Rivera-Schatz v. Fin. Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R.)

• Decision Date: 07 August 2018
• Docket Number: Adv. Proc. No. 18-081-LTS in 17 BK 3283-LTS,Case No. 17-3283 (LTS) (Jointly Administered)
• Citation: 327 F.Supp.3d 364
• Parties: IN RE: The FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as representative of the Commonwealth of Puerto Rico, Debtors. Hon. Thomas Rivera-Schatz (in his official capacity and on behalf of the Senate of Puerto Rico), and Hon. Carlos J. Méndez-Núñez (in his official capacity and on behalf of the House of Representatives of Puerto Rico), Plaintiffs, v. The Financial Oversight and Management Board for Puerto Rico, José B. Carrión III, Andrew G. Biggs, Carlos M. García, Arthur J. González, José R. González, Ana J. Matosantos, David A. Skeel, Jr., and Natalie A. Jaresko (in their official capacities), Defendants.
• Court: U.S. District Court — District of Puerto Rico

327 F.Supp.3d 364

IN RE: The FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as representative of the Commonwealth of Puerto Rico, Debtors.¹Hon. Thomas Rivera-Schatz (in his official capacity and on behalf of the Senate of Puerto Rico), and Hon. Carlos J. Méndez-Núñez (in his official capacity and on behalf of the House of Representatives of Puerto Rico), Plaintiffs,

v.The Financial Oversight and Management Board for Puerto Rico, José B. Carrión III, Andrew G. Biggs, Carlos M. García, Arthur J. González, José R. González, Ana J. Matosantos, David A. Skeel, Jr., and Natalie A. Jaresko (in their official capacities), Defendants.

Case No. 17-3283 (LTS) (Jointly Administered)

Adv. Proc. No. 18-081-LTS in 17 BK 3283-LTS

United States District Court, D. Puerto Rico.

Signed August 7, 2018

ALDARONDO & LÓPEZ-BRAS, PSC, By: Eliezer Aldarondo-Ortiz, Claudio Aliff-Ortiz, Iván M. Castro-Ortiz, Sheila Torres-Delgado, David Rodríguez-Burns, ALB Plaza, Suite 400, 16 State Road 199, Guaynabo, P.R. 00969, Attorneys for Plaintiff the Hon. Thomas Rivera-Schatz in his official capacity as President of the Senate of Puerto Rico and on behalf of the Senate of Puerto Rico

By: Israel Roldán-González, Víctor Calderón-Cestero, Verónica Ferraiouli-Hornedo, Carlos E. Rivera-Justiniano, Attorneys for Plaintiff the Hon. Carlos J. Méndez-Núñez in his official capacity as Speaker of the Puerto Rico House of Representatives and on behalf of the Puerto Rico House of Representatives

O'NEILL & BORGES LLC, By: Hermann D. Bauer, 250 Muñoz Rivera Avenue, Suite 800, San Juan, P.R. 00918-1813, PROSKAUER ROSE LLP, By: Martin J. Bienenstock, Stephen L. Ratner, Mark D. Harris, Timothy W. Mungovan, Kevin J. Perra, Eleven Times Square, New York, N.Y. 10036, and, Guy Brenner, 1001 Pennsylvania Ave., NW, Suite 600 South, Washington, DC 20004, Attorneys for Defendants the Financial Oversight and Management Board for Puerto Rico, José B. Carrión III, Andrew G. Biggs, Carlos M. García, Arthur J. González, José R. González, Ana J. Matosantos, David A. Skeel, Jr., and Natalie A. Jaresko (in their official capacities)

PROMESA

Title III

OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS THE PLAINTIFFS' COMPLAINT

LAURA TAYLOR SWAIN, United States District Judge

Before the Court is Defendants' Motion Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) to Dismiss Plaintiff's Complaint Dated July 9, 2018 (see Docket Entry No. 26 in Adversary Proceeding No. 18-00081, the "Motion")² , filed by the Financial Oversight and Management Board for Puerto Rico (the "Oversight Board"), José B. Carrión III, Andrew G. Biggs, Carlos M. García, Arthur J. González, José R. González, Ana J. Matosantos, David A. Skeel, Jr., and Natalie A. Jaresko (collectively with the Oversight Board, the "Defendants"). The Plaintiffs in this action, representing members of the Senate and House of Representatives (collectively, the "Legislature") of the Commonwealth of Puerto Rico, assert that the Oversight Board has acted in excess of its authority and encroached on prerogatives of the Legislature by refusing to certify a budget developed by the Legislature and, after the Legislature refused to enact legislation recommended by the Oversight Board, certifying a new fiscal plan and budget that includes reduced appropriations for the Legislature. The Court heard argument on the instant Motion on July 25, 2018 (the "Hearing"),³ and has considered carefully all of the arguments and submissions made in connection with the Motion.⁴ Except as explained below, the Court has subject matter jurisdiction of this action pursuant to 48 U.S.C. § 2166. For the following reasons, Defendants' Motion is granted.

I. BACKGROUND

The Court hereby incorporates by reference the factual summary set forth in section I of the Court's Opinion and Order on the Governor's Lawsuit. The following additional background facts are drawn from the Adversary Complaint for Declaratory and Injunctive Relief (Docket Entry No. 1, the "Complaint") filed in the above-captioned action on July 9, 2018, by the Honorable Thomas Rivera-Schatz, in his official capacity as President of the Senate of Puerto Rico and on behalf of the Senate of Puerto Rico, and the Honorable Carlos J. Méndez-Núñez, in his official capacity as speaker of the House of Representatives of Puerto Rico and on behalf of the House of Representatives (collectively, "Plaintiffs").

The focus of the instant dispute is the parties' disagreement over the future status of Puerto Rico's Wrongful Termination Act, Law No. 80 of May 30, 1976 (as amended, "Law 80"), pursuant to which private sector employers who dismiss employees without just cause must pay compensation to their former employees based upon a formula established by the statute. (Compl. ¶ 3 n. 2.) Law 80 thus protects employees from termination of their employment without just cause.

On April 19, 2018, in connection with the Oversight Board's rejection of the Governor's proposed fiscal plan, the Oversight Board certified its own fiscal plan for the Commonwealth pursuant to Section 201(e)(2) of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA").⁵ The April 2018 Board Fiscal Plan asserted that "Puerto Rico must become an employment at will jurisdiction" and stated that it was "built on the assumption that, by no later than May 31, 2018, the Legislative Assembly of Puerto Rico will pass the Labor Reform Package and present it to the Governor of Puerto Rico for his signature." (Id. ¶¶ 37-38.) On April 24, 2018, the Oversight Board submitted a draft labor reform bill to the Legislature that included a provision that would repeal Law 80. (Id. ¶ 36.) That draft bill was introduced in the Senate of Puerto Rico but was not passed. (Id. ¶¶ 40, 42.)

Subsequently, the Oversight Board reached an agreement with the Governor which included, among other things, a requirement that the Governor and Legislature approve a law repealing Law 80. (Id. ¶ 46.) In connection with that agreement, the Oversight Board certified a revised fiscal plan on May 30, 2018. The May Board Fiscal Plan continued to call for the repeal of Law 80, but removed certain other reforms and fiscal measures that had been included in the April 2018 Board Fiscal Plan. (Id. ¶¶ 43-44.)

On May 30, 2018, the Senate of Puerto Rico passed a bill to repeal Law 80 only with respect to employees who would be hired after the bill became law. (Id. ¶ 47.) On June 4, 2018, in response to an inquiry from the Honorable Jorge Navarro Suárez, President of the Government Commission of the Puerto Rico House of Representatives, the Oversight Board stated that, if "the Government of Puerto Rico fail[ed] to comply exactly with the understanding reached with the Oversight Board concerning the repeal of Law 80," the Oversight Board would revert to the April 2018 Board Fiscal Plan, amend the fiscal plan to reduce or eliminate certain budgetary appropriations, and submit a budget consistent with such fiscal plan. (Id. ¶¶ 49-50.) The Oversight Board's letter specifically noted that the Oversight Board's amended fiscal plan and budget would "[m]aintain the cuts to the budgets of the Legislature and Judiciary as outlined in the April 19 Fiscal Plan." (Id. ¶ 50.) A subsequent letter from the Oversight Board to the Legislature on June 29, 2018 indicated that the Legislature had failed to fully repeal Law 80 and, as a result, the Oversight Board would follow through on the cost-cutting measures it had referenced in its June 4, 2018 letter including, among others, "[r]ight-sizing measures" for the Legislature. (Id. ¶ 53-54.)

On June 30, 2018, the Puerto Rico House of Representatives and the Senate of Puerto Rico approved a fiscal year 2019 Commonwealth budget (the "Legislative Assembly Budget"), which the Governor signed and which did not provide for Law 80's repeal. (Id. ¶ 55.) On June 30, 2018, the Oversight Board certified a separate Commonwealth budget for fiscal year 2019. (Id. ¶¶ 56-57.)

II. DISCUSSION

Defendants move pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6)⁶ to dismiss the Complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief may 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 its existence. 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).

Plaintiffs' Complaint requests relief in the following two Counts. In Count One, Plaintiffs allege that the Oversight Board overstepped its authority in seeking to compel the Legislature to repeal Law 80, and seek two declarations: a declaration "that the rejected policy recommendations in the Fiscal Plan are non-binding recommendations, and that the Legislative Assembly cannot be compelled to implement any of these policies" (Compl. ¶ 79); and, based on assertions that the Oversight Board refused to certify the Legislature's proposed 2018-2019 budget and "violat[ed] PROMESA in exceeding its authority" when it "imposed the 2018-2019 FOMB Budget," a declaration that "the 2018-2019 FOMB Budget is null and void, and reinstating the [Legislative Assembly Budget] duly approved by the Legislative Assembly and signed by the Governor of Puerto Rico." (Id. ¶ 81). In Count Two, following allegations that the Oversight Board's refusal to certify the Legislative Assembly Budget and imposition of its own budget was unlawful because it was based solely on the Legislature's failure to comply precisely with the Oversight Board's specifications for repeal of Law 80 and...