United States Court of Appeals

For the First Circuit

No. 22-1048

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 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; 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 OF THE PUERTO RICO PUBLIC BUILDINGS 

AUTHORITY, 

Debtors,

________________________________________

COOPERATIVA DE AHORRO Y CREDITO ABRAHAM ROSA; COOPERATIVA DE 

AHORRO Y CREDITO DE CIALES; COOPERATIVA DE AHORRO Y CREDITO DE 

JUANA DIAZ; COOPERATIVA DE AHORRO Y CREDITO DE RINCON; 

COOPERATIVA DE AHORRO Y CREDITO DE VEGA ALTA; COOPERATIVA DE 

AHORRO Y CREDITO DR. MANUEL ZENO GANDIA,

Plaintiffs, Appellants,

COOPERATIVA DE AHORRO Y CREDITO DE LARES Y REGION CENTRAL, 

Plaintiff,

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; 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; 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 OF THE PUERTO RICO PUBLIC BUILDINGS 

AUTHORITY; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR 

PUERTO RICO; CORPORACIÓN PÚBLICA PARA LA SUPERVISIÓN Y SEGURO DE 

COOPERATIVAS DE PUERTO RICO; GOVERNMENT DEVELOPMENT BANK OF 

PUERTO RICO; GDB DEBT RECOVERY AUTHORITY; JORGE L. PADILLA, 

Nominal Defendant; MATTHEW KARP, Nominal Defendant; DAVID 

PAUKER, Nominal Defendant; GDB PUBLIC ENTITY TRUST; PUERTO RICO 

FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY; JOSE B. CARRION, 

III; ANDREW G. BIGGS; ARTHUR J. GONZALEZ; CARLOS M. GARCIA; JOSE 

R. GONZALEZ; ANA J. MATOSANTOS; DAVID A. SKEEL, JR.; ELI DIAZ 

ATIENZA; SECURITIES FIRMS A-Z; LAW FIRMS AND COUNSEL; ACCOUNTING 

AND/OR AUDITING FIRMS; INSURANCE COMPANIES A-Z,

Defendants, Appellees,

CHRISTIAN SOBRINO,

Defendant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

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

Before

Kayatta, Howard, and Thompson,

Circuit Judges.

Guillermo J. Ramos-Luiña for appellants.

Arthur Steinberg, with whom Scott I. Davidson, King & Spalding 

LLP, Ileana M. Oliver-Falero, Charles E. Vilaró-Valderrábano, and 

* Of the Southern District of New York, sitting by 

designation.
Cancio Covas & Santiago, LLP were on brief, for appellees the GDB 

Debt Recovery Authority, Jorge L. Padilla, Matthew Karp, and David 

Pauker.

Juan Carlos Deliz, with whom DBPR Legal, LLC was on brief, 

for appellee Corporación Pública para la Supervision y Seguro de 

Cooperativas de Puerto Rico. 

John E. Roberts, with whom Timothy W. Mungovan, Adam L. 

Deming, Martin J. Bienenstock, Mark D. Harris, Jonathan E. Richman, 

Julia D. Alonzo, Shiloh A. Rainwater, and Proskauer Rose LLP were 

on brief, for appellee the Financial Oversight and Management Board 

for Puerto Rico, for itself and as representative of the debtors,

and the Board's individual members.

Luis C. Marini-Biaggi, Carolina Velaz Rivero, Ignacio J. 

Labarca-Morales, and Marini Pietrantoni Muñiz LLC for appellees 

the Puerto Rico Fiscal Agency and Financial Advisory Authority and 

the Government Development Bank of Puerto Rico.

November 23, 2022
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THOMPSON, Circuit Judge. In this adversary proceeding,1

six Credit Unions2 claim the Commonwealth of Puerto Rico and 

several of its agencies and instrumentalities3 induced and forced

them to invest in worthless government-issued securities. 

According to the Credit Unions, the defendants knew -- but did not 

disclose -- that these would be losing investments given the 

precarious and dire financial situation in which Puerto Rico found 

itself at the time. As part of the broader proceedings underway 

to restructure the Commonwealth's debts pursuant to Title III of 

1 "[A]n adversary proceeding is a subsidiary lawsuit within 

the larger framework of a bankruptcy case." In re Fin. Oversight 

& Mgmt. Bd. for P.R., 872 F.3d 57, 63 (1st Cir. 2017) (alteration 

in original) (quoting Kowal v. Malkemus (In re Thompson), 965 F.2d 

1136, 1140 (1st Cir. 1992)); see also Fed. R. Bankr. P. 7001 (which 

48 U.S.C. § 2170 says shall apply to PROMESA cases).

2 The plaintiffs include Cooperativa de Ahorro y Crédito 

Abraham Rosa, Cooperativa de Ahorro y Crédito de Ciales, 

Cooperativa de Ahorro y Crédito de Juana Díaz, Cooperativa de 

Ahorro y Crédito de Rincón, Cooperativa de Ahorro y Crédito Vega 

Alta, and Cooperativa de Ahorro y Crédito Dr. Manual Zeno Gandia.

3 The agencies and instrumentalities named as defendants 

include the Corporación Pública para la Supervisión y Seguro de 

Cooperativas de Puerto Rico ("COSSEC"), the Government Development 

Bank ("GDB"), the GDB Debt Recovery Authority and the three members 

of its Board of Trustees, the GDB Public Entity Trust, the Puerto 

Rico Fiscal Agency and Financial Advisory Authority ("FAFAA" or 

"AAFAF"), the Puerto Rico Sales Tax Financial Corporation 

("COFINA"), the Puerto Rico Highways and Transportation Authority 

("HTA"), the Employees' Retirement System of the government of the 

Commonwealth of Puerto Rico ("ERS"), the Puerto Rico Electric Power 

Authority ("PREPA"), the Public Buildings Authority ("PBA"), the 

Financial Oversight and Management Board ("FOMB") and its seven

members (plus one ex-officio member), as well as unidentified 

securities firms, law firms and attorneys, accounting firms, 

auditing firms, and insurance companies. 
- 5 -

the Puerto Rico Oversight, Management, and Stability Act 

("PROMESA"),4 the Credit Unions filed an adversary complaint 

alleging the defendants, through conversations, meetings, and 

presentations held between 2009 and 2015, as well as through 

written policy guidance issued within the same timeframe, induced 

them to purchase government bonds by both misrepresenting and 

withholding information about the risks of the investment. The 

district court dismissed the Credit Unions' claims, and, for the 

reasons we explain below, we affirm.

LAYING THE GROUNDWORK

We begin, as we generally do, with a summary of the facts 

and procedural history of the case. When we review the grant of 

a motion to dismiss, "[a]ll facts are taken from the complaint and 

accepted as true . . . and we disregard any conclusory 

allegations." Ponsa-Rabell v. Santander Sec. LLC, 35 F.4th 26, 30 

n.2 (1st Cir. 2022) (citing O'Brien v. Deutsche Bank Nat'l Tr.

Co., 948 F.3d 31, 35 (1st Cir. 2020)). We may also consider 

documents attached to the complaint or incorporated by reference 

therein. Id. (citing O'Brien, 948 F.3d at 35). We start with a

4 Detailed descriptions of PROMESA, its genesis, and its 

structure abound in our case law. See, e.g., In re Fin. Oversight

& Mgmt. Bd. for P.R., 32 F.4th 67, 73-75 (1st Cir. 2022); Centro

de Periodismo Investigativo, Inc. v. Fin. Oversight & Mgmt. Bd.

for P.R., 35 F.4th 1, 5 (1st Cir. 2022). This opinion will 

presume the reader's general familiarity with PROMESA's raison 

d'être.
- 6 -

brief introduction of the defendants that the Credit Unions (also

referred to as the "cooperatives") allege and argue were actively

involved in the fraudulent scheme that forms the basis of their

claims. 

The Corporación Pública para la Supervisión y Seguro de 

Cooperativas de Puerto Rico ("COSSEC") is the agency through which 

the Commonwealth of Puerto Rico establishes and implements 

regulations and supervision over financial depository 

institutions, including the plaintiff Credit Unions. COSSEC 

generates what are known as "circular letters" several times per 

year that address issues such as "[r]egulatory reporting 

requirements," "[i]ncrease[s] in the allowed amount of investments 

in Puerto Rico bonds," and "[r]equired insurance coverages." The 

Credit Unions must comply with the circular letters, which are 

enforced by COSSEC, or face potential adverse consequences such as 

an administrative fine, removal of officers or directors, or 

placement in receivership. The Credit Unions rely on information 

provided by COSSEC about the Commonwealth's financial situation. 

The Government Development Bank ("GDB") is a fiscal 

agent of the Commonwealth that "designed, oversaw, controlled and 

was in charge of all bond and debt issued by the Commonwealth and 

its instrumentalities, including the issuance of the Puerto Rico 

Debt Securities that were offered and sold to [the Credit Unions]." 

The GDB had "specific knowledge" of the details of the 
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Commonwealth's financial situation from 2009 onwards. The GDB 

Debt Recovery Authority is a separate entity created by a 2017 

statute for the purpose of implementing a debt restructuring plan 

for the GDB's debts.

According to the Credit Unions as alleged in their 

complaint, the GDB and other governmental agencies "adopted 

regulatory measures over [the Credit Unions] to implement the 

taking of their cash and liquid funds" all the while knowing the 

likely "adverse effects" to the Credit Unions. These measures 

included using COSSEC to place "excessive amounts of 

unsustainable, materially diminished and value impaired 

governmental instruments in [the Credit Unions'] investment 

portfolios." From 2009 to 2015, through meetings and conversations 

between agency officials, 

[t]he Commonwealth, the GDB and COSSEC abused and 

misused the governmental regulatory power over credit 

unions, adopting a regulatory policy of steering credit 

unions' liquid resources towards Puerto Rico Debt 

Instruments which the Commonwealth and the GDB knew were 

unsafe, risky, unsustainable and that lacked adequate 

sources of repayment. This regulatory policy was 

implemented through the issuance of circular letters 

together with coercive and selective examinations and 

the threat of retaliatory legislative initiatives. As 

a result of this scheme, the Commonwealth and the GDB 

took material portions of [the Credit Unions'] cash and 

liquid assets without providing adequate compensation 

for them. 

The Credit Unions attached two of these circular letters as 

exhibits to their pleading. In Circular Letter 09-03, issued in 
- 8 -

2009, COSSEC "authorized the purchase of . . . bonds currently 

offered by the Commonwealth of Puerto Rico through the [GDB]." 

The letter stated that "[t]he cooperatives that participate in the 

purchase of these investment products may benefit from the 

advantages that these bonds offer," including as payment history 

because the bonds are "backed by the Government, which guarantees 

100% of interest and principal payments" and as collateral because 

the "bonds are excellent guarantees, which allows investors to 

apply for loans against their investment." The letter provided

that "cooperatives may purchase" the bonds, "as long as they ensure 

that at the time of purchase" the bonds are rated within a certain 

range of quality and creditworthiness classifications.5 The letter

reminded the cooperatives that acquisition of the bonds must be in 

compliance with the governing regulations about limits of 

investments but provided that COSSEC will not consider a drop in 

classification after the date of acquisition or purchase of the 

investment to be a violation of the governing regulations. Should 

5 "Municipal bond ratings determine the amount of investment 

risk and interest cost on bonds used for financing government 

projects. These ratings, much like a credit risk evaluation, 

assess the following factors in determining the degree of interest 

and risk:

• Current state of the economy

• Debt structure

• Financial condition

• Management practices"

Municipal Bond Ratings, Bondview,

https://www.bondview.com/municipal-bond-ratings/summary-rating, 

last visited November 21, 2022.
- 9 -

the bonds' classification drop after purchase, the letter 

authorized the Credit Unions to "perform an analysis to determine 

the course of action to take in the best interest of the 

institution." The Credit Unions allege that the "guarantee[d] 

100% of interest and principal payments" statement was misleading 

because members of COSSEC's board of directors knew the government 

could not, given Puerto Rico's financial posture, honor repayment 

to the Credit Unions. 

In the other Circular Letter attached to the complaint 

-- 2012-02 -- issued in 2012, COSSEC acknowledged Puerto Rico's 

economic recession and explained that an "indirect effect of 

increasing the levels of default for financial institutions" leads 

to financial institutions' hesitancy to grant credit, which leads 

to a higher proportion of "liquid resources" and an excess of 

regulatory liquidity. Therefore, COSSEC was authorizing a 5% 

increase (from 25% to 30%) in the total percentage of "liquid 

resources in negotiable instruments" the cooperatives "may invest 

in additional instruments." 

The Credit Unions allege that, after COSSEC issued 

Circular Letter 2012-02, the defendants "obtained around 156 

million dollars from [them]" and that, by August 2017, the Credit 

Unions had "heavily invested in securities issued by the Puerto 

Rico government and its instrumentalities." The Credit Unions 

contend that "[t]he taking of the cash, capital and liquid reserves 
- 10 -

of the [Credit Unions] through the improper use of COSSEC's 

regulatory authority was undertaken with knowledge by the GDB [and 

other agencies] of the risks and difficulties surrounding Puerto 

Rico's public finances" and that the GDB knowingly exposed the 

Credit Unions to "higher concentrations of risk." 

In addition, the Credit Unions aver that both the GDB 

and COSSEC were derelict in their duties and failed to help devise 

strategies to stabilize Puerto Rico's financial system in 2015 

when the financial crisis was on the doorstep of the Commonwealth 

or when the Credit Unions were actively involved in proposing ways 

to mitigate the failure of the financial system and the restructure

of it. The Credit Unions further assert that Circular Letter 2012-

02 "allowed the government to take an increased amount of [Credit 

Union] moneys in exchange for instruments of substantially 

diminished value that had the consequence of a higher concentration 

of risk in unsound Puerto Rico Debt Securities, which was a harmful 

investment strategy for the [Credit Unions]." The Credit Unions' 

professed damages include monetary losses in income, principal, 

capital, and liquidity, market value losses for the debt securities 

they continue to hold, reputational losses, and business losses.6

6 In spite of being defrauded, the Credit Unions allege that 

they have nonetheless shown growth and remained stable financial 

institutions throughout Puerto Rico's financial crunch.
- 11 -

In March 2018, the Credit Unions initiated this

adversary proceeding against the Commonwealth of Puerto Rico, 

COSSEC, the GDB, the GDB Debt Recovery Authority, the members of 

the GDB Debt Recovery Authority's Board of Trustees, the FOMB, the 

individual members of the FOMB, the Puerto Rico Fiscal Agency and 

Financial Advisory Authority ("FAFAA" or "AAFAF"), and five of the 

Title III co-defendant debtors: the Puerto Rico Sales Tax 

Financing Corporation ("COFINA"), the Employees Retirement System

("ERS"), the Highways and Transportation Authority ("HTA"), the 

Public Buildings Authority ("PBA"), and the Electric Power 

Authority ("PREPA"). The Credit Unions requested an exception 

from discharge of their debts alleged in the Title III proceeding,

advancing two primary theories of recovery. First, pursuant to 11 

U.S.C. §§ 105 and 944, on the basis that the defendants' conduct, 

which the Credit Unions alleged was fraudulent, should disqualify 

them from dischargeability of the defendants' debts related to the 

Credit Unions' claims. Second, citing PROMESA, the Credit Unions 

requested a declaratory judgment and exception to discharge based 

on the defendants' allegedly fraudulent conduct. The Credit Unions 

also listed some specific common law claims such as breach of 

contract, breach of warranties, and promissory estoppel, as well 

as federal and Puerto Rico statutory claims such as violations of 
- 12 -

statutes related to securities, negligence, fiduciary obligation, 

and fraud.7

In response, the defendants filed motions to dismiss all 

the counts for failure to state claims upon which relief can be 

granted pursuant to Fed. R. Civ. P. 12(b)(6), the fraud-based 

claims for failure to meet the particularity requirement of Fed. 

R. Civ. P. 9(b), the Puerto Rico law-based claims under Fed. R. 

Civ. P. 12(b)(1) as time-barred by statutes of limitations, and 

claims alleged against some of the defendants also under Rule 

12(b)(1) on the basis that the claims were either not yet ripe or 

moot. After several skirmishes over the Credit Unions' efforts to 

amend their complaint, the district court ultimately allowed a

second amended complaint ("SAC") (the operative complaint in this 

appeal), which beefed up the factual allegations to support the 

extant claims.8 The SAC sets forth seven counts against the various 

7 Shortly after the Credit Unions filed their initial 

complaint, the district court allowed the Official Committee of 

Unsecured Creditors to intervene.

8 The Credit Unions' motion to amend their pleading to file a 

second amended complaint lingered awhile because the parties 

litigated a second case the Credit Unions had filed against COSSEC. 

As summarized by the district court in its decision to allow the 

Credit Unions to file the second amended complaint, this second 

case sought "a declaration that COSSEC . . . was insolvent and an 

injunction requiring the Commonwealth to lend money to COSSEC." 

The district court denied the injunction, see Docket Entry 24 in 

Case No. 19-AP-389, and although the Credit Unions filed a notice 

of appeal, they subsequently voluntarily dismissed it.
- 13 -

defendants, specifically (and as relevant to this appeal) the SAC 

contends that:

• COFINA, HTA, ERS, and PREPA (through the GDB as each agency's 

"fiscal agent") benefited from the fraudulent actions and 

omissions such that the plaintiffs' claims in the Title III 

cases should be excepted from discharge pursuant to 11 U.S.C. 

§§ 105 and 944 (count 1);

• plaintiffs should be designated as a separate class for the 

Title III case and granted a declaratory judgment and 

exception to discharge pursuant to the purposes of PROMESA

(count 2);

• the Commonwealth, through the GDB and COSSEC and the circular 

letters, engaged in fraudulent actions and omissions and are 

liable under Puerto Rico's Act Against Organized Crime (count 

3);

• (labeled "breach of contractual obligations") the GDB, 

COSSEC, and the Commonwealth's fraudulent misrepresentations 

and omissions damaged the Credit Unions, or in the 

alternative, these entities caused harm to the Credit Unions 

through gross negligence (count 4);

• (labeled "torts claim") COSSEC and its directors engaged in 

fraudulent acts for which they are separately and civilly 
- 14 -

liable under the general Puerto Rico torts statute (count 5); 

and

• "[t]he illegal appropriation of the [Credit Unions'] moneys 

. . . by the Commonwealth, through the use of its regulatory 

powers, to fund an insolvent government, violates the takings 

clause of the Constitution of Puerto Rico, Article II § 9, 

and the Constitution of the United States, Amendment V" (count 

6).9 

Again, the defendants filed motions to dismiss the entire SAC for 

the same reasons they asserted in their initial motions to dismiss 

the first complaint.10 For reasons we'll explore momentarily, the 

district court granted the motions, dismissing the entire SAC 

against all the defendants, and, on January 4, 2022, entered final 

judgment. The Credit Unions timely appealed; their subsequent 

briefing challenges only the dismissal of counts 1-6 as against 

the Commonwealth, COSSEC, the GDB, and the GDB Debt Recovery 

Authority.

9 The seventh count alleged unjust enrichment -- the dismissal 

of this claim is not pressed on appeal. 

10 The FOMB filed its motion to dismiss on behalf of itself, 

the Commonwealth, and the five debtor-defendants (COFINA, PREPA, 

HTA, PBA, ERS). COSSEC, AAFAF, and the Official Committee of 

Unsecured Creditors joined the FOMB's motion. The GDB and GDB 

Debt Recovery Authority each filed its own motion to dismiss.
- 15 -

A SET OF LENSES FOR OUR REVIEW

We review the district court's dismissal of the Credit 

Unions' claims pursuant to Rule 12(b)(1) and 12(b)(6) de novo.

Ponsa-Rabell, 35 F.4th at 32; Álvarez-Maurás v. Banco Popular of 

P.R., 919 F.3d 617, 622 (1st Cir. 2019). "We may affirm the 

dismissal on any basis available in the record." Ponsa-Rabell, 35 

F.4th at 32 (cleaned up) (quoting Yan v. ReWalk Robotics Ltd., 973 

F.3d 22, 30 (1st Cir. 2020)). "To survive a [12(b)(6)] motion to 

dismiss, a complaint must contain sufficient factual matter, 

accepted as true, to state a claim to relief that is plausible on 

its face." Id. (internal quotation marks omitted) (quoting 

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). We need to decide 

"whether all the facts alleged, when viewed in the light most 

favorable to the plaintiffs, render the plaintiff's entitlement to 

relief plausible." Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 

1, 14 (1st Cir. 2011). "No single allegation in a complaint need 

lead to the conclusion of some necessary element, provided that, 

in sum, the allegations of the complaint make the claim as a whole 

at least plausible." Falmouth Sch. Dep't v. Doe ex rel. Doe, 44 

F.4th 23, 47 (1st Cir. 2022) (cleaned up) (quoting OcasioHernández, 640 F.3d at 14-15).

Because several of the Credit Unions' claims are based 

on the defendants' allegedly fraudulent conduct, our review 

includes a deeper scrutiny of the plaintiffs' allegations. See
- 16 -

Katz v. Belveron Real Est. Partners, LLC, 28 F.4th 300, 308 (1st 

Cir. 2022) ("[H]eightened pleading requirements apply not only to 

claims of fraud simpliciter but also to related claims as long as 

the central allegations of those claims effectively charge fraud." 

(quoting Foisie v. Worcester Polytechnic Inst., 967 F.3d 27, 49 

(1st Cir. 2020))). Pursuant to Rule 9(b), the plaintiffs "must 

state with particularity the circumstances constituting fraud."

Fed. R. Civ. P. 9(b). The pleader of a fraud claim "is expected 

to specify the who, what, where, and when of the allegedly false 

or fraudulent representation." Alt. Sys. Concepts, Inc. v. 

Synopsys, Inc., 374 F.3d 23, 29 (1st Cir. 2004) (citing Powers v.

Bos. Cooper Corp., 926 F.2d 109, 111 (1st Cir. 1991)). Moreover, 

where, as here, a plaintiff pleads in part fraud by omission in a 

securities-related fraud case, we've said that "a plaintiff must 

first identify a statement made by defendants, show how the 

omission rendered that statement misleading, and finally establish 

that there was a duty to disclose the omitted information." PonsaRabell, 35 F.4th at 34. 

WORKING THROUGH THE ISSUES

The Credit Unions challenge several portions, though not 

all, of the district court's comprehensive decision granting the 

defendants' motions to dismiss, including, as against the 

Commonwealth, the GDB, and COSSEC, the dismissal of all the fraudbased claims for failure to meet the Rule 9(b) heightened pleading 
- 17 -

standard (counts 1-5), the dismissal of the Puerto Rico law-based 

claims (counts 4 and 5) as time-barred, and the dismissal of the 

takings claim as not plausibly pled.11 We will supply additional 

factual allegations as needed to provide the full context of each 

issue as we work through the Credit Unions' arguments. 

Allegations of Fraud

On appeal, the Credit Unions do not dispute that their 

first five counts sound in fraud; before us they focus on arguing 

that they have plausibly alleged fraudulent conduct on the part of 

the Commonwealth, COSSEC, and the GDB with sufficient 

particularity to satisfy Rule 9(b) and to survive the defendants' 

12(b)(6) motion to dismiss.12 We disagree and explain why. 

We proceed with our de novo review of the allegations 

upon which the Credit Unions focus in light of the general elements 

11 In response, the FOMB again writes on behalf of the 

Commonwealth and the five debtor-defendants, and COSSEC and AAFAF 

filed a joint brief (though the Credit Unions do not challenge the 

district court's dismissal of the SAC as against the debtordefendants or AAFAF). The GDB and the GDB Debt Recovery Authority 

each filed their own responsive brief.

12 The Credit Unions spill quite a bit of ink in their opening 

brief and reply brief arguing that the district court misapplied 

both Rules 12(b)(6) and 9(b) by failing to take their well pled 

allegations as true, failing to draw reasonable inferences in their 

favor, and holding them to an "unattainable" and "excessively high 

pleadings standard" for the claims sounding in fraud. After 

reviewing the district court's decision granting the motions to 

dismiss, we disagree. The district court accurately described and 

applied the heightened pleading standard for claims based on 

fraudulent conduct and, after taking a fresh look, for the reasons 

explained herein, we arrive at the same conclusions drawn by the 
- 18 -

of a Puerto Rico fraud claim.13 To plausibly allege fraud, the 

plaintiffs must provide sufficiently specific factual allegations 

regarding four elements: "(1) a false representation by the 

defendant; (2) the plaintiff's reasonable and foreseeable reliance 

thereon; (3) injury to the plaintiff as a result of the reliance; 

and (4) an intent to defraud." P.R. Elec. Power Auth. v. Action

Refund, 515 F.3d 57, 66 (1st Cir. 2008) (citing Microsoft Corp. v.

Comput. Warehouse, 83 F. Supp. 2d 256, 262 (D.P.R. 2000)),

(abrogated on other grounds as recognized in Portugues-Santana v. 

Rekomdiv Int'l, 657 F.3d 56 (1st Cir. 2011)); see also P.R. Laws 

Ann. Tit. 31, § 3408 (governing claims for "deceit" or fraud in 

the inducement -- "[t]here is deceit when by words or insidious 

district court with respect to the lack of specificity with which 

the Credit Unions have alleged fraudulent conduct.

In a separately enumerated issue in their brief, the Credit 

Unions say the district court also erred by applying the wrong 

"judicial scrutiny standard" in light of the Credit Unions' 

allegations of government misconduct and ignoring the duty (though 

without identifying whose duty) to fulfill PROMESA's mandate of 

promoting governmental transparency. As best we can tell, the 

Credit Unions are arguing that the dismissal of this adversary 

proceeding is unfair because it does not allow them to reach the 

discovery phase of this litigation so that they can uncover the 

details not currently within their access and control. Again, as 

we discuss herein, the Credit Unions did not meet the heightened 

pleading standard. Moreover, the plaintiffs have not persuaded us 

that they are entitled either to a pass on this standard or to a 

different standard because they are alleging misconduct 

perpetrated by the government. 

13 In the SAC, the Credit Unions did not allege fraudulent 

conduct pursuant to any specific federal or Commonwealth 

securities laws.
- 19 -

machinations on the part of one of the contracting parties the 

other is induced to execute a contract which without them he would 

not have made").

This court "strictly applie[s] Rule 9(b) . . . in the 

securities context," holding that the particularity with which 

plaintiffs must plead "supporting facts applies 'even when the 

fraud relates to matters peculiarly within the knowledge of the 

opposing party.'" New Eng. Data Servs., Inc. v. Becher, 829 F.2d 

286, 288 (1st Cir. 1987) (quoting Wayne Inv., Inc. v. Gulf Oil 

Corp., 739 F.2d 11, 14 (1st Cir. 1984)) (both cases holding general 

allegations made "based on information and belief" were 

insufficiently specific); see also Greebel v. FTP Software, Inc., 

194 F.3d 185, 193 (1st Cir. 1999). Unlike the plaintiffs in Becher

and Wayne Investment, the Credit Unions do provide some factual 

allegations beyond "based-on-information-and-belief" assertions. 

However, after carefully scrutinizing the SAC back to front, we 

believe that the plaintiffs stumble at plausibly pleading even the 

first element of fraud -- false representations by the defendants. 

Combing through the SAC, we see that it primarily 

outlines a broad and vague fraudulent scheme involving (a) COSSEC's 

issuance of the two circular letters attached to the SAC and 

summarized above, (b) meetings and conversations between COSSEC, 

the GDB, and the Commonwealth, and (c) a presentation by COSSEC. 

Each encounter involved spreading information that the defendants 
- 20 -

allegedly knew to be false at that time, resulting in the Credit 

Unions' losing investments in the Puerto Rico debt securities. 

But the allegations here flunk the plausibility test because the 

SAC does not come close to providing the required level of 

particularity to satisfy Rule 9(b).

For example, the Credit Unions repeatedly mention 

"meetings and conversations between officials of the GDB, the 

governor's office and COSSEC['s chairman and executive president]"

and between COSSEC officials in preparation for and at COSSEC's

Board of Directors' meetings prior to issuing Circular Letter 09-

03. In other words, the allegations are about communication 

between agency officials. But importantly, the SAC does not 

identify when these encounters took place or when and how they led 

to misrepresentations made directly to one or more of the Credit 

Unions. For example, although the Credit Unions assert in their 

brief that the SAC "[e]xplains how COSSEC's Executive President 

pressured Plaintiffs to 'cooperate' with the Government's 

financial needs," the part of the SAC to which they cite in support 

alleges only that the government misused its regulatory authority 

through meetings and conversations between COSSEC's Chairman, 

COSSEC's Executive President, and (unidentified) officials at the 

GDB and governor's office. The SAC does not allege a conversation 

or meeting with officials from the Credit Unions. 
- 21 -

Another particularity deficiency is found in the 

allegation that "COSSEC's Board of Directors and COSSEC's 

Executive President . . . 'warned' [the Credit Unions] that in the 

absence of said 'cooperation' it would be necessary to reevaluate 

the tax-exempt status of Cooperatives." This purported threat is 

missing an anchor to an alleged time and place; who issued the 

threat to whom and when? The Credit Unions also allege that COSSEC 

"summoned the cooperatives to its headquarters" shortly after the 

2009 Circular Letter issued and "sponsored a presentation by the 

GDB to the[m] about the purported virtues of the Puerto Rico 

bonds," and that this presentation was a key part of its scheme 

"to obtain funding from the Cooperatives for the government's 

unsustainable spending while knowing that the Commonwealth did not 

have the financial means and capability of honoring the bonds in 

case of default." But again, we see no details about particular 

statements made or information provided or withheld about the bonds

during this presentation. Other allegations in the SAC describe 

how some defendants allegedly forced officials in other defendant 

agencies or instrumentalities to take actions but provide no 

specifics about how, when, what actions, or which plaintiffs were 

affected by this pressure.14 

14 A quick aside about the two circular letters highlighted 

as playing a starring role in the defendants' alleged scheme to 

defraud. False, say the Credit Unions, are the statements in 

Circular Letter 09-03 about the purported advantages of the 
- 22 -

We also examine the Credit Unions' allegations that the 

defendants knew the bonds would decline in value at the time the 

bonds were proposed in the circular letters and subsequently issued

to the plaintiffs because, as the leaders of the Commonwealth's

financial policy, the Commonwealth, the GDB, and COSSEC had to 

have known Puerto Rico's "financial situation." Therefore (the 

way the plaintiffs tell it in the SAC), the defendants knew the 

bonds were worthless and admitted as much when COSSEC wrote in 

Circular Letter 09-03 that it would not consider any future drop 

in the securities' quality and creditworthiness classifications as 

violations of the regulations governing the Credit Unions' 

investments. But (and as the district court noted), these

authorized bonds (government backing guaranteeing "100% of 

interest and principal payments" and the bonds serving as 

"excellent collateral"). We read the Credit Unions' allegations 

about the allegedly knowing misrepresentations in these two 

letters "in light" of the letters' full text, see Clorox Co. P.R.

v. Proctor & Gamble Com. Co., 228 F.3d 24, 32 (1st Cir. 2000), 

keeping in mind that these documents can "trump the complaint's 

allegations if a conflict exists" between them, Schatz v.

Republican State Leadership Comm., 669 F.3d 50, 55 n.3 (1st Cir. 

2012). The actual language of the letter can be read to contradict 

the Credit Unions' assertions: The letter plainly states (emphasis 

ours) that "these investment products may benefit from the 

advantages that these bonds offer" -- there is no guarantee these 

benefits will come to fruition. As such, this plain language would 

seem to trump the allegations about the deliberately and knowingly 

misleading statements in the letter and we, accordingly, do not 

credit the spin in the Credit Unions' allegations about the 

purported guarantee of the advantages of investing in the bonds. 

See id. at 57. Even if there was no conflict in the language of 

the SAC as compared to the letters, the Credit Unions failed to 

adequately plead knowledge of the falsity of any allegedly false 

statements, as we next explain. 
- 23 -

allegations about what the defendants must have known by virtue of 

their roles governing the Commonwealth's fiscal policy are too 

broad and speculative. See N. Am. Catholic Educ. Programming 

Found., Inc. v. Cardinale, 567 F.3d 8, 13 (1st Cir. 2009) ("The 

courts have uniformly held inadequate a complaint's general 

averment of the defendant's 'knowledge' of material falsity, 

unless the complaint also sets forth specific facts that make it 

reasonable to believe that [the] defendant knew that a statement 

was materially false or misleading." (quoting Greenstone v. Cambex 

Corp., 975 F.2d 22, 25 (1st Cir. 1992) (Breyer, J.) (citations 

omitted), superseded by statute on other grounds) (emphasis in 

original)). The plaintiffs do not challenge the Title III court's 

explanation that a particular pleading of knowledge was required, 

but instead contend that they pled the defendants had "knowledge 

of th[e] falsity" of their representations. Without any specific 

details to demonstrate the defendants' particular knowledge about 

the status of the bonds, the implication about the connection 

between the defendants' identities and what they knew and when 

requires too broad an inferential leap. See id.; see also Wayne 

Inv., Inc., 739 F.2d at 14 (speculative allegations about fraud do 

not meet the strictures of Rule 9(b)). Rather, the Credit Unions 

had to plead facts specifically and plausibly demonstrating the 

defendants knew what they said was wrong at the time they said it.
- 24 -

Moreover, as we earlier noted, to plausibly plead fraud 

by omission in a securities-related fraud case, a plaintiff must

"first identify a statement made by defendants, show how the 

omission rendered that statement misleading, and finally establish 

that there was a duty to disclose the omitted information." PonsaRabell, 35 F.4th at 34. However, "[o]ur case law is clear" that 

"[i]t is not a material omission to fail to point out information 

of which the market is already aware." Id. at 35 (quoting Baron

v. Smith, 380 F.3d 49, 57 (1st Cir. 2004)). There is no "duty to 

repeat information already known or readily accessible to 

investors." Id. Circular Letter 2012-02 justified the Credit 

Unions' purchase of government bonds at a higher rate than usual 

by explicitly pointing out the Commonwealth's state of economic 

recession. Therefore, we can infer that the Credit Unions, when 

making their investment decisions, were made aware, by the 

defendants, of the fact that the economy in Puerto Rico was not at 

its strongest point.15 We also know (because the plaintiffs told 

15 Although the defendants do not present any argument that 

the Credit Unions were sophisticated purchasers of the securities, 

we have previously noted a plaintiff's level of sophistication 

when evaluating the reasonableness of the investors' reliance on 

the alleged misrepresentations in a Puerto Rico fraud claim. See

Feliciano-Muñoz v. Rebarber-Ocasio, 970 F.3d 53, 59, 64-65 (1st 

Cir. 2020) (concluding on summary judgment for the plaintiff's 

Puerto Rico statutory deceit claim that no jury could find the 

buyer-plaintiff reasonably relied on the defendant's false 

statement given the plaintiff's sophistication as a buyer); P.R.

Elec. Power Auth., 515 F.3d at 67 (reasoning that PREPA's 

sophistication was one reason it could not have reasonably relied
- 25 -

us) that they actively proposed ways to mitigate the financial 

issues the Commonwealth faced; they allege they accepted 

invitations from the government to discuss Puerto Rico's debt which 

culminated in a legislative proposal, adopted into law in December 

2015.

Wrapping up this aspect of the Credit Unions' appeal, as

we stated above, specificity is the name of the game when alleging 

fraud, and the Credit Unions have not filled the bill here. See

Synopsys, Inc., 374 F.3d at 29-30 (affirming dismissal of 

misrepresentation claim when allegations sketched a scheme to 

mislead the plaintiff and withhold information without specifying 

"who allegedly uttered the misleading statements, to whom they 

were made, where they were made, when they occurred, and what 

actions they engendered"). Nor have they helped us understand how 

the allegations they have made are sufficient in the context of 

our binding precedent to survive the defendants' motions to dismiss 

for failure to state a plausible claim. See Falmouth Sch. Dep't, 

44 F.4th at 47 (affirming the dismissal of statutory counterclaims 

in part because the "laundry list of allegations" recited in the

complaint, even when considered as a whole picture, were too 

conclusory and the cross-appellant failed to cite to any analogous 

case for support). We agree with the district court's conclusion 

on the defendant's alleged misrepresentation for PREPA's fraud 

claim).
- 26 -

that the "allegations here amount to conclusory assertions that 

fraud occurred at unspecified meetings attended by unspecific 

individuals over a four-year period." So we affirm the dismissal 

of the fraud-based counts for not meeting the requirements of Rule 

9(b).16

16 Part of the Credit Unions' count 1 claim seeking an 

exception to discharge of their Title III bankruptcy claims is 

premised upon the GDB's debt restructuring plan completed in 2018. 

Pursuant to Title VI of PROMESA (PROMESA § 601), in 2018 the 

district court issued an order approving a Qualifying Modification 

("QM") to restructure the GDB's debts. PROMESA provides that a QM 

may issue after a consultation between the bond issuer and holders, 

resulting in a voluntary agreement reviewed and approved by the 

FOMB as meeting specific statutory criteria. 48 U.S.C. § 2231(a), 

(g). PROMESA also provides that a QM "will be conclusive and 

binding on all holders of Bonds whether or not they have given 

such consent." Id. at § 2231(m) (emphasis added). The district 

court concluded that the Credit Unions' request for exception from 

discharge from debts owed to them by the GDB was moot because the 

GDB had already modified its debts pursuant to the approved QM. 

Before us, the Credit Unions contend the district court's 

mootness conclusion is wrong because they were not GDB bondholders 

at the time of the QM, and they say the SAC timely questions 

(through its allegations of fraudulent conduct on the part of the 

defendant-debtors) whether the QM is binding on them. Contrary to 

the assertions in the plaintiffs' briefing, however, the SAC 

includes information that the Credit Unions were in fact 

bondholders when the QM was approved. The Credit Unions also

admitted during oral argument that some of them -- though perhaps 

not each -- were indeed bondholders at the time of the QM. Even 

if the Credit Unions' fraud claims were adequately pled, we agree 

with the GDB that the Credit Unions were bondholders at the time 

of the QM process such that the completion of this process rendered 

the Credit Unions' subsequent request for exception from discharge 

moot. See Redfern v. Napolitano, 727 F.3d 77, 83-84 (1st Cir. 

2013) ("[F]ederal courts 'lack constitutional authority to decide 

moot questions'" when, for example, "the issue[] presented [is] no 

longer live." (first quoting Barr v. Galvin, 626 F.3d 99, 104 (1st 

Cir. 2010), then Maher v. Hyde, 272 F.3d 83, 86 (1st Cir. 2001))). 
- 27 -

Puerto Rico Claims Time-Barred

In counts 4 and 5, the Credit Unions set forth claims 

for negligence and fraud against the Commonwealth, COSSEC, and the 

GDB, citing P.R. Laws Ann. Tit. 31, §§ 3018, 3019, 3020, 3021, 

3408, and 5141.17 In addition to moving to dismiss these counts 

as not plausibly pled, the defendants also argued that the statutes 

of limitations for each count expired prior to the Credit Unions' 

initiating this adversary proceeding. Agreeing with the 

defendants, the district court dismissed these claims pursuant to 

Rule 12(b)(1), reasoning that the statutes of limitations for each 

of these claims were either one year, see P.R. Laws Ann. Tit. 31,

§ 5298 (providing a one-year statute of limitation for "[a]ctions 

to demand civil liability . . . for obligations arising from the 

fault or negligence mentioned in § 5141 of this title, from the 

time the aggrieved person had knowledge thereof"), or two years 

for the securities-related fraud claims, see PaineWebber Inc. of 

P.R. v. First Bos. (P.R.) Inc., 136 P.R. Dec. 541, 545-46 (P.R. 

1994) (certified translation at 3-4)). Continuing, the district 

court concluded the Credit Unions were aware of their potential 

claims for damages by December 2015 because, as alleged in the 

SAC, they proposed and drafted legislation "to provide stability 

17 The Credit Unions tagged count 4 as "breach of contractual 

obligations" but the allegations claim fraudulent inducement into 

agreements and negligence and cite statutes governing fraud and 

negligence.
- 28 -

to the [financial] system." The district court noted that the 

Credit Unions did not dispute that their claims were governed by 

either a one- or two-year statute of limitations. Instead, they 

argued that equitable tolling should apply because the Credit 

Unions diligently pursued their rights and extraordinary 

circumstances such as Hurricane Maria got in the way of a timely 

filing. 

Before us, the Credit Unions argue anew that the 

applicable statutes of limitations are equitably tolled, 

emphasizing again that the SAC spells out the variety of their 

efforts from 2015 to the present to work with the defendants about 

the financial crisis and the Credit Unions' losses therefrom, 

including conversations with various government agencies and the 

FOMB, and that the defendants know "firsthand" about these efforts 

and will be able to review materials related thereto during the 

discovery process. Nonetheless, the district court concluded the 

Credit Unions' efforts to work with the agencies did not excuse 

them "from timely pursuing litigation with respect to claims 

related to their known injury."

We have already affirmed the dismissal of the fraudbased part of counts 4 and 5 pursuant to Rule 12(b)(6), but to the 

extent these two counts include non-fraud related claims (i.e., 

negligence based on Puerto Rico law), we briefly review, and 

reject, the Credit Unions' equitable tolling arguments. 
- 29 -

"Equitable tolling is available 'in exceptional circumstances' to 

extend the statute of limitations." Vistamar, Inc. v. FagundoFagundo, 430 F.3d 66, 71 (1st Cir. 2005) (quoting Neverson v.

Farquharson, 366 F.3d 32, 40 (1st Cir. 2004)). However, 

"[e]quitable tolling, if available at all, is the exception rather 

than the rule; resort to its prophylaxis is deemed justified only 

in extraordinary circumstances," id. (quoting Delaney v. Matesanz,

264 F.3d 7, 14 (1st Cir. 2001)), such as "when the circumstances 

that cause a plaintiff to miss a filing deadline are out of his 

hands," id. at 72 (quoting González v. United States, 284 F.3d 

281, 291 (1st Cir. 2002)). The Credit Unions rely on the hurricane 

as the basis for their entitlement to equitable tolling. Taking

as true their allegations of actual loss on the bonds in 2015 and 

of their efforts to work with the government at that time to 

mitigate that loss, the one-year statutes of limitations for their 

negligence-based claims expired prior to the hurricane in the fall 

of 2017. Equitable tolling, therefore, cannot rescue from 

dismissal the untimely non-fraud-based part of counts 4 and 5.

Takings Claim

In the SAC, the Credit Unions allege that the defendants 

used "regulatory powers" to take "material portions of Plaintiffs' 

cash and liquid assets," resulting in "illegally appropriat[ing] 

the moneys of the Cooperatives to finance the government operation" 

by providing "materially diminished and value impaired government 
- 30 -

papers that did not constitute just compensation."18 According to 

the plaintiffs, the defendants used the circular letters to compel 

the Credit Unions "to purchase knowingly materially diminished and 

value impaired government bonds," "depriv[ing] the Cooperatives' 

property of any significant economic value." The Credit Unions 

allege the defendants' actions resulted in both a per se physical 

taking and a categorical regulatory taking.

18 A brief overview of takings claims in general may be helpful 

here. "The Takings Clause of the Fifth Amendment provides that 

'private property [shall not] be taken for public use, without 

just compensation.'" Asociación De Subscripción Conjunta Del

Seguro De Responsabilidad Obligatorio v. Flores Galarza, 484 F.3d 

1, 27 (1st Cir. 2007) (quoting U.S. Const. amend. V). "To make a 

cognizable claim of a taking in violation of the Fifth Amendment, 

the plaintiffs must first show that they possess a recognized 

property interest which may be protected by the Fifth Amendment." 

Id. (quoting Wash. Legal Found. v. Mass. Bar Found., 993 F.2d 962, 

973 (1st Cir. 1993)). "Assuming that the plaintiff can establish 

a constitutionally protected property interest, the plaintiff must 

next show that the challenged action 'caused an illegal taking of 

that interest.'" Id. (quoting Wash. Legal Found., 993 F.2d at 

974) (cleaned up). "The Supreme Court has recognized two types of 

takings: physical takings and regulatory takings." Id. at 27-

28. "A physical taking occurs either when there is a condemnation 

or a physical appropriation of property." Id. at 28 (quoting 

Philip Morris, Inc. v. Reilly, 312 F.3d 24, 33 (1st Cir. 2002) (en 

banc)). "Physical takings challenges 'involve the straightforward 

application of per se rules,' which means that 'when the government 

physically takes possession of an interest in property for some 

public purpose, it has a categorical duty to compensate the former 

owner.'" Id. (quoting Tahoe–Sierra Pres. Council, Inc. v. Tahoe

Reg'l Plan. Agency, 535 U.S. 302, 322 (2002)) (cleaned up). "A 

regulatory taking transpires when some significant restriction is 

placed upon an owner's use of his property for which 'justice and 

fairness' require that compensation be given." Philip Morris, 312 

F.3d at 33 (quoting Goldblatt v. Hempstead, 369 U.S. 590, 594 

(1962)). "When a regulation denies all economically beneficial or 

productive uses of land, it is a taking." Id. (citing Lucas v.

S.C. Coastal Council, 505 U.S. 1003, 1015 (1992)).
- 31 -

The defendants moved to dismiss this count as not stating 

a plausible takings claim against them because the Credit Unions 

alleged a post-purchase reduction in value of the bonds and because 

a taking cannot occur unless the government's seizure of the 

property in question destroys the entire value of the property. 

The district court concluded the Credit Unions had not plausibly 

alleged that "COSSEC's regulatory actions coerced or forced a 

taking of the [Credit Union]'s property" because the two circular 

letters upon which the plaintiffs specifically rely used 

permissive language not mandatory language -- language that made 

clear the ultimate decision whether to purchase the securities was 

up to the Credit Unions. 

Before this court, the Credit Unions argue that they 

plausibly alleged their takings claim under both takings 

theories.19 What their arguments boil down to is an assertion that 

the district court failed to connect the dots the plaintiffs 

plotted across the SAC which, according to the plaintiffs, "paints 

a complete picture of a scheme designed to impose 'irresistible 

19 The Credit Unions also argue that the defendants' actions 

amount to a non-categorical regulatory taking pursuant to the 

three-factor analysis described in Penn. Cent. Transp. Co. v. City 

of N.Y., 438 U.S. 104 (1978), arguing why their allegations are 

sufficient to plausibly plead this alternative takings theory. 

Problem is, the Credit Unions specifically alleged a direct taking 

and categorical regulatory taking in the SAC but not a noncategorical regulatory taking. So we'll say no more on this part 

of their takings argument.
- 32 -

pressure' over the[m] . . . [;] a scheme that was made up of 

several components, which should be analyzed jointly." Similar to 

the basis for the fraud claims, these dot "components" include the 

two Circular Letters (though the Credit Unions conceded at oral 

argument that the express language authorized -- but did not 

mandate -- the bond purchases) plus allegations that several other 

circular letters issued between 2009 and 2012 (the contents of 

these additional letters are not provided), that COSSEC often 

announced policy changes through circular letters, and that 

compliance with the letters is mandatory and subject to COSSEC's 

enforcement. These components, say the Credit Unions, provide

sufficient factual information from which the district court 

should have -- and we must -- reasonably infer that the "known 

effect of the [l]etters, regardless of [their] particular formal 

language, was to coerce or force the [Credit Unions] to follow 

their content, even if seemingly painted as mere suggestion." In 

this way, say the Credit Unions, the defendants knew the letters 

would "apply irresistible pressure over the[m to purchase the 

bonds] without having to expose themselves through an outright 

command to purchase the bonds." The Credit Unions insist this 

whole picture, viewed properly and as adequately sketched in their 
- 33 -

complaint, is enough for their takings claim (under either takings 

theory) to survive the motion to dismiss.20

20 During oral argument, we tried to pin down the Credit 

Unions' precise theory about what property had been taken and how 

because the Credit Unions did not allege a complete loss of their 

entire investments but instead the SAC repeatedly mentions the 

"materially diminished and value impaired government instruments." 

The problem there is that our court has long held that "per se 

regulatory takings occur where the regulations completely deprive 

an owner of all economically beneficial use of her property," 

Franklin Mem'l Hosp. v. Harvey, 575 F.3d 121, 126 (1st Cir. 2009) 

(cleaned up, citations omitted), not simply a diminution in value.

In addition, a plaintiff needs to allege the complete loss of a 

specific interest in the property taken. See Parella v. Ret. Bd. 

of R.I. Emp. Ret. Sys., 173 F.3d 46, 58 (1st Cir. 1999) 

("plaintiffs must first establish an independent property right 

before they can argue that the state has taken that right without 

just compensation") (citing Eastern Enter. v. Apfel, 524 U.S. 498 

(1998)); see also In re Fin. Oversight & Mgmt. Bd., 41 F.4th 29, 

41-42 (1st Cir. 2022) (where all parties agreed "that the 

Commonwealth (or one of [its] instrumentalities . . . ) took 

private property" -- i.e., money -- from the takings claimants"). 

The Credit Unions are instead laser-focused on the manner of the 

taking being the totality of the circumstances present at the time 

they purchased the bonds; the circumstances including the combined 

coercive force of the circular letters and the multi-faceted 

relationship they are locked into with COSSEC. 

As best we can tell, based on closely examining the SAC, the 

Credit Unions' takings claim theory seems to be that they were 

compelled to spend more on the bonds than the bonds were worth on 

the date of purchase. Problem is, merely alleging in the SAC an 

after-purchase decline in the value of the bonds in support of 

this theory does not, in and of itself, mean the bonds were not 

worth what the Credit Unions paid at the time of purchase. And 

relatedly, the allegations in the SAC about what the government 

and its instrumentalities knew at the time the Credit Unions 

purchased the bonds are all no-meat-on-the-bones conclusory in 

nature, e.g., the "instruments lacked true value," and the 

defendants pushed the bonds "with full knowledge of the 

government's lack of financial capacity to pay." See OcasioHernández, 640 F.3d at 11-12 (to "show[] that the pleader is 

entitled to relief," the allegations need "enough detail to provide 

a defendant with 'fair notice of what the . . . claim is and the 

grounds upon which it rests'") (first quoting Fed. R. Civ. P. 8(a) 
- 34 -

In retort, the defendants point out that the Credit 

Unions simply have not alleged that they were required to purchase 

the bonds authorized or up to the authorized level provided in the 

circular letters. We agree, and emphasize that COSSEC's use of 

permissive language in Circular Letters 09-03 and 2012-02 plainly 

conflicts with the Credit Unions' allegations to the contrary and 

belies their claim that they had no choice but to purchase the 

bonds offered. See Schatz v. Republican State Leadership Comm.,

669 F.3d 50, 55 n.3 (1st Cir. 2012) (stating the documents attached

to the pleading can "trump the complaint's allegations if a 

conflict exists" between them). These letters did not instruct 

the Credit Unions to purchase the bonds. The only rational 

inference to be drawn from these two letters is that the defendants 

authorized and enticed the Credit Unions to purchase the bonds in 

an amount representing up to 30% of their liquid assets. "[W]here 

a property owner voluntarily participates in a regulated program, 

there can be no unconstitutional taking." Franklin Mem'l Hosp. v.

Harvey, 575 F.3d 121, 129 (1st Cir. 2009) (citing Garelick v.

Sullivan, 987 F.2d 913, 916 (2d Cir. 1993)). The Credit Unions' 

allegations about the so-called mandatory nature of the circular 

and then quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 

(2007)). Ultimately, we need not determine the specific property 

interest at play here because we conclude the Credit Unions failed 

to plausibly plead coercion as the manner in which the government 

and related entities deprived them of any property interest. 
- 35 -

letters in general and COSSEC's general authority to force 

compliance with regulations, taken as true, do not lead to the 

inference that the defendants actually forced or compelled the 

Credit Unions to purchase -- or would have punished the plaintiffs 

if they had not invested in -- the bonds authorized by the two 

letters specified in the SAC. Cf. Philip Morris, Inc. v. 

Harshbarger, 159 F.3d 670, 678-79 (1st Cir. 1998) (holding 

plaintiff was likely to succeed on its takings claim because a 

state statute mandating disclosure of products' ingredients list 

(a valuable trade secret) did not adequately safeguard against 

potential public access to the list and therefore functionally 

compelled the business to either disclose its trade secrets or 

withdraw from the market). Indeed, as the Credit Unions also 

alleged in the SAC, not all of the Credit Unions felt compelled to 

purchase the bonds -- almost a quarter of the Credit Unions did 

not purchase the bonds.

The Credits Unions' takings claim was properly dismissed 

under Rule 12(b)(6).21

21 The Credit Unions also raise a couple of additional 

arguments in their attempt to revive their complaint which we 

acknowledge here but for various reasons find unpersuasive. First, 

they assert that the district court "abused its discretion" by 

entering the judgment dismissing the SAC a few weeks before 

entering its order confirming the Title III final plan of 

adjustment for the debts of the Commonwealth, the ERS, and the PBA 

(wherein the district court overruled the Credit Unions' 

objections to the final plan based in part on the dismissal of 

this adversary proceeding). The Credit Unions argue that the 
- 36 -

WRAP UP

The district court's judgment is affirmed. Each party 

shall bear their own costs. 

district court deprived them of due process because the dismissal 

of their adversary proceeding was not final (i.e., had not been 

reviewed by this court) when the district court relied on it to 

resolve their objections to the Title III plan, hamstringing the 

Credit Unions' efforts to litigate their claims against the 

defendants. As the defendants point out, the Credit Unions have 

not provided any support for their thinly briefed contention that 

the district court did anything wrong by adjudicating the motions 

to dismiss pending before it, and we conclude this issue is waived 

for lack of development. See Perea v. Ed. Cultural, Inc., 13 F.4th 

43, 55 n.24 (1st Cir. 2021) ("[I]issues . . . unaccompanied by 

some effort at developed argumentation[ ] are deemed waived."

(quoting United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 

1990))).

The Credit Unions also argue that the dismissal of the 

adversary proceeding effectively provided the Title III debtors 

with a free pass on their fraudulent actions and argue that if the 

Credit Unions were to prevail on their claims against the 

defendants in the adversary proceeding then they would be entitled 

to an exception from discharge in the Title III case pursuant to 

the Title III court's equitable power. The Credit Unions' 

arguments about why the Title III court should have excepted its 

claims from discharge are front and center in its appeal from the 

confirmation order in the Title III case (No. 22-1079) so we do 

not further address this argument here.