180807 MEM ORDER RE MELÉNDEZ STAY RELIEF.DOCX VERSION AUGUST 3, 2018 1 

UNITED STATES DISTRICT COURT 

DISTRICT OF PUERTO RICO 

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

In re: PROMESA 

 Title III 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

as representative of No. 17 BK 3283-LTS 

THE COMMONWEALTH OF PUERTO RICO, (Jointly Administered) 

et al., 

 Debtors.1

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

MEMORANDUM ORDER DENYING 

MICHAEL MELÉNDEZ’S URGENT MOTION REQUESTING THE LIFT OF STAY

Before the Court is the Urgent Motion Requesting the Lift of Stay (Docket Entry 

No. 3477 in Case No. 17-3283, the “Motion”)2 filed by Michael Meléndez (“Movant”) for relief 

from the automatic stay imposed by the filing of the above-captioned Title III case on an agerelated employment discrimination case captioned Michael Meléndez v. José L. Caldero López, 

et al., Civ. No. KPE 2016-3539 (508) (the “Litigation”), which is currently pending before the 

Court of First Instance of the Commonwealth of Puerto Rico (the “Commonwealth Court”). The 

 

1

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

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

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

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

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

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

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

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

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

Federal Tax ID: 9686). (Title III case numbers are listed as Bankruptcy Case numbers 

due to software limitations.) 

2

 All docket entry references are to entries in Case No. 17-3283, unless otherwise 

 specified. 

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180807 MEM ORDER RE MELÉNDEZ STAY RELIEF.DOCX VERSION AUGUST 3, 2018 2 

Court has jurisdiction of this contested matter pursuant to 48 U.S.C. § 2166. The Court has 

considered carefully the parties’ submissions.3

 For the following reasons, the Motion is denied 

because Movant has not demonstrated that “cause” exists to lift the automatic stay. 

BACKGROUND

 On December 1, 2016, Movant commenced the Litigation against José L. Caldero 

López, Superintendent of the Puerto Rico Police Department of the Commonwealth of Puerto 

Rico, the Commonwealth of Puerto Rico (the “Commonwealth”), and the Police Department of 

Puerto Rico (the “Police Department” and, collectively with José L. Caldero López and the 

Commonwealth, “Respondents”).4

 (Mot. at 1-2.) In the Litigation Movant, who alleges that he 

has served as a Police Department pilot, seeks to recover damages, including pay and pension 

differentials, allegedly suffered as a consequence of Respondents’ alleged age discrimination in 

connection with Movant’s duty assignments. (Id. at 1, 4.) On May 22, 2017, the 

Commonwealth filed a Notice of Automatic Stay and of Procedures for Filing Motions for Relief 

from the Automatic Stay in the Commonwealth of Puerto Rico’s Title III Case in the Litigation 

requesting that the Commonwealth Court take notice of, among other things, the automatic stay 

applicable to the Litigation pursuant to the Puerto Rico Oversight, Management, and Economic 

Stability Act (“PROMESA”). (Obj. ¶ 2.) Movant filed the instant Motion on July 11, 2018, 

seeking relief from the automatic stay in order to obtain a final ruling in the Litigation as to (i) 

“whether or not the age discrimination occurred,” (ii) if age discrimination did occur, whether 

 

3

 Respondents have filed their Objection of the Commonwealth to Urgent Motion 

 Requesting the Lift of Stay Filed by Michael Meléndez (Docket Entry No. 3704, the 

 “Objection”). Movant did not file a reply submission. 

4

 In their Objection, Respondents represent that the summons in connection with the 

Litigation was served on May 9, 2017. (Obj. ¶ 1.) 

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Movant would “be entitled to a reinstatement to his former position,” and (iii) the amount of just 

compensation to which Movant might be entitled. (Mot. at 10.) 

 Movant argues that failing to continue the Litigation in the Commonwealth Court 

would cause irreparable injury to his property rights, “since a determination validating the 

existence of a taking would allow [Movant] to become a constitutionally secured creditor of the 

[Commonwealth] with a right to defend [his] claims” through the processes set forth in 

PROMESA, and that recommencement of the Litigation is necessary to allow Movant to 

determine whether “he has a right to file a proof of claim in the Title III case, or whether [he] is a 

non-dischargeable creditor in such case.” (Id. at 10-11.) Movant cites his proximity to 

retirement age in further support of his contention that he will suffer irreparable damages if the 

automatic stay remains in place. (Id. at 6.) Additionally, Movant asserts that lifting the 

automatic stay would not harm the Commonwealth because continuation of the Litigation would 

not “disrupt the [Commonwealth’s] processes for managing the Commonwealth” and would not 

“interfere with the Commonwealth’s ability to provide essential services.” (Id. at 2, 11-12.) 

 Respondents argue that, as a “potential, prepetition, unsecured creditor, Movant 

has failed to demonstrate the extraordinary circumstances necessary to show why his claims 

should not be resolved through the claims resolution process” in the Title III case. (Obj. ¶ 4.) 

Specifically, Respondents assert that the Litigation is in a “very preliminary stage . . . as no 

answer or other responsive pleading has been filed,” that continuation of the Litigation would 

fail to resolve any issues relevant to the Commonwealth’s Title III case, that lifting the stay 

would divert the Commonwealth’s “attention and resources to defending Movant’s claims in 

another forum,” that the Commonwealth would expend “considerable time and expense” in 

connection with the Litigation, and that the impact on the Commonwealth of lifting the 

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automatic stay would outweigh any harm that the Movant might suffer were the automatic stay 

to remain in effect. (Id. ¶¶ 5, 14, 17, 26, 27, 29.) 

The Court has considered all of the submissions carefully. 

DISCUSSION

Section 362(d)(1) of Title 11 of the United States Code, made applicable in these 

proceedings by Section 301 of PROMESA, 48 U.S.C. § 2161, permits a court to grant relief from 

the automatic stay “for cause.” To determine whether cause exists to lift the bankruptcy stay, 

courts in this district examine the factors first enumerated by the United States Court of Appeals 

for the Second Circuit in In re Sonnax Indus., Inc., 907 F.2d 1280, 1286 (2d Cir. 1990) 

(“Sonnax”). See, e.g., Brigade Leveraged Capital Structures Fund Ltd. v. Garcia-Padilla, 217 F. 

Supp. 3d 508, 518 (D.P.R. 2016) (citing Sonnax). Of particular relevance to the instant case are 

the following factors identified in the Sonnax decision: “whether relief would result in a partial 

or complete resolution of the issues,” a “lack of any connection with or interference with the 

bankruptcy case,” “whether the litigation could prejudice the interest of other creditors,” “the 

interests of judicial economy and the expeditious and economical resolution of litigation,” 

“whether the parties are ready for trial in the other proceeding,” and the “impact of the stay on 

the parties and the balance of harms.” Sonnax, 907 F.2d at 1286.

 Movant has not demonstrated that the Sonnax criteria weigh in his favor with 

respect to the continuation of the Litigation. Although the Litigation could resolve the present 

dispute between Movant and Respondents, continuation of the Litigation would not result in an 

expeditious and economical resolution of Movant’s claims given the very early procedural stage 

of the Litigation (in which no pleading responsive to the Complaint has yet been filed). (Obj. ¶ 

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2.) Modification of the automatic stay would also interfere with the claims resolution process 

established by the Bankruptcy Code and incorporated into PROMESA, and would require 

Respondents to dedicate limited resources, including time, effort, and attention, to defending 

against Movant’s claims. Movant’s unsecured claims for monetary relief can instead be 

liquidated and addressed through the claims process, including proceedings in this Court if 

necessary. Finally, Movant has not demonstrated that the harm from resolution of his claims 

through the claims process would outweigh the burden that would accrue to the Commonwealth 

by continuation of the Litigation at such an early stage. 

 Accordingly, the Court concludes that Movant has not demonstrated that cause 

exists for the automatic stay to be lifted to allow the Litigation to proceed. 

CONCLUSION

 For the foregoing reasons, the Motion is denied. The automatic stay continues in 

place as against all defendants in the Litigation. See 11 U.S.C. §§ 362(a) and 922(a)(1). This 

Memorandum Order resolves docket entry no. 3477. 

 SO ORDERED. 

Dated: August 7, 2018 

 /s/ Laura Taylor Swain 

 LAURA TAYLOR SWAIN

 United States District Judge 

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