IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF PUERTO RICO 

____________________________________________ 

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

as representative of 

THE COMMONWEALTH OF PUERTO RICO, et al.

Debtor. 

____________________________________________ 

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO 

as representative of 

THE EMPLOYEES RETIREMENT SYSTEM OF THE 

GOVERNMENT OF THE COMMONWEALTH OF 

PUERTO RICO, 

Debtor. 

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PROMESA 

Title III 

Case No. 3:17-bk-03283 (LTS) 

PROMESA 

Title III 

Case No. 3:17-cv-01685 (LTS) 

Case No. 3:17-bk-03566 (LTS) 

 

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REPLY IN SUPPORT OF URGENT MOTION TO SET SUPPLEMENTAL BRIEFING 

AND DISCOVERY SCHEDULE WITH RESPECT TO MOTION OF CERTAIN 

SECURED CREDITORS OF THE EMPLOYEES RETIREMENT SYSTEM OF THE 

GOVERNMENT OF THE COMMONWEALTH OF PUERTO RICO 

FOR RELIEF FROM THE AUTOMATIC STAY 

 

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To the Honorable United States District Court Judge Laura Taylor Swain: 

Movants 1 respectfully submit this reply in support of their Urgent Motion to Set 

Supplemental Briefing and Discovery Schedule with Respect to Motion of Certain Secured 

Claimholders of the Employees Retirement System of the Government of the Commonwealth of 

Puerto Rico for Relief from the Automatic Stay (Case No. 17-3566-LTS, Dkt. No. 308) (the 

“Urgent Motion”)2, and in response to the Objection of the Financial Oversight and Management 

Board for Puerto Rico to the Urgent Motion to Set Supplemental Briefing and Discovery Schedule 

with Respect to Motion of Certain Secured Claimholders of the Employees Retirement System of 

the Government of the Commonwealth of Puerto Rico for Relief from the Automatic Stay (Case 

No. 17-3566-LTS, Dkt. No. 309), and The Official Committee of Retired Employees of the 

Commonwealth of Puerto Rico’s Joinder to the Objection of the Financial Oversight and 

Management Board for Puerto Rico to the Urgent Motion to Set Supplemental Briefing and 

Discovery Schedule with Respect to Motion of Certain Secured Claimholders of the Employees 

Retirement System of the Government of the Commonwealth of Puerto Rico for Relief from the 

 1

 Movants include Altair Global Credit Opportunities Fund (A), LLC, Andalusian Global 

Designated Activity Company, Glendon Opportunities Fund, L.P., Mason Capital Master Fund, 

LP, Nokota Capital Master Fund, L.P., Oaktree-Forrest Multi- Strategy, LLC (Series B), Oaktree 

Opportunities Fund IX, L.P., Oaktree Opportunities Fund IX (Parallel 2), L.P., Oaktree Value 

Opportunities Fund, L.P., Ocher Rose, L.L.C., SV Credit, L.P., Puerto Rico AAA Portfolio Bond 

Fund, Inc., Puerto Rico AAA Portfolio Bond Fund II, Inc., Puerto Rico AAA Portfolio Target 

Maturity Fund, Inc., Puerto Rico Fixed Income Fund, Inc., Puerto Rico Fixed Income Fund II, Inc., 

Puerto Rico Fixed Income Fund III, Inc., Puerto Rico Fixed Income Fund IV, Inc., Puerto Rico 

Fixed Income Fund V, Inc., Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc., 

Puerto Rico Investors Bond Fund I, Puerto Rico Investors Tax-Free Fund, Inc., Puerto Rico 

Investors Tax-Free Fund, Inc. II, Puerto Rico Investors Tax-Free Fund III, Inc., Puerto Rico 

Investors Tax-Free Fund IV, Inc., Puerto Rico Investors Tax-Free Fund V, Inc., Puerto Rico 

Investors Tax- Free Fund VI, Inc., Puerto Rico Mortgage-Backed & U.S. Government Securities 

Fund, Inc., Tax-Free Puerto Rico Fund, Inc., Tax-Free Puerto Rico Fund II, Inc., and Tax-Free 

Puerto Rico Target Maturity Fund, Inc. 

2

 Capitalized terms not otherwise defined herein have the meaning ascribed to them in the Urgent Motion. 

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Automatic Stay (Case No. 17-3566-LTS, Dkt. No. 310). In further support of the Urgent Motion, 

Movants state as follows:

ARGUMENT 

1. Movants agree with the Oversight Board that the facts supporting the Adequate 

Protection Motion should not be in dispute. In particular, there should be no dispute that (1) the 

automatic stay is preventing Movants from seeking a temporary restraining order or preliminary 

injunction ordering the Commonwealth to retain (for the benefit of Movants) the employer 

contributions it is receiving; and (2) that the Commonwealth has been dissipating these employer 

contributions since receiving them. 

2. Nonetheless, rather than conceding these facts, the Oversight Board and the Retiree 

Committee are contesting them and are requiring Movants to prove what all know to be true. 

Certainly, it would be simpler for the Oversight Board to stipulate to these facts. But, in the 

absence of such a stipulation, the Bondholders are entitled to seek to prove them through discovery. 

Discovery is thus appropriate for several reasons. 

3. First, discovery is normally allowed when facts are challenged in a contested matter. 

Federal Rule of Bankruptcy Procedure 9014 provides that the relevant portions of Bankruptcy Rule 

7026 (and, by extension, Federal Rule of Civil Procedure 26) apply to contested matters such as 

this. Under Fed. R. Civ. P. 26, “parties are entitled to a broad discovery.” Santiago v. Fenton, 891 

F.2d 373, 379 (1st Cir. 1989). “Parties may obtain discovery regarding any matter, not privileged, 

which is relevant to the subject matter involved in the pending action . . . .” Fed. R. Civ. P. 26(b)(1). 

Moreover, “a district court may not impose discovery restrictions that preclude a suitor from the 

legitimate pursuit of evidence supporting her cause of action.” Danny B. ex rel. Elliott v. Raimondo, 

784 F.3d 825, 835 (1st Cir. 2015); see also Panola Land Buyers Ass'n v. Shuman, 762 F.2d 1550, 

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1559–60 (11th Cir. 1985) (abuse of discretion to limit discovery to single issue where other issues 

were also relevant); Trevino v. Celanese Corp., 701 F.2d 397, 405–06 (5th Cir. 1983) (abuse of 

discretion to enter protective order barring relevant discovery based on misunderstanding of 

plaintiff's claims); Wolf v. United States, 157 F.R.D. 494, 495 (D. Kan. 1994) (“A court abuses its 

discretion when it stays discovery and prevents a party from having a sufficient opportunity to 

develop a factual basis for defending against [a dispositive] motion.”). Movants are therefore 

entitled to pursue facts through discovery that are necessary to prove their entitlement to the relief 

sought in the Adequate Protection Motion. 

4. Second, Movants do not plan to seek extensive discovery. In addition to whatever 

discovery is necessary to authenticate documents, Movants should need only a single Fed. R. Civ. 

P. 30(b)(6) deposition and a series of no more than ten requests for admission. Both the Rule 

30(b)(6) deposition and the requests for admission would cover (1) the status of contributions made 

after the commencement of the ERS Title III case, (2) the status of the Pre- and Post-Petition 

Segregated Accounts, (3) the dissipation of the assets of ERS after the Title III case, and (4) the 

dissolution of ERS. Movants are not seeking to use this as a fishing exercise; the discovery sought 

will be narrowly tailored to the issues being contested by the Oversight Board and the Retiree 

Committee. 

5. Third, the Oversight Board has presented no persuasive reason why Movants 

should be denied discovery, despite having the burden to do so. See Bennett v. La Pere, 112 F.R.D. 

136, 140 (D.R.I. 1986) (“[T]he party opposing discovery should have the burden of establishing 

some good cause or sound reason for blocking disclosure.”). Unless the Oversight Board concedes 

the admissibility and authenticity of the documents in Movants’ supplemental declaration (Case 

No. 17-3566-LTS, Dkt. No. 307), Movants will need to establish these facts through discovery or 

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at the hearing. Moreover, if the Oversight Board intends to challenge the truth of any statement 

contained in these documents, Movants will need to investigate the basis for that claim. And, of 

course, Movants will need to investigate any evidence the Oversight Board intends to submit to 

counter Movants’ claim that the automatic stay is impairing the value of their collateral. Indeed, 

the Oversight Board’s position on this issue has shifted dramatically during this case: Although it 

initially agreed that Movants were entitled to adequate protection because the initial PROMESA 

stay interfered with Movants’ ability to protect their collateral from potential dissipation by ERS, 

the Oversight Board now takes the surprising position that the Title III automatic stay has not 

affected Movants’ ability to stop the actual dissipation of their collateral by ERS and the 

Commonwealth. 

6. Finally, Movants are not opposed to resolving these issues through stipulations in 

lieu of discovery, if possible. However, given the limited amount of time before the final hearing, 

Movants believe the Court must set a schedule for discovery that can occur in the event the parties 

are unable to agree to stipulated facts. Failing to set such a schedule now would either prevent 

Movants from being able to present sufficient evidence to establish their right to relief at the 

September 13 hearing or require the delay of the final hearing. Movants’ collateral continues to 

be dissipated, and any delay of the final hearing would be prejudicial to Movants. 

CONCLUSION 

7. For the reasons above and in the Urgent Motion, Movants respectfully request entry 

of an order, substantially in the form attached to the Urgent Motion as Exhibit A, setting a 

supplemental briefing and discovery schedule. 

 

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In San Juan, Puerto Rico, today August 6, 2018. 

By: 

/s/ Alfredo Fernández-Martínez ___ /s/ Bruce Bennett_____________ 

Alfredo Fernández-Martínez

DELGADO & FERNÁNDEZ, LLC

PO Box 11750 

Fernández Juncos Station 

San Juan, Puerto Rico 00910-1750 

Tel. (787) 274-1414 

Fax: (787) 764-8241 

afernandez@delgadofernandez.com

USDC-PR 210511 

Counsel for ERS Bondholders Altair Global 

Credit Opportunities Fund (A), LLC, 

Andalusian Global Designated Activity 

Company, Glendon Opportunities Fund, 

L.P., Mason Capital Management, LLC, 

Nokota Capital Master Fund, L.P., OaktreeForrest Multi- Strategy, LLC (Series B), 

Oaktree Opportunities Fund IX, L.P., 

Oaktree Opportunities Fund IX (Parallel 2), 

L.P., Oaktree Value Opportunities Fund, 

L.P., Ocher Rose, L.L.C., and SV Credit, 

L.P.

Bruce Bennett (pro hac vice) 

JONES DAY 

555 South Flower Street 

Fiftieth Floor 

Los Angeles, California 90071 

Tel. (213) 489-3939 

Fax: (213) 243-2539 

bbennett@jonesday.com 

Benjamin Rosenblum (pro hac vice) 

James M. Gross (pro hac vice) 

JONES DAY 

250 Vesey Street 

New York, NY 10281 

Tel. (212) 326-3939 

Fax: (212) 755-7306 

brosenblum@jonesday.com 

jgross@jonesday.com 

Geoffrey S. Stewart (pro hac vice) 

Beth Heifetz (pro hac vice) 

Christopher J. DiPompeo (pro hac vice) 

Sparkle L. Sooknanan (pro hac vice) 

JONES DAY 

51 Louisiana Ave. N.W. 

Washington, DC 20001 

Tel. (202) 879-3939 

Fax: (202) 626-1700 

gstewart@jonesday.com

bheifetz@jonesday.com 

cdipompeo@jonesday.com 

ssooknanan@jonesday.com 

Counsel for ERS Bondholders Altair Global 

Credit Opportunities Fund (A), LLC, 

Andalusian Global Designated Activity 

Company, Glendon Opportunities Fund, L.P., 

Mason Capital Management, LLC, Nokota 

Capital Master Fund, L.P., Oaktree-Forrest 

Multi- Strategy, LLC (Series B), Oaktree

Opportunities Fund IX, L.P., Oaktree

Opportunities Fund IX (Parallel 2), L.P.,

Oaktree Value Opportunities Fund, L.P.,

Ocher Rose, L.L.C., and SV Credit, L.P.

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/s/ Alicia I. Lavergne-Ramírez /s/ Jason Zakia 

José C. Sánchez-Castro

USDC-PR 213312 

jsanchez@sanpir.com 

Alicia I. Lavergne-Ramírez

USDC-PR 215112 

alavergne@sanpir.com 

Maraliz Vázquez-Marrero

USDC-PR 225504 

mvazquez@sanpir.com 

SÁNCHEZ PIRILLO LLC 

270 Muñoz Rivera Avenue, Suite 1110 

San Juan, PR 00918 

Tel. (787) 522-6776 

Fax: (787) 522-6777 

Counsel for Puerto Rico AAA Portfolio

Bond Fund, Inc., Puerto Rico AAA

Portfolio Bond Fund II, Inc., Puerto Rico

AAA Portfolio Target Maturity Fund, Inc.,

Puerto Rico Fixed Income Fund, Inc.,

Puerto Rico Fixed Income Fund II, Inc.,

Puerto Rico Fixed Income Fund III, Inc.,

Puerto Rico Fixed Income Fund IV, Inc.,

Puerto Rico Fixed Income Fund V, Inc.,

Puerto Rico GNMA & U.S. Government

Target Maturity Fund, Inc., Puerto Rico

Investors Bond Fund I, Puerto Rico

Investors Tax-Free Fund, Inc., Puerto

Rico Investors Tax-Free Fund, Inc. II,

Puerto Rico Investors Tax-Free Fund III, 

Inc., Puerto Rico Investors Tax-Free Fund

IV, Inc., Puerto Rico Investors Tax-Free

Fund V, Inc., Puerto Rico Investors TaxFree Fund VI, Inc., Puerto Rico

Mortgage-Backed & U.S. Government

Securities Fund, Inc., Tax-Free Puerto

Rico Fund, Inc., Tax-Free Puerto Rico

Fund II, Inc., and Tax-Free Puerto Rico

Target Maturity Fund, Inc.

John K. Cunningham (pro hac vice) 

Glenn M. Kurtz (pro hac vice) 

WHITE & CASE LLP 

1221 Avenue of the Americas

New York, NY 10036 

Tel. (212) 819-8200 

Fax (212) 354-8113 

jcunningham@whitecase.com 

gkurtz@whitecase.com

Jason N. Zakia (pro hac vice) 

Cheryl T. Sloane (pro hac vice) 

WHITE & CASE LLP 

200 S. Biscayne Blvd., Suite 4900 

Miami, FL 33131 

Tel. (305) 371-2700 

Fax (305) 358-5744 

jzakia@whitecase.com 

csloane@whitecase.com 

Counsel for Puerto Rico AAA Portfolio

Bond Fund, Inc., Puerto Rico AAA

Portfolio Bond Fund II, Inc., Puerto Rico

AAA Portfolio Target Maturity Fund, Inc.,

Puerto Rico Fixed Income Fund, Inc.,

Puerto Rico Fixed Income Fund II, Inc.,

Puerto Rico Fixed Income Fund III, Inc.,

Puerto Rico Fixed Income Fund IV, Inc.,

Puerto Rico Fixed Income Fund V, Inc.,

Puerto Rico GNMA & U.S. Government

Target Maturity Fund, Inc., Puerto Rico

Investors Bond Fund I, Puerto Rico

Investors Tax-Free Fund, Inc., Puerto

Rico Investors Tax-Free Fund, Inc. II,

Puerto Rico Investors Tax-Free Fund III, 

Inc., Puerto Rico Investors Tax-Free Fund

IV, Inc., Puerto Rico Investors Tax-Free

Fund V, Inc., Puerto Rico Investors TaxFree Fund VI, Inc., Puerto Rico

Mortgage-Backed & U.S. Government

Securities Fund, Inc., Tax-Free Puerto

Rico Fund, Inc., Tax-Free Puerto Rico

Fund II, Inc., and Tax-Free Puerto Rico

Target Maturity Fund, Inc. 

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