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UNITED STATES DISTRICT COURT 

DISTRICT OF PUERTO RICO 

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

In re: 

 

THE FINANCIAL OVERSIGHT AND PROMESA 

MANAGEMENT BOARD FOR PUERTO RICO, Title III 

 as representative of Case No. 17 BK 3283 (LTS) 

THE COMMONWEALTH OF PUERTO RICO, 

et al., (Jointly Administered) 

 Debtors. 

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

 New York, N.Y. 

 November 2, 2022 

 9:00 a.m. 

Before: 

HON. LAURA TAYLOR SWAIN, 

 Chief U.S. District Judge 

APPEARANCES: 

For the Financial 

Oversight and Management 

Board for Puerto Rico: Martin J. Bienenstock, Esq. 

 Brian S. Rosen, Esq. 

 Joshua A. Esses, Esq. 

 Matthew A. Skrzynski, Esq. 

For the Official Committee 

of Unsecured Creditors 

(the "Committee"): Luc A. Despins, Esq. 

For Assured Guaranty 

Corp. and Assured 

Guaranty Municipal Corp: William J. Natbony, Esq. 

For Lilia Molina Ruiz: Jose Luis Novas-Debien, Esq. 

For National Public 

Finance Guarantee 

Corporation: Robert Berezin, Esq. 

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APPEARANCES, Continued: 

For The Puerto Rico 

Fiscal Agency and 

Financial Advisory 

Authority: Peter Friedman, Esq. 

For Fuel Line Lenders: Richard G. Mason, Esq. 

Also present: Judge Shelley Chapman, Mediation Team Leader 

Proceedings recorded by stenography. Transcript produced by 

CAT. 

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THE COURT: Ms. Tacoronte, would you please call the

case?

THE DEPUTY CLERK: The United States District Court

for the District of Puerto Rico is now in session. The

Honorable Laura Taylor Swain presiding. Also present, the

Honorable Magistrate Judge Judith Dein. God save the United

States of America and this Honorable Court.

In Re: The Financial Oversight --

THE COURT: Ms. Tacoronte, we are getting a lot of

interference. I don't know whether it was something rubbing

the microphone or static. It was starting to get clearer, so

would you mind doing the proclamations again? I mean the

calling the case again, from the beginning.

THE DEPUTY CLERK: No problem, your Honor. Thank you.

The United States District Court for the District of

Puerto Rico is now in session. The Honorable Laura Taylor

Swain presiding.

THE COURT: That's much better, except now we've lost

you.

So would you do the In Re: Financial Oversight Board

part. So we've lost you.

Okay. Is somebody texting somebody to check this?

Alright. So those who are listening in, we're having

a little technical difficulty, so please be patient with us.

This happens when we connect across 1500 miles, and Court

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Solutions, and AT&T lines so that we maximize access.

Are they checking things on the Puerto Rico end?

THE DEPUTY CLERK: They disconnected, and they're

going to come back in.

THE COURT: Alright. It is being worked on, everyone.

THE DEPUTY CLERK: Testing.

THE COURT: We can hear you.

THE DEPUTY CLERK: Can you hear us now?

THE COURT: Yes.

THE DEPUTY CLERK: Our apologies, your Honor.

THE COURT: Thank you for coming back in.

So if you'd start with the caption of the case, that

would be great.

THE DEPUTY CLERK: Absolutely, your Honor.

In Re: The Financial Oversight and Management Board

for Puerto Rico, as representative of the Commonwealth of

Puerto Rico, et al., PROMESA, Title III, Case No. 2017-BK-3283

for Omnibus Hearing.

THE COURT: Thank you.

Welcome counsel, parties in interest, and members of

the public and press here in New York, those appearing or

observing here and in San Juan, and the telephonic

participants. It is good that we can now use both courtrooms

again for personal appearances and for observation of the

proceedings. I thank you for complying with the instructions

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of the court staff and encourage you to continue to comply with

all of the COVID-19 protocols so that we can stay safe.

I remind those present in the courtrooms and listening

on the phone lines that consistent with court and judicial

conference policies and the orders that have been issued, there

is to be no use of electronic devices in the courtroom to

communicate with any person, source, or outside repository of

information, nor to record any part of the proceedings. Thus,

all electronic devices must be turned off unless you are using

it to take notes, or refer to notes or documents already loaded

on the device, or you have prior Court permission to use the

device to communicate with others, and nobody's asked me for

that permission, so I trust you'll turn it off. All audible

signals, including vibration features must be turned off.

I'll be calling on each speaker during the

proceedings, and when I do, please identify yourself by name

for clarity of the record. After the speakers listed on the

agenda for particular matters have spoken, I'll provide an

opportunity for other parties in interest to address briefly

any issues raised during the course of the argument that

require further remarks. If you wish to be heard under these

circumstances, please raise your hand and, if you're in the

Puerto Rico courtroom, come to the podium, or if you're on

Court Solutions, state your name clearly so I'll call on people

in an orderly way if more than one person wants to be heard.

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Please don't interrupt each other or me during the

hearing. If we interrupt each other, it's difficult to create

an accurate transcript. But, as usual, having said that, I

apologize in advance, because I may interrupt you if you go

beyond your allotted time or if I have a question. And, of

course, if anybody has trouble hearing me or another

participant, please say something right away.

The agenda, which was filed as Docket Entry No. 22765

in Case No. 17-3283 is available to the public at no cost on

the Kroll Restructuring website, previously known as Prime

Clerk, for those interested. Although the company has been

renamed Kroll Restructuring, the Prime Clerk website addresses

and phone numbers are still operational.

I encourage each speaker to keep track of his or her

own time. The Court will also be keeping track of the time,

and speakers appearing here in New York will see a yellow light

at the podium when two minutes are remaining, and when time is

up, they'll see a red light and hear two buzzes. The speakers

appearing via Court Solutions will just hear two buzzes when

time is up. Here's an example of the buzzer sound.

Do we have an example of the buzzer sound?

THE LAW CLERK: One moment. I apologize. It's

counting up instead of counting down.

THE COURT: So should we skip the example of the

buzzer sound?

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THE LAW CLERK: Sorry, Judge. One moment. I guess

for now. Sorry.

THE COURT: Alright. So you'll either hear two buzzes

or I'll say thank you and you'll get the hint.

So if we need to take a break, the people who are on

the AT&T listen-only line should put their phones on hold

rather than hang up. Our timing is until 12:50 this morning,

if we need that much time, and, if necessary to resume, we

would resume from 2:10 and end at 5:00.

I may call a break this morning in the area of 11:00

or 11:30. During that break, people who are on the AT&T line

should put their lines on hold, not hang up and try to dial

back in, because they won't be able to.

As usual, our first item is status reports from AAFAF

and the Oversight Board, and as requested in the procedures

order, these reports have been made in writing in advance of

the hearing. They are available on the public docket at Docket

Entry Nos. 22773 and 22775 respectively in Case No. 17-3283. I

thank both the Oversight Board and AAFAF for the care and

detail reflected in their reports.

We'll begin by discussing the Oversight Board's

report.

Mr. Bienenstock, do you have additional comments?

MR. BIENENSTOCK: Good morning, Judge Swain. Martin

Bienenstock of Proskauer Rose, LLP, for the Oversight Board. I

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don't have additional comments in respect to the status report,

but of course I'd be happy to answer any questions the Court

has.

THE COURT: Thank you. I do have some questions.

So I see from the report that it was some two weeks

after the issuance of the Court order that the Board designated

its pre-existing municipal bond advisor as lead negotiator, and

your report says that there were consultations among the Board

and the attorneys and all that, but this must have been

something that you all saw coming, because the request had been

made. The time is short from the order until the deadline. 

So I'd just like you to give me some more insight into

why it took so long to get someone from the home team, and I'm

going to ask you to go to the podium, because I think that's

the way the cameras are set up.

Thank you.

MR. BIENENSTOCK: Sure, your Honor.

A couple things that I hope will be responsive to the

Court's concerns that I'm inferring. First, no time was wasted

whatsoever in respect of the Oversight Board's efforts to put

together new proposals for the new situation created by the

existence of litigation on very significant issues and

determining how to negotiate them, et cetera.

Citibank functioned as it had been functioning, and as

far as the Board's processes towards the plan, there was no

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time wasted whatsoever. It was only the official designation

of Citibank that occurred, as your Honor pointed out, two weeks

later, and really that was because there were several, or least

a few people or entities who wanted to be considered for that.

The Board did what boards are supposed to do. They

considered the request and the options on an informal basis,

and then made the decision. But in terms of wasting time, no

time was wasted. Citibank continued functioning as it had

always been functioning, as did the Board in respect of the

PREPA restructuring.

THE COURT: Thank you.

Is the lead mediator empowered consistent with the

September 29 order?

MR. BIENENSTOCK: Absolutely, your Honor.

THE COURT: Now, have there been any substantive

communications with the mediation team since the September 29

order regarding plan terms to be proposed on December 1?

MR. BIENENSTOCK: Your Honor, I know there are some.

I don't have complete knowledge of all, but the mediation team

is in regular contact, to my understanding, with the chairman

of the Oversight Board, with some members of the Oversight

Board, as well as with Citibank, and sometimes with me. So the

communications have definitely continued.

I don't want to minimize, and I don't think we

minimize that in our status report, but just to be certain, I

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don't want to minimize the task that confronts everyone

involved, because, based on the outcome of the litigation,

there could be 8.3 billion, more or less, claims to deal with.

And so we have to take into account a lot of potential

outcomes.

We also, as we explained in the status report, we want

to provide bondholders who want to settle and eliminate the

uncertainty the opportunity to do so even if others want to

litigate. As your Honor knows and can imagine, some

bondholders have a low basis in their debt, some have a high

basis, some are the monolines, who simply signed on, and they

all have different risk tolerances. So it's complicated, but

it's been proceeding.

THE COURT: I certainly know and understand, not in as

granular detail, of course, as you and the Board and your

advisors do and the mediation team does, but I know how

complicated it is, which is why I took steps to keep the

continuity of the availability of the mediation team. I

expected that this would not be a process wholly internal to

the Board. I am glad to hear that you all are thinking about

different scenarios, but it was my expectation and intention

that there would be real substantive work with the mediation

team and intermediate communications with other parties in

interest going on in October, and now it's November 2nd.

The deadline is December 1, and certainly, from the

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outside, that looks like a potential problem in terms of the

Board's ability to comply with my direction to file a plan

that, in a realistic scenario or scenarios, could be

confirmable.

MR. BIENENSTOCK: Your Honor, in terms of filing a

plan with a lot of consensus, that will be very difficult, and

may not happen on December 1. But in terms of filing a

confirmable plan, that can happen, and we hope -- we hope

obviously, as things progress, that the briefing is completed

on the key summary judgment motions, that the parties will be

getting together formally, rather than the informal

communications that have taken place, that we will garner

support and deals as we go.

But to have it happen by December 1, I think no matter

how much activity there has been to date, and there has been a

lot, which I'll get into a slight bit, your Honor, is not very

plausible, because of what I said at the outset. We may have

8.3 billion, more or less, of liabilities to deal with. And

that sort of has to sink in, and more things have to happen

before deals can be cut.

But in terms of activity that's happened, I know on

a -- from my personal knowledge, I've had discussions with

counsel for the Committee, counsel for the Fuel Line Lenders,

others in my shop have had discussions with counsel for the

bondholders. And more importantly than the lawyers, frankly,

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City has been having discussions both with the mediators and

with different stakeholders on a regular basis. 

Now, I don't want to give a false impression that

they're onto some type of deal and working out the details.

They're not. But all of the communications and whatnot that

have occurred were simply necessary predicates to get to the

next step.

THE COURT: I am monitoring the filings on the bond

rights issues, and of course we're also on top of Law 41 --

there are a lot of moving pieces on my side as well -- and the

other outstanding issues. It continues to puzzle me why the

Oversight Board now is focusing so much time and effort on

promoting a position in motion practice that's directly

contrary to the risk analysis that must have underlane the

Board's prior advocacy for the RSA and the prior proposals that

offered significant recovery to the bondholders.

Can you give me any insight into why there is such a

dramatic flip of the switch?

MR. BIENENSTOCK: Well, I can -- I certainly will give

your Honor the facts I am aware of, and I hope the Court finds

them to explain the issue your Honor has come up with. When

the case started, there had been a pre-PROMESA RSA that

provided for full or nearly full payment to all of the

bondholders and monolines. And the first thing that the Board

did was investigate that to see if it was either mandatory to

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go forward with it or appropriate to go forward with it, even

if it was not mandatory.

Then there was stay litigation that your Honor is

aware of, the request for the receiver, et cetera. Then came

the hurricane, and the First Circuit remanded if the

bondholders wanted to retry that in light of new circumstances,

and throughout the process of the Board -- first and foremost,

it wanted a deal. It wanted a consensual arrangement. And

obviously that cost more than a deal procured by litigating

claims.

Then when it made the RSA that your Honor is referring

to, what doesn't get any play in the papers, your Honor, in the

pleadings, is that that RSA had determination events that the

government was not entitled to deploy and the Board was

entitled to deploy. Those termination events were there from

the outset, and they actually could be triggered almost from

the outset, because there was a date by which there was a

deadline that we had to procure this Court's approval of

certain aspects of that RSA. And if that deadline was missed,

either party or almost any party could terminate the RSA, and

the bondholders knew that.

As your Honor will recall, at about the time of the

hurricanes, the Board did a study of whether the damage, et

cetera, to the business community, to the physical structure,

should change what PREPA could afford. It then proceeded from

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its findings at that point, and then, when the government

exercised the termination right, the Board looked both at the

facts it knew and new facts, and one of the new facts was the

ease with which both consumers and businesses in Puerto Rico

can convert from the electric power grid to solar. And that is

a real issue.

On the one hand, you want people to have the benefit

of solar, because it's -- the sun is free. On the other hand,

the more people and businesses who take the benefit of solar,

the more you have to charge everyone else to use the electric

power grid to cover the fixed costs. And it became more and

more apparent to the Board that, in the reality we're now

living with, where Tesla and everyone else is coming out with

solar roofs, et cetera, for business and for consumers, that

the economics that the Board had relied on previously were not

necessarily affordable.

And to that end, the Board looked to real experts --

I'm not talking about lawyers. I'm talking about real

experts -- to delve into what price can you charge before

you'll encourage too many people to convert to solar and things

of that sort, and how much of an additional burden are you

putting on the large portion of the population in Puerto Rico

that's very poor.

And we also, shifting gears, your Honor, we looked

very seriously at the issue the Committee raised that the debt

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wasn't valid. And as we've previously explained, with -- I

don't want to start an oral argument here on that debt, but

suffice it to say that we found that the Committee had a very

serious claim objection, and the Board, like any debtor, based

on the Bankruptcy Code, as incorporated into PROMESA, has a

duty to review claims and object to claims that should not be

allowed.

So I would say the answer to your question boils down

to a combination of changing circumstances on the ground,

especially the danger of converting to solar, and giving credit

to the Committee's issue on the recourse issue caused the Board

to take the position it's taking. And it believes it's right.

I should also say that, as your Honor knows, I think

it's four of the Board's seven members are new. And while that

is sort of an internal thing, the fact is the four members at

least, you know, each felt that they didn't want to be bound by

a prior board unless they thought that it was doing the right

thing. But in this case, I think all seven members want to

deal with the facts as they are now, and that really has lead

to the emphasis on the claim objection and the economics that

the Board is prepared to negotiate.

THE COURT: Thank you. That concludes the questions

that I wanted to put to you.

I am going to ask the lead mediator, Judge Chapman,

who's here to speak, but I'd just like to make a few contextual

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comments before I do that. And after Judge Chapman has spoken,

anyone else who wishes to speak should indicate they want to be

recognized.

So in order to hold a confirmation hearing in June,

which remains my goal, in order to extricate PREPA from these

Title III proceedings for the benefit of the people of Puerto

Rico, which should continue to be all of our focus, I do expect

to see a confirmable plan by December 1. I'm glad to see in

the report that the Board recognizes that it has to contemplate

multiple scenarios, because what I mean by a confirmable plan

is one that meaningfully and realistically contemplates

scenarios in which each party fails to prevail on their claims

in litigation to the extent that they expect to in order that,

on resolution of issues in the litigation, no matter what the

outcome is, we can move forward toward confirmation with

alacrity.

I see that and I hear again today that one of the

approaches you're thinking about is settle now, litigate later.

To the extent that means you might ask me not to move forward

with resolving the issues that are put before me in litigation,

that would not be consistent with my plan.

MR. BIENENSTOCK: Your Honor, is it okay if I respond

to that?

THE COURT: Yes, please.

MR. BIENENSTOCK: The Board could not agree more with

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what your Honor just said. I did not mean in any way to

suggest that we would ask the Court to pause. What the status

report means, when it says provide an opportunity for people to

settle short of a litigation outcome, is when the briefing is

finished, we anticipate the Court will set an oral argument.

I don't know that it's likely to be in December

anymore, because that might be too close to Christmas, but it

could be, or else it will probably be in January I would think,

or somewhere around there. But whatever it is, and since it's

possible, certainly plausible the Court may not decide it at

the hearing, these are complicated motions requiring, you

know -- your Honor knows better than I do what they require to

resolve.

So what we meant in the status report is we'll provide

bondholders, and maybe other creditors, Fuel Line Lenders maybe

as well, but there are so few of them, they're probably going

to all act together, but, in any event, we'll provide

settlement opportunities calculated to have people opt in

before the Court would rule. That's what we meant. Not that

we would ask the Court to defer ruling, because, frankly, I

mean, the quickest way to a confirmable plan is to get rulings

on this.

We just want to give people the opportunity to settle,

because the Board has always taken the position that it would

rather have a settlement, and we see no reason not to. But we

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do not intend to use it to delay the litigation or the plan.

That's for sure.

THE COURT: I thank you for that clarification, and in

the same vein, I don't expect to see a place holder filed on

December 1. I want to see something that the Oversight Board

believes in good faith should move toward approval of a

disclosure statement.

I did expect, as I suggested before in my questions,

that mediation would be employed to facilitate substantive

engagement among the parties in the formulation of the plan

that will be filed on December 1, and if the requirement to

file a confirmable plan is, you've fleshed out my understanding

and my understanding of a confirmable plan isn't met every

possible way of reacting to that will be on the table.

But having said that, I don't know that the

responsibilities for achieving the goals and making the

compromises necessary to create the plan is solely the problem

of the Oversight Board. All of the stakeholders need to come

together and remain focused on the goal of a fair and legally

compliant resolution of the disputed claims that leaves the

people of Puerto Rico in a stronger position to go forward

toward a responsible future of growth and access to the credit

markets.

Mr. Bienenstock.

MR. BIENENSTOCK: Yes, your Honor. I think the Board

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has been attempting to proceed I think consistent with the

expectations your Honor just put on the record, but I can go a

step further on the plan, even though currently it's obviously

not been -- no plan has been -- no proposed plan has been

approved by the Board. But I can tell the Court this. Simply,

it's sort of more in the nature of a law of nature than

anything the Board has approved.

Since the plan has to take into account different

outcomes, I can tell the Court initially one -- we have an

impaired accepting class. This Court rendered a ruling in

favor of Vitol, where it assigned Vitol a 41 million-dollar

claim, and Vitol has agreed to take half of what the general

unsecured creditor class gets in satisfaction of its

41 million-dollar claim, so there's an impaired accepting

class.

Whether we have additional accepting classes will

depend, one, on whether and when some creditors decide to --

they're risk adverse and they want to settle at less than they

were originally asking for, but, two, the plan is then going to

have to say if the bondholders not only have an allowable claim

for their full amount but are also secured by all present and

future revenues. Then they get virtually everything, and they

will accept the plan, and the other parties may not, but it

will be confirmable. And if they don't have an allowable

claim, then, as you've said, everyone else will be paid so much

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it's hard to imagine it won't be very consensual confirmable,

and if they have an allowable claim but it's not secured, then

we're really looking more or less to treat everyone the same.

They'll all be unsecured claim holders.

Now, I realize that the Fuel Line Lenders and some

other stakeholders assert a seniority claim, so there may have

to be adjustments to settle this or a ruling on it. It's

briefed, but it's not currently one of the things that's in

play.

So I hope what I've described is consistent with what

your Honor was contemplating. I'm not sure there's another way

of doing it, but it's very serious. It follows the rules. And

I think it's, along the lines of what I described, I think is

the best the Board is going to be able to do at the end of the

day by December 1.

THE COURT: I appreciate your sharing that.

I would just add a law of nature overlay to that which

I trust is a part of the Board's consideration here. Even a

zero sum outcome on positions as to recourse and security, and

even though I know and expect you all respect my rulings,

there's always been a great deal of appellate activity in these

cases. So a win in the trial court isn't necessarily a win

that sticks, and, therefore, and you know it, even if you think

you've got the best argument in the world, there's always the

possibility for any player here of the aberrant result. And so

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I should think that both as a matter of realism and as a matter

of, well, risk analysis, which is related I hope to real,

simple, different scenarios -- would need to incorporate

compromise one way or another. So if one wins, everybody will

be happy and they'll consent to that, and if the other wins

everybody will be happy. That's true, but that's also not

super likely that you can get something that sticks.

So all of it is a question of negotiation, which is

probably restating the obvious, but I want to see momentum

here. I want to see real engagement, and I want to be in

momentum toward June, which will be early in the next hurricane

season. Here we are.

Mr. Bienenstock.

MR. BIENENSTOCK: Well, we have been considering

obviously what to do about the prospect of appeals, because we

know if -- when and if the Court has to rule on the summary

judgment motions, obviously the losing party, especially if

it's the bondholder, is going to appeal.

So in one sense that's another opportunity to settle,

but it hasn't been lost on us that it's not all over, and, you

know, whether we deal with it by delaying the effective date of

a plan or, better yet, settling the appeal, we're conscious of

that and we obviously want to settle it if we could. Also, I

think it's implicit in what I was saying earlier, but just to

make it clear, as I explained earlier, the Board has put a lot

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of the time and effort into trying to determine the right

amount it can increase rates, both in view of the people who

have to pay them and the solar issue of not to -- not to get

everyone off the grid. However that comes out, there's going

to be what the consultants call a resource envelope, which is

just all of the money we have, all of the debt we can issue to

pay -- to pay creditors.

The Board is really agnostic as to how that is

distributed. It's not trying to save money. It's not trying

to pay less than it can pay to creditors who are absorbing some

amount of losses. That's never been the Board's objective.

It's just to pay it all out. It's just a matter of how to

allocate it. And it doesn't have any favorites.

THE COURT: Thank you, Mr. Bienenstock.

So, Judge Chapman, would you go to the podium, please?

JUDGE CHAPMAN: Good morning, Your Honor. Can you

hear me?

THE COURT: Yes, I can.

JUDGE CHAPMAN: Alright. Your Honor, as you're aware,

Shelley Chapman, Willkie Farr & Gallagher, acting as the lead

mediator of the mediation team appointed by your Honor

April 25, 2022. I'm appearing on behalf of the entire

mediation team. 

I have had an opportunity to talk to Judge Drain and

Judge Shannon about the report that was filed by the Board last

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evening, and have had additional conversations with the other

two mediators in preparation for today. As is usually the

case, your Honor, I have prepared remarks. Between

Mr. Bienenstock and your Honor's comments, most of what I had

to say has been covered. But I think it's important for me to

give you some of my thoughts on some of the things that

Mr. Bienenstock mentioned, and also some of the thoughts that I

had before this morning's hearing.

Let me say this at the outset. Nothing about this is

personal, but everything about it is personal. It's personal

in the sense that front of mind for the mediators every day is

getting this case to a resolution and achieving the goals as

your Honor outlined for the citizens of Puerto Rico. That's

front of mind for us every single day. So at times when things

aren't going swimmingly, it can appear that things are getting

personal, but they're not. We pride ourselves on being

professionals. So anything I say today I don't mean

personally.

Mr. Bienenstock started by talking to your Honor about

that the Board wasted no time in turning to new proposals for

the situation, and that was in response to your Honor's

question about what took two weeks to designate whom the

mediators felt was the obvious party to act as the lead

negotiator. Your Honor, we were frozen during that period of

time. There were no communications whatsoever.

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So while I have no doubt that members of the Board

were working hard, we had nothing to do. We had no one to talk

to. And two weeks in the grand scheme of things doesn't sound

like a long period of time, but suddenly two weeks has become

six weeks, and at this point there have been virtually no

substantive communications, virtually no substantive

communications.

The impaired consenting class plan that

Mr. Bienenstock mentioned to you was mentioned to us, and I'll

be blunt, your Honor. I did not believe that that was how the

Board intended to proceed. And I don't want to get into the

merits. I don't want to get into anything that would violate

mediation confidentiality.

THE COURT: I expect that you will avoid --

JUDGE CHAPMAN: I will avoid that at all costs, and if

anyone listening or your Honor thinks that I'm wandering too

close to that line, I trust you will turn this red light on 

somehow. But there are many other constituents, I see some in

the room, others on the line, and they can talk more about

that. Primary concern to us is the looming December 1st

deadline.

Now, the various toggles based on litigation outcomes,

they've been known for a long time. This litigation has been

looming out there for a long time. So that's something that

smart bankruptcy restructuring practitioners can deal with, and

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I include Mr. Bienenstock very much in that category. So I

have no doubt that that work is going on.

I could sit down in a room with Judge Drain and Judge

Shannon. We could sketch that all out. We have seen no

proposals. If there is a proposal that has been shared with

any of the parties, as I stand here today, I am unaware of

that. So, therefore, I find it concerning as to how the Board

will indeed comply with the December 1st deadline.

I was glad, actually, to hear Mr. Bienenstock talk

about affordability, because however this litigation comes

out -- and we were also glad to hear general agreement that the

sooner your Honor rules on certain issues the better. And I

hate to put the burden on the Court, but there it is.

Yes, we need to talk about affordability, because we

believe -- the mediation team, that is, believes that however

the litigation comes out on the various issues that have been

identified, at bottom, this case may well turn on the issue of

affordability. We feel -- we've come to feel over the last

month that -- and, again, it's our feeling. It may not be the

reality, but we feel that we are being treated in some

circumstances as an adversary. We are no one's adversary. We

are seeking to be every mediation party's potential ally. We

have admittedly talked more to some than to others. We are the

only ones who know the things that we are told. We don't share

them with the other mediation parties. Those are the rules of

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the road. 

So we had thought we were going to hit the ground

running and begin mediating. We asked a long list of

questions. We identified a long list of topics we believe

needed to be addressed in order to get at the question of

affordability and some other issues that would relate to plan

formulation. 

We tried to have a meeting. We asked for a meeting to

be held yesterday. No go. We asked for a meeting to be held

next Tuesday. We hope that's a go, but we don't know for sure.

So everyone can look at the calendar. If we do have that

meeting next week, that's November 8th, then there's

Thanksgiving, and then it's my birthday on November 30th, but

December 1st is the following day.

So we're very concerned about how this is going to

play out. We're very anxious to have all the parties reengage.

Mr. Bienenstock himself said in pleadings that were filed

months ago "we can mediate and litigate at the same time." So

I see the litigation filings, and I've read them. We're here

to mediate. We're continuing to try to engage.

We don't feel much coming back from the Board. We're

hoping that will change dramatically, perhaps after today. You

asked Mr. Bienenstock some questions about, you know, how far

we've gotten here in terms of the litigation and what changed.

I'm not going to get into that, but I would say the following:

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The creditors have been kept waiting, but, more importantly,

the people of Puerto Rico have been kept waiting. And it's

just gone on too long.

Yes, certain facts changed in the wake of the natural

disaster that befell Puerto Rico, but many of the data sets,

issues, potential solutions have been well known for a long

time, and we just need to -- we need to get some traction here.

And I hope after today's hearings my phone will be ringing off

the hook.

Unless your Honor has any other questions, I think

I'll leave it there.

THE COURT: Thank you, Judge Chapman.

Mr. Bienenstock, did you wish to say anything before I

call on others?

MR. BIENENSTOCK: Your Honor --

THE COURT: I need you to go to the podium. Thank

you.

MR. BIENENSTOCK: Okay. Your Honor, to really respond

with -- I would have to weigh into the mediation privilege, so

I'd rather not. I'll just leave it at what I said earlier.

The Board is very proud of the way it's proceeded

doing everything the Board is supposed to do, and I don't want

get into the issues that Judge Chapman raised.

THE COURT: I will again reiterate that I expect the

facilities and abilities, talents and perspectives of the

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mediation team to be used meaningfully in the process of

getting to December 1, and I think that I am hearing accurately

from your remarks and from Judge Chapman's remarks that that

hasn't happened yet. I expect that to happen in the

formulation of a plan for December 1.

Thank you.

Now, sir, you raised your hand. So the person behind

Mr. Natbony. I'm sorry.

MR. MASON: Richard Mason, Your Honor.

THE COURT: Thank you, Mr. Mason.

MR. MASON: Richard Mason, Wachtell, Lipton, Rosen &

Katz for the Fuel Line Lenders.

Just very, very briefly, your Honor, so that the

record is clear, I did have a couple of conversations with my

friend Mr. Bienenstock, which I always appreciate, but the Fuel

Line Lenders have as yet received no proposal. Candidly, and I

appreciate the internal activity that the Board has undertaken,

the lack of activity externally, and just focusing on us, if

you will, during the month of October, given the tightness of

time, has been somewhat surprising.

Mr. Bienenstock spoke about economic issues, electric

rates, affordability. I think he used the phrase "resource

envelope." Your Honor might recall that in my remarks at our

last hearing I tried to emphasize that our group, and I presume

other creditor groups, needed to see analysis on those issues

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so that we could understand factually and deeply where the

Board was coming from. We have seen nothing since that hearing

in that respect. Hopefully, that will change.

And, lastly, just to mention, Mr. Bienenstock referred

to Vitol, which I think is a small creditor in the scheme of

things, as potentially being an impaired accepting class. I

think we would meet that with some pretty severe skepticism,

but, obviously, if that's the road he is going to go down,

we'll address it at the time.

Thank you, your Honor. That's all I have.

THE COURT: Mr. Natbony.

MR. NATBONY: Thank you, and good morning, your Honor.

THE COURT: Good morning.

MR. NATBONY: William Natbony from Cadwalader

Wickersham & Taft, on behalf of Assured.

On behalf of Assured, I just want to share and support

Judge Chapman's concerns and comments about timing and the

process that has been engaged in since your Honor amended the

order continuing the mediation. With respect to the timing

comments of both your Honor and Judge Chapman, Assured has been

standing by, and continues to stand by, and is ready and

willing to participate in good faith, continued negotiations,

as your Honor had contemplated. And, of course, with the

assistance of the mediation team.

As to the recourse arguments talked about by

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Mr. Bienenstock, we're going to leave those arguments obviously

to the papers that have been filed and will be filed, and we'll

address those in due course, and obviously have disagreement

with the Board on those issues.

Thank you, your Honor.

THE COURT: Thank you.

Mr. Friedman.

MR. FRIEDMAN: Your Honor, Peter Friedman from

O'Melveny & Myers on behalf of AAFAF.

The only thing we want to emphasize is one of the

things you said, which is getting this right, and we recognize

that there is a tremendous desire for consensus and expedition,

but we also recognize that this -- the result of this process

will cost money that will tax the people of Puerto Rico, who

have a 56 percent poverty rate I believe, is twice as poor as

Mississippi, already has high consumer rates -- commercial

rates compared to retail rates, which is the inverse of

virtually every state in the country.

The consequences are profound, and I think just from

public material the differences of what may be affordable, what

people's legal rights are are vast. And so while we understand

that everybody wants to get to consensus, it has to be a deal

that works for the realities of Puerto Rico. And that's

difficult and that's expensive. 

And all the talking in the world in mediation and good

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intentions to get to a deal may get people closer but may not

actually be able to bridge that gap, at least from the

government's perspective as to what truly is in the best

interest of Puerto Rico, so that's where we stand.

We have tremendous respect for all the professionals,

particularly the mediation panel, and certainly don't view them

as our adversary, but where we stand comes not from a place of

wanting to be obstreperous or difficult but to see the best

interest of the future of Puerto Rico served. And our

viewpoint may be different, and it's only meant to serve that

interest.

Thank you, your Honor.

THE COURT: Thank you, Mr. Friedman.

Mr. Berezin.

MR. BEREZIN: Yes, your Honor.

THE COURT: Thank you.

MR. BEREZIN: Your Honor, excuse me, Robert Berezin,

Weil, Gotshal & Manges, LLP, on behalf of National Public

Finance Guarantee Corporation.

Your Honor, I understand what it's like to fall in

love with arguments. The Board seems to have fallen hard for

the Committee's non-recourse argument, as if it's some kind of

alchemy transforming eight billion dollars in lawful debt into

thin air. This is indeed a sudden and new development, and we

fear the mediation will lay fallow absent some change.

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In that regard, your Honor, we remind the Court of the

pending but stayed motion to lift the stay to appoint a

receiver. We agree with Mr. Friedman that the people of Puerto

Rico must remain at the center of these proceedings, and we

believe a receiver will drive lower costs and more reliable

power for the people of Puerto Rico. So it is urgent for that

reason alone, but in addition, to resolve these Title III

cases, the receiver litigation will put front and center

whether a receiver has a right to assume and exercise PREPA's

property rights until all defaults are cured. Whether PREPA

granted bondholders an interest in property through the

receiver company, whether that right is binding on all PREPA

creditors due to the Authority Act's codification of the

receiver right granted to bondholders.

Your Honor, make no mistake, National wants a

consensual resolution. National is committed to mediation.

National has stood and will stand ready to engage with the

Board and AAFAF in mediation. But the receiver litigation

would be a wake-up call required, in our view, to realize the

promise of mediation.

Thank you, your Honor.

THE COURT: Thank you.

Anyone else in this courtroom? I don't see anyone at

the podium in San Juan.

Is there anyone who's on the phone who wanted to be

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heard? If so, unmute and state your name. You have to unmute

on both the Court Solutions dashboard and on your phone to be

heard.

Alright. Thank you. I hear no further --

MR. DESPINS: Your Honor.

THE COURT: Oh, yes.

MR. DESPINS: I'm sorry. This is Luc Despins for the

Committee. I apologize.

May I be heard at this time?

THE COURT: Yes. Good morning, Mr. Despins.

MR. DESPINS: Good morning, your Honor. I apologize

for not being there in person. I certainly didn't expect the

hearing to take the turn it has taken, so obviously my

apologies for not being there. But very briefly, your Honor,

the Committee is really concerned about -- when we hear issues

of expediting in the sense that everyone has to be in favor of

expediting an exit from these Chapter -- Title III cases.

That's apple pie.

But from the Committee's perspective, we've been

asking, we've been pushing this issue for three years plus, so

we're really concerned about the fact that expedition could

take precedence over a ruling on the merits, because we believe

obviously in the merits of our claims that we've articulated

three years ago. So that's the first point.

The second point is the Committee objects in the

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strongest terms possible to the turn that the mediation has

taken here where you have mediators showing up in court,

reporting to the Court on the behavior of some parties. Not us

by the way, but I'm fearing that I'll be next. But not us, but

the Board. The Board refused to have a meeting this week. The

Board didn't do that. The Board didn't do that.

I just don't understand how that is possible, and the

question I have is, is that a two-way street? Meaning, can the

Committee raise the engagement or no engagement of the

mediation team with respect to some issues? I expect not,

because that would be breeching the mediation privilege.

On the other hand, it seems that it's fair game for

the mediation team to appear and to criticize the position in

mediation of some parties, and I'm really concerned about that.

The Board can fend for itself. I don't care about the Board,

but I care about the fact from a process point of the view.

This could be the Committee next. So we are really concerned

about that.

And the last point is that, you know, the people of

Puerto Rico, and of course the creditors in our group, deserve

an answer to an issue that is fundamental here, because this is

not a decimal point impact on them. This could have a huge

impact on the people of Puerto Rico. And, therefore, when

people say that that should be the primary concern, we agree,

but that turns on -- it's not necessarily that expedition is

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what they need. They need to know whether they indirectly

should be repaying this debt that is a non-recourse claim.

So I'm not going to argue the merits of this, but I

wanted to express these concerns to your Honor. Thank you very

much.

THE COURT: Thank you, Mr. Despins.

Judge Chapman wishes to be heard again, and as she

walks to the podium, I will reiterate that the Court's

intention is to decide what is placed before the Court and to

do that carefully and as intelligently as the Court can and as

fairly and accurately as the Court can until and unless the

issues are taken off the table or superseded by events.

Judge Chapman.

JUDGE CHAPMAN: Your Honor, thank you for giving me

some additional time. I said at the outset of my remarks that

nothing that I was about to say was personal, but unfortunately

Mr. Despins made it personal and directed some pretty sharp

criticism at the mediation team, which I have to tell you I

believe is entirely unfounded. I did not mention the

Committee.

I can report to the Court that there has been

communication between Mr. Despins and a member of the mediation

team. I did not view any of my remarks as overstepping the

appropriate line and breeching mediation confidentiality. Your

Honor asked the Oversight Board to file a status report on the

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status of the mediation. They did so. Mr. Bienenstock gave

you additional details. I came to the podium and I provided

you with our version of those same facts.

Mr. Despins can speculate that somehow we're going to

have him next on a list. Nothing could be farther from the

truth. I have in my brief case right now an analysis of the

unsecured claims. We're very aware of the important role that

he and his constituents play. And I just could not remain

seated in the face of what I viewed as a troubling and personal

attack on the manner in which the mediation team has been

proceeding.

To the extent that your Honor believes that we have

done anything inappropriate, I trust and expect that your Honor

will advise us, but we intend to soldier on and not sacrifice

anyone's interests in the interest of expedition. 

Thank you, your Honor.

THE COURT: Thank you, Judge Chapman.

I believe that Judge Chapman and the others who have

spoken today have been careful not to go to the substance of

any communications in mediation. My mediation order does

contemplate reporting by the mediation team on non-substantive

issues as the mediation team believes necessary. It is no

secret that certain parties are not happy with the sequencing

of mediation. That's not a secret, and it is a procedural

point.

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Judge Chapman said that she didn't intend anything to

be personal, and we all need to make sure that things are not

personal but, rather, are directed towards a proper resolution

of the very, very serious issues that are before the parties in

interest and ultimately before the Court as to legal issues,

particularly on rights of credits. But, ultimately, the Court

is looking forward to having the very weighty responsibility of

determining whether a plan is consistent with the requirements

of law and can be confirmed as one that is legal under PROMESA

and structured so as to improve the situation of the people of

Puerto Rico and allow Puerto Rico to go forward.

So I thank you all for your serious engagement with my

questions about the status of plan formulation and of

mediation. I hope that everyone has heard things that will be

significant in their determinations as to how to proceed

between now and December 1, and that there will offline be

meaningful and substantive work and communications on the

mediation front.

So now I will turn to the AAFAF report.

Mr. Friedman, is there anything further from AAFAF to

that report?

MR. FRIEDMAN: No, your Honor. Nothing further.

Peter Friedman from O'Melveny & Myers on behalf of

AAFAF. We have nothing further.

THE COURT: Thank you. I had no questions for AAFAF.

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Is there anyone with comments on AAFAF's report? I

don't see anyone at the podium in San Juan. No one has raised

hands here. I'll wait a couple of seconds for any comments

from the phone line.

Alright. I believe that there are no further comments

with respect to AAFAF's report, and so we will now proceed to

the contested matters. 

The first agenda item II.1 is the administrative

expense claim motions by the various litigation plaintiffs. So

there is a group of five administrative expense claims in which

the claimants are represented by Ivonne Gonzalez-Morales. The

first of which is the Carmen Socorro Cruz-Hernandez litigation.

The motion is Docket Entry No. 21195 in Case No. 17-3283. The

second arises from the Madeline Acevedo-Camacho litigation, and

was filed as Docket Entry No. 21194. The third is arising from

the Francisco Beltran-Cintron litigation, which is Docket Entry

No. 21224. The fourth arises from the Abraham Gimenez

litigation, which is Docket Entry No. 21227; and the fifth

arises from the Acevedo Arocho litigation, which is Docket

Entry No. 21230.

So we have an allocation of 15 minutes for the opening

argument by Ms. Gonzalez-Morales.

Ms. Gonzalez-Morales, are you there?

MS. GONZALEZ-MORALES: Yes. Good morning, Your Honor.

THE COURT: Good morning.

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MS. GONZALEZ-MORALES: I address the Court, Ivonne

Gonzalez-Morales, on behalf of the group of employees stated.

Can I start?

THE COURT: Yes, please.

MS. GONZALEZ-MORALES: Okay. Before entering to the

merits, we must briefly highlight the fact that all claimants,

as regular and former government employees, hold back wage

claims accrued during the ordinary course of employment. Of

the five cases identified in these different motions, only one

have a judgment. That is the case of Carmen Socorro

Cruz-Hernandez.

And in that judgment, it was determined that the

Commonwealth, Family Department and other instrumentalities

broke the salary -- violated the federal and state wage laws

when implemented the minimum wage and disregarded the uniform

retribution -- regulation, which the employees confronted the

situation that they were paid up to the 19 pay scale the same

salary of the laborers and workmen, to the extreme that in

1996, 19 -- the first -- the employees assigned to the first 19

pay scales were receiving the same salary of laborers and

workers.

In addition, is important to bring to the

consideration of the Court that in the -- in the petition of

bankruptcy, the government of Puerto Rico made clear that it

was going to continue paying employees the -- in the regular

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course of employment the pertinent wages. Also, there is --

the claimants confront the situation that although they qualify

for the transferring of the claims to the administrative claim

reconciliation procedures, they have been discriminated, and,

to this day, they have not -- their claims have not been

considered in those procedures, which contradicts the very

purpose of the claim review and process of the Title III cases.

With this conduct, the Oversight Board is failing to

take affirmative action and denies claimants the opportunity of

settling their claims and obtain full payments of the

meritorious employee wage disputes and prevent frivolous

litigations. Once is that clarified, in the case of Carmen

Socorro Cruz-Hernandez, although most of the judgment have been

paid, there are some outstanding payments that have not been

done and are identified in Exhibit Three.

Since claimants have not provided service to the

employment contract, the service rendered by the Family

Department would have been substantially effected. Therefore,

under section 503(b)(1)(A) of the Bankruptcy Code, they submit

that they are -- they should be granted administrative expense

for the wages earned and not paid, especially because they have

established that the Commonwealth, although they have

reasonable problems, they submitted to the Court evidence that

-- of the bank accounts, and that permits the employees to have

their wages paid, plus have established that by paying the

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amount that they claim, the government can continue operations.

Therefore, we cannot imagine why Congress would amend section

503(b)(A) to authorize priority claims and avoid a statutory

interpretation that would lead to an absurd result.

The Bankruptcy Code clearly responds to the public

outcry of terminating abuses by the -- of the bankrupt

employers and does not make reference to the judgment entered

prior or before the rule, also, since they have sufficient

funds to continue operating. Most notably, the Commonwealth in

its opposition does not consent that movants provided

pre-petition services and the Commonwealth received substantial

benefits for the services. Neither contests that -- the fact

of the Commonwealth's obtained unjust enrichment, they seek the

payment of the administrative expenses applications.

In regards the four cases that are pending

determination, is important to bring to the Court's

consideration that although the administrative expense claims

stem from identical litigation claims with final judgment, in

the case of Carmen Socorro, Nilda Agosto, Juan Perez-Colon, and

Janet Abrams, which are pending determination from this Court.

THE COURT: Ms. Gonzalez Morales, pardon me. I'd like

to ask you a question.

Do you agree that an administrative expense claim must

be based on something where liability has already been

determined? You've just said that in four of these cases, the

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arguments and the claims would be the same as in Carmen

Socorro, but you've also I think just acknowledged that there

hasn't been a determination of liability or a judgment in any

of those four cases yet. So doesn't that fact alone mean that

I cannot recognize the claims in those four cases as

administrative claims at this point?

MS. GONZALEZ-MORALES: Your Honor, we have to make a

clarification. The claims have been bifurcated in pre-petition

claims and post-petition claims. The post-petition claims,

since they address the practice of unpayment violations of law

and is a fact that is not in controversy that the Governor of

Puerto Rico have not paid claimants the just, regular rate that

they deserve for the post-petition claims, they are entitled

for payment, because they have not been paid the wages that the

Puerto Rican law requires. So --

THE COURT: So has there been --

MS. GONZALEZ-MORALES: -- with that said --

THE COURT: Has there been a determination by a court

that the wages paid post-petition are insufficient?

MS. GONZALEZ-MORALES: Well, we refer to the four

judgments that we have just addressed: Carmen Socorro, Nilda

Agosto, Juan Perez-Colon. There are four cases, four judgments

that have addressed the issue of the Commonwealth violations on

salaries of the claimants. So, for the post-petition claim,

there is no obstacles to concede and grant movants their

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request for administrative expenses, because their work has

produced benefits to the state.

In regards the pre-petition claim that all together

around $200 million, when you add up the claims, movants --

since there's not a judgment, movants reserve the right to

litigate these cases, and if succeed, to come again and claim

the administrative expenses. It's important to clarify that

movants are also requesting this Court to order to -- a

creation of a special fund to guarantee these administrative

expenses if granted by a court. However, movants also request

this Court to order a mediation process or some kind of

procedures where the Oversight Board will meet with claimants

in order to resolve this controversy about the wages.

We have a real concern, your Honor, because when you

see the result of the wage violations incurred by the

Commonwealth of Puerto Rico, and if you notice the amount of

claimants originally accumulated in -- for instance, in the two

cases from the Family Department, Madeline Acevedo and

Francisco Beltran, they were originally about 7,000 employees.

However, to this date, only 2,000 employees are still working.

That means that over 70 percent have left the government. This

will -- this is creating a severe administrative problem for

the government agencies and services that the government should

bring to the Commonwealth of Puerto Rico citizens, and that is

why we are -- have bifurcated the administrative expense --

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(Sound played)

MS. GONZALEZ-MORALES: -- petition in a pre-petition

and post-petition in order to solve the problem of wage theft

that the Government of Puerto Rico have been incurring.

I don't know whether the judge have another question.

THE COURT: Well, the time has run out. We heard the

two buzzes.

(Sound played)

THE COURT: So if you want to wind up in a sentence

your remarks, then I will turn to the speaker for the Oversight

Board.

MS. GONZALEZ-MORALES: Well, we pray for the granting

of the administrative explained -- as we have expressed in our

prior memorandums. Thank you, your Honor.

THE COURT: Thank you, Ms. Gonzalez Morales, and I

will call on you for a reply argument after Mr. Rosen speaks

for the Oversight Board.

MR. ROSEN: Good morning, Your Honor. Brian Rosen of

Proskauer Rose on behalf of the Oversight Board, as the

representative of the Commonwealth of Puerto Rico, pursuant to

Section 315 of PROMESA.

Your Honor, simply stated, this hearing is a lot like

Ground Hog Day. As you are keenly aware, you have addressed

these litigations and the asserted claims twice before, once on

August 4th of 2021 in connection with the 345th Omnibus

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Objection, and then again on Ms. Gonzalez' motion for

reconsideration of your order sustaining the 345th Omnibus

Objection. And while these arguments that Ms. Morales is

raising today are repackaged, the arguments raised in these

five motions are essentially the same. And to take what Yogi

Berra once said, your Honor, this is like deja vu all over

again.

These five motions, your Honor, are seeking the same

relief in a slightly different form as she came before you

before. The first motion on the agenda, your Honor, is the one

that Ms. Morales was referring to as the one that maintains a

judgment and asserts liability only for pre-petition services

for some of the plaintiff employees.

The remaining four motions, your Honor, are filed by

the moving groups in four litigations in which the movants

acknowledge that they do not have a final judgment of liability

against the Commonwealth. Rather, movants assert that they are

similarly situated to plaintiffs in other litigations in which

a judgment has been entered. These motions and the

corresponding litigations contend that they are both pre- and

post-petition amounts owed.

Your Honor, you caught that -- excuse me. You raised

that question very clearly, and you got the answer from

Ms. Morales that there really isn't a judgment entered. And as

I'll go later on, your Honor, the Commonwealth very adamantly

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contests the liability associated with those litigations. As

asserted in those, your Honor, the Commonwealth has raised

certain affirmative defenses, and the issues are on appeal to

the Puerto Rico Supreme Court. They relate to, among other

things, whether the claims asserted by the plaintiffs are

barred by laches or by a three-year statute of limitations and

whether the lower court erred in denying the motion for summary

judgment related to the cause of action.

It must be noted, your Honor, that the Commonwealth

considers any dispositive judgment to be issued by the Puerto

Rico Supreme Court in favor of the Commonwealth on those issues

to similarly apply to the other pending actions. In fact, this

was one of the reasons, your Honor, that the Commonwealth

opposed the lifting of the stay with respect to those actions.

Your Honor, as I said, with respect to all the motions

asserting that pre-petition services are entitled to admin

expenses, we have seen this before. Movants are making the

same or similar arguments previously made in connection with

the 345th Omnibus Objection, and it's the same arguments, your

Honor, that you addressed in your motion -- or, excuse me, in

the motion for reconsideration and your order wherein you

denied the motion for reconsideration, addressing the issues

under 503(b)(1)(A)(ii), your Honor. 

In ruling that in the denial of the reconsideration,

your Honor, the Court recognized that movants had not put forth

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a theory in which expenses had accrued and continued to accrue

post-petition, and that they had failed to persuade the Court

that 11 U.S.C. 503(b)(1)(A) applied to their claims. Your

Honor, the movants here again argue that pre-petition portions

are allowable as admin expenses pursuant to section 503(b). 

And the theory they espouse now is that they provided a benefit

to the Commonwealth through their services, making it possible

for the agencies to continue uninterrupted service, but they go

farther, your Honor.

In connection with the most recent application, they

again stress section -- or subsection (A)(ii), which the Court

did address briefly in the motion for reconsideration order.

And they're claiming that there's an exception to the

post-petition benefit rule.

But, your Honor, the theories that they put forward

ignore the plane statutory language of the Bankruptcy Code

requiring that the payment be, quote, attributable to the

post-petition period. The law is clear that without a

post-petition nexus or a connection entitlement to payment does

not qualify for admin expense priority.

So what do they do? What does Ms. Morales attempt to

do? She provides an admin expense claim motion and she deletes

a piece of the statute. She deletes the portion where it talks

about being attributable to that activity.

Your Honor, she tries to claim that there is an

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exception to the rule and -- by citing cases which focus on

WARN Act or severance liability, but that's not the situation

here. Those causes where there might have been some

responsibility, some admin expense claim, your Honor, were in

the context of WARN Act or severance where there might have

about been an obligation which actually accrued post-petition,

not pre-petition. Your Honor, here there is no such

obligation.

So, your Honor, for the same reasons that the Court

ruled in the 345th Omnibus Objection that they should be

reclassified to general unsecured claims, for the same reason

that the Court denied the motion for reconsideration, the Court

should deny the request for the administrative expense claim

status here with respect to those which were pre-petition

activity.

With respect to the post-petition periods, your Honor,

that are asserted in the motion, the Commonwealth has

acknowledged that services provided during those periods may be

entitled to admin expense priority, but the liability and the

quantification is in bona fide dispute, as the Court recognized

earlier. And it rests, your Honor, on the ruling that is

hopefully to come down by the Puerto Rico Supreme Court in the

Acevedo-Arocho action to which I referred before.

And as I said, your Honor, unlike the other cases

where there is a judgment, the Commonwealth courts have not

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determined there to be any liability as to the movants

asserting post-petition liability. Movants in those motions

consider themselves similarly situated to plaintiffs in other

cases that do have a judgment, but that is a big difference,

your Honor.

Furthermore, your Honor, the four groups of plaintiffs

that assert post-petition services are from those cases.

They're related to defenses -- the Commonwealth's defenses of

laches and statute of limitations, and if the Commonwealth were

to be successful in those defenses before the Supreme Court and

then possibly on remand, it would consider those issues to be

similarly dispositive in all the other actions and there would

be no liability at all, your Honor.

THE COURT: Now, the Commonwealth would consider it

that way, but that wouldn't necessarily preclude the plaintiffs

from trying to litigate it and obtain a different result.

MR. ROSEN: Absolutely, your Honor. I agree.

Your Honor, Ms. Morales has also raised in her

comments something about either the ACR or the ADR processes

that the Court has authorized in these cases, and, your Honor,

we have always held major litigation cases to the side.

In this case, Ms. Morales is seeking, as she says,

hundreds of millions of dollars of liabilities. And it's not

something which is the run of the mill type of claim where

someone says, my pension benefit should be $100, not $60 like

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you say. Those are the types of things that we've been dealing

with, your Honor, in the ACR processes.

Likewise, in the ADR, your Honor, these claims are so

sizable, and they are along the -- significantly along the path

in litigation in connection with the Puerto Rico Supreme Court

action that we would wait until there were some sort of

determination by the court, the Puerto Rico Supreme Court, so

we could, if in fact it's doable, proceed to ADR or proceed to

mediation. But until Ms. Morales moves off of her position as

she stated here that she demands full payment, I don't think

there's something that anyone can do, whether the Commonwealth

or the Oversight Board, until we have that determination by the

Puerto Rico Supreme Court.

So, your Honor, for the same reasons the Court has

ruled in connection with the 345th Omnibus Objection and in the

motion for reconsideration, we ask the Court to again deny the

five motions which are before the Court. Unless the Court has

any further questions, I don't have anything more.

THE COURT: I have a couple of questions for you

before you step away. The movants assert that claims totaling

about two-thirds, or 635,000 of the slightly over one million

dollar Socorro Cruz-Hernandez judgment qualify as convenience

claims in class 68 under the Commonwealth Plan, and do you

agree? And to the extent that you agree, are those claims

being processed and paid in accordance with the Commonwealth

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Plan?

MR. ROSEN: Your Honor, we have not had an opportunity

to determine whether or not those are, in fact, convenience

class claims. We will try to do that with Alvarez & Marsal.

But I would point out that the Commonwealth also disputes that

that judgment, which gave rise to the claim itself, is final,

and that they do assert that they do have additional rights

that they may pursue.

So we will endeavor, your Honor, to get an answer to

your question about the convenience class, but I will say that

the Commonwealth is still reserving its rights with respect to

the balance of the money that is owed.

THE COURT: So does this implicate the dispute as to

whether the automatic stay stayed the deadline to appeal the

judgment in Socorro Cruz-Hernandez? 

MR. ROSEN: Your Honor, the Commonwealth is taking the

position, as reported to us, that the automatic stay is still

in effect, and that's why they have not pursued any additional

appellate rights right now. 

THE COURT: Alright. Some of the -- well, the motions

were filed as proofs of claim. Are you going to stand on

procedure or will you treat the motions as proofs of claim to

which you'll react appropriately on the claims processing side?

MR. ROSEN: Your Honor, if it is easier for the Court,

I will not stand on procedure or ceremony here. We still do

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have these motions pending -- excuse me, these proofs of claim

pending as, of course, general unsecured claims based on the

classifications earlier. We still will object to those claims.

But on the admin expense claims, your Honor, if the Court were

to rule on those today without further objection being

interposed, we would accept that.

THE COURT: Thank you.

So now I'll call Ms. Gonzalez-Morales back.

MR. ROSEN: Thank you, your Honor.

THE COURT: Thank you.

MS. GONZALEZ-MORALES: First of all, we have to object

the Oversight representative when mention that the claims of

administrative expenses filed are subject to review by the

Puerto Rico Supreme Court. For that purpose, we included in

our -- as Exhibit B, the answer to the denial of the legal sale

given by the Commonwealth where does not inform the theory that

is informing this Court today.

The injunction is requested to be maintained because

of the complexity, because the cases are in an initial state,

and, second, because of the complexity of the action, and the

cause associated with litigating those claims. Nowhere in the

answer to the request of lift of stay that is pending before

the Court arises the argument -- the new argument that the

Commonwealth is presenting to this Court.

The Acevedo-Arocho claim refers to a special action

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that some auditors and tax specialists of the Treasury

Department had, not -- that special claim was not stayed by the

Court of First Instance. Therefore, is misrepresenting this

Court about the pending Supreme Court decision will affect the

administrative expense petition. So we request this Court to

dismiss that argument, because it's not faithful because of the

record of the case, and we submit our petition of

administrative expense as we previously requested.

Thank you, your Honor.

THE COURT: Thank you.

We will now take a ten-minute break. So we will

resume the proceeding -- actually, it will be a 13-minute

break, so we'll resume the proceeding at 11:30 a.m.

People who are listening on the AT&T line, don't hang

up. Put it on hold or just put the phone down on the table. 

Mr. Friedman, before we go.

MR. FRIEDMAN: Your Honor, may I be excused? I don't

think AAFAF has anything further to say. I don't believe any

of the other matters require AAFAF to speak.

THE COURT: Just in case anyone did not hear

Mr. Friedman on the speaker, he asked to be excused because

AAFAF doesn't need to appear in connection with any of the

other motions, and that request is granted.

MR. FRIEDMAN: Thank you, your Honor.

THE COURT: Good to see you, Mr. Friedman.

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MR. FRIEDMAN: Thank you, your Honor.

THE COURT: Alright. We are adjourned to 11:30.

Thank you.

(Recess) 

THE COURT: Please be seated, and thank you for your

patience.

I have one more question for Mr. Rosen in connection

with the previous agenda item, and that's a follow-up to your

response, Mr. Rosen, to my question as to whether the Oversight

Board would treat the motions filed on behalf of these wage

claimant groups as the administrative claims rather than

raising an objection that they were filed as motions, rather

than as claims. And you said yes, but then your response

seemed to suggest that you would consider a denial of the

relief sought today as a complete resolution or expungement of

those claims as administrative claims.

Is that what you meant?

MR. ROSEN: Your Honor, I thought what you were asking

was in as much as these were requested to be treated as admin

expense claims, a determination by you would be dispositive of

that. That would still leave, however, what we always perceive

to be the general unsecured proofs of claim that we would still

be dealing with.

THE COURT: Thank you for making that clear.

Alright. I will now make my oral ruling with respect

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to these applications.

Before the Court are five separate motions seeking

allowance in payment of administrative expense claims, which

are at Docket Entry Nos. 21194, 21195, 21224, 21227, and 21230

in Case No. 17-3283. I will call these docket entries the

"Motions," and the various movants thereto I'll refer to as the

"Movants." The Financial Oversight and Management Board of

Puerto Rico has objected to each of the motions, see Docket

Entry Nos. 21640 through 21644.

The Court has carefully reviewed the relevant

pleadings and listened to the arguments today. The Court now

makes its oral ruling as to the motions and reserves the right

to make non-substantive corrections in the transcript of the

ruling.

Movants seek immediate payment of certain prepetition

wage claims as administrative expenses, as well as "comfort

orders" that over $200 million in asserted pre- and

postpetition claims that are the subject of pending actions

will be given administrative expense priority. And they ask

the Court to order the Commonwealth to create a reserve of

those funds to be available for immediate payment when final

judgments are rendered in those cases. Movants have also filed

the instant motions as proofs of claim. For the reasons that

follow, the Court denies each of the Motions for allowance of

Movants' asserted administrative expense claims at this

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juncture, as well as all of the requested ancillary relief.

The Movants' asserted claims are based upon multiple

underlying actions in which they seek damages from several

departments of the Commonwealth, including the Treasury

Department, and the Department of Transportation and Public

Works. All but one of the underlying actions are currently

pending before the Commission for Appeals for Public Service,

or CASP, before the Puerto Rico Court of First Instance or

before the Puerto Rico Supreme Court. The gravamen of the

several actions is that the Movants allege that they are owed

back pay due to a salary shortfall caused by the Commonwealth

not properly adjusting wages following its implementation of

the federal minimum wage laws.

Addressing the pending actions first, Movants argue

that they are "similarly situated" to other plaintiffs who have

prevailed on similar claims. However, the potential merit of

the claims in the underlying actions is irrelevant with respect

to the Motions before this Court today, because administrative

expense claimants have the burden of conclusively establishing

the liability of the debtor before seeking a ruling on

entitlement to priority treatment.

"The burden of proving entitlement to priority payment

as an administrative expense . . . rests with the party

requesting it[.]" That is a quote from In re Fin. Oversight &

Mgmt. Bd. for P.R., 621 B.R. 289, 296 (D.P.R. 2020), aff'd, 7

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F.4th 31 (1st Cir. 2021). It falls to the claimant to

establish the liability of the debtor under applicable law.

See, e.g., Gorgan v. Garner, 498 U.S. 279, 283 (1991).

With respect to the pending actions, Movants do not

appear to argue that they are entitled to immediate payment or

that they hold final judgments. Instead, in the Motion

pertaining to the Acevedo-Camacho action, they state that

"Movants are not the beneficiaries of a judgment from a

Commonwealth Court since their litigation claim[s] have not yet

been resolved on the merits, [they] request [for] this court[]

to take judicial notice that by filing the present Motion,

Movants are not requesting[] the immediate payment of the back

pay accrued pre-petition[.]" (Docket Entry No. 21194 paragraph

22(A).) Similarly, Movants cannot request immediate payment of

their back pay claims in any of the other pending actions.

Instead of immediate payment, Movants ask for a

comfort order that their postpetition wage claims will be

administrative expenses, as well as for the Court to order the

Commonwealth to set aside hundreds of millions of dollars into

a reserve to pay the judgments when the cases are won and

finalized, and Movants don't believe that that final result is

in any doubt.

However, Movants are not entitled to such a comfort

order or to any reserve. Their claims are contingent. Any

comfort orders with respect to the future treatment of Movants'

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potential post postpetition claims would be a premature and

improper advisory opinion, because the Commonwealth's liability

has not yet been established. Further, Movants' request that

the Court order the Commonwealth to set aside funds to satisfy

potential future rulings is unsupported by any basis in law or

in fact.

Accordingly, the Motions for allowance and payment of

any wage claims deriving from the pending actions are denied at

this juncture, along with any ancillary requested relief.

Movants have filed their Motions as administrative claims in

advance of the administrative claims bar date, and they will be

addressed by the Debtor in due course.

So the separate claims that have been filed will be

argued by the Debtor. Is that your intention, Mr. Rosen?

MR. ROSEN: Do you want me to --

THE COURT: Just speak into your microphone.

MR. ROSEN: Your Honor, I thought what you were going

to do was -- based upon your questioning, was address them as

admin expense claims now, but if we can reserve that and deal

with them subsequently -- what I was saying was we will deal

with the prepetition when we deal with the general unsecured

claims. We'll object to those proofs of claim as we would

normally do, your Honor.

To the extent that there is a postpetition piece, your

Honor, we will -- we will deal with that, as we said, in our

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papers, your Honor. The Commonwealth does not dispute that

there might be something on a postpetition basis. It just

wants to deal with the litigation that is out there with the

Puerto Rico Supreme Court, or CASP, as you referred to already,

so --

THE COURT: Alright. So I think now I'm getting a

little confused as to what I believe they filed --

MR. ROSEN: Yes. 

THE COURT: -- and whether there are parallel claims

filed as well as these motions, but I am ruling today on -- as

to the postpetition claims -- the request that they be paid

immediately or be secured. That is being denied.

MR. ROSEN: Yes.

THE COURT: To the extent there remains an underlying

timely filed claim for treatment of finally determined

liability for postpetition wages, as an administrative expense,

I'm not ruling on that today, and I'm leaving it to the Debtor

to handle liquidation and any payment of that claim or

objection to that claim in the ordinary course of resolution of

claims.

MR. ROSEN: We are in complete agreement, your Honor.

THE COURT: Alright. Thank you. This is complicated.

So going on now, only one of the Motions pertains to

an action in which the respective Movants have obtained a final

judgment. This is Docket Entry No. 21195 relating to the case

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Carmen Socorro Cruz-Hernandez, et al., v. Family Department,

ARV, and AIJ, which is Case No. K AC 1991-0665, (which I'll

refer to that as the "Socorro Cruz Hernandez Action"). Movants'

request that the portion of the judgment pertaining solely to

prepetition wages be paid immediately in full as

"administrative back pay." 

Movants contend their prepetition wage claims merit

administrative expense status under section 503(b)(1)(A)(ii) of

the Bankruptcy Code, as incorporated through Section 301(a) of

PROMESA, which provides for a category of administrative

expenses consisting of "wages and benefits awarded pursuant to

a judicial proceeding . . . as back pay attributable to any

period of time occurring after commencement of the case under

this title as a result of a violation of Federal or State law

by the debtor, without regard to the time of the occurrence of

unlawful conduct on which such award is based or as to whether

any services were rendered[.]" With respect to wages earned

prepetition, Movants argue that because this provision refers

to "back pay," it makes all prepetition wages an administrative

expense of the Debtor.

At a hearing held on August 4, 2021, the Court

rejected Movants' counsel's arguments regarding section

503(b)(1)(A)(ii) in connection with similar claims. In the

course of opposing the reclassification of several claims as

general unsecured claims, counsel had made this same argument

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that wage claims for back pay earned prepetition are

administrative expenses. At the August 2021 hearing, I

considered and rejected that argument, saying that "the

claimant's asserted basis for administra[tive] expense priority

under section 503(b)(1)(A) of Title 11 only extends to claims

arising from events that occur after the commencement of a

bankruptcy case, and all of these claimants are asserting

claims that long predate the debtors' Title III petitions."

(Aug. 4, 2021, Hr'g Tr., Docket Entry No. 17705, at 113:19-24.)

I reaffirmed this ruling in the course of denying Movants'

counsel's motion for reconsideration of the reclassification

ruling. The ruling denying reconsideration cited the August 4,

2021, hearing transcript, and stated that the claimants "failed

to persuade the Court that 11 U.S.C. [section] 503(b)(1)(A)

applied to their claims." (Docket Entry No. 20569 at 4.) 

The argument remains meritless. To the extent to

which res judicata does not render making the same ruling yet

again unnecessary, I am now reaffirming my prior interpretation

of the plain language of 11 U.S.C. section 503(b)(1)(A)(ii).

It applies only to "back pay attributable to any period of time

occurring after commencement of the case under this title[.]"

Accordingly, none of the claims asserted here for wages

attributable to the prepetition period qualify for

administrative expense priority and the Motion (Docket Entry

No. 21195) is denied. I am not likely to come to a different

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conclusion should this argument be presented to me again. The

Court will enter an order denying each of the administrative

expense motions. And, again, that is denying these motions

which are seeking immediate payment, the provision of a comfort

order, or the putting aside of security for these putative

administrative expense claims. 

The Court will enter an order denying the motions

consistent with these oral remarks, and the movants' underlying

administrative claims and their filed prepetition proofs of

claim that are not yet the subject of disallowance by a final

order of the Court have not been resolved and will be addressed

in due course before the Oversight Board's time to object to

proofs of claim elapses.

I thank both counsel for their help and guidance to me

and for their arguments.

MR. ROSEN: Thank you, your Honor.

THE COURT: So now the next contested matter is Agenda

Item II.2, which is Molina-Ruiz stay relief motion.

Mr. Rosen.

MR. ROSEN: Your Honor, the screens are black here. I

don't know if they'll go back on.

THE COURT: Okay. Let's see if we can get those to

work.

MR. ROSEN: Oh, they're on now. Thank you.

THE COURT: Alright. So counsel Jose Luis

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Novas-Debien is speaking on behalf of the movants, and I have

him down for five minutes for his opening remarks.

Good morning, Mr. Novas-Debien.

MR. NOVAS-DEBIEN: Good morning, Your Honor. It's a

pleasure to be here this morning.

We will be brief, your Honor, as all matters have been

briefed already in the various pleadings before the Court. I'm

just going to focus, your Honor, on the matters that remain

contested per the joint report that the parties filed on the

31st, and it boils down to three items where we are in

disagreement, upon which or related to the Court had already

directed us to confer and had posed some relevant questions.

So those three matters that remain contested or that

merit some further clarification for your Honor are, number

one, the status of the litigation over at the Puerto Rico State

Court in Bayamon Park; a second matter that remains contested

is whether movants' claim is actually a claim within the

purview of the Bankruptcy Code, and, thus, subject to the

automatic stay; and lastly, your Honor had directed the parties

to expound upon the impact of the Gracia-Gracia case upon the

case at bar. And so those are the three items that I'm just

going to touch upon as quickly as I can.

The most important, your Honor, that's where we will

start, the status of the litigation. Your Honor, before us we

have a judgment that is long, final, firm, and unappealable.

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It's a non-monetary judgment ordering the return of certain

animals to Ms. Lilia Molina. It's final, firm, an

unappealable, because as of November 17, 2017, all motions to

reconsider that had been filed by the Commonwealth had been

denied.

In fact, when the Court actually moved later on to

stay the proceedings based on Title III, PROMESA, that was on

an order dated August 28, 2018, the Bayamon Court itself

recognized that it was a final and firm judgment, executable.

It recognized that the case was at the post judgment execution

of judgment stage, where Ms. Molina had been seeking a return

of the animals for a while. And not only that, your Honor, and

what makes it final and firm, also, is that -- and contrary to

what the Commonwealth states or posits, the automatic stay

under Title III, PROMESA, perhaps dating back all the way to

May 3rd, 2017, is really not self-executing, your Honor.

There's a number of federal courts that have

recognized a state court's ability or authority to decide

whether automatic stays apply to the proceedings -- to

proceedings before them or not, most specially when the

proceedings are proceedings that relate -- that don't relate to

monetary judgments, that really have no impact on a debtor's

estate in a bankruptcy case. So the state court, just to wrap

up this point, issued a judgment back on August 18, 2016, that

became final and firm December 30th -- or 31st, actually, 2017,

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when the final motion to reconsider -- the Commonwealth's

motion to reconsider was denied.

So that brings us to the second point, and that's the

nature of, you know, whether movants' claim, which -- in the

meaning of the Bankruptcy Code is a claim under section 101(5).

It really is not, your Honor, because it's a claim per the

state court judgment. It provides for return of certain

animals. There are no money damages to speak of or any right

to payment at this stage.

There's also no issue of the Commonwealth's ability to

perform and comply with the judgment at this stage. We're

going to get into that in a moment. It is a judgment that is

perfectly executable regarding the delivery of those animals.

We do know that the Commonwealth attempts to create a

factual issue regarding its ability to deliver the animals at

this stage, and upon that would hinge what the Commonwealth

advances as possible monetary claims, but that's -- it's really

a non-issue, because the horses, your Honor, the animals --

(Sound played)

MR. NOVAS-DEBIEN: -- were received by a third-party

receiver, which is the Bayamon Municipality. In Puerto Rico, a

receivership is a contract like any other, and it provides for

very simple obligations. And it's basically when the

depositor, which is the Commonwealth, turns over the property

to the receiver, the receiver is simply bound to keep the

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property safe, save normal wear and tear, that kind of thing,

keep it, safe keep it, and return it back to the depositor,

which is the Commonwealth, upon the depositor's request. Those

are the basic elements of the receivership under the Puerto

Rico Civil Code. In Spanish it's titled (Remarks in Spanish.)

So the Commonwealth cannot now claim that these

animals are not in its possession, that they are -- they would

be in a tenuous situation now before claimant, who could sue

them for damages. That's not the case. The Commonwealth is

perfectly able to now, within the Bayamon case, to produce

those animals simply by claiming that the Municipality, which

is a receiver, turn them over, because that's the

Municipality's legal duty and that's -- and that's the matter

with that.

To conclude, Your Honor --

THE COURT: Yes. I was going to ask you --

MR. NOVAS-DEBIEN: Yes.

THE COURT: -- to conclude the remarks, because you

did run over your time about a minute and a half ago.

MR. NOVAS-DEBIEN: Yes. And so we leave it submitted

as it is, your Honor. Under Gracia-Gracia, your Honor, of

course the Court needs to, at a threshold level, make a

determination, number one, whether there's any equity that the

Commonwealth has on these animals, which it does not; and the

second, that a threshold issue is whether the animals are in

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any way important or necessary for the structuring of the

Commonwealth's finances, which obviously they are not.

So that's what we have for the Court, your Honor, in

terms of argument.

THE COURT: Thank you very much.

I'll now call Mr. Rosen to the podium here in New

York.

MR. ROSEN: Thank you very much, your Honor. Brian

Rosen of Proskauer Rose on behalf of the Oversight Board.

Your Honor, this really comes down to what I perceive

it to be, which is a simple argument, is there a claim or is

there not a claim against the Commonwealth. And counsel, he

hedges all the time, and he carefully used the words "at this

stage" in his remarks today.

We have been trying to understand what the magnitude,

if any, of the issue might be back against the Commonwealth.

There is no dispute. The Commonwealth does not have these

animals. Several of the animals were donated. The balance of

those are with the Municipality of Bayamon. But the

Commonwealth --

THE COURT: Donated by whom to what?

MR. ROSEN: Your Honor, I don't know if they were

actually donated by the Commonwealth directly or by Bayamon

directly to this third party, to a parks organization I believe

it was, your Honor. I'm not exactly sure who made the

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donation.

These animals were taken away, your Honor. They were

in a horrible state. Animals had to have -- actually,

corrective vision surgery. I understand one of them had

cataracts. Your Honor, the Municipality of Bayamon has

invested over $60,000 to maintain the upkeep of these animals

and bring them back to health, but, your Honor, that's not the

issue I think here. The issue is the judgment seeks for the

Commonwealth, and it's solely against the Commonwealth, to have

the Commonwealth turn over these animals.

THE COURT: Yes.

MR. ROSEN: The Commonwealth does not have them. I do

not understand the Puerto Rico law reference that counsel made

for the first time today that it is a receivership and they

could, merely by asking, have them turned over. That is not my

understanding as to what the status is.

But, your Honor, what we have tried to lay out in the

joint status report, as well as in our other pleadings, is that

in the event that the Commonwealth is unable to return the

animals, under Puerto Rico law, there is a right, nunc pro

tunc, to request a claim back against the Commonwealth.

Counsel, on the one hand, says we're not seeking any monetary

relief. On the other hand, he says, as he did today, "at this

stage." We would like to know if, in fact, there is a waiver

of the monetary claim, if any, back against the Commonwealth.

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That might change the result of what we're trying to do here.

But the fact is they are still reserving their rights to assert

a monetary claim back against the Commonwealth.

THE COURT: Well, whether you give them any surviving

animals back today or not, there's still that looming potential

for a monetary claim against the Commonwealth, correct? If, in

fact, these animals have been, you know, lost, donated, stolen,

or whatever. And maybe Bayamon has a claim back against the

Commonwealth. Who knows. 

But I think what I'm hearing today, and we'll ask

Mr. Novas-Debien to correct me if I'm wrong, is that they are

looking for an order that allows them to go to the Commonwealth

and say, give me my dogs and ponies. And the Commonwealth

might say, I don't have them, I cannot give them to you, so the

answer is no; and since all I've asked them to do -- all I've

authorized them to do is go and ask for them and get them, if

the Commonwealth has them and will give them back, then

everybody will have to figure out what the next stage is.

Perhaps I would be asked for further relief from the automatic

stay, or maybe they will simply have this claim against the

Commonwealth, which would be for noncompliance with the

judgment, breach of a bailment, something like that.

So, Mr. Novas-Debien, are you asking me today for

permission to do anything other than go and physically get the

animals?

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MR. ROSEN: Your Honor, before he makes that answer,

if I could just interject.

THE COURT: Yes.

MR. ROSEN: It was included in the joint status

report, and counsel started off with this with regard to the

status of the litigation itself. There's still a dispute as to

whether or not the judgment is final.

The Commonwealth disagrees with counsel's recitation

of the facts. It still believes that this is not final and it

can appeal the issue. So I don't think it's as simple as

saying, I want to go back and enforce a judgment in another

court and ask the Commonwealth to turn over animals which it

does not have. If anything, your Honor, it would be that the

party should go back and continue the litigation until they get

to a judgment that might be final and firm under Puerto Rico

law.

MR. NOVAS-DEBIEN: Your Honor, I'm sorry.

THE COURT: Just before you speak, Mr. Novas Debien,

how about I lift the stay to permit the movant to enforce the

existing judgment in so far as the movant seeks to obtain

possession of the animals?

MR. ROSEN: And to the extent that the judgment is not

firm and final, your Honor --

MR. NOVAS-DEBIEN: May I speak? May I answer the

question, your Honor, or will Mr. Rosen continue answering my

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questions?

THE COURT: Okay. I'm going to let Mr. Rosen continue

making this one statement, and then you have the podium after

that.

Mr. Rosen.

MR. ROSEN: Your Honor, I would suggest that if your

Honor were prepared to lift the stay in any regard, it would be

to allow the litigation to continue and to allow the

Commonwealth to assert its rights. And if, in the event that

there is no appellate action or further appellate action taken

by the Commonwealth and the judgment would be firm and final,

then -- then Ms. Molina-Ruiz could assert whatever rights that

she might have with respect to that firm and final judgment.

THE COURT: Thank you.

Now, thank you for your patience, Mr. Novas-Debien.

Please speak.

MR. NOVAS-DEBIEN: Thank you, ma'am. Thank you, your

Honor.

To answer your question, your Honor, that's all the

claimant or movant seeks is to lift the stay so she can go back

to the Bayamon Court and request return of animals that the

Commonwealth has conceded are available, including their

offspring.

That's another civil code obligation of the receiver.

If he has animals, the receiver has animals that have two

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turned into four, he has to return all four. That's all,

nothing more.

At this stage, it is impossible under the Puerto Rico

Rules of Civil Procedure and the status of litigation for Ms.

Molina to seek anything else. She never intended to seek

anything else but her animals, and that's all she's asking, to

-- right now, to be allowed to go back to Bayamon and ask for

her animals to be given back, as the Court had ordered back in

August, 2016.

This cannot become perpetual and now be continued

under the PROMESA Act, because, in Puerto Rico, judgments

become final and firm, your Honor. And that's what we're

trying to establish here. We have a final, firm, and

unappealable judgment that now must be complied with. That's

it. And it involves no money and no issue for the Commonwealth

money wise within the purview of Title III, PROMESA. It just

doesn't belong here is our view, your Honor. Never belonged

here.

MR. ROSEN: Your Honor, counsel I don't think answered

the question. He said that he wants to go back and go get the

animals. My point is, to the extent that there are still

appellate rights, those rights should be allowed to be asserted

by the Commonwealth in that proceeding. That's all I'm

suggesting, your Honor. And if they're not, and counsel is

correct that it is firm and final, then it is firm and final,

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but the Commonwealth feels differently.

THE COURT: So I would think some language that says,

permitting them to enforce and/or litigate to the extent

necessary the judgment for possession of the animals.

MR. ROSEN: The parties' rights are reserved and can

be reserved --

MR. NOVAS-DEBIEN: The state court --

THE COURT: One at a time, Mr. Debien.

MR. NOVAS-DEBIEN: Yes.

THE COURT: So I'm going to let Mr. Rosen finish his

sentence.

MR. NOVAS-DEBIEN: Yes.

MR. ROSEN: Your Honor, I think words to the effect,

that all parties reserve their rights in connection with the

judgment, including, without limitation, any appellate rights.

That would be fine with us.

THE COURT: Mr. Novas-Debien?

MR. NOVAS-DEBIEN: Yes, your Honor. We don't -- we're

not asking the Court to curtail or to shut down any appellate

rights that the Commonwealth may have. The state court judge

in Bayamon knows exactly what those rights are and ELA sure

knows what they are, and they can assert them there.

So it's really besides the point what they can do.

The Bayamon Court is -- it's grist of the mill of the Bayamon

Court, not your Honor's -- it should not -- I mean, if the

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Commonwealth feels more comfortable with an order that

indicates that they are not waiving any rights to continue the

litigation on appeal, that's fine by us. It's their right. We

don't want to infringe their rights.

THE COURT: Thank you.

So, Mr. Rosen, anything further?

MR. ROSEN: No. I guess I wish counsel would go as

far as to represent to the Court that they will not seek any

monetary recovery, although he said it several times, but he

doesn't want to go hard and fast on it, but I have nothing

further, your Honor.

THE COURT: Yes. Well, why should he have to now if

all he's going to do is try to get the horses --

MR. ROSEN: I know. It's the second half of the

problem we've always focused on.

THE COURT: Mr. Novas-Debien, Mr. Rosen says the

Commonwealth, when you come for the horses, is going to say

they don't have the horses. And so are you asking me for any

relief in that regard right now?

MR. NOVAS-DEBIEN: I'm sorry, your Honor. I missed

with regard to what exactly.

THE COURT: Mr. Rosen is saying that the Commonwealth

is going to say they don't have the horses, they can't give you

the horses whenever it is that the judgment is determined to be

final, because he doesn't agree with you that Bayamon is

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obliged to give you the horses if the Commonwealth tells them

to. So he's concerned that then your client will say, give me

the value of the horses in money. 

So I'll put it this way. Are you asking me for

permission to pursue that sort of claim right now, or do you

accept that you would have to come back to this Court to seek

to pursue that kind of claim?

MR. NOVAS-DEBIEN: Yes, absolutely not. It's not the

intent to seek monetary damages within that case, because that

is -- it's a judgment precluded by the stage of where

proceedings are. There's never been a recommend -- at this

stage, your Honor, it's not claimant's -- it's not claimant's

intent to go to the Bayamon Court and seek money, a money award

of any kind. She's just going to move for the return of the

animals. That is what we have been stating all along.

MR. ROSEN: I don't think we can get anything further

out of counsel at this point, your Honor. I don't know what

else to do. But you understand my concerns.

THE COURT: I understand the concern. I think that

that concern may well ripen into something real if you don't

come up with some animals, but counsel is not asking me to make

any sort of -- make or authorize any sort of damages

determination right now.

MR. ROSEN: Thank you, your Honor.

MR. NOVAS-DEBIEN: That's correct, your Honor.

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THE COURT: Okay. Thank you.

So give me just a moment. Actually, Mr. Rosen, why

don't you go back there for a moment.

MR. ROSEN: Yes, your Honor.

THE COURT: Okay. So are you claiming in any way that

the animals are property of the Commonwealth or are necessary

to an effective reorganization of the Commonwealth?

MR. ROSEN: No, your Honor. We do not maintain that

the Commonwealth has any equity in these animals, nor is the

property necessary for an effective reorganization.

THE COURT: Thank you.

MR. ROSEN: Our only point, your Honor, is that the

parties to whom he needs to get appropriate relief are not

parties to the judgment. We've tried to maintain that all

along. We don't have the animals. That's all we say, Your

Honor.

THE COURT: Okay. So --

MR. ROSEN: There's no effective relief in other

words.

THE COURT: Alright. Having listened carefully to the

statements in court here today, and having read the

submissions, and in light of the limited relief that is sought

by the movant, and the Commonwealth's acknowledgement that it

does not claim any right of ownership in the animals in

question, and that they are not necessary for its

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reorganization, the Court grants the motion from relief from

the stay to the extent that it is necessary to permit the

movant to seek to enforce the judgment ordering return of the

animals to the movant. This relief is without prejudice to the

parties' positions and any rights that they may have with

respect to further appellate litigation of the judgment.

Is that language acceptable to the Commonwealth?

MR. ROSEN: It is, Your Honor.

THE COURT: Is that language acceptable to you,

Mr. Novas-Debien?

MR. NOVAS-DEBIEN: Absolutely.

THE COURT: Thank you. The Court will enter an order

accordingly. Thank you both very much.

MR. NOVAS-DEBIEN: Thank you, your Honor. Permission

to withdraw.

THE COURT: Yes. Thank you. You may.

So the next and final set of contested matters are

Omnibus Objections to claims, beginning with the 453rd Omnibus

Objection to claim. 

I understand that Mr. -- is it Mr. Esses?

MR. ESSES: Esses. 

THE COURT: Mr. Esses will be speaking on behalf of

the Commonwealth.

Is the counsel for the objecting parties,

Ms. Hernandez-Rodriguez, here or in the San Juan courtroom?

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Ms. Hernandez-Rodriguez, are you on the Court

Solutions line? If you are, I'd like you to acknowledge that

and unmute and speak. 

I will also note for the record that I do not see her

registered on the Court Solutions line. So is there anyone in

either courtroom or on the Court Solutions line intending to

speak in opposition to the 453rd Omnibus Objection to claim?

Alright. I hear no one.

Please go ahead, Mr. Esses. 

MR. ESSES: Thank you, your Honor. For the record,

Joshua Esses of Proskauer Rose for the Oversight Board. 

On the 453rd objection, I'll just explain what

happened, what's going on here, and the limited relief that

we're seeking. The claimant Ms. Maria Figueroa-Torres filed

Proof of Claim No. 179281 asserting unpaid wages of

approximately $63,000 owed by the Department of Health, which

is an agency of the Commonwealth, and also against the Ponce

District Hospital, which is not a part of the Commonwealth for

these Title III cases.

The Oversight Board transferred that claim to ACR, and

after further review, bifurcated the claim into a claim against

the Department of Health and a claim against the Ponce District

Hospital, which we denoted as 179281-1.

The Board withdrew that claim, the new bifurcated

claim against the Ponce District Hospital from ACR, and the

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453rd Omnibus Objection objected to it on the grounds it

doesn't assert liability against the Commonwealth. The

claimant filed a response in essence saying it does assert a

liability against the Commonwealth, because the Ponce District

Hospital was, at the time of the contract and at the time of

the claimant's employment, a part of the Department of Health.

And what the other Oversight -- what the Oversight

Board intended to do is to allow that claim to proceed and fall

against the Commonwealth in the ACR process. So, you know, I

want to emphasize to both your Honor and to the claimant that

every dollar the Commonwealth owes the claimant under

Commonwealth law in connection with her wage claim will be paid

as determined through the ACR process and this Court's ACR

order, but the proof of claim which we are asking you to

disallow in connection with this Omnibus Objection is simply

with respect to the claim asserted against the Ponce District

Hospital, which is not a part of these Title III cases.

So that's the relief that we're looking for today.

THE COURT: So have you offered any proof -- I haven't

seen anything in the record that indicates that the Ponce

District Hospital at some point separated from the

Commonwealth. My understanding of the objection was that you

were saying that, at some point, working for the Ponce District

Hospital was not the same as working for the Commonwealth. I

didn't see anything in the record that explained when that

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happened, what happened to the liabilities of the Ponce

District Hospital, and so I was not prepared to sustain this

objection. 

It sounds today as though you may be saying something

different, which would be that the -- if you're working for the

Ponce District Hospital, you're working for the Commonwealth,

and so the claim should be against the Commonwealth and not the

Ponce District Hospital; and any compensation for that work

that is found to be owing would be a liability of the

Commonwealth.

MR. ESSES: Yes, your Honor, to the extent that at the

time the claimant was working for the Ponce District Hospital,

the hospital was a part of the Department of Health and the

Commonwealth.

THE COURT: So do you have anything that would

establish that at some point, some relevant point in time, the

Ponce District Hospital was not part of the Department of

Health of the Commonwealth?

MR. ESSES: There's nothing that I could point to,

your Honor. I would think that the burden would be on the

claimant to establish that the Ponce District Hospital was a

part of the Commonwealth at the relevant time. But in either

case, we are prepared to allow every cent that the claimant is

owed under Puerto Rico law to -- by the Commonwealth for work

performed for the Ponce District Hospital in full through the

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ACR process.

THE COURT: Give me just one moment.

MR. ESSES: Alternatively, your Honor, we're happy to

adjourn this to hopefully be resolved just through the

submission of papers that we can provide, the documentary

evidence with respect to whether or not the Ponce District

Hospital was a part of the Commonwealth at the relevant times.

THE COURT: That would be a clearer and better way to

resolve this, and so this is adjourned pending supplementation

of the objection.

MR. ESSES: Thank you, your Honor.

THE COURT: If I establish a deadline of November 30th

for filing and service of the supplement, is that sufficient

time?

MR. ESSES: Certainly.

THE COURT: That is what we will do. Supplemental

papers to be filed by November 30th.

So the next objection is the 492nd Omnibus Objection.

MR. ESSES: Thank you, Your Honor. 

I can report that the claimant -- claimant's counsel

confirmed to me via email this morning that they'll no longer

be pursuing that objection, so unless you have any questions

with respect to that, I have nothing further to add.

THE COURT: So they're no longer opposing the

objection.

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MR. ESSES: Yes, your Honor.

THE COURT: Alright. So you're content to have me

rule on the papers on that?

MR. ESSES: Yes, your Honor.

THE COURT: Alright. Before the Court is the 492nd

Omnibus Objection (Substantive) of the Commonwealth of Puerto

Rico, the Employees Retirement System of the Government of the

Commonwealth of Puerto Rico, and the Puerto Rico Highways and

Transportation Authority to Claims for which the Debtors are

Not Liable (Docket Entry No. 21741 in case 17-3283. I'll call

it the "Omnibus Objection"), which is filed by the Oversight

Board. This objection seeks disallowance of several proofs of

claim, including Proof of Claim No. 27270 filed by Downtown

Development Corporation, which I will sometimes refer to as

"DDC". 

In opposition to the Omnibus Objection, DDC argues

that its claim is a valid obligation incurred by the

Commonwealth in connection with a lease dated September 5,

2014, which was referred to in a letter attached to DDC's proof

of claim, and which DDC filed with an amended proof of claim

and with its opposition to the Omnibus Objection.

The Court has carefully considered the pleadings

submitted by the Oversight Board and the DDC concerning the

Omnibus Objection, and, for the reasons that follow, the

Omnibus Objection is sustained and the proof of claim is

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disallowed in its entirety.

Before I finish with this oral ruling, Mr. Esses, are

you saying that the response to the objection is being

withdrawn or that -- is there something in the record

withdrawing it, or they're just not showing up today and

they're resting on their papers?

MR. ESSES: I think the latter is a fair description.

THE COURT: Then I'll finish my ruling. 

To begin with, the Court will not reject out of hand

all consideration of the September 5, 2014, lease agreement

submitted by DDC in response to the Omnibus Objection. Case

law in this Circuit instructs courts to provide leave to amend

proofs of claim "freely . . . when justice so requires," taking

into consideration whether the amendment (i) is "a veiled

attempt to assert a distinctly new right to payment as to which

the debtor estate was not fairly alerted by the original proof

of claim," (ii) would result in unfair prejudice to other

holders of unsecured claims, and (iii) is "the product of bad

faith or dilatory tactics on the part of the claimant." Gens

v. Resolution Trust Corporation, 112 F.3d 569, 575 (1st Cir.

1997). Here, DDC does not seem to be asserting a new claim,

but rather further supporting and clarifying the basis of its

timely proof of claim. The supplementation does not appear to

be the result of bad faith or dilatory tactics, and no creditor

would be unfairly prejudiced by the supplementation. As such,

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the Court will next consider the Omnibus Objection and the

validity of the Proof of Claim as supplemented by DDC. 

"A proof of claim which comports with the requirements

of Bankruptcy Rule 3001(f) constitutes prima facie evidence of

the validity and amount of the claim." In re Hemingway

Transport, Inc., 993 F.2d 915, 925 (1st Cir. 1993). However,

if a debtor interposes an objection supported by "substantial

evidence," the burden of demonstrating the validity of the

claim shifts to the claimant. Id. And the Court stated "once

the trustee manages the initial burden of producing substantial

evidence, the ultimate risks of nonpersuasion as to the

allowability of the claim rests with the party asserting the

claim." 

DDC's Proof of Claim asserts a claim for $38,385.19

against the Commonwealth. According to DDC's response to the

Omnibus Objection, that amount allegedly represents the balance

of rent outstanding under the lease agreement between DDC and

the government dated September 5, 2014. As evidence of the

amount of debt owed by the government, a "Tenant Ledger" is

annexed to the Proof of Claim.

Through the Omnibus Objection and the annexed

declaration of Jay Herriman, the Oversight Board has rebutted

the initial prima facie validity of the Proof of Claim, thereby

causing the burdens of proving the validity of the claim to

revert to DDC. Specifically, the Oversight Board has

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convincingly demonstrated that the Tenant Ledger does not

accurately represent the government's outstanding rent

obligations to DDC.

Apparently our AT&T line has gotten disconnected, so

we'll pause for a minute. So they're going to try to reconnect

it, and I'll finish the ruling after that.

Mr. Esses, if you want to have a seat or continue to

stand, it's up to you. 

(Pause taken)

THE COURT: Okay. I understand it is back up, so I

will finish making my ruling.

Commonwealth law is clear that no valid claim may be

asserted against the government for the use of leased premises

during a period when a written lease is not in effect. See

Vicar Buildings v. Commonwealth of Puerto Rico, 192 D.P.R. 256

(P.R. 2015.) 

A review of the Tenant Ledger shows that as of the end

of the 2009 lease between DDC and the government in June of

2014, the balance of rent owed by the government was zero.

(See page 15 of 26 of the Proof of Claim.) Then, on each of

July 1, 2014, August 1, 2014, and September 1, 2014, the Tenant

Ledger added $17,993.33 to the balance allegedly owed by the

government. Notwithstanding that, DDC has not alleged, much

less demonstrated that a lease agreement was in place at any of

those points. Rather, it appears that a lease was executed on

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September 5, 2014. Thus, the Tenant Ledger appears to

incorrectly add approximately $38,385 to the balance of rent

owed by the government. That amount represents $17,993.33 for

each of July and August of 2014, plus a prorated amount for

four days of September 2014. Moreover, the Tenant Ledger

appears to demonstrate that the government paid rent in a

manner consistent with that state of affairs. Page 5 of 26 of

the Proof of Claim, which is another page of the Tenant Ledger,

shows that check number 3253866 was in the amount of

$15,594.80, an amount that almost exactly corresponds to the

prorated amount that would have been due for the month of

September 2014, excluding the first four days of that month

when no lease was in effect.

DDC has submitted no evidence tying the outstanding

balance of rent allegedly owed to any period of time in which a

lease was in effect between DDC and the government. Rather, it

appears that the most logical interpretation of the document

submitted by DDC is that the asserted debt corresponds to the

period when no lease was in effect, and DDC's Proof of Claim

attempts to carry forward that invalid debt.

Accordingly, DDC has not met its burden of

establishing the validity of its claim, and the Oversight

Board's objection is sustained in its entirety. DDC's Proof of

Claim is therefore disallowed in its entirety.

Now, Mr. Esses, does this resolve the only pending

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response to the Omnibus Objection?

MR. ESSES: I believe that's right, and so we'll file

a notice of presentment with the Court -- or I should say we'll

submit a notice of presentment to your chambers.

THE COURT: Yes. So what I'll need is -- to the

extent that there's nothing else outstanding in the Omnibus

Objection, it's sustained in its entirety, and I ask that you

submit a Word version of the proposed order resolving the

Omnibus Objection to chambers.

MR. ESSES: Certainly. Thank you, your Honor.

THE COURT: Thank you.

So that takes us to the 526th Omnibus Objection, which

is number 22259 in case 17-3283.

I am informed that Ms. Gonzalez-Morales left the

courtroom in San Juan.

MR. SKRZYNSKI: Good afternoon, Your Honor.

THE COURT: Good afternoon.

MR. SKRZYNSKI: Matthew Skrzynski on behalf of

Proskauer Rose for the Oversight Board.

The 526th objection at ECF No. 22259 objected to

claims that assert liability in connection with the prepetition

case captioned Nilda Agosto-Maldonado, et al., v. The Puerto

Rico Family Department, et al., Case No. KPE 2005-0608. I'll

refer to this as the Augusto-Maldonado litigation. 

Plaintiffs' counsel has failed a master proof of claim

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on behalf of all plaintiffs in the litigation, and other

documents that identify the names of those plaintiffs. This

objection identified claimants whose names did not appear on

the plaintiffs' list.

We did receive one response filed at ECF No. 22624

filed by two claimants, claimant Rivera-Garcia and claimant

Valle-Valdivieso. As to claimant Rivera, which corresponds to

Proof of Claim No. 32127, we saw that counsel filed a request

to amend that proof of claim to change the name of the

claimant. As noted in our reply, we did not object to that

name change and the Court has approved the claimant's request

for leave to amend at ECF 22771. With that change to the proof

of claim, our objection is resolved as to Claim No. 32127. 

As to claimant Valle, the corresponding Proof of Claim

No. 113154, counsel in their reply stated that the name Luz

Valle Valdivieso appears in the plaintiff list, but such name

still does not appear to be included. For this reason, we ask

that the objection be sustained as to Proof of Claim No.

113154.

THE COURT: Thank you.

Just to be clear, is there anyone appearing in San

Juan or on Court Solutions to speak in opposition to this

objection to claim? If you're in San Juan, come to the podium.

If you are on Court Solutions, please unmute on your phone and

the Court Solutions dashboard and state your name.

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I see no one at the podium or approaching the podium

in San Juan, and I hear no one speaking on Court Solutions, so

I will rule.

Before the Court is the 526th Omnibus Objection

(Substantive) of the Commonwealth of Puerto Rico and the

Employees Retirement System of the Government of the

Commonwealth of Puerto Rico to Claims for which the Debtors are

Not Liable (Docket Entry No. 22259 in Case No. 17-3283) filed

by the Oversight Board. The Omnibus Objection seeks

disallowance of several proofs of claim, including the Proof of

Claim No. 113154 (the "Valle-Valdivieso Claim"). It had also

objected to the "Rivera-Garcia Claim," but with the amendment

of that claim, am I to understand correctly that the Oversight

Board withdraws that aspect of the 526th objection?

MR. SKRZYNSKI: That's right.

THE COURT: Thank you.

The Court has carefully considered the pleading

submitted by the Oversight Board and the claimant concerning

the Omnibus Objection and the arguments today. And the Court

does expect that the order ultimately submitted concerning the

objection will reflect the withdrawal of the objection to the

Rivera-Garcia Claim.

So as to the Valle-Valdivieso Claim, the proof of

claim which comports with the requirements of 3001(f) of the

Bankruptcy Rules constitutes prima facie evidence of the

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validity and amount of the claim, but if the Debtor proffers an

objection supported by substantial evidence, the burden of

demonstrating the validity of the claim shifts to the claimant.

In re Hemingway Transport, Inc., 993 F.2d 915, 925 (1st Cir.

1993). 

The Valle-Valdivieso claim appears to be based upon

Ms. Valle-Valdivieso's status as a plaintiff who has obtained a

judgment against the government in the lawsuit captioned Nilda

Agosto-Maldonado, et al., v. Commonwealth of Puerto Rico Family

Department, et al. or the Agosto-Maldonado litigation. But as

set forth in the Omnibus Objection and the Reply, and as

confirmed by the Court's own review of the exhibit to the

judgment submitted by Ms. Valle-Valdivieso in support of the

claim, her name does not appear among those of the plaintiffs

in the Agosto-Maldonado litigation. 

The Oversight Board has, therefore, rebutted the

Valle-Valdivieso Claim's validity, and the claimant has not

proffered evidence that she has a valid claim against the Title

III debtors arising out of the Agosto-Maldonado litigation.

Accordingly, the Oversight Board's Omnibus Objection is

sustained as to the Valle-Valdivieso Claim, and that Claim,

which is number 113154, is disallowed in its entirety.

Does this resolve all of the outstanding matters with

respect to the 526th Omnibus Objection?

MR. SKRZYNSKI: Yes, your Honor. We are not aware of

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any other responses.

THE COURT: Very well then. With the exception of the

withdrawn objection to the Rivera-Garcia claim, the Omnibus

Objection is sustained in its entirety and the Oversight Board

is directed to submit a Word version of a revised proposed

order resolving the Omnibus Objection to chambers.

MR. SKRZYNSKI: We will.

THE COURT: Thank you.

Now we have the 527th Omnibus Objection.

MR. SKRZYNSKI: Your Honor, Matthew Skrzynski again

for the Oversight Board.

The last item on the agenda is the 527th objection to

claims at ECF No. 22261. This objection partially objects to

claims to the extent that they assert liability in connection

with the Agosto-Maldonado litigation. As with the prior

objection, the claimant's name does not appear on the

plaintiffs' list associated with such litigation that has been

filed by counsel.

THE COURT: I need you to speak a little louder. 

MR. SKRZYNSKI: I will.

We received one response from claimant Sara

Cruz-Lorenzana, Proof of Claim No. 83256, filed at ECF No.

222429. The claimant states that the proof of claim does not

state that the claimant is a plaintiff but rather the plaintiff

in another case. As we pointed out in the reply however, the

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debtors did have a concern that the proof of claim attaches a

debt certificate, and in the certificate of debt the claimant

lists two case numbers, one of those being KPE 20050008, which

has been identified by the debtors' advisors as being used in

other proofs of claim to reference the Agosto Maldonado

litigation.

So, in sum, the debtors do believe that the proof of

claim purports to assert some liability in connection with the

Agosto Maldonado litigation, and for this reason, we ask the

objection be sustained as to Proof of Claim No. 83256.

THE COURT: So am I correct that you're asking me to

disallow Proof of Claim 83256 solely to the extent it asserts a

claim arising out of the Agosto Maldonado litigation?

MR. SKRZYNSKI: That's correct.

THE COURT: The objection is sustained in that limited

context, and so the objection is sustained as to the Sara Cruz

Lorenzana proof of claim to the extent that proof of claim

asserts any liability arising out of the Agosto Maldonado

litigation.

So I direct you, when the 527th Objection to Claims,

Omnibus Objection, is resolved in its entirety, to submit a

proper Word version of the order to chambers.

MR. SKRZYNSKI: We will.

THE COURT: Thank you.

MR. SKRZYNSKI: Thank you.

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THE COURT: I think that concludes all of the matters

that were lined up to be addressed today. Is there anything

further for the Court to take up?

Seeing no one volunteering to add anything, I thank

everyone who has appeared today for their arguments and

preparations to the Court. This concludes the hearing agenda

for this to Omnibus Hearing.

The next scheduled Omnibus Hearing is December 14,

2022. That hearing will begin at 9:30 a.m. Atlantic Standard

Time, which will by then be 8:30 Eastern Standard Time. I will

notify the parties in advance of the hearing as to where I

intend to preside for that hearing.

As always, I thank the court staff in Puerto Rico,

Boston, and New York, who consistently do wonderful work in

support of all of these complex cases. Stay safe and keep

well. We are adjourned.

(Adjourned)

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