In re Fin. Oversight & Mgmt. Bd. for P.R.
| Decision Date | 27 September 2021 |
| Docket Number | No. 17 BK 3283-LTS (Jointly Administered), No. 17 BK 4780-LTS (Jointly Administered),Adv. Proc. No. 20-142-LTS,17 BK 3283-LTS (Jointly Administered) |
| Citation | 633 B.R. 463 |
| 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 Electric Power Authority, Debtor. PV Properties, Inc., Plaintiff, v. Puerto Rico Electric Power Authority, The Financial Oversight and Management Board for Puerto Rico, and Natalie Jaresko, Defendants. |
| Court | U.S. District Court — District of Puerto Rico |
PROSKAUER ROSE LLP, By: Martin J. Bienenstock, Ehud Barak, Margaret A. Dale, John A. Peterson III, Eleven Times Square, New York, NY 10036 and Paul V. Possinger, 70 W. Madison St., Suite 3800, Chicago, IL 60602 and Jennifer L. Jones, 2029 Century Park East, Suite 2400, Los Angeles, CA 90067, O'NEILL & BORGES LLC, By: Hermann D. Bauer, 250 Muñoz Rivera Ave., Suite 800, San Juan, PR 00918-1813, Attorneys for the Financial Oversight and Management Board, in its capacity as defendant and as representative for the Puerto Rico Electric Power Authority, and Natalie Jaresko.
FERNANDO E. AGRAIT, By: Fernando E. Agrait, 701 Avenida Ponce de León, Edificio Centro de Seguros, Oficina 414, San Juan, Puerto Rico 00907, CHARLES A. CUPRILL, P.S.C., LAW OFFICES, By: Charles A. Cuprill-Hernandez, 356 Fortaleza Street - Second Floor, San Juan, PR 00901, Attorneys for Plaintiff PV Properties, Inc.
PROMESA Title III
Before the Court is Defendants’ Motion to Dismiss Plaintiff's Amended Complaint Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) (Docket Entry No. 12 in Adv. Proc. No. 20-00142-LTS,2 the "Motion") filed by the Financial Oversight and Management Board for Puerto Rico (the "Oversight Board"), in its own capacity and as the Title III representative of the Puerto Rico Electric Power Authority ("PREPA"), and Natalie Jaresko (together with the Oversight Board and PREPA, "Defendants"). The Motion seeks dismissal of the Amended Adversary Complaint (Docket Entry No. 3, the "Amended Complaint") filed by PV Properties, Inc. ("PV Properties" or "Plaintiff").
Plaintiff filed a response to the Motion (Docket Entry No. 17, the "Opposition"), and Defendants filed a reply in support of the Motion (Docket Entry No. 18, the "Reply"). The Court has considered carefully all of the arguments and submissions made in connection with the Motion. The Court has statutory subject matter jurisdiction of this action pursuant to section 306(a) of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"), 48 U.S.C. § 2166(a).
In the Amended Complaint, PV Properties asserts that it produces and owns renewable energy certificates ("RECs") arising out of the production of solar power. PV Properties contends that, under Commonwealth law, PREPA has a statutorily imposed obligation to purchase RECs and comply with the Commonwealth's renewable portfolio standard. Accordingly, PV Properties requests entry of a declaratory judgment recognizing that PREPA is obligated to purchase PV Properties’ RECs and determining that such obligation is an administrative expense pursuant to section 507(a)(2) of the Bankruptcy Code, 11 U.S.C. § 507(a)(2).
For the following reasons, Defendants’ Motion is granted as set forth herein, and Plaintiff's Amended Complaint is dismissed in part pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of constitutional subject matter jurisdiction and in part pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.3
The following recitation of facts is drawn from the Amended Complaint, except where otherwise noted.
Act 82-2010, as amended by Act 17-2019, mandates that PREPA comply with a renewable portfolio standard requiring that a certain percentage of the electricity distributed by PREPA be generated from renewable energy sources (the "Renewable Portfolio Standard"). See 12 L.P.R.A. §§ 8124 (), 8121 (defining "retail electricity supplier" to include PREPA). To the extent that PREPA does not produce renewable energy or purchase renewable energy from others in an amount sufficient to comply with the Renewable Portfolio Standard, PREPA can meet its obligations through the purchase of RECs. See 12 L.P.R.A. §§ 8131, 8132. Each REC represents one megawatt-hour of energy generated from a renewable energy source. 12 L.P.R.A. § 8121(8). Under Commonwealth law, "RECs are personal property and tradable or negotiable commodities that may be purchased, sold, assigned, and/[o]r transferred between persons for any lawful purpose." 12 L.P.R.A. § 8129; see also 12 L.P.R.A. § 8121(8).
PV Properties is a Puerto Rico corporation that generates renewable energy through distributed photovoltaic generation systems. (Am. Compl. ¶¶ 2, 3, 16.) As a result, PV Properties generates 24,000 RECs per year. (Am. Compl. ¶ 16.) Those RECs are, according to PV Properties, worth more than $840,000. (Am. Compl. ¶ 16.) PV Properties asserts that PREPA has failed to comply with its Renewable Portfolio Standard obligations—and failed to purchase PV Properties’ RECs—since the commencement of PREPA's case under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA") on July 2, 2017.4 (Am. Compl. ¶¶ 2, 32.) As a result of PREPA's alleged noncompliance and its unwillingness to purchase PV Properties’ RECs, PV Properties contends, PV Properties has suffered an injury to the "economic and financial value that each REC represents as an asset." (Am. Compl. ¶ 2.) PV Properties further alleges that the Oversight Board and its Executive Director, Natalie Jaresko, are "empowered to authorize the acquisition of Plaintiff's RECs by PREPA." (Am. Compl. ¶¶ 5, 6.)
Based upon the foregoing allegations, the Amended Complaint requests a judgment declaring that "pursuant to Act 17-2019 PREPA is obligated to acquire PV Properties[’] REC's and to pay for those REC's generated by PV Properties after the filing of PREPA[’s] Title III petition, as an administrative expense under 11 U.S.C. § 507(a)(2)." (Am. Compl. at 9.)
Defendants move pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) to dismiss the Amended Complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. A court presented with motions to dismiss under both Rules 12(b)(1) and 12(b)(6) should ordinarily decide jurisdictional questions before addressing the merits. Deniz v. Municipality of Guaynabo, 285 F.3d 142, 149 (1st Cir. 2002). The party invoking the jurisdiction of a federal court carries the burden of proving that there is a proper basis for the exercise of jurisdiction. Johansen v. United States, 506 F.3d 65, 68 (1st Cir. 2007). The Court also has an independent duty to assess whether it has subject matter jurisdiction of an action. See Fed. R. Civ. P. 12(h)(3) ; FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231, 110 S.Ct. 596, 107 L.Ed.2d 603 (1990).
Article III, Section 2 of the Constitution of the United States limits the exercise of federal judicial power to actual cases and controversies. U.S. Const. art. III, § 2; Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 239-41, 57 S.Ct. 461, 81 L.Ed. 617 (1937). The authority conferred on federal courts by the Declaratory Judgment Act, 28 U.S.C. § 2201, is likewise limited to controversies that are within the constitutionally constrained scope of federal jurisdiction. Aetna, 300 U.S. at 240, 57 S.Ct. 461. To be justiciable, a controversy must be "a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion what the law would be upon a hypothetical state of facts." Aetna, 300 U.S. at 241, 57 S.Ct. 461. Federal courts are not empowered to issue advisory opinions where there is no actual controversy of this nature. See id.; Golden v. Zwickler, 394 U.S. 103, 108, 89 S.Ct. 956, 22 L.Ed.2d 113 (1969) ; Shell Oil Co. v. Noel, 608 F.2d 208, 213 (1st Cir. 1979).
In resolving a Rule 12(b)(1) motion to dismiss an action for lack of standing, the Court must "credit the plaintiff's well-pled factual allegations and draw all reasonable inferences in the plaintiff's favor." Sanchez ex rel. D.R.-S. v. United States, 671 F.3d 86, 92 (1st Cir. 2012) ; see Lyman v. Baker, 954 F.3d 351, 359-60 (1st Cir. 2020) (). To demonstrate constitutional standing, a plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision. Spokeo, Inc. v. Robins, 578 U.S. 330, 136 S. Ct. 1540, 1547, 194 L.Ed.2d 635 (2016). Plaintiffs, as "[t]he part[ies] invoking federal jurisdiction[,] bear[ ] the burden of establishing these elements." Lujan v. Defs. of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).
Here, PV Properties has adequately framed a controversy within the scope of the Court's Article III authority with respect to PV Properties’ claim against PREPA. PV Properties has pleaded that the value of RECs that it owns has diminished as a result of PREPA's alleged noncompliance with its statutory obligations. Moreover, that injury would be redressed if the Court were to give PV Properties relief by...
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