UNITED STATES DISTRICT COURT

DISTRICT OF PUERTO RICO

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

as representative of

THE COMMONWEALTH OF PUERTO RICO, et al., 

Debtors.1

PROMESA 

Title III 

No. 17 BK 3283-LTS 

(Jointly Administered) 

Re: ECF No. 22442

Hon. Laura Taylor Swain

RESPONSE AND RESERVATION OF RIGHTS OF THE UNITED STATES TRUSTEE 

REGARDING APPLICATION OF OVERSIGHT BOARD FOR ENTRY OF ORDER (I) 

RATIFYING CONTINUED APPOINTMENT OF LEAD MEDIATOR AND (II) 

APPOINTING WILLKIE FARR & GALLAGHER LLP AS SPECIAL ADVISOR TO 

THE LEAD MEDIATOR

1 The Debtors in these Title III Cases, along with each Debtor’s respective Title III case 

number and the last four (4) digits of each Debtor’s federal tax identification number, as 

applicable, are the (i) Commonwealth of Puerto Rico (Bankruptcy Case No. 17 BK 3283-LTS) 

(Last Four Digits of Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax Financing Corporation 

(“COFINA”) (Bankruptcy Case No. 17 BK 3284-LTS) (Last Four Digits of Federal Tax ID: 

8474); (iii) Puerto Rico Highways and Transportation Authority (“HTA”) (Bankruptcy Case No. 

17 BK 3567-LTS) (Last Four Digits of Federal Tax ID: 3808); (iv) Employees Retirement 

System of the Government of the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case No. 

17 BK 3566-LTS) (Last Four Digits of Federal Tax ID: 9686); (v) Puerto Rico Electric Power 

Authority (“PREPA”) (Bankruptcy Case No. 17 BK 4780-LTS) (Last Four Digits of Federal Tax 

ID: 3747); and (vi) Puerto Rico Public Building Authority (“PBA”) (Bankruptcy Case No. 19-

BK-5523-LTS). (Title III case numbers are listed as Bankruptcy Case numbers due to software 

limitations).

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The United States Trustee for Region 21, by her undersigned counsel, hereby responds to 

the Application (“the Application”) of the Financial Oversight and Management Board 

{“FOMB”) for the entry of an order (I) ratifying the continued appointment of Former Judge 

Shelley C. Chapman as the lead mediator (“the Lead Mediator”) of the Mediation Team for the 

PROMESA Title III case of PREPA, the Puerto Rico Electric Power Authority; and (II) 

appointing Willkie Farr & Gallagher LLP (“Willkie”) as special advisor to the Lead Mediator to 

assist her in the performance of her duties. [ECF No. 22442].

The United States Trustee has standing to be heard on this matter as it involves the 

allowance of professional compensation under Title III of PROMESA. See PROMESA, 48 

U.S.C. Chapter 20, at Sec. 316(a) and (b) (codified at 48 U.S.C. 2176(a)).

The United States Trustee has no authority to and does not object to the ratification of the 

Lead Mediator’s continued appointment or to the employment of Willkie to assist the Lead 

Mediator. The United States Trustee, however, identifies potential difficulties with the proposed 

compensation terms of the Lead Mediator and Willkie and reserves her rights to object to their

compensation.

Proposed Terms of Compensation

In its Application, the FOMB proposes that the Lead Mediator, her former law clerk, Ms. 

Jamie Eisen, who is now counsel at Willkie, and Willkie, be compensated by PREPA by a flat 

monthly fee of $50,000 payable by PREPA on the 15th of each month. The payment of such 

monthly fees would not be subject to the filing by the Lead Mediator or Willkie of any timekeeping records or reports of services rendered and would not be subject to review by the Court, 

the fee examiner, or the United States Trustee. Application, paragraph 22. PREPA would also 

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reimburse the Lead Mediator and Willkie for their reasonable and necessary expenses. The 

FOMB requests that the Court excuse the Lead Mediator and Willkie from any obligation to 

maintain time records, to prove conformity with its non-bankruptcy customary comparable rates, 

or to prove the reasonableness of its fees under any of PROMESA’s “relevant factors.” 

Inconsistency with PROMESA and Applicable Rules

The United States Trustee questions whether the requested compensation is consistent 

with PROMESA’s requirements for the compensation of professional persons. Unlike chapter 9 

of Title 11, the United States Bankruptcy Code, PROMESA expressly requires that the Court

find that the compensation sought is “reasonable compensation for actual, necessary services by 

the professional person . . . .” PROMESA, sec. 316(a)(1) (codified at 48 U.S.C. § 2176(a)(1)). 

The Court may award compensation less than the compensation requested. PROMESA, sec. 

316(b). The remainder of section 316 of PROMESA is clearly derived from 11 U.S.C. § 330, 

which applies generally to all chapters of the Bankruptcy Code except for chapter 9. Because 

PROMESA, sec. 316, requires the filing of fee applications, Fed. R. Bankr. P. 2016(a) applies to 

the contents of such applications. PROMESA, sec. 310. Like section 330 of the Bankruptcy 

Code, section 316 instructs that a reasonableness determination requires considering “relevant 

factors,” such as the “time spent” and the “rates charged.”

Moreover, although sections 330 and 331 (governing final and interim compensation) of 

the Bankruptcy Code have direct analogues in sections 316 and 317 of PROMESA, PROMESA 

contains no provision comparable to section 328(a) of the Bankruptcy Code. Section 328(a) 

expressly permits the Court to “pre-approve” compensation arrangements like that proposed by 

the FOMB, the Lead Mediator, and Willkie. Section 328 provides that the court may award 

compensation that differs from the agreed-upon terms only if the terms and conditions approved 

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by the court later “prove to have been improvident in light of developments not capable of being 

anticipated at the time of the fixing of such terms and conditions.” This is a rigorous standard 

that effectively freezes compensation in all but the most unusual circumstances. 

Bankruptcy Code section 328(a)’s standard is completely absent from PROMESA. Thus, 

PROMESA sections 316 and 317 leave the burden on fee applicants to prove the reasonableness 

of the fees they seek on a retrospective review. Although pre-approval of compensation was not 

the issue in this Court’s September 6, 2022, Order on professional disclosures, the Court 

nevertheless was clear that every debtor-compensated professional must file final fee 

applications pursuant to section 316 of PROMESA: “A final fee application must be filed at the 

end of each professional’s engagement or the end of the case, even if the professional is not 

seeking any additional compensation or payment. Any amounts that were awarded as interim 

compensation are subject to reconsideration at any time prior to the final award, for any reason. . 

. . The professional will have to return any moneys to the estate that have been paid, but which 

are not finally awarded.”). Order Concerning Non-Compliance with the Puerto Rico Recovery 

Accuracy in Disclosures Act, ECF No. 22062 (Sep. 6, 2022) (quoting 3 COLLIER ON 

BANKRUPTCY ¶ 331.04 (16th ed. 2022)). This is particularly true in PROMESA, which has no 

section 328 analogue for pre-approval of compensation.

Section 105(a) Provides No Basis for the Relief Sought

The FOMB asks the Court to approve relief not provided by PROMESA based upon the 

Court’s general equitable powers under section 105(a) of the Bankruptcy Code, which applies to 

PROMESA by operation of PROMESA, sec. 301(a). But this argument proves too much. As 

noted above, section 328 of the Bankruptcy Code could support an order of the type sought here

(assuming the burden of proof were met). But section 328 is notably absent from section 301(a) 

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of PROMESA. Section 105(d)(2) of the Bankruptcy Code conditions the equitable powers of the 

court to assure that they are not used to grant relief inconsistent with another provision of the 

Bankruptcy Code or Rules. So, in the context of PROMESA, the FOMB is asking this Court to 

rely on section 105 to interpret the section 301(a) list of applicable Bankruptcy Code provisions 

to include authorities contained section 328(a) of the Bankruptcy Code. But section 328(a) is not 

on the meticulously compiled list. Because section 328(a) of the Bankruptcy Code is the sole 

source for the Court’s authority to pre-approve innovative fee arrangements, any pre-approval of 

the FOMB’s Application to pay flat fees to the Lead Mediator and Willkie would be per se

inconsistent with section 301(a) of PROMESA and therefore inappropriate.

Conclusion

The United States Trustee hopes to be able to work with the FOMB to agree on a 

compensation arrangement that is consistent with PROMESA. Other professionals in these Title 

III cases have generally complied with PROMESA’s requirements, and nothing is particularly 

novel about them. If no such agreement can be reached, the United States Trustee reserves her 

rights to maintain an objection to the payment of compensation to the Lead Mediator and Willkie

based upon the positions outlined in this response.

October 6, 2022

(SPACE INTENTIONALLY LEFT BLANK)

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Respectfully submitted,

MARY IDA TOWNSON

UNITED STATES TRUSTEE, Region 21

U.S. DEPARTMENT OF JUSTICE

OFFICE OF THE UNITED STATES TRUSTEE

Edificio Ochoa

500 Tanca Street, Suite 301

San Juan, Puerto Rico 00901-1922

Tel.: (787) 729-7444

Fax: (787) 729-7449

(Electronically Filed)

By: __s/ Monsita Lecaroz-Arribas___

Assistant U.S. Trustee

USDC-PR No. 207707 

monsita.lecaroz@usdoj.gov

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