Rivera-Rivera v. PREPA

• Court: Court of Appeals for the First Circuit
• Decided: October 27, 2021
• Docket: 20-1797P
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 20-1797

IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE COMMONWEALTH OF PUERTO RICO; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO RICO HIGHWAYS AND TRANSPORTATION AUTHORITY; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO RICO ELECTRIC POWER AUTHORITY (PREPA); THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO RICO SALES TAX FINANCING CORPORATION, a/k/a Cofina; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE EMPLOYEES RETIREMENT SYSTEM OF THE GOVERNMENT OF THE COMMONWEALTH OF PUERTO RICO; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE OF THE PUERTO RICO PUBLIC BUILDINGS AUTHORITY,

Debtors.

JOSE RAMON RIVERA-RIVERA, President, Fiduciary, and Trustee of the Board of Trustees of the Electric Power Authority's Employees’ Retirement System; SISTEMA DE RETIRO DE LOS EMPLEADOS DE LA AUTORIDAD DE ENERGIA ELECTRICA, (SREAEE); BOARD OF TRUSTEES OF THE PUERTO RICO ELECTRIC POWER AUTHORITY EMPLOYEES' RETIREMENT SYSTEM; RALPHIE E. DOMINICCI RIVERA; ANGEL R. FIGUEROA-JARAMILLO; JUAN CARLOS ADROVER; SAMMY RODRIGUEZ; ALVIN ROMAN; ERNESTO ZAYAS LOPEZ, a/k/a Erasto Zayas Lopez,

Plaintiffs, Appellants,

v.

THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE COMMONWEALTH OF PUERTO RICO; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS REPRESENTATIVE FOR THE PUERTO RICO ELECTRIC POWER AUTHORITY (PREPA); FERNANDO GIL ENSEAT; CARLOS M. YAMIN-RIVERA; ROBERT POE; CHARLES BAYLESS; DAVID K. OWENS; RALPH A. KREIL; GERARDO LORAN-BUTRON; TOMAS TORRES-PLACA; PEDRO R. PIERLUISI,

Defendants, Appellees, PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY

Interested Party, Appellee,

ERNESTO SGROI HERNANDEZ; RICARDO ROSSELLO NEVARES; CHRISTIAN SOBRINO-VEGA,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Laura Taylor Swain, U.S. District Judge]

Before

Kayatta and Barron, Circuit Judges, and O’Toole, Jr., District Judge.

Guillermo J. Ramos-Luiña, with whom Rafael A. Ortiz-Mendoza, Rolando Emmanuelli-Jiménez, Jessica E. Méndez-Colberg, Wendloyn Torres-Rivera, and Bufete Emmanuelli, C.S.P. were on brief, for appellants. William J. Shushon, with whom Peter M. Friedman, John J. Rapisardi, and O’Melveny & Myers LLP were on brief, for interested party-appellee the Puerto Rico Fiscal Agency and Advisory Authority. Lary Alan Rappaport, with whom Martin J. Bienenstock, Ehud Barak, Mark D. Harris, Paul V. Possinger, Timothy W. Mungovan, John E. Roberts, and Proskauer Rose LLP were on brief, for appellee Fiscal Oversight and Management Board for Puerto Rico as representative of the Commonwealth of Puerto Rico and the Puerto Rico Electric Power Authority. Carlos Lugo-Fiol was on brief for appellee Governor of Puerto Rico Pedro Pierluisi. Katiuska Bolaños Lugo, with whom Díaz & Vázquez Law Firm,

 Of the Southern District of New York, sitting by designation.  Of the District of Massachusetts, sitting by designation. P.S.C. was on brief, for appellees Robert Poe, Charles Bayless, David K. Owens, Ralph A. Kreil, Gerardo Lorán-Butrón, and Tomás Torres-Placa.

October 27, 2021 BARRON, Circuit Judge. This case concerns a request for

declaratory relief in relation to a now-expired and formally

rescinded executive order that the Governor of Puerto Rico issued

in connection with the effort to address the Commonwealth's ongoing

fiscal crisis. The order, among other things, temporarily

appointed members to the Board of Trustees of the Retirement System

of the Puerto Rican Electric Power Authority ("PREPA"),

effectively displacing the sitting trustees for a limited purpose.

The case was heard by the federal court established in June 2016

by Title III of the Puerto Rico Oversight, Management, and Economic

Stability Act ("PROMESA"), see 48 U.S.C. §§ 2161-2177, to handle

matters relating to the debt crisis in Puerto Rico ("the Title III

Court"). The Title III Court dismissed the complaint on the ground

that it is moot. We now affirm.

I.

The Puerto Rico Electric Power Authority Employees'

Retirement System ("Retirement System") was created in 1945

pursuant to a collective bargaining agreement between PREPA and

the Puerto Rico Electric Industry and Irrigation Workers Union.

The Retirement System is responsible for administering a pension

plan for more than 12,000 retired employees of PREPA, a public

corporation responsible for the generation and transmission of

electricity in Puerto Rico.

A resolution issued alongside the 1945 collective

- 4 - bargaining agreement entrusts administration of the Retirement

System's pension plan to a Board of Trustees. Pursuant to the

Retirement System's Bylaws, three trustees are selected by PREPA

employees, three trustees are selected by PREPA's Board of

Directors, one trustee is elected by retired PREPA employees, and

one serves dually as a trustee and as the Executive Director of

PREPA.

The Fiscal Oversight and Management Board ("FOMB") was

created by PROMESA. It is authorized, among other things, to

"require . . . the Governor to submit to the Oversight

Board . . . budgets . . . regarding a covered territorial

instrumentality." 48 U.S.C. § 2121(d)(1)(B). The FOMB

designated PREPA as a covered entity on September 30, 2016.

On March 22, 2018, Governor Ricardo Rosselló Nevares

issued Executive Order No. 2018-012 ("Order"). Citing the

Commonwealth’s ongoing economic crisis and PROMESA’s

acknowledgment of the "Government's failure to issue audited

financial statements since the year 2014," the Order asserted that

"it is necessary to have the most recent, precise, updated, and

audited financial information from PREPA, including all of the

units that comprise it." P.R. Exec. Order No. 2018-012, at 1

(Mar. 22, 2018); see 48 U.S.C. § 2146(a) (setting out requirements

regarding the FOMB's issuance of a restructuring certification for

a covered entity); H.R. Rep. No. 114-602, pt. 1, at 47 (2016)

- 5 - (providing that the FOMB "must certify by an affirmative

vote . . . that the [covered] entity has . . . adopted procedures

necessary to deliver timely audited financial statements"). The

Order’s preambulatory clauses treated the Retirement System as a

component of PREPA and thus as a covered entity subject to the

FOMB’s oversight. P.R. Exec. Order No. 2018-012, at 1. The Order

then asserted that the Retirement System’s Board of Trustees had

"not complied with the annual obligation imposed by [PREPA's]

Bylaws," which the Order read as imposing on the Board of Trustees

an "obligation to approve annually the actuarial reports and

financial statements of the Retirement System." Id. at 2. The

Order further asserted that "certain members of said Board [of

Trustees] have opted to not act" in compliance with their

obligation under PREPA’s Bylaws, which in turn "impacts directly

PREPA’s ability to complete its financial statements" because "the

Retirement System's actuarial reports, financial

statements, . . . and other pertinent information . . . is part of

PREPA’s financial statements." Id.

Section 1 of the Order appointed PREPA's Board of

Directors as trustee for the Retirement System for two purposes:

finalizing and issuing actuarial reports and financial statements

of the Retirement System for Fiscal Year 2017, and delivering

information to the Puerto Rico Fiscal Agency and Financial Advisory

Authority ("AAFAF") related to the preparation of PREPA's budget

- 6 - for Fiscal Year 2019.1 Id. at 4. Section 2 granted PREPA’s Board

of Directors, in its capacity as trustee for the Retirement System,

"any power or function of the Board of Trustees that may be

necessary or convenient to carry out the urgent purposes mentioned

above." Id. at 4-5. Section 2 also acknowledged that the

Retirement System's sitting Board of Trustees reserved authority

to "exercis[e] the other functions corresponding to it in the daily

administration of the Retirement System, provided that it may not

impede . . . the approval and/or publication by the Board of

Directors of the Retirement System's actuarial reports or

financial statements." Id. at 5.

The Order also described when it would terminate: by its

own terms, the Order would no longer be effective upon the

Retirement System's issuance of their actuarial reports and

financial statements "for the corresponding fiscal years, up to

and including fiscal year 2017," the FOMB's certification of a

revised fiscal plan for PREPA, and the FOMB's certification of a

budget for PREPA for fiscal year 2019. Id. at 5.

On March 27, 2018, José Ramón Rivera-Rivera, President

of the Retirement System's Board of Trustees prior to the Order's

issuance, filed a complaint in the Puerto Rico Court of First

Instance. The complaint sought a permanent injunction rendering

1The AAFAF is a defendant in this suit in its capacity as a representative for the Commonwealth of Puerto Rico and PREPA.

- 7 - the Order and actions taken under it void. The other plaintiffs

were the Retirement System, the Retirement System's Board of

Trustees (in its organizational capacity), and members of the

Retirement System's Board of Trustees. 2 We refer to the

plaintiffs, collectively, as the "Retirement System." The

complaint also sought a declaration that the Retirement System is

a trust "separate and independent of" PREPA and that the Order is

an undue "interference with the independence and powers of the

Retirement System." The suit named as the defendants the

Commonwealth of Puerto Rico, Governor Rosselló Nevares, PREPA, and

President of PREPA's Board of Directors, Ernesto Sgroi Hernández.

We refer to the defendants, collectively, as "the defendants."

The FOMB, acting pursuant to 48 U.S.C. § 2166(a),

removed this action to the Title III Court. It did so on the

ground that the injunctive and declaratory relief requested by the

Retirement System would "interfere with the [FOMB's] ability,

2 The members of the Retirement System's Board of Trustees who initially filed suit were Ralphie E. Dominicci Rivera, Ángel R. Figueroa-Jaramillo, and Ernesto Zayas López. These members were elected to their positions by PREPA employees. The Second Amended Complaint names as plaintiffs Juan Carlos Adrover, Sammy Rodríguez, and Alvin Román, members of the Board who were designated as such by PREPA management. One peculiarity in this case is that José Ortiz, Executive Director of PREPA's Governing Body, also served as a member of the Retirement System's Board of Trustees. He did not consent to join the action as a plaintiff but was named as a defendant in the Second Amended Complaint because plaintiffs viewed him as an indispensable party to the action.

- 8 - among other things, to restructure PREPA by placing the Retirement

System and its assets . . . outside of the [FOMB's] purview."3

The Retirement System filed in response a motion to remand the

case to the Court of First Instance. The motion was denied. In

re Fin. Oversight & Mgmt. Bd. for P.R., Title III Case No. 17-BK-

3283, Adv. No. 18-AP-0047, 2018 WL 8130850, at *5 (D.P.R. Oct. 12,

2018).

In November 2019, Governor Wanda Vázquez Garced issued

Executive Order No. 2019-060, which operated to formally withdraw

the executive order that is our focus here. The Retirement System

then filed a Second Amended Complaint in January 2020, which sought

relief in the form of "a Declaratory Judgment decreeing that [the

Order] was null and void and therefore the actions that were taken

based on [it] are equally null and void."4

The FOMB moved to dismiss the Retirement System’s Second

Amended Complaint for lack of subject matter jurisdiction on

mootness grounds, due to the expiration and formal rescission of

the Order. See Fed. R. Civ. P. 12(h)(3). The Title III Court

3 The FOMB is a defendant in this suit in its capacity as representative for the Commonwealth of Puerto Rico and in its capacity as a representative for PREPA. See 48 U.S.C. § 2175(b) ("The [FOMB] in a case under [Title III] is the representative of the debtor."). 4 The FOMB alleges, and the Retirement System does not dispute, that Exec. Order No. 2018-012, by its own terms, was no longer in effect as of June 2019.

- 9 - determined that the Retirement System had demonstrated the

existence of a substantial controversy, premised on the "disputed

validity of acts taken pursuant to" the Order. See Rivera-Rivera,

Adv. Proc. No. 18-AP-0047-LTS (slip op. at 9) (D.P.R. July 30,

2020). However, the Title III Court held that the Retirement

System failed to show that its requested declaratory relief

presented a controversy of sufficient reality or immediacy. Id.

at 11.

Noting that the reality or immediacy of a plaintiff's

requested relief is shown where "it takes on a conclusive character

and 'settle[s] some dispute which affects the behavior of the

defendant[s] towards the plaintiff[s],'" id. at 10 (citing In re

Fin. Oversight & Mgmt. Bd. for P.R. ("Aurelius Capital Master II"),

919 F.3d 638, 646 (1st Cir. 2019)), the Title III Court explained

that the dispute lacked "sufficient immediacy and reality" to give

the relief sought by the Retirement System -- the "right to

evaluate, intervene, modify, amend or ratify" the financial

statements issued by the PREPA Board of Directors while the Order

was in effect -- and that it failed to show what past "specific

actions in mind that [the Retirement System] hope[d] to eschew, or

that they intend[ed] to modify," id. at 11-12. The Title III

Court held accordingly that the case was moot and that it lacked

subject matter jurisdiction under the Declaratory Judgment Act, 28

U.S.C. § 2201. Id. at 12.

- 10 - Appellants filed a timely notice of appeal. We have

jurisdiction to hear this appeal under 28 U.S.C. § 1291 and 48

U.S.C. § 2166(e)(2).

II.

The threshold question on appeal is "whether the facts

alleged, under all the circumstances, show that there is a

substantial controversy, between parties having adverse legal

interests, of sufficient immediacy and reality to warrant the

issuance of a declaratory judgment." See Md. Cas. Co. v. Pac.

Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826

(1941); see also Town of Portsmouth v. Lewis, 813 F.3d 54, 59 (1st

Cir. 2016).5 Our review is de novo, see Aurelius Cap. Master II,

919 F.3d at 644, and because the case before us arises under the

Declaratory Judgment Act, the burden is on the Retirement System

to make the required showing, see Town of Portsmouth, 813 F.3d at

59.

We may assume that the Retirement System could have met

its burden to make that showing while the Order was still

operative, based on the fact that the Order displaced the Board of

Trustees with respect to some of its functions and limited the

5The parties do not dispute the existence of a substantial controversy. We thus affirm the Title III court's determination that "[t]he disputed validity of acts taken pursuant to the Executive Order is a substantial controversy." Rivera-Rivera, No. 18-AP-0047-LTS (slip op. at 9) (D.P.R. July 30, 2020).

- 11 - trustees' ability to fulfill their fiduciary duties to the

Retirement System. But, the Order expired by its own terms in

June 2019, upon the certification of PREPA’s Fiscal Plan by the

FOMB. It was then later rescinded formally by an executive order

issued by Governor Wanda Vázquez Garced on November 24, 2019. See

P.R. Exec. Order 2019-060 (Nov. 24, 2019). Thus, there is no

longer any basis for concluding that there is the requisite type

of controversy, insofar as the basis for showing as much is

premised on an ongoing displacement brought about by the Order.

See Town of Portsmouth, 813 F.3d at 58-60 (finding the case moot

because the state legislature prohibited the tolls in dispute).

The Retirement System nevertheless contends that it has

suffered continued harm from the Order -- even after it ceased to

be operative -- and that, as a result, this Court should find the

existence of a controversy of sufficient immediacy and reality

despite the Order's expiration and rescission. The Retirement

System nowhere explains, however, what harm is ongoing -- and

fairly traceable to the now-expired Order -- that is presently

causing them injuries that could give them standing to seek

declaratory relief.

The Retirement System does allege ongoing harm resulting

from the Order's grant of authority to PREPA's Board of Directors

based on its understanding that the financial statements issued by

the Board, now binding on the Retirement System, "do not reflect

- 12 - the decisional power that [the Retirement System's trustees have]

over the Retirement System." But, as the defendants note and the

Title III Court concluded, the Retirement System fails to "explain

what being ‘bound’ practically means or how it is causing them

concrete injury."

For example, the Retirement System does not allege that

the information disclosed in the financial statements issued under

the Board of Directors' authority in any way misrepresents the

Retirement System's financial position. Nor does it allege that

the financial statements have resulted in harm to PREPA retirees

or other beneficiaries of the pension plan. Indeed, in its Second

Amended Complaint, the Retirement System alleges that the harm

resulting from the Order and actions taken under it "cannot be

effectively quantified" and suggests that its filing of the action

before us was spurred by a "generalized state of uneasiness"

experienced by the "approximately 12,268 retirees and

approximately 6,227 active employees in the [Retirement System]."

Accordingly, even if the Order has some ongoing effect

on the Retirement System's expectations as to its relationship

with the Commonwealth, FOMB, and PREPA, the Retirement System has

failed to show that any effect constitutes a concrete injury for

purposes of the "case or controversy" requirement of Article III

of the U.S. Constitution. See Spokeo, Inc. v. Robins, 136 S.Ct.

1540, 1550, 194 L.Ed.2d 635 (2016) ("Robins cannot satisfy the

- 13 - demands of Article III by alleging a bare procedural violation.

A violation of one of the FCRA’s procedural requirements may result

in no harm."); Gov. Wentworth Reg’l Sch. Dist. v. Hendrickson, 201

F. App’x 7, 9 (1st Cir. 2006). Thus, the Retirement System fails

to show that the Title III Court erred in dismissing the action on

mootness grounds.

III.

The Retirement System does separately contend that, even

though the Order is no longer in place -- and even if there is no

live, immediate controversy as a result -- the Second Amended

Complaint still is not moot under certain well-known exceptions to

the mootness doctrine. It thus contends that, insofar as an

exception applies, there is an "immediate and real" controversy

that would satisfy the Declaratory Judgment Act's requirements.

We may assume that a showing that one of these exceptions applies

would have the consequence that the Retirement System posits.

But, as we will explain, none of the exceptions to which the

Retirement System directs our attention is applicable here.

The Retirement System first invokes the "voluntary

cessation" exception to mootness, which provides that a

defendant's voluntary cessation of putatively illegal or

unconstitutional conduct will not moot a case, unless the defendant

"meets 'the formidable burden of showing that it is absolutely

clear the allegedly wrongful behavior could not reasonably be

- 14 - expected to recur.'" American Civil Liberties Union of

Massachusetts v. U.S. Conference of Catholic Bishops, 705 F.3d 44,

55 (1st Cir. 2013) (quoting Friends of the Earth, Inc. v. Laidlaw

Envtl. Servs. (TOC), Inc., 528 U.S. 167, 190, 120 S.Ct. 693, 145

L.Ed.2d 610 (2000)). The Retirement System contends that the

defendants have failed to show that unlawful interference with its

independence will not occur the "next time the [Fiscal Oversight

and Management Board] or the Commonwealth deems it necessary for

PREPA to comply with the Oversight Board's requirements regarding

the certification of PREPA's Fiscal Plan and Budget."

The Retirement System did not make this argument to the

Title III Court, however, and "[i]t is a well-settled principle in

this circuit that 'a party . . . may not raise on appeal issues

that were not seasonably advanced (and, hence, preserved) below.'"

Toren v. Toren, 191 F.3d 23, 29 (1st Cir. 1999)(second alteration

in original)(quoting Daigle v. Me. Med. Ctr. Inc., 14 F.3d 684,

687 (1st Cir. 1994)). But, even if we were to overlook the problem

with the Retirement System raising this argument as late as it

has, we do not find it to be persuasive, given that the Order

"expired by its own terms, according to criteria adopted before

[the Retirement System] ever filed this litigation." There is

thus no basis on this record for finding that the concerns about

manipulation to evade review that underlie this exception to

mootness are implicated. ACLU of Mass., 705 F.3d at 55.

- 15 - The Retirement System next argues that the "capable of

repetition yet evading review" exception to mootness applies here.

We may apply this exception where a plaintiff shows "(1) the

challenged action was in its duration too short to be fully

litigated prior to cessation or expiration, and (2) there was a

reasonable expectation that the same complaining party would be

subject to the same action again." Weinstein v. Bradford, 423

U.S. 147, 149 (1975); see also Davidson v. Howe, 749 F.3d 21, 26

(1st Cir. 2014). The Retirement System has failed to satisfy the

first requirement, as it offers no explanation for why the Order

did not remain operative long enough for a challenge to its legal

validity to be fully litigated, given that the Order was in effect

for fifteen months until its expiration. See Gulf of Me.

Fisherman's All. v. Daley, 292 F.3d 84, 89 (1st Cir. 2002)

(considering "the actual, as opposed to theoretical" life of a

regulation "and the historical fact that review is indeed possible"

as part of its analysis of whether the challenged regulation "was

too short in duration to be fully litigated before its expiration")

(internal quotation marks omitted).

The Retirement System does point us to delays beyond its

control that it contends prevented this case from being fully

litigated before the Order expired. But, the record does not

provide support for rejecting the Title III Court's contrary

reading of the record. See Fisherman's All., 292 F.3d at 89

- 16 - ("[A]ppellant never requested expedited review during this

litigation. On the contrary, both parties sought numerous

extensions of time for filing the administrative record, motions,

and briefs. As a result of these delays, we cannot know whether

[appellant] might have obtained a judgment on its

challenges . . . .").

Finally, the Retirement System argues that the

"collateral consequences" exception to mootness applies here.

This exception has been applied traditionally in criminal cases

because a federal court can, as a general matter, "presume that

[collateral consequences] exist" stemming from an unconstitutional

conviction. See Sibron v. New York, 392 U.S. 40, 55-56, 88 S.Ct.

1889, 20 L.Ed.2d 917 (1968). Even if we assume that the exception

may apply outside of the criminal conviction context, see United

Steel Paper & Forestry Rubber Mfg. Allied Indus. & Serv. Workers

Int'l Union AFL-CIO-CLC v. Government of the Virgin Islands, 842

F.3d 201, 209 (3d Cir. 2016), the problem here is that the

Retirement System points to the same inchoate and barely

articulated consequences that we found too diffuse and unformed to

supply a basis for finding a substantial controversy of sufficient

immediacy now that the Order is no more. Thus, this ground for

overcoming mootness fails as well.

- 17 - IV.

The Title III Court correctly held that the plaintiffs

failed to show the existence of a justiciable case and controversy.

We thus affirm the Title III Court’s dismissal of the case for

lack of subject matter jurisdiction.

- 18 -