2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 1 - Governmental Finances (§§ 1 — 155) › Chapter 8 - Puerto Rico Public Corporation Debt Enforcement and Recovery Act (§§ 111 — 113nn) › Subchapter III - Debt Enforcement (§§ 113 — 113nn) › § 113y - Contract rejection, impairment, and modification

(a) Subject to subsection (d) of this section and Court approval, after notice and a hearing, and notwithstanding any contractual provision to the contrary, a petitioner may reject any contract if the rejection is in the petitioner’s best interests; Provided, however, That a petitioner may not reject a contract (except for collective bargaining agreements and retirement or post-employment benefit plans) where rejection of such contract would produce damages that would not exceed the threshold for special trade debt, as defined in subsection (52) of § 111a of this title.
(b) Any counterparty to a contract the petitioner seeks to reject shall file with the Court its calculation of rejection damages at least five (5) days prior to the hearing on rejection. A counterparty opposing rejection shall file such calculation with its objection at least seven (7) days prior to the hearing on rejection. The petitioner may object to such proposed damages at any time before confirmation. Disputes concerning rejection damages shall be resolved by the Court.
(c) Rejection of a contract pursuant to subsection (a) of this section shall be treated as a material breach of such contract.
(d) The Court shall not approve the rejection of a collective bargaining agreement or retirement or post-employment benefit plan unless the petitioner has demonstrated that:
(1) The equities balance in favor of the rejection of such agreement or plan. In making such determination, the Court shall take into consideration the impact of the provisions of §§ 9101 et seq. of Title 3, including any agreements made by employees and the petitioner pursuant to negotiations provided thereunder, on such agreement or plan;
(2) absent rejection, the petitioner will likely become unable to perform public functions; and
(3) the petitioner shared with the representative(s) for employees and retirees, as applicable, the data underlying its request to reject the agreement or plan and conferred, at reasonable times, in good faith with the representative(s) to reach voluntary modifications to such agreements or plans, and such efforts did not succeed;
(e) During a period when a collective bargaining agreement continues in effect, if essential to the continuation of the petitioner’s public functions, or in order to avoid irreparable damage to the petitioner, the Court, after notice and a hearing, may authorize the petitioner to implement interim changes in the terms, conditions, wages, benefits, or work rules provided by such collective bargaining agreement. Any hearing pursuant to this subsection shall be scheduled in accordance with the needs of the petitioner. The implementation of such interim changes shall not render the application for rejection moot.
(f) Nothing in this chapter impairs the right, if any, of the petitioner under a collective bargaining agreement, retirement or post-employment benefit plan, or applicable law to terminate, modify, amend, or otherwise enforce any of the provisions of such collective bargaining agreement or retirement or post-employment benefit plan without obtaining the relief in subsection (d) of this section.
(g) Only a party to a contract a petitioner seeks to reject hereunder and having the right under such contract to enforce such contract, or such entity’s authorized representative, shall have standing to object to and be heard on the petitioner’s request pursuant to this section.
(h) Subject to subsection (b) of this section and §113z of this title, any damages arising from the rejection of a prepetition contract shall be treated as prepetition claims for affected debt that are neither priority claims nor administrative claims.
History —June 28, 2014, No. 71, § 326.