U.S. District Court Judge Laura Taylor Swain said she would hear a bondholder suit in the Puerto Rico Electric Power Authority case that Puerto Rico bondholders and Puerto Rico’s government argued should be assigned to a different judge.
GoldenTree Asset Management and bond insurer Syncora Guarantee filed suit in the U.S. District Court for Puerto Rico in mid-November charging Puerto Rico’s central government, Fiscal Agency and Financial Advisory Authority, and FAFAA Executive Director Omar Marrero, and Gov. Pedro Pierluisi manipulated PREPA’s fiscal plans and budgets to deprive bondholders of their claim on the authority’s revenues and depress the value of the bonds.
The court’s clerk set it up as an adversary proceeding in the PREPA bankruptcy and filed a statement saying the plaintiffs failed to identify the case as connected with the Puerto Rico Oversight, Management, and Economic Stability Act.
The bond parties argued the suit wasn’t related to PROMESA and the case should be assigned randomly. The defendants argued the case should be part of the ongoing bankruptcy. Swain Tuesday agreed with Puerto Rico and took the case.
It remains to be seen whether the bond parties will appeal. A spokesperson for GoldenTree couldn’t be immediately reached.
“It seems that GoldenTreee filed it first in District Court to avoid Judge Swain,” Puerto Rico Attorney John Mudd said. “If that was the intent, it did not work.”
Puerto Rico Clearinghouse Principal Cate Long said, “GoldenTree is correct that a court clerk cannot unilaterally reassign the venue of a case under District of Puerto Rico rules. Their complaint will need to go back to the district court where a judge can assign it to the Title III court.”
In a filing on Thursday GoldenTree and Syncora said, “This case is not an adversary proceeding brought under PROMESA. Rather, this is a plenary civil proceeding before the United States District Court for Puerto Rico by non-debtor plaintiffs against non-debtor defendants with respect to claims and causes of action for violations of non-bankruptcy law.”
On Friday FAFAA told Judge Swain the bond parties are trying to “evade this court as a forum.” They cited a passage of PROMESA that said a federal district court is required to transfer any civil proceeding arising under PROMESA’s bankruptcy provision to the court handling the bankruptcy.
The bond parties’ claims are “interfering with PREPA’s property, or at the very least ‘related to'” PREPA’s ongoing bankruptcy, FAFAA said.
On Tuesday Swain said the suit “on its face involves parties, transactions, claims, and issues of law that are the same or similar to those pending in any number of matters in the Title III case and related proceedings.” Judicial efficiency and economy recommended that she handle the case.