United States Court of Appeals

For the First Circuit

No. 19-1391

IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO 

RICO, as Representative for the Commonwealth of Puerto Rico; THE 

FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as 

Representative for the Puerto Rico Highways and Transportation 

Authority; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR 

PUERTO RICO, as Representative for the Puerto Rico Electric 

Power Authority (PREPA); THE FINANCIAL OVERSIGHT AND MANAGEMENT 

BOARD FOR PUERTO RICO, as Representative for the Puerto Rico 

Sales Tax Financing Corporation, a/k/a Cofina; THE FINANCIAL 

OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as 

Representative for the Employees Retirement System of the 

Government of the Commonwealth of Puerto Rico,

Debtors.

COOPERATIVA DE AHORRO Y CREDITO DR. MANUEL ZENO GANDIA; 

COOPERATIVA DE AHORRO Y CREDITO DE JUANA DIAZ; COOPERATIVA DE 

AHORRO Y CREDITO DE RINCON,

Creditors, Appellants,

v.

THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as 

representative for the Commonwealth of Puerto Rico; THE 

FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as 

representative for the Puerto Rico Sales Tax Financing 

Corporation, a/k/a Cofina,

Debtors, Appellees,

PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY; 

ARISTEIA MASTER L.P.; ASIG INTERNATIONAL LIMITED; CANYON 

BALANCED MASTER FUND, LTD.; CANYON BLUE CREDIT INVESTMENT FUND, 

L.P.; CANYON DISTRESSED OPPORTUNITY INVESTING FUND II, L.P.; 

CANYON DISTRESSED OPPORTUNITY MASTER FUND II, L.P.; CANYON NZDOF INVESTING, L.P.; CANYON VALUE REALIZATION FUND, L.P.; CANYON 
VALUE REALIZATION MAC 18 LTD.; CANYON-ASP FUND, L.P.; CANYON-GRF 

MASTER FUND II, L.P.; CANYON-SL VALUE FUND, L.P.; CENTURYLINK 

INC. DEFINED BENEFIT MASTER TRUST; COMPASS ESMA LP; COMPASS TSMA 

LP; CORBIN ERISA OPPORTUNITY FUND, LTD.; CORBIN OPPORTUNITY 

FUND, L.P.; CREDIT FUND GOLDEN LTD.; DECAGON HOLDINGS 1, LLC; 

DECAGON HOLDINGS 2, LLC; DECAGON HOLDINGS 3, LLC; DECAGON 

HOLDINGS 4, LLC; DECAGON HOLDINGS 5, LLC; DECAGON HOLDINGS 6, 

LLC; DECAGON HOLDINGS 7, LLC; DECAGON HOLDINGS 8, LLC; DECAGON 

HOLDINGS 9, LLC; DECAGON HOLDINGS 10, LLC; EP CANYON LTD., f/k/a 

Permal Canyon 10 Ltd.; GN3 SIP LIMITED; GOLDENTREE ENTRUST 

MASTER SPC, on behalf of and for the account of Segregated 

Portfolio I; GOLDENTREE NJ DISTRESSED FUND 2015 LP; GOLD COAST

CAPITAL SUBSIDIARY X LIMITED; GOLDENTREE 2017K-SC, LTD.; 

GOLDENTREE DISTRESSED FUND 2014 LP; GOLDENTREE DISTRESSED MASTER 

FUND 2014 LTD.; GOLDENTREE E DISTRESSED DEBT FUND II LP; 

GOLDENTREE E DISTRESSED MASTER FUND II LP; GOLDENTREE HIGH YIELD 

VALUE FUND OFFSHORE (STRATEGIC), LTD.; GOLDENTREE HIGH YIELD 

VALUE MASTER UNIT TRUST; GOLDENTREE INSURANCE FUND SERIES 

INTERESTS OF THE SALI MULTI-SERIES FUND, LP; GOLDENTREE MASTER 

FUND, LTD.; GOLDENTREE MULTI-SECTOR FUND OFFSHORE ERISA, LTD.; 

GOLDENTREE MULTI-SECTOR MASTER FUND ICAV - GOLDENTREE MULTISECTOR MASTER FUND PORTFOLIO A; GOLDENTREE STRUCTURED PRODUCTS -

C LP; GOLDENTREE STRUCTURED PRODUCTS OPPORTUNITIES FUND 

EXTENSION HOLDINGS, LLC; GT NM, LP; GUADALUPE FUND, LP; HIGH 

YIELD AND BANK LOAN SERIES TRUST; LOUISIANA STATE EMPLOYEES' 

RETIREMENT SYSTEM; MA MULTI-SECTOR OPPORTUNISTIC FUND, LP; 

PANDORA SELECT PARTNERS, L.P.; ROCK BLUFF HIGH YIELD 

PARTNERSHIP, LP; SAN BERNARDINO COUNTY EMPLOYEES RETIREMENT 

ASSOCIATION; SB SPECIAL SITUATION MASTER FUND SPC-PORTFOLIO D; 

SCOGGIN INTERNATIONAL FUND, LTD.; SCOGGIN WORLDWIDE FUND LTD.; 

TACONIC MASTER FUND 1.5 LP; TACONIC OPPORTUNITY MASTER FUND LP; 

CANYON VALUE REALIZATION MASTER FUND, L.P.; PAROCHIAL EMPLOYEES' 

RETIREMENT FUND OF LOUISIANA; TILDEN PARK INVESTMENT MASTER FUND 

LP; WHITEBOX ASYMMETRIC PARTNERS, L.P.; WHITEBOX CAJA BLANCA 

FUND, LP; WHITEBOX INSTITUTIONAL PARTNERS, L.P.; WHITEBOX MULTISTRATEGY PARTNERS, L.P.; WHITEBOX TERM CREDIT FUND I L.P.; 

WINDERMERE IRELAND FUNDS PLC; OFFICIAL COMMITTEE OF UNSECURED 

CREDITORS; ARISTEIA CAPITAL, LLC; CANYON CAPITAL ADVISORS, LLC; 

GOLDENTREE ASSENT MANAGEMENT LP; TACONIC CAPITAL ADVISORS, L.P.; 

TILDEN PARK CAPITAL MANAGEMENT LP; WHITEBOX ADVISORS LLC,

Movants, Appellees,

EDUARDO BHATIA-GAUTIER; JOSE L. DALMAU-SANTIAGO; ROSSANA LOPEZLEON; MIGUEL A. NADAL-POWER; CIRILO TIRADO-RIVERA; ANIBAL JOSE 

TORRES-TORRES; PETER C. HEIN; STEPHEN T. MANGIARACINA; SERVICE 

EMPLOYEES INTERNATIONAL UNION; UNITED AUTOMOBILE, AEROSPACE & 
AGRICULTURAL IMPLEMENT WORKERS OF AMERICA INTERNATIONAL UNION; 

PETER C. HEIN; GMS GROUP LLC; LAWRENCE B. DVORES; MARK ELLIOTT; 

COOPERATIVA DE AHORRO Y CREDITO DEL VALENCIANO; CAPITULO 

AUTORIDAD DE CARRETERAS; CAPITULO INSTITUTO DE CULTURA 

PUERTORRIQUENA; CAPITULO DE OFICINA DESARROLLO SOCIOECONOMICO Y 

COMUNITARIO; CAPITULO OFICINA DEL PROCURADOR DEL VETERANO; 

CAPITULO DE JUBILADOS; MOVIMIENTO DE CONCERTACION CIUDADANA 

INC.; RENE PINTO-LUGO; UNION DE EMPLEADOS DE OFICINA Y 

PROFESIONALES DE LA AUTORIDAD DE EDIFICIOS PUBLICOS; UNION 

INSULAR DE TRABAJADORES INDUSTRIALES Y CONSTRUCCIONES ELECTRICAS 

INC.; UNION INDEPENDIENTE DE EMPLEADOS DE LA AUTORIDAD DE 

ACUEDUCTOS Y ALCANTARILLADOS; UNION DE EMPLEADOS DE OFICINA 

COMERCIO Y RAMAS ANEXAS, PUERTOS; UNION DE EMPLEADOS 

PROFESIONALES INDEPENDIENTES; UNION NACIONAL DE EDUCADORES Y 

TRABAJADORES DE LA EDUCACION; ASOCIACION DE INNSPECTORES DE 

JUEGOS DE AZAR; MANUEL NATAL-ALBELO,

Movants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Laura Taylor Swain,* U.S. District Judge]

Before

Howard, Chief Judge,

and Kayatta, Circuit Judge.**

Guillermo J. Ramos-Luiña for appellants.

Martin J. Bienenstock, with whom Stephen L. Ratner, Jeffrey 

W. Levitan, Brian S. Rosen, Mark. D. Harris, Timothy W. Mungovan, 

John E. Roberts, Adam L. Deming, Michael A. Firestein, Lary A.

Rappaport, Proskauer Rose LLP were on brief, for debtorsappellees.

Peter M. Friedman, with whom John J. Rapisardi, Suzzanne 

Uhland, and O'Melveny & Myers LLP were on brief, for appellee 

* Of the Southern District of New York, sitting by designation. 

** Judge Torruella heard oral argument in this matter and 

participated in the semble, but he did not participate in the 

issuance of the panel's decision. The remaining two panelists 

therefore issued the opinion pursuant to 28 U.S.C. § 46(d).
Puerto Rico Fiscal Agency and Financial Advisory Authority.

David M. Cooper, with whom Susheel Kirpalani, Quinn Emanuel 

Urquhart & Sullivan LLP, Rafael Escalera, Sylvia M. Arizmendi, 

Carlos R. Rivera-Ortiz, Reichard & Escalera LLC were on brief, for 

movants-appellees.

March 2, 2021
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KAYATTA, Circuit Judge. We consider another appeal 

arising out of the Title III debt-restructuring proceedings 

commenced by the Financial Oversight and Management Board for 

Puerto Rico ("the Board") on behalf of the Puerto Rico Sales Tax 

Financing Corporation (COFINA) under the Puerto Rico Oversight, 

Management, and Economic Stability Act (PROMESA), 48 U.S.C. 

§§ 2101–2241. Following the initiation of the Title III 

proceedings, appellants -- various Puerto Rican credit unions 

("the Credit Unions") -- filed an adversary proceeding against 

several defendants, including the Commonwealth of Puerto Rico, the 

Government Development Bank for Puerto Rico, and COFINA. While 

that adversary proceeding was pending, the Board proposed a plan 

of adjustment ("the Plan") restructuring COFINA's debt by, among 

other things, resolving disputes between COFINA and the 

Commonwealth of Puerto Rico and between the junior and senior 

holders of COFINA's outstanding debt. As most relevant here, over 

the Credit Unions' objection, the Plan as finally approved also 

called for the dismissal with prejudice of all litigation against 

COFINA that arose prior to the Plan's effective date. The Credit 

Unions failed to seek a stay of the order approving the Plan and 

dismissing their claims against COFINA. The Plan has now been 

fully implemented for over two years and given rise to transactions 

involving billions of dollars and tens of thousands of individuals. 
- 6 -

For the following reasons, we now dismiss this appeal as equitably 

moot.

I.

We have previously chronicled the contentious fight over 

Puerto Rico's sales and use tax revenues ("SUT revenues"), which 

spurred the Title III proceedings to restructure COFINA. See

Pinto-Lugo v. Fin. Oversight & Mgmt. Bd., Nos. 19-1181 , 19-1182, 

19-1960, 2021 WL 438891, at *1-4 (1st Cir. Feb. 8, 2021). So we 

repeat only those facts critical to this appeal.

The Commonwealth of Puerto Rico has long been in the 

midst of what Congress has described as a "fiscal emergency." 48 

U.S.C. § 2194(m)(1). In 2006, to address its inability to fill 

budget shortfalls by issuing general obligation bonds ("GO 

bonds"), the Commonwealth passed Act 91, which established COFINA, 

a public corporation independent from the Commonwealth with the 

purpose of issuing non-recourse bonds. See P.R. Laws Ann. tit. 13, 

§§ 11a–16. Act 91 financed COFINA bonds by pledging a certain 

percentage of the Commonwealth's SUT revenues to the payment of 

COFINA bondholders. Conflict over those SUT revenues eventually 

led to litigation between the Commonwealth, COFINA bondholders, 

and GO bondholders, the latter of whom claimed that the SUT 

revenues were "available revenues" which must first be used to 

satisfy general public debt under Puerto Rico's Constitution, P.R. 

Const. art. VI, § 8. See Lex Claims, LLC v. Fin. Oversight & Mgmt. 
- 7 -

Bd., 853 F.3d 548, 550–51 (1st Cir. 2017). To resolve this 

dispute, the Board initiated Title III proceedings on May 5, 2017. 

As of that date, the aggregate outstanding principal and interest 

on COFINA bonds totaled over $17 billion, a significant portion of 

the Commonwealth's sizeable public debt. 

On March 22, 2018, while those Title III proceedings 

were ongoing, the Credit Unions filed an adversary complaint. They 

alleged that prior to the Title III proceedings, the Commonwealth, 

COFINA, and other Puerto Rico government entities fraudulently 

induced the Credit Unions to purchase COFINA bonds. The Credit 

Unions later amended their complaint to add a claim alleging a 

violation of the Takings Clause of the United States Constitution. 

They also asserted that the claims raised in the adversary 

proceeding are non-dischargeable because they alleged violations 

of constitutional rights and conduct of a fraudulent nature. 

Meanwhile, mediation in the Title III proceedings led to 

a settlement between COFINA and the Commonwealth, which allocated 

53.65% of the SUT revenues to COFINA and the remainder to the 

Commonwealth, and between junior and senior COFINA bondholders, 

resolving competing claims to the payments that a reorganized 

COFINA would make in the future. Those settlements formed the 

basis of the Plan, which provided for a complete restructuring of 

COFINA's debt. The Plan also discharged all claims against COFINA 

and provided for the dismissal with prejudice of all litigation 
- 8 -

arising from the COFINA restructuring. In that regard, the Plan 

stated that "the releases, injunctions and exculpation . . . 

constitute an essential component of the compromises reached and 

are not severable from the other provisions of this Plan." 

The Credit Unions objected to the Plan's discharge of 

all claims against COFINA, arguing that the discharge should be 

narrowed to exclude the claims they asserted against COFINA and 

other governmental entities in their adversary proceeding, which 

was (and remains) at the pleading stage. In response, the Plan 

was amended to clarify that the Credit Unions were "entitled to 

continue pursuit" of their adversary proceeding "against all 

parties other than COFINA and Reorganized COFINA." 

After hearing argument on January 16 and 17, 2019, the 

Title III court overruled all objections to the Plan and, on 

February 5, 2019, entered its final approval. Because no party 

objected to the Plan's waiver of the typical fourteen-day stay or 

otherwise asked the Title III court to stay approval pending any 

appeal, the Plan was implemented beginning on February 12, 2019. 

One week later, the Credit Unions moved for 

reconsideration of the confirmation order, seeking to strike the 

provision releasing the claims they asserted against COFINA in 

their adversary proceeding. The Title III court denied the motion. 

The court explained that the discharge of claims against COFINA 

"is a fundamental component of the Plan and of restructuring 
- 9 -

proceedings in general" and found that removing the discharge 

provision would cause COFINA "substantial" prejudice, "as the 

uncertainty presented by pending litigation after confirmation of 

a plan would frustrate the purpose of these Title III proceedings 

and could adversely impact the marketability of new bonds issued 

pursuant to the Plan." This appeal followed one month later. 

II.

A.

The Board and an intervening coalition of senior COFINA 

bondholders urge us to dismiss this appeal under the doctrine of 

equitable mootness. Under that doctrine, we have long recognized 

that "where a reorganization plan has been in place for an extended 

period of time after thorough vetting and approval by the 

bankruptcy court, there comes a point where 'the impracticability 

of fashioning fair and effective judicial relief' cautions against 

disturbing the reorganization plan." United Sur. & Indem. Co. v. 

López-Muñoz (In re López-Muñoz), 983 F.3d 69, 72 (1st Cir. 2020) 

(quoting Rochman v. Ne. Utils. Serv. Grp. (In re Pub. Serv. Co. of 

N.H.), 963 F.2d 469, 471 (1st Cir. 1992)). And just recently, we 

discussed the doctrine at length in Pinto-Lugo, a set of appeals 

contesting the same plan of adjustment challenged by the Credit 

Unions here. See 2021 WL 438891, at *4–11. As we explained in 

Pinto-Lugo, the decision 
- 10 -

whether to reject an appeal of an order 

confirming a plan of reorganization because 

the plan has been implemented calls for us to 

consider at least three factors: "(1) whether 

the appellant pursued with diligence all 

available remedies to obtain a stay of 

execution of the objectionable order; 

(2) whether the challenged plan proceeded to 

a point well beyond any practicable appellate 

annulment; and (3) whether providing relief 

would harm innocent third parties." 

Id. at *4 (internal quotation marks and alterations omitted) 

(emphasis in original) (quoting PPUC Pa. Pub. Util. Comm'n v. 

Gangi, 874 F.3d 33, 37 (1st Cir. 2017)).

Analyzing those factors, we dismissed the Pinto-Lugo

objectors' challenges to the Plan as equitably moot. We found 

that the first factor cut sharply against the objectors because 

they "failed to object to the waiver of the automatic stay of 

confirmation, did not seek any stay pending appeal, neither sought 

to expedite the appeal nor objected to requests for extension, and 

in fact sought to extend the briefing schedule themselves." Id.

at *9. As to the second factor, we explained that the Plan could 

not feasibly be unwound:

Pursuant to the Plan and new bond legislation, 

upon consummation of the Plan old COFINA bonds 

worth over $17 billion were exchanged for 

reorganized COFINA bonds worth over 

$12 billion. Those new COFINA bonds have 

since changed hands tens of thousands of times 

on the open market for over a year, with many 

now held by strangers to these proceedings. 

In addition, COFINA distributed about 

$322 million to creditors, Bank of New York 

Mellon (BNYM), as trustee, transferred more 
- 11 -

than $1 billion in disputed SUT revenues to 

the Commonwealth and COFINA, and insurers of 

the old bonds have paid holders of old bonds 

under the Plan. Complicating matters further, 

claims have been released and all litigation 

arising from the restructuring has been 

dismissed with prejudice. 

Id. at *8. The third factor also weighed in favor of equitable 

mootness, given the "incalculable inequity" that unraveling the 

plan would cause to "many thousands of innocent third parties who 

have extended credit, settled claims, relinquished collateral and 

transferred or acquired property in legitimate reliance on the 

unstayed order of confirmation." Id. (quoting In re Pub. Serv. 

Co. of N.H., 963 F.2d at 475).

This appeal suffers from the same problems. As in PintoLugo, the Credit Unions here were anything but diligent in seeking 

to obtain a stay or prevent delay: They failed to object to the 

waiver of the automatic stay of confirmation, to seek any stay 

pending appeal, to request to expedite the appeal, or to object to 

requests for extension. In fact, on multiple occasions the Credit 

Unions sought to extend the briefing schedule themselves. As to 

the second and third factors, the Credit Unions challenge the same 

plan that the objectors in Pinto-Lugo sought to overturn, a plan 

which has now been fully implemented for over two years and which 

has led to tens of thousands of transactions worth billions of 

dollars by third parties relying on it in good faith. Upsetting 
- 12 -

the Plan at this late date would throw those transactions into 

doubt, harming those third parties. 

B.

Notwithstanding the foregoing, the Credit Unions make 

six arguments why equitable mootness is inapplicable to their 

appeal. First, they contend that the doctrine is inapplicable to 

proceedings under PROMESA. Yet we rejected this same argument in 

Pinto-Lugo, explaining that nothing in PROMESA undercuts the 

equitable nature of a proceeding to approve a plan of adjustment 

and that the interests of finality and reliance that undergird the 

doctrine in the context of Chapter 9 and 11 bankruptcies apply 

with equal force to proceedings under Title III. See 2021 WL 

438891, at *6.

Second, the Credit Unions argue that the nature of their 

claims cautions against application of the doctrine. To the extent 

the Credit Unions rely on the constitutional nature of their 

claims, we have previously held that "the presence of underlying 

constitutional claims does not act as a per se bar to the 

applicability of the doctrine" of equitable mootness. Id. at *7

(applying the doctrine despite the presence of constitutional 

claims). This is because a "'constitutional right,' or a right of 

any other sort, 'may be forfeited in criminal as well as civil 

cases by the failure to make timely assertion of the right before 

a tribunal having jurisdiction to determine it.'" Henderson v. 
- 13 -

United States, 568 U.S. 266, 271 (2013) (quoting United States v. 

Olano, 507 U.S. 725, 731 (1993)); see also Bennett v. Jefferson 

Cnty., 899 F.3d 1240, 1251 (11th Cir. 2018) (applying equitable 

mootness despite the presence of state-based constitutional claims 

and explaining that "the mere fact that a potential or actual 

violation of a constitutional right exists does not generally 

excuse a party's failure to comply with procedural rules for 

assertion of the right"). Similarly, the Credit Unions' reliance 

on the allegedly non-dischargeable nature of their claims goes to 

the merits of their objections to plan approval rather than to the 

ramifications of their failures to try to forestall plan 

implementation. And while the merits of an objection may perhaps 

play some role in weighing the pros and cons of the equitable 

relief being sought, certainly the merits cannot be determinative. 

Otherwise, equitable mootness would apply only when not needed. 

See Pinto-Lugo, 2021 WL 438891, at *9.

Third, the Credit Unions contend that dismissing their 

appeal as equitably moot would violate their due process right to 

appeal. Suffice to say, if this were so, the doctrine of equitable 

mootness -- which every circuit has adopted in some form, see id.

at *4 -- would not exist. More to the point, the Credit Unions 

have not been denied any right to appeal. To the contrary, they 

have briefed their case and presented oral argument on the various 

issues raised by their appeal. Although in denying this appeal as 
- 14 -

equitably moot we will not reach the merits of those issues, that 

does not amount to a denial of the Credit Unions' right to due 

process, just as dismissal of a cause of action based on an 

affirmative defense such as laches does not violate a litigant's 

right to due process.

Fourth, the Credit Unions vaguely assert that the Plan's 

confirmation was "steamrolled," presumably suggesting that the 

Plan proponents have unclean hands. But, as noted, the Credit 

Unions received notice of the Plan, objected to it in writing, 

participated in the confirmation hearing, and had their objection 

heard and addressed by the court. They were "steamrolled" only in 

that they lost quickly.

Fifth, trying to fight fire with fire, the Credit Unions 

argue that appellees are equitably estopped from asserting that 

the Credit Unions' claims are equitably moot because appellees 

"represented that in the confirmation process [the Credit Unions] 

should have had the opportunity to assert them." Specifically, 

the Credit Unions point to appellees' contention in the adversary 

proceeding that "[u]ntil a plan of adjustment is filed that does 

not provide for payment in full of any claims [the Credit Unions] 

may have, any decisions on (or requests related to) 

dischargeability are premature." That assertion, however, was

correct: Had the Plan allowed the Credit Unions' claims, there 

would have been no need to litigate dischargeability. And, as we 
- 15 -

have repeatedly noted, the Credit Unions had ample opportunity to 

object to the discharge before the Title III court.

Finally, the Credit Unions argue that their protection 

and the protection of their members and depositors "would be 

aligned with the policy objectives of a Plan of Adjustment," and 

so the "failure to protect [them] and their members . . . would 

defeat" the purpose of the Plan. But reversing the order approving 

the Plan would by no means inevitably provide any benefit to the 

Credit Unions and their members. It would imperil the roughly 50% 

of bond value preserved by the Plan. See Pinto-Lugo, 2021 WL 

438891, at *2. And it would leave the Credit Unions with a claim 

against a debtor that could well have no assets with which to pay 

unsecured claims. In any event, trying to undo the Plan at this 

point would hardly further the Plan's policy objectives. To the 

contrary, it would reverse or at least call into question the 

"important forward motion" the Plan provides to "the 

Commonwealth's economic recovery." Id. at *8. 

C.

Unable to show that the equitable mootness doctrine is 

inapplicable to their case, the Credit Unions assert a variety of 

reasons why the equitable mootness factors do not actually favor 

dismissal.

As to "whether the appellant pursued with diligence all 

available remedies to obtain a stay of execution of the 
- 16 -

objectionable order," id., at *4 (alteration omitted) (emphasis in 

original) (quoting PPUC Pa. Pub. Util. Comm'n, 874 F.3d at 37),

the Credit Unions do not contest that they repeatedly failed to 

seek a stay of the confirmation order. Rather, they argue that 

"preservation of [their] rights did not require staying the 

Plan . . . but merely limiting the releases and discharge to be 

granted to COFINA." This argument, however, ignores the fact that 

the discharge could only be limited by modifying the Plan. The 

Credit Unions also argue that they timely sought to challenge the 

Plan through the filing of their objections and by their oral 

presentation at the confirmation hearing. But objecting to the 

merits of a Plan is simply not the same as asking that the Plan 

approval order be stayed while those objections are considered on 

appeal.

The Credit Unions next take issue with "whether 

providing relief would harm innocent third parties." PPUC Pa. 

Pub. Util. Comm'n, 874 F.3d at 37. In that regard, they argue 

that because "COFINA provides no public services, no 

citizens . . . [would] be affected by the modification or delay of 

the Plan." Along similar lines, they contend that the third 

parties trading COFINA bonds, particularly certain hedge funds, 

are not "innocent" parties but instead were "active participants 

in the use of the bankruptcy proceeding to profit at the expense 

of" COFINA and its "traditional investors." But the restructured 
- 17 -

COFINA bonds are traded on public markets and have changed hands 

tens of thousands of times since confirmation of the Plan. It is 

simply implausible that all, or even most, current COFINA 

bondholders were involved in the Title III proceedings. And given 

the existence of these numerous innocent third parties, whether 

COFINA itself provides public services is irrelevant.

Undeterred, the Credit Unions point to provisions of the 

Plan that exclude certain claims against BNYM, the bond trustee, 

from the releases, and suggest that if those claims are 

permissible, then the continuation of their claims against COFINA 

would not disrupt the Plan. Those provisions, however, do not

permit any claims against COFINA. Indeed, every claim against 

COFINA, to the extent not satisfied in full, was discharged by the 

Plan. The fact that the Plan permits certain claims against BNYM, 

just as it allows the Credit Unions' claims against non-COFINA 

defendants, in no way suggests that permitting the Credit Unions 

to pursue claims against COFINA would not disrupt the Plan or the 

marketability of COFINA bonds.

The Credit Unions also contend that there is no 

evidentiary support for the idea that permitting their claims would 

upend the Plan. We long ago noted, however, that "substantial 

consummation" of a plan of reorganization "raises a 'strong 

presumption' that an appellate court will not be able to fashion 

an equitable and effective remedy." In re Pub. Serv. Co. of N.H., 
- 18 -

963 F.2d at 473 n.13 (quoting In re AOV Indus., Inc., 792 F.2d 

1140, 1149 (D.C. Cir. 1986)). On top of that presumption, the 

Plan states that "the releases, injunctions and exculpation . . . 

constitute an essential component of the compromises reached and 

are not severable from the other provisions of this Plan." See In 

re Millennium Lab Holdings II, LLC, 945 F.3d 126, 143 (3d Cir. 

2019) (holding that "striking the release provisions as to Voya 

would certainly undermine the plan" because "the plan says that 

the settlement payment . . . could not be compelled absent full 

and complete releases from all of Millennium’s pre-bankruptcy 

lenders, including Voya" (emphasis in original)); see also In re 

Charter Commc’ns, Inc., 691 F.3d 476, 485 (2d Cir. 2012) (noting 

that, although "a nonseverability clause standing on its own cannot 

support a finding of equitable mootness," such a clause "may be 

one indication that a particular term was important to the 

bargaining parties").

Additionally, in approving the Plan, the Title III court 

found that the Plan

incorporates a complex series of interrelated 

compromises and settlements that resolve the 

most significant potential obstacle to 

confirmation of a plan of adjustment. 

Moreover, since the compromises and 

settlements are inextricably interwoven, they 

all hinge on one another and the approval of 

all of these compromises and settlements is 

required in order to satisfy the conditions to 

the Effective Date set forth in the Plan. 
- 19 -

And, as we have already explained, in denying the Credit Unions' 

motion for reconsideration, the court further found that the 

release of claims against COFINA "is a fundamental component of 

the Plan" and that removing the release would cause COFINA 

"substantial" prejudice, "as the uncertainty presented by pending 

litigation after confirmation of a plan would frustrate the purpose 

of these Title III proceedings and could adversely impact the 

marketability of new bonds issued pursuant to the Plan." 

The Credit Unions' only response to these findings is 

that the financial value of the relief they seek amounts to only 

four tenths of one percent of the restructured debt of COFINA. We 

rejected a similar argument in Pinto-Lugo, declining to grant 

relief involving amounts only slightly larger (in relation to the 

$12 billion of restructured COFINA debt) than those claimed by the 

Credit Unions. We did so because the Plan

rested at base on the [Title III] court's 

approval of a settlement between the 

Commonwealth and COFINA pursuant to which the 

Commonwealth retained 46.35% of SUT revenues.

The Title III court could approve or 

disapprove the plan; no one explains how the 

Title III court could have successfully 

compelled the Commonwealth to settle its 

adversary proceeding against COFINA for less 

than the 46.35% provided for in the approved 

settlement. See 48 U.S.C. § 2165. So it would 

seem to follow that we, too, could not "tweak" 

the plan by ordering the Commonwealth to 

settle for 46.35% minus $316 million. In 

short, we face an up-or-down decision --

affirm or vacate Plan approval. And because 

no one sought a stay of the plan approval, 
- 20 -

vacating approval is precisely what would 

trigger a hopeless effort to unscramble the 

eggs.

2021 WL 438891 at *10. 

So too here, the Credit Unions fail to explain how the 

Title III court could successfully compel COFINA to accept the 

Plan without the release of all claims against it, particularly in 

light of the COFINA-Commonwealth settlement's carefully calibrated 

division of SUT revenues, which could be upset if the release were 

modified as the Credit Unions request. See 48 U.S.C. § 2165. Nor 

do the Credit Unions explain how their recovery from COFINA of a 

judgment of many millions of dollars would not adversely affect 

the thousands of innocent purchasers of new COFINA bonds. So it 

would seem to follow that we face the same up-or-down decision we 

faced in Pinto-Lugo -- affirm or vacate Plan approval. This 

conclusion is further confirmed by the Credit Unions' own 

description of relief they seek on appeal, which recognizes that 

the "Judgment confirming COFINA's plan of adjustment must be 

reversed" before any modification of the Plan would be possible. 

But just as in Pinto-Lugo, because the Credit Unions failed to 

seek a stay of the Plan's implementation, granting such relief 

would be as futile as squeezing the toothpaste back into the tube. 

See In re Specialty Equip. Cos., 3 F.3d 1043, 1049 (7th Cir. 1993) 

(dismissing appeal as equitably moot because nullification of non-
- 21 -

debtor third-party releases "would amount to imposing a different 

plan of reorganization on the parties").

The Credit Unions also point to Samson Energy Resources

Co. v. Semcrude, L.P., in which the Third Circuit rejected an 

attempt to dismiss an appeal as equitably moot. 728 F.3d 314 (3d 

Cir. 2013). In Samson, the appellants sought to modify a confirmed 

Chapter 11 plan so that they could go forward with an adversary 

proceeding. The amount at issue was only $207,300, approximately 

0.13% of the funds set aside under the plan for the class to which 

the appellants belonged and just 0.01% of the $2 billion 

reorganized by the plan. Id. at 324.1 Given the small amounts at 

issue and the debtor's "robust financial health" post-bankruptcy, 

id. at 325, the court found that the debtor's financial well-being 

would not be threatened by allowing appellant's claims to proceed, 

id. at 325-26, nor would any other third-party be negatively 

impacted, id. The court also found that there was no risk that 

allowing the appellants' claims to proceed would lead to any other 

claims against the debtor. Id. at 324.

1 Although the appellants' adversary proceeding was a 

putative class action with potential liability of approximately 

forty to eighty million dollars, no class had been certified at 

the time of the appeal, nor was it clear how many of the class 

members' claims may have been precluded due to their acquiescence 

to the plan of reorganization. Id. Without more clarity about 

the class, the court found premature any fears of upending the 

plan of reorganization. Id. at 324-25.
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Here, by contrast, there is no reason to expect that 

COFINA would have anywhere near the available unpledged funds 

necessary even to begin paying the Credit Unions' claims. There

would also be no principled basis for allowing the Credit Unions'

claims to proceed and not allowing, for example, the claims of the 

Elliott objectors in Pinto-Lugo. While the sums claimed by the 

Credit Unions and the Elliott objectors are small in relation to 

the amount of pledged revenues that flow through COFINA, they could 

still result in liability on the order of nine figures. Such

substantial liability might well threaten COFINA's solvency, given 

its inability to divert pledged SUT revenues, thereby upsetting 

the central aim of the Plan. And, as set forth above, the Title III 

court specifically found that permitting the Credit Unions' claims 

could disrupt the marketability of the restructured COFINA bonds, 

which would harm tens of thousands of innocent bondholders and 

threaten the Commonwealth's economic recovery. Furthermore, if 

the claims are valid, then the Credit Unions offer no reason why 

liability would not inure to the Commonwealth, which would be more 

likely to have assets to pay than would COFINA. Because, as we 

have noted, the Plan does not bar proceeding against anyone other 

than COFINA, the practical harm to the Credit Unions would appear 

to be speculative.

Finally, the Credit Unions argue that one of the purposes 

of equitable mootness -- finality of confirmed plans of 
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reorganization -- would not be served by denial of this appeal 

because "Puerto Rico's fiscal crisis will not be resolved by 

COFINA’s Plan of Adjustment." Expanding on this argument, the 

Credit Unions note that Title III proceedings regarding the 

Commonwealth and other governmental agencies are ongoing and that 

unspecified issues surrounding COFINA's plan of adjustment are 

still being litigated. Similarly, the Credit Unions argue that

"[m]arket participants are aware that finality is only achieved 

upon exhaustion of all legal remedies and expiration of all 

applicable terms" and that restructured COFINA bonds are "subject 

to market risks." Yet we have long affirmed the "important public 

policy favoring orderly reorganization and settlement of debtor 

estates by 'affording finality to the judgments of the bankruptcy 

court.'" In re Pub. Serv. Co. of N.H., 963 F.2d at 471–72 (quoting 

In re AOV Indus., Inc., 792 F.2d at 1147). Furthermore, that other 

proceedings may be ongoing or that Puerto Rico's fiscal recovery 

remains a work in progress does not change the fact that the Plan 

has been fully implemented for over two years. Whatever risks 

market forces or those other proceedings may pose to Puerto Rico's 

recovery, we decline to add to those risks by ruling in favor of 

parties who, by their inaction, rendered the relief they seek 

impossible without causing harm to many other innocent parties and 

the public.
- 24 -

III.

For the foregoing reasons, we dismiss as equitably moot 

the Credit Unions' challenge to the Title III court's confirmation 

of the Plan.