Senado de Puerto Rico

EL SENADO NO DEROGA LA LEY 80, ¿ Y AHORA QUE?

 

 

Ya el Senado ha hecho claro que no va a derogar la Ley 80. La pregunta es ¿que va a pasar ahora? Obviamente depende de la Junta. Si quiere, la Junta reimpone el plan fiscal anterior, donde eliminaba los bonos de navidad y reducía otras partidas en el Gobierno, va a donde la Juez Swain bajo las secciones 104(k) y 108(a)(2) de PROMESA pidiendo se suspenda la operación de la Ley 80, ya que, en su determinación, esta ley derrota los propósitos de PROMESA. O la Junta puede simplemente hacer nada.

 

Me parece que eso último es lo que Thomas Rivera Schatz esta apostando, que la Junta, luego de la derrota con el nombramiento de Zamot y el préstamo de la AEE, tiene miedo a que la Juez Swain no le conceda lo que quiere. Si la Junta nada hace, TRS habrá sería el triunfador sobre la todopoderosa Junta y por ende un héroe en PR. La gobernación estaría a su alcance.

 

Si la Junta decide reducir el presupuesto e ir al Tribunal, ya TRS ha dicho que ha consultado a los abogados en el Senado para impugnarlo en el Senado. No se que abogados son, pero con su presupuesto asumo que habla de abogados experimentados en casos constitucionales en el Tribunal Federal. Claro, me parece que el Senado y aún la Legislatura, carecen de standing para impugnar actuaciones de la Junta, ver, Raines v. Byrd, 521 U.S. 811 (1997). Interesantemente, el amigo Luis Vega Ramos ha indicado que, si el presupuesto es alterado por la Junta, también acudirá al Tribunal. Pero les recuerdo a los que sueñan con declarar la Junta inconstitucional, si se va la Junta, se va el Título III, ver sección 3 de PROMESA.

El problema con todo esto es que bajo la sección 202(e)(3), la Junta puede certificar su propio presupuesto y el Tribunal carece de jurisdicción para revisar las certificaciones de la Junta, ver sección 106(e) de PROMESA. Esta revisión solo se dará en el momento del plan de ajuste, que esta lejos de ser radicado. Más aún, la eliminación de la Ley 80 esta en el plan fiscal y si la Junta desea pelear el asunto, no dudo que la Juez Swain avale cualquier reducción del presupuesto.

Si mi análisis es el correcto, se preguntarán, ¿por qué TRS hizo lo que hizo? Sencillo, si tiene razón, es un héroe, pero si pierde, es un héroe también. Es lo que llamamos un win-win situation. Muchas personas en PR quieren eliminar la Junta ya que les afecta sus prebendas y hasta el momento los únicos en hacerlo son las uniones y la Asociación de Profesores de Mayagüez. Van a aplaudir a cualquiera que lo haga, por fútil que sea el esfuerzo y lo único que les importa a los políticos es la reelección.

¿Que consecuencias puede tener todo esto?  Esencialmente, el atrasar la radicación del plan de ajuste. El propósito del Título III es la certificación por el Tribunal del plan de ajuste que explica como se “ajustan” las deudas y como se van a pagar. Este documento en el caso de Detroit fue de  más de 600 páginas y tardó 9 meses desde su radicación en ser aprobado. Aquí sería más largo y tardaría más tiempo en ser certificado. Sin embargo, mientras haya luchas legales sobre el plan fiscal, no se puede presentar el plan de ajuste ya que este último tiene que estar basado en el plan fiscal, sección 314(b)(7) de PROMESA. La mayoría de los bonistas no han recibido pago desde 1 de julio de 2016 y el caso de Título III del ELA ya tiene 13 meses de radicado. Los casos más grandes de Capítulo 9, en lo que se basa PROMESA, han durado un máximo de 25 meses. En mayo de 2018, Natalie Jaresko indicó que el plan de ajuste se radicaría en año a año y medio, queriendo decir que los bonistas no habrán recibido pago por más de tres años. Pocos mencionan que el 11 U.S.C. § 930(a)(2), adoptado en PROMESA por la sección 301, indica que la petición de quiebras podrá ser desestimada luego de notificación y vista, por “unreasonable delay by the debtor that is prejudicial to creditors.” Falta de pago por 3 años podría ser ese factor determinante. Y si se desestima la petición de Título III, no hay el stay. Recordemos que PR paga las pensiones porque no paga la deuda.

 

 

 

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LA JUNTA RETA AL SENADO

Anoche la Junta de Supervisión Fiscal le mando un reto al Senado de PR al enviarle un racimo de artículos de economía que suman 2,196 páginas sobre porque se tiene que eliminar la Ley 80. Las primeras 35 páginas son como un resumen de la literatura. Esencialmente, la Junta dice, “Aquí tienes politiquero, mira ver que haces con esto.”

El Senado tiene dos opciones, o aprueba la eliminación de la ley 80 o no la aprueba. A mi entender, Thomas Rivera Schatz luego de protestar y quejarse, eventualmente permitirá que se apruebe la eliminación, que es lo que el Gobernador y la Junta quieren. De esa forma, el Gobernador gana una victoria sobre Rivera Schatz y continua su teatro de conflictos victoriosos contra la Junta. Win Win para Rosselló González.

Por el otro lado, Thomas Rivera Schatz podría trancarse y detener la eliminación de la ley 80. ¿Que haría la Junta? La Junta podría decir se acabó el acuerdo, reduzco el presupuesto de la Legislatura, reduzco el presupuesto de PR para eliminar el bono de navidad y los días de vacaciones y enfermedad en el Gobierno. Con la ley 80, podría ir a donde la Juez Swain bajo la sec. 108(a)(2) de PROMESA, que dice:

(a) IN GENERAL.—Neither the Governor nor the Legislature

may—

(1) exercise any control, supervision, oversight, or review over the Oversight Board or its activities; or

(2) enact, implement, or enforce any statute, resolution, policy, or rule that would impair or defeat the purposes of this Act, as determined by the Oversight Board. (negrillas añadido)

Como la Junta ya tiene la literatura para justificar su petición, el peso de la prueba pasaría al opositor de la medida y ahí es donde la cosa se pone interesante; ¿quien tiene standing (legitimación active) para oponer las pretensiones de la Junta? Sabemos que el Gobierno no lo hará ya que llegó a un acuerdo con la Junta. ¿La tendría el Senado como parece indicar Rivera Schatz? Antes de que me mencionen las doctrinas del TSPR, recuerden que esto sería en Corte Federal. En Arizona State Legislature v. Arizona Independent Redistricting Commission, 576 U.S. __ (2015), el SCOTUS delimitó bajo que circunstancias la legislatura estatal tendría standing en Corte Federal. Pero no es la legislatura, es el Senado, así que maybe, maybe not. Además del Senado, no dudo que uniones y otras asociaciones retarán las acciones de la Junta, pero dudo tengan éxito.

 

De ganar la Junta, el Gobernador gana doble, derrota a un potencial opositor, Rivera Schatz, se presenta como la alternativa que menos daño hace a PR y sigue ayudando a la Junta a pasar por la piedra a los bonistas, que obviamente es su empeño. Claro, si pierde la Junta, el también pierde. Por ende, todos los que cacarean que Rosselló y la Junta son lo mismo tienen un argumento válido.

 

Antes de irme, sin embargo, debo señalar que las primeras 35 páginas del racimo de 2,196 claramente dan a entender que la eliminación del bono de navidad y la reducción de días de vacaciones y enfermedad vienen por ahí, probablemente en el próximo año fiscal. Así que vayan preparándose para la próxima pugna. 

 

****Me puedes escuchar hoy y todos los martes a las 5pm en el programa de Kike Cruz, Análisis 630 por NotiUno 630am.

Puerto Rico’s Local Chapter 9, a Good Start

PR’s Local Chapter 9

Yesterday, Senators Nadal Power and Rosa Rodríguez filed a proposed act by which PR’s public corporations could reorganize its debts or even liquidate themselves. Essentially a local Bankruptcy Chapter 9. Both should be congratulated for having the moral fortitude to admit this must be considered. The preamble correctly indicates that state law may regulate those areas where Federal Bankruptcy law is silent or those entities excluded from the Bankruptcy Code, such as insurance companies or Puerto Rico’s municipalities and public corporations, expressly excluded via 11 U.S.C. § 101 (52). Moreover, the liquidation procedure of the P.R. Civil Code, Articles 1811-29, 31 L.P.R.A.  §§ 5171-5214 is totally obsolete since it dates back to the 19th Century.  In addition, the Preamble to this Act states that it is obsolete, making this a special law that preempts the more general law of the Civil Code.

The piece is a good start but lacks many of the necessary statutes that makes the Federal Bankruptcy Code a unique tool. Moreover, it should include the island’s municipalities, most of which are insolvent. In addition, it would make some sense for the law to require that some of the Commonwealth Courts be set for this type of procedure which will elicit massive litigation once it is started. Also, its judges should be especially trained in bankruptcy and dispute resolution since at this time the Puerto Rico bench is devoid of such knowledge. Now I will go to the specific areas that need to be added to the law. For your reference, I include English and Spanish versions but the statute states that the English version will prevail in case of doubt.

The law lacks a definitions section. The Bankruptcy Code has a long definitions section with more than fifty entries, see 11 U.S.C. § 101. For example, the proposed law does not define what is a public corporation, something which may cause further litigation and delay. The law should clearly define what entities are covered by the law.

Although the law specifies that the Court may grant a stay (Article 8(c)) it does not state the parameters pursuant to which it may be granted or even who can grant it. I believe there should be an automatic stay as in the Bankruptcy Code. Moreover, the law does not state who or even if, this stay, once granted, may be lifted. Anyone who litigates in Bankruptcy Court knows that a significant amount of the court’s time is consumed by this issue. Hence, it should be automatic on filing the petition and later any party in interest  could petition the court to do so under clear guidelines which should be in the law.

Article 2 of the law provides a procedure by which the Board of Directors or whomever has control over the corporation may make a declaration “declaring themselves eligible under this Act, subject to the process spelled out in Article 1. If the Governor so authorizes it, said resolution will be filed in the Court of First Instance (Superior Court).” Article 4 states that “[t}he resolution declaring eligibility under Article 2 shall state:

(1) the reasons why the public corporation is eligible under this Act and whether it is caused or not by lack of liquidity;

(2) recommendations as to the interim management of the public corporation;

(3) recommendations as to a plan for restoring solvency if possible, and complying with existing obligations and liquidation if necessary.

The information that is required by this section is de minimis. It should be that information required by the Bankruptcy Rules and Schedules D-H of the official forms. These include information of bank accounts, creditors, the corporate debtors, objections to creditors claims etc. Moreover, there is no procedure to object to the filing of the procedure, either voluntary or involuntary. Article 3 mentions that in an involuntary case there must be a public hearing; does that mean a hearing in Court or another type of hearing? When will the Schedules be filed in an involuntary proceeding? Not clear at all. In addition, in a Chapter 9, debtor is required to claim he has negotiated in good faith with his creditors to prevent the filing. Given the importance of some of the public corporations, this should be included in this Act.

There is no procedure in the law for the filing of proof of claim or what it must contain. The proof of claim is the means by which a creditor establishes his claim in a Bankruptcy Proceeding. Why is it important? Because it is vital for an orderly reorganization to know who is a creditor and how much is he owed. Moreover, it is not uncommon for debtors to forget a creditor who will then have to rush to file a motion explaining his claim. The procedure should be spelled out completely. Moreover, what is the effect of the filing of a proof of claim or the cut-off date to file it or to object to the claim.  In the Bankruptcy Code, the filing of the proof of claim is prima facie evidence of a claim’s validity. See Fed.R.Bankr.P. 3001(f). “Under this rule, a claim is presumed valid until an objecting party has introduced evidence sufficient to rebut the claimant’s prima facie case.” In re Inter-Island Vessel Co., 98 B.R. 606, 608 (Bankr.D.Mass.1988). A proof of claim will prevail over a mere formal objection. See, e.g., Juniper Dev. Group v. Kahn (In re Hemingway Transp., Inc.) 993 F.2d 915, 925 (1st Cir. 1993) (“The interposition of an objection does not deprive the proof of claim of presumptive validity unless the objection is supported by substantial evidence.”).

A very important issue is attorney compensation. Since public corporations are not natural personas pursuant to PR law, they must act through and of attorneys before its courts. Attorneys are usually retained and paid by debtor BEFORE the filing of any bankruptcy papers and employees and attorneys on retainer could not represent the public corporation since there is an inherent conflict of interest since they may be creditors at a later date. Bankruptcy law requires that the compensation paid to the attorneys BEFORE the filing be disclosed. Moreover, attorneys and other professionals, indispensable to the reorganization effort have to have Court approval for their hiring and compensation. Provisions for the hiring and compensation of attorneys must be spelled out by the Act. In addition, the Act must specify how the public corporations are to make payments in the ordinary course of business and to whom. Also, there is no provision on how or if new credit can be secured, which is a necessary addition to the Act.

Once the resolution is filed, Article 7 of the Act states that “[t]he public corporation that has been declared eligible under this Act shall, while the proceedings go on, be administered by a Board of Receivers composed of 5 members. The Governor shall name 2 of the members with the advice and consent of the Senate, and the Court shall name 3. The Court shall establish the powers and duties and supervise the Board of Receivers and shall have the power to issue orders as necessary to execute its role.” Chapter 9 of the Bankruptcy Code, and Chapter 11, provide for the debtor to remain in possession administering the entity due to its large size and complexity This should be considered here and a procedure to remove them when necessary. Moreover, the Federal Bankruptcy system has the U.S. Trustees’ Office  responsible for overseeing the administration of bankruptcy cases and private trustees under 28 U.S.C. §586 and 11 U.S.C. §101, et seq. Its powers are clearly established by law. The PR Courts lack the knowledge and experience to know what powers receivers may have and should be clearly spelled out in the law. Moreover, Trustees in Bankruptcy court, no matter how complicated the case, handle the case with their staff. There is no need to involve 5 persons, much less 2 named by the Governor, who will be professional politicians to try to save his behind in the crisis. Also, it would take time to have the Governor do it. In addition, what procedure should be used to contest the power and actions of the Receivers? The Act is silent.

Another area that has always brought litigation in the Bankruptcy Code is the avoidance power of the Trustee or here, receivers. For example, any payment done 90 days before the filing of the petition or 1 year when it involves insiders (family, lawyers, etc.) would be considered a voidable preference. Also, the Act is silent about the rejection of executory contracts (rentals and union contracts, for example). The Act only generally states that the Court may, under certain circumstances, impair contracts. Since the main reason for this Act is to deal with bond holders, the procedure should be spelled out completely.

The Act is totally silent as to creditors’ committees, a very common and necessary feature of Bankruptcy proceedings. Provisions to this effect should be added.

Although the Act mentions a plan, which obviously has to spell out the reorganization, there are no timetables for its filing or what its contents must have. This is a necessary amendment to the Act, as well as a more clearly defined timetable of things to do.

No plan can function without a clear understanding of the type of creditors involved in the procedure. In Bankruptcy proceedings some creditors will be secured, some with preferences, even none secured may have different debts maturing at different times and some that will be impaired by the plan and others that won’t. The Act needs to deal with this and determine the order of payment.

Now lets discuss procedural matters. The Bankruptcy Code has many sections, but there are Federal Rules of Bankruptcy Procedure and even Local Rules of the Bankruptcy Court that need to be taken into account for this Act. Will one judge be able to handle all cases of one particular public corporation which include labor, environmental, torts, debt collection, etc.? Moreover, what happens when the Court issues a determination on a certain small but important aspect of the case? Can it be reviewed by the Appellate Courts as an Appeal or will it be a certiorari? Can a certiorari even be considered for such a case? The Act is silent as to these important issues. Also, will this procedure be eligible for the Puerto Rico Rules of Complex Litigation, which has different rules than those of Civil Procedure? The Act should address this question.

In addition, what effect will this Act or the Court’s orders have on environmental or other administrative claims by local agencies (we know it won’t have any on Federal Agencies)? Can the Court impair them or reverse them? Also, the Act does not make it illegal to accelerate debt due to bankruptcy or to in any way impair debtor and it should be considered.

There are other areas where the law is silent. If there is a claim that is not liquidated, a tort damages claim not adjudicated, can the Court, in imitation of 11 U.S.C. § 502(c)(1) estimate the amount? After the case is commenced, will payments to Social Security, pensions and others continue? Under what circumstances? Will the Retirement Administration be eligible for this proceeding? What happens if a creditor is not notified and only learns of the proceeding after the plan has been approved? The Senators and their staff should carefully review the Bankruptcy Code and its Rules, especially 3000’s and 6000’s. Also, the Act provides for liquidation but does not provide any details of how to do it.

Finally, some jurisdictional issues not mentioned in the Preamble of the Act. The Act would not have the ample police power of the Federal Government to stay actions by Federal Agencies and it cannot enjoin federal courts. However, even in cases where the Federal Court has exercised its jurisdiction in a Constitutionally valid way, the case may still be sent state court via Burford v. Sun Oil Co., 319 U.S. 315 (1943) or Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25 (1959) type abstentions. In addition, the case in Federal Court could be dismissed for reasons of comity, see, Smith v. Bayer Corporation, 131 S.Ct. 2368  (2011).  Finally, since the idea is to hand a type of discharge to the public corporations of their debts, does PR have to power to impair obligations of those who are not its residents? Can PR give a discharge to debts owed by those who do not live here? In Stellwagen v. Clum, 245 U.S. 608-615 (1917) the Court stated that “[I]t is settled that a state may not pass an insolvency law which provides for a discharge of the debtor from his obligations, which shall have the effect of a bankruptcy discharge as to creditors in other states, and this although no general federal bankruptcy act is in effect.” The questions need clear answer. As I said in the beginning, this is a laudable effort, but much more is needed.