230817 MEM ORD RE ADMIN EXP MOT 19520 VERSION AUGUST 17, 2023 1

UNITED STATES DISTRICT COURT

DISTRICT OF PUERTO RICO

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In re: PROMESA

Title III

THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO 

RICO,

as representative of No. 17 BK 3283-LTS

THE COMMONWEALTH OF PUERTO RICO (Jointly Administered)

et al.,

Debtors.1

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MEMORANDUM ORDER GRANTING VERIFIED MOTION OF NTT

DATA EAS, INC. FOR ALLOWANCE OF ADMINISTRATIVE EXPENSE CLAIM

Before the Court is the Verified Motion of NTT DATA EAS, Inc. For Allowance of 

Administrative Expense Claim (Docket Entry No. 19520 in Case No. 17-3283) (the “Motion”), 

filed by NTT DATA EAS, Inc. (“NTT DATA”). The Motion requests allowance of an 

administrative expense claim in the Title III case of the Commonwealth of Puerto Rico pursuant 

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

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

applicable, are the (i) Commonwealth of Puerto Rico (the “Commonwealth”) 

(Bankruptcy Case No. 17-BK-3283-LTS) (Last Four Digits of Federal Tax ID: 3481); (ii) 

Puerto Rico Sales Tax Financing Corporation (“COFINA”) (Bankruptcy Case No. 17-

BK-3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii) Puerto Rico Highways 

and Transportation Authority (“HTA”) (Bankruptcy Case No. 17-BK-3567-LTS) (Last 

Four Digits of Federal Tax ID: 3808); (iv) Employees Retirement System of the 

Government of the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case No. 17-

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

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

of Federal Tax ID: 3747); and (vi) Puerto Rico Public Buildings Authority (“PBA”) 

(Bankruptcy Case No. 19-BK-5523-LTS) (Last Four Digits of Federal Tax ID: 3801) 

(Title III case numbers are listed as Bankruptcy Case numbers due to software 

limitations).

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to section 503(b)(1)(A) of the Bankruptcy Code, 11 U.S.C. § 503(b)(1)(A), and the “fundamental 

fairness” doctrine derived from Reading Co. v. Brown, 391 U.S. 471 (1968).

The Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”), 

acting on behalf of the Commonwealth of Puerto Rico (the “Commonwealth” or “Puerto Rico”)

under Title III of PROMESA, filed an objection to the Motion (Docket Entry No. 20541) (the 

“Objection”), and NTT DATA filed a reply in support of the Motion (Docket Entry No. 21279)

(the “Reply”).

The Court, which has subject matter jurisdiction of this action pursuant to section 

306(a) of PROMESA, 48 U.S.C. § 2166(a), has carefully reviewed the papers submitted in 

connection with the Motion. For the following reasons, the Motion is granted and NTT’s

administrative claim is allowed in the amount of $176,713.20. 

BACKGROUND

Except as otherwise indicated, the following are undisputed facts alleged in NTT 

DATA’s motion and reply papers, or drawn from documents cited therein or annexed thereto.

As early as 2008, NTT DATA began performing services for Puerto Rico’s 

Environmental Quality Board (“EQB” and, together with NTT DATA, the “Parties”), an agency 

under the Department of Natural and Environmental Resources (“DNER”). (Reply ¶ 7.) On or 

about June 13, 2018, NTT DATA submitted a “Proposal for Consulting Services” (“Proposal”) 

to EQB, directed to the attention of EQB’s Executive Director, Tania Vazquez, Esq. 

(“Vazquez”). (Obj. Ex. A at 12.) In the Proposal for the “Continuance of Services for FY2019,” 

NTT DATA details how it would continue the implementation of specific PeopleSoft Modules2

2 Capitalized terms used herein to describe the terms of agreements have the meaning 

given to them in the relevant agreement. 

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and continue its Production Support Services for EQB’s Financials and Human Capital 

Management applications. (Obj. Ex. A at 15.) The Proposal states that the Proposal was 

organized based on conversations NTT DATA had with EQB personnel. (Obj. Ex. A at 15.) 

The Proposal contains a Solution Overview section and provides a description of the 

requirements “as described by” EQB personnel. (Obj. Ex. A at 15.) The Solution Overview 

includes a chart entitled Detailed Scope of Support in which the total estimated hours were 4,400 

(Obj. Ex. A at 19), and it indicates that EQB had requested NTT DATA to submit the Proposal 

and its scope of services. (Obj. Ex. A at 19.) In the Project Assumptions section that follows, 

the Proposal states that NTT DATA may shift hours among tasks to make the most efficient use 

of the time and budget allocated with no corresponding change to the total fixed price. (Obj. Ex. 

A at 21.) 

On September 25, 2018, more than a year after the commencement of the 

Commonwealth’s Title III case, NTT DATA and EQB entered into a contract entitled 

Professional Services Contract (the “Contract”), pursuant to which NTT DATA would, for the 

fiscal year 2018-2019 (ending June 30, 2019), provide support for the production and the 

enhancement of applications made by PeopleSoft, Inc. (Reply ¶ 7; Obj. Ex. A at 10.) The 

Contract was filed with the Commonwealth’s Comptroller’s Office. (Mot. ¶ 7.)

The Contract initially executed by the Parties (the “Original Contract”) contained 

sections entitled “APPEAR”, “LEGAL BASIS”, “STATE”, “TERMS AND CONDITIONS”, 

and “SIGNATURE AND CLOSURE”. (Obj. Ex. A at 1-11.) The “TERMS AND 

CONDITIONS” section of the Original Contract comprised 22 subparts (“ARTICLE I” through 

“ARTICLE XXII”). Article I stated that NTT DATA will provide consulting/professional 

services with all tasks described in the Proposal, and that the Proposal is incorporated into the

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Contract. (Obj. Ex. A at 2.) Article II indicated that NTT DATA will, among other things, 

support the application software at the production stage and assist with the resolution of issues 

that may impact overall system functionality. (Obj. Ex. A at 2-3.) Pursuant to Article IVPayment, NTT DATA was prohibited from billing more than 4,400 labor hours during the term 

of the Original Contract and EQB would not compensate (and NTT DATA was not allowed to 

bill) more than $445,142.00. (Obj. Ex. A at 4.) Article IV also contained a clause (the “May 

Not Exceed Clause”) stating that “NTT DATA may not exceed the total amount to be paid nor 

the maximum number of hours to be billed nor the monthly estimate of billing.” (Obj. Ex. A at 

4.) Article XXII states that the effective date of the contract will be September 25, 2018, to June 

30, 2019, and that EQB has full discretion to terminate the Contract by sending a written 

notification to NTT DATA. (Obj. Ex. A. at 10.) 

The Contract was amended for the first time on April 8, 2019 (the “First 

Amended Contract”) and it contained the same sections, but the Terms and Conditions section 

was limited to one article: Article IV. (Obj. Ex. A at 25-27.) The First Amended Contract’s 

version of Article IV did not contain a billable hour cap and all references to the hours cap were 

removed from it. (Obj. Ex. A at 26.) The May Not Exceed Clause was changed to read: “NTT 

DATA may not exceed the total amount to be paid . . . .” (Obj. Ex. A at 26.) The Contract was 

amended for the second time on June 18, 2019 (the “Second Amended Contract”), and it also 

contained the same sections, but the Terms and Conditions section was limited to Article IV and 

Article XXII - Effective Date of this Contract. (Obj. Ex. A at 28-30.) Article IV of the Second 

Amended Contract indicates that the “[p]arties agreed to add a cost of $66,000 in order to 

provide professional services and tasks described in the original contract. During the term of this 

Contract, EQB agrees to compensate NTT DATA the amended maximum amount of . . . 

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511,142.00 . . . .” (Obj. Ex. A at 29.) Additionally, Article IV’s May Not Exceed Clause was 

changed to match the clause from the Original Contract: “NTT DATA may not exceed the total 

amount to be paid nor the maximum number of hours to be billed nor the monthly estimate of 

billing . . . .” (Obj. Ex. A at 29.) Although included in this version of the Contract, unlike 

Article IV, Article XXII – Effective Date of this Contract had no substantive revisions and had

only minor formatting changes. (See Obj. Ex. A at 30.) 

The Contract was amended for the final time on July 31, 2019 (the “Third 

Amended Contract”), and it contained the same number of sections as the Original Contract 

(APPEAR to SIGNATURE AND CLOSURE), but the Terms and Conditions section was 

limited to one article: Article XXII – Effective Date of this Contract. (Obj. Ex. A at 31-32.) 

Article XXII was amended to state that the period of performance was extended to December 31, 

2019. (Obj. Ex. A at 31.) The following sentence was also added to Article XXII: “The funding 

level necessary to support a continuance of support for the staffing level and hourly rates 

accorded in the original contract will be adjusted by DNER to support the amended period of 

performance.” (the “Adjustment Clause” (Obj. Ex. A at 32.)) The Third Amended Contract, like 

the earlier versions, was signed by EQB Executive Director Vazquez. (Obj. Ex. A at 11, 27, 30, 

32.) 

According to NTT DATA, by July 31, 2019, NTT DATA had already submitted 

invoices that totaled $509,280.75 out of the Second Amended Contract’s revised cap of 

$511,142.00. (Reply ¶ 15.) According to the Commonwealth, by August 2019, EQB had made 

payments to NTT DATA that totaled $499,638.75. (Obj. ¶ 9; Obj. Ex. B.) EQB refused to pay 

the last five invoices, covering September 2019 to January 2020, which totaled $176,713.20,

with labor hours totaling 1,830.15. (See Mot. at 2, 6, 10-19.) The description on each of the 

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contested invoices stated, “Continuance of Services for FY2019”. (Mot. at 10-19.) 

DISCUSSION

NTT DATA seeks an order pursuant to sections 503(b) and 507(a)(2) of the 

Bankruptcy Code and the fundamental fairness doctrine allowing an administrative expense 

claim in the amount of $176,713.20, the total of the unpaid invoices (the “Claim”).

3

 

Relying on section 503(b)(1)(A) of the Bankruptcy Code, NTT DATA asserts that 

the services it performed in excess of the Second Amended Contract’s cap qualify for 

administrative expense priority because the services were beneficial to the Commonwealth, and 

that the Third Amended Contract’s Adjustment Clause indicates that the Third Amendment

abandoned the invoicing maximum altogether. (Reply ¶ 13.) Alternatively, NTT DATA argues 

that it is entitled to payment under the fundamental fairness doctrine, which has its origins in 

Reading Co. v. Brown, 391 U.S. 471 (1968). (Reply ¶ 29.) The Commonwealth objects to the 

Motion, arguing that the invoicing maximum was not abandoned, in that the Second Amended 

Contract’s May Not Exceed Clause was not stricken from the final amended version of the 

contract. (Obj. ¶ 19). The Commonwealth also argues that the fundamental fairness doctrine 

only applies to situations involving tort-like harm. (Obj. ¶¶ 27, 29, 32.) Before the Court can 

address whether the services NTT DATA performed are entitled to administrative expense 

priority, the Court must first address whether the Commonwealth was obligated under the 

contract to compensate NTT DATA for the services performed. 

3 Sections 503 and 507(a)(2) of the Bankruptcy Code are made applicable in these Title III 

cases by section 301(a) of PROMESA. See 48 U.S.C. § 2161(a).

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The May Not Exceed Clause

The Court begins by addressing NTT DATA’s argument that the Third Amended 

Contract vis-à-vis its Adjustment Clause abandoned the Second Amended Contract’s May Not 

Exceed Clause. (Reply ¶ 13). NTT DATA contends that, because the Adjustment Clause 

provides that “[t]he funding level necessary to support a continuance of support for the staffing 

level and hourly rates accorded in the original contract will be adjusted by the DNER to support 

the amended period of performance,” EQB/DNER specifically agreed to support the continued 

funding, including payment of the Claim. (Reply ¶ 13; Obj. Ex. A at 32.) The Court agrees. 

Article 1233 of the Puerto Rico Civil Code provides that, “[i]f the terms of a 

contract are clear and leave no doubt as to the intentions of the contracting parties, the literal 

sense of its stipulations shall be observed. If the words should appear contrary to the evident 

intention of the contracting parties, the intention shall prevail.” 31 L.P.R.A. § 3471. By signing 

the Third Amended Contract containing the Adjustment Clause, which clearly calls for the 

allocation of additional funds, EQB abandoned the May Not Exceed Clause, which was retained 

and amended for the Second Amended Contract. The Adjustment Clause expressly provides that 

the DNER obligated itself to adjusting the funding level (dollar cap) to the extent required to 

accommodate the staffing level (labor hour cap) so as to support the period of performance 

extended through December 31, 2019. (Obj. Ex. A at 32.) The Court thus finds that the 

Adjustment Clause leaves no doubt as to the intention of the Parties and therefore must be 

observed. See 31 L.P.R.A. § 3471. Furthermore, the Adjustment Clause is not inconsistent with 

the Second Amended Contract’s May Not Exceed Clause insofar as the Second Amended 

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Contract spoke to work to be performed within the original term, and the Adjustment Clause 

specifically addresses the extended period of performance. 

Even if the terms themselves are not clear, a reading that gives meaning to the 

Adjustment Clause of the Third Amended Contract is also supported by the circumstances of the 

Parties’ entry into the Third Amended Contract and reasonable inferences as to their intent. It 

would not be reasonable to believe that the Parties contemplated that NTT DATA would perform 

five months of additional work without a modification of the cap. The Court must examine all 

the circumstances and acts of the Parties even if it seems that the Parties have expressed 

themselves in clear terms. See Banco Popular de P.R. v. Sucn. Talavera, 174 D.P.R. 686, 709, 

2008 TSPR 132 (2008); Marina Ind. Inc. v. Brown Boveri Corp., 114 D.P.R. 64, 69 (1983). In 

order to judge the intention of the contracting parties, attention must principally be paid to their 

acts, contemporaneously with and subsequent to the contract. See 31 L.P.R.A. § 3472.

Here, EQB entered into the Third Amended Contract with the clear intention that 

NTT DATA would continue to perform services over an extended period of time, under 

circumstances in which billing in excess of the caps would be unavoidable and thus was entirely 

foreseeable. (Obj. Ex. A at 31-32.) In light of the amounts that had already been billed by and 

paid to NTT DATA at that point in time, the Parties must have reasonably expected that the 

extended period of performance would lead to billing in excess of the dollar and/or labor hour 

caps. The DNER was well aware that the cap was nearly reached by the time the Third 

Amended Contract was signed. (Obj. ¶ 9; Obj. Ex. B.) 

 The Third Amended Contract’s reference to the pay structure of the Original 

Contract combined with the payment adjustment language shows that the Parties did not intend 

for the original cap to apply, but did intend to incorporate the rate structured established by the 

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Original Contract. (See Obj. Ex. A at 4, 24.) The Second Amended Contract provides a monthly 

rate computation, so it presented no danger of an open-ended claim against the Commonwealth 

for additional fees with no agreed-upon financial parameters. (See Obj. Ex. A at 29.) The 

Adjustment Clause is consistent with the Parties’ reasonable expectation that additional services 

would be performed and compensated, and is consistent with Puerto Rico law requiring a

specific prior governmental commitment to pay for services at a disclosed cost or rate. (See Obj. 

¶ 18.) Thus, the Commonwealth has a contractual obligation to pay for the additional services.

Section 503(b)(1)(A) of the Bankruptcy Code

Finding that NTT DATA’s work billed in excess of the Second Amended 

Contract’s caps is compensable, the Court turns next to whether the obligations qualify as 

administrative expenses under section 503(b)(1)(A) of the Bankruptcy Code. That section

provides, in relevant part, that “(a) [a]n entity may . . . file a request for payment of an 

administrative expense” and, “(b) [a]fter notice and a hearing, there shall be allowed 

administrative expenses . . . including—(1)(A) the actual, necessary costs and expenses of 

preserving the estate[.]” 11 U.S.C.A. § 503 (Westlaw through P.L.118-13).4 Actual and 

necessary costs and expenses include those ordinarily incident to the operation of the debtor’s 

“business” and includes goods and services from third-party contractors or vendors. See In re

4 Although there is no “estate” in a Title III case, the First Circuit has held that, in the 

context of applying section 503(b)(1)(A) in a Title III case, the term “estate” should be 

understood to refer to “property of the debtor.” See 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, 38 (1st Cir. 2021).

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Whistler Energy II, L.L.C., 931 F.3d 432, 443 (5th Cir. 2019). The benefit does not have to be 

substantial to qualify. See In re Energy Future Holdings Corp., 990 F.3d 728, 741 (3d Cir. 

2021). 

In the First Circuit, “a request for priority payment of an administrative expense 

pursuant to Bankruptcy Code § 503(a) may qualify if (1) the right to payment arose from a postpetition transaction with the debtor estate, rather than from a prepetition transaction with the 

debtor, and (2) the consideration supporting the right to payment was beneficial to the estate of 

the debtor.” Cramer v. Mammoth Mart, Inc. (In re Mammoth Mart, Inc.), 536 F.2d 950, 954 (1st 

Cir. 1976). “When third parties are induced to supply goods or services to the debtor-inpossession pursuant to a contract that has not been rejected, the purposes of § 64(a)(1)5 plainly 

require that their claims be afforded priority.” Id. “The burden of proving entitlement to priority 

payment as an administrative expense . . . rests with the party requesting it.” Woburn Assocs. v. 

Kahn (In re Hemingway Transp., Inc.), 954 F.2d 1, 5 (1st Cir. 1992) (citations omitted). 

The factual record before the Court demonstrates that NTT DATA performed the 

obligations required of it under the Contract. Additionally, the Commonwealth has not pled that 

it did not receive “consideration supporting the claimant’s right to payment beneficial to the 

debtor.” In re Hemingway Transp., Inc., 954 F.2d at 5; see also In re Jeans.com, 491 B.R. 16, 24 

(Bankr. D.P.R. 2013) (“The contract rate is typically presumed to set the reasonable value, but 

either party may offer evidence to prove a different reasonable value.”). The Commonwealth 

5 Although In re Mammoth Mart interpreted § 64(a)(1) of the former Bankruptcy Act, “it 

ha[s] been held that ‘the body of law that grew up interpreting § 64(a)(1) has value as 

precedent in interpreting 11 U.S.C. § 503(b)(1)(A).’” In re Chateaugay Corp., 102 B.R. 

335, 354 (Bankr. S.D.N.Y. 1989) (quoting In re Peninsula Gunite, Inc., 24 B.R. 593, 594 

(B.A.P. 9th Cir. 1982)); see also In re Fin. Oversight & Mgmt. Bd. for Puerto Rico, 481 

F. Supp. 3d 60, n. 8 (D.P.R. 2020).

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does not argue that NTT DATA did not perform under the Contract, nor does it argue that NTT 

DATA failed to provide the services outlined in the Proposal incorporated therein. The Contract 

called for NTT DATA’s assistance at the production and troubleshooting stages of the 

implementations. (Obj. Ex. A at 3.) The Proposal outlined technical expertise NTT DATA 

would provide EQB in implementing modules and supporting EQB’s existing PeopleSoft 

applications. (Obj. Ex. A at 15.) 

According to the Proposal, EQB personnel communicated with NTT DATA about 

what EQB was looking for in the Contract and services, and the Proposal was designed with 

those wishes in mind. (Obj. Ex. A at 15.) These services were procured to obtain a benefit in the 

form of software implementations for one of the Commonwealth’s agencies. (Obj. Ex. A at 15.) 

Furthermore, EQB requested that NTT DATA draft the Proposal concerning such services

(services in which EQB sought and accepted for many years), and thus NTT DATA was induced 

to supply services pursuant to an unrejected contract. (Obj. Ex. A at 19.) The Court concludes 

that the performed services were beneficial to the Commonwealth and, because the services were 

contracted for and performed post-petition, NTT DATA has met its burden under section 

503(b)(1)(A) of the Bankruptcy Code of demonstrating that it is entitled to an allowed 

administrative expense claim in the amount of its outstanding invoices. In light of this 

conclusion, the Court need not address NTT DATA’s alternative argument brought under the 

fundamental fairness doctrine as to why the excess services are entitled to administrative expense 

priority treatment.

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CONCLUSION

For the foregoing reasons, the Motion is granted, and NTT DATA’s Claim is 

allowed as an administrative expense claim in the amount of $176,713.20. This Memorandum 

Order resolves Docket Entry No. 19520 in Case No. 17-3283.

SO ORDERED.

Dated: August 17, 2023

 /s/ Laura Taylor Swain 

LAURA TAYLOR SWAIN

United States District Judge

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