Hearing Date: June 28, 2017 

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.,

 Debtors.1

PROMESA

Title III 

No. 17 BK 3283-LTS 

(Jointly Administered) 

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

 as representative of 

PUERTO RICO SALES TAX FINANCING 

CORPORATION (COFINA), 

 Debtor. 

PROMESA

Title III 

No. 17 BK 3284-LTS 

(Jointly Administered) 

This Document Relates to: 

17 BK 3284 

OBJECTION TO PUERTO RICO FUNDS AND MUTUAL FUND GROUP’S 

MOTION FOR RELIEF FROM THE AUTOMATIC STAY 

1

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

number listed as a bankruptcy case number due to software limitations 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); and (ii) Puerto Rico Sales Tax Financing Corporation (“COFINA”) (Bankruptcy Case 

No. 17 BK 3284-LTS) (Last Four Digits of Federal Tax ID: 8474).

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TABLE OF CONTENTS 

Page

TABLE OF AUTHORITIES .......................................................................................................... ii

BACKGROUND ............................................................................................................................ 3

A. The GO Group And The Commonwealth’s Constitutional Debt ........................... 3

B. The Commonwealth’s Default And The Lex Claims Litigation ............................. 4

C. The Motion For Relief From The Automatic Stay ................................................. 8

ARGUMENT .................................................................................................................................. 9

CONCLUSION ............................................................................................................................. 14

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TABLE OF AUTHORITIES 

Page(s)

Cases

Cruz Aviles v. Bella Vista Hosp., Inc.,

112 F. Supp.2d 200 (D.P.R. 2000) .................................................................................... 11, 12 

In re San Juan Dupont Plaza Hotel Fire Litig.,

687 F. Supp. 716 (D.P.R. 1988) .............................................................................................. 12 

Lex Claims, LLC v. Fin. Oversight and Mgmt. Bd., 853 F.3d 548

(1st Cir. 2017) ........................................................................................................................... 8 

Nieves ex rel Nieves v. Univ. of P.R.,

7 F.3d 270 (1st Cir.1993) ........................................................................................................ 12 

Pan Am. Comput. Corp. v. Data Gen. Corp., 112 P.R. Dec. 780 (1982) ..................................... 12 

Twin County Grocers, Inc v. Mendez & Co., 81 F. Supp.2d 276 (D.P.R. 1999) .......................... 12 

Valley Forge Christian Coll. v. Ams. United for Separation of Church & State, Inc.,

454 U.S. 462 (1982) .................................................................................................................. 9 

Statutes and Rules

11 U.S.C. § 362(d)(1) .................................................................................................................... 9 

23 L.P.R.A. § 104(c)(1) .................................................................................................................. 3 

23 L.P.R.A. § 104(c)(3) .................................................................................................................. 4 

D.P.R. Local Rule 7 ...................................................................................................................... 11 

P.R. Const., art. VI, § 2 ................................................................................................................... 4 

P.R. Const., art. VI, § 6 ................................................................................................................... 4 

P.R. Const., art. VI, § 7 ................................................................................................................... 4 

P.R. Const., art. VI, § 8 ................................................................................................................... 3 

P.R. Sup. Ct. R. 25 ........................................................................................................................ 11 

PROMESA § 204(c)(3)........................................................................................................... 3, 4, 5 

PROMESA § 303(3) ....................................................................................................................... 5 

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PROMESA § 405 ........................................................................................................................ 6, 8 

Puerto Rico Emergency Moratorium and Financial Rehabilitation Act, No. 21-2016 ................... 9 

Puerto Rico Financial Emergency and Fiscal Responsibility Act, Act. No. 5-2017 .......... 9, 10, 13 

Puerto Rico Fiscal Plan Compliance Act, Act. No. 26-2017 ........................................................ 14 

U.S. Const. art. III, § 2 .................................................................................................................... 9 

Other Authorities

Official Statement for Commonwealth of Puerto Rico General Obligation Bonds of 2014, 

Series A (2014) ......................................................................................................................... 3 

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The Ad Hoc Group of General Obligation Bondholders (the “GO Group”)2

 submits this 

objection to the Motion For Relief From The Automatic Stay (Dkt. 270) (the “Motion”) filed by 

the Puerto Rico Funds and the Mutual Fund Group (collectively, “Movants”). The Motion seeks 

relief from the automatic stay to permit the litigation of certain pending motions to certify 

questions to the Puerto Rico Supreme Court (the “Certification Motions”) in Lex Claims v. 

Rosello, No. 3:16-cv-02374-FAB (the “Lex Claims Action”), and to permit the litigation of any 

certified questions before the Puerto Rico Supreme Court. 

There is no question that one of the important issues in these Title III cases is whether 

certain proceeds of the broad-based sales and use tax (“SUT”) imposed by the Commonwealth of 

Puerto Rico (the “Commonwealth”) are (i) property of the Commonwealth that is available for 

distribution to the Commonwealth’s creditors or (ii) property of the Puerto Rico Sales Tax 

Financing Corporation (“COFINA”). This question will have to be resolved, either conclusively 

in litigation or as part of a negotiated settlement. But the procedure Movants have proposed for 

seeking resolution of a portion of this dispute should be rejected. As we explain below, 

Movants’ proposal would utterly divorce the legal questions on which they seek certification 

from the concrete claims and requests for relief at issue in the Lex Claims Action. The federal 

courts lack jurisdiction to serve as forums for such abstract legal debates. Moreover, the relevant 

claim that was the subject of the Certification Motions in the Lex Claims Action will be mooted 

by the end of July, making resolution of any certified questions by the Puerto Rico Supreme 

Court a practical impossibility. 

2

 The members of the GO Group filing this reply are certain funds or entities managed or 

advised by Aurelius Capital Management, LP, Autonomy Capital (Jersey) LP, FCO Advisors LP, 

Monarch Alternative Capital LP, Senator Investment Group LP, and Stone Lion L.P. 

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Other defects in Movants’ proposal make stay relief unwarranted here. For example, 

Movants’ proposal would leave the decision to certify questions of Puerto Rico law to another 

district judge, who is not responsible for these Title III cases and therefore may not be wellpositioned to appreciate the full scope of considerations that should inform the certification 

decision. Certification could lead to prolonged delay—a risk that this Court should consider as 

part of its overall responsibility for the Title III actions. Likewise, any decision on certification 

should await further clarity regarding how COFINA’s claim on the Commonwealth’s SUT will 

be adjudicated within these Title III proceedings—i.e., whether the litigation will be pursued by 

representatives of the Commonwealth and COFINA, as the Oversight Board has proposed, see 

Dkt. 303, or through some other means. That is necessary to ensure that the full scope of 

relevant issues—including any issues of federal law that may be implicated by the purported 

assignment of SUT revenues to COFINA—can be considered by this Court. Finally, the Lex

Claims Action would not even serve as an appropriate vehicle for the questions Movants seek to 

litigate: It involved a claim of preemption under federal law, rather than a straightforward claim 

that the COFINA structure violates the Puerto Rico Constitution. And the operative complaint in 

the Lex Claims Action was filed more than eight months ago, before a number of relevant events 

that may bear on the proper resolution of COFINA’s claim on the Commonwealth’s SUT. Yet, 

Movants’ one-sided proposal calls for litigation to proceed only as to certification, without any 

provision for amendments to the pleadings or other procedural steps that might be required to 

take account of these intervening developments. 

Under these circumstances, Movants’ request for relief from the automatic stay should be 

denied.

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BACKGROUND

A. The GO Group And The Commonwealth’s Constitutional Debt 

The GO Group is composed of beneficial holders of approximately $3 billion of bonds 

issued or guaranteed by the Commonwealth and backed by a pledge of its good faith, credit, and 

taxing power. Accordingly, these bonds qualify as “public debt” under Puerto Rico’s 

Constitution, which triggers a series of interlocking constitutional and statutory protections. Due 

to these protections, these bonds are known as “Constitutional Debt.” 

Constitutional Debt is entitled to an absolute first-priority claim to and lien on all of the 

Commonwealth’s “available resources.” Article VI, Section 8, of the Puerto Rico Constitution 

provides that, “[i]n case the available resources3

 including surplus for any fiscal year are 

insufficient to meet the appropriations made for that year, interest on the [Constitutional Debt] 

and amortization thereof shall first be paid, and other disbursements shall thereafter be made in 

accordance with the order of priorities established by law.” This protection expressly places 

Constitutional Debt above all other expenditures of the Commonwealth, and, given its 

constitutional mooring, it cannot be waived or abrogated by legislation.

The “order of priorities established by law” to which Section 8 refers is set forth in a 

Puerto Rico statute. That statute provides that “the payment of interest and amortizations 

corresponding to the [Constitutional Debt]” comes first. 23 L.P.R.A. § 104(c)(1). Consistent 

with the Constitutional Debt’s absolute first claim on all available resources, other obligations of 

the Commonwealth, including “[p]rotection of persons and property,” “[p]ublic education 

3

 The Constitution in English reads “revenues”; in Spanish, it reads “recursos.” The 

Commonwealth has acknowledged that “recursos” in this context is more accurately translated as 

“resources.” See, e.g., Official Statement for Commonwealth of Puerto Rico General Obligation 

Bonds of 2014, Series A, at 28 (2014). 

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programs,” and “retirement systems and payment of pensions,” have a lower priority. Id.

§ 104(c)(3). 

Other provisions of the Puerto Rico Constitution reinforce the Constitutional Debt’s firstpriority claim on all of the Commonwealth’s “available” resources, including Article VI, Section 

2, which grants holders of the Constitutional Debt the immediate right to compel disposition of 

the Commonwealth’s available resources for payment of their bonds. See also, e.g., P.R. Const., 

art. VI, § 7 (requiring a balanced budget); id. § 6 (overriding any budget that fails to provide 

funds for payment of Constitutional Debt); id. § 2 (limiting the amount of Constitutional Debt 

the Commonwealth may guarantee or issue, thereby protecting the Commonwealth’s 

creditworthiness); id. (providing that the Commonwealth’s power “to impose and collect taxes” 

shall never be “surrendered or suspended”). In short, Constitutional Debt must be paid first and 

in full, no matter what. 

B. The Commonwealth’s Default And The Lex Claims Litigation 

Notwithstanding these clear constitutional protections, the Commonwealth defaulted on 

its Constitutional Debt on July 1, 2016, by failing to pay approximately $817 million in principal 

and interest then due. Since that time, the Commonwealth has continued to default on almost all 

further payments due on the Constitutional Debt. Today, the full amount overdue on 

Constitutional Debt (including overdue principal, overdue interest, and statutory interest thereon) 

exceeds $1.4 billion, a figure that grows with every passing day as interest continues to accrue on 

these overdue amounts. 

On July 20, 2016—shortly after the Commonwealth’s default—certain members of the 

GO Group (the “Lex Claims Plaintiffs) filed the Lex Claims Action in this Court, where it was 

assigned to Judge Besosa. See Lex Claims Action Dkt. 1. In their complaint, the Lex Claims 

Plaintiffs challenged certain measures and transactions implemented by the Commonwealth 

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shortly after the enactment of the Puerto Rico Oversight, Management, and Economic Stability 

Act, Pub. L. 114-187 (“PROMESA”). The Lex Claims Plaintiffs alleged that these measures 

violated Section 204(c)(3) of PROMESA (see generally, Lex Claims Action Dkt. 1), which 

prohibited the Commonwealth from “enact[ing] new laws that either permit the transfer of any 

funds or assets outside the ordinary course of business or that are inconsistent with the 

constitution or laws of the territory as of the date of enactment of this Act,” during the interim 

period before the Oversight Board appointed pursuant to PROMESA was operation. PROMESA 

§ 204(c)(3). In an amended complaint filed on August 15, 2016, the Lex Claims Plaintiffs 

challenged additional post-PROMESA measures and transactions. See Lex Claims Action Dkt. 

25.

On October 7, 2016, the Lex Claims Plaintiffs sought (and were subsequently granted) 

leave to amend their complaint for a second time. See Lex Claims Action Dkt. 39. The 

centerpiece of their second amended complaint was its Second Cause of Action, which 

challenged Executive Order 2016-30, the executive order by which former-Governor Garcia 

Padilla declared a moratorium on the payment of the Constitutional Debt, under Section 303(3) 

of PROMESA. See Lex Claims Action Dkt. 78, at ¶¶ 135-144.

Section 303(3) of PROMESA preempts “unlawful executive orders that alter, amend, or 

modify rights of holders of any debt of the territory or territorial instrumentality.” PROMESA 

§ 303(3). The Lex Claims Plaintiffs alleged that Executive Order 2016-30 was preempted by that 

provision because it caused the Commonwealth to cease payment on the Constitutional Debt but 

did not interrupt the Commonwealth’s ongoing transfers of proceeds from its SUT to COFINA. 

See Lex Claims Action Dkt. 78, at ¶¶ 138-141. As the Lex Claims Plaintiffs’ explained, because 

all revenues derived from the Commonwealth’s SUT are “available resources” under the Puerto 

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Rico Constitution, Executive Order 2016-30’s failure to interrupt these transfers to COFINA 

while the Constitutional Debt was in default unlawfully altered Constitutional Debtholders’ 

absolute right to be paid first from the Commonwealth’s available resources. See id. ¶ 140.4

After the Lex Claims Plaintiffs sought leave to file their second amended complaint, the 

court granted four separate motions to intervene filed by groups of COFINA bondholders or 

insurers, as well as a motion to intervene by the Oversight Board. Lex Claims Action Dkt. 184 

(granting motions filed by the Oversight Board (Dkt. 62); Ambac Assurance Corp. (Dkt. 55); the 

Puerto Rico Funds (Dkt. 95); and the Mutual Funds Group (Dkt. 113)); Lex Claims Action Dkt. 

198 (granting motion to intervene by COFINA Seniors Coalition (Dkt. 186)).5

 Several of these 

intervenors, along with the defendants, argued that the Lex Claims Action was subject to the stay 

on certain forms of creditor litigation imposed by Section 405 of PROMESA. 

Judge Besosa rejected that contention in an opinion issued on February 17, 2017, see Lex

Claims Action Dkt. 184. Litigation on the Lex Claim Plaintiffs’ Second Cause of Action was 

brought to a halt roughly one month later, however, when the First Circuit issued an order 

staying the Lex Claims Action pending the resolution of expedited appeals filed by the Oversight 

Board, a group of COFINA bondholders, and an insurer of COFINA bonds. Order, Lex Claims, 

LLC v. Fin. Oversight & Mgmt. Bd., 853 F.3d 548 (1st Cir. Mar. 20, 2017). 

4

 The Lex Claims Plaintiffs also asserted claims for declaratory relief regarding the invalidity 

of the purported assignment of portions of the revenues derived from the Commonwealth’s SUT 

to COFINA. The Lex Claims Plaintiffs acknowledged that these claims were subject to the stay 

on certain forms of creditor litigation imposed by Section 405 of PROMESA, and therefore 

asserted them only for the purpose of avoiding any potential defenses under the doctrine of claim 

preclusion. These claims were never the subject of further proceedings in the Lex Claims

Action.

5

 In the Lex Claims Action, many of the same parties who currently appear as the “Mutual 

Fund Group” and the “COFINA Senior Bondholders Coalition,” sought leave to intervene under 

the names “Major COFINA Bondholders” and “COFINA Senior Bondholders” respectively. To 

avoid confusion, the GO Group will refer to these groups by their current names. 

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The weekend before the First Circuit stayed the Lex Claims Action pending appeal, three 

intervenors filed the Certification Motions that Movants currently seek leave to litigate. Lex

Claims Action Dkt. 221 (COFINA Seniors), Dkt. 223 (Puerto Rico Funds), Dkt. 232 (Ambac). 

These motions each sought certification of distinctly worded questions to the Puerto Rico 

Supreme Court: 

x The Puerto Rico Funds sought to certify the question: “Does the portion of the 

revenues of the Commonwealth of Puerto Rico’s [SUT] that was transferred to 

[COFINA] and pledged to its bondholders pursuant to Title 13, Puerto Rico 

Statutes, constitute ‘available resources’ for purposes of Section 8 of Article VI of 

the Constitution of Puerto Rico?” Lex Claims Action Dkt. 223, at 1.

x Ambac Assurance Corp., which insures certain bonds issued by COFINA, wished 

to ask: “Does COFINA’s enabling legislation legally render [SUT] revenues 

COFINA property, making them unavailable to the Secretary of the Treasury such 

that they are not ‘available resources’ within the meaning of Article VI, Section 8 

of the Puerto Rico Constitution?” Lex Claims Action Dkt. 232, at 22. 

x The COFINA Senior Bondholders sought certification of three questions, at least 

two of which assume any number of factual findings:

o “Whether the equitable doctrine of laches under Puerto Rico law bars a 

challenge to the legislative transfer of [SUT] to [COFINA], when the 

challenge was first raised nearly 10 years after the enactment of legislation 

establishing COFINA, during which time billions of dollars of COFINA 

bonds were issued and sold in the market;” 

o “Whether the equitable doctrine of ‘actos propios’ under Puerto Rico law 

bars a challenge to the legislative transfer of [SUT] to COFINA, when the 

bond resolutions and offering documents pursuant to which purchased 

their bonds expressly stated that Plaintiffs would have no claim on the 

[SUT];” and 

o “Whether the Legislative Assembly, in the exercise of its constitutional 

power to impose taxes, to determine how the revenues derived from those 

taxes shall be used and allocated, and to issue debt, validly transferred the 

[SUT] to COFINA and determined that it is not an ‘available resource’ 

under Sections 2 and 8 of Article VI of the Constitution,” Lex Claims 

Action Dkt. 221, at 2. 

These requests for certification had not been briefed or ruled upon when the First Circuit stayed 

further litigation pending appeal on the next business day. Because the First Circuit ultimately 

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ruled that the Lex Claims Action was subject to Section 405’s enactment stay, Lex Claims, LLC 

v. Fin. Oversight and Mgmt. Bd., 853 F.3d 548, 550 (1st Cir. 2017) (per curiam), no further 

litigation took place on the Certification Motions prior to the Commonwealth’s Title III filing on 

May 3, 2017. 

C. The Motion For Relief From The Automatic Stay 

The Motion seeks relief from the automatic stay to allow the pending Certification 

Motions in the Lex Claims Action to be briefed and decided by Judge Besosa, and (if those 

motions are granted) to allow the Puerto Rico Supreme Court to answer any certified question. 

See Dkt. 270, at 2. Movants apparently envision an entirely abstract inquiry into the propriety of 

certification and the resolution of any certified question; indeed, they specifically disclaim any 

intent to “resume litigation of the causes of action” or to pursue the dispositive motions they filed 

shortly before the First Circuit entered a stay. Id. at 13.

On June 10, 2017, the Oversight Board filed a motion seeking approval of a procedure to 

resolve the dispute between the Commonwealth and COFINA regarding entitlement to the 

proceeds of the Commonwealth’s SUT. See Dkt. 303. Under the Oversight Board’s proposed 

procedure, litigation would be directed (at least in the first instance) by agents appointed to 

represent the Commonwealth and COFINA. See id. at 14-16. Observing that Movants sought 

stay relief to pursue certification to the Puerto Rico Supreme Court, the Oversight Board 

contended that litigation of the question in this Court is the superior alternative because, in 

contrast to certification, such litigation could encompass “the broader question whether federal 

law impacts the answer to whether the Pledged Sales Taxes are property of the Commonwealth 

title III debtor or the COFINA title III debtor and what that impact is.” Id. at 8-9.

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ARGUMENT 

THE MOTION SHOULD BE DENIED BECAUSE MOVANTS’ HAVE 

FAILED TO DEMONSRATE CAUSE FOR RELIF FROM THE STAY 

To obtain relief from the automatic stay, Movants must establish “cause.” 11 

U.S.C. § 362(d)(1). Although this standard is flexible, it cannot be stretched to justify Movants’ 

request to establish a highly artificial procedure for litigating the constitutional validity of the 

COFINA structure in the abstract. The Motion also suffers from serious practical flaws. Stay 

relief should accordingly be denied. 

A. The sort of litigation Movants seek leave to pursue is utterly foreign to the federal 

court system. As Movants candidly acknowledge (Dkt. 270, at 13), they do not seek stay relief 

to allow the Lex Claims Plaintiffs “to resume litigation of the[ir] causes of action.” Rather, 

Movants seek leave to resurrect the Lex Claims Action only in an effort to pose abstract 

questions regarding COFINA’s constitutional validity to the Puerto Rico Supreme Court. If 

those questions are answered, Movants apparently envision that no further litigation would take 

place in the Lex Claims Action.

But actual “causes of action” are the stuff of litigation in the federal courts, where Article 

III limits the exercise of the “judicial Power” of the United States to concrete “Cases” and 

“Controversies.” U.S. Const. art. III, § 2. Thus, legal questions presented to a federal court must 

be resolved, “not in the rarified atmosphere of a debating society, but in a concrete factual 

context conducive to a realistic appreciation of the consequences of judicial action.” Valley 

Forge Christian Coll. v. Ams. United for Separation of Church & State, Inc., 454 U.S. 462, 472 

(1982). What Movants propose is exactly the opposite: Because Movants seek only to lift the 

stay for purposes of certification of questions to the Puerto Rico Supreme Court, the Lex Claims

Action would serve only as a vehicle for resolution of abstract legal questions, in a manner that is 

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utterly divorced from the claims at issue in the case and any concrete relief sought by the parties. 

That proposal is inconsistent with Article III.

Moreover, even if Article III did not foreclose Movants’ proposal today, the claim at 

issue in the Lex Claims Action would be moot well before the Puerto Rico Supreme Court could 

rule on the constitutional validity of the COFINA structure. As explained above, see pp. 5-6, 

supra, although the Lex Claims Plaintiff’s Second Cause of Action implicated the validity of the 

COFINA structure, it was pled as a preemption challenge to Executive Order 2016-30, pursuant 

to which the Commonwealth defaulted on its Constitutional Debt. The Commonwealth’s 

statutory authority for implementing Executive Order 2016-30 rests on the Puerto Rico Financial 

Emergency and Fiscal Responsibility Act, Act. No. 5-2017.6

 That Act purports to authorize the 

Governor to promulgate executive orders providing priority rules for the Commonwealth’s 

spending during an “Emergency Period,” id. §203(c), but provides that the Emergency Period 

shall expire, at the latest, on August 1, 2017. See id. § 103(q).7

 At that point, the Lex Claims

Plaintiffs’ PROMESA-based challenge to Executive Order 2016-30 will become moot, because 

Executive Order 2016-30 will no longer have any basis in any Puerto Rico statute. 

6

 Former-Governor Garcia Padilla promulgated Executive Order under the Puerto Rico 

Emergency Moratorium and Financial Rehabilitation Act, No. 21-2016. That Act was repealed 

in certain respects by Act No. 5-2017, but Executive Order 2016-30 was not withdrawn. Thus, 

as a matter of statutory law, the authority for Executive Order 2016-30 rests on Act No. 5-2017. 

7

 Section 103(q) provides that the Emergency Period would expire on May 1, 2017, with a 

possible extension of up to three months at the discretion of the Governor. The Governor has 

extended the statutory Emergency Period until August 1, 2017, but no further extensions are 

possible under Act. No. 5-2017. 

To be clear, the GO Group does not accept the constitutional validity of Act No. 5-2017, or 

any other legislative action purporting to authorize the Commonwealth to declare a moratorium 

on the payment of its Constitutional Debt. Under Article VI of the Puerto Rico Constitution and 

Section 303 of PROMESA, any such payment moratorium is patently unlawful. 

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If the Court were to grant Movants’ request for lift stay relief on June 28, briefing on the 

Certification Motions would occupy at least another three weeks. See D.P.R. Local Civil Rule 7. 

Thus, the earliest that Judge Besosa could order certification would be July 19. At that point, 

there would be less than two weeks before the dispute underlying the Lex Claims Action would 

become moot. There is thus no realistic prospect that granting Movants’ request for stay relief 

would lead to an adjudication of the constitutional questions Movants seek to pose to the Puerto 

Rico Supreme Court. 

2. Aside from these constitutional impediments, the abstract and artificial nature of the 

litigation Movants propose would create serious practical concerns that counsel against granting 

their request for relief from the automatic stay. 

First, Movants seek to pose the certification question to Judge Besosa, rather than to this 

Court as part of these administratively consolidated Title III proceedings. But this Court has 

responsibility for the Tittle III cases, and it is uniquely situated to weigh the costs of certification 

against any benefits the procedure might produce. For example, although Movants predict that 

certification would promote the resolution of these Title III cases, the procedure in fact creates a 

meaningful risk of prolonged delay. In one case, the Puerto Rico Supreme Court denied a 

certification request after a two-year delay. See Cruz Aviles v. Bella Vista Hosp., Inc., 112 F. 

Supp. 2d 200, 203 n.1 (D.P.R. 2000). This Court, in the exercise of its responsibility for the Title 

III cases, should weigh that possibility against the benefits Movants attribute to certification.8

8

 The risk that the Puerto Rico Supreme Court would decline to hear one or more certified 

questions cannot be discounted. Whether to hear a question posed by a federal court is always a 

matter of discretion for the Supreme Court, except that the court “will not issue the certification 

sought when the question raised is a mixed question that involves aspects of federal and/or state 

law” of another jurisdiction, which must be resolved by the petitioner court. P.R. Sup. Ct. R. 25. 

Before accepting any certified question, the court will consider whether “‘(1) questions of Puerto 

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Likewise, if certification were deemed advisable, it should fall to this Court to fashion the 

question or questions that would be posed to the Puerto Rico Supreme Court, in order to 

maximize the likelihood that any answers provided by the Puerto Rico Supreme Court would 

facilitate the prompt and orderly resolution of these Title III cases. Movants’ proposal, which 

calls for another district judge to make that decision, should accordingly be rejected.

Second, Movants’ request for stay relief is premature because it is not yet clear how the 

dispute regarding COFINA’s claim on the Commonwealth’s SUT will be resolved in these Title 

III cases. As noted above, the Oversight Board has proposed a procedure by which agents 

appointed by the Oversight Board would direct litigation on this issue on behalf of the 

Commonwealth and COFINA. See p. 8, supra. If the Court accepts that proposal, or a variant 

thereof, then the agents appointed by the Oversight Board should have the opportunity to frame 

the issues at play in the litigation before any request for certification is adjudicated. 

Alternatively, litigation regarding COFINA’s claim on the Commonwealth’s SUT may be 

Rican law [are] involved; (2) said questions may determine * * * the outcome of the case; (3) 

there are no clear precedents in the case law of the Puerto Rico Supreme Court; (4) an account of 

all the facts relevant to said questions [has been] included, clearly showing the nature of the 

controversy in which the questions arise.’” In re San Juan Dupont Plaza Hotel Fire Litig., 687 

F. Supp. 716, 725 (D.P.R. 1988) (quoting Pan Am. Comput. Corp. v. Data Gen. Corp., 112 

D.P.R. 780, 788 (1982)). 

As courts in the First Circuit have long recognized, “the Supreme Court of Puerto Rico has 

exercised its discretionary powers and narrowed its acceptance of certified questions from the 

federal court adjudicating certified issue only if the outcome will dispose of the entire case.” 

Twin County Grocers, Inc v. Mendez & Co., 81 F. Supp.2d 276, 280 n.2 (D.P.R. 1999) (emphasis 

added)). It is not enough that “the case potentially may end by resolution of the state issues,” 

Cruz Aviles, 112 F. Supp. 2d at 203 n.1 (emphasis added). The Puerto Rico Supreme Court will

not accept certification if there is any unresolved issue of law or fact, Nieves v. Univ. of P.R., 7 

F.3d 270, 277-78 & n.11 (1st Cir.1993) (“The Puerto Rico Supreme Court would reject any 

certification of [a] factually undeveloped issue.”) (citing Pan Am. Computer Corp. v. Data Gen. 

Corp., 112 P.R. Dec. 780, 788 (1982) (Rule 27 certification is warranted only if, among other 

things, “the case makes an account of all the facts relevant to said questions showing clearly the 

nature of the controversy giving rise to the questions”)); Cruz Aviles, 112 F. Supp. 2d at 201 n.1 

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13

initiated as adversary proceedings within these Title III cases, either by creditors of 

Commonwealth or creditors of COFINA. Before that litigation is initiated, it is premature to ask 

whether certification would be warranted. As the Oversight Board has observed (Dkt. 303, 

¶ 19), any such litigation may turn on issues of federal law that must be resolved by this Court 

(and which could potentially lead the Puerto Rico Supreme Court to not accept any certified 

questions, see note 8, supra.). Moreover, although the GO Group agrees with Movants that the 

constitutional validity of the COFINA structure can be adjudicated as a matter of law, other 

potential parties to as-yet unfiled litigation may take a different view and suggest that discovery 

is required. Again, the Court should have the benefit of those views before any request for 

certification is resolved.9

Third, and finally, the Lex Claims Action is a poor vehicle for posing the legal questions 

Movants seek to have certified, even setting aside the impending mootness of the case. As noted 

above, the primary claim in the Lex Claims Action posed a preemption question under 

PROMESA, rather than a straightforward challenge to the constitutional validity of the COFINA 

structure. Now that these Title III cases have been filed and a straightforward claim for 

declaratory relief may proceed in this Court, it would not be prudent to select a case with 

significant procedural complication as a vehicle for resolving underlying questions regarding 

COFINA’s constitutional validity. Moreover, the operative complaint in the Lex Claims Action 

was filed more than eight months ago. See Lex Claims Action Dkt. 78. Since that time, a 

number of significant developments have occurred, including the Oversight Board’s certification 

of a Fiscal Plan that treats the SUT proceeds earmarked for COFINA as property of the 

9

 The Court has also established a framework for mediation in these Title III cases, which 

may provide another vehicle for resolving the dispute over COFINA’s claim on the 

Commonwealth’s SUT. See Dkt. 329. 

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14

Commonwealth, Dkt. 1, Ex. A at 12, and the Commonwealth’s enactment of a “Fiscal Plan 

Compliance Act” that implements that understanding. See Act No. 26-2017, Chs. 4 and 6 

(certified translation attached as Exhibit A). These intervening developments undercut COFINA 

bondholders’ argument that ownership of a portion of the Commonwealth’s SUT was transferred 

to COFINA. If litigation in the Lex Claims Action were to proceed, the Lex Claims Plaintiffs 

would naturally wish to amend their complaint to include allegations regarding these intervening 

developments. Yet, because Movants seek to divorce an abstract legal question from the context 

of the case in which it arose, their proposal would apparently not provide any opportunity for 

these necessary amendments. That additional unfairness also counsels against granting the 

Motion.

In sum, Movants’ request to seek certification of questions to the Puerto Rico Supreme 

Court is premature and procedurally misguided. It should be rejected.

CONCLUSION 

The Motion should be denied.

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15

Dated: June 21, 2017 

/s/ J. Ramón Rivera 

J. Ramón Rivera Morales 

USDC-PR Bar No. 200701 

JIMÉNEZ, GRAFFAM & LAUSELL

P.O. Box 366104 

San Juan, PR 00936 

Telephone: (787) 767-1030 

Facsimile: (787) 751-4068 

Email: rrivera@jgl.com 

Respectfully submitted, 

/s/ Mark T. Stancil 

Lawrence S. Robbins (admitted pro hac vice)

Mark T. Stancil (admitted pro hac vice)

Gary A. Orseck (admitted pro hac vice)

Kathy S. Zecca (admitted pro hac vice)

Ariel N. Lavinbuk (admitted pro hac vice)

Donald Burke (admitted pro hac vice)

ROBBINS, RUSSELL, ENGLERT, ORSECK,

UNTEREINER & SAUBER LLP

1801 K Street, N.W., Suite 411-L 

Washington, DC 20006 

Telephone: (202) 775-4500 

Facsimile: (202) 775-4510 

Email: mstancil@robbinsrussell.com 

/s/ Andrew N. Rosenberg 

Andrew N. Rosenberg (admitted pro hac vice)

Richard A. Rosen (admitted pro hac vice)

Walter Rieman (admitted pro hac vice)

Kyle J. Kimpler (admitted pro hac vice)

Karen R. Zeituni (admitted pro hac vice)

PAUL, WEISS, RIFKIND, WHARTON 

& GARRISON LLP

1285 Avenue of the Americas 

New York, NY 10019 

Telephone: (212) 373-3000 

Facsimile: (212) 757-3990 

Email: arosenberg@paulweiss.com 

Counsel to the Ad Hoc Group of General Obligation Bondholders 

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EXHIBIT A 

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CERTIFIED TRANSLATION 

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate 

 translation, to the best of my abilities, of the document in Spanish which I have seen. 

66 

« ́

CHAPTER 4.- TRANSFER FROM PUBLIC CORPORATIONS, AGENCIES AND 

INSTRUMENTALITIES TO THE GENERAL FUND; CREATION OF COMMITTEE AND 

ADJUSTMENT OF CHARGES, DUTIES AND RATES. 

 Article 4.01.-Transfer of Surplus 

 Public corporations, agencies and instrumentalities of the Government of Puerto Rico 

are hereby ordered to transfer to the Department of the Treasury the surplus of generated 

income. Said funds shall be considered as available resources of the State and deposited by 

the Department of the Treasury in the General Fund of the Government of Puerto Rico to 

comply with the liquidity requirements contemplated in the Fiscal Plan adopted under the 

provisions of the Puerto Rico Oversight, Management and Economic Stability Act of 2016,

Public Law 114-187, also known as PROMESA. 

 Article 4.02.-Committee 

 The amount of funds to be contributed by each of the corporations and instrumentalities 

shall be determined by a committee composed of the Executive Director of the Fiscal Agency 

and Financial Advisory Authority of Puerto Rico, the Secretary of the Department of the 

Treasury and the Executive Director of the Office of Budget and Management, having the 

authority to set the necessary rates to comply with the provisions of the Fiscal Plan approved for 

the Government of Puerto Rico and the one governing its corporations. Said committee shall 

make sure that the transfer of funds as provided in Article 4.01 of the present Law does not 

affect the services offered by public corporations and instrumentalities and that they are the 

surplus available after the operational expenses and obligations of said entities have been 

covered, in accordance with the expense budget recommended by the Office of Budget and 

Management for each fiscal year. 

 Furthermore, said Committee shall have the authority to revise the sources of income of 

the public corporations, agencies and instrumentalities, and adjust, increase or reduce any 

charge, duty, rate, tariff, fee, premium or any income of a similar nature, in order to comply with 

the metrics provided in the Fiscal Plan of the Government of Puerto Rico. In addition, the 

Committee shall be able to impose an additional administrative fee on any contributions that it 

may deem necessary, which may be from five percent (5%) to ten percent (10%), to comply with 

the metrics of the Fiscal Plan certified by the Financial Oversight and Management Board. 

 This Law shall have precedence over any law establishing any charge, duty, rate, tariff, 

fee, premium or any income of a similar nature, and the 

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Document Page 21 of 26
CERTIFIED TRANSLATION 

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate 

 translation, to the best of my abilities, of the document in Spanish which I have seen. 

67 

committee shall have the authority to revise, increase or reduce the amount even if it is provided 

in the Law. The committee shall have the authority to revise, increase or reduce said income 

without being subject to the provisions of any Law, regulations or administrative order 

establishing a specific amount for said income. 

 Any provision of law, regulations, administrative order, corporate resolution, or any other 

document of a similar nature, restricting or reducing the funds that may be transferred by a 

public corporation, agency or instrumentality of the Government of Puerto Rico to the General 

Fund as provided in this Chapter is hereby suspended. 

 The committee shall have the authority to promote any necessary administrative order, 

circular letter or regulations for its operation and for compliance with the provisions of the 

present Law. 

 Article 4.03.-Exclusions 

 The provisions of this Chapter shall not apply to the University of Puerto Rico, created by 

virtue of Law No. 1 enacted on January 20, 1966, as amended, known as the 3/DZ RI WKH

University of Puerto Rico ́ the Puerto Rico Public Corporation for Credit Union Oversight and 

Insurance, created by virtue of Law 114-2001, as amended, better known as the 3Puerto Rico 

Public Corporation for Credit Union Oversight and Insurance Act, ́ 3Municipal Finance 

Corporation Act, ́ better known as COFIM, Law 19-2014, as amended, 3Law of the Special 

Commission regarding Legislative Funds for Community Impact, ́ Law 20-2015 and 3Law of the 

Joint Commission regarding Special Reports of the Comptroller, ́ Law No. 83 enacted on June 

23, 1954, as amended. This Chapter shall not apply to the funds of public corporations and 

entities for community purposes, when they are funds received by private entities. 

 As to the 3Urgent Interest Fund Act, ́ better known as COFINA, Law 9-2006, as 

amended, the Executive shall have the authority to use the Funds of COFINA, occasionally, 

only as a last alternative and subject to submission of a sworn certification to the Legislative 

Assembly. Submission of said certification shall not be interpreted as the Executive having 

indefinite use of the funds of COFINA. Said certification shall have to establish the need, period 

and amount of funds to be used, to cover a significant occasional deficiency in the cash flow to 

comply with the Fiscal Plan of the Government of Puerto Rico. Said certification shall be signed 

and sworn by the Executive Director of the Fiscal Agency and Financial Advisory Authority 

(AAFAF) and by the Director of the Office of Budget and Management. The signature and oath 

of these officials on the certification shall be non-delegable. In said certification officials 

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Document Page 22 of 26
CERTIFIED TRANSLATION 

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate 

 translation, to the best of my abilities, of the document in Spanish which I have seen. 

68 

shall certify that the information is correct, exact and true in accordance with the fiscal reality of 

the Government of Puerto Rico. 

 Article 4.04.-Compliance Clause 

 All transfers made under the provisions of this Chapter shall be subject to the 

requirements of Section 201(b)(1) (M) of Public Law 114-187 known as the Puerto Rico 

Oversight, Management and Economic Stability Act or PROMESA. 

Case:17-03283-LTS Doc#:415 Filed:06/21/17 Entered:06/21/17 17:23:12 Desc: Main

Document Page 23 of 26
CERTIFIED TRANSLATION 

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate 

 translation, to the best of my abilities, of the document in Spanish which I have seen. 

66 

« ́

CHAPTER 4.- TRANSFER FROM PUBLIC CORPORATIONS, AGENCIES AND 

INSTRUMENTALITIES TO THE GENERAL FUND; CREATION OF COMMITTEE AND 

ADJUSTMENT OF CHARGES, DUTIES AND RATES. 

 Article 4.01.-Transfer of Surplus 

 Public corporations, agencies and instrumentalities of the Government of Puerto Rico 

are hereby ordered to transfer to the Department of the Treasury the surplus of generated 

income. Said funds shall be considered as available resources of the State and deposited by 

the Department of the Treasury in the General Fund of the Government of Puerto Rico to 

comply with the liquidity requirements contemplated in the Fiscal Plan adopted under the 

provisions of the Puerto Rico Oversight, Management and Economic Stability Act of 2016,

Public Law 114-187, also known as PROMESA. 

 Article 4.02.-Committee 

 The amount of funds to be contributed by each of the corporations and instrumentalities 

shall be determined by a committee composed of the Executive Director of the Fiscal Agency 

and Financial Advisory Authority of Puerto Rico, the Secretary of the Department of the 

Treasury and the Executive Director of the Office of Budget and Management, having the 

authority to set the necessary rates to comply with the provisions of the Fiscal Plan approved for 

the Government of Puerto Rico and the one governing its corporations. Said committee shall 

make sure that the transfer of funds as provided in Article 4.01 of the present Law does not 

affect the services offered by public corporations and instrumentalities and that they are the 

surplus available after the operational expenses and obligations of said entities have been 

covered, in accordance with the expense budget recommended by the Office of Budget and 

Management for each fiscal year. 

 Furthermore, said Committee shall have the authority to revise the sources of income of 

the public corporations, agencies and instrumentalities, and adjust, increase or reduce any 

charge, duty, rate, tariff, fee, premium or any income of a similar nature, in order to comply with 

the metrics provided in the Fiscal Plan of the Government of Puerto Rico. In addition, the 

Committee shall be able to impose an additional administrative fee on any contributions that it 

may deem necessary, which may be from five percent (5%) to ten percent (10%), to comply with 

the metrics of the Fiscal Plan certified by the Financial Oversight and Management Board. 

 This Law shall have precedence over any law establishing any charge, duty, rate, tariff, 

fee, premium or any income of a similar nature, and the 

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Document Page 24 of 26
CERTIFIED TRANSLATION 

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate 

 translation, to the best of my abilities, of the document in Spanish which I have seen. 

67 

committee shall have the authority to revise, increase or reduce the amount even if it is provided 

in the Law. The committee shall have the authority to revise, increase or reduce said income 

without being subject to the provisions of any Law, regulations or administrative order 

establishing a specific amount for said income. 

 Any provision of law, regulations, administrative order, corporate resolution, or any other 

document of a similar nature, restricting or reducing the funds that may be transferred by a 

public corporation, agency or instrumentality of the Government of Puerto Rico to the General 

Fund as provided in this Chapter is hereby suspended. 

 The committee shall have the authority to promote any necessary administrative order, 

circular letter or regulations for its operation and for compliance with the provisions of the 

present Law. 

 Article 4.03.-Exclusions 

 The provisions of this Chapter shall not apply to the University of Puerto Rico, created by 

virtue of Law No. 1 enacted on January 20, 1966, as amended, known as the 3/DZ RI WKH

University of Puerto Rico ́ the Puerto Rico Public Corporation for Credit Union Oversight and 

Insurance, created by virtue of Law 114-2001, as amended, better known as the 3Puerto Rico 

Public Corporation for Credit Union Oversight and Insurance Act, ́ 3Municipal Finance 

Corporation Act, ́ better known as COFIM, Law 19-2014, as amended, 3Law of the Special 

Commission regarding Legislative Funds for Community Impact, ́ Law 20-2015 and 3Law of the 

Joint Commission regarding Special Reports of the Comptroller, ́ Law No. 83 enacted on June 

23, 1954, as amended. This Chapter shall not apply to the funds of public corporations and 

entities for community purposes, when they are funds received by private entities. 

 As to the 3Urgent Interest Fund Act, ́ better known as COFINA, Law 9-2006, as 

amended, the Executive shall have the authority to use the Funds of COFINA, occasionally, 

only as a last alternative and subject to submission of a sworn certification to the Legislative 

Assembly. Submission of said certification shall not be interpreted as the Executive having 

indefinite use of the funds of COFINA. Said certification shall have to establish the need, period 

and amount of funds to be used, to cover a significant occasional deficiency in the cash flow to 

comply with the Fiscal Plan of the Government of Puerto Rico. Said certification shall be signed 

and sworn by the Executive Director of the Fiscal Agency and Financial Advisory Authority 

(AAFAF) and by the Director of the Office of Budget and Management. The signature and oath 

of these officials on the certification shall be non-delegable. In said certification officials 

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Document Page 25 of 26
CERTIFIED TRANSLATION 

I, Juan E. Segarra, USCCI #06-067/translator, certify that the foregoing is a true and accurate 

 translation, to the best of my abilities, of the document in Spanish which I have seen. 

68 

shall certify that the information is correct, exact and true in accordance with the fiscal reality of 

the Government of Puerto Rico. 

 Article 4.04.-Compliance Clause 

 All transfers made under the provisions of this Chapter shall be subject to the 

requirements of Section 201(b)(1) (M) of Public Law 114-187 known as the Puerto Rico 

Oversight, Management and Economic Stability Act or PROMESA. 

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