PUERTO RICO: Pending Litigation vs. Commonwealth & Oversight Board
With approximately $74 billion of debt and insufficient resources to satisfy it, there have been many lawsuits filed against the Commonwealth of Puerto Rico (and in some instances, the Oversight Board) before the filing of the Title III case.
1. On Jan. 7, 2016, certain insurers of bonds issued by the public corporations of the Commonwealth of Puerto Rico (the "Commonwealth") filed a complaint against the Commonwealth's Governor, Secretary of Treasury, Sub-secretary of Treasury, Secretary of Justice, and Director of Office of Management and Budget (the "OMB Director"), the Puerto Rico Tourism Company's Executive Director (the "Tourism Director"), the President of the Government Development Bank for Puerto Rico (the "GDB"), and certain John Does seeking declaratory judgment that certain executive orders issued by the Governor violate the Takings Clause and Contracts Clause of the U.S. Constitution. See Assured Guaranty Corp., et al. v. Garcia-Padilla, et al., No. 16-01037-FAB (D.P.R. Jan. 7, 2016).
2. On Jan. 19, 2016, an insurer of debt issued by the Commonwealth and its public corporations filed a complaint against the Commonwealth's Governor, Secretary of Treasury, Sub-secretary of Treasury, Secretary of State, Secretary of Justice, and OMB Director, the Tourism Director, the GDB's President, and certain John Does seeking declaratory judgment that section 8 of the Puerto Rico Constitution, the Management and Budget Office Organic Act, and executive orders relating to the foregoing (a) are preempted by the Bankruptcy Code, (b) improperly operate in a field occupied by Congress, (c) conflict with the Bankruptcy Code, and (d) with respect to the executive orders, violate the Contracts Clause and Takings Clause of the U.S. Constitution. See Financial Guaranty Insurance Company v. Garcia-Padilla, et al., No. 16-01095-FAB (D.P.R. Jan. 19, 2016).