In re Fin. Oversight & Mgmt. Bd. for Puerto Rico
| Decision Date | 07 February 2019 |
| Docket Number | No. 17 BK 3283-LTS (Jointly Administered),No. 17 BK 3284-LTS,17 BK 3283-LTS (Jointly Administered),17 BK 3284-LTS |
| Parties | IN RE: The FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as Representative of the Commonwealth of Puerto Rico, et al., Debtors. In re: The Financial Oversight and Management Board for Puerto Rico, as Representative of Puerto Rico Sales Tax Financing Corporation, Debtor. |
| Court | U.S. District Court — District of Puerto Rico |
Julia D. Alonzo, Ehud Barak, Martin J. Bienenstock, Bradley R. Bobroff, Margaret A. Dale, Peter D. Doyle, Carl Forbes, Jr., Mark D. Harris, Jeffrey W. Levitan, Gregg M. Mashberg, Matthew J. Morris, Kevin J. Perra, Stephen L. Ratner, Brian S. Rosen, Scott Rutsky, Chris Theodoridis, Jared D. Zajac, Maja Zerjal, Proskauer Rose LLP, Lucia Chapman, Stephan E. Hornung, Michael Luskin, Luskin, Stern & Eisler LLP, New York, NY, Ginger D. Anders, Adele M. El-Khouri, Chad I. Golder, Rachel G. Miller Ziegler, Donald B. Verrilli, Munger, Tolles & Olsen LLP, Guy Brenner, Ann M. Ashton, Ralph C. Ferrara, Proskauer Rose LLP, Washington, DC, Hermann D. Bauer Alvarez, Ubaldo M. Fernandez Barrera, Carla Garcia Benitez, Daniel J. Perez Refojos, O'Neill & Borges, Wandymar Burgos Vargas, Susana I. Penagaricano-Brown, Puerto Rico Department of Justice, Raul Castellanos-Malave, Development & Construction Law Group LLC, Andres W. Lopez, The Law Offices of Andres W. Lopez, P.S.C., Katiuska Bolanos-Lugo, Cancio, Nadal, Rivera & Diaz, PSC, Ricardo Burgos Vargas, San Juan, PR, William D. Dalsen, Michael R. Hackett, Timothy W. Mungovan, Laura Stafford, Proskauer Rose LLP, Joseph P. Davis, III, Greenberg Traurig, LLP, Boston, MA, Michael A. Firestein, Lary Alan Rappaport, Jennifer L. Roche, Steven O. Weise, Proskauer Rose LLP, Los Angeles, CA, Paul V. Possinger, Proskauer Rose LLP, Chicago, IL, for Debtors.
PROMESA
Before the Court are cross memoranda of the Bank of New York Mellon ("BNYM") and Whitebox Multi-Strategy Partners, L.P. and certain of its affiliates (collectively, "Whitebox")2 regarding the questions presented for the Court by Section 19.5 of the Plan of Adjustment3 for COFINA. Section 19.5 requires the Court to determine whether and to what extent monies must be withheld from the distribution of Whitebox under the Plan of Adjustment to cover legal fees and expenses that BNYM may incur in connection with certain litigation that Whitebox has commenced. The memoranda were submitted in connection with procedures established by the Court. (See Docket Entry No. 4518.) BNYM also submitted evidentiary declarations in support of its position in the form of the Declaration of Daniel P. Goldberg, Esq. (Docket Entry No. 4600-1, the "Goldberg Declaration") and the Declaration of Robert M. Fishman, Esq. (Docket Entry No. 4601-1, the "Fishman Declaration" and, collectively with the Goldberg Declaration, the "Declarations"). The dispute initially also involved a third party, Ambac Assurance Corporation ("Ambac"). The Court held a hearing on this matter on January 17, 2019 (the "Hearing") in connection with the hearing related to confirmation of the Plan of Adjustment. At the Hearing, the parties informed the Court that Ambac and BNYM had reached an agreement and that "Ambac [would] not be participating in the legal argument or the evidentiary part of the hearing." (Docket Entry No. 4850, Jan. 17, 2019 Hr'g Tr. at 140:23-141:3.) The Court heard argument from Whitebox and BNYM and BNYM introduced the Declarations into evidence. As explained below, the Court sustained BNYM's objection to Whitebox's effort to cross-examine the Declarants.4
At the Hearing, BNYM objected to Whitebox cross-examining the Declarants on the grounds that Whitebox had failed to comply with the Court's procedural orders requiring it to notify the Court and parties of its intention to cross-examine and to identify the subject matter and exhibits it intended to use in cross-examination.
When asked by the Court if it had complied with the procedural orders, counsel for Whitebox informed the Court that it had not, in fact, made the required disclosures. (See Docket Entry No. 4965, the "Glenn Declaration," ¶¶ 15-16.) Under such circumstances, this Court appropriately precluded Whitebox from cross-examining the Declarants. See Martinez-Serrano v. Quality Health Servs. of P.R., Inc., 568 F.3d 278, 283 (1st Cir. 2009) (). The Court did allow Whitebox to present its oral arguments in opposition to BNYM's position on Section 19.5.
Twelve days after the Hearing, on January 29, 2019, Whitebox filed a motion for reconsideration of the Court's ruling precluding the cross-examination of the Declarants. (See Docket Entry No. 4964, the Motion of Whitebox Multi-Strategy Partners, L.P. and Certain of Its Affiliates for Reconsideration of the Court's Order Precluding the Cross-Examination of Certain Witnesses .) Therein, Whitebox dissected the Court's various procedural orders, and concluded that it had, in fact, made timely disclosures, argued that if there was an error, it was unintentional, de minimis , and excusable under the circumstances, and further contended that allowing cross-examination would not prejudice any party and would benefit the Court. (See id. at 2-3.) Whitebox attached the depositions taken by Ambac and Whitebox of the Declarants in support of the contention that BNYM was on notice of their intention to cross-examine. BNYM, representing that operational considerations in connection with planned distributions under the confirmed Plan of Adjustment require the resolution of the Section 19.5 issues before February 8, 2019, filed its objection to the motion for reconsideration on an expedited basis, continuing to argue that its analysis of the Court's orders establish that Whitebox did not comply with this Court's requirements, and further asserting that Whitebox failed to preserve any objection at the Hearing and did not make any offer of proof, thereby precluding review of the ruling. (Docket Entry No. 5066, the Objection of the Bank of New York Mellon, as Trustee, to Whitebox's Motion for Reconsideration of this Court's Order Sustaining an Evidentiary Objection During the Hearing of the Section 19.5 Dispute , at 3-9.) In addition, BNYM contended that, while Whitebox would not be harmed by a holdback under Section 19.5, delay would affect all of the bondholders since no distribution can be made until the Section 19.5 issues are resolved. (Id. at 13-14.) Whitebox filed its reply promptly, in accordance with the Court's expedited scheduling order. (Docket Entry No. 5073, the Reply of Whitebox Mutlti-Strategy Partners, L.P. and Certain of Its Affiliates in Further Support of Motion Seeking Reconsideration of the Court's Order Precluding the Cross-Examination of Certain Witnesses .)
"Ordinarily, a district court faced with a motion to reconsider must apply an interests-of-justice test." United States v. Roberts, 978 F.2d 17, 21 (1st Cir. 1992). "Justice is an ideal that defies precise definition[,]" so that it is "impossible to list a series of integers that will necessarily dominate the interests-of-justice equation in every case." Id. However, the First Circuit has offered "certain rules of thumb to guide the district courts" including:
(1) the nature of the case, (2) the degree of tardiness, (3) the reasons underlying the tardiness, (4) the character of the omission, (5) the existence vel non of cognizable prejudice to the nonmovant in consequence of the omission, (6) the effect of granting (or denying) the motion on the administration of justice, and (7) whether the belated filing would, in any event, be more than an empty exercise.
As noted above, Whitebox has submitted the depositions of the Declarants. The examinations at the depositions are presumably indicative of the cross-examination Whitebox would have pursued at the Hearing. As evidenced by the questioning, Whitebox and Ambac focused on the hypothetical nature of many of the underlying assumptions in the proposed budget, and challenged the investigation made into the scope of legal work to be done. Similarly, Ambac challenged the Declarants' assumptions and highlighted the deficiencies it perceived in their analyses in its Response Memorandum. (Docket Entry No. 4654, Memorandum of Ambac Assurance Corporation in Response to Declarations of the Bank of New York Mellon Pursuant to Section 19.5 of COFINA's Amended Title III Plan of Adjustment , at 5-12.)5 Neither Ambac nor Whitebox has provided the Court with an alternative proposed budget or examples of budgets in comparable litigation. In its motion for reconsideration and related filings, Whitebox has not made an offer of proof or indicated in any way that its cross-examination would elicit additional facts beyond those already in the record.
In the interest of justice, the Court will consider the depositions of the Declarants as well as Ambac's filings in making its determinations on the Section 19.5 issues presented to the Court by Whitebox. See Anderson v. Brennan, 911 F.3d 1, 13 (1st Cir. 2018) () (internal quotations and citation omitted). However, the Court will not allow further cross-examination as it will unnecessarily delay the proceedings for no purpose. It is clear to the Court that any cross-examination would focus on the amount of any holdback endorsed by this opinion,...
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