UNITED STATES DISTRICT COURT

DISTRICT OF PUERTO RICO 

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In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of 

THE COMMONWEALTH OF PUERTO RICO, et al.,

Debtors.1

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PROMESA

Title III

No. 17 BK 3283-LTS

Re: ECF Nos. 2697, 2710

(Jointly Administered)

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of 

THE COMMONWEALTH OF PUERTO RICO

Debtor.

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PROMESA

Title III

No. 17 BK 3283-LTS

This Supplemental Brief relates 

only to the Commonwealth and 

shall only be filed in the lead 

Case No. 17 BK 3283-LTS.

SUPPLEMENTAL BRIEF AND DECLARATION IN 

COMPLIANCE WITH MARCH 9, 2018 COURT ORDER

The Commonwealth of Puerto Rico (the “Commonwealth”) respectfully submits this 

Supplemental Brief and Declaration (the “Supplemental Brief”), pursuant to the Court’s Order 

Directing Supplemental Briefing of Motion Requesting Relief of Stay Under Section 362(D)(1) of 

The Bankruptcy Code [ECF No. 2697], in support of its position requesting this Court deny 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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Motion Requesting Relief of Stay Under 362(d)(1) of the Bankruptcy Code [ECF No. 2434] 

(the “Motion”) filed by the certified class (collectively, “Movants”) in the cases captioned Gladys 

García Rubiera, et al. v. Hon. Luis G. Fortuño, et al, Case No. 02-1179 (GAG) before the United 

States District Court for the District of Puerto Rico, and Gladys García Rubiera, et al, v. 

Asociación de Suscripción Conjunta, et al., Civil Number K DP2001-1441 before the Puerto Rico 

First Instance Court (collectively, the “Prepetition Actions”), to which the Commonwealth filed a 

timely objection on February 21, 2018 [ECF No. 2570] (the “Objection”).

2

PRELIMINARY STATEMENT

1. On February 7, 2018, Movants filed the Motion seeking relief from the stay and the 

enforcement of two stipulations between the Movants and the Commonwealth entered into prior

to the commencement of this Title III case. 

2. The Motion is a claim by prepetition, unsecured creditors seeking preferential

treatment to collect on their prepetition claims against the Commonwealth to the detriment of other 

creditors of the Commonwealth and without any determination as to whether such claims should 

be allowed, impaired or discharged in the Title III proceeding. 

3. On March 9, 2018, the Court directed the parties to file supplemental briefs and 

declarations addressing various issues enumerated in the Order by March 16, 2018 at 5:00 p.m.

(AST), and simultaneous supplemental replies by March 23, 2018 at 5:00 p.m. (AST), which 

deadlines were extended to March 23, 2018 at 5:00 p.m. (AST) and March 30, 2018 at 5:00 p.m. 

(AST) [ECF No. 2710]. Additionally, the Court extended the automatic stay for 30 days to enable 

 

2 The Financial Oversight and Management Board for Puerto Rico, as the Debtors’ representative pursuant to section 

315(b) of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), has authorized the 

Department of Justice to file this Supplemental Brief on behalf of the Commonwealth. 

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the parties to brief the foregoing questions and the Court to address the issue of stay relief in light 

of the additional briefing. 

4. In an effort to avoid further litigation costs and expenses in the District Court, the 

Commonwealth, with the consent of the Oversight Board, engaged with Movants to clarify the 

manner in which the issues would be addressed and, if possible, resolve the Motion consensually.

The last telephone conference was held on March 13, 2018.

5. The Commonwealth is prepared to consent to a modification of the stay to proceed 

with the notice and insurance premium claims resolution process developed in civil case K 

DP2001-1441(801) (which discussions with Movants were in the advanced stages when the case 

was stayed upon the filing of the Title III case under PROMESA), provided that the stay would 

remain in place with respect to the payment of the reimbursements. The foregoing is without 

prejudice to Movants’ rights to seek further relief from this Court, including the treatment of their 

claims arising from the Prepetition Actions under a plan of adjustment or otherwise in the Title III 

Case.

3

See Ambac Assurance Corp. v. Commonwealth of P.R., 17-AP-159-LTS (D.P.R. Feb. 27, 

2018) [ECF No. 156] (“Such lien-related issues may ripen in other respects in the future in 

connection, for instance, with claims and objections to claims, and litigation concerning 

confirmation of a plan of adjustment.”); Id. (“Plaintiff has not suffered a concrete injury, as its 

rights, and any impairment of those rights, will not be determined until a plan of adjustment is 

proposed.”)

 

3 The Commonwealth reserves the right to object to the Movants’ claim to the funds held by the Commonwealth, as 

the Commonwealth asserts that such claims should be presented by an adversary proceeding, as they involve a 

“proceeding to recover money or property, other than a proceeding to compel the debtor to deliver property to the 

trustee”. See Fed. R. Bankr. P. 7001(2), made applicable to this case by section 310 of PROMESA. 48 U.S.C. § 

2170.

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6. Although a consensual resolution to the Motion could not be reached, the parties

discussed the four issues identified by the Court and agreed, in general terms, with respect to the 

answers to the issues submitted by the Court as discussed by this Supplemental Brief and the 

Supplementary Memorandum In Compliance With Order Of March 9th And March 13th, 2018

filed by Movants on March 21, 2017 [ECF No. 2777], which draft was submitted in advance to 

the Commonwealth.

SUPPLEMENTAL BRIEF AND DECLARATION

(I) Whether And To What Extent The Commonwealth Has “Established And Complied 

With” A Constitutionally Sufficient Notice And Reimbursement Procedure 

Consistent With The 2013 First Circuit Decision, Garcia- Rubiera v. Fortuno, 772 

F.3d 102 (1st Cir. 2013).

7. Prior to the commencement of the Commonwealth’s Title III proceeding, the 

parties were in the process of implementing the notice of reimbursement procedures in compliance 

with the guidelines set forth in Garcia- Rubiera v. Fortuno, 772 F.3d 102 (1st Cir. 2013), as agreed 

in García Rubiera et al. v. Fortuño, Case No. 02-1179 (GAG), in which a settlement Stipulation 

and Judgment was executed. A settlement Stipulation and Judgment was also executed in the 

parallel state case García Rubiera v. ELA, KDP2001-1441(801) that included similar, if not 

identical, notification procedures as the agreed procedures in the federal action, Garcia- Rubiera

v. Fortuno.

4 To avoid unnecessary duplication of notification procedures, the parties agreed to 

proceed with only one notification process for both cases. See Garcia- Rubiera v. Fortuno, Civil 

No. 2002-1179 [ECF No. 446].

8. The stipulations of both the federal and state cases specified the manner and form 

of notices to be provided to the class members and the procedure for class members to request 

 

4 Because the defendants in the federal action were sued only in their official capacities, and the Commonwealth 

was one of two defendants in the state case, and the plaintiff class was the same in both the state and federal cases, 

the parties engaged in concurrent negotiations to settle both cases. 

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reimbursements for unclaimed funds retained by the Commonwealth relating to duplicate 

payments made by class members that purchased private insurance and also paid compulsory 

insurance. Prior to the filing of this Title III case, the parties were in advanced discussions

regarding the notification list and the Internet Portal developed by the Treasury Department, which 

were the only remaining outstanding items to be finalized before implementing the notification

process. All of the various notices (regular mail, radio, and newspaper) are drafted but have not 

been delivered.

(II) Whether And To What Extent There Remain Potential Refund Monies That Have 

Neither Been Claimed Nor Escheated Pursuant To Act 230.

9. The Commonwealth, as of March 15, 2018, has a reserve account with a balance of 

$76.1 million that corresponds to unclaimed money from 2006 to present. As detailed in the 

Objection, funds received before 2006 are property of the Commonwealth and funds received after 

2006 are deposited into a “reserve account” for accounting purposes.

5 The 2006 cutoff date stems 

from an injunction that prevented the Commonwealth from transferring unclaimed funds to the 

General Fund “until it has established and complied with a reimbursement procedure which meets 

the basic requirements of constitutional due process.” García-Rubiera v. Fortuño, 727 F.3d 102, 

117 (1st Cir. 2013).

According to Act 230-2002:

The Joint Underwriting Association shall transfer to the Secretary of the Treasury 

the funds designated in its annual statement as “Funds Retained by the Insurer 

Belonging to Others”. The Joint Underwriting Association shall transfer those 

amounts that represent the items that on the close on December 31 have remained 

in its books for more than two (2) years counting from the date on which the 

premiums were collected through the [issuance] or renewal of a motor vehicle 

license. Said transfers shall be made annually by March 30 of the year following 

 

5 Courts in this district have found that funds held in similar capacities are property of such debtor’s estate, as the 

debtor retains a legal interest over such funds. See In re Maxon Eng’g Servs., Inc., 332 B.R. 495, 500 (Bankr. 

D.P.R. 2005). 

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the close to which the transfer corresponds. 26 LPRA 8055 (m). Then, the Secretary 

of the Treasury shall retain the funds transferred by the Joint Underwriting 

Association in its fiduciary capacity for a five (5)-year term counting from the date 

in which the retained funds are transferred by the Joint Underwriting Association 

to the Secretary of the Treasury. Once five (5) years have elapsed without the 

consumer claiming the retained funds, these shall become property of the 

Commonwealth of Puerto Rico and they shall be transferred to the General Fund of 

the Commonwealth Treasury. 

26 L.P.R.A. § 8055.

10. Pursuant to Act 230-2002, in March 2013, the Joint Underwriting Association 

transferred to the Secretary of the Treasury retained funds for the 2010 period. Furthermore, in

March 2013, the Secretary of the Treasury transferred to the General Fund of the Commonwealth 

Treasury retained funds for the 2005 period (which the Treasury received in March 2008). The 

funds for the period from 2006 to 2010 are held by the Commonwealth in a reserve account.

(III) Whether Any Such Funds Have Been Held Apart From The Commonwealth’s 

General Fund For Application To Liabilities Under The Class Settlement.

11. As noted above, the funds received during the period from 2006 to 2010 were 

segregated for accounting purposes, as well as the funds received after 2010. Notwithstanding, for 

purpose of the federal and state cases, the class is limited to the vehicle owners in the Commonwealth 

of Puerto Rico who, between the years 1998 and 2010, paid compulsory insurance premiums while 

maintaining valid private insurance. The Commonwealth, as of March 2018, has a reserve account with 

a balance of $76.1 million that corresponds to unclaimed money from 2006 to the present.

(IV) Whether Partial Relief From Stay To Permit The Parties To Seek Determinations 

From The District Court On Any Or All Of These Issues Is Appropriate.

12. The Commonwealth agrees with Movants that, in view of the above discussion, 

there is no reason to seek any determination in the District Court. However, the Commonwealth 

disagrees with the extent of Movants’ requested relief—as previously noted, the Commonwealth 

would be agreeable to modify the stay in order to proceed with the notification and insurance 

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premium claims resolution process agreed to in civil case K DP2001-1441(801), provided that the 

stay would remain in place with respect to the payment of any reimbursements.

CONCLUSION

13. As previously noted, good faith efforts were made to reach an agreement with the 

Movants to submit a joint motion seeking the modification of the stay to the limited extent as noted 

above. However, the parties have been unable to reach an agreement at the present time. While the 

Commonwealth submits that Movants’ request to lift the stay should be denied for the reasons set 

forth in the Objection, the Commonwealth does not object to a partial modification of the Title III 

stay in order to proceed with the notification and insurance premium claims resolution process, 

provided that the stay remains in place with respect to the payment of any reimbursements. The 

proposal is without prejudice to Movants’ rights to seek further relief from this Court, including 

the treatment of their claims arising from the Prepetition Actions under a plan of adjustment or 

otherwise in the Title III cases.

14. Nothing contained in this Supplemental Brief should be construed as a waiver or 

modification of the Title III Stay to allow the prosecution against the Commonwealth of any claim 

by anyone other than Movants as provided for herein, and the Commonwealth reserves all rights, 

defenses, and protections with respect to any other motions for relief of stay or any other matters 

pending in the Commonwealth’s Title III case. The Commonwealth further reserves its rights with 

respect to any claim currently pending in the Prepetition Action or hereinafter asserted by Movants, 

including any claims for damages. As a potential prepetition, unsecured creditor of the 

Commonwealth, Movants’ claims for reimbursement are subject to the claim resolution process 

that will be undertaken in the Title III case.

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Dated: March 23, 2018.

San Juan, Puerto Rico 

Respectfully submitted, 

WANDA VÁZQUEZ GARCED 

Secretary of Justice 

/s/ Wandymar Burgos Vargas

WANDYMAR BURGOS VARGAS 

USDC 223502 

Deputy Secretary in Litigation 

Department of Justice 

P.O. Box 9020192 

San Juan, Puerto Rico 00902-0192 

Phone: 787-721-2940 Ext. 2500, 2501

wburgos@justicia.pr.gov 

Attorneys for the Commonwealth of Puerto Rico 

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