Hermandad De Empleados del Fondo Del Seguro del Estado, Inc. v. Fin. Oversight & Mgmt. Bd. (In re Fin. Oversight & Mgmt. Bd. for P.R.)

• Decision Date: 28 October 2020
• Docket Number: No. 19-2028,19-2028
• Citation: 979 F.3d 10
• Parties: 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 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 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, Debtors. Hermandad De Empleados del Fondo del Seguro del Estado, Inc.; Unión de Médicos de la Corporación del Fondo del Seguro del Estado Corp. (UMCFSE), Plaintiffs, Appellants, v. Financial Oversight and Management Board; Commonwealth of Puerto Rico; State Insurance Fund Corporation ; Javier Rivera Ríos, in his official capacity as Administrator of the State Insurance Fund Corporation ; Christian Sobrino Vega; José Iván Marrero Rosado; Teresita Fuentes; Wanda Vázquez Garced, in her official capacity as Governor; Omar J. Marrero Díaz, in his official capacity as Executive Director of AAFAF; Francisco Parés Alicea, in his official capacity as Secretary of Treasury, Defendants, Appellees, Natalie A. Jaresko, Defendant.
• Court: U.S. Court of Appeals — First Circuit

979 F.3d 10

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 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 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, Debtors.Hermandad De Empleados del Fondo del Seguro del Estado, Inc.; Unión de Médicos de la Corporación del Fondo del Seguro del Estado Corp. (UMCFSE), Plaintiffs, Appellants,

v. Financial Oversight and Management Board; Commonwealth of Puerto Rico; State Insurance Fund Corporation ; Javier Rivera Ríos, in his official capacity as Administrator of the State Insurance Fund Corporation ; Christian Sobrino Vega; José Iván Marrero Rosado; Teresita Fuentes; Wanda Vázquez Garced, in her official capacity as Governor; Omar J. Marrero Díaz, in his official capacity as Executive Director of AAFAF; Francisco Parés Alicea, in his official capacity as Secretary of Treasury, Defendants, Appellees,Natalie A. Jaresko, Defendant.

No. 19-2028

United States Court of Appeals, First Circuit.

October 28, 2020

Jessica E. Méndez-Colberg, with whom Rolando Emmanuelli Jiménez and Bufete Emmanuelli were on brief, for appellants.

Mark D. Harris, with whom Timothy W. Mungovan, John E. Roberts, Martin J. Bienenstock, Stephen L. Ratner, John E. Richman, and Proskauer Rose LLP were on brief, for appellees.

Before Thompson, Kayatta, and Barron, Circuit Judges.

BARRON, Circuit Judge.

In response to a mounting fiscal crisis, Puerto Rico enacted a series of laws that affect the relationship between public employees in the Commonwealth and their employers. Two unions representing such employees filed suit in federal district court in Puerto Rico in July 2018, alleging that these laws impermissibly interfere with their collective bargaining rights. We affirm the District Court's dismissal of the complaint for failure to state a claim on which relief may be granted.

I.

The Puerto Rico unions that bring this suit are Hermandad de Empleados del Fondo del Seguro del Estado, Inc. and Unión de Médicos de la Corporación del Fondo del Seguro del Estado Corp. (collectively, the "unions"). Each represents workers at Puerto Rico's State Insurance Fund Corporation ("CFSE," after the organization's Spanish-language name), a Puerto Rico public corporation that provides medical and related services to workers in the Commonwealth who have suffered work-related injuries.

As the exclusive bargaining representatives for approximately two thousand employees, these unions negotiate with the CFSE over the terms of their members' employment. Both unions have collective bargaining agreements with the CFSE that are in effect.¹

To address Puerto Rico's fiscal crisis, the Puerto Rico Legislative Assembly passed the four laws (collectively, the "challenged laws") affecting the rights and benefits of public sector workers within the Commonwealth that are at issue here. Set forth in the order of their enactment from earliest to latest, these measures are:

(1) Act 66-2014, the "Government of the Commonwealth of Puerto Rico Special Fiscal and Operational Sustainability Act," which was passed on June 17, 2014;

(2) Act 3-2017, the "Law to Address the Economic, Fiscal, and Budgetary Crisis to Guarantee the Operation of the Government of Puerto Rico," enacted on January 23, 2017;

(3) Act 8-2017, the "Law for the Management and Transformation of Human Resources in the Government of Puerto Rico," passed on February 4, 2017; and, finally,

(4) Act 26-2017, the "Compliance with the Fiscal Plan Act," which became law on April 29, 2017.

The unions filed suit in the United States District Court for the District of Puerto Rico on July 25, 2018. The unions' complaint, after an amendment, asserted claims against the Commonwealth of Puerto Rico, the Financial Oversight and Management Board for Puerto Rico ("FOMB"), the CFSE, and various Puerto Rico government officials based on the way these measures allegedly violated the Contract Clause of the United States Constitution, see U.S. Const. art. I., § 10, cl. 1, and the Collective Bargaining Clause of the Puerto Rico Constitution, see P.R. Const. art. II, § 17. The unions requested both "full compensatory and punitive damages" and declaratory relief. They also requested "cost[s] and attorney fees."

More specifically, the unions alleged in their complaint that, through these four laws, Puerto Rico took away in whole or in part benefits that the unions bargained for on behalf of their members and that their members would otherwise be entitled to under the collective bargaining agreements. For instance, the unions alleged that the collective bargaining agreements guarantee their members a certain number of vacation days and give departing workers the option to convert unused days into cash, but that Acts 66-2014 and 3-2017 eliminate the ability of workers to convert unused days into cash, and that Act 26-2017 generally restricts the maximum number of allowable vacation days to fifteen -- beneath what the unions' contracts would otherwise guarantee. In addition, the unions alleged that the collective bargaining agreements provide for fringe benefits, including reimbursement for certain travel and clothing expenses, but that Act 66-2014 and Act 3-2017 reduce or eliminate some of these benefits.

Separately, the unions alleged that the collective bargaining agreements establish processes that the CFSE must follow before hiring new employees. But, the unions alleged, Act 8-2017 contains so-called "mobility" provisions that allow for the transfer of employees from other government entities to the CFSE, even when such transfers would bypass the hiring processes provided for in the agreements.

The complaint contended that the District Court possessed federal question jurisdiction to consider the unions' claims under 28 U.S.C. § 1331 because, according to the complaint, "th[e] action arises under PROMESA and the U.S. Constitution." It also claimed that the District Court had subject-matter jurisdiction under 48 U.S.C. § 2126(a), which gives the District Court for the District of Puerto Rico jurisdiction over "action[s] against the Oversight Board, and any action otherwise arising out of [PROMESA]." Finally, it alleged that jurisdiction existed under 48 U.S.C. § 2166(a)(2), which gives the District Court of Puerto Rico "original but not exclusive jurisdiction of all civil proceedings arising under [Title III of PROMESA], or arising in or related to cases under [Title III]." In a filing below, the FOMB and one of the individual defendants -- Natalie Jaresko, the executive director of the FOMB -- agreed that the District Court had subject-matter jurisdiction under 48 U.S.C. § 2166(a).²

On the defendants' motions, the District Court determined that some aspects of the unions' claims for declaratory relief had been rendered moot and dismissed those claims for lack of jurisdiction. See Fed. R. Civ. P. 12(b)(1). It dismissed the remainder of the plaintiffs' claims on the merits because it concluded that they failed to state a claim on which relief could be granted. See id. 12(b)(6). The unions then timely appealed.

II.

We first address the question of Article III jurisdiction. The question arises primarily because, according to the District Court, the fourth and most recent of the challenged laws, Act No. 26-2017, superseded the three earlier enacted laws that the plaintiffs challenge: Act No. 66-2014, Act No. 3-2017, and Act No. 8-2017. The District Court concluded that, in consequence, the fourth measure mooted the plaintiffs' requests for declaratory relief concerning the three earlier challenged laws. Moreover, the defendants contend that the enactment of even more recent legislation, as well as the expiration of some of the provisions of the first three challenged measures, moot still other aspects of the unions' claims for declaratory relief. The unions disagree on both counts, and so do we.

All four challenged measures were enacted before the plaintiffs filed suit, and none of the provisions in them are asserted to have expired prior to that time. This suggests that insofar as there is an Article III issue for us to resolve, it has to do with the plaintiffs' potential lack of Article III standing to bring their claims for declaratory relief, rather than with the fact that any post-suit developments rendered those claims moot. See Friends of the Earth, Inc. v. Laidlaw Env't. Servs. (TOC), Inc., 528 U.S. 167, 189-90, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000).

Moreover, the unions raise claims for damages based on the same alleged violations of the federal and Puerto Rico constitutions that ground their declaratory judgment claims. And, as we will explain, for that reason, Article III does not bar us from addressing whether the plaintiffs are entitled to declaratory relief.

To see why, it helps to understand that the plaintiffs in their damages claim seek recompense only for the harm caused during the period in which the challenged laws were in effect. There is no doubt that the plaintiffs have standing to bring such claims, and the defendants do not contend otherwise. There also is no basis for concluding that the fourth challenged law's passage -- or any other development -- mooted those damages claims. That being so, though, there also is no Article III bar to requesting a declaration that the challenged laws are "null," "void," and "violat[ive]" of the federal and Puerto Rico constitutions, because it is well established that claims for declaratory relief...