Court Opinion

ID: 4381039
Source: CourtListenerOpinion
Date Created: 2019-03-26 19:00:12.333023+00
Date Added: 2024-06-11T07:49:48.160374
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 18-1108

       IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD
            FOR PUERTO RICO, AS REPRESENTATIVE FOR THE
                   COMMONWEALTH OF PUERTO RICO,

                             Debtor.
                      _____________________

      AURELIUS CAPITAL MASTER, LTD.; ACP MASTER, LTD.; AURELIUS
    CONVERGENCE MASTER, LTD.; AURELIUS INVESTMENT, LLC; AURELIUS
         OPPORTUNITIES FUND, LLC; AUTONOMY MASTER FUND LIMITED;
       CORBIN OPPORTUNITY FUND, L.P.; FCO SPECIAL OPPORTUNITIES
        (A1) LP; FCO SPECIAL OPPORTUNITIES (D1) LP; FCO SPECIAL
    OPPORTUNITIES (E1) LLC - MASTER SERIES 1; FUNDAMENTAL CREDIT
   OPPORTUNITIES MASTER FUND, LP; JACANA HOLDINGS I, LLC; JACANA
 HOLDINGS II, LLC; JACANA HOLDINGS III, LLC; JACANA HOLDINGS IV,
 LLC; JACANA HOLDINGS V, LLC; LEX CLAIMS, LLC; LMAP 903 LIMITED;
    MCP HOLDINGS MASTER LP; MONARCH ALTERNATIVE SOLUTIONS MASTER
FUND LTD; MONARCH CAPITAL MASTER PARTNERS II LP; MONARCH CAPITAL
  MASTER PARTNERS III LP; MONARCH CAPITAL MASTER PARTNERS IV LP;
        MONARCH DEBT RECOVERY MASTER FUND LTD.; MONARCH SPECIAL
    OPPORTUNIES MASTER FUND LTD.; MPR INVESTORS, LLC; P MONARCHY
RECOVERY LTD.; PINEHURST PARTNERS, LP; PRISMA SPC HOLDINGS LTD -
                   SEGREGATED PORTFOLIO AG; RRW I LLC,

                     Plaintiffs, Appellants,

P STONE LION IE, A FUND OF PERMAL MANAGED ACCOUNT PLATFORM ICAV;
 PERMAL STONE LION FUND; SENATOR GLOBAL OPPORTUNITY MASTER FUND
    LP; SL LIQUIDATION FUND LP; SL PUERTO RICO FUND II, L.P.;
                     SL PUERTO RICO FUND LP,

                           Plaintiffs,

                               v.

    COMMONWEALTH OF PUERTO RICO; THE FINANCIAL OVERSIGHT AND
                MANAGEMENT BOARD FOR PUERTO RICO,

                     Defendants, Appellees.
                        ____________________

            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,
              Torruella, and Thompson, Circuit Judges.

     Lawrence S. Robbins, with whom Mark T. Stancil, Donald Burke,
Peter B. Siegal, and Robbins, Russell, Englert, Orseck, Untereiner
& Sauber LLP were on brief, for appellants.
     Martin J. Bienenstock, with whom Stephen L. Ratner,
Timothy W. Mungovan, Mark D. Harris, Jonathan E. Richman,
Jeffrey W. Levitan, and Proskauer Rose LLP were on brief, for
appellees.
     Ian Heath Gershengorn, with whom Lindsay C. Harrison, Robert
Gordon, Richard Levin, Catherine Steege, and Melissa Root, were on
brief, for intervenor The Official Committee of Retired Employees
of the Commonwealth of Puerto Rico.
     Beth Heifetz, with whom Benjamin Rosenblum, Bruce Bennett,
Geoffrey S. Stewart, Victoria Dorfman, Christopher DiPompeo,
Sparkle L. Sooknanan, Parker Rider-Longmaid, Jones Day, Alfredo
Hernández-Martínez, Delgado & Fernández, LLC, on brief, for amici
curiae Altair Global Credit Opportunies Fund (A), LLC, et al.

                           March 26, 2019

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

                                 -2-
          TORRUELLA, Circuit Judge.         We are once again required

to consider an appeal arising from the restructuring of Puerto

Rico's public debt under Title III of the Puerto Rico Oversight,

Management, and Economic Stability Act of 2016 ("PROMESA").             See

generally Aurelius Inv., LLC v. Commonwealth of P.R., 915 F.3d

838,   844-47    (1st   Cir.   2019)     (discussing    PROMESA   and   the

capabilities of the Board it created).        Appellants are Puerto Rico

general obligation ("GO") bondholders ("Bondholders"). On June 27,

2017, they filed suit seeking injunctive and declaratory relief

claiming that they possess a priority and property interest over

certain revenues of the Puerto Rico government.         Specifically, the

Bondholders sought declarations to confirm their property rights

to the revenues; determine that the diversion of the revenues

constitutes an unconstitutional taking; and specify permissible

uses for these revenues.       Appellee, the Financial Oversight and

Management Board for Puerto Rico ("Board")1, thereafter filed --

as sole representative of the Commonwealth in the Title III

proceedings -- a motion to dismiss for lack of subject matter

jurisdiction and failure to state a claim.             The district court

granted the Board's motion on January 30, 2018, and the instant

appeal ensued.

1  For our decision regarding the constitutionality of the Board
members' appointment, see Aurelius Inv., 915 F.3d 838.

                                   -3-
          Before   us,    the    Bondholders    challenge    the   district

court's decision to dismiss Counts 3 to 6 of their complaint as

seeking improper advisory opinions; Count 8, presenting a Takings

Claim, as unripe; and Counts 1, 2, 9, and 10 as barred under

Section 305 of PROMESA.       We affirm.

                                     I.

          In reviewing a district court's dismissal pursuant to

Fed. R. Civ. P. 12(b)(1) and 12(b)(6), "we consider only 'the facts

alleged in the complaint, and exhibits attached thereto.'"           Newman

v. Lehman Bros. Holdings Inc., 901 F.3d 19, 25 (1st Cir. 2018)

(quoting Freeman v. Town of Hudson, 714 F.3d 29, 35 (1st Cir.

2013)).   We accordingly derive the details that follow from the

Bondholders' complaint.

          Appellants     --   the   Bondholders   --   own   a   substantial

amount of GO bonds and other debt issued by Commonwealth entities.

The Bondholders characterize the GO bonds as "Constitutional Debt"

because it is "secured by an absolute and enforceable first claim

and enforceable first claim and lien on all of the Commonwealth's

'available resources,' in addition to, and complemented by, a

pledge of the Commonwealth's good faith, credit, and taxing power"

under the Puerto Rico Constitution.            Along with this priority

claim, the Bondholders allege a property interest in revenues

"that, although conditionally earmarked for payment of certain

                                    -4-
obligations of Commonwealth instrumentalities, are required by

Puerto Rico law to be 'clawed back' for the express and sole

purpose     of   paying   Constitutional   Debt    when   other   available

resources are insufficient to do so."       They refer to these revenues

as the "Clawback Revenues."         Lastly, the Bondholders assert a

claim over "certain proceeds of property taxes that Puerto Rico

statutory law requires be levied and collected for the benefit of

Constitutional Debtholders and segregated in a trust for the

express and sole purpose of paying Constitutional Debt."                The

Bondholders refer to these as the "Special Property Tax Revenues,"

which together with the "Clawback Revenues" make up what they

anoint as the "Restricted Revenues" that the Commonwealth must set

aside to repay the "Constitutional Debt" that they own.           According

to    the   Bondholders,     in   2017,    the    Commonwealth    collected

approximately $940 million in "Restricted Revenues," and it will

collect an equal or greater amount in upcoming years.

             The Bondholders base their priority claims on several

authorities.      First, they point to the Puerto Rico Constitution,

which provides in relevant part that when "the available resources

. . . are insufficient to meet the appropriations made for that

year, interest on the public debt and amortization thereof shall

be first paid."2     P.R. Const. art. VI, § 8.       The Bondholders also

2    The Bondholders also look to Article VI, Sections 2, 6, and 7

                                    -5-
claim that Section 4(c) of the Office of Management and Budget

Organic Act, P.R. Laws Ann. tit. 23, § 104(c)(1), establishes the

same priority.     Finally, the Bondholders note that the 2014 GO

Bond Resolution and the Official Statement for the 2006 Puerto

Rico Infrastructure Financing Authority bonds establish that the

"[t]he Constitution of Puerto Rico provides that public debt . . .

constitutes a first lien on available Commonwealth taxes and

revenues."     In support of their alleged property interest in the

"Restricted Revenues," the Bondholders rely again on provisions of

the Commonwealth Constitution, as well as on several local laws

and executive orders that they describe as creating the "Restricted

Revenues."

             The Bondholders aver that, since 2015, the Commonwealth

government, "first through its elected leaders and now through the

Oversight Board[,] has engaged in a consistent pattern of unlawful

conduct designed to avoid their obligations to Constitutional

Debtholders for the benefit of more politically favored causes and

creditors."    Specifically, they claim that in fiscal year 2016 the

of the Puerto Rico Constitution and aver that: (1) if the
government does not appropriate funds in its budget to pay the
"Constitutional Debt" that is due, payments for that debt will be
automatically appropriated in the next fiscal year; (2) the
Commonwealth must have a balanced budget but, when it does not, it
must increase its taxes; and (3) there is a limit on how much
"Constitutional Debt" the Commonwealth can take on.

                                  -6-
Commonwealth     clawed    back     around     $289    million     in    "Clawback

Revenues," yet failed to apply any of these to the repayment of

"Constitutional Debt."         The Bondholders insist that this conduct

has continued since 2016.           As an example, they note that neither

the Fiscal Plan the Board certified in March 2017 nor the 2018

fiscal year budget provide for the setting aside of "Clawback

Revenues" to service the "Constitutional Debt."

          Based on the foregoing allegations, the Bondholders'

complaint sought the following:

          [I]n Counts One and Two . . . declaratory judgments

     that under Puerto Rico law, the Restricted Revenues are

     restricted by law and cannot be used by the Commonwealth

     for any purpose except to satisfy the Commonwealth's

     payment     obligations        with     respect     to   outstanding

     Constitutional Debt.

          In Counts Three and Four . . . declaratory judgments

     that the Commonwealth lacks any equitable or beneficial

     property    interest      in    the    Restricted    Revenues,       and

     [Bondholders],       as    Constitutional        Debtholders,       have

     equitable    and     beneficial       property    interests    in    the

     Restricted Revenues.

                                       -7-
       In Counts Five and Six . . . declaratory judgments

that [Bondholders], as Constitutional Debtholders, have

a statutory lien on the Restricted Revenues.

       In Count Seven . . . a declaratory judgment that

the Clawback Revenues are special revenues as defined in

the Bankruptcy Code.

       In Count Eight . . . a declaratory judgment that

the     [Commonwealth]'s         diversion      of    the       Restricted

Revenues without just compensation is an unlawful taking

under    the    Fifth      Amendment       of   the     United         States

Constitution.

       In Counts Nine and Ten . . . declaratory judgments

that, under Puerto Rico law, the Restricted Revenues

must    be   segregated     and     deposited    into      a    designated

account for the exclusive benefit of Constitutional

Debtholders and not commingled with other funds of the

Commonwealth         or   used    for     any   purpose        other    than

repayment of Constitutional Debt.

       In Count Eleven . . . injunctive relief enjoining

[the    Commonwealth]        from       continuing    to       divert    the

Restricted Revenues, and directing [the Commonwealth] to

segregate      and    preserve      the   Restricted       Revenues      for

payment of the Constitutional Debt.

                                    -8-
           The Bondholders filed their complaint as an adversary

proceeding under Section 310 of PROMESA on June 27, 2017.                     The

Board moved to dismiss on August 21, 2017 for lack of subject

matter jurisdiction and failure to state a claim upon which relief

may be granted pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6),

respectively.    The district court held a hearing on the Board's

request on December 5, 2017, and thereafter granted the Board's

motion to dismiss on January 30, 2018.

           In its opinion, the district court resolved that it

lacked subject matter jurisdiction to entertain Counts 3 to 8 of

the Bondholders' complaint.       It noted that Counts 3 to 7 sought

improper   advisory    opinions    because     these    counts      asked    for

"abstract declarations of the parties' respective relationships to

the subject revenues, without application of the relief to resolve

any current concrete dispute, such as a claim objection proceeding,

request    for   adequate    protection   or    relief     from     stay,      or

confirmation-related     proceeding."     As    to     Count   8,   the     court

concluded that it presented an unripe Takings Claim because the

Commonwealth had made no final decision regarding the treatment of

the revenues at issue.      The court also ruled that the relief sought

in Counts 1, 2, and 9 through 11 must be disallowed because it

"would directly restrict the Commonwealth's use of its revenues

                                   -9-
and its exercise of political and governmental powers," an outcome

prohibited under Section 305 of PROMESA.

          The Bondholders then appealed, challenging the dismissal

of all counts except for that of Counts 7 and 11.

                                II.

          We   review   dismissals    for   lack   of   subject    matter

jurisdiction de novo.    Town of Barnstable v. O'Connor, 786 F.3d

130, 138 (1st Cir. 2015).      The same lens of appellate review

applies to dismissals for failures to state a claim.        Newman, 901

F.3d at 24.3   In so doing, we "construe the [c]omplaint liberally

and treat all well-pleaded facts as true," with the Bondholders

receiving "the benefit of all reasonable inferences."             Town of

Barnstable, 786 F.3d at 138.    When the district court, however,

"accurately takes the measure of a case, persuasively explains its

reasoning, and reaches a correct result, it serves no useful

3  In the past, we have deployed an abuse of discretion standard
when reviewing a district court's grant or denial of declaratory
relief.   See, e.g., Verizon New England, Inc. v. Int'l Bhd. Of
Elec. Workers, Local No. 2322, 651 F.3d 176, 187 (1st Cir. 2011);
Animal Welfare Inst. v. Martin, 623 F.3d 19, 29 (1st Cir. 2010);
Rossi v. Gemma, 489 F.3d 26, 38 (1st Cir. 2007). Here, however,
de novo review is warranted because the district court found it
had no discretion in deciding whether to issue Bondholders'
requested declaratory judgments.     Rather, the district court
concluded from the outset that it could not even entertain the
Bondholders' requests because it lacked jurisdiction over some
counts, while it found that other counts contravened Section 305
of PROMESA. In any event, we would reach the same result under
either standard.

                                -10-
purpose for a reviewing court to write at length in placing its

seal of approval on the decision below."            Moses v. Mele, 711 F.3d

213, 216 (1st Cir. 2013).

           The Bondholders first ask us to reverse the district

court's dismissal of Counts 3 to 6 of their complaint.                         As

discussed before, Counts 3 and 4 sought declarations that the

Bondholders -- and not the Commonwealth -- possess an equitable

and beneficial property interest in the "Restricted Revenues."

Counts 5 and 6 similarly sought declarations, but this time that

the Bondholders also have a statutory lien over the same revenues.

The   Bondholders     argue   that   dismissing     these    counts     as   non-

justiciable contravenes settled understandings of Article III and

the Declaratory Judgment Act ("DJA"), 28 U.S.C. § 2201.                      The

Bondholders also allege that their "requested declarations would

facilitate the process of formulating a plan of adjustment for the

Commonwealth   that    will   comply    with     PROMESA's    requirement    for

confirmation of a plan."       Further, the Bondholders maintain that

"[p]rompt clarification" of their rights would offer "critical

guidance" in the buildup to the plan confirmation stage.                      In

response, the Board insists that dismissal was appropriate because

"the requested declarations related only to abstract rights and

relationships,   without      any    immediate    effect     on   the   parties'

conduct, and did not conclusively resolve any dispute between the

                                     -11-
parties."      The Bondholders' arguments give us no reason to set

aside the dismissal of these counts.

              Our federal courts can only entertain actual cases and

controversies, see U.S. Const. art. III, § 2, cl. 1, and the DJA

allows district courts to grant declaratory relief, but this

authority is also limited to cases of actual controversy, 28 U.S.C.

§ 2201(a).      The Supreme Court has explained that the DJA's "case

of   actual    controversy"   requirement    refers   to   the   cases   and

controversies that are justiciable under Article III.            Aetna Life

Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937).             This means that

the DJA "does not itself confer subject matter jurisdiction, but,

rather, makes available an added anodyne for disputes that come

within the federal courts' jurisdiction on some other basis."

Ernst & Young v. Depositors Econ. Prot. Corp., 45 F.3d 530, 534

(1st Cir. 1995) (citing Franchise Tax Bd. v. Constr. Laborers

Vacation Trust, 463 U.S. 1, 15-16 (1983)).

              To determine if the declaratory relief is sought within

a case of actual controversy, district courts must examine "whether

the facts alleged, under all the circumstances, show that there is

a substantial controversy, between parties having adverse legal

interests, of sufficient immediacy and reality to warrant the

issuance of a declaratory judgment."        Maryland Cas. Co. v. Pacific

Coal & Oil Co., 312 U.S. 270, 273 (1941) (emphasis added); see

                                  -12-
also Aetna, 300 U.S. at 241 (describing a justiciable controversy

as "a real and substantial controversy admitting of specific relief

through a decree of a conclusive character, as distinguished from

an opinion advising what the law would be upon a hypothetical state

of facts").      The Supreme Court has further remarked that, in

evaluating requests for declaratory relief, courts shall exercise

          [a] maximum of caution . . . where a ruling is sought
          that would reach far beyond the particular case . . .
          The disagreement must not be nebulous or contingent
          but must have taken on fixed and final shape so that
          a court can see what legal issues it is deciding, what
          effect its decision will have on the adversaries, and
          some useful purpose to be achieved in deciding them.

Pub. Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 243-44

(1952).    In the absence of an actual controversy, federal courts

cannot issue advisory opinions.      Golden v. Zwickler, 394 U.S. 103,

108 (1969).

            Although the Bondholders' allegations in support of

Counts 3 to 6 demonstrate that a substantial controversy exists

between them and the Board, such a controversy is not sufficiently

immediate or real to warrant declaratory relief.            See Maryland,

312 U.S. at 273.     Again, the Bondholders seek two things through

these counts.    First, a declaration that the Bondholders have, and

the   Commonwealth   lacks,   an   equitable    and   beneficial   property

interest in the "Restricted Revenues."         Second, a declaration that

they possess a statutory lien over the "Restricted Revenues."          The

                                   -13-
Bondholders, however, fail to show that the relief requested would,

if granted, settle "some dispute which affects the behavior of the

defendant towards the plaintiff[s]."                 Hewitt v. Helms, 482 U.S.

755,   761   (1987)     (emphasis        omitted).      To    the   contrary,        the

declarations would "reach far beyond the particular case" as they

unleash ramifications to be resolved in future litigation and

implicate the potential claims of other creditors without them

having a say in the current suit. Wycoff, 344 U.S. at 243; see id.

at 244 ("The disagreement must not be nebulous or contingent but

must have taken on fixed and final shape so that a court can see

what legal issues it is deciding, what effect its decision will

have on the adversaries, and some useful purpose to be achieved in

deciding them.").

             Moreover,    like     the    district    court    noted    below,       the

Bondholders'      requests    seek        abstract     declarations         that     are

unrelated    to   any    current    concrete     dispute,      such    as    a     claim

objection proceeding, request for adequate protection or relief

from stay, or confirmation-related proceeding.                      See Church of

Scientology of Cal. v. United States, 506 U.S. 9, 12 (1992) (noting

"that a federal court has no authority 'to give opinions upon moot

questions or abstract propositions, or to declare principles or

rules of law which cannot affect the matter in issue in the case

before   it.'"     (citations       omitted)).          Indeed,       the    eventual

                                         -14-
presentation of the Commonwealth's plan of adjustment before the

Title III court will probably address the claims averred in each

of the counts at issue, and at that time the Bondholders and other

creditors will be able to present their claims prior to plan

confirmation.      See 48 U.S.C. §§ 2172, 2174.       Thus, we agree with

the district court that the Bondholders' request for declaratory

judgments in Counts 3 to 6 was non-justiciable and affirm its

dismissal of these counts for lack of subject matter jurisdiction.

           Next, the Bondholders seek our review of the district

court's dismissal of Count 8 as unripe.              In this count, they

request a declaration that the Commonwealth's diversion, without

just compensation, of the "Restricted Revenues" for purposes other

than the payment of "Constitutional Debt" "would constitute" an

unlawful taking under the Fifth Amendment.      (Emphasis added).       The

district court concluded that this count "presents a different

combination   of    barriers   to   justiciability    --   a   hypothetical

factual context and an unripe claim."       Specifically, the district

court found that the very language the Bondholders used (i.e.,

that any diversion of the "Restricted Revenues" "would constitute"

an unlawful taking) laid bare the hypothetical nature of their

request.   We agree.

           To assert a takings claim, plaintiffs "must demonstrate

that (1) [they] 'received a final decision from the state on the

                                    -15-
use of [their] property,' and (2) 'sought compensation through the

procedures the [s]tate has provided for doing so.'"                            García-

Rubiera v. Calderón, 570 F.3d 443, 451 (1st Cir. 2009) (citing

Williamson Cty. Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S.

172, 194 (1985)).           A plaintiff that does not assert these "two

independent prudential hurdles" fails to establish a takings claim

that   is   ripe     for    adjudication.          Asociación     de    Subscripción

Conjunta    del    Seguro     de   Responsabilidad        Obligatorio     v.   Flores

Galarza, 484 F.3d 1, 13 (1st Cir. 2007) (quoting Suitum v. Tahoe

Reg'l Planning Agency, 520 U.S. 725, 733-34 (1997)).

             First     things      first:          The    declaration      that     the

Bondholders seek in Count 8 reveals, most literally, that a taking

has yet to occur.          The only reasonable interpretation of the words

"would constitute" is that they want a declaration about the

legality of actions that the Commonwealth may undertake in the

future.     Such a claim, in our view, captures the basic essence of

a claim that is unripe.            See Williamson Cty., 473 U.S. at 186-87.

             But if that were not enough, it is also easy to see how

the    Bondholders'        allegations      fail    the    two-pronged      test    of

Williamson County.           Nowhere do the Bondholders allege that the

Commonwealth "has arrived at a definitive position" regarding any

disbursement      of   "Restricted      Revenues"        that   may    "inflict[]   an

actual, concrete injury" upon them for Takings Clause purposes.

                                         -16-
See García-Rubiera, 570 F.3d at 452.          Under PROMESA, no claims

will be discharged, and no determinations will be made about the

treatment of claims, until the plan of adjustment is confirmed,

see 48 U.S.C. § 2174, for which the Bondholders have not received

a final decision from the Commonwealth on the status of their

alleged property.   We therefore need delve no further to affirm

the district court's dismissal of Count 8 as unripe.

          The   Bondholders'   final    ask   is   that   we   reverse   the

dismissal of Counts 1, 2, 9, and 10 for failure to state a claim.

Counts 1 and 2 called for declarations that the Commonwealth cannot

use or collect the "Restricted Revenues" for any purpose other

than paying the debt owed to the Bondholders, whereas Counts 9 and

10 sought declarations that the "Restricted Revenues" must be

segregated and deposited into a designated account and not be used

for anything but repayment of "Constitutional Debt."           The district

court found that Section 305 of PROMESA barred it from providing

the relief sought in these counts.        According to the court, if

granted, the relief demanded would "result in declarations . . .

that . . . directly restrict the Commonwealth's use of its revenues

and its exercise of political and governmental powers."

          Fashioned after Section 904 of the Bankruptcy Code, 11

U.S.C. § 904, Section 305 of PROMESA establishes that:

       [N]otwithstanding any power of the court, unless the
       Oversight Board consents or the plan so provides, the

                                 -17-
       court may not, by any stay, order, or decree . . .
       interfere with -- (1) any of the political or
       governmental powers of the debtor; (2) any of the
       property or revenues of the debtor; or (3) the use or
       enjoyment by the debtor of any income-producing
       property.

48 U.S.C. § 2165 (emphasis added).            We recently addressed the

scope of this provision in In re Fin. Oversight and Mgmt. Bd. for

P.R., 899 F.3d 13 (1st Cir. 2018).        There, we observed that Section

305 is "respectful and protective of the status of the Commonwealth

and its instrumentalities as governments, much like [S]ection 904

of the municipal bankruptcy code."          Id. at 21.       We accordingly

concluded that Section 305 "bar[s] the Title III court itself from

directly interfering with the debtor's powers or property" because

doing so would "impinge[] on [the Commonwealth's] autonomy."              Id.

            Before us, however, the Bondholders contend that their

desired declarations would not "interfere" with the Commonwealth's

authority     because   a   declaratory    judgment   does     not     mandate

compliance.     To sustain this argument, the Bondholders point us

to Steffel v. Thompson, 415 U.S. 452 (1974).           In that case, the

Supreme Court remarked that "even though a declaratory judgment

has 'the force and effect of a final judgment,' 28 U.S.C. § 2201,

it is a much milder form of relief than an injunction.               Though it

may be persuasive, it is not ultimately coercive; noncompliance

with it may be inappropriate, but it is not contempt."                 Id. at

471. (citations omitted).       For its part, the Board insists that

                                   -18-
the district court was correct to dismiss since the declarations

at issue would, plainly put, direct the Commonwealth how it can

use and administer some of its revenues.          Here again we agree that

dismissal of these counts was required.           We find no way around the

fact that -- absent the Board's consent or a provision in a plan

of   adjustment   --    the    requested    declarations    would   constitute

decrees   that    unlawfully     interfere     with   the   autonomy   of   the

Commonwealth and its entities in the use of the "Restricted

Revenues."    See 48 U.S.C. § 2165.

             Although    the    Bondholders     are    right   to   say     that

declaratory judgments do not carry the same force as injunctions,

it is still "substantially likely that [the Commonwealth] would

abide" by a declaration of the district court "even though [it]

would not be directly bound by such a determination." Franklin v.

Massachusetts, 505 U.S. 788, 803 (1992).              The Supreme Court even

recognized as such in Steffel.              See 415 U.S. at 471.       Because

noncompliance with declaratory judgments is deemed inappropriate,

the Court explained, parties are usually persuaded to act according

to judicial declarations.         See id.    In other instances, the Court

has also characterized declaratory relief as interfering with a

state's administration of its law.           See, e.g., Kugler v. Helfant,

421 U.S. 117, 131 (1975); Zemel v. Rusk, 381 U.S. 1, 19 (1965).

Thus, had it conceded the relief the Bondholders sought in Counts

                                     -19-
1, 2, 9, and 10, the district court would have directed the

Commonwealth about how it must handle and disburse the "Restricted

Revenues" -- an impermissible interference under Section 305 of

PROMESA without the Board's consent or relevant authorization in

a plan of adjustment.             See 48 U.S.C. § 2165.         This conclusion is

consistent     with    how       other   courts      have   interpreted   the    plain

language of Section 904 of the Bankruptcy Code, 11 U.S.C. § 904,

the analogue to PROMESA's Section 305.                 See In re City of Detroit,

Mich.,   841    F.3d      684,    696    (6th   Cir.    2016)   (noting   that    "[a]

declaration         that     [debtor's]         practices       are   illegal       or

unconstitutional" interferes with the debtor's autonomy contra

Section 904); In re City of Stockton, 478 B.R. 8, 20 (Bankr. E.D.

Cal. 2012) (concluding that Section 904 "can only mean that a

federal court can use no tool in its toolkit -- no inherent

authority power, no implied equitable power, no Bankruptcy Code

§ 105 power, no writ, no stay, no order -- to interfere with a

[debtor] regarding political or governmental powers, property or

revenues,      or   use    or     enjoyment     of    income-producing    property"

(emphasis added)).

             The district court, therefore, was correct to hold that

Section 305 of PROMESA precludes it from granting the relief

requested in Counts 1, 2, 9, and 10, and it properly dismissed

                                           -20-
those counts for failure to state a claim upon which relief may be

granted.

                                  III.

            For the foregoing reasons, the district court correctly

dismissed    the   Bondholders'   complaint,   and   its   judgment   is

affirmed.

            Affirmed.

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