In re Fin. Oversight & Mgmt. Bd. for P.R.
| Decision Date | 21 May 2021 |
| Docket Number | Case No. 17-BK-3283 (LTS) (Jointly Administered), Case No. 17-BK-4780 (LTS),Adv. Proc. No. 21-41 (LTS) |
| Citation | 631 B.R. 571 |
| 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 the Puerto Rico Electric Power Authority, Debtor. Unión de Trabajadores de La Industria Eléctrica y Riego, Inc., Ángel Figueroa-Jaramillo, as President of Unión de Trabajadores de La Industria Eléctrica y Riego, Inc., Freddyson Martínez-Estevez, Vice President of Unión de Trabajadores de La Industria Eléctrica y Riego, Inc., Ralphie Dominicci-Rivera, Waldo Rolón, and Ronald Vázquez, as Vice President of the Retirees Chapter of Unión de Trabajadores de La Industria Eléctrica Y Riego, Inc., Plaintiffs, v. Pedro R. Pierluisi-Urrutia, in his official capacity as Governor of the Commonwealth of Puerto Rico, Commonwealth of Puerto Rico, Puerto Rico Electric Power Authority, the Financial Oversight and Management Board for Puerto Rico, as representative of Puerto Rico Electric Power Authority, Ralph A. Kreil-Rivera, in his official capacity as the President of the Governing Board of the Puerto Rico Electric Power Authority, Efran Paredes-Maysonet, in his official capacity as Executive Director of Puerto Rico Electric Power Authority, Puerto Rico Public Private Partnership Authority, Fermín Fontánes-Gómez, in his official capacity as Executive Director of Puerto Rico Public Private Partnership Authority, Puerto Rico Fiscal Agency and Financial Advisory Authority, Omar J. Marrerodíaz, in his official capacity as Executive Director of Puerto Rico Fiscal Agency and Financial Advisory Authority, LUMA Energy, LLC, LUMA Energy, ServCo, LLC, and Wayne Stensby, in his official capacity as President and CEO of LUMA Energy, LLC and LUMA Energy ServCo, LLC., Defendants. |
| Court | U.S. District Court — District of Puerto Rico |
BUFETE EMMANUELLI C.S.P., By: Rolando Emmanuelli-Jiménez, Jessica Méndez-Colberg, 472 Tito Castro Ave., Marvesa Building, Suite 106, Ponce, Puerto Rico 00176, Counsel for UTIER, Ángel Figueroa-Jaramillo, Freddyson Martínez-Estevez, Ralphie Dominicci-Rivera, Waldo Rolón, and Ronald Vázquez.
MARINI PIETRANTONI MUÑIZ LLC, By: Luis C. Marini-Biaggi, 250 Ponce de León Avenue, Suite 900, San Juan, Puerto Rico 00918, Co-Counsel for Hon. PEDRO R. PIERLUISIURRUTIA, in his official capacity as Governor of the Commonwealth of Puerto Rico; COMMONWEALTH OF PUERTO RICO; PUERTO RICO PUBLIC PRIVATE PARTNERSHIP AUTHORITY; FERMÍN FONTANÉS GÓMEZ, in his official capacity as Executive Director of PUERTO RICO PUBLIC PRIVATE PARTNERSHIP AUTHORITY; PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY; and OMAR J. MARRERODÍAZ, in his official capacity as Executive Director of PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY.
DÍAZ & VÁZQUEZ LAW FIRM, P.S.C., By: Katiuska Bolaños, 290 Jesús T. Piñero Ave., Oriental Tower, Suite 803, San Juan, PR 00918, PUERTO RICO ELECTRIC POWER AUTHORITY; RALPH A. KREIL-RIVERA, in his official capacity as the President of the Governing Board of the PUERTO RICO ELECTRIC POWER AUTHORITY; and EFRAN PAREDES-MAYSONET, in his official capacity as Executive Director of PUERTO RICO ELECTRIC POWER AUTHORITY.
O'MELVENY & MYERS LLP, By: John J. Rapisardo, Peter Friedman, Maria J. DiConza, 7 Times Square, New York, New York 10036 and Elizabeth L. McKeen, 610 Newport Center Drive, 17th Floor, Newport Beach, CA 92660 and Madhu Pocha, 1999 Avenue of the Stars, 8th Floor, Los Angeles, California 90067, Counsel for Hon. PEDRO R. PIERLUISIURRUTIA, in his official capacity as Governor of the Commonwealth of Puerto Rico; COMMONWEALTH OF PUERTO RICO; PUERTO RICO ELECTRIC POWER AUTHORITY; RALPH A. KREIL-RIVERA, in his official capacity as the President of the Governing Board of the PUERTO RICO ELECTRIC POWER AUTHORITY; EFRAN PAREDES-MAYSONET, in his official capacity as Executive Director of PUERTO RICO ELECTRIC POWER AUTHORITY; PUERTO RICO PUBLIC PRIVATE PARTNERSHIP AUTHORITY; FERMÍN FONTANÉS GÓMEZ, in his official capacity as Executive Director of PUERTO RICO PUBLIC PRIVATE PARTNERSHIP AUTHORITY; PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY; and OMAR J. MARRERO DÍAZ, in his official capacity as Executive Director of PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY.
O'NEILL & BORGES LLC, By: Herman D. Bauer, 250 Muñoz Rivera Ave., Suite 800, San Juan, PR 00918-1813, Attorneys for the Financial Oversight and Management Board as representative for PREPA.
PROSKAUER ROSE LLP, By: Martin J. Bienenstock, Paul V. Possinger, Ehud Barak, Margaret A. Dale, Jonathan E. Richman, Eleven Times Square, New York, NY 10036 and Timothy W. Mungovan, Laura E. Stafford, Elliot R. Stevens, One International Place, Boston, MA 02110 and Jennifer L. Jones, 2029 Century Park East, Suite 2400, Los Angeles, CA 90067-3010, Attorneys for the Financial Oversight and Management Board as representative for the Commonwealth and PREPA.
DLA PIPER LLP (US), By: Brett Ingerman, The Marbury Building, 6225 Smith Ave., Baltimore, MD 21209-3600 and Tomasita Sherer, 1251 Ave. of the Americas, 27th Fl., New York, NY 10020-1104 and Mariana Muñiz Lara, Calle de la Tanca #500, Suite 401, San Juan, PR 00901-1969, Counsel for LUMA ENERGY, LLC; LUMA ENERGY, SERVCO, LLC; and WAYNE STENSBY.
PROMESA
This matter is before the Court on the Motion for Preliminary Injunction to Enjoin the Execution of the O&M Agreement (Docket Entry No. 8 in Adv. Proc. 21-41, the "Motion")2 filed by Unión de Trabajadores de La Industria Eléctrica y Riego ("UTIER"), Ángel Figueroa-Jaramillo, Freddyson Martínez-Estevez, Ralphie Dominicci-Rivera, Waldo Rolón, and Ronald Vázquez (collectively, "Plaintiffs"). In the Motion, Plaintiffs seek an order enjoining the implementation of the Operation and Management Agreement (the "O&M Agreement," Docket Entry No. 1-1) between the Puerto Rico Electric Power Authority ("PREPA") and LUMA Energy, LLC and LUMA Energy ServCo, LLC ("LUMA Energy" or "LUMA"). Under the terms of the O&M Agreement, LUMA Energy is scheduled to take over operation of PREPA's Transmission and Distribution System (the "T&D System") on June 1, 2021. In the Motion, Plaintiffs seek to enjoin the enforcement of the O&M Agreement, alleging, inter alia, that it is null and void under Puerto Rico and federal law (the First Claim for Relief), that it is null and void because it is a leonine contract (the Second Claim for Relief), that the O&M Agreement is a contract in prejudice of a third party (the Third Claim for Relief), that the O&M Agreement is a tortious interference with Plaintiffs’ collective bargaining rights (the Fourth Claim for Relief), and that the O&M Agreement violates the Contracts Clause of the Constitution of the United States ( U.S. Const. art. I, § 10, cl. 1, the "Contracts Clause") (the Fifth Claim for Relief).3 Plaintiffs’ claims are brought against the Commonwealth of Puerto Rico, PREPA, the Oversight Board, the Puerto Rico Fiscal Agency and Financial Advisory Authority, the Puerto Rico Public-Private Partnership Authority ("P3"), LUMA Energy, Governor Pierluisi, Ralph A. Kreil-Rivera, Efran Paredes-Maysonet, Fermín Fontánes-Gómez, Omar J. Marrero-Díaz and Wayne Stensby (collectively, "Defendants").
The Court heard oral argument on the Motion on May 18, 2021, and has considered thoroughly all of the written submissions4 of the parties and the Court now makes the following findings of fact and conclusions of law in accordance with Federal Rules of Bankruptcy Procedure 7052 and 7065.5
The following facts, which are drawn from the parties’ submissions, are undisputed. In 2018, the Puerto Rico Legislature passed the Puerto Rico Electric Power System Transformation Act, Act No. 120-2018 ("Act 120"), codified at 22 L.P.R.A. § 1111 et seq., which authorized and established the legal framework for the sale, disposition, and/or transfer of the assets, operations, and services of PREPA through a public-private partnership, in accordance with the Public-Private Partnership Act, Act No. 29-2009, 27 L.P.R.A. § 2601 et seq. ("Act 29"). (See Mot. ¶ 13; Opp. ¶ 15.)
On June 22, 2020, the P3, the Puerto Rico Energy Bureau ("PREB"), the PREPA Governing Board, and the Governor of Puerto Rico approved the O&M Agreement among PREPA, LUMA Energy, and P3. (See O&M Agreement at Art. 2.) The O&M Agreement provides for LUMA Energy to assume operation and management of PREPA's T&D System, while PREPA retains ownership of the T&D assets. (See id. at Art. 3.) Under Act 120, current employees of PREPA's T&D System will have the option to (i) apply for employment with LUMA Energy, (ii) remain at PREPA if a position is available, or (iii) transfer to another government agency. (See 22 L.P.R.A. § 1121.)
Act 120 further provides the following:
Employees who, as a result of this chapter, are transferred under the concept of mobility to another government entity shall keep all of their vested rights in accordance with the laws, rules, collective bargaining agreements, and regulations applicable thereto, as well as the privileges, obligations, and status with respect to any existing pension or retirement plan[.] No regular PREPA employee shall be left unemployed nor lose benefits as a result of any PREPA transactions.
(Id. ) The O&M Agreement requires LUMA Energy to comply with Act 120 and all other "applicable law." (See O&M Agreement, at §§ 9.1, 9.9.) Defendants represent that LUMA Energy is required to provide the vested rights as part of its obligation to comply with Law 120. (See Opp. ¶ 44.)
UTIER is a union that represents PREPA employees. UTIER is party to a collective bargaining agreement (the "CBA") with...
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