Natbony Declaration Exhibit 5 

 

Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 1 of 87
United States Court of Appeals

for the

First Circuit

Case Nos. 22-1079, 22-1092, 

22-1119, 22-1120

IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR 

PUERTO RICO, AS REPRESENTATIVE FOR THE COMMONWEALTH OF 

PUERTO RICO; THE FINANCIAL OVERSIGHT AND MANAGEMENT 

BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO 

RICO SALES TAX FINANCING CORPORATION, a/k/a Cofina; THE 

FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO 

RICO, AS REPRESENTATIVE FOR THE EMPLOYEES RETIREMENT 

SYSTEM OF THE GOVERNMENT OF THE COMMONWEALTH 

OF PUERTO RICO; 

(For Continuation of Caption See Inside Cover)

_____________________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE 

DISTRICT OF PUERTO RICO, SAN JUAN, IN CASE NO. 3:17-BK-03283-LTS

BRIEF FOR DEBTORS-APPELLEES/CROSS-APPELLANTS

TIMOTHY W. MUNGOVAN 

JOHN E. ROBERTS

ADAM L. DEMING

PROSKAUER ROSE LLP

One International Place

Boston, Massachusetts 02110

(617) 526-9600

JOSEPH S. HARTUNIAN

PROSKAUER ROSE LLP

1001 Pennsylvania Avenue NW, 

Suite 600 South

Washington, DC 20004

(202) 416-6800

MARTIN J. BIENENSTOCK 

JEFFREY W. LEVITAN

MARK D. HARRIS

BRIAN S. ROSEN

EHUD BARAK

LUCAS KOWALCZYK

PROSKAUER ROSE LLP

11 Times Square

New York, New York 10036

(212) 969-3000

PAUL V. POSSINGER 

PROSKAUER ROSE LLP

70 West Madison, Suite 3800 

Chicago, Illinois 60602

(312) 962-3550

Attorneys for Debtors-Appellees/Cross-Appellants

Case: 22-1119 Document: 00117860420 Page: 1 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 2 of 87
THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR 

PUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO RICO 

HIGHWAYS AND TRANSPORTATION AUTHORITY; THE FINANCIAL 

OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS 

REPRESENTATIVE FOR THE PUERTO RICO ELECTRIC POWER 

AUTHORITY (PREPA); THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE OF 

THE PUERTO RICO PUBLIC BUILDINGS AUTHORITY,

Debtors, 

____________________________ 

THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR 

PUERTO RICO, AS REPRESENTATIVE FOR THE COMMONWEALTH OF 

PUERTO RICO; THE FINANCIAL OVERSIGHT AND MANAGEMENT 

BOARD FOR PUERTO RICO, AS REPRESENTATIVE OF THE 

PUERTO RICO PUBLIC BUILDINGS AUTHORITY,

Debtors-Appellees/Cross-Appellants,

THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR 

PUERTO RICO, AS REPRESENTATIVE FOR THE EMPLOYEES 

RETIREMENT SYSTEM OF THE GOVERNMENT OF THE 

COMMONWEALTH OF PUERTO RICO,

Debtor-Appellee,

v.

COOPERATIVA DE AHORRO Y CREDITO ABRAHAM ROSA; 

COOPERATIVA DE AHORRO Y CREDITO DE CIALES; COOPERATIVA 

DE AHORRO Y CREDITO DE JUANA DIAZ; COOPERATIVA DE AHORRO 

Y CREDITO DE RINCON; COOPERATIVA DE AHORRO Y CREDITO DE 

VEGA ALTA; COOPERATIVA DE AHORRO Y CREDITO DR. MANUEL 

ZENO GANDIA,

Objectors-Appellants/Cross-Appellees,

SUIZA DAIRY CORP.,

Objector/Claimant-Appellant/Cross-Appellee,

LUIS F. PABON BOSQUES; RAUL MARTINEZ PEREZ; ELVIN A. ROSADO 

MORALES; CARLOS A. ROJAS ROSARIO; RAFAEL TORRES RAMOS,

Creditors-Appellants/Cross-Appellees,

DESARROLLADORA ORAMA, S.E.; C.O.D. TIRE DISTRIBUTORS 

IMPORTS ASIA, INC.; CORREA TIRE DISTRIBUTOR INC.; WORLD WIDE 

TIRE, INC.; SEQUERIA TRADING CORPORATION; SABATIER TIRE 

CENTER, INC.; VICTOR LOPEZ CORTES, INC.; MULTI GOMAS, INC.; 

JOSE COLLAZO PEREZ; IVELISSE TAVARES MARRERO; MANUEL 

PEREZ ORTIZ; CORAL COVE, INC.; SUCESION ANGEL ALVAREZ 

Case: 22-1119 Document: 00117860420 Page: 2 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 3 of 87
PEREZ; ANTONIO COLON SANTIAGO; COOPERATIVA DE AHORRO Y 

CREDITO DE AGUADA; VILMA TERESA TORRES LOPEZ; VIVIANA 

ORTIZ MERCADO; ORLANDO TORRES BERRIOS; GERMAN TORRES 

BERRIOS; JUAN ALBERTO TORRES BERRIOS; VHERMANOS TORRES 

TORRES, INC.; CORPORACION PLAYA INDIA, S.E.; MARIANO RAMOS 

GONZALEZ; RAMON MORAN LOUBRIEL; RAFAEL MORAN LOUBRIEL; 

ANA MORAN LOUBRIEL; SAN GERONIMO CARIBE PROJECT, INC.; 

CARIBBEAN AIRPORT FACILITIES INC.; ESTATE OF RAUL DE PEDRO 

& DIANA MARTINEZ; ALFONSO FERNANDEZ CRUZ; SUN AND SAND 

INVESTMENTS, CORP.; FDR1500, CORP.; MARGARETA BLONDET; 

SUCESION COMPUESTO POR MARIA I. RUBERT BLONDET; SONIA 

RUBERT BLONDET; MARGARITA RUBERT BLONDET; SONIA RUBERT, 

Administradora; MANUEL A. RIVERA-SANTOS; PABLO MELENDEZ 

BRULLA; SUCESION AGUSTIN RODRIGUEZ COLON; GLORIA M. 

ESTEVA MARQUES; SUCESION MANUEL MARTINEZ RODRIGUEZ; 

LUIS REYES FEIKERT; JORGE RAMON POZAS; MIRIAM SANCHEZ 

LEBRON; JUAN A. TAPIA ORTIZ; ANTONIO PEREZ COLON,

Claimants-Appellees,

PFZ PROPERTIES, INC.; OSCAR ADOLFO MANDRY APARICIO; MARIA 

DEL CARMEN AMALIA MANDRY LLOMBART; SELMA VERONICA 

MANDRY LLOMBART; MARIA DEL CARMEN LLOMBART BAS; OSCAR 

ADOLFO MANDRY BONILLA; GUSTAVO ALEJANDRO MANDRY

BONILLA; YVELISE HELENA FINGERHUT MANDRY; MARGARET ANN 

FINGERHUT MANDRY; VICTOR ROBERT FINGERHUT MANDRY; JUAN

CARLOS ESTEVA FINGERHUT; PEDRO MIGUEL ESTEVA FINGERHUT; 

MARIANO JAVIER MCCONNIE FINGERHUT; JANICE MARIE MCCONNIE 

FINGERHUT; VICTOR MICHAEL FINGERHUT COCHRAN; MICHELLE 

ELAINE FINGERHUT COCHRAN; ROSA ESTELA MERCADO GUZMAN; 

EDUARDO JOSE MANDRY MERCADO; SALVADOR RAFAEL MANDRY 

MERCADO; MARGARITA ROSA MANDRY MERCADO; ADRIAN 

ROBERTO MANDRY MERCADO; VICENTE PEREZ ACEVEDO; 

CORPORACION MARCARIBE INVESTMENT; DEMETRIO AMADOR INC.; 

DEMETRIO AMADOR ROBERTS; MARUZ REAL ESTATE CORP.; LORTUTA LTD., INC.; LA CUARTEROLA, INC.; JUAZA, INC.; CONJUGAL 

PARTNERSHIP ZALDUONDO-MACHICOTE; FRANK E. TORRES 

RODRIGUEZ; EVA TORRES RODRIGUEZ; FINCA MATILDE, INC.; 

JORGE RAFAEL EDUARDO COLLAZO QUINONES,

Objectors/Claimants-Appellees,

ANTONIO MARTIN CERVERA; MARIA TERESITA MARTIN; WANDA 

ORTIZ SANTIAGO; NANCY I. NEGRON-LOPEZ; GROUP WAGE 

CREDITORS; YASHEI ROSARIO; ANA A. NUNEZ VELAZQUEZ; 

EDGARDO MARQUEZ LIZARDI; MARIA M. ORTIZ MORALES; ARTHUR 

SAMODOVITZ; MIGUEL LUNA DE JESUS; ISMAEL L. PURCELL SOLER; 

ALYS COLLAZO BOUGEOIS; MILDRED BATISTA DE LEON; JAVIER 

ALEJANDRINO OSORIO; SERVICE EMPLOYEES INTERNATIONAL 

UNION (SEIU); INTERNATIONAL UNION, UNITED AUTOMOBILE, 

AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF 

AMERICA; MAPFRE PRAICO INSURANCE COMPANY; CERTAIN 

CREDITORS WHO FILED ACTIONS IN THE UNITED STATES DISTRICT 

COURT FOR THE DISTRICT OF PUERTO RICO; MED CENTRO, INC., f/k/a 

Case: 22-1119 Document: 00117860420 Page: 3 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 4 of 87
Consejo de Salud de la Comunidad de la Playa de Ponce, Inc.; ASOCIACION DE 

JUBILADOS DE LA JUDICATURA DE PUERTO RICO; HON. HECTOR 

URGELL CUEBAS; COOPERATIVA DE AHORRO Y CREDITO 

VEGABAJENA; UNIVERSITY OF PUERTO RICO RETIREMENT SYSTEM 

TRUST; PETER C. HEIN; MIRIAM E. LIMA COLON; BETZAIDA 

FELICIANO CONCEPCION; ANGEL L. MENDEZ GONZALEZ;

ASOCIACION DE MAESTROS PUERTO RICO; ASOCIACION DE 

MAESTROS DE PUERTO RICO-LOCAL SINDICAL; MORGAN STANLEY 

& CO. LLC; GOLDMAN SACHS & CO. LLC; J.P. MORGAN SECURITIES 

LLC; SANTANDER SECURITIES LLC; SIDLEY AUSTIN LLP; BMO 

CAPITAL MARKETS GKST, INC.; CITIGROUP GLOBAL MARKETS INC.; 

SAMUEL A. RAMIREZ & CO., INC.; MESIROW FINANCIAL, INC.; 

MERRILL LYNCH, PIERCE, FENNER & SMITH INC.; MERRILL LYNCH 

CAPITAL SERVICES, INC.; BARCLAYS CAPITAL INC.; RBC CAPITAL 

MARKETS, LLC; RAYMOND JAMES & ASSOCIATES, INC.; COMMUNITY 

HEALTH FOUNDATION OF P.R. INC.; QUEST DIAGNOSTICS OF PUERTO 

RICO, INC.; U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee for 

the PRPFC Outstanding Bonds and PRIFA Bonds, and Fiscal Agent for PRPBA 

Bonds; U.S. BANK NATIONAL ASSOCIATION, as Trustee for the PRPFC 

Outstanding Bonds and PRIFA Bonds, and Fiscal Agent for PRPBA Bonds; 

NILSA CANDELARIO; EL OJO DE AGUA DEVELOPMENT, INC.; PEDRO 

JOSE NAZARIO SERRANO; JOEL RIVERA MORALES; MARIA DE 

LOURDES GOMEZ PEREZ; HECTOR CRUZ VILLANUEVA; LOURDES 

RODRIGUEZ; LUIS M. JORDAN RIVERA; TACONIC CAPITAL ADVISORS 

LP; AURELIUS CAPITAL MANAGEMENT, LP; CANYON CAPITAL 

ADVISORS LLC; FIRST BALLANTYNE LLC; MOORE CAPITAL 

MANAGEMENT, LP; PUERTO RICO FISCAL AGENCY AND FINANCIAL 

ADVISORY AUTHORITY; HON. PEDRO R. PIERLUISI URRUTIA; UNITED

STATES, on behalf of the Internal Revenue Service; ASOCIACION 

PUERTORRIQUENA DE LA JUDICATURA, INC.; FEDERACION DE 

MAESTROS DE PUERTO RICO, INC.; GRUPO MAGISTERIAL 

EDUCADORES(AS) POR LA DEMOCRACIA, UNIDAD, CAMBIO, 

MILITANCIA Y ORGANIZACION SINDICAL, INC.; UNION NACIONAL 

DE EDUCADORES Y TRABAJADORES DE LA EDUCACION, INC.; MARIA 

A. CLEMENTE ROSA; JOSE N. TIRADO GARCIA, as President of the United 

Firefighters Union of Puerto Rico,

Objectors-Appellees,

VAQUERIA TRES MONJITAS, INC.; BLACKROCK FINANCIAL 

MANAGEMENT, INC.; EMSO ASSET MANAGEMENT LIMITED; MASON 

CAPITAL MANAGEMENT, LLC; SILVER POINT CAPITAL, L.P.; VR 

ADVISORY SERVICES, LTD; AURELIUS CAPITAL MANAGEMENT, LP, 

on behalf of its managed entities; GOLDENTREE ASSET MANAGEMENT LP, 

on behalf of funds under management; WHITEBOX ADVISORS LLC, on behalf 

of funds under management; MONARCH ALTERNATIVE CAPITAL LP, on 

behalf of funds under management; TACONIC CAPITAL ADVISORS L.P., on 

behalf of funds under management; ARISTEIA CAPITAL, LLC, on behalf of 

funds under management; FARMSTEAD CAPITAL MANAGEMENT, LLC, on 

behalf of funds under management; FOUNDATION CREDIT, on behalf of funds 

under management; CANYON CAPITAL ADVISORS LLC, in its capacity as a 

member of the QTCB Noteholder Group; DAVIDSON KEMPNER CAPITAL 

MANAGEMENT LP, in its capacity as a member of the QTCB Noteholder 

Group; SCULPTOR CAPITAL LP, in its capacity as a member of the QTCB 

Case: 22-1119 Document: 00117860420 Page: 4 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 5 of 87
Noteholder Group; SCULPTOR CAPITAL II LP, in its capacity as a member of 

the QTCB Noteholder Group; AMBAC ASSURANCE CORPORATION; 

ANDALUSIAN GLOBAL DESIGNATED ACTIVITY COMPANY; CROWN 

MANAGED ACCOUNTS, for and on behalf of Crown/PW SP; LMA SPC, for 

and on behalf of Map 98 Segregated Portfolio; MASON CAPITAL MASTER 

FUND LP; OAKTREE-FORREST MULTI-STRATEGY, LLC (SERIES B); 

OAKTREE OPPORTUNITIES FUND IX, L.P.; OAKTREE OPPORTUNITIES 

FUND IX (PARALLEL), L.P.; OAKTREE OPPORTUNITIES FUND IX

(PARALLEL 2), L.P.; OAKTREE HUNTINGTON INVESTMENT FUND II, 

L.P.; OAKTREE OPPORTUNITIES FUND X, L.P.; OAKTREE 

OPPORTUNITIES FUND X (PARALLEL), L.P.; OAKTREE 

OPPORTUNITIES FUND X (PARALLEL 2), L.P.; OAKTREE VALUE 

OPPORTUNITIES FUND HOLDINGS, L.P.; OCEANA MASTER FUND LTD.; 

OCHER ROSE, L.L.C.; PENTWATER MERGER ARBITRAGE MASTER 

FUND LTD.; PWCM MASTER FUND LTD.; REDWOOD MASTER FUND, 

LTD.; BANK OF NEW YORK MELLON; OFFICIAL COMMITTEE OF 

UNSECURED CREDITORS; ASSURED GUARANTY CORP.; ASSURED 

GUARANTY MUNICIPAL CORP.; OFFICIAL COMMITTEE OF RETIRED 

EMPLOYEES; NATIONAL PUBLIC FINANCE GUARANTEE CORP.; 

FINANCIAL GUARANTY INSURANCE COMPANY; AMERINATIONAL 

COMMUNITY SERVICES, LLC, as servicer for the GDB Debt Recovery 

Authority; CANTOR-KATZ COLLATERAL MONITOR LLC, as Collateral 

Monitor for the GDB Debt Recovery Authority.; ATLANTIC MEDICAL 

CENTER, INC.; CAMUY HEALTH SERVICES, INC.; CENTRO DE SALUD 

FAMILIAR DR. JULIO PALMIERI FERRI, INC.; CIALES PRIMARY 

HEALTH CARE SERVICES, INC.; CORP. DE SERV. MEDICOS PRIMARIOS 

Y PREVENCION DE HATILLO, INC.; COSTA SALUD, INC.; CENTRO DE 

SALUD DE LARES, INC.; CENTRO DE SERVICIOS PRIMARIOS DE 

SALUD DE PATILLAS, INC.; HOSPITAL GENERAL CASTANER, INC.;

GNMA & US GOVERNMENT TARGET MATURITY FUND FOR PUERTO 

RICO RESIDENTS, INC., f/k/a Puerto Rico GNMA & U.S. Government Target 

Maturity Fund, Inc.; MORTGAGE-BACKED & US GOVERNMENT 

SECURITIES FUND FOR PUERTO RICO RESIDENTS, INC., f/k/a Puerto 

Rico Mortgage-Backed & U.S. Government Securities Fund, Inc.; PUERTO 

RICO RESIDENTS BOND FUND I, f/k/a Puerto Rico Investors Bond Fund I; 

PUERTO RICO RESIDENTS TAX-FREE FUND, INC., f/k/a Puerto Rico 

Investors Tax-Free Fund, Inc.; PUERTO RICO RESIDENTS TAX-FREE FUND 

II, INC., f/k/a Puerto Rico Investors Tax-Free Fund II, Inc.; PUERTO RICO 

RESIDENTS TAX-FREE FUND III, INC., f/k/a Puerto Rico Investors Tax-Free 

Fund III, Inc.; PUERTO RICO RESIDENTS TAX-FREE FUND IV, INC., f/k/a 

Puerto Rico Investors Tax-Free Fund IV, Inc.; PUERTO RICO RESIDENTS 

TAX-FREE FUND V, INC., f/k/a Puerto Rico Investors Tax-Free Fund V, Inc.; 

PUERTO RICO RESIDENTS TAX-FREE FUND VI, INC., f/k/a Puerto Rico 

Investors Tax-Free Fund VI, Inc.; TAX-FREE FIXED INCOME FUND FOR 

PUERTO RICO RESIDENTS, INC., f/k/a Puerto Rico Fixed Income Fund, Inc.; 

TAX-FREE FIXED INCOME FUND II FOR PUERTO RICO RESIDENTS, 

INC., f/k/a Puerto Rico Fixed Income Fund II, Inc.; TAX-FREE FIXED 

INCOME FUND III FOR PUERTO RICO RESIDENTS, INC., f/k/a Puerto Rico 

Fixed Income Fund III, Inc.; TAX-FREE FIXED INCOME FUND IV FOR 

PUERTO RICO RESIDENTS, INC., f/k/a Puerto Rico Fixed Income Fund IV, 

Inc.; TAX-FREE FIXED INCOME FUND V FOR PUERTO RICO 

RESIDENTS, INC., f/k/a Puerto Rico Fixed Income Fund V, Inc.; TAX-FREE 

FIXED INCOME FUND VI FOR PUERTO RICO RESIDENTS, INC., f/k/a 

Case: 22-1119 Document: 00117860420 Page: 5 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 6 of 87
Puerto Rico Fixed Income Fund VI, Inc.; TAX FREE FUND FOR PUERTO 

RICO RESIDENTS, INC., f/k/a Tax-Free Puerto Rico Fund, Inc.; TAX FREE 

FUND II FOR PUERTO RICO RESIDENTS, INC., f/k/a Tax-Free Puerto Rico 

Fund II, Inc.; TAX-FREE HIGH GRADE PORTFOLIO BOND FUND FOR 

PUERTO RICO RESIDENTS, INC., f/k/a Puerto Rico AAA Portfolio Bond 

Fund, Inc.; TAX-FREE HIGH GRADE PORTFOLIO BOND FUND II FOR 

PUERTO RICO RESIDENTS, INC., f/k/a Puerto Rico AAA Portfolio Bond Fund 

II, Inc.; TAX-FREE HIGH GRADE PORTFOLIO TARGET MATURITY FUND 

FOR PUERTO RICO RESIDENTS, INC., f/k/a Puerto Rico AAA Portfolio 

Target Maturity Fund, Inc.; TAX FREE TARGET MATURITY FUND FOR 

PUERTO RICO RESIDENTS, INC., f/k/a Tax-Free Puerto Rico Target Maturity 

Fund, Inc.; UBS IRA SELECT GROWTH & INCOME PUERTO RICO FUND; 

SERVICIOS INTEGRALES EN LA MONTANA (SIM),

Creditors-Appellees,

UNITED STATES,

Respondent-Appellee.

Case: 22-1119 Document: 00117860420 Page: 6 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 7 of 87
CORPORATE DISCLOSURE STATEMENT

Appellee / Cross-Appellant the Financial Oversight and Management Board 

for Puerto Rico, as Title III representative of the Commonwealth of Puerto Rico, 

the Employees Retirement System of the Government of the Commonwealth of 

Puerto Rico, and the Puerto Rico Public Buildings Authority, is not required to file 

a Corporate Disclosure Statement pursuant to Federal Rule of Appellate 

Procedure 26.1 because it is not a non-governmental corporate party.

Case: 22-1119 Document: 00117860420 Page: 7 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 8 of 87
ii

TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT ...............................................................................1

STATEMENT OF JURISDICTION..........................................................................5

QUESTIONS PRESENTED......................................................................................5

STATEMENT OF THE CASE..................................................................................6

A. PROMESA ............................................................................................6

B. The Plan of Adjustment.........................................................................7

C. The Confirmation Order........................................................................7

1. The Suiza Objection....................................................................8

2. The Cooperativas’ Objection ....................................................11

a. The Cooperativas’ Adversary Proceeding......................11

b. The Cooperativas’ Confirmation Objection ...................13

3. The Individual Appellants.........................................................14

4. The Takings Claimants’ Objection ...........................................16

D. The Present Consolidated Appeals......................................................17

SUMMARY OF ARGUMENT...............................................................................18

STANDARD OF REVIEW.....................................................................................27

ARGUMENT...........................................................................................................28

I. THE TITLE III COURT ERRED IN HOLDING PREPETITION, 

UNSECURED JUST-COMPENSATION CLAIMS ARE NONDISCHARGEABLE AND MUST BE PAID IN FULL ...............................28

II. THE COOPERATIVAS’ ARGUMENTS AGAINST 

CONFIRMATION ARE MERITLESS.........................................................41

A. The Cooperativas’ “Takings” Claims Will Receive Proper 

Treatment.............................................................................................42

B. The Plan Was Not Required to Except the Cooperativas’ Fraud 

Claims from Discharge........................................................................44

1. 11 U.S.C. § 105(a) Cannot Be Used to Create an 

Exception to Discharge .............................................................46

Case: 22-1119 Document: 00117860420 Page: 8 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 9 of 87
iii

2. No Exception to Discharge Exists Under 11 U.S.C. 

§ 944(c)(1).................................................................................50

3. The Cooperativas’ Discussion of the Merits of Their 

Fraud Claims Is Irrelevant ........................................................51

C. The Cooperativas’ Remaining Arguments Fail ..................................51

III. SUIZA’S OBJECTIONS TO THE PLAN WERE PROPERLY 

OVERRULED ...............................................................................................53

A. Suiza Does Not Have a Takings Claim...............................................54

B. Suiza’s Procedural Challenge Fails.....................................................59

C. The Plan Does Not Discriminate Against Suiza .................................62

D. The Plan Does Not Contain Non-Consensual Third-Party 

Releases...............................................................................................63

IV. THE COURT LACKS JURISDICTION OVER THE INDIVIDUAL 

APPELLANTS’ APPEAL.............................................................................64

CONCLUSION........................................................................................................66

Case: 22-1119 Document: 00117860420 Page: 9 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 10 of 87
iv

TABLE OF AUTHORITIES

Page(s)

CASES

Anderson v. Bessemer City,

470 U.S. 564 (1985)............................................................................................54

Archer v. Warner,

538 U.S. 314 (2003)............................................................................................57

Begier v. IRS,

496 U.S. 53 (1990)..............................................................................................33

Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics,

403 U.S. 388 (1971)............................................................................................38

Blanchette v. Conn. Gen. Ins. Corps.,

419 U.S. 102 (1974)............................................................................................29

Block v. North Dakota,

461 U.S. 273 (1983)............................................................................................35

Butz v. Economou,

438 U.S. 478 (1978)............................................................................................39

Caplin & Drysdale v. United States,

491 U.S. 617 (1989)............................................................................................38

Carlson v. Green,

446 U.S. 14 (1980)..............................................................................................38

Chaparro-Febus v. Int’l Longshoremen Ass’n, Loc. 1575,

983 F.2d 325 (1st Cir. 1992)...............................................................................56

Chevron USA Inc. v. Sch. Bd. Vermilion Parish,

294 F.3d 716 (5th Cir. 2002) ..............................................................................64

Church of Scientology of Cal. v. United States,

506 U.S. 9 (1992)................................................................................................65

Case: 22-1119 Document: 00117860420 Page: 10 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 11 of 87
v

City of Newport v. Fact Concerts, Inc.,

453 U.S. 247 (1981)............................................................................................49

Davis v. Passman,

442 U.S. 228 (1979)............................................................................................38

Dopp v. HTP Corp.,

947 F.2d 506 (1st Cir. 1991)...............................................................................55

Gilbert v. City of Cambridge,

932 F.2d 51 (1st Cir. 1991).................................................................................35

Gonzaga Univ. v. Doe,

536 U.S. 273 (2002)............................................................................................39

Hanover Nat’l Bank v. Moyses,

186 U.S. 181 (1902)............................................................................................29

In re Ahlers,

794 F.2d 388 (8th Cir. 1986) ..............................................................................34

In re Andersen,

215 B.R. 792 (B.A.P. 10th Cir. 1998) ................................................................61

In re Automatic Plating of Bridgeport,

202 B.R. 540 (Bankr. D. Conn. 1996)................................................................47

In re Big3D, Inc.,

438 B.R. 214 (B.A.P. 9th Cir. 2010) ..................................................................34

In re Briggs Transp. Co.,

780 F.2d 1339 (8th Cir. 1985) ............................................................................32

In re City of San Bernadino,

566 B.R. 46 (Bankr. C.D. Cal. 2017) ................................................................48

In re City of Stockton,

909 F.3d 1256 (9th Cir. 2018) .....................................................................passim

In re Crocker,

362 B.R. 49 (B.A.P. 1st Cir. 2007).........................................................28, 46, 48

Case: 22-1119 Document: 00117860420 Page: 11 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 5 - FOMB Brief in 22-1119 Page 12 of 87
vi

In re Dietrich,

490 F. App’x 802 (6th Cir. 2012).......................................................................42

In re Dorsey,

870 F.3d 359 (5th Cir. 2017) ..............................................................................42

In re Hines,

193 F. App’x 391 (6th Cir. 2006).......................................................................61

In re Jacobson,

378 B.R. 805 (Bankr. E.D. Tex. 2008)...............................................................48

In re Jones,

129 B.R. 1003 (Bankr. N.D. Ill. 1991)...............................................................47

In re Ludlow Hosp. Soc’y,

124 F.3d 22 (1st Cir. 1997).................................................................................46

In re Mansaray-Ruffin,

530 F.3d 230 (3d Cir. 2008) ...............................................................................52

In re Nichols,

440 F.3d 850 (6th Cir. 2006) ..............................................................................31

In re Perez,

411 B.R. 386 (D. Colo. 2009).......................................................................25, 47

In re Plaza de Diego Shopping Ctr., Inc.,

911 F.2d 820 (1st Cir. 1990)...............................................................................47

In re Purdue Pharma L.P.,

635 B.R. 26 (S.D.N.Y. 2021) .............................................................................48

In re Quanta Resources Corp.,

739 F.2d 912 (3d Cir. 1984) ...............................................................................32

In re SPM Mfg. Corp.,

984 F.2d 1305 (1st Cir. 1993).......................................................................25, 47

In re SW Bos. Hotel Venture, LLC,

748 F.3d 393 (1st Cir. 2014)...............................................................................27

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Exhibit 5 - FOMB Brief in 22-1119 Page 13 of 87
vii

In re Thompson,

965 F.2d 1136 (1st Cir. 1992).............................................................................65

In re Thrall,

196 B.R. 959 (Bankr. D. Colo. 1990).................................................................47

In re Treco,

240 F.3d 148 (2d Cir. 2001) ...............................................................................32

In re Tully,

818 F.2d 106 (1st Cir. 1987)...............................................................................57

In re Valenti,

310 B.R. 138 (B.A.P. 9th Cir. 2004) ..................................................................47

In re Watson,

403 F.3d 1 (1st Cir. 2005)...................................................................................66

Knick v. Twp. of Scott,

139 S. Ct. 2162 (2019)............................................................................28, 38, 58

Kuehner v. Irving Trust Co.,

299 U.S. 445 (1937)......................................................................................30, 31

Lancaster Cmty. Hosp. Dist. v. Antelope Valley Hosp. Dist.,

940 F.2d 397 (9th Cir. 1991) ..............................................................................50

Langton v. Hogan,

71 F.3d 930 (1st Cir. 1995).................................................................................56

Liu v. SEC,

140 S. Ct. 1936 (2020)........................................................................................49

Louisville Joint Stock Land Bank v. Radford,

295 U.S. 555 (1935).....................................................................................passim

Lucas v. S.C. Coastal Council,

505 U.S. 1003 (1992)..........................................................................................40

Lynch v. United States,

292 U.S. 571 (1934)............................................................................................33

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Exhibit 5 - FOMB Brief in 22-1119 Page 14 of 87
viii

Memphis Cmty. Sch. Dist. v. Stachura,

477 U.S. 299 (1986)............................................................................................39

Nw. Bank Worthington v. Ahlers,

485 U.S. 197 (1988)......................................................................................25, 47

P.R. Dairy Farmers Ass’n v. Pagan,

748 F.3d 13 (1st Cir. 2014).........................................................................8, 9, 54

Penn Cent. Transp. Co. v. City of New York,

438 U.S. 104 (1978).....................................................................................43, 59

Poinsett Lumber Mfg. v. Drainage Dist. No. 7,

119 F.2d 270 (8th Cir. 1941) ........................................................................35, 36

Reading v. Brown,

391 U.S. 471 (1968)............................................................................................31

Rivera-Rosario v. U.S. Dep’t of Agric.,

202 F.3d 35 (1st Cir. 2000).................................................................................55

Root v. Railway Co.,

105 U.S. 189 (1882)............................................................................................49

Ruckelshaus v. Monsanto Co.,

467 U.S. 986 (1984)............................................................................................40

Semtek Int’l Inc. v. Lockheed Martin Corp.,

531 U.S. 497 (2001)............................................................................................35

Soriano v. United States,

352 U.S. 270 (1957)............................................................................................35

Stellwagen v. Clum,

245 U.S. 605 (1918)............................................................................................29

U.S. Bank Nat. Ass’n ex rel. CWCapital Asset Mgmt. LLC v. Vill. at 

Lakeridge, LLC,

138 S. Ct. 960 (2018)..........................................................................................28

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ix

Union de Trabajadores de la Industria Eléctrica y Riego v. Fin. 

Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. 

for P.R.),

7 F.4th 31 (1st Cir. 2021)..............................................................................24, 45

United States v. Dow,

357 U.S. 17 (1958)..............................................................................................40

United States v. Sec. Indus. Bank,

459 U.S. 70 (1982)..................................................................................21, 22, 29

United States v. Zannino,

895 F.2d 1 (1st Cir. 1990)...................................................................................51

United Student Aid Funds, Inc. v. Espinosa,

559 U.S. 260 (2010)............................................................................................62

Univ. of Tex. v. Camenisch,

451 U.S. 390 (1981)............................................................................................56

Vaqueria Tres Monjitas, Inc. v. Irizarry,

587 F.3d 464 (1st Cir. 2009)........................................................................passim

Varela v. Dynamic Brokers, Inc. (In re Dynamic Brokers, Inc.),

293 B.R. 489 (B.A.P. 9th Cir. 2003) ..................................................................61

Williamson Cnty. Reg’l Planning Comm’n v. Hamilton Bank of 

Johnson City,

473 U.S. 172 (1985)............................................................................................37

Wright v. Union Cent. Life Ins. Co.,

304 U.S. 502 (1938)............................................................................................32

STATUTES AND RULES

32 L.P.R.A. § 2907 ..................................................................................................16

11 U.S.C. § 105.................................................................................................passim

11 U.S.C. § 502..................................................................................................59, 61

11 U.S.C. § 503..................................................................................................19, 29

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11 U.S.C. § 506........................................................................................................33

11 U.S.C. § 507............................................................................................19, 28, 45

11 U.S.C. § 510..................................................................................................44, 45

11 U.S.C. § 523.................................................................................................passim

11 U.S.C. § 544........................................................................................................33

11 U.S.C. § 545........................................................................................................33

11 U.S.C. § 547........................................................................................................32

11 U.S.C. § 548........................................................................................................33

11 U.S.C. § 944..................................................................................................23, 50

11 U.S.C. § 1121......................................................................................................50

11 U.S.C. § 1129......................................................................................................45

11 U.S.C. § 1141................................................................................................23, 50

11 U.S.C. § 1324......................................................................................................47

11 U.S.C. § 1327......................................................................................................47

11 U.S.C. § 1330......................................................................................................47

28 U.S.C. § 1291........................................................................................................5

42 U.S.C. § 1983................................................................................................37, 39

48 U.S.C. § 2121........................................................................................................6

48 U.S.C. § 2144......................................................................................................15

48 U.S.C. § 2161...............................................................................................passim

48 U.S.C. § 2166........................................................................................................5

48 U.S.C. § 2172......................................................................................................50

48 U.S.C. § 2174........................................................................................................6

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xi

48 U.S.C. § 2194........................................................................................................6

Fed. R. Civ. P. 9.......................................................................................................11

Fed. R. Civ. P. 12.....................................................................................................12

OTHER AUTHORITIES

11A Charles Alan Wright & Arthur R. Miller, Federal Practice and 

Procedure § 2947 (3d ed. 2021)..........................................................................56

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PRELIMINARY STATEMENT

Each of these four appeals attacks a different aspect of the Title III court’s 

order (the “Confirmation Order”) confirming the comprehensive plan of 

adjustment for the Commonwealth of Puerto Rico, the Employees Retirement 

System of the Government of the Commonwealth of Puerto Rico (“ERS”), and the 

Puerto Rico Public Buildings Authority (“PBA”) (collectively, the “Debtors”). 

Although, as the Title III court found, the plan is “a crucial step in the effort to 

achieve the economic recovery of the Commonwealth of Puerto Rico and its 

instrumentalities,” FOMB-Add14,

1 this consolidated appeal, no matter its outcome,

will not undo the plan’s primary debt restructurings and benefits to the 

Commonwealth.

The Financial Oversight and Management Board for Puerto Rico (the 

“Board”) brings one of the appeals because the Confirmation Order requires the 

Debtors to pay too much. Contrary to the plain language of Title III and the 

holdings of other circuits, the Confirmation Order requires the Debtors to pay in 

full up to $400 million of prepetition, unsecured Fifth Amendment takings claims 

on the ground payment of just compensation is a non-dischargeable constitutional 

 1 Citations to “FOMB-Add” are to the Addendum to this brief, and “FOMB-App” 

refers to the Appendix filed in Appeal No. 22-1119. “Suiza-App” refers to the 

Appendix filed in Appeal No. 22-1092, “Coop-App” refers to the Appendix filed 

in Appeal No. 22-1079, and “Individual-Add” refers to the Addendum filed in 

Appeal No. 22-1120. 

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requirement. As other circuits have ruled, however, the Constitution grants 

Congress the bankruptcy power, which makes prepetition, unsecured monetary

claims under the Constitution subject to discharge and restructuring in bankruptcy,

just like any other unsecured claim. If the Board is correct on this point, the two 

appeals seeking to have claims treated as Fifth Amendment takings claims would 

be moot because the claims’ treatment would not change regardless of whether 

they are prepetition takings claims. All parties agree their claims are prepetition, 

unsecured claims.2

Suiza Dairy Corp. (“Suiza”) settled its takings (and other) claims before the 

Commonwealth’s Title III case commenced but now contends its settlement claim 

for a series of money payments should be treated as a takings claim. No final 

judgment declared that a taking occurred, however, and, by settling, Suiza waived 

its right to a final judgment and to prosecute any appeals. In the settlement 

agreement, Suiza agreed to dismiss with prejudice any claims it had under the 

Takings Clause and various other constitutional provisions in exchange for 

contractual promises, including for certain payments. Suiza’s contention that the 

Commonwealth failed to make those promised payments is a contract claim, not a 

takings claim.

 2 The fourth appeal is unrelated to the Fifth Amendment and is already moot.

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The appeal brought by a group of credit unions (the “Cooperativas”) 

contends the Title III court erred by relying on its prior ruling to determine the 

Cooperativas had no non-dischargeable fraud or takings claim against the 

Commonwealth. The Cooperativas’ underlying claim is the Commonwealth used 

its influence to compel them to purchase governmental bonds, the bonds defaulted, 

and therefore a taking and fraud occurred. The Title III court previously dismissed 

the Cooperativas’ claims, holding they failed to state viable causes of action. The 

Cooperativas are separately appealing that order in Appeal No. 22-1048.

In their appeal here, the Cooperativas spend most of their brief arguing they 

should prevail in their other appeal. The question in this appeal of the 

Confirmation Order, however, is simply whether the Cooperativas were entitled to 

re-litigate their takings and fraud claims in the context of confirmation. Clearly, 

they were not.

As a practical matter, the Board agrees that, if the Cooperativas have a valid 

takings claim, it should be treated the same way this Court determines other 

takings claims should be treated. That is precisely the relief the Cooperativas have 

requested, so there is no dispute to resolve as to the Cooperativas’ takings claim in 

this appeal. 

As to the Cooperativas’ fraud claims, the merits of those claims make no 

difference in this appeal because valid fraud claims are dischargeable in Title III 

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cases. The Cooperativas argue fraud claims are special and should be excepted 

from discharge, but that is not the law. In enacting the Puerto Rico Oversight, 

Management, and Economic Stability Act (“PROMESA”), Congress did not 

incorporate § 523(a)(2) of the Bankruptcy Code, which excepts fraud claims from 

discharge in cases of human persons, not entities. The Cooperativas argue the Title 

III court should have exercised its power under 11 U.S.C. § 105(a) to legislate its 

own exception to discharge for fraud claims. But § 105(a) expressly provides 

courts can use it to carry out the bankruptcy statute, not override it. Thus, even if 

the Cooperativas have allowable fraud claims, the plan of adjustment properly 

treats them as dischargeable. 

The fourth appeal is brought by individuals appealing a single issue: an 

alleged holding by the Title III court that “Act 80-2020, Act 81-2020, and Act 82-

2020 are preempted by PROMESA.” Individual-Add254. The Title III court 

never made any such holding. Instead, it ruled Acts 80–82 are no longer on the 

books, and therefore any question about whether those Acts are preempted by 

PROMESA “has been mooted.” FOMB-Add97. This Court thus lacks jurisdiction 

over the fourth appeal because there is no ruling it can issue to remedy something 

that did not occur.

The Board therefore requests the Court to: (a) rule that unsecured, 

prepetition takings claims are dischargeable and not entitled to full payment;

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(b)(i) dismiss the Cooperativas’ appeal as moot as to their asserted takings claims 

because the Board has agreed to treat those claims the same as other takings claims 

if they are not dischargeable and if the Cooperativas ultimately prevail on those 

claims, and (ii) affirm the ruling that the Cooperativas’ fraud claims are 

dischargeable; (c) dismiss Suiza’s appeal as moot if the Court sustains the Board’s 

position on prepetition takings claims, or otherwise affirm the ruling that Suiza 

does not hold a takings claim, and; (d) dismiss the individual appellants’ appeal for 

lack of appellate jurisdiction.

STATEMENT OF JURISDICTION

This Court has jurisdiction over Appeal No. 22-1119 pursuant to 28 U.S.C. 

§ 1291 and 48 U.S.C. § 2166(e)(2). The Court lacks jurisdiction over Appeal 

No. 22-1120 for the reasons stated below.

QUESTIONS PRESENTED

1) Did the Title III court err by holding that prepetition, unsecured takings 

claims arising under the Fifth Amendment are immune from impairment and 

discharge?

2) If the Board’s position on Fifth Amendment takings claims is not sustained, 

did the Title III court commit clear error in finding Suiza’s settlement 

agreement does not provide Suiza a Fifth Amendment takings claim?

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3) Did the Title III court err in holding that the Cooperativas’ fraud-based 

claims are dischargeable and in refusing to allow the Cooperativas to relitigate their takings claim even if this Court does not sustain the Board’s 

position on Fifth Amendment takings claims?

4) Should the appeal brought by the individual appellants be dismissed because 

there is no appellate remedy for a trial court order that does not exist?

STATEMENT OF THE CASE

A. PROMESA

Puerto Rico was subject to what Congress found to be a “fiscal emergency” 

resulting from a “combination of severe economic decline, and, at times,

accumulated operating deficits, lack of financial transparency, management 

inefficiencies, and excessive borrowing . . . .” 48 U.S.C. § 2194(m)(1). To 

address that emergency, Congress enacted PROMESA, which established the 

Board and charged it with helping the Commonwealth “achieve fiscal 

responsibility and access to the capital markets.” Id. § 2121(a). The Board 

commenced the first debt-restructuring case under Title III of PROMESA on 

behalf of the Commonwealth in May 2017.

The Title III court “shall” confirm a plan of adjustment proposed by the 

Board if the plan meets the criteria enumerated in PROMESA. Id. § 2174(b).

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B. The Plan of Adjustment

After nearly five years of extensive litigation, mediation, and negotiations 

stretched out by decimating hurricanes, earthquakes, and COVID-19, on 

November 3, 2021, the Board filed an eighth amended plan of adjustment for the 

Commonwealth, ERS, and PBA (the “Plan”). Coop-App346. Although the Plan 

received widespread support from creditors and other stakeholders, Suiza, the 

Cooperativas, and certain claimholders with claims for just compensation under the 

Takings Clause objected to the Plan’s treatment of their claims.

C. The Confirmation Order

After reviewing the record, the Title III court issued an order on 

December 14, 2021, explaining why it believed prepetition Fifth Amendment 

takings claims are not subject to discharge or impairment. FOMB-App225–28. 

The Title III court directed the Board either to show cause why the court should 

not deny confirmation or to revise the Plan to provide for full payment of such 

claims. FOMB-App232–33. By response dated December 21, 2021, the Board 

showed cause, but also declared it would, subject to its appellate rights, modify the 

Plan to provide for full payment of takings claims if the Title III court adhered to 

its prior opinion. FOMB-App238–73. By order dated January 10, 2022, the Title 

III court directed the Board, subject to preservation of its appellate rights, to 

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provide for full payment of takings claims, which the Board did. FOMB-App325–

28.

On January 18, 2022, the Title III court confirmed the Plan. FOMBAdd160–252; see also FOMB-Add1–159 (Findings of Fact and Conclusions of 

Law in support of the Confirmation Order). While the Title III court required that 

Fifth Amendment takings claims neither be impaired nor discharged, it overruled 

Suiza’s and the Cooperativas’ confirmation objections contending they had Fifth 

Amendment takings claims or other bases to avoid discharge. 

1. The Suiza Objection

Suiza is one of three milk processors in Puerto Rico. See P.R. Dairy 

Farmers Ass’n v. Pagan, 748 F.3d 13, 16 (1st Cir. 2014). It purchases “raw milk” 

from dairy farmers and then processes and sells it to consumers. Id. 

Suiza filed an unsecured claim for $48,485,151.22 in the Commonwealth’s 

Title III case for payments due under a prepetition settlement with Puerto Rico’s 

Milk Industry Regulation Administration (“ORIL” by its Spanish acronym). See

Suiza-App1–60 (proof of claim including exhibits); see also Pagan, 748 F.3d at 

17–18. In 2004, Suiza sued ORIL’s administrator in federal court, alleging certain 

ORIL regulations governing milk prices violated numerous constitutional 

provisions, including the Takings Clause. See Vaqueria Tres Monjitas, Inc. v. 

Irizarry, 587 F.3d 464, 471–72 (1st Cir. 2009).

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In 2007, the district court granted Suiza’s motion for a preliminary 

injunction to preclude ORIL from enforcing the regulations. Irizarry, 587 F.3d at 

472; Suiza-App2836–930. The district court found Suiza demonstrated a 

likelihood of success on its claims that the regulations violated the Takings, Due 

Process, Equal Protection, and dormant Commerce Clauses, and ordered ORIL to 

pay Suiza a temporary regulatory accrual. Irizarry, 587 F.3d at 472. This Court 

affirmed the injunction, id. at 487–88, and held the regulatory accrual was not just 

compensation but rather an equitable remedy, id. at 479–80.

On October 29, 2013, the parties agreed to settle the case. See Pagan, 748 

F.3d at 18; see also Suiza-App5–12 (the “Settlement Agreement”). Under the 

Settlement Agreement, Suiza agreed to dismiss its claims “with prejudice,” SuizaApp6, and ORIL pledged to make certain payments (the “regulatory accrual”) “to 

allow [Suiza] to recoup a fair rate of return on [its] products,” Pagan, 748 F.3d at 

23. The Settlement Agreement stated ORIL did not concede the merits of Suiza’s 

claims. Suiza-App5–6. The court incorporated the Settlement Agreement into a 

final judgment and closed the case, retaining jurisdiction to enforce the agreement. 

Suiza-App3103–05.

Suiza’s proof of claim in the Title III case does not check the box for 

secured claim or priority, and it describes the basis of the claim as a “regulatory 

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accrual claim for . . . violations involving Takings Clause” and then references the 

Settlement Agreement. Suiza-App3. 

The Plan classifies Suiza’s claim as part of Class 53, which includes a 

similar claim by another milk processor under the Settlement Agreement. FOMBAdd54–55. Claims in Class 53 receive a 50% recovery. Id. That is more 

favorable than the treatment provided to the Commonwealth’s other general 

unsecured claimholders because “the dairy industry is one of the Commonwealth’s 

largest agricultural industries and employs a significant number of Puerto Rico’s 

residents.” FOMB-App208; Suiza-App3385. 

Suiza nevertheless objected to confirmation of the Plan, arguing it is entitled 

to a full recovery because, in its view, its claim is for just compensation under the 

Takings Clause and is protected from discharge by the Fifth Amendment. SuizaApp352–83. The Title III court rejected Suiza’s argument that it holds a nondischargeable takings claim, finding Suiza’s claim instead arises under the 

Settlement Agreement. FOMB-Add114–17. As the court explained, to the extent 

Suiza previously asserted a takings claim, it had agreed to dismiss that claim with 

prejudice. FOMB-Add115–16. “Accordingly, it follows that Suiza merely has a 

contract-based claim for payment pursuant to the [Settlement Agreement],” which 

is subject to impairment and discharge. FOMB-Add116.

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2. The Cooperativas’ Objection

The Cooperativas are a group of state-chartered credit unions owning

government bonds. Coop-App1331. They filed proofs of claim in the 

Commonwealth’s Title III case based on alleged fraud and takings by the 

Commonwealth regarding their purchase and ownership of such bonds. See 

FOMB-App86–171. The allegations underlying those claims were also the subject 

of an adversary proceeding dismissed with prejudice before confirmation.

a. The Cooperativas’ Adversary Proceeding

In March 2018, the Cooperativas commenced an adversary proceeding 

claiming the Commonwealth, its instrumentalities, and other governmental parties

had fraudulently induced them to purchase bonds despite knowing the bonds would 

decline in value as a result of the Commonwealth’s insolvency. See CoopApp1331–33. Their complaint alleged seven causes of action. Counts One and 

Two sought declarations that the Cooperativas’ claims were excepted from 

discharge because they alleged dishonest conduct. Coop-App1391–98. Counts 

Three through Five alleged tort, contract, and territorial-law RICO claims. CoopApp1398–1410. Count Six alleged that the fraudulent inducement amounted to an 

unconstitutional taking without just compensation. Coop-App1410–13. Count 

Seven alleged unjust enrichment. Coop-App1413.

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After giving the Cooperativas several opportunities to amend, the Title III 

court in December 2021 dismissed their complaint in its entirety under Federal 

Rules of Civil Procedure 9(b) and 12(b)(6). FOMB-App274–317. The court held 

that the first five counts failed as a matter of law because each alleged fraud but 

did not plead fraudulent conduct with the requisite particularity. FOMB-App295–

96. The court concluded the Cooperativas had not sufficiently alleged the 

purported misrepresentations were knowingly false when made and had failed to 

identify the speakers or the Cooperativas’ representatives who had relied on them. 

FOMB-App294, 297–98.

The court further held the sixth count failed to allege a viable claim under 

the Takings Clause. FOMB-App312–15. The alleged appropriation of the 

Cooperativas’ money through the bond purchases did not constitute a “taking” 

because the Cooperativas failed to allege any facts showing they had been 

compelled to buy those bonds. Id. The court also held that, even if the 

Cooperativas’ fraud-based claims had been viable, they would be dischargeable 

because PROMESA contains no provision excepting fraud claims from discharge. 

See FOMB-App299–304. 

The Cooperativas appealed the order dismissing their adversary complaint, 

and that appeal is pending in this Court as Appeal No. 1048. Coop-App1496. The 

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Cooperativas filed their opening brief in that appeal on March 23. See Doc. No. 

00117856391.

b. The Cooperativas’ Confirmation Objection

Before the dismissal of their adversary proceeding, the Cooperativas 

objected to confirmation of the Plan, arguing the fraud and takings claims in their 

then-pending adversary proceeding should be excepted from discharge. See CoopApp319–26; Coop-App329–33. They contended their takings claims could not be 

impaired or discharged because constitutional claims are supposedly not subject to 

Congress’s bankruptcy powers. Coop-App319–26. They further argued all their 

claims should be excepted from discharge because they sound in fraud. CoopApp329–33. 

The Title III court overruled the Cooperativas’ objections for the same 

reasons stated in its decision dismissing their adversary proceeding. See FOMBAdd104. As the court had previously explained, the Cooperativas failed to state a 

claim for fraud, and, even if they had, no statutory or other basis existed for 

excepting fraud claims from discharge. See FOMB-App296–304. The court 

further held that, because the Cooperativas had failed to adequately allege a taking, 

the Fifth Amendment did not protect their claims from impairment and discharge. 

FOMB-Add104.

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3. The Individual Appellants

Appellants Raul Martinez-Perez, Luis F. Pabon Bosques, Carlos A. Rojas 

Rosario, Elvin A. Rosado Morales, and Rafael Torres Ramos (the “Individual 

Appellants”) are former Commonwealth employees. None of them objected to

confirmation of the Plan below.

In their notice of appeal, they state their appeal is taken only “from the 

portions” of the Confirmation Order “holding that Act 80-2020, Act 81-2020, and 

Act 82-2020 are preempted by PROMESA.” Individual-Add254. The Title III 

court, however, did not make any ruling concerning the preemption of Acts 80–82

because Acts 80–82 had already been invalidated.

Acts 80–82 permitted certain government employees to retire early and 

provided enhanced retirement benefits. In November 2020, the Commonwealth 

Government agreed with the Board not to implement the Acts until an agreement 

was reached concerning their financial viability. See FOMB-App213–15. No such 

agreement was reached. Nevertheless, in November 2021, the Government 

enacted Joint Resolution 33 (“JR 33”), which required the Commonwealth to 

partially implement Act 80, thereby breaching the Government’s promise.

In response to JR 33, the Board commenced an adversary proceeding 

seeking to nullify and enjoin enforcement of the three Acts and JR 33 on several 

grounds, including that they were significantly inconsistent with the 

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Commonwealth’s certified fiscal plan. See FOMB-App234–37; see also 48 U.S.C. 

§ 2144(a). On December 27, 2021, the Board, the Government, and the Office of 

Management and Budget executed a stipulation (the “Stipulation”) to resolve the 

adversary proceeding. See FOMB-App318–24. The parties agreed that Acts 80, 

81, and 82 and JR 33 were “invalidate[d] . . . pursuant to PROMESA, including as 

significantly inconsistent with the [relevant] certified fiscal plan,” except as 

otherwise provided in the Stipulation. FOMB-App321. The Title III court soordered the Stipulation and entered final judgment. FOMB-App324. There was 

no appeal. 

Before the resolution of the adversary proceeding challenging Acts 80–82, 

the Board had requested a ruling in its proposed confirmation order that 

PROMESA preempts Acts 80–82. FOMB-Add96–97. In the Confirmation Order, 

the Title III court declined to address that question. Instead, it noted that any 

question concerning the preemption of Acts 80–82 “has been mooted by the 

Court’s approval of the [Stipulation] . . . [which] resolved litigation concerning the 

validity of [the] Acts” and invalidated the Acts on the ground they were 

“significantly inconsistent with the relevant certified fiscal plan.” FOMB-Add97. 

The Individual Appellants thus appeal a ruling that never issued. 

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4. The Takings Claimants’ Objection

Several claimholders filed proofs of claim in the Commonwealth’s Title III 

case seeking just compensation for alleged prepetition takings of their private 

property. Those claims arose either from eminent-domain proceedings under 

Puerto Rico’s “quick take” statute, 32 L.P.R.A. § 2907, e.g., FOMB-App62–86, or 

from inverse-condemnation proceedings, e.g., FOMB-App1–62. Eminent-domain 

claims are partially secured by monies held on deposit with the Puerto Rico Court 

of First Instance pursuant to 32 L.P.R.A. § 2907, although some eminent-domain 

claimants asserted unsecured claims for compensation in excess of the deposited 

funds. 

To the extent eminent-domain claims are allowed, the plan filed by the 

Board in November 2021 would have provided claimholders with: (i) as to the 

secured portion of their claims, full recovery of the funds held on deposit for their 

benefit with the Court of First Instance and (ii) as to the unsecured portion, a prorata share of the recovery allocable to general unsecured claimholders. See CoopApp128. That plan would have treated inverse-condemnation claims as general 

unsecured claims. Coop-App48–49. 

Certain claimholders objected to the plan’s treatment of eminent-domain and 

inverse-condemnation claims, arguing that the Fifth Amendment prohibits the 

impairment or discharge of any claim for just compensation arising under the 

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Takings Clause. The Board responded by citing precedent holding prepetition,

unsecured claims under the Takings Clause and other constitutional provisions are 

subject to impairment and discharge, like any other unsecured claim. FOMBApp190–205.

As discussed, the Title III court held allowed eminent-domain and inversecondemnation claims must be paid in full. FOMB-Add112. The court concluded

the Takings Clause creates an “irreducible entitlement to just compensation” that 

cannot be discharged or impaired in a bankruptcy case. See FOMB-Add106. The 

court noted the Board “preserved for appeal” its argument that unsecured claims 

for just compensation can be impaired and discharged. FOMB-Add113.

D. The Present Consolidated Appeals

Suiza, the Cooperativas, and the Individual Appellants appealed from the 

Confirmation Order. As noted above, the Notice of Appeal filed by the Individual 

Appellants states their appeal is taken only “from the portions” of the Confirmation 

Order “holding that Act 80-2020, Act 81-2020, and Act 82-2020 are preempted by 

PROMESA,” Individual-Add254, which is a holding the Title III court did not 

make. 

The Cooperativas moved the Title III court to stay the Confirmation Order 

pending appeal. Coop-App1121–37. The Title III court denied that motion, 

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finding the Cooperativas were unlikely to succeed in their appeal. CoopApp1291–1321. 

The Board appealed the Title III court’s holding that the Fifth Amendment 

precludes the Plan from impairing or discharging prepetition, unsecured claims for 

just compensation under the Takings Clause. FOMB-Add253–72. This Court 

consolidated the Board’s appeal with those of Suiza, the Cooperativas, and the 

Individual Appellants and ordered expedited briefing. Doc. 00117849999.

SUMMARY OF ARGUMENT

I. The Fifth Amendment takings claims here are conceded to be unsecured 

prepetition takings claims. Before the Title III cases commenced, the Debtors took 

property either by direct condemnation or by regulation (inverse condemnation). 

For the direct condemnations, the Plan provides the former property owners with

all the moneys the Commonwealth set aside for them. The only remaining claims 

are by former property owners for additional compensation and by current property 

owners for compensation for the regulations that allegedly diminished the value of 

their properties. No one contends there is any collateral or other property interest 

held by any of the claimants for the remaining claims. 

The Title III court ruled the unsecured, prepetition, just-compensation claims 

for Fifth Amendment takings are non-dischargeable and must be paid in full. 

FOMB-Add106–13. It supported its ruling with two authorities: (i) Supreme 

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Court authority holding the bankruptcy power is subject to the Fifth Amendment 

and (ii) the Fifth Amendment’s requirement of just compensation for takings. 

The court’s fundamental error was applying Supreme Court precedent out of 

context to prepetition, unsecured claims. The precedent only governed required 

Fifth Amendment treatment of secured claims or other property interests existing 

during bankruptcy. In each instance in which the Supreme Court observed the 

bankruptcy power is subject to the Fifth Amendment, it was referring to how a 

litigant’s postpetition property interest must be treated during the bankruptcy. In 

no instance did the Supreme Court consider, discuss, or opine the bankruptcy 

estate must compensate a litigant for a prepetition, unsecured claim for the debtor’s 

having diminished or taken the claimant’s collateral or other property interest 

before bankruptcy. 

The Title III court’s decision is contrary to PROMESA, logic, precedent, 

and bankruptcy practice for over two hundred years.

Just as it is undisputed that the takings claims at issue are unsecured, it is 

undisputed that PROMESA grants no priority to such claims. Section 301(a) of 

PROMESA (48 U.S.C. § 2161(a)) incorporates Bankruptcy Code § 507(a)(2), 

which grants priority only to administrative expenses allowed by Bankruptcy Code 

§ 503(b) for necessary expenses preserving the debtor’s property or estate. The 

takings claims are prepetition claims. They provide nothing to preserve the 

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debtor’s property. The Title III court did not identify a priority in the statute for 

takings claims. Rather, it determined the Fifth Amendment’s just-compensation 

requirement is a constitutional imperative that transcends the statute.

Logic shows that determination is erroneous. While the Fifth Amendment 

creates and imposes a just-compensation claim, Article I, Section 8, clause 4 of the 

Constitution grants Congress bankruptcy power to discharge claims. There is no 

basis in the text or in logic to conclude one such provision trumps the other or that 

they even address the same issue. 

The Title III court assumed one provision must control the other, and relied 

on Supreme Court rulings providing the bankruptcy power is subject to the Fifth 

Amendment. The Supreme Court never made that ruling in connection with a 

prepetition, unsecured claim, however. Instead, that ruling applied to the treatment 

of a litigant’s postpetition lien value or other property interest, or the government’s 

postpetition taking of a railroad’s property for the public good. There are many 

statutory and jurisprudential examples of federal bankruptcy law’s taking property 

postpetition without triggering the just-compensation requirement and without 

rendering a claim non-dischargeable. Those examples prove the obvious: the 

Supreme Court’s ruling that the bankruptcy power is subject to the Fifth 

Amendment can be applied only in the contexts in which the Supreme Court ruled, 

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not the instant context involving prepetition, unsecured claims and no postpetition 

taking, security interest, or other property interest.

Since the first bankruptcy statute in 1800 and the first constitutional 

municipal bankruptcy statute in 1937, no bankruptcy statute or decision has 

required payment in full for, or ruled non-dischargeable, a claim for a private or 

governmental debtor’s prepetition consumption of collateral or other property 

interest. In virtually all reorganizations under chapters 9 and 11 involving secured 

debt or other property interests, the private or governmental debtors consume some 

of their creditors’ collateral before bankruptcy. There simply is no such thing as a 

claim to payment in full for collateral consumed prepetition, and the consumption 

does not convert the creditor’s claim into a non-dischargeable claim. To the 

contrary, as shown below, the bankruptcy law has uniformly entitled secured 

claimholders only to protection of their property interests from the time they 

request it after a bankruptcy case commences, and entitles them only to payment of 

the value of their collateral as such value exists during or at the end of the 

bankruptcy case. 

The two decisions the Title III court cited as holding the bankruptcy power 

is subject to the Fifth Amendment are great examples of how the Fifth Amendment 

only protects property interests in specific interest in bankruptcy. See United 

States v. Sec. Indus. Bank, 459 U.S. 70 (1982); Louisville Joint Stock Land Bank v. 

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Radford, 295 U.S. 555, 589 (1935). In Radford, the issue was whether a 

mortgagee having a lien against the debtor’s property during the bankruptcy case 

could be constitutionally deprived of various state-law rights of a mortgagee in 

specific property, such as the right to a foreclosure sale, receiver, and the like. In 

the sentence immediately following the sentence the Title III court cited that the 

bankruptcy power is subject to the Fifth Amendment, the Supreme Court ruled the 

debtor’s personal obligation was dischargeable. Radford, 295 U.S. at 589. The 

Supreme Court then made crystal clear the Fifth Amendment protects only specific 

rights in property. Id. at 590. Here, the creditors holding prepetition Fifth 

Amendment takings claims have no rights in specific property. The property was 

taken prepetition. That is why they have only prepetition, unsecured claims. The 

only two circuits to determine the same issue this appeal presents have both held 

that such claims are dischargeable just as any other prepetition, unsecured claims.

In Security Industrial Bank, the issue was whether during the bankruptcy the 

debtor could avoid a creditor’s lien against collateral constituting exempt property. 

459 U.S. at 71–72. It had nothing to do with a prepetition, unsecured claim.

Manifestly, non-dischargeability and its consequence that a claim must be 

paid in full, hinder or prevent bankruptcy’s fresh-start and rehabilitation policies. 

It is no surprise the Bankruptcy Code limits non-dischargeability almost 

exclusively to cases of individual (human) debtors, and only when they are guilty 

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of fraudulent conduct. See, e.g., 11 U.S.C. §§ 523, 944 (made applicable to Title 

III cases by 48 U.S.C. § 2161(a)), 1141. This avoids the predicament of a school 

district, irrigation district, town, or city becoming insolvent due to inversecondemnation claims for restricting the uses of property and then being unable to 

emerge from Bankruptcy Code chapter 9 or PROMESA Title III and having to 

close down. To be sure, if a municipality intentionally and willy-nilly inflicts 

inverse or direct condemnation on property owners on the theory it will exploit 

bankruptcy to discharge its liability, the bankruptcy case may be dismissed for lack 

of good faith. But bankruptcy cases filed for proper purposes could fail if 

prepetition, unsecured takings claims must be paid in full rather than paid in 

accordance with the debtor’s means. 

II. The Cooperativas’ appeal concerns whether the Title III court properly 

relied on its prior ruling dismissing the Cooperativas’ complaint asserting takings 

and fraud claims to determine whether the Plan treated the Cooperativas’ claims 

properly as dischargeable claims. The Cooperativas nevertheless spend most of 

their brief arguing about a different issue—namely, whether they stated viable 

causes of action for fraud and takings in their adversary proceeding against the 

Commonwealth and others that the Title III court previously dismissed. Coop. Br. 

18–25, 31–37. The Cooperativas will have the opportunity to argue about the 

viability of their takings and fraud causes of action in Appeal No. 22-1048, which 

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challenges the order dismissing their adversary proceeding. The issues in this 

appeal of the Confirmation Order are much narrower.

The first issue is whether the Plan properly treats the Cooperativas’ takings 

claim. On that point, there is no dispute between the parties. The Board agrees 

that if the Cooperativas can establish a valid Fifth Amendment takings claim, that 

claim will receive the same treatment as eminent-domain and inversecondemnation takings claims. That is precisely the relief the Cooperativas request 

in this appeal. In reality, the Cooperativas will not be able to establish their takings 

claim, which has already been dismissed by the Title III court. But if the 

Cooperativas somehow prevail in Appeal No. 22-1048 and establish a taking on 

remand, the Board agrees their takings claim would receive the same treatment as 

other takings claims. 

The only issue in dispute concerns the Plan’s discharge of the Cooperativas’ 

fraud claims. The Cooperativas contend they have fraud claims and that those 

claims are not dischargeable under PROMESA. That is incorrect. No provision of 

PROMESA excepts fraud claims from discharge. Section 523(a)(2) of the 

Bankruptcy Code—which excepts fraud claims from discharge in individual 

(human) bankruptcy cases—was not incorporated into PROMESA (see 48 U.S.C. 

§ 2161(a)), a strong indication Congress did not intend for such an exception to 

apply, see Union de Trabajadores de la Industria Eléctrica y Riego v. Fin. 

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Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R.), 7 

F.4th 31, 38 (1st Cir. 2021).

The Cooperativas argue the Title III court should have used its equitable 

powers under § 105(a) of the Bankruptcy Code to except their fraud claims from 

discharge. Coop. Br. 16. But a court’s powers under § 105(a) are limited to 

carrying out provisions of the Bankruptcy Code. See Nw. Bank Worthington v. 

Ahlers, 485 U.S. 197, 206 (1988). A court cannot invoke § 105(a) to create new 

rights or exceptions to discharge not provided in the Code. See In re SPM Mfg. 

Corp., 984 F.2d 1305, 1311 (1st Cir. 1993); In re Perez, 411 B.R. 386, 402 

(D. Colo. 2009). The Title III court thus did not abuse its discretion when it 

declined to rule the Cooperativas’ fraud claims are not dischargeable under 

§ 105(a).

III. Suiza argues it holds a takings claim against the Commonwealth that

cannot be discharged by the Plan. Suiza Br. 12–27. The Title III court correctly 

rejected that argument because Suiza’s claim arises from a breach of contract, not a 

taking. FOMB-Add116. Suiza effectively concedes the point when it declares the 

“basis” of its claim is ORIL’s failure to pay the regulatory accrual due under the 

Settlement Agreement. Suiza Br. 17–18. Because Suiza’s right to payment arises 

under a contract (the Settlement Agreement), it was properly impaired and 

discharged. See, e.g., In re City of Stockton, 909 F.3d 1256, 1266 (9th Cir. 2018).

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Suiza contends its claim should be treated as a takings claim because a court 

supposedly ruled Suiza suffered a taking. Suiza Br. 15–17. No court ever issued 

such a ruling, however. Rather, Suiza secured a preliminary injunction by 

demonstrating a likelihood of success on its takings allegation in an earlier lawsuit, 

see Irizarry, 587 F.3d at 472, and that injunction was dissolved more than eight 

years ago when Suiza voluntarily dismissed the suit before final judgment. In all 

events, the Settlement Agreement changed the nature of Suiza’s rights. By 

agreeing to dismiss with prejudice its lawsuit alleging a taking, Suiza voluntarily 

extinguished any rights under the Takings Clause in exchange for contractual 

rights. See Suiza-App5–9.

Suiza also argues its contractual right to payment of the regulatory accrual 

under the Settlement Agreement represents just compensation for a taking, and it 

therefore has a takings claim. Suiza Br. 18–19. The Settlement Agreement does 

not state the regulatory accrual is just compensation for a taking, however. To the 

contrary, the government parties to the Settlement Agreement expressly denied any

taking had occurred. See Suiza-App5–6. Moreover, this Court held the regulatory 

accrual required by the preliminary injunction in Suiza’s former lawsuit did not

represent just compensation for a taking. See Irizarry, 587 F.3d at 479–80. 

Because that same regulatory accrual was incorporated into the Settlement 

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Agreement, the accrual under the Settlement Agreement likewise does not 

represent just compensation for a taking.

Suiza’s remaining objections to the Plan fail for the reasons explained 

below.

IV. The Court lacks jurisdiction over the Individual Appellants’ appeal 

because the sole issue identified in their notice of appeal concerns the preemption 

of Acts 80–82, which was not decided below because Acts 80-82 were previously 

invalidated. See Individual-Add254 (limiting appeal to purported “holding that 

Act 80-2020, Act 81-2020, and Act 82-2020 are preempted by PROMESA”); 

FOMB-Add97 (declining to decide preemption question). 

The Individual Appellants challenge the Stipulation, which invalidated Acts 

80–82 and was so-ordered by the Title III court. The order adopting the 

Stipulation was not appealed, however, and cannot be challenged in this appeal. 

The Individual Appellants lack standing to challenge the Stipulation in any event 

because they were not parties to it or to the adversary proceeding in which the 

Stipulation was ordered.

STANDARD OF REVIEW

When reviewing an order confirming a plan of adjustment, this Court 

reviews conclusions of law de novo and factual findings for clear error. In re SW 

Bos. Hotel Venture, LLC, 748 F.3d 393, 402 (1st Cir. 2014). The standard of 

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review of determinations of mixed questions of law and fact is clear error when the 

mixed question is largely factual. U.S. Bank Nat. Ass’n ex rel. CWCapital Asset 

Mgmt. LLC v. Vill. at Lakeridge, LLC, 138 S. Ct. 960, 967 (2018). When the 

Title III court declines to exercise its power under 11 U.S.C. § 105, its decision is

reviewed for abuse of discretion. In re Crocker, 362 B.R. 49, 53 (B.A.P. 1st Cir. 

2007).

ARGUMENT

I. THE TITLE III COURT ERRED IN HOLDING PREPETITION, 

UNSECURED JUST-COMPENSATION CLAIMS ARE NONDISCHARGEABLE AND MUST BE PAID IN FULL. 

The claimants here allege prepetition takings of their private property by the 

Commonwealth through either eminent-domain or inverse-condemnation 

proceedings. To the extent the Commonwealth set aside money for such claims, 

the Plan transfers the money to the claimants. None of the remaining claims at 

issue are secured by any property. Therefore, all claims for just compensation 

beyond amounts deposited with the Commonwealth court are prepetition,

unsecured claims. They are prepetition claims because all the takings occurred 

prepetition, and the Supreme Court has definitively ruled takings claims arise at the 

time of taking. See Knick v. Twp. of Scott, 139 S. Ct. 2162, 2171 (2019).

Nothing in Title III grants priority to takings claims or requires them to be 

paid in full. PROMESA § 301(a) incorporates Bankruptcy Code § 507(a)(2),

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which grants priority only to administrative expenses allowed under Bankruptcy 

Code § 503(b) as necessary expenses to preserve property. Prepetition takings 

claims clearly are not allowable administrative expenses.

The constitution grants Congress the bankruptcy power to legislate the 

discharge of debts, see Stellwagen v. Clum, 245 U.S. 605, 616 (1918); Hanover 

Nat’l Bank v. Moyses, 186 U.S. 181, 192 (1902), and the Fifth Amendment 

requires payment of just compensation for takings. Nothing in the Constitution 

provides prepetition takings claims cannot be discharged. The Title III court relied 

on the Supreme Court’s rulings in Radford, 295 U.S. 555, and Security Industrial 

Bank, 459 U.S. 70, that the bankruptcy power is subject to the Fifth Amendment to 

conclude prepetition Fifth Amendment takings claims cannot be discharged. But 

the Supreme Court’s rulings were in the context of requiring Fifth Amendment 

treatment of property interests held by creditors in specific property during 

bankruptcy cases, not treatment of prepetition, unsecured claims. Blanchette v. 

Connecticut General Insurance Corps., 419 U.S. 102, 162 (1974) is another 

example of the Supreme Court applying the Fifth Amendment to a postpetition—

not prepetition—taking. 

The Title III court applied the Supreme Court’s rulings about the treatment 

of secured claims existing during bankruptcy cases to the treatment of prepetition, 

unsecured claims. See FOMB-Add106–13. That was error. Indeed, Radford

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explained the Fifth Amendment requires protection of “rights in specific property,”

295 U.S. at 601, not non-dischargeability. In the sentence immediately following 

Radford’s ruling that the bankruptcy power is subject to the Fifth Amendment, 

Radford ruled the claims are dischargeable: “Under the bankruptcy power 

Congress may discharge the debtor’s personal obligation, because, unlike the 

States, it is not prohibited from impairing the obligation of contracts.” Id. at 589.

Here, claimants have no postpetition “rights in specific property.” All their 

property rights were taken prepetition. That is why the Fifth Amendment does not 

require full payment of their prepetition, unsecured takings claims. In Kuehner v. 

Irving Trust Co., 299 U.S. 445 (1937), the Supreme Court demonstrated the Fifth 

Amendment does not require full payment of unsecured claims. There, a landlord 

attempted to invoke the Fifth Amendment and Radford to avoid operation of a 

section of the Bankruptcy Act of 1898, as amended, that artificially capped 

landlord damage claims against their debtor-tenants for rejection of their leases. 

The cap effectively took from the landlord a portion of the damage claim it had 

under state law and limited the amount the landlord could collect from the debtor’s 

estate. The Supreme Court observed that, unlike Radford, the landlord had no lien 

or other property interest in the debtor’s assets, and held the Fifth Amendment 

“does not prohibit bankruptcy legislation affecting the creditor’s remedy for its 

enforcement against the debtor’s assets, or the measure of the creditor's 

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participation therein, if the statutory provisions are consonant with a fair, 

reasonable, and equitable distribution of those assets.” Kuehner, 299 U.S. at 452.

Thus, contrary to the Title III court’s ruling, Kuehner shows that the absence 

of a lien or other property interest makes a difference in applying the Fifth 

Amendment. Without a property interest, the creditor’s claim is subject to 

payment on any equitable basis. It does not require payment in full. 

The Title III court asserted the existence of a security interest in specific 

property “is not determinative of Fifth Amendment protection.” FOMB-Add105. 

To be sure, the Fifth Amendment applies to multiple property interests, not just 

security interests. For instance, if a litigant has an ownership interest in property 

during the bankruptcy case and the government takes the property during the 

bankruptcy case, the Fifth Amendment would require full payment of just 

compensation. The debtor’s liability for full payment would be an allowable 

administrative expense under Reading v. Brown, 391 U.S. 471 (1968). But here, 

none of the claimants has a property interest. They have only prepetition,

unsecured claims for money. Under Kuehner, those claims are subject to any 

equitable distribution of the debtor’s assets, not payment in full. 

The Courts of Appeals addressing the issue unanimously agree the Takings 

Clause protects only specific property interests in bankruptcy cases, not unsecured 

claims. See, e.g., In re Nichols, 440 F.3d 850, 854 (6th Cir. 2006) (explaining the 

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Takings Clause protects only a “property right . . . in the collateral that secures the 

debt”); In re Treco, 240 F.3d 148, 161 (2d Cir. 2001); In re Briggs Transp. Co., 

780 F.2d 1339, 1342 (8th Cir. 1985); In re Quanta Resources Corp., 739 F.2d 912, 

922 n.11 (3d Cir. 1984). The Title III court’s reliance on the Fifth Amendment to 

infuse claimants’ prepetition, unsecured takings claims with a right to payment in 

full is simply contrary to established law. 

The Title III court rejected the Board’s argument that, even during a 

bankruptcy case, the bankruptcy power can avoid property interests protected by 

the Fifth Amendment. FOMB-Add111 n.41. The Title III court asserted the 

avoidable transfers are already avoidable by applicable state law. Id. That is true 

for some avoidable transfers, but not others. Before bankruptcy, when a debtor 

pays a valid debt, its creditor receives clear and valid ownership of the money the 

debtor paid. But Bankruptcy Code § 547 can take the money away from the 

creditor as a voidable preference. Avoidance of the preferential transfer is not 

avoidable by state law. The Supreme Court has nonetheless recognized the 

bankruptcy statute can take valid property rights by its “invalidation of transfers

working a preference.” Wright v. Union Cent. Life Ins. Co., 304 U.S. 502, 517 

(1938). On the Title III court’s theory, an entity deprived of the money the debtor 

paid it suffers a taking that must be repaid in full. Clearly, no purpose would be 

served by avoiding a preferential transfer if it has to be repaid in full, which it does 

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not. The Supreme Court has never held preference transferees hold nondischargeable claims for just compensation; indeed, requiring such compensation 

would effectively defeat the point of avoidance, which is to ensure equitable

distribution of the debtor’s property among all creditors of equal priority. See 

Begier v. IRS, 496 U.S. 53, 58 (1990). The Code’s numerous other avoidance 

provisions—none of which has been held unconstitutional—further illustrate the 

point. See, e.g., 11 U.S.C. § 544(a) (avoidance of otherwise valid but unperfected 

security interests); id. § 545 (avoidance of otherwise valid statutory liens in certain 

circumstances); id. § 548(a) (avoidance of certain transfers regardless of their 

state-law validity).3

Several analogies show the Title III court’s ruling is also inconsistent with 

the understanding of the Fifth Amendment that has shaped bankruptcy practice and 

jurisprudence. First, when a debtor consumes its creditor’s collateral before

bankruptcy, Bankruptcy Code § 506 does not give the creditor an allowable 

 3 The Title III court notably acknowledged that, by its logic, the Takings Clause 

could “preclude a debtor’s exercise of avoidance powers.” FOMB-Add112. The 

court insisted that avoidance would be limited only in “highly specific” 

circumstances. Id. The court thus conceded its theory upends operation of the 

bankruptcy statute itself in some circumstances. The Title III court also ignored 

that contracts have been held to be property protected by the Fifth Amendment 

from taking. Lynch v. United States, 292 U.S. 571, 579 (1934). The Title III 

court’s reasoning, taken to its logical conclusion, means contract claims cannot be 

impaired and discharged, writing the bankruptcy power out of the Constitution.

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secured claim for the prepetition destruction of the collateral. It grants only a 

secured claim based on the remaining collateral value during the bankruptcy case. 

Second, when a secured claimholder desires adequate protection against the 

diminution of the value of its collateral arising from operation of the bankruptcy 

law, the law is clear that its entitlement to adequate protection commences with its 

postpetition request for adequate protection. In re Ahlers, 794 F.2d 388, 395 n.6 

(8th Cir. 1986) (“[T]he starting date should not be when the petition is filed, but 

rather when the secured creditor seeks either possession of the collateral or 

adequate protection . . . .”), rev’d on other grounds, 485 U.S. 197 (1988); In re 

Big3D, Inc., 438 B.R. 214, 228 (B.A.P. 9th Cir. 2010) (“A significant majority of 

later decisions follow Ahlers’ lead in setting the point for commencement of 

adequate protection payments at the filing of the motion for relief from stay or 

adequate protection” and collecting cases).

In sum, allowing discharge of the instant unsecured prepetition takings 

claims would not violate Radford or make the bankruptcy power any less “subject 

to” the Fifth Amendment. Rather, it would mean that the Fifth Amendment and 

the bankruptcy power have two different effects at two different times: (i) in the 

past, the Takings Clause gave the claimant a claim for just compensation; and 

(ii) later, PROMESA allowed that claim to be adjusted in a Title III case. 

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PROMESA did not cause the taking, and thus the bankruptcy power’s being 

subject to the Fifth Amendment is not violated. 

The Title III court observed the Constitution provides the remedy of just

compensation as a reason why no statute can discharge it. First, outside 

bankruptcy, just-compensation claims are routinely modified by operation of law 

after the taking occurs. For example, such claims “can become time-barred just 

like any other claim can” without violating the Fifth Amendment. Block v. North 

Dakota, 461 U.S. 273, 292 (1983); see also Soriano v. United States, 352 U.S. 270, 

277 (1957); Gilbert v. City of Cambridge, 932 F.2d 51, 57–59 (1st Cir. 1991). As 

with other claims, the expiration of the limitations period “bars the remedy” of just 

compensation even if it “does not extinguish the substantive right” under the 

Takings Clause. See Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 

504 (2001). So, too, the claim can be waived or settled at less than full value. 

Notably, the two circuits that have addressed the issue determined the 

constitutional origin of claims for just compensation does not preclude their 

adjustment in bankruptcy. Stockton, 909 F.3d at 1268 (rejecting argument that a 

takings claim “has protected status because it was originally founded as a 

constitutional claim”); Poinsett Lumber Mfg. v. Drainage Dist. No. 7, 119 F.2d 

270, 272–73 (8th Cir. 1941) (holding that a just-compensation claim is not 

“invested with a constitutional sanctity beyond other forms of liability” that limits 

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its adjustment).4 And the Ninth Circuit specifically held unsecured claims for 

payment arising from prepetition takings almost identical to those at issue here are 

dischargeable, consistent with the Fifth Amendment. See Stockton, 909 F.3d at 

1268–69. The Ninth Circuit’s reasoning is unassailable and should be adopted by 

this Court. 

Just as in this case, the claimant in Stockton held a prepetition claim for just 

compensation (beyond amounts deposited in the claimant’s favor in California 

court) based on the prepetition taking of his property by the municipal debtor. The 

Ninth Circuit held the claim could be impaired and discharged. The court 

acknowledged “the bankruptcy power is subject to the Fifth Amendment,” but,

consistent with Kuehner, ruled the claimant lacked a “property interest cognizable 

as such in bankruptcy” because his just-compensation claim was not tethered to 

any “actual property interest.” See id. at 1268. That interest had been 

“extinguished long before the bankruptcy was filed,” when the claimant’s property 

 4 The Title III court distinguished Poinsett as factually inapposite on various 

grounds, including that the claimant there had failed to timely preserve its 

objection and that the case had centered on whether a governmental agency was 

involved for purposes of establishing equity jurisdiction. FOMB-Add108–10. 

None of those distinctions makes any difference regarding the Eighth Circuit’s 

legal determination that claims for just compensation are not impervious to 

adjustment in bankruptcy. Poinsett was a debtor under the Bankruptcy Act’s 

chapter for municipal debtors. Poinsett was created by the legislature, formulated 

plans for drainage improvements, and levied a tax or special assessment to meet 

the principal and interest on the district’s bonds.

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was taken by the debtor. Id. at 1268–69. All that remained was an “unsecured 

claim for greater compensation,” which was adjustable in bankruptcy the same as 

“other constitutionally based lawsuits seeking money damages, such as § 1983 

claims.” See id. at 1268.

The Title III court declined to follow Stockton based in part on its view 

(contrary to all authority discussed supra) that the distinction between secured and 

unsecured claims “lacks any clear basis in Supreme Court jurisprudence.” See 

FOMB-Add110. Instead, the Title III court sided with the dissenting judge’s view 

that all Fifth Amendment claims “pass through bankruptcy unaffected.” FOMBAdd110–11 (citing Stockton, 909 F.3d at 1278 (Friedland, J., dissenting)). That 

view, however, was premised on one assumption that corroborates the Board’s 

position. Judge Friedland asserted the claimant retained a pospetition interest in 

the property. Stockton, 906 F.3d at 1276 (Friedland, J., dissenting). Judge 

Friedland’s view was also based on another assumption the Supreme Court has 

overturned. She assumed a violation of the Fifth Amendment does not occur until 

just compensation is actually denied. Id. at 1274 (Friedland, J., dissenting) (“[N]o 

constitutional violation occurs until just compensation has been denied.”) (citing

Williamson Cnty. Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 

U.S. 172, 194 n.13 (1985)). Judge Friedland’s assertion corroborates the Board’s 

position that the existence of a property interest during the bankruptcy is critical to 

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Fifth Amendment claims. Additionally, the Supreme Court has since ruled the 

Fifth Amendment claim arises “at the time of the uncompensated taking,” Knick, 

139 S. Ct. at 2172, and overruled Williamson County, the key precedent on which 

Judge Friedland relied. 

Second, the Takings Clause is not the only constitutional provision for which 

the Constitution itself prescribes the remedy; damages actions may be “implied 

directly under the Constitution” when other constitutional rights are violated. 

Davis v. Passman, 442 U.S. 228, 230 (1979) (implying damages remedy for 

violations of Fifth Amendment’s Due Process Clause); see also Carlson v. Green, 

446 U.S. 14, 19 (1980) (Eighth Amendment’s Cruel and Unusual Punishments 

Clause); Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 

U.S. 388, 396 (1971) (unreasonable searches and seizures under Fourth 

Amendment). There is no basis to elevate damages remedies for some 

constitutional violations above others in bankruptcy, ensuring full payment on 

Fifth Amendment claims while allowing the discharge of others. The Supreme 

Court has consistently rejected attempts to create such a hierarchy of constitutional 

rights. See Caplin & Drysdale v. United States, 491 U.S. 617, 628 (1989) 

(rejecting any “distinction between, or hierarchy among, constitutional rights”).5

 

 5 The hierarchy of rights created by the Title III court is not only contrary to 

Supreme Court precedent but is based on misreading of the Bill of Rights. 

Constitutional amendments protecting personal liberty interests and freedoms 

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The Court has similarly deemed “the abstract ‘value’ or ‘importance’ of 

constitutional rights” an impermissible measure of damages for constitutional 

violations. See Memphis Cmty. Sch. Dist. v. Stachura, 477 U.S. 299, 310 (1986). 

Similarly, although 42 U.S.C. § 1983 provides a remedy for constitutional 

violations, § 1983 claims are “routinely adjusted in bankruptcy.” Stockton, 909 

F.3d at 1268. The Title III court thought this point conflated constitutional 

guarantees (like the Takings Clause) with statutory remedies. FOMB-Add110. 

But regardless of their statutory nature, § 1983 claims vindicate Constitutional 

rights. See Gonzaga Univ. v. Doe, 536 U.S. 273, 285 (2002) (“[Section] 1983 

merely provides a mechanism for enforcing . . . rights independently ‘secured by 

the Constitution.’”); Butz v. Economou, 438 U.S. 478, 504 (1978) (“The § 1983 

action was provided to vindicate federal constitutional rights.”). It would be 

counterintuitive to distinguish among constitutional violations and allow, say, 

prepetition, unsecured First Amendment violations to be dischargeable in 

 

accomplish their goals by prohibiting conduct altogether. The First Amendment, 

for example, prohibits the passage of laws restricting speech and religion. 

Unsurprisingly, amendments prohibiting conduct do not permit violations if the 

government pays compensation after the fact. The Fifth Amendment, by contrast, 

does not prohibit governmental takings; it allows takings but, to protect rights in 

property, it obligates the government to pay just compensation. It is illogical to 

infer from that payment requirement that just-compensation claims must be paid in 

full in bankruptcy while other constitutional claims for damages can be discharged 

and paid in bankruptcy dollars.

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bankruptcy but not prepetition, unsecured Fifth Amendment claims, simply 

because of their means of enforcement, when all are equally fundamental rights. 

Finally, as a practical matter, the Title III court’s ruling endangers the ability 

of municipalities to restructure debt—to the detriment of takings claimants. 

Property owners aggrieved by municipal property regulations are entitled to seek 

compensation equivalent to the property’s value through inverse-condemnation 

actions. See United States v. Dow, 357 U.S. 17, 21–22 (1958). A broad range of 

regulations could give rise to such claims, such as regulations protecting wetlands 

by prohibiting development, Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992), 

and regulations making trade secrets public, Ruckelshaus v. Monsanto Co., 467 

U.S. 986 (1984). Depending on the extent of the regulations and the diminution in 

property value, such regulations could result in monetary claims against the 

municipality so substantial that the municipality is forced into bankruptcy. Under 

the Title III court’s logic, the claimants would hold non-dischargeable claims to the 

municipality’s revenues. That would effectively stop the municipality from 

reorganizing into a financially sustainable entity, as it would be barred from 

adjusting precisely the debts that forced it into bankruptcy in the first place, and

would force such creditors to simply race to the courthouse to enforce judgments 

against the municipality. 

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II. THE COOPERATIVAS’ ARGUMENTS AGAINST CONFIRMATION 

ARE MERITLESS.

The Cooperativas’ appeal centers on the fraud and “takings” claims they 

asserted in an adversary proceeding dismissed before confirmation for failure to 

state valid claims. See Coop. Br. 18–25, 31–37. Below, the Cooperativas objected 

to the Plan on the ground that it failed to except their fraud and “takings” claims 

from discharge. See Coop-App647–78. The Title III court correctly overruled 

those objections, referencing its order dismissing the Cooperativas’ adversary 

proceeding. FOMB-Add104. In that earlier order, the court explained that fraud 

claims are not excepted from discharge under PROMESA and that the 

Cooperativas had not alleged viable takings claims regardless of whether takings 

claims are excepted from discharge as a general matter. See FOMB-App274–317.

On appeal, the Cooperativas attack the order dismissing their adversary 

proceeding, arguing the Title III court incorrectly dismissed their fraud and 

“takings” claims on the merits. Coop. Br. 18–25, 31–37. Those arguments have 

no place in this appeal. Whether the Cooperativas have stated valid fraud and 

takings claims against the Commonwealth is the subject of a different appeal, 

No. 22-1048, which challenges the order dismissing the adversary proceeding. 

The present appeal concerns whether the treatment the Plan provides for the 

Cooperativas’ claims is permissible. For the reasons explained below, the answer 

is “yes.”

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If the Cooperativas prevail in Appeal No. 22-1048 and their fraud and 

“takings” claims are reinstated, and if the Cooperativas ultimately prove those 

claims on the merits, the Plan would treat those claims appropriately as general 

unsecured claims, or the Commonwealth would provide full payment of just 

compensation for the “takings” claims if the Title III court’s ruling at issue in the 

Board’s cross-appeal is affirmed and becomes final. Thus, the Cooperativas have 

nothing to complain about here. The Court should decline the invitation to 

determine as part of this appeal whether the Cooperativas have adequately alleged 

fraud and “takings” claims because that issue is irrelevant to confirmation and 

would turn this appeal into a duplicate of No. 22-1048. See In re Dietrich, 490 

F. App’x 802, 804 (6th Cir. 2012) (“[T]he main bankruptcy case and adversary 

proceeding must be treated as distinct for the purpose of appeal.”); see In re 

Dorsey, 870 F.3d 359, 362–63 (5th Cir. 2017) (same).

A. The Cooperativas’ “Takings” Claims Will Receive Proper 

Treatment.

Were the Cooperativas to prevail in Appeal No. 22-1048 and ultimately 

establish their takings claims, the Board agrees those claims would receive the 

same treatment afforded other takings claims. Because that treatment is precisely 

what the Cooperativas request, no dispute exists between the parties concerning the 

treatment of takings claims. See, e.g., Coop. Br. 15 (arguing Plan should treat their 

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takings claims the same as other takings claims “should this Honorable Court 

reverse the dismissal of AP18-00028”).

The Title III court ruled the Fifth Amendment requires takings claims to be 

paid in full. FOMB-Add112. In accordance with that ruling, the Plan currently 

provides for full payment of eminent-domain and inverse-condemnation takings 

claims. Coop-App946–47, § 58.1. The Board has challenged that ruling in its

cross-appeal and seeks to treat unsecured takings claims as general unsecured 

claims. See Point I, supra. Regardless of the outcome of the cross-appeal, the 

Board agrees that valid takings claims, if any, held by the Cooperativas would 

receive the same treatment under the Plan as valid unsecured eminent-domain and 

inverse-condemnation takings claims. The Cooperativas thus have no basis to 

complain about the Plan’s treatment of their takings claims: If they are correct that 

the Fifth Amendment requires takings claims to be paid in full (an issue to be 

decided in the cross-appeal), and if they prevail on their takings claims (an issue to 

be decided in Appeal No. 22-1048 and, if this Court reverses, on remand), their 

takings claims will be paid in full.

The Cooperativas’ discussion of the merits of their takings claims is 

irrelevant to this appeal. Coop. Br. 18–25.6

 This Court will decide in Appeal 

 6 The Board disputes the Cooperativas’ arguments concerning the viability of their 

takings claims but will address those arguments in Appeal No. 22-1048. The 

discussion of Penn Central Transportation Co. v. City of New York, 438 U.S. 104 

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No. 22-1048 whether the Cooperativas have stated viable takings claims. For 

purposes of this appeal, the only salient point is that the Cooperativas’ valid 

takings claims, if any, will be treated the same way as other valid takings claims.

B. The Plan Was Not Required to Except the Cooperativas’ Fraud 

Claims from Discharge.

The Cooperativas’ fraud claims against the Commonwealth in the adversary 

proceeding have been dismissed for failure to state valid claims. FOMB-App316–

17. If this Court were to reinstate those claims in Appeal No. 22-1048, and if the 

Cooperativas were ultimately to prove them on the merits, the Plan would 

discharge those claims and treat them as subordinated pursuant to 11 U.S.C. 

§ 510(b). See Coop-App429 (defining “[§] 510(b) Subordinated Claims”); CoopApp480–81 (providing treatment of § 510(b) Subordinated Claims). Section 

510(b) provides all claims “for damages arising from the purchase or sale of [a 

security of the debtor or of an affiliate] . . . shall be subordinated to all claims or 

interests that are senior to or equal to the claim or interest represented by such 

security . . . .” 11 U.S.C. § 510(b) (incorporated by 48 U.S.C. § 2161(a)). The 

 

(1978) (Coop. Br. 24–25) is particularly inapt because the Title III court’s Penn 

Central analysis addressed an argument the Cooperativas advanced below in 

opposition to confirmation but have abandoned on appeal—namely, that approval 

of the Plan itself would constitute a taking.

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Cooperativas’ fraud claims all arise from their purchase of securities and thus fall 

squarely within § 510(b).

7

The Cooperativas argue PROMESA requires the Plan to except their claims 

from discharge because the claims sound in fraud. Coop. Br. 25–31. They are 

wrong. Nothing in PROMESA excepts fraud claims from discharge. As the 

Cooperativas concede, PROMESA does not incorporate § 523(a)(2) of the 

Bankruptcy Code, which excepts from discharge fraud-based claims against an

individual debtor (not an entity or governmental debtor). See 48 U.S.C. § 2161(a); 

Coop. Br. 27 n.4. Congress’s decision not to incorporate § 523(a)(2) into 

PROMESA is a clear indication Congress did not intend for a fraud exception to 

discharge to apply in Title III. See Union de Trabajadores, 7 F.4th at 38 (ascribing 

meaning to Congress’s choice to incorporate Bankruptcy Code § 507(a)(2), “and 

no other provision of § 507”). In fact, Congress opted not to incorporate any of the 

exceptions to discharge contained in § 523, which underscores its intent that a 

Title III discharge cover all claims. See 48 U.S.C. § 2161(a).

 7 To the extent the Cooperativas’ claims are subordinated, they will receive no 

distribution under the Plan pursuant to the absolute-priority rule. See 11 U.S.C. 

§ 1129(b)(2)(B)(ii).

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The Cooperativas contend other provisions incorporated into PROMESA 

would except their fraud claims from discharge, but the provisions they cite do no 

such thing.

1. 11 U.S.C. § 105(a) Cannot Be Used to Create an Exception to 

Discharge.

The Cooperativas first invoke equitable principles under 11 U.S.C. § 105(a) 

to avoid discharge of their fraud claims. Coop. Br. 28–31. Section 105(a) 

empowers bankruptcy courts to “issue any order, process, or judgment that is 

necessary or appropriate to carry out the provisions of [the Bankruptcy Code].” 11 

U.S.C. § 105(a) (incorporated by 48 U.S.C. § 2161(a)). The Cooperativas contend 

that the court should have used its § 105(a) power to except their fraud claims from 

discharge so as not to reward a supposedly “dishonest Debtor.” Coop. Br. 16. 

The Title III court did not abuse its discretion when it declined to invoke 

§ 105(a) to create an exception to discharge for fraud claims. See Crocker, 362 

B.R. at 53 (reviewing exercise of § 105(a) powers for reversible error). To the 

contrary, the Title III court would have abused its discretion if it had invoked 

§ 105(a) to create a discharge exception Title III does not create. The Title III 

court did not have the power to create a new exception to discharge under § 105(a). 

“Although expansively phrased, [§] 105(a) affords bankruptcy courts considerably 

less discretion than first meets the eye, and in no sense constitutes ‘a roving 

commission to do equity.’” In re Ludlow Hosp. Soc’y, 124 F.3d 22, 27 (1st Cir. 

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1997). Rather, a court’s discretion “is limited and cannot be used in a manner 

inconsistent with the commands of the Bankruptcy Code.” In re Plaza de Diego 

Shopping Ctr., Inc., 911 F.2d 820, 830–31 (1st Cir. 1990); see Ahlers, 485 U.S. at

206 (§ 105(a) “must and can only be exercised within the confines of the 

Bankruptcy Code”). Thus, courts cannot use § 105(a) to create new substantive 

rights not provided in the Bankruptcy Code. SPM Mfg., 984 F.2d at 1311. And, as 

relevant here, they cannot use § 105(a) to create or expand discharge exceptions 

that otherwise do not exist. Perez, 411 B.R. at 402; see also In re Automatic 

Plating of Bridgeport, 202 B.R. 540, 541–42 (Bankr. D. Conn. 1996) (refusing to 

use § 105(a) to extend the § 523(a)(2) exception to corporate debtors).8

 

The Cooperativas fail to cite a single case authorizing a court to employ 

§ 105(a) to legislate, and add what Congress specifically excluded by creating

exceptions to discharge not provided in PROMESA. In re Thrall holds only that 

discharge is an equitable remedy that falls within the purview of a judge, not a 

jury. 196 B.R. 959, 969–70 (Bankr. D. Colo. 1990). Thrall does not hold that 

§ 105(a) authorizes a court to create exceptions to discharge; to the contrary, it 

holds that “[a]lthough [§ 105(a)] gives bankruptcy courts enforcement powers, it 

 8 Cf. In re Valenti, 310 B.R. 138, 141, 145 (B.A.P. 9th Cir. 2004) (improper to use 

§ 105(a) to get around time limits in 11 U.S.C. § 1330(a); In re Jones, 129 B.R. 

1003, 1010–11 (Bankr. N.D. Ill. 1991) (improper to use § 105(a) to get around 

more-specific provisions of 11 U.S.C. §§ 1324 and 1327(a)).

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48

does not extend a bankruptcy court’s authority beyond the purposes and functions 

of the Code.” Id. at 964. In re Jacobson (cited in Coop. Br. at 30) likewise does 

not authorize new exceptions to discharge, but instead holds § 105(a) “authorizes a 

bankruptcy court to fashion such orders as are necessary to further the purposes of 

the substantive provisions of the [Bankruptcy] Code.” 378 B.R. 805, 810–11

(Bankr. E.D. Tex. 2008) (emphasis added). Because no substantive PROMESA

provision recognizes an exception to discharge for fraud claims, Jacobson does not 

advance the Cooperativas’ cause.

9

The Title III court was thus not permitted to create an exception from 

discharge for fraud claims. In all events, it certainly was not required to do so. 

See Crocker, 362 B.R. at 53 (reviewing court’s exercise of § 105(a) powers for 

abuse of discretion). The Cooperativas cite no authority for the remarkable 

 9 In re City of San Bernadino is likewise inapposite. Coop. Br. 30 (citing 566 B.R. 

46 (Bankr. C.D. Cal. 2017). That case did not involve exceptions to discharge. 

Instead, it concerned whether a court could use § 105(a) in connection with thirdparty releases and injunctions in a plan of adjustment. 566 B.R. at 57–58. The 

court held that third-party releases and injunctions were permitted under § 105(a)

only if they are essential to the reorganization. Id. That use of § 105(a) was 

repudiated and rejected in In re Purdue Pharma L.P., 635 B.R. 26, 104 (S.D.N.Y. 

2021). Here, even if City of San Bernadino were good law, which it is not, there 

has been no showing that excepting the Cooperativas from discharge is essential to 

the Commonwealth’s reorganization. To the contrary, excepting claims from 

discharge could only be detrimental to the Commonwealth’s reorganization.

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proposition that the Title III court would have abused its discretion by declining to 

craft a new exception to discharge for fraud claims even if permitted to do so.

The Cooperativas’ invocation of general “equitable powers” fares no better. 

Coop. Br. 29. Again, the Cooperativas cite no authority holding a court may 

invoke “equity” to legislate exceptions to discharge that Congress did not provide 

in PROMESA. The Cooperativas’ attempt to invoke “equity” to justify not 

discharging claims against governmental debtors is particularly untenable because 

it means giving more money to the Cooperativas and less to the people. Even if it 

were possible that “equity” would require certain debts of a private debtor to be

non-dischargeable, such a result would make no sense with respect to a 

governmental debtor, which must be able to survive and continue providing 

services for its constituents. Denying a governmental discharge for certain claims 

would just increase the burden on the taxpayers who rely on the governmental 

debtor for services, a result that would not be “equitable” in any sense of the 

word.10 For similar reasons, courts have refused to assess punitive or treble 

damages against governmental entities because the guiltless taxpayers would 

ultimately bear the punishment. See, e.g., City of Newport v. Fact Concerts, Inc., 

 10 The Cooperativas’ reliance on Root v. Railway Co., 105 U.S. 189 (1882), and 

Liu v. SEC, 140 S. Ct. 1936 (2020), is misplaced because neither case addressed 

discharge in bankruptcy. See Coop. Br. 28.

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453 U.S. 247, 261–62, 266–67 (1981); Lancaster Cmty. Hosp. Dist. v. Antelope 

Valley Hosp. Dist., 940 F.2d 397, 404 (9th Cir. 1991).

2. No Exception to Discharge Exists Under 11 U.S.C. 

§ 944(c)(1).

The Cooperativas also mention in passing § 944(c)(1) of the Bankruptcy 

Code, see Coop. Br. 27, 29, which provides that a debtor is not discharged from 

any debt “excepted from discharge by the plan or order confirming the plan,” 11 

U.S.C. § 944(c)(1) (incorporated by 48 U.S.C. § 2161(a)). That provision has no 

application here because neither the Plan nor the Confirmation Order excepts the 

Cooperativas’ claims from discharge. The same statutory language is in 

Bankruptcy Code § 1141(d)(1) as applied to chapter 11 reorganizations. That 

language has neither been interpreted nor deployed to mean a court can simply 

insert discharge exceptions into a confirmation order. Indeed, both PROMESA

and the Bankruptcy Code grant the debtor the exclusive right to propose a plan. 

11 U.S.C. § 1121; 48 U.S.C. § 2172(a). Courts are not empowered to draft and 

propose plans. They can insert discharge exceptions into the confirmation order 

only when the plan proponent or statute creates the exception as part of the 

restructuring. Section 944(c)(1) by its terms does not require the Title III court to 

except the Cooperativas’ fraud claims from discharge, and the Cooperativas cite no 

authority suggesting the court abused its discretion by declining to create such an 

exception even if it had power to do so.

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3. The Cooperativas’ Discussion of the Merits of Their Fraud 

Claims Is Irrelevant.

As they did with their “takings” claims, the Cooperativas spill significant ink 

arguing the merits of their fraud claims. Coop. Br. 31–37. As with their takings 

claims, the merits of the fraud claims are irrelevant to this appeal. To the extent 

the Cooperativas have allowed claims, they are unsecured claims and will be 

treated as such. The issue here is whether the Plan was permitted to discharge 

those claims, not whether the Cooperativas have valid claims. The Board will 

defend the Title III court’s order dismissing the Cooperativas’ fraud claims in 

Appeal No. 22-1048. For purposes of this appeal, it is sufficient for the Court to 

conclude the Plan and confirmation order were permitted to discharge the fraud 

claims.

C. The Cooperativas’ Remaining Arguments Fail.

The Cooperativas make a series of additional arguments at the back of their 

brief, none of which succeeds. They first argue that their fraud claims “are not a 

mere collection of moneys” and thus cannot be discharged under the Plan. Coop. 

Br. 37. That argument appears to be a restatement of their earlier arguments that 

fraud and takings claims are not dischargeable—arguments addressed above. To 

the extent the Cooperativas are attempting to make an independent argument on 

page 37 of their brief, the argument is neither clear nor developed and is thus 

waived. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990).

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The Cooperativas next contend that they have a First Amendment right to 

have their takings and fraud claims adjudicated on the merits and that the Plan 

cannot be used to “evade judicial evaluation” of those claims. Coop. Br. 38–41. 

That argument fails because the Cooperativas are receiving a “judicial evaluation” 

of their fraud and takings claims. The Title III court reviewed those claims and 

determined that they failed to state a viable claim for relief. FOMB-App316–17. 

This Court will likewise review the viability of the claims in Appeal No. 22-1408. 

If the Cooperativas prevail in Appeal No. 22-1408, they can continue to litigate the 

allowability of their fraud and takings claims in the Title III court. The Plan does 

not “adjudicate” the claims; it merely determines how they would be treated if they 

are allowed.

11

The Cooperativas also argue credit unions are important, and therefore the 

“preservation” of their claims is “required pursuant to the public interest.” Coop. 

Br. 41–44. Again, the Cooperativas can pursue their claims if this Court reverses 

the decision dismissing those claims in Appeal No. 22-1048. The Cooperativas 

 11 For that reason, the Cooperativas’ citation to In re Mansaray-Ruffin, 530 F.3d 

230 (3d Cir. 2008), is of no moment. Coop. Br. 41. The Plan does not purport to 

have preclusive effect on the merits of the Cooperativas’ claims against the 

Title III debtors. It governs only their ultimate dischargeability (should they be 

found meritorious). The Plan merely treats those claims—when and if allowed—

but the merits of those claims are adjudicated in an adversary proceeding separate 

from the confirmation hearing.

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cite no authority, however, holding their claims should be excepted from discharge 

on the grounds that credit unions are in the “public interest.” And certainly, the 

Cooperativas did not provide any evidence or authority to show the Title III court 

abused its discretion by confirming a plan that does not favor the Cooperativas.

Finally, the Cooperativas make a series of arguments about why this appeal 

is not equitably moot. Coop. Br. 44–48. Because the Board has not invoked 

equitable mootness, those arguments are irrelevant.

III. SUIZA’S OBJECTIONS TO THE PLAN WERE PROPERLY 

OVERRULED.

Suiza’s complaints about the Plan’s treatment of its claim are likewise 

unavailing. Suiza primarily argues it has asserted a claim for a taking and that 

takings claims cannot be discharged. Suiza Br. 12–23. That argument fails for the 

simple reason that Suiza does not have a valid takings claim. Suiza, rather, settled

its takings claims for a promise of monetary payments, and those takings claims 

were dismissed as part of the Settlement Agreement. As the Title III court held,

Suiza’s claim arises from its Settlement Agreement with ORIL, and claims for 

breach of contract can be impaired and discharged in bankruptcy. FOMBAdd115–16. 

Based on the record evidence, including a declaration from the Board’s 

executive director and the Settlement Agreement, the Title III court found the dairy 

producers’ claims (including Suiza’s) were correctly classified in their own class 

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and not as part of the general-unsecured-creditor or takings classes. FOMBAdd54–55. That finding was not clearly erroneous. See Anderson v. Bessemer 

City, 470 U.S. 564, 573–74 (1985).

Moreover, even if Suiza did have a takings claim, it would be unsecured, 

and for the reasons stated in the Board’s cross-appeal, a prepetition, unsecured 

takings claim is dischargeable. See Point I, supra. Suiza’s other objections to the 

Plan likewise fail for the reasons stated below.

A. Suiza Does Not Have a Takings Claim.

Suiza’s claim against the Commonwealth arises from the Settlement 

Agreement, which settled a prepetition litigation challenging ORIL’s price-fixing 

regulations as a taking and a violation of the Due Process, Equal Protection, and 

dormant Commerce Clauses. Before a final adjudication on the merits, Suiza 

agreed to dismiss all its claims, including its takings claim, with prejudice in 

exchange for certain promises, including that ORIL would make certain payments 

to Suiza. Suiza-App5–12; see Pagan, 748 F.3d at 18. Suiza’s right to payment 

from the Commonwealth thus arose out of the Settlement Agreement, as the Title 

III correctly found. FOMB-Add115–16. Suiza concedes the point, asserting that 

the Settlement Agreement requires payment of a regulatory accrual and that unpaid 

portions of the regulatory accrual form “the basis for Suiza’s [proof of claim].” 

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Suiza Br. 17–18. Moreover, its proof of claim describes its right to payment by 

referencing and attaching the Settlement Agreement. Suiza-App1–60.

Under Puerto Rico law, a settlement agreement is a contract, Rivera-Rosario 

v. U.S. Dep’t of Agric., 202 F.3d 35, 37 (1st Cir. 2000), a breach of which gives 

rise to a right to payment of damages, Dopp v. HTP Corp., 947 F.2d 506, 511 (1st 

Cir. 1991). And because Suiza’s right to payment arises under a contract, it can be 

discharged. See, e.g., Stockton, 909 F.3d at 1266 (“[A] contractual . . . right for 

monetary relief . . . can be adjusted in bankruptcy.”).

Manifestly, once Suiza noticed the Title III court was ruling prepetition 

takings claims must be paid in full and are non-dischargeable, Suiza was 

dissatisfied it had agreed to promises of money payments and dismissed its takings 

claims. Those are the facts, however, and Suiza cannot use confirmation to amend 

its settlement agreement.

Suiza attempts to amend the Settlement Agreement by contending its right to 

payment does not arise from the Settlement Agreement but instead from a taking 

by the Commonwealth. Suiza Br. 12–23. In its view, the district court and this 

Court previously determined that a taking occurred, and the Settlement Agreement 

“in no way erases that.” Suiza Br. 18–19. There are two flaws in that argument. 

First, no court has ever held that Suiza suffered a taking. The district court granted 

a preliminary injunction and in so ruling found that Suiza was likely to succeed on 

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its due-process, equal-protection, and takings claims. See Suiza-App2926. This 

Court affirmed that Suiza had a “likelihood of success” solely on the due-process 

ground, not reaching the takings or other claims. Irizarry, 587 F.3d. at 483 n.18. 

A preliminary injunction is not a final ruling on the merits. See Univ. of Tex. v. 

Camenisch, 451 U.S. 390, 395 (1981). Once Suiza agreed to settle and dismiss its 

claims with prejudice, the dismissal dissolved the preliminary injunction without 

any final adjudication of whether a taking had occurred. See Chaparro-Febus v. 

Int’l Longshoremen Ass’n, Loc. 1575, 983 F.2d 325, 331 n.5 (1st Cir. 1992) 

(“[P]reliminary injunctions, which are interlocutory in nature, cannot survive a 

final order of dismissal.”); 11A Charles Alan Wright & Arthur R. Miller, Federal 

Practice and Procedure § 2947 (3d ed. 2021).

Second, contrary to Suiza’s assertion, the Settlement Agreement did change 

the nature of Suiza’s rights. In the Settlement Agreement, Suiza agreed to dismiss 

its takings and other claims with prejudice. Suiza-App6. That dismissal 

extinguished any rights Suiza might have had under the Takings Clause and 

replaced them with contractual rights under the Settlement Agreement. See 

Langton v. Hogan, 71 F.3d 930, 935 (1st Cir. 1995) (explaining that when parties 

“agree to a settlement of [a] dispute and entry of a judgment with prejudice based 

on that settlement, then the terms of that judgment in relation to that legal issue are 

subject to res judicata principles”). Suiza contends the Settlement Agreement did 

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not “relieve the government from its duty to provide just compensation.” Suiza Br. 

14; see also id. at 19. But of course it did. Suiza voluntarily decided to avoid the 

risk and expense of litigation by dismissing its takings claim in exchange for

contractual rights to a stream of payments. Once that occurred, it no longer had 

any entitlement to just compensation—even if its takings claim was valid in the 

first place. Suiza would be barred by res judicata from going into court and 

demanding just compensation for its takings claim. It therefore cannot recover on 

a takings claim in Title III, either.12

Suiza argues the regulatory accrual payments required by the Settlement 

Agreement show its claim is for a taking. Suiza Br. 18–19. Its argument proceeds 

in four steps: (1) the preliminary injunction required ORIL to pay Suiza a 

regulatory accrual; (2) the regulatory accrual was just compensation for a taking; 

(3) the Settlement Agreement provides for the same regulatory accrual; therefore 

(4) the Settlement Agreement provides just compensation for the alleged taking. 

Id. That argument fails at the second step and because Suiza’s takings claim was 

 12 Archer v. Warner, 538 U.S. 314, 321–22 (2003) is inapposite because it 

addressed 11 U.S.C. § 523(a)(2)(A), which is not incorporated into PROMESA. 

See 48 U.S.C. § 2161(a). Moreover, it is well settled that exceptions to discharge 

should be construed narrowly in favor of the debtor. In re Tully, 818 F.2d 106, 110 

(1st Cir. 1987). The takings claims exception incorrectly read into PROMESA 

Title III by the Title III court, see Point I, supra, should not be broadly construed to 

encompass Suiza’s claim stemming from a settlement of several constitutional and 

other claims, only one of which related to the Takings Clause.

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dismissed with prejudice. In an appeal of the order granting the preliminary 

injunction, this Court held the regulatory accrual did not constitute just 

compensation for any alleged taking but instead was an “equitable remedy.” See 

Irizarry, 587 F.3d at 479–80 (rejecting attempt to “characteriz[e]” the preliminary 

injunction as “ordering the payment of monetary damages in just compensation for 

a regulatory taking”). Accordingly, the regulatory accrual in the Settlement 

Agreement—which mirrors the regulatory accrual ordered in the preliminary 

injunction—is likewise not just compensation for a taking. Notably, the Settlement 

Agreement itself does not characterize the regulatory accrual as just compensation,

but instead disclaims the allegation that any taking occurred. Suiza-App5.

Knick, 139 S. Ct. 2162, does not help Suiza. See Suiza Br. 14, 19. That case 

merely held the right to and claim for just compensation arises at the time of a 

taking. It did not hold a party like Suiza cannot agree to extinguish a takings claim 

in exchange for a contractual right to payments. If Suiza were correct that a party 

that settles by dismissing its takings claim in exchange for a stream of payments 

can later renege and contend its takings claim was not dismissed with prejudice, it

would undermine the “public policy encouraging the amicable resolution of cases.” 

Id. at 22. Suiza’s concern that parties would be afraid to settle takings claims out 

of fear their rights under a settlement could be discharged in bankruptcy is 

overblown, as settlements are made every day with entities eligible for future 

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bankruptcies. A settling party concerned about insolvency might also negotiate 

settlement terms preserving a just-compensation claim in any event. For example, 

parties can condition a settlement’s going into effect only after the last payment is 

made and thus any rights that the parties had before the settlement would not be 

extinguished until all obligations under the settlement had been fulfilled. That is 

not the case here.

13

B. Suiza’s Procedural Challenge Fails. 

Suiza further misses the mark when it argues the Title III court was not 

permitted to decide in the context of Plan confirmation that Suiza’s claim arose 

from a breach of contract rather than a taking. Suiza Br. 24–27. According to 

Suiza, its proof of claim asserts a taking, and, because no party objected to the 

claim, the court was required to treat it as a takings claim. Id. at 24–25 (citing 11 

U.S.C. § 502(a) for the proposition that a claim not objected to is “deemed 

allowed”). There are several flaws in that argument.

First, Suiza’s proof of claim does not assert a takings claim. Although the 

word “takings” appears, the proof of claim references and attaches the Settlement 

Agreement, including the formulas for determining the amounts owed to Suiza 

 13 Suiza abandons any argument the Plan itself constituted a taking. Suiza Br. 22. 

The Title III court’s conclusion the Plan does not constitute a taking under Penn 

Central, 438 U.S. 104, is therefore not under review in this appeal. See FOMBAdd116–17.

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under the Settlement Agreement. Suzia-App3. It is thus clear from the face of the

proof of claim that Suiza’s right to payment arose under the Settlement Agreement. 

Suiza’s argument that the Title III court “change[d] the nature of the Claim without 

going through the objection to claim process” (Suiza Br. 24) thus fails because 

Suiza’s claim as filed was contractual in nature.

Second, the Plan did not object to or change the nature of Suiza’s claim; it 

merely classified the claim in a non-takings class. By challenging that 

classification, Suiza put into play at the confirmation hearing whether its claim 

should be classified with takings claims or with general unsecured claims.

Third, it is irrelevant a claim is “deemed allowed” if there are no objections. 

Under the Plan, the time to object to claims runs until 180 days after the effective 

date and has thus not expired. Suiza-App4792–93, § 82.1. Accordingly, the 

Commonwealth is not time-barred from challenging Suiza’s proof of claim, 

including, if necessary, any allegation that its right to payment results from a 

“taking.” Besides, to the extent, if any, Suiza’s proof of claim asserted a takings 

claim, the Plan’s classification of it clearly objected to that part of the claim, and 

Suiza litigated it by challenging classification.

Fourth, the question whether Suiza holds a takings or contractual claim was 

properly decided at confirmation rather than during the claims-objection process. 

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objection process is normally designed to determine the amount and priority of 

claims, which are not the issue here. See 11 U.S.C. § 502(b). The issue here was

whether Suiza’s claim is dischargeable or whether it is a takings claim that is 

arguably not dischargeable. Questions of dischargeability may be decided in the 

context of Plan confirmation. See, e.g., In re Hines, 193 F. App’x 391, 397 (6th 

Cir. 2006); In re Andersen, 215 B.R. 792, 795 (B.A.P. 10th Cir. 1998), aff’d, 179 

F.3d 1253 (10th Cir. 1999). Suiza cites no case holding that the “nature” of a 

claim can only be resolved in the claims-objection process rather than at 

confirmation.14

Fifth, Suiza’s position elevates form over substance. Suiza had a full and 

fair opportunity to litigate whether its right to payment arises from a taking or a 

breach of contract. Suiza submitted briefing on that question, see Suiza-App352–

83, 593–96, 1058–70, 3964–80, 3981–85, 3986–89, 3990–93, and it participated in 

argument at the Plan confirmation hearing, see Suiza-App1476–77, 1947–54, 

 14 Varela v. Dynamic Brokers, Inc. (In re Dynamic Brokers, Inc.), 293 B.R. 489, 

497 (B.A.P. 9th Cir. 2003), is inapposite because that case involved an objection to 

the amount of a claim, which is not the issue here. Moreover, the Varela debtor 

“sandbag[ged]” the creditor by inserting a claim objection into a reorganization 

plan in the hopes the creditor would not notice it. 293 B.R. at 497. Here, by 

contrast, Suiza put the nature of its claim at issue in its confirmation objection by 

asserting its claim must be excepted from discharge. See Suiza-App352–83. Suiza 

had notice and opportunity to address whether its claim arose from a taking or a 

breach of contract.

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2709–19. It thus received all the process it was due. See United Student Aid 

Funds, Inc. v. Espinosa, 559 U.S. 260, 272 (2010). As a practical matter, it makes 

no difference whether the takings-versus-contract issue was litigated as part of the 

claims-objection process or at confirmation because the Title III court would have 

reached the same conclusion either way.

15 

C. The Plan Does Not Discriminate Against Suiza. 

Suiza’s argument that the Plan “unfairly discriminates” is just a restatement 

of its argument that it holds a takings claim that cannot be discharged. Suiza Br. 

28–33. Significantly, if the Board’s cross-appeal is sustained, takings claims and 

general claims will be treated equally. Thus there will be no discrimination, let 

alone unfair discrimination between the treatments of takings claims and general 

unsecured claims. If the Board’s cross-appeal is not sustained, the full payment to 

takings claims will be required as a matter of law, and there will be no substance to 

the charge that general unsecured claims not entitled to full payment are suffering 

unfair discrimination. Accordingly, in substance, Suiza is arguing about whether 

its claim is a takings claim, not whether its treatment reflects unfair discrimination. 

 15 Suiza’s contention it should have been given the opportunity to present 

“additional evidence as to the constitutional nature of the claim” makes little sense. 

Suiza Br. 25. Suiza had the opportunity to present evidence below. If the 

Commonwealth further objects to Suiza’s claim, Suiza will have an opportunity to 

respond. 

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The alleged “discrimination” arises from the Plan’s provision of a full recovery for 

parties with takings claims but only a 50% recovery for Suiza. Id.; compare SuizaApp4747, § 57.1, with Suiza-App4747–48, § 58.1. Suiza alleges its claim is for a 

taking and therefore must receive the same treatment as other takings claims. 

Suiza Br. 28. Suiza does not have a takings claim, however.

D. The Plan Does Not Contain Non-Consensual Third-Party 

Releases. 

Suiza’s final challenge to the Plan is puzzling. It complains the Plan 

improperly discharges claims Suiza has against third parties who are not debtors in 

this case. Suiza Br. 33–37. In support, Suiza cites § 57.1(b) of the Plan, which 

provides that, after Suiza receives a distribution from the Commonwealth on its

claim, that claim shall be discharged “and shall not be recouped . . . from any other 

source.” Suiza Br. 33 n.99 (citing Suiza-App3678, § 57.1(b)). Section 57.1(b) is 

not a third-party release, however. It merely provides that once Suiza’s claim 

against the Commonwealth for payment under the Settlement Agreement is treated 

and discharged, Suiza cannot recover any additional money on that claim from the 

Commonwealth or any other signatory to the Settlement Agreement, which are all 

part of the Commonwealth government and not independent entities. See SuizaApp10–12 (signature page). The provision does not release any claims Suiza may 

have against third parties that are not part of the Commonwealth government.

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Suiza argues § 57.1(b) improperly releases a takings claim it has against “the 

public.” Suiza Br. 33. It is not clear what that means. There is no such thing as a 

takings claim against the “public.” If Suiza has a claim for a taking, it would be 

against the Commonwealth government (not the “public”), and it would be 

properly discharged under the Plan. In any event, Suiza voluntarily dismissed with 

prejudice its takings claim, so it no longer has any takings claim at all—never mind 

a takings claim against the “public.” Suiza-App5–6. The Title III court thus 

correctly held that, except for certain releases agreed to by some of the creditors 

not including Suiza, the Plan does not release any claims a creditor holds against 

any non-debtor. FOMB-Add146.

IV. THE COURT LACKS JURISDICTION OVER THE INDIVIDUAL 

APPELLANTS’ APPEAL.

The Court does not have jurisdiction over the Individual Appellants’ appeal, 

which purports to challenge the Title III court’s “holding that Act 80-2020, Act 81-

2020, and Act 82-2020 are preempted by PROMESA.” Individual-Add254. There 

was no such holding below. Instead, the Title III court noted the preemption 

question was “mooted by the Court’s approval of the [Stipulation]” in the prior 

adversary proceeding, which invalidated the Acts on other grounds. FOMBAdd97. There is thus no appealable order and therefore no remedial order this 

Court could issue. See Chevron USA Inc. v. Sch. Bd. Vermilion Parish, 294 F.3d 

716 (5th Cir. 2002) (dismissing appeal where issue was not decided below). 

Case: 22-1119 Document: 00117860420 Page: 81 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

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The appeal is also moot. Even if the Court were to hold PROMESA does 

not preempt Acts 80–82, it would have no practical effect because the Acts are 

already off the books. See Church of Scientology of Cal. v. United States, 506 U.S. 

9, 12 (1992) (dismissing appeal where court could not provide appellant “any 

effectual relief”).

In their opening brief, the Individual Appellants attempt to challenge the 

Stipulation invalidating Acts 80–82, which was so ordered by the Title III court. 

Individual Br. 17–21. The Title III court’s order endorsing the Stipulation was 

never appealed, however, and is now final. The Individual Appellants cannot 

challenge the Stipulation or the order adopting the Stipulation through an appeal of 

the Confirmation Order. The Individual Appellants lack standing to challenge the 

Stipulation in any event because they are neither parties to it nor third-party 

beneficiaries, and they were not parties to the adversary proceeding resolved by the 

Stipulation. See In re Thompson, 965 F.2d 1136, 1148 (1st Cir. 1992).

16

The bottom line is that the only order under review here is the Confirmation 

Order, and that order did not address Acts 80–82. The Individual Appellants lack 

 16 Contrary to the Individual Appellants’ assertion, there is no need for further factfinding to reject their position. Individual Br. 22–27. They have identified no 

facts that would change the analysis.

Case: 22-1119 Document: 00117860420 Page: 82 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

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standing to challenge the Confirmation Order anyway because they did not object 

to the Plan below. See In re Watson, 403 F.3d 1, 7 (1st Cir. 2005). 

CONCLUSION

For the foregoing reasons, the Board respectfully requests that the Court 

reverse the Title III court’s holding that prepetition, unsecured takings claims 

cannot be impaired by the Plan; affirm the Title III court’s ruling that the claims 

brought by Suiza and the Cooperativas can be impaired and discharged; and 

dismiss the appeal brought by the Individual Appellants.

Dated: April 1, 2022 Respectfully submitted,

/s/ Timothy W. Mungovan

TIMOTHY W. MUNGOVAN

JOHN E. ROBERTS

ADAM L. DEMING

PROSKAUER ROSE LLP

One International Place

Boston, MA 02110

Tel: (617) 526-9600

tmungovan@proskauer.com

jroberts@proskauer.com

ademing@proskauer.com

PAUL V. POSSINGER 

PROSKAUER ROSE LLP

70 West Madison, Suite 3800

Chicago, IL 60602

Tel: (312) 962-3550

ppossinger@proskauer.com

JOSEPH S. HARTUNIAN

PROSKAUER ROSE LLP

MARTIN J. BIENENSTOCK

JEFFREY W. LEVITAN

MARK D. HARRIS

BRIAN S. ROSEN

EHUD BARAK

LUCAS KOWALCZYK

PROSKAUER ROSE LLP

Eleven Times Square

New York, NY 10036 

Tel: (212) 969-3000

mbienenstock@proskauer.com

jlevitan@proskauer.com

mharris@proskauer.com

brosen@proskauer.com

ebarak@proskauer.com

lkowalczyk@proskauer.com

Case: 22-1119 Document: 00117860420 Page: 83 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

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1001 Pennsylvania Ave, N.W. 

Suite 600 South

Washington, DC 20004

Tel: (202) 416-6800

jhartunian@proskauer.com

Counsel to the Financial Oversight and Management Board for Puerto Rico, as 

representative of the Commonwealth of Puerto Rico, the Employees Retirement 

System of the Government of the Commonwealth of Puerto Rico, and the Puerto 

Rico Public Buildings Authority

Case: 22-1119 Document: 00117860420 Page: 84 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

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CERTIFICATE OF COMPLIANCE

Pursuant to Fed. R. App. P. 32(g), I hereby certify that this document 

complies with the type-volume limitations set forth in Fed. R. App. P. 

28.1(e)(2)(B)(i) because, excluding the parts of the document exempted by Fed. R. 

App. P. 32(f), this document contains 15,220 words.

I further certify that this document complies with the typeface requirements 

of Fed. R. App. P. 32(a)(5) and the type-style requirements of Fed. R. App. P. 

32(a)(6) because this document has been prepared in a proportionally spaced 

typeface using Microsoft Word 2016 in a 14-point Times New Roman font.

Dated: April 1, 2022

/s/ Timothy W. Mungovan

Timothy W. Mungovan 

Case: 22-1119 Document: 00117860420 Page: 85 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

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69

CERTIFICATE OF SERVICE

I hereby certify that on this same date, I electronically filed the foregoing 

document with the United States Court of Appeals for the First Circuit by using the 

CM/ECF system, which electronically served a copy on all counsel of record. 

Dated: April 1, 2022

/s/ Timothy W. Mungovan

Timothy W. Mungovan

Case: 22-1119 Document: 00117860420 Page: 86 Date Filed: 04/01/2022 Entry ID: 6487128 Case:17-03283-LTS Doc#:24541-5 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

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