IN THE UNITED STATES DISTRICT COURT 

FOR THE 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) 

 

REPLY BRIEF OF AD HOC GROUP OF GENERAL OBLIGATION BONDHOLDERS, 

AMBAC ASSURANCE CORPORATION, ASSURED GUARANTY CORP., 

ASSURED GUARANTY MUNICIPAL CORP., THE MUTUAL FUND GROUP, 

AND NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION IN SUPPORT 

OF PRODUCTION AND USE OF FISCAL PLAN DEVELOPMENT MATERIALS

 

1

 The Debtors in these Title III cases (collectively, the “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 (the “Commonwealth”) (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); and (v) Puerto Rico Electric 

Power Authority (“PREPA”) (Bankruptcy Case No. 17 BK 4780-LTS) (Last Four Digits of Federal Tax ID: 3747) 

(Title III Case numbers are listed as bankruptcy case numbers due to software limitations). 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 1 of 13
Pursuant to this Court’s December 22, 2017 and January 19, 2018 Orders (Dkts. 2166 & 

22692), Movants3 submit this reply brief in support of their request for an order compelling 

production, and allowing the use, of Fiscal Plan Development Materials. See Dkts. 2154 at 3 

(Joint Report of Movants and Respondents With Respect to Order Authorizing Rule 2004 

Examination, or the “Joint Report”). 

INTRODUCTION

There are two questions before the Court. First, is whether Movants may use in litigation 

Fiscal Plan Development Materials relating to the Fiscal Plan certified on March 13, 2017 (the 

“Certified Fiscal Plan”). As Respondents say, they have already provided most of these 

materials to Movants by posting them to the data room. The problem, however, is that these 

materials are subject to either a strict NDA or a mediation agreement that prohibit their use in 

litigation. Second, is whether, with respect to the Fiscal Plan currently under development (the 

“2018 Fiscal Plan”), Respondents must produce (and permit the use of) the same kinds of Fiscal 

Plan Development Materials that they have already provided with respect to the Certified Fiscal 

Plan. Respondents say no to both questions. Our opening brief (Dkt. 2223) demonstrates that 

Respondents’ position is not only at odds with their repeated proclamations of transparency, it is 

contrary to law as well. 

Instead of addressing these issues, Respondents’ opposition (the “Opposition” or “Opp.”) 

(Dkt. 2274) takes as its premise that the twice-litigated question of whether a Rule 2004 

 

2

 Unless otherwise specified, docket numbers shall refer to filings on the docket of In re Financial Oversight 

and Management Board of Puerto Rico as Representative of the Commonwealth of Puerto Rico, No. 17-3283. 

Capitalized terms shall have the meaning assigned to them in the Urgent Renewed Joint Motion By The Ad Hoc 

Group Of General Obligation Bondholders, Ambac Assurance Corp., Assured Guaranty Corp., Assured Guaranty 

Municipal Corp., The Municipal Fund Group, And National Public Finance Guarantee Corporation For Order 

Authorizing Rule 2004 Examination (Dkt. 1870). 

3

 Members of Movant Ad Hoc Group of General Obligation Bondholders file this Brief exclusively on their 

own behalves and do not assume any fiduciary or other duties to any other creditor or person. 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 2 of 13
2 

examination is appropriate in the first place has never been decided. The Opposition accordingly 

resurrects arguments, virtually all of which the Court has previously heard (sometimes multiple 

times), as though they have some special force with respect to Movants’ Requests 8, 16, and 17. 

But the Court has already rejected Respondents’ points because they are wrong. The Court 

should order Respondents to produce all responsive materials pursuant to the Rule 2004 Order, 

so that they can actually be used in the litigation. 

I. The Court Should Order Production Of Fiscal Plan Development Materials And 

Allow Their Use In The Litigation

 The primary issue before the Court is whether Movants are entitled to use the Fiscal Plan 

Development Materials in connection with these Title III proceedings. See Dec. 14, 2017 Tr. at 

50, 51 (describing “usage” issue as the outstanding dispute). Respondents ignore this issue, 

insisting that it is enough that their disclosures “have enabled Movants to understand the 

‘liabilities and financial condition of the debtor.’” Opp. 4 (emphasis added). But, as explained 

in our opening brief, it is not enough for Movants to have access to this material if they cannot 

use it in connection with these Title III proceedings. That is because neither the Court nor nonmoving creditors—none of whom currently has access to the materials produced—will otherwise 

be able to assess the validity of the assumptions and inputs that were used in developing the 

fiscal plan. 

Returning to an example provided in our opening brief (which Respondents do not 

address, let alone refute), health care expenses are a major component of both the Certified and 

2018 Fiscal Plans. Projected health care expenditures are driven by three main inputs: (i) how 

many people are being provided health care; (ii) the cost-per-person of that health care; and 

(iii) the rate of growth of health care costs. If Respondents continue to refuse to release this key 

information from the constraints of the NDA, creditors entitled to vote on the plan of adjustment 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 3 of 13
3 

will not have sufficient information to make an informed decision to accept or reject any plan 

that is based upon these numbers. And the Court will not have the information necessary to 

determine whether the plan is confirmable. 

Also at issue is whether Respondents must produce all the models, inputs, formulae, and 

assumptions with respect to the 2018 Fiscal Plan.4

 Dkt. 2223 at 3-5 (describing unproduced 

materials). These materials have already been provided with respect to the Certified Fiscal Plan 

(though they have been posted to the data room subject to the aforementioned restrictions). The 

weekend before this reply brief was due, Respondents posted to the data room (subject to the 

mediation agreement restrictions) a model supporting the 2018 Fiscal Plan. Movants are still 

evaluating the information provided and are not in a position to say that this model provides all 

of the inputs, formulae and assumptions underlying the 2018 Fiscal Plan. Notably, however, 

Respondents have not committed to provide complete information with respect to the 2018 

Fiscal Plan. Because these materials have already been provided with respect to the Certified 

Fiscal Plan, Respondents cannot credibly argue that it would be unduly burdensome to produce 

the same documents with respect to the 2018 Fiscal Plan.5

 All of these materials should be 

produced forthwith. 

 

4

 With respect to the Certified Fiscal Plan, Respondents have, with limited exceptions, posted to the data 

room materials sufficient to respond to the three outstanding document requests (8, 16 & 17). 

5

 Movants also seek AAFAF and Board communications related to the Certified and 2018 Fiscal Plans. 

Respondents oppose this on the ground that such communications are not expressly identified in the document 

requests. See Opp. 1-2, 4-5. That is not so, for two reasons. First, the instructions for the Requests unreservedly 

stated that “You are required to answer these Document Requests drawing upon all materials.... You must provide 

all information....” Dkt. 1870 at 20. The Requests therefore necessarily included responsive communications, 

without the need to tediously list every type of material potentially responsive to each request. Second, the parties’ 

Joint Report (which Respondents, of course, signed) identifies as an “area of disagreement” the production of 

“communications between and among Respondents and Respondents’ respective officials, employees, consultants 

and representatives.” Joint Report ¶ I.b at 3. To the extent Respondents assert it is burdensome to collect and 

review these communications, Movants are willing to discuss a reasonable protocol for search terms and custodians 

to minimize any asserted burden on Respondents. 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 4 of 13
4 

II. Respondents’ Objections Are A Rehash Of Arguments They Have Previously Made, 

Unsuccessfully, In Attempting To Avoid All Discovery 

In their Opposition, Respondents advance a number of objections, all of which they have 

previously asserted as grounds to avoid discovery altogether. The Court has rejected each and 

every one of them, and they fare no better here than the last time (or times) around. 

First, Respondents assert, as they do in response to each discovery request (see, e.g., Dkt. 

1345 at 2; Dkt. 1928 at 9), that granting Movant’s request would impose a staggering burden. 

They say that Movants are seeking “every conceivable document” (Opp. 1); “virtually limitless 

discovery” (Opp. 3); and an “unbridled production” (Opp. 7), all of which will “cast a pall” over 

the Title III process if the Court allows it (Opp. 2, 9). But sheer repetition and adjectives do not 

make this true. As explained above, the present dispute is about (a) Movants’ right to use certain 

documents that Respondents have already produced; and (b) Movants’ entitlement to obtain and 

use the same documents underlying the 2018 Fiscal Plan that Respondents have produced with 

respect to the Certified Fiscal Plan. There is nothing “unbridled” about these requests. 

Second, Respondents ask the Court to reconsider their argument that Section 106(e) of 

PROMESA, which insulates from judicial review the Board’s decision to certify a fiscal plan, 

operates as a bar to discovery into a fiscal plan. Opp. 4. This makes sense, they argue, because 

the fiscal plan is a mere “blueprint for further fiscal and economic actions by the 

Commonwealth. . . . Turning it inside out for litigation purposes, as Movants seek to do, would 

not advance any legitimate goal.” Opp. 5. This Court has already rejected that very argument. 

See Nov. 15, 2017 Tr. at 110-11 (rejecting Respondents’ argument that all information regarding 

the Fiscal Plan is immune from discovery).6

 

 

6

 Respondents also claim that most of the Fiscal Plan Development Materials will be “completely irrelevant 

to the eventual plan of adjustment” (Opp. 6), but this argument is also contrary to the Court’s conclusions. See Nov. 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 5 of 13
5 

Relatedly, Respondents make a second run at the argument that there is no basis for Rule 

2004 discovery into the fiscal plan, because the fiscal plan “does not address treatment of 

prepetition claims.” Opp. 6. Instead, they say, the treatment of prepetition claims “will be the 

subject of a confirmation hearing and focused discovery.” Id.; see also Dec. 14, 2017 Tr. at 

27-28 (AAFAF’s counsel making the same argument). Again, the Court has already rejected that 

same argument. See Dec. 14, 2017 Tr. at 49 (allowing 2004 examination over objection that it is 

premature); see also Nov. 15, 2017 Tr. at 110 (“It will be nothing less than a major sin if this 

gets to the end and then we start doing discovery. . . . [T]hat is just not going to happen.”). 

Third, Respondents object that there is no need for the Court to order that Movants may 

use the Fiscal Plan Development Materials in litigation, because the parties “are in discussions” 

on this topic. Opp. 4. Respondents made the very same “no need to trouble the court” argument 

in resisting an order authorizing a Rule 2004 examination (see Dkt. 1928 at 8-10), and the Court 

rejected it: “While the Court recognizes Respondents’ efforts to produce information 

voluntarily, there is a need in this Title III proceeding . . . for formal and controlled discovery 

related to the Commonwealth of Puerto Rico’s financial condition.” Dec. 15, 2017 Order (Dkt. 

2033) at 2. The same logic holds here. 

Fourth, Respondents say that our theory of relevance fails, because we cite the wrong 

confirmation standard. As Movants have explained, a component of the “fair and equitable” test 

holds that for any plan of adjustment to be confirmed over the objection of a dissenting class of 

creditors, it must provide creditors with “the maximum that the [debtor] could reasonably pay” 

under the circumstances. Lorber v. Vista Irrigation Dist., 127 F.2d 628, 639 (9th Cir. 1942); see 

also 6 Collier on Bankruptcy ¶ 943.03[1][f][i]. At the same time, PROMESA requires that a 

 15, 2017 Tr. at 110 (stating that in preparing revised fiscal plans, Respondents are in fact gathering information that 

will need to be provided later in relation to the plan of adjustment, so disclosure should happen now). 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 6 of 13
6 

plan of adjustment must be “consistent with the applicable Fiscal Plan.” PROMESA 

§ 314(b)(7). Accordingly, discovery regarding the basis for the fiscal plan is appropriate. 

Respondents contend that dissenting creditors are not entitled to the maximum a debtor 

could pay. Instead, citing the “best interests” test of Section 314(b)(6) of PROMESA, they say 

that the Court need only “‘consider’ what creditors would receive under non-bankruptcy law.” 

Opp. 6. That is a patent misreading of PROMESA. Section 314(b) of PROMESA identifies 

multiple conditions that a plan of adjustment must satisfy to be confirmed. True, one such 

condition is the “best interests” test articulated in Section 314(b)(6). But another condition is 

that “the plan complies with the provisions of the [Bankruptcy] Code, made applicable to a [Title 

III proceeding] by section 301 of this Act.” PROMESA § 314(b)(1). Section 301, in turn, 

incorporates Section 1129(b)(1) of the Bankruptcy Code into Title III proceedings. And Section 

1129(b)(1) requires that a plan may be confirmed over the dissent of a class of creditors only if it 

is “fair and equitable”—which means it must provide creditors with “the maximum that the 

[debtor] could reasonably pay” under the circumstances. Thus, to be confirmed over a class of 

dissenting creditors, a plan of adjustment must be in the “best interests” of creditors and “fair 

and equitable.” Respondents cite no basis to read the latter requirement out of the statute. 

Finally, Respondents again try to resist all discovery on the ground that the requested 

materials are protected by the deliberative process privilege. To make this argument, they 

mischaracterize Movants’ Requests as primarily related to communications. Opp. 8. But, as 

explained above, that is only a small part of the issue before the Court: the main focus is the use

of materials already provided, and the provision of live models, formulae and inputs with respect 

to the 2018 Fiscal Plan. And Respondents concede that “Fiscal Plans, raw data, models, 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 7 of 13
7 

underlying data and assumptions, formulas, and inputs . . . are not themselves subject to the 

privilege.” Id. 

There is no reason why any Fiscal Plan Development Materials—whether 

communications or otherwise—should be shielded from scrutiny by a claim of privilege.7 

Respondents complain that production of these materials would “cast a pall over the” process if 

officials know that their work “will be subject to public scrutiny.” Opp. 9. That is nonsensical—

why shouldn’t the public scrutinize these materials? How else can creditors and the Court, 

evaluate their options? 

In any event, the deliberative process privilege is neither absolute nor as broad as 

Respondents have asserted. Respondents should be required to provide a categorical log of any 

other materials withheld based upon a claim of privilege. See Joint Rpt. at 3, 4. Respondents 

also should be ordered to identify in their log the number of documents being withheld in each 

category. Respondents complain that they should not be required to “continuous[ly] log[]” such 

materials (Opp. 10), but just as with the search for and production of these materials in the first 

instance, Movants are willing to meet-and-confer with Respondents to devise a reasonable 

protocol. Respondents’ protests are not a basis for a wholesale denial of discovery into (and 

logging of) communications. 

CONCLUSION 

For the foregoing reasons, Movants respectfully request the Court to order that 

Respondents complete production of all Fiscal Plan Development Materials within two weeks. 

 

7

 Movants note that Respondents appear finally to have dropped their groundless objection that Fiscal Plan 

Development Materials include “confidential and proprietary information.” See, e.g., Dkt. 1928 at 23. 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 8 of 13
8 

Dated: January 29, 2018 

 San Juan, Puerto Rico 

PAUL, WEISS, RIFKIND, WHARTON &

GARRISON, LLP 

By: /s/ Andrew N. Rosenberg 

Andrew N. Rosenberg** 

Kyle J. Kimpler** 

Karen R. Zeituni** 

1285 Avenue of the Americas 

New York, NY 10019 

Telephone: (212) 373-3000 

Email: arosenberg@paulweiss.com 

 kkimpler@paulweiss.com 

 kzeituni@paulweiss.com 

Respectfully submitted. 

JIMÉNEZ, GRAFFAM & LAUSELL

By: /s/ J. Ramón Rivera Morales 

J. Ramón Rivera Morales 

(USDC-PR No. 200701) 

Andrés F. Picó Ramírez 

 (USDC-PR No. 302114) 

PO Box 366104 

San Juan, PR 00936-6104 

Telephone: (787) 767-1030 

Email: rrivera@jgl.com 

apico@jgl.com 

ROBBINS, RUSSELL, ENGLERT, ORSECK,

UNTEREINER & SAUBER LLP 

 

By: /s/ Mark T. Stancil 

Lawrence S. Robbins** 

Mark T. Stancil** 

Gary A. Orseck** 

Kathryn S. Zecca** 

Ariel N. Lavinbuk** 

Donald Burke** 

1801 K Street, NW 

Washington, D.C. 20006 

Telephone: (202) 775-4500 

Email: lrobbins@robbinsrussell.com 

 mstancil@robbinsrussell.com

 gorseck@robbinsrussell.com 

 kzecca@robbinsrussell.com 

 alavinbuk@robbinsrussell.com 

 dburke@robbinsrussell.com 

** admitted pro hac vice 

 

Counsel to the Ad Hoc Group of General Obligation Bondholders 

 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 9 of 13
9 

FERRAIUOLI LLC 

By: /s/ Roberto Cámara-Fuertes 

Roberto Cámara-Fuertes (USDC-PR No. 219002)

Sonia Colón (USDC-PR No. 213809) 

221 Ponce de León Avenue, 5th Floor 

San Juan, PR 00917 

Telephone: (787) 766-7000 

Facsimile: (787) 766-7001 

Email: rcamara@ferraiuoli.com 

 scolon@ferraiuoli.com 

MILBANK, TWEED, HADLEY & Mc

CLOY LLP 

By: /s/ Dennis F. Dunne 

Dennis F. Dunne 

Andrew M. Leblanc

Atara Miller 

Grant R. Mainland 

(admitted pro hac vice) 

28 Liberty Street 

New York, NY 10005 

Telephone: (212) 530-5770 

Facsimile: (212) 822-5770 

Email: ddunne@milbank.com 

 aleblanc@milbank.com 

 amiller@milbank.com 

 gmainland@milbank.com 

Attorneys for Ambac Assurance Corporation

 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 10 of 13
10 

CASELLAS ALCOVER & BURGOS P.S.C.

By: /s/ Heriberto Burgos Pérez 

Heriberto Burgos Pérez 

USDC-PR 204809 

Ricardo F. Casellas-Sánchez 

USDC-PR 203114 

Diana Pérez-Seda 

USDC-PR 232014 

P.O. Box 364924 

San Juan, PR 00936-4924 

Telephone: (787) 756-1400 

Facsimile: (787) 756-1401 

Email: hburgos@cabprlaw.com 

 rcasellas@cabprlaw.com 

 dperez@cabprlaw.com 

Attorneys for Assured Guaranty Corp. 

and Assured Guaranty Municipal 

Corp. 

CADWALADER, WICKERSHAM & TAFT 

LLP 

By: /s/ Howard R. Hawkins 

Howard R. Hawkins, Jr. * 

Mark C. Ellenberg* 

Ellen Halstead* 

Thomas J. Curtin* 

Casey J. Servais* 

200 Liberty Street 

New York, NY 10281 

Telephone: (212) 504-6000 

Facsimile: (212) 406-6666 

Email: howard.hawkins@cwt.com 

 mark.ellenberg@cwt.com 

 ellen.halstead@cwt.com 

 thomas.curtin@cwt.com 

 casey.servais@cwt.com 

* Admitted pro hac vice 

Attorneys for Assured Guaranty Corp. and 

Assured Guaranty Municipal Corp. 

 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 11 of 13
11 

TORO, COLÓN, MULLET, RIVERA& 

SIFRE, P.S.C. 

 s/ Manuel Fernandez-Bared 

MANUEL FERNÁNDEZ-BARED 

USDC-PR No. 204,204 

E-mail: mfb@tcmrslaw.com 

 s/ Linette Figueroa-Torres______ 

LINETTE FIGUEROA-TORRES 

USDC-PR No. 227,104 

E-mail: lft@tcmrslaw.com 

s/ Jane Patricia Van Kirk______ 

JANE PATRICIA VAN KIRK 

USDC-PR No. 220,510 

E-mail: jvankirk@tcmrslaw.com 

P.O. Box 195383 

San Juan, PR 00919-5383 

Tel.: (787) 751-8999 

Fax: (787) 763-7760 

Counsel to the Mutual Fund Group 

KRAMER LEVIN NAFTALIS & 

FRANKEL LLP 

 s/ Gregory A. Horowitz 

THOMAS MOERS MAYER* 

AMY CATON* 

GREGORY A. HOROWITZ* 

DOUGLAS BUCKLEY* 

1177 Avenue of the Americas 

New York, New York 10036 

Tel.: (212) 715-9100 

Fax: (212) 715-8000 

Email: tmayer@kramerlevin.com 

 acaton@kramerlevin.com 

ghorowitz@kramerlevin.com 

dbuckley@kramerlevin.com 

*(admitted pro hac vice) 

Counsel to the Mutual Fund Group

 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 12 of 13
12 

 /s/ Eric Pérez-Ochoa (USDC-PR No. 206314) 

 Eric Pérez-Ochoa (USDC-PR No. 206314) 

 Luis Oliver-Fraticelli (USDC-PR No. 209204) 

 Alexandra Casellas-Cabrera (USDC-PR. No. 301010) 

 Lourdes Arroyo-Portela (USDC-PR No. 226501) 

 

 ADSUAR MUÑOZ GOYCO SEDA & PÉREZ- 

 OCHOA, PSC, P.S.C. 

 208 Ponce de León Avenue, Suite 1600 

 San Juan, Puerto Rico 00936 

 Telephone: (787) 756-9000 

 Facsimile: (787) 756-9010 

 Email: epo@amgprlaw.com 

 loliver@amgprlaw.com 

 acasellas@amgprlaw.com 

 larroyo@amgprlaw.com 

 

 – and – 

 Marcia Goldstein 

 Jonathan Polkes 

 Gregory Silbert 

 Kelly DiBlasi 

 Gabriel A. Morgan 

 WEIL, GOTSHAL & MANGES LLP 

 767 Fifth Avenue 

 New York, New York 10153 

 Counsel to National Public Finance Guarantee 

 Corporation 

Case:17-03283-LTS Doc#:2301 Filed:01/29/18 Entered:01/29/18 16:49:43 Desc: Main

Document Page 13 of 13