary decisions by the Oversight Board

, which the Supreme Court unanimously he ld does not constitute the United States for statutory and constitutional purposes. ” Def.’s Reply at 2.13 The basic premise behind defendant’s argument is correct : t his court lacks jurisdiction over claims against a party other than the United States

. United States v. Sherwood , 312 U.S. 584, 588 (1941)

. Thus, to establish jurisdiction, a plaintiff claiming a taking in this court must allege that their property was taken by federal action

. See Altair Global Credit Opportunities Fund (A), LLC v. United St ates , 151 Fed. Cl. 276, 285 (2020) ( Altair II ). To
be sure

, d efendant does not deny that plaintiffs have made such allegations : here, plaintiffs clearly allege a taking by federal legislation. Nor does

defendant argue that plaintiffs’ allegations are frivo lous. Instead, d efendant objects to the “true nature” of plaintiffs’ claim , arguing that the alleged taking

is “necessarily predicated” on the actions of a non

- federal entity

. See Def.’s

Mot. to Dismiss at 11

. Such an argument, however, goes to the merits of plaintiffs’ claim rather than our jurisdiction

, because it concerns whether plaintiffs can actually establish sufficient federal action to create a takings liability for the United States.

Although difficult to maintain at times, the distinctio n between a jurisdictional question and a question on the merits of a claim is not a meaningless one

. The Federal Circuit has repeatedly held that once the plaintiff identifies a money

- mandating source to establish Tucker Act jurisdiction , whether the plai ntiff is entitled to relief under that source is a question on the merits of the claim. See Greenlee Cnty

. , Ariz. v. United

States , 487 F.3d 871, 876 (Fed. Cir. 2007); Doe v. United States , 463 F.3d 1314, 1325 (Fed. Cir. 2006)

. There is , in short, “no further jurisdictional requirement that the court determine whether the additional allegations of the complaint state a nonfrivolous claim on the merits.” S ee Jan’s Helicopter
Serv., Inc. v. F ed. A viation A dmin. , 525 F.3d 1299, 1309 (Fed. Cir. 2008).

T hus, whether a particular government action is sufficient to create a takings liability is a question that we address when we evaluate a motion to dismiss

for failure to state a claim. See Del

- Rio Drilling Programs, Inc. v. United

States , 146 F.3d 1358, 13 62 (Fed. Cir. 1998)

.

Because plaintiffs ’ complaint unambiguously alleges that federal action took their property without just compensation, we have subject matter jurisdiction under the Tucker Act. See Altair II , 151 Fed. Cl. at 288 (assuming jurisdiction over claims alleging that Congress’s enactment of PROMESA effected a taking ).

B. PROMESA D oes N ot D isplace This Court’s Tucker Act

J urisdiction over P laintiffs’ T akings C laim

.

Defendant also argues that this court lacks subject matter jurisdiction

because PROMESA mandates that this action be brought in the d istrict c ourt14 for the District of Puerto Ric o :

Except as provided in . . . title III (relating to adjustments of debts), any action against the Oversight Board, and any action otherwise arising out of this Act, in whole or in part, shall be brought in a United States district court for the covered territory. . . . 48 U.S.C. § 2126(a)

.

D efendant asserts as a threshold matter that th is action “ ‘arises out of’ PROMESA, if not ‘in whole’ then certainly at least ‘in part,’ because [plaintiffs’] takings claim is explicitly based on Congress’s enactment of

PROMESA .” Def.’s Mot. to Dismiss at 14. Defendant then a rgues that the

broad and manda tory language of § 2126(a)

— as seen in the use of “any” and

“shall”

— is sufficient indication of Congress’s intent to displace Tucker Act jurisdiction over plaintiffs’ takings claim . It maintains that “ [i] f a statute is clear enough in making another forum e xclusive, it does not need to ‘mention’ the Tucker Act by name, refer to the Fifth Amendment or constitutional claims, nor does it need to use any other magic words to exclude this Court from its application.” Def.’s Reply at 5

.

Assuming for now that pla intiffs’ takings claim arises out of

PROMESA

, in whole or in part, we do not find in PROMESA the kind of

clear congressional intent required to displace this court’s jurisdiction under

the Tucker Act. A lthough Congress has the power to withdraw Tucker Act jurisdiction , including jurisdiction over takings claims

, s ee Horne v. Dep’t of Agric ., 569 U.S. 513, 527 (2013), a withdrawal of Tucker Act jurisdiction by implication is disfavored. Ruckelshaus v. Mon santo Co. , 467 U.S. 986, 1017 (1984)

. Thus , Tucker Act jurisdiction is not displaced unless another

remedial scheme reflects Congress’s “unambiguous intention to withdraw the Tucker Act remedy ” otherwise available to the plaintiff. See Acceptance

Ins

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

. In undertaking this analysis , courts must examin e “the purpose of the [ statute alleged to displace the Tucker Act ], the entirety of its text, and the structure

of review that it establishes.” Horne , 569 U.S. at 527.

Examining the entirety of PROMESA shows , first of all, that requiring plaintiffs to bring their takings claim in district court amounts to limiting the remedies they may seek. Because PROMESA does not itself waive sovereign immunity, 9 a plaintiff suing the United States for monetary

9 There is no provision of PROMES A that may be read as an unequivocal waiver of sovereign immunity. Remedies contemplated under § 2126 do not include relief sought against the United States:15 relief must look to either the Tucker Act or the Little Tucker Act for a waiver

of sovereign immunity. The Little Tucker Act, however, allows the district

court to award only up to $10,000 of monetary relief

— which is less than the amount plaintiffs seek in this action. Thus, w ere plaintiffs to sue in district

cour t, the district court wo uld lack jurisdiction to grant the monetary relief that they seek. Defendant did not assert otherwise at oral argument, merely pointing to forms of equitable relief which the district court could have
grant ed had the plaintiffs brought their takings claim there earlier

, such as declaring the enactment of PROMESA unconstitutional under the Declaratory Judgment Act or refusing to confirm the Plan

. See Oral Arg. at

7: 00 to 9:50

.

Equitable relief, however, cannot replace monetary relief in takings

suits

. As the Supreme Court has repeatedly held, equitable relief is “generally unavailable” for takings claims because “[a]s long as an adequate provision for obtaining just compensation exists, there is no basis to enjoin the government’s action effecting a taking.” See Knick v. Township of Scott, Pa

., 139 S. Ct. 2162, 2176 (2019) ; E

. Enters

. v. Apfel , 524 U.S. 498, 521 (1998) (“[T]he Declaratory Judgment Act allows individuals threatened with a taking to seek declaration of the constitutionality of the disputed government
action before potentially uncompensable damages are sustained.”) (internal

citat ion and quotation marks omitted) (emphasis added). Indeed, except
where government action “fails to meet the ‘ public use ’ requirement” or “is so arbitrary as to violate due process,” the Takings Clause does not actually prohibit government interference wit h private property

. See Lingle v. Chevron U.S.A., Inc. , 544 U.S. 528, 543 (2005). The Takings Clause is “designed not to limit the governmental interference with property rights per

se , but to secure compensation in the event of otherwise proper interferen ce amounting to a taking.” Id . at 537 (internal citation and quotation marks

omitted ).

In the light of these principles , it is clear that monetary relief is the sole remedy that plaintiffs could in fact seek for the alleged taking

. First, plaintiffs lack a basis for injunctive or declaratory relief because they do not allege that PROMESA fails to meet the public use requir ement or is so arbitrary as to violate due process. S ee Compl. ¶ 35 (acknowledging that

Except with respect to any orders entered to remedy constitutional violations, no order of any c ourt granting declaratory or injunctive relief against the Oversight Board, including relief permitting or requiring the obligation, borrowing, or expenditure of funds, shall take effect during the pendency of the action before such

court

. . . . §2126(c).16 PROMESA was enacted for the “public purpose of ameliorating Puerto Rico’s financial crisis”). Moreover, the case that defendant cites as an example of the Title III cou rt’s refusal to confirm a plan for violation of the Fifth Amendment is inapposite: there, “no one dispute[d] that [Puerto Rico] engaged in prepetition takings of some property.” In re Fin. Oversight & Mgmt. Bd ., 41 F.4 th 29, 43 (1 st Cir. 2022). The debtor thus had an existing obligation to pay just compensation and the question before the Title III court was whether the Fifth Amendment permitted the impairment of that obligation through bankruptcy. See i d. at 46

. Defendant does not cite

, and we

have not found

, a case in which the Title III court refused to confirm a plan because the plan itself would effect an uncompensated taking.

Given t he inadequacy of remedies available in district court for plaintiffs’ taki ngs claim , we do not find in PROMESA unambiguous congressional intent to displace this court’s Tucker Act jurisdiction

. Indeed, this case is unlike those cases in which Tucker Act jurisdiction was displaced by a “specific and comprehensive scheme for admin istrative and judicial review” of the plaintiff’s takings claim. See Alpine PCS , Inc. v. United States

, 878 F.3d, 1086, 1092 (Fed. Cir. 2018). In such cases, two conditions were met: first, the alleged taking resulted from a federal agency’s action; second, Congress had created a statutory framework for both administrative and judicial review of that agency’s actions. See Alpine PCS , Inc. , 878 F.3d at
1097

- 9 8 (explaining how the Communications Act provides for administrative and judicial review of challenges to license cancellations, including claims that a cancellation effected a taking); Horne , 569 U.S. at 527 (explaining how the Agricultural Marketin g Agreement Act provides for administrative and judicial review of o bjection s to marketing order s , including claims that a marketing order effected a taking) ; Vereda, Ltda. v

. United States , 271 F.3d 1367, 1375 (Fed. Cir. 2001) ( explaining how the Controlled Substance Act provides for administrative and judicial review of challenges to forfeiture s of property, including claims that a forfeiture

effected a taking ). Neither of those conditions , however, are met here. Plaintiffs allege a taking effected by Congress’s enactment of PROMESA

itself

, which is not a claim for which PROMESA provides a scheme of administrative and judicial review. 10

10 Defendant’s reliance on Hinck v. United States , 550 US. 501 (2007) is also misplaced because Hinck did not involve Tucker Act jurisdiction over takings claims . Instead, Hinck addressed whether 28 U.S.C. § 6404(h)(1) vests exclusive jurisdiction in the Tax Court to review § 6404(e)(1) determinations despite statutes granting jurisdiction to the district courts and

the Court of Federal Claims to review tax refund actions. See Hi nck , 550 U.S. at 507. And in answering that question in the affirmative, the Court relied not17 Because PROMESA does not reflect Congress’s unambiguous intent to displace Tucker Act jurisdiction, we retain jurisdiction over plaintiffs’ takings claim.

C. Exercising Jurisdiction o ver Plaintiffs’ T akings C laim Would Not Require Improper Review of the Title III Court’s

Decision.

Next, d efendant argues that even if PROMESA d oes not displace the Tucker Act, this court still lacks jurisdiction because “considering the merits of [plaintiffs’] claim would require this Court to review and find error in the

decisions of the Title III court in adjudicating COFINA’s restructuring.”

Def.’s Mot. to Dismiss at 18. Specifically, defendant points out that the Title III court already considered and “rejected claims from junior COFINA bondholders that the confirmation plan arising from PROMESA effected a Fifth Amendment taking of the bondholders’ liens on the SUT revenues.” Id

. at 19.

As is well established, this court “has no jurisdiction to review the merits of a decision rendered by a federal district court.” Shinnecock Indian

Nation v. United States , 782 F.3d 1345, 1352 (Fed. Cir. 2015) ; see also

Allustiarte v. United States , 256 F.3d 1349, 1352 (Fed. Cir. 2001 ) (holding

that the Court of Federal Claims lack s jurisdiction to review the decision of bankruptcy courts). We thus lack jurisdiction t o hear claims which amount
to a collateral attack on the judgment of the district court , such as a claim in which the plaintiff alleges that the district court effected a taking by improper application of the law. See Shinnecock Indian Nation , 782 F.3d at 1353.

But plaintiffs’ takings claim is not a collateral attack on the decision

of the Title III court. According to plaintiffs, the confirmation of the Plan “simply describes part of the process that resulted in the taking of COFINA Bondholders’ property,” a process to which plaintiffs attribute no legal error

. See Pls.’ Resp. at 11 . Indeed, we have jurisdi ction over plaintiffs’ takings

claim because it does not require us to scrutinize the Title III court’s reasoning or result

— the merits of plaintiffs’ claim do not depend on whether

only on the principle that a “precisely drawn, detailed statute pre

- empts more general remedies,” but also on the principle that “when Congress enacts a specific remedy when no remedy was previously recognized . . . the remedy provided is generally regarded as exclusive.” See i d . at 506. The latter principle does not apply here because PROMESA did not create a previously unrecognized remedy for takings in violation of the Fifth Amendment.18 the Title III court properly confirmed the Plan. See Boise Cascade Corp. v.

United States , 296 F.3d 1339, 1345 (Fed. Cir. 2002) ( holding that the Court of Federal Claims had jurisdiction over the plaintiffs’ takings claim because the claim was “not based on the propriety of the district court’s decision”).

Plaintiffs could succee d on the merits even if the Title III court’s decision

was proper , because the theory of liability behind their takings claim is an

attack on Congress’s enactment of PROMESA for authorizing the Title III process in the first place

.

Moreover, the takings claim that the Title III court rejected is not the same takings claim plaintiffs bring here. That is, t he Title III court only

considered whether the Plan and Settlement Agreement submitted by the Oversight Board would take COFINA bondholder s’ property without just compensation. See In re. Fin. Oversight , 361 F. Supp. 3d at 24 4 (“[T]he character of the governmental action strongly supports the Court’s

conclusion that the Plan and Settlement Agreement do not result in an unconstitutional taking.”); id . at 245 (“The objections to the Plan and Settlement Agreement based upon the Takings Clause of the United States

Constitution are therefore overruled.”). T he Title III court did not address whether the United States could be held liable for a taking based specifically

on Congress’s enactment of PROMESA

.

Because plaintiffs’ takings claim is not an improper collateral attack

on the decision of the Title III court

, we retain jurisdiction over their claim.

D. This Court Has Jurisdiction o ver the Claims of Plaintiffs Added in the Amended Complaints.

Defendant’s final argument is that we lack jurisdiction over the claims

of p laintiffs added in the amended complaints

, because the amendments were

filed outside of the six

- year statute of limitations for this court. See 28 U.S.C. § 2501 (“Every claim of wh ich the United States Court of Federal claims h as jurisdiction shall be barred unless the petition thereon is filed within six years after such claim first accrues.”). In making this argument, defendant

asserts

— based on the allegations of the complaint

— tha t the underlying takings claim accrued on June 30, 2016 , when PROMESA was enacted

. 11 It

11 Plaintiffs d id not challenge this assumption about claim accrual in their response to defendant’s motion, even though they acknowledged at oral argument that their claim would not have been ripe in 2016. Notwithstanding the imprecision in plaintiffs’ takings claim, we take their allegations at face value for purposes of ruling on defendant’s jurisdictional arguments.

B ecause plaintiffs allege that Congress’s enactment of PROMESA took their19 apparently concedes that the originally named plaintiffs filed timely claims, whereas the amended complaints untimely added the claims of eight other plaintiffs

.

Defendant argues that we lack jurisdiction over the claims of untimely added plaintiffs because § 2501 may not be equitably tolled by the filing of a class action complaint. We need not address the availability of equitable tolling, however, because tollin g is not the only way to add plaintiffs who might otherwise be barred by § 2501

. RCFC 15(c)(1)(B) provides another

avenu e: the rule allows complaints to be amended outside the statute of limitations so long as the amendment “relates back” to the original p leading. See Big Oak Farms, Inc. v. United States , 141 Fed. Cl. 482, 489 (2019) (identifying RCFC 15(c)(1)(B) and class action tolling as two different avenues for adding plaintiffs outside the statute of limitations); Barron Bancshares, Inc. v. United Sta tes , 366 F.3d 1360, 1370 (Fed. Cir. 2004) (holding that RCFC 15(c) “ overcome [s]” jurisdictional challenges based on § 2501). To determine whether the addition of plaintiffs sufficiently “relates back” under RCFC 15(c)(1)(B), this court weighs whether: “(1) the claim arose out of the ‘same conduct, transaction, or occurrence’ as the original complaint; (2) the new plaintiff shares an ‘identity of interest’ with the original complaint; (3) the defendant had ‘fair notice’ of the new plaintiff’s claim; and (4) the addition of the new plaintiff causes the defendant prejudice.” See Big Oak Farms , 141 Fed. Cl. at 489.

All four of th e se factors weigh in favor of finding that the addition of plaintiffs “relates back” to the original complaint. The additional plaintiffs allege, just like the original plaintiffs, that they are owners of a substantial quantity of First Sub ordinated Secured COFINA bonds and th at their property interests as bondholders were taken without just compensation as the direct and intended result of Congress’s enactment of COFINA. See Compl. ¶ 1

- 8. Moreover, whether the additional plaintiffs can establish a claim does not depend on fact ual circumstances unique to each plaintiff; whatever effect the enactment of PROMESA may have had on the value of

COFINA bonds and the junior COFINA bondholders’ rate of recovery, the impact would have been the same. See Big Oak Farms , 141 Fed. Cl. at 490

- 91 (fin ding no “identity of interest” or “fair notice” to the defendant because “the duration and severity of the flooding must be assessed on a case by case basis along with the character of the land at issue” for each plaintiff to establish a takings claim). No r does the addition of eight plaintiffs cause

property without just compensation , we construe June 30, 2016 to be the date of taking, which makes claims filed after July 1, 2022 u ntimely in the absence of tolling or RCFC 15(c)(1)(B).20 undue prejudice to defendant by significantly expanding discovery or unreasonably broadening the issues. See id . at 491 (“Increasing the number of plaintiffs by over 100 creates a clear litigation burden partic ularly given the years that have passed and the proof required to prove impacts to property more than seven years after the flooding in 2011.”).

Because RCFC 15(c)(1)(B) allows the amendments that were made, we find that we have jurisdiction over the cla ims of all plaintiffs currently named in the second amended complaint. H aving found no impediment to our jurisdiction over this action, we next address whether plaintiffs state a claim upon which relief could be granted.

II. Plaintiffs Fail to State a Claim U nder RCFC 12(b)(6).

The court may grant a motion to dismiss for failure to state a claim when “a complaint does not allege facts that show the plaintiff is entitled to the legal remedy sought.” Steffen v. United States , 995 F.3d 1377, 1379 (Fed. Cir. 2021). Although the court is required to accept as true all factual allegations pleade d when ruling on a RCFC 12(b)(6) motion, the complaint must contain “enough facts to state a claim to relief that is plausible on its

face” to survive dismissal. Frankel v. United States , 84 2 F.3d 1246, 1249 (Fed. Cir. 2016) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007))

. A claim is plausible on its face “when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the

defendant is liab le for the misconduct alleged.” Id . (quoting Ashcroft v. Iqbal

, 556 U.S. 662, 678 (2009)

. Mere “labels and conclusions” or “a formulaic

recitation of the elements of a cause of action” are not sufficient

. Twombly

, 550 U.S. at 555.

Defendant makes five ar guments in support of its motion to dismiss under RCFC 12(b)(6): (1) plaintiffs do not plausibly allege cognizable property interest s ; (2) even if plaintiffs allege cognizable property interest s , collateral estoppel bars the claim that such interest s were taken; (3) there is no government action sufficient to establish a taking because Congress did not command or coerce the Oversight Board to restructure COFINA’s debts; (4) plaintiffs allege a mere frustration of contract rights by the government

, which is insufficient to constitute a taking; (5) plaintiffs fail to state a cognizable regulatory takings claim under Penn Central

. As explained below, we reject the first two arguments but agree with defendant’s third
argument that Congress’s enactment of PROMESA is not a sufficient basis
to support a taking s claim

. Having concluded that plaintiffs fail to state a claim upon which relief could be granted, we do not find it necessary to decide defendant’s remaining two arguments.21 A. Plaintiffs ’ Allegations Re garding Their Property Interests Do

Not Warrant Dismissal

.

When adjudicating a takings claim, the court must first determine whether the plaintiff has established a property interest cognizable under the

Fifth Amendment. Huntleigh USA Corp. v. United St ates , 525 F.3d 1370, 1377 (Fed. Cir. 2008). It is only after identifying a valid property interest that the court must determine “whether the government action at issue amounted to a compensable taking of that property interest.” Id . at 1378 (quoting Am.

P elagic Fishing Co., L.P. v. United States , 379 F.3d 1363, 1372 (Fed. Cir. 2004)).

The Fifth Amendment protects tangible property, such as real and personal property, as well as intangible property, such as contractual rights and right s to enforce a lien

. Id. at 1377

- 78 (holding that the contract rights the plaintiff alleged were valid property interests under the Fifth Amendment); Armstrong v. United States , 364 U.S. 40, 44 (1960) (holding that the petitioners’ rights to enforce their a sserted liens were compensable property interests under the Fifth Amendment). Because the Fifth

Amendment does not itself create a property interest, however, “the existence of a property interest is determined by reference to existing rules or

understandi ngs stemming from an independent source such as state law.” Phillips v. Wash. Legal Found ., 524 U.S. 156, 164 (1998) (citing Bd. of Regents of State Colls

. v. Roth , 408 U.S. 564, 577 (1972)). When the asserted property interest arose is also critical, beca use “only persons with a valid property interest at the time of the taking are entitled to compensation.” Reoforce, Inc. v. United States, 853 F.3d 1249, 1263 (Fed. Cir.2017) (quoting Wyatt v. United States , 271 F.3d 1090, 1096 (Fed. Cir. 2001)) ; s ee also A&D Auto Sales, Inc. v. United States, 748 F.3d 1142, 1153 (Fed. Cir. 2014) (holding that plaintiffs had valid and compensable property interests because “[t]he challenged government action did not predate the acquisition of the plaintiffs’ interests” ).

Plaintiffs allege in their complaint that they were “at all material times the owners of a substantial quantity of COFINA bonds,” from which two types of cognizable property interests arise: first, a contractual right to repayment of principal and int erest on the bonds, and second, a lien on the

DSTF and all COFINA revenues that could be enforced in the event of a default on that repayment. 12 See Compl. ¶ 1

- 7. And as they clarify in their

12 A valid security interest would be limited to a lien on SUT revenues already collected at the time of the alleged taking, because Puerto Rico law22 response to defendant’s motion, the reference to “material times” mean s the date range from June 30, 2016, to February 5, 201 9

. See Pls.’ Resp. at 17

. Defendant argues, however, that plaintiffs fail to plausibly allege cognizable property interests because their complaint contains no more than a “boilerp late allegation ” later supplemented with attorney argument. See Def.’s Reply at 12.

Although we agree that the complaint lacks specific factual allegations regarding each plaintiff’s ownership of COFINA bonds

, a right to repayment on the bonds as well as a lien on revenues are valid property interests, and there is no reason to believe that plaintiffs could not supply particularized allegations about when they acquired the bonds

. See Steffen

, 995 F.3d at 138 0 (fin ding that granting leave to amend the complaint would

be futile because the plaintiffs could not establish one of the statutory requirement s as a matter of law). As such, dismissal under RCFC 12(b)(6) is

not the appropriate remedy for plaintiffs’ failure to include specific allegations establishing their bond ownership

. See A&D Auto Sales , 748 F.3d

at 1158

- 59 (“The plaintiffs have failed to properly allege economic loss, but at oral argument in this court they . . . made clear that they intended to establish loss of value. In this situation the appropriate remedy is to grant leave to amend to include specific allegations establishing loss of value.”). Indeed, defendant’s argument is belied by its next assertion, in which it

contends that the Title III court already resolved the claim that plaintiffs’ property interests (presumably not illusory) were taken.

B. Collateral Estoppel Does Not Bar Plaintiffs’ Claim.

Collateral estoppel, or issue preclusion, “bar[s] the revisiting of issues that have already been litigated by the same parties or their privies based on

the same cause of action.” Banner v. United States , 238 F.3d 1348, 1354 (Fed. Cir. 2001). The four req uirements of collateral estoppel are: “(1) the issues are identical to those in a prior proceeding

, (2) the issues were actually litigated

, (3) the determination of the issues was necessary to the resulting judgment

, and (4) the party defending against preclusion had a full and fair opportunity to litigate the issues.” Id

. As discussed above

, however, the takings claim that the Title III court addressed is not the same claim that plaintiffs present here : t he Title III court did not decide whether the United States was liable for a taking based on Congress’s enactment of PROMESA.

does not recognize the mere expectancy of property as a property interest.

S

ee In re Fin. Oversight , 948 F.3d at 468 n.8 (“Puerto Rico law recognizes that the mere expectancy of property is not itself a property interest.”); id . at 472 (“It is impossible to have a lien on something that does not exist.”).23 Accordingly, the issues here are not identical to those in a prior proceeding

, and collateral estoppel does not bar plaintiffs’ claim.

C. Neve rtheless, Regardless of Which Regulatory Takings Test Is Applied, Congress’s Enactment of PROMESA Does Not Amount to a Taking as a Matter of Law

.

Earlier, we rejected defendant’s argument that we lack jurisdiction

because plaintiffs’ takings claim is necessarily predicated on the actions of the Oversight Board , a territorial entity

. We took plaintiffs’ allegations in the complaint at face value for purposes of our jurisdictional inquiry and held

that whether there was sufficient federal actio n to warrant liability in the

United States went to the merits of plaintiffs’ claim, not to our jurisdiction.

We now addre ss that question on the merits

.

Although it is clear that p laintiffs assert a regulatory taking, the parties disagree about wh ich ty pe of test applies. Plaintiffs argue for application of

a per se regulatory taking s test; d efendant argues that the more nuanced Penn
Central test applies. The dispute turns out to be immaterial, however. Irrespective of which test is applied, there is a fatal flaw in plaintiffs’ logic. The United States has to have been responsible for the taking

, yet, as we
alluded to earlier, plaintiffs cannot complete their claim here without relying

on what turn out to be the actions of ind ependent actors. Indeed, it became clear at oral argument that plaintiffs recognize that nothing was taken from

them by the mere passage of PROMESA

— the ir property interests were impaired only after the Oversight Board, a non

- federal entity, took a series

o f actions

. Barring unusual circumstances not present here, however, a taking involving third parties is insufficient to amount to a compensable regulatory taking

. See A&D Auto Sales, 748 F.3d at 1153

.

The Federal Circuit held in A&D Auto Sales that although “[t]here is no per se rule either precluding or imposing liability when the government instigates action by a third party,” there are “two broad principles” to guide the analysis. I d

. First, “governm ent action directed to a third party does not give rise to a taking if its effects on the plaintiff are merely unintended or

collateral.” I d

. Second, e ven if the effects on the plaintiff are direct and

intended

, takings liability is limited to circumstances in which “the third party is acting as the government’s agent or the government’s influence over the third party was coercive rather than merely persuasive.” See id

. at 1154.

Thus, t o be entitled to just com pensation, p laintiffs would need to

show that : (1) Congress enacted PROMESA with the intent to restructure COFINA’s debts and take plaintiffs’ property interests as COFINA24 bondholders; and (2) either the Oversight Board acted as an agent of the

United Stat es in filing a Title III petition for COFINA or the United States

coerced the Oversight Board to do so. Yet, e ven if we assumed that Congress

intended the restructuring of COFINA’s debts

— despite the fact that

PROMESA does not once mention COFINA

— plaintiffs could not get past
the second hurdle

. They in fact make no attempt to do so, alleging neither an agency relationship nor coercion. See Oral Arg

. at 48:44 to 49:04 (“There

wasn’t coercion. We’re not arguing that. What we are saying is there was only one reason why Congress passed PROMESA. And that was to get at the funds held by COFINA and a handful of other entities that had also issued bonds.”).

Indeed, it is clear that plaintiffs could not establish either an agency relationship or coercion in this case as a matter of law. Whereas “ [ a ] n agency relationship may exist where the third party is hired or granted legal authority to carry out the government’s business,” A&D Auto Sales, 748 F.3d at 1154

, the Supreme Court has held that the Oversight Board is a territorial entity that “acts not on behalf of the United States, but on behalf of, and in the interests of, Puerto Rico” in a Title III proceeding. Fin. Oversight & Mgmt. Bd. for P.R. v. Au relius Inv., LLC , 140 S. Ct. 1649, 1662 (2020) . As such, the Oversight Board could not have acted as an agent of the United States in the

Title III case for COFINA

. S ee Altair II, 151 Fed. Cl. at 28 7 ( “T he acts of

the [Oversight] Board are not attributable , directly or indirectly, to the United States in a manner needed to sustain liability under the fifth amendment for an alleged taking.”). Similarly, no reading of the language of PROMESA could support a finding that the United States required the Oversigh t Board to initiate Title III proceedings on behalf of COFINA. To the contrary, PROMESA expressly provided for the Oversight Board to act in its “sole discretion” at each of the step that was necessary for the restructuring of

COFINA’s debts.

Although plaintiffs cite a number of cases where mere “authorization” by the federal government was sufficient to constitute a taking, those cases

are not apposite. See , e.g

., Cedar Point Nursery v. Hassid , 141 S. Ct. 2063 (2021); Preseault v. United States , 100 F.3d 1525 (Fed. Cir. 1996); Hendler

v. United States , 952 F.2d 1364 (Fed. Cir. 1991). Whereas each of those cases

involved authorization of physical takings, plaintiffs here do not and could

not allege a physical appropriation of property

. Such fact ual predicates

, however, matter. U nder the Supreme Court’s takings jurisprudence, the difference between physical and non

- physical takings is significant enough that it is “inappropriate to treat cases involving physical takings as controlling precedents for the evaluation of a claim that there has been a ‘regulatory taking,’ and vice versa.” See Tahoe

- Sierra Pres

. Council, Inc. v.25 Tahoe Reg ’ l Plan . Agency , 535 U.S. 302, 323 (2002) . Plaintiffs do not cite

, and we have not found, any case in which mere authorization was sufficient to constitute a compensable taking when property was not physically appropriated.

Because the mere enactment of PROMESA had no impact on plaintiffs’ property interests, plaintiffs cannot re ceive just compensation without showing that the Oversight Board acted either as an agent of the

United States or under coercion of the United States. Plaintiffs, however,

c annot show either

. Accordingly, Congress’s enactment of PROMESA is not

sufficient federal government action to constitute a taking . W e therefore

dismiss plaintiffs’ claim for failure to state a claim upon which relief c an be granted.

CONCLUSION

For the foregoing reasons, defendant’s motion for dismissal under RCFC 12(b)(6) is GRANTED. The Clerk is directed to enter judgment accordingly. No co sts.

s/Eric G. Bruggink

ERIC G. BRUGGINK Senior Judge