Financial Control Board



In a seemingly surprising order, Judge Besosa denied the Control Board’s motion to intervene in the Peaje litigation. The Judge denied the intervention for two technical reasons (1) the Board’s motion did not include a “pleading that sets forth the claim of defense for which intervention is sought” as required by Rule 24(c) of the Federal Rules of Civil Procedure and (2) denied the request for an order for PR to provide certain documents since there was not evidence the Government had failed to comply with the documents the Board requested.


As to Rule 24(c), Judge Besosa is quite correct. Most Circuit Court’s of Appeal do not allow the dismissal of said motions to intervene for failure to comply with this Rule but the First Circuit does. Moreover, a pleading is much more than a simple motion. Rule 7 of the Federal Rules of Civil Procedure states that the only pleadings allowed are a complaint, answer to the complaint, answer to the counterclaim, answer to a crossclaim, third-party complaint and answer to third-party complaint. Since the Board failed to present any pleading, Judge Besosa correctly denied the request.


The second point Judge Besosa made was that the Board could make requests to the Court in furtherance of the goals established in PROMESA but that there was no evidence that the Puerto Rico Government had failed to provide any of the documents that had been requested. Judge Besosa was clear that if that was the case, the Board could seek the Court’s assistance.


The Board today filed a motion for reconsideration of the Judge’s order not to grant the intervention on the grounds that his legal reasoning is mistaken. I am not a fan of motions for reconsideration since Judges rarely reconsider. In my view, it is better to just do what they want instead of telling them they are wrong, but the issue is under the consideration of the Judge.


What does this all mean? Judge Besosa made clear to everyone that he is the ultimate authority in his Courtroom. Tomorrow, the hearing on the lifting of the stay in the consolidated cases, Peaje, Assured and Altair, will be held, and the Board’s position, for the time being, will not be considered by the Court.





An update on the earlier blog post on the cases of Brigade Leveraged Capital Structures Fund, Ltd. v. García Padilla, 16-1610; National Public Finance Guarantee Corporation v. García Padilla, 16-2101 and Trigo v. García Padilla,16-2257, which seek a declaration that the PR Moratorium law is unconstitutional.


The Puerto Rico Government has asked Judge Besosa to stay proceedings due to section 405 of PROMESA which stays on all cases seeking monetary compensation from the ELA.


Judge Besosa, who previously decided the PR Recovery Act was preempted by section 903 of the Bankruptcy Code, ordered plaintiffs to brief the issue no later than July 18 and said he was unable to decide without this briefing. He further decided he was NOT going to grant a stay at this time and denied motions to the effect of staying case until the issue was decided.


In my experience, Judges issue temporary stays when they are convinced it is proper. The denials here show that Judge Besosa is leaning on not granting the stay request since none of these three cases request monetary compensation which is what section 405 of PROMESA precludes. I believe Judge Besosa will decide this and other issues in the cases by August 2016.