180424 MEM AND OP RE FEB 26 JGD ORD VERSION APRIL 24, 2018 1 

UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF PUERTO RICO 

----------------------------------------------------------x 

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

----------------------------------------------------------x 

MEMORANDUM ORDER REMANDING CERTAIN ASPECTS OF MAGISTRATE JUDGE’S 

FEBRUARY 26, 2018, ORDER FOR FURTHER PROCEEDINGS 

 Before the Court is an objection (Docket Entry No. 2707, the “Objection”), filed 

by Assured Guaranty Corp., Assured Guaranty Municipal Corp. and National Public Finance 

Guarantee Corporation (collectively, the “Objectors”), to an order entered by Magistrate Judge 

Judith Gail Dein on February 26, 2018 (Docket Entry No. 2590, the “February 26 Order”). As 

relevant here, the February 26 Order held that “communications among the Commonwealth, 

AAFAF, the Oversight Board and their professionals, as well as other materials relating to the 

 

1

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

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

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

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

Corporation (“COFINA”) (Bankruptcy Case No. 17 BK 3284-LTS) (Last Four Digits of 

Federal Tax ID: 8474); (iii) Puerto Rico Highways and Transportation Authority 

(“HTA”) (Bankruptcy Case No. 17 BK 3567-LTS) (Last Four Digits of Federal Tax ID: 

3808); (iv) Employees Retirement System of the Government of the Commonwealth of 

Puerto Rico (“ERS”) (Bankruptcy Case No. 17 BK 3566-LTS) (Last Four Digits of 

Federal Tax ID: 9686); and (v) Puerto Rico Electric Power Authority (“PREPA”) 

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

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

limitations). 

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180424 MEM AND OP RE FEB 26 JGD ORD VERSION APRIL 24, 2018 2 

creation of the 2017 and 2018 Plans” including “drafts preceding the final plans” (collectively, 

the “Pre-Decisional Fiscal Plan Documents”) are subject to the deliberative process privilege. 

(February 26 Order at 4-6.) In their Objection, their Reply papers (Docket Entry No. 2835) and a 

further submission (Docket Entry No. 2906), Objectors argue that the February 26 Order’s 

conclusions regarding the applicability of the deliberative process privilege are clearly erroneous 

and contrary to law. Objectors principally contend that: 

A. The deliberative process privilege should not protect factual information that is 

included in the Pre-Decisional Fiscal Plan Documents. (Objection at 3.) 

B. The February 26 Order improperly extends the deliberative process privilege to (1) 

communications between (x) the Oversight Board, on one hand, and (y) the 

Commonwealth2

 and AAFAF (together, the “Commonwealth Entities”), on the other 

hand and (2) communications between the Respondents and their respective 

professionals. (Objection at 6.) 

C. The February 26 Order is in error to the extent it concludes, in denying disclosure of 

documents on the basis of the deliberative process privilege, that the interests of 

Respondents in non-disclosure outweigh the interests of creditors and the public in 

access to the Pre-Decisional Fiscal Plan Documents. (Objection at 10.) 

The Ad Hoc Group of General Obligation Bondholders filed a limited joinder to 

the Objection. (Docket Entry No. 2708.) The Court has considered the February 26 Order and 

the submissions of the parties carefully. 

For the reasons stated below, the Objection is sustained to the extent that the 

elements of the February 26 Order to which objection has been made are remanded for further 

proceedings. 

 

 

2

 Capitalized terms used herein, but not otherwise defined, shall have the meaning set forth 

in the February 26 Order. 

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180424 MEM AND OP RE FEB 26 JGD ORD VERSION APRIL 24, 2018 3 

DISCUSSION

A party may file an objection with the assigned district judge to an order issued 

by a magistrate judge within 14 days of service of a copy of that order. Fed. R. Civ. P. 72(a). 

The Objection now before the Court was timely. The district judge shall not disturb the order 

unless such “order is clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A) 

(LexisNexis 2017). Under the “clearly erroneous” standard, a district court “must accept both 

the trier’s findings of fact and conclusions drawn therefrom unless, after scrutinizing the entire 

record, [it forms] a strong, unyielding belief that a mistake has been made.” Phinney v. 

Wentworth Douglas Hosp., 199 F.3d 1, 4 (1st Cir. 1999) (internal quotation and citation 

omitted). A magistrate judge’s rulings will be reviewed under the “contrary to law” standard 

when the motion “turns on a pure question of law.” PowerShare, Inc. v. Syntel, Inc., 597 F.3d 

10, 15 (1st Cir. 2010). “This means that, for questions of law, there is no practical difference 

between review under Rule 72(a)’s ‘contrary to law’ standard and review under Rule 72(b)’s de 

novo standard.” Id. Mixed questions of law and fact invoke a sliding scale of review pursuant to 

which 

[t]he more fact intensive the question, the more deferential the level 

of review (though never more deferential than the clear error 

standard); the more law intensive the question, the less deferential 

the level of review. 

In re IDC Clambakes, Inc., 727 F.3d 58, 64 (1st Cir. 2013) (internal quotation marks omitted). 

The February 26 Order was issued after a series of court conferences and meetand-confer interactions among the parties concerning, among other issues, (i) the breadth of 

Objectors’ Rule 2004 disclosure requests, (ii) the ongoing treatment of materials responsive to 

such requests that had been made available pursuant to confidentiality or non-disclosure 

agreements, and (iii) Respondents’ assertion of deliberative process privilege. The parties filed 

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180424 MEM AND OP RE FEB 26 JGD ORD VERSION APRIL 24, 2018 4 

joint status reports on December 11, 2017 (Docket Entry No. 1972) and December 22, 2017 

(Docket Entry No. 2154) identifying the continuation of confidentiality restrictions and the 

applicability of the deliberative process privilege to a broadly defined class of “Pre-Decisional 

Fiscal Plan Documents” as the only remaining areas in contention and, in January 2018, filed 

short memoranda of law regarding these issues. 

The memoranda of law did not treat the deliberative process issues in any great 

detail, and included only conclusory arguments regarding the effect of the involvement of 

consultants and different government entities in communications and document preparation. 

Much of the argumentation focused on whether Respondents should be required to produce a 

categorical log of materials withheld on the basis of the privilege, should they be permitted to 

assert the privilege in the first instance. There was no particularized argumentation regarding 

procedures for determination of the applicability of the privilege and Bhatia-Gautier v. RosellóNevares, 2017 TSPR 173, 2017 WL 4975587 (P.R. 2017) (“Bhatia-Gautier I”), the September 

2017 decision of the Supreme Court of Puerto Rico concerning access to public documents under 

the constitution and laws of Puerto Rico that is cited extensively in the Objection, was not 

mentioned in any of the January 2018 submissions. 

The February 26 Order, like the parties’ submissions, treats the deliberative 

process privilege issues in conceptual rather than specific terms, directs the preparation of a 

categorical privilege log, and contemplates particularized scrutiny of privilege claims in 

connection with objections to privilege log entries. 

A. Factual Information Included in the Pre-Decisional Fiscal Plan Documents 

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Objectors challenge the February 26 Order to the extent it applies the deliberative 

process privilege to factual elements of the Pre-Decisional Fiscal Plan Documents. (Objection at 

3–6.) Objectors cite Bhatia-Gautier v. Roselló-Nevares, Civil No. SJ2017CV00271 (P.R. Super. 

Ct. Mar. 16, 2018) (“Bhatia-Gautier II,” Docket Entry No. 2863-1), a decision rendered by a 

court of first instance following the issuance of Bhatia-Gautier I, for the proposition that the 

privilege does not extend to documents that contain purely factual information (e.g., numbers 

and data). (Objection at 4.) The February 26 Order provides that “drafts preceding the final 

[2017 and 2018 fiscal] plans,” as well as the “internal communications leading up to [the 

creation of] those documents,” are subject to the deliberative process privilege and may be 

withheld from production. (February 26 Order at 5.) 

The February 26 Order recognizes that the parties have agreed that “raw data” is 

not protected by the privilege, but the parties do not appear to have made, and the February 26 

Order does not address, specific issues regarding data or other factual matters included in 

documents the parties have characterized as “Pre-Decisional.” Furthermore, Bhatia-Gautier II 

was decided after the February 26 Order was entered and Judge Dein has not had an opportunity 

to consider its implications in connection with the disputes regarding Pre-Decisional Fiscal Plan 

Documents. The Court notes that, consistent with the parties’ approach in their briefing to Judge 

Dein, the February 26 Order established a two-stage procedure whereby (i) Respondents may 

assert the deliberative process privilege and are required to catalog the withholding of categories 

of documents in a privilege log3

 and (ii) Objectors have the opportunity to challenge any item 

 

3

 The February 26 Order requires that the privilege log “include the following information: 

(i) the basis for withholding each category of documents; (ii) a sufficient description of 

the subject matter of the category of documents to permit Movants to evaluate the claim 

of privilege; (iii) the date range for the set of documents in each category; and (iv) an 

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180424 MEM AND OP RE FEB 26 JGD ORD VERSION APRIL 24, 2018 6 

listed on such privilege log. (February 26 Order at 5-6.) Given that Judge Dein does not appear 

to have been asked to address the status of factual elements of Pre-Decisional Fiscal Plan 

Documents and did not have the benefit of the extensive briefing that the parties have submitted 

to this Court, the Court remands this matter for further consideration by Judge Dein in the first 

instance and any necessary clarification of the February 26 Order. 

B. Communications 

Objectors argue that the February 26 Order errs in concluding that the deliberative 

process privilege extends to (i) communications between the Oversight Board and the 

Commonwealth Entities and (ii) communications between the Respondents and their respective 

professionals. (Objection at 6.) Again, it does not appear that the parties made anything more 

than conclusory arguments concerning the questions of whether communications among 

Commonwealth Entities and between the Oversight Board and such entities can be protected by 

the deliberative process privilege, and whether the involvement of Respondents’ professional 

advisors in the preparation or review of Pre-Decisional Fiscal Plan Documents renders the 

privilege inapplicable. Bhatia-Gautier I decision, which features prominently in Objectors’ 

procedural and substantive arguments to this Court, was not even mentioned in the briefing to 

Judge Dein, and Bhatia-Gautier II postdates the February 26 Order. The Court concludes that, 

since the able Magistrate Judge did not have the opportunity to address the legal and factual 

particulars of the issues that are now being argued to this Court, the record is insufficient to 

enable this Court to apply appropriately the review standards. On remand, Judge Dein may 

 

aggregate list of all persons sending and receiving documents in each category.” 

(February 26 Order at 6.) 

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determine in the first instance whether additional or different procedures and proceedings should 

be undertaken in light of the Bhatia-Gautier decisions and the particular roles and responsibilities 

of the Commonwealth Entities, the Oversight Board and their respective professionals in 

developing positions and taking actions on behalf of the Commonwealth under PROMESA in 

determining whether the deliberative process privilege should be analyzed on an entity by entity 

or other basis in this context. 

C. Weighing of Competing Interests 

Objectors argue that Judge Dein erred in concluding that “that the interests of the 

[Respondents] weighed in favor of shielding the disclosure of the Pre-Decisional Fiscal Plan 

Documents from creditors and the public.” (Objection at 10.) In the First Circuit, courts 

determining whether nondisclosure is justified under the deliberative process privilege apply a 

two-step analysis. See, e.g., Texaco P.R., Inc. v. Dep’t of Consumer Affairs, 60 F.3d 867, 884 

(1st Cir. 1995) (stating that “nondisclosure is not automatic.”) First, courts determine whether 

the “document satisfies the criteria for protection under the deliberative process privilege” and 

then, in “determining whether to honor an assertion of the privilege,” the courts “weigh 

competing interests.” Id. (internal citation omitted); see also Bhatia-Gautier II. These interests 

can include “the interests of the litigants, society’s interest in the accuracy and integrity of factfinding, and the public’s interest in honest, effective government.” Id. (internal citation omitted). 

The February 26 Order is silent in this respect and does not explicitly apply a balancing test, 

perhaps because the two-stage procedure it contemplates provides opportunities for narrowing of 

controversies and further input prior to final disclosure decisions. On remand, the Court may 

consider when, and in what manner, the balancing test is to be applied. 

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CONCLUSION

For the foregoing reasons, the Objection is sustained to the extent that the 

elements of the February 26 Order to which Objections have been asserted are remanded to the 

Magistrate Judge for further proceedings consistent with this Memorandum Order. 

This order resolves Docket Entry Nos. 2707 and 2708. 

SO ORDERED. 

Dated: New York, New York 

 April 24, 2018 

 /s/ Laura Taylor Swain 

 LAURA TAYLOR SWAIN

 United States District Judge 

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