Opinion
Case No. 17-3283 (LTS) (Jointly Administered) Adv. Proc. No. 18-041-LTS
2019-08-07
IN RE: The FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as representative of The Commonwealth of Puerto Rico, et al., Debtor. René Pinto Lugo, et al, VAMOS, Movimiento de Concentración Ciudadana Inc., (VAMOS); Unión de Empleados de Oficina y Profesionales de la Autoridad de Edificios Públicos, (UEOGAEP); Unión Insular de Trabajadores Industriales y Construcciones Eléctricas Inc., (UITICE); Unión Independiente de Empleados de la Autoridad de Acueductos y alcantarillados, (UIA); Unión de Empleados de Oficina Comercio y Ramas Anexas, Puertos, (UEOCRA); Unión De Empleados del Banco de la Vivienda, (UEBV); Unión de Nacional Educadores y Trabajadores de la Educación, (UNETE); Asociación de Inspectores de Juegos de Azar, (AIJA); Asociación de Jubilados de la Autoridad de Energía Eléctrica Hereinafter (AJAEE), Plaintiffs, v. The Government of the United States of America, (USA); Financial Oversight and Management Board for Puerto Rico (the FOMB); and Ricardo Rosselló Nevares in His Official Capacity, Defendants.
ROBERTO O. MALDONADO NIEVES, By: Roberto O. Maldonado Nieves, C/7 N.E. #344, Suite 1-A, Esq. Franklin D. Roosevelt, San Juan, Puerto Rico 00921, Attorney for Plaintiffs U.S. DEPARTMENT OF JUSTICE CIVIL DIVISION, By: Joseph H. Hunt, Thomas G. Ward, Jennifer D. Ricketts, Christopher R. Hall, Jean Lin, Cesar A. Lopez-Morales, Laura Hunt, 20 Massachusetts Ave., N.W., Washington, D.C. 20530, Attorneys for the United States of America O'NEILL & BORGES LLC, By: Hermann D. Bauer, Ubaldo M. Fernández, 250 Muñoz Rivera Ave., Suite 800, San Juan, Puerto Rico 00918-1813, PROSKAUER ROSE LLP, By: Martin J. Bienenstock, Stephen L. Ratner, Timothy W. Mungovan, Chantel L. Febus, Eleven Times Square, New York, New York 10036, Attorneys for The Financial Oversight and Management Board for Puerto Rico DEPARTMENT OF JUSTICE, By: Wanda Vázquez Garced, Wandymar Burgos Vargas, P.O. Box 9020192, San Juan, Puerto Rico 00902, MARINI PIETRANTONI MUÑIZ LLC, By: Luis C. Marini-Biaggi, María T. Álvarez-Santos, MCS Plaza, Suite 500, 255 Ponce de León Ave., San Juan, Puerto Rico 00917, O'MELVENY & MYERS LLP, By: John J. Rapisardi, William J. Sushon, Peter Friedman, 7 Times Square, New York, NY 10036, Attorneys for Governor Ricardo Antonio Rosselló Nevares
ROBERTO O. MALDONADO NIEVES, By: Roberto O. Maldonado Nieves, C/7 N.E. #344, Suite 1-A, Esq. Franklin D. Roosevelt, San Juan, Puerto Rico 00921, Attorney for Plaintiffs
U.S. DEPARTMENT OF JUSTICE CIVIL DIVISION, By: Joseph H. Hunt, Thomas G. Ward, Jennifer D. Ricketts, Christopher R. Hall, Jean Lin, Cesar A. Lopez-Morales, Laura Hunt, 20 Massachusetts Ave., N.W., Washington, D.C. 20530, Attorneys for the United States of America
O'NEILL & BORGES LLC, By: Hermann D. Bauer, Ubaldo M. Fernández, 250 Muñoz Rivera Ave., Suite 800, San Juan, Puerto Rico 00918-1813, PROSKAUER ROSE LLP, By: Martin J. Bienenstock, Stephen L. Ratner, Timothy W. Mungovan, Chantel L. Febus, Eleven Times Square, New York, New York 10036, Attorneys for The Financial Oversight and Management Board for Puerto Rico
DEPARTMENT OF JUSTICE, By: Wanda Vázquez Garced, Wandymar Burgos Vargas, P.O. Box 9020192, San Juan, Puerto Rico 00902, MARINI PIETRANTONI MUÑIZ LLC, By: Luis C. Marini-Biaggi, María T. Álvarez-Santos, MCS Plaza, Suite 500, 255 Ponce de León Ave., San Juan, Puerto Rico 00917, O'MELVENY & MYERS LLP, By: John J. Rapisardi, William J. Sushon, Peter Friedman, 7 Times Square, New York, NY 10036, Attorneys for Governor Ricardo Antonio Rosselló Nevares
PROMESA
Title III
OPINION AND ORDER GRANTING MOTIONS TO DISMISS PLAINTIFFS' AMENDED COMPLAINT PURSUANT TO FED. R. CIV. P. 12(B)(1)
LAURA TAYLOR SWAIN, United States District Judge
Before the Court are the United States' Motion to Dismiss Plaintiffs' Adversary Complaint Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) (Docket Entry No. 34 in Adv. Proc. No. 18-00041-LTS, the "U.S. Motion") filed by the United States of America (the "United States"), the Motion of the Financial Oversight and Management Board for Puerto Rico to Dismiss Plaintiffs' First Amended Adversary Complaint Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) (Docket Entry No. 36, the "FOMB Motion") filed by the Financial Oversight and Management Board for Puerto Rico (the "Oversight Board" or "FOMB"), and the Non-Debtor Defendant Governor Ricardo Rosselló Nevares Motion to Dismiss Plaintiffs' First Amended Adversary Complaint Under Fed. R. Civ. P. 12(b)(1) and 12(b)(6) (Docket Entry No. 38, the "Governor's Motion" and, together with the U.S. Motion and the FOMB Motion, the "Motions") filed by Governor Ricardo Antonio Rosselló Nevares (the "Governor") in his official capacity as the Governor of the Commonwealth of Puerto Rico. Each of the Motions seeks dismissal of certain counts of the First Amended Adversary Complaint (Docket Entry No. 29, the "Amended Complaint") filed by Plaintiffs René Pinto-Lugo ("Pinto-Lugo"), VAMOS, Movimiento de Concentración Ciudadana Inc. ("VAMOS"), Unión de Empleados de Oficina y Profesionales de la Autoridad de Edificios Públicos ("UEOGAEP"), Unión Insular de Trabajadores Industriales y Construcciones Eléctricas Inc. ("UITICE"), Unión Independiente de Empleados de la Autoridad de Acueductos y Alcantarillados ("UIA"), Unión de Empleados de Oficina Comercio y Ramas Anexas, Puertos, ("UEOCRA"), Unión de Empleados del Banco de la Vivienda ("UEBV"), Unión de Empleados Profesionales Independientes ("UEPI"), Unión Nacional de Educadores y Trabajadores de la Educación ("UNETE"), Asociación de Inspectores de Juegos de Azar ("AIJA"), and Asociación de Jubilados de la Autoridad de Energía Eléctrica ("AJAEE") (collectively, the "Plaintiffs").
All docket entry references are to entries in Adversary Proceeding No. 18-00041-LTS (the "Adversary Proceeding"), unless otherwise specified.
Governor Rosselló resigned from office on August 2, 2019. Federal Rule of Civil Procedure 25(d), made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure 7025, provides for the automatic substitution of his successor in office.
Plaintiffs filed an opposition to the Motions (Docket Entry No. 59, "Plaintiffs' Opposition"). Replies were filed by the Oversight Board (Docket Entry No. 71, the "FOMB Reply"), the United States (Docket Entry No. 72, the "United States Reply"), and the Governor (Docket Entry No. 73, the "Governor's Reply"). With the Court's permission, Plaintiffs filed a sur-reply (Docket Entry No. 79, the "Sur-reply"). The Court has considered carefully all of the arguments and submissions made in connection with the Motion.
In their Amended Complaint, Plaintiffs assert that the political relationship between the United States and Puerto Rico has long contravened the Constitution of the United States, the Declaration of Independence, and international covenants. They challenge, among other actions, the creation and interposition of the Oversight Board under the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"), 48 U.S.C. § 2101 et seq., and seek, inter alia, declarations that the Oversight Board is unconstitutional, that its acts are null and void, and that the United States is liable for the Commonwealth of Puerto Rico's debt obligations. Plaintiffs assert that the Court has subject matter jurisdiction of this action pursuant to 28 U.S.C. § 1331 and 48 U.S.C. § 2126(a).
For the following reasons, Defendants' Motions are granted as set forth herein. Plaintiffs' First through Sixth Causes of Action are dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction.
I.
BACKGROUND
The following recitation of facts is drawn from the Amended Complaint, except where otherwise noted. Plaintiffs' factual allegations concerning the parties are taken as true for purposes of the instant motion practice.
Plaintiff Pinto-Lugo is a resident of San Juan, Puerto Rico and an owner of certain bonds issued by the Commonwealth of Puerto Rico (the "Commonwealth" or "Puerto Rico") and the Puerto Rico Electric Power Authority ("PREPA"). (Am. Compl. at 8, 16.) The Amended Complaint alleges that, as a bondholder, Pinto-Lugo has "has suffered losses in the investment in bonds made by him" and is "subject to the decisions made and that will continue to be [made by] the [Oversight Board]" pursuant to PROMESA. (Am. Compl. at 16.)
Plaintiff VAMOS is a Puerto Rico non-profit that organizes, educates, and provides support to socioeconomic and cultural groups. (Am. Compl. at 8-9, 16-17.) Its activities include food drives, leadership workshops and counseling services, and community organization efforts. (Am. Compl. at 8-9, 16-17.) VAMOS conducts such activities "on behalf of communities and in particular [ ] socioeconomic[ally] needy [communities] that are being adversely affected by the policies and actions undertaken by the [Oversight Board]." (Am. Compl. at 16-17.)
Plaintiffs UEOGAEP, UITICE, UIA, UEOCRA, UEBV, UEPI, UNETE, and AIJA (collectively, the "Union Plaintiffs") are Puerto Rico labor unions that represent employees of the Commonwealth and its instrumentalities. (Am. Compl. at 9-13, 17.) The Union Plaintiffs are creditors of the Commonwealth and its instrumentalities based upon alleged violations of collective bargaining agreements ("CBAs") and violations of constitutional and statutory rights of members of the Union Plaintiffs. (Am. Compl. 9-13.) The Amended Complaint alleges that the Union Plaintiffs have been subject to the Commonwealth's refusal to "comply with already adjudicated claims" and the Commonwealth's "unilateral actions to freeze, stay and unilaterally alter or modify economic and non economic provisions of their respective [collective bargaining agreements] and under applicable Puerto Rico statutes, allegedly as a result of the fiscal crisis of the Government of Puerto Rico and pursuant to policies, plans, and budgets recommended and/or imposed by the [Oversight Board]." (Am. Compl. at 17-18.)
Plaintiff AJAEE is an organization that represents former employees of PREPA who allegedly have vested pension rights pursuant to statute and collective bargaining agreements. (Am. Compl. at 14, 19.) The Amended Complaint alleges that, as pension beneficiaries and creditors of the Commonwealth and PREPA, AJAEE and its members "are subject to the decisions made and that will continue to be made by the [Oversight Board]." (Am. Compl. at 19.)
Plaintiffs commenced the Adversary Proceeding on April 24, 2018, and filed the Amended Complaint on July 26, 2018. The Amended Complaint presents a history of the relationship between the Commonwealth of Puerto Rico and the United States federal government, beginning with the Spanish-American War in 1898. (Am. Compl. at 21-37.) In summarizing that relationship, the Amended Complaint alleges that the United States federal government exercises control over Puerto Rico and does not provide the people of Puerto Rico with an adequate measure of democratic participation and self-determination. (See, e.g., Am. Compl. at 24, 36.)
The Complaint alleges that Puerto Rico's status as a territory and its treatment under United States law violates the United States Constitution (Am. Compl. at 26, 37) and the Charter of the United Nations (the "U.N. Charter") (Am. Compl. at 28-30). Plaintiffs allege that the extensive powers granted to the Oversight Board by PROMESA, which was enacted in 2016, are inconsistent with aspects of the United States Declaration of Independence, several provisions of the United States Constitution (including the First, Fifth, and Fourteenth Amendments), the U.N. Charter, the Universal Declaration of Human Rights, and the International Covenant on Civil and Political Rights.
In addition to enumerating provisions of the PROMESA statutory scheme that Plaintiffs find objectionable, the Amended Complaint describes nine post-PROMESA events or actions as examples of the broad powers of the Oversight Board:
a) On October 14, 2016, then-Governor of Puerto Rico Alejandro García Padilla submitted to the FOMB the first proposed Fiscal Plan for the Commonwealth (the "García Padilla Plan"). The García Padilla Plan was rejected by the FOMB at its meeting on November 18, 2016. At that meeting, the FOMB adopted and communicated publically a set of five principles for the Fiscal Plan.
b) Governor Rosselló submitted his first Revised Fiscal Plan - a revision of the García Padilla Plan - to the FOMB on February 28, 2017 (the "February 28 Plan). The February 28 Plan proposed no funding for public pension systems per se, but instead provided for a "pay-as-you-go model to cover remaining defined benefit obligations" from the Commonwealth' general budget. On March 9, 2017, the FOMB, sent the Governor a letter stating that the February 28 Plan did not "comply with the requirements set forth in PROMESA". Despite noting that, in the FOMB's view, the February 28 Plan was "heading in the right direction" in many areas, the Board again insisted-as it had at its November 18, 2016meeting and its January 18, 2017 letter-on a firm, round and unexplained "10% benchmark" for pension cuts. The FOMB also stated that it would approve a Fiscal Plan on March 13, 2017.
c) The Government soon after submitted a revised version of its fiscal plan which was finally approved by the FOMB on March 13, 2017. Despite some resistance from the governor, the plan included furloughs and elimination of other public employee benefits per the FOMB's conditions.
d) On June 30, 2017, the FOMB unilaterally ordered $13 million in cuts to the state legislature's budget; a capacity not included in PROMESA, per se.
e) On July 22, 2017, the Puerto Rican Legislature approved Senate Bill 404, which reversed certain retirement cuts that had been approved by the García Padilla administration during 2013. Nevertheless, the FOMB sent a letter to the Governor, ordering for the law to be vetoed.
f) On August 4, 2017, the FOMB imposed a two-day per month furlough on public employees, despite protests from Puerto Rico's government.
g) On August 31, 2017, the FOMB sent another letter, but now in regards to the recently passed Act 47, which allowed for the Patients Ombudsman to impose penalties on those health insurers that deny medical services to their patients for purely economic reasons. Per the FOMB's request, Rosselló was to provide additional information to support the law, or the FOMB would prevent the law from taking place.
h) On January 11, 2018, the FOMB rejected Senate Bill 774, which sought to create a fund to support municipal governments in an attempt to respond to post-hurricane emergencies as well as
aleviate limited funding on the city-level. That same day, the FOMB also rejected Senate Bill 43, which created a firearm and drug-free program for the island's schools.
j) On March 28, 2018 the FOMB rejected the fiscal plans proposed by the Government of Puerto Rico for the government, PREPA, and PRASA submitting letter to the Government of Puerto Rico with recommendations including a series of austerity measures that would adversely affect the Plaintiffs and the People of Puerto Rico.
(Am. Compl. at 53-55.)
The Amended Complaint asserts six causes of action.
The First Cause of Action alleges that PROMESA and the powers that it grants to the Oversight Board deprive Plaintiffs and the people of Puerto Rico of their rights to self-determination, due process, and equal protection in violation of the United States' obligations under the U.N. Charter, the Universal Declaration of Human Rights, and the International Covenant on Civil and Political Rights. (Am. Compl at 62-64.) Plaintiffs argue that "the creation of the FOMB should be declared unconstitutional, and the implementation of any and all fiscal plans approved by the FOMB, just as any of its act[s] should be declared null and void, and the proceedings under PROMESA should be stayed." (Am. Compl. at 63-64.) The First Cause of Action further seeks an order requiring "the members of the Board, the Board itself and all of its employees and contractors to return to the Government of Puerto Rico any and all monies paid by the government of Puerto Rico pursuant to the terms of the PROMESA Act, and to order the Government of the USA to account for and pay to the Government of Puerto Rico any sums of money used by the FOMB and its employees and its contractors that are not returned inasmuch as it must respond for the enactment and imposition over the Plaintiffs and the People of Puerto Rico of an illegal and unconstitutional act." (Am. Compl. at 64.)
Plaintiffs' Second Cause of Action alleges that the powers provided to the Oversight Board by PROMESA deprive the Plaintiffs of rights recognized by the Declaration of Independence and the First, Fifth, and Fourteenth Amendments to the United States Constitution by allowing the Oversight Board to override and impair the ability of the people of Puerto Rico to participate in the democratic process and to enjoy the benefits of their contractual and property rights. The relief sought by Plaintiffs with respect to their Second Cause of Action is substantially the same as that sought in the First Cause of Action. Plaintiffs ask that the creation of, and all acts performed by, the Oversight Board be declared "null and void and unconstitutional," that all "proceedings under PROMESA" be stayed, that all amounts paid to the Oversight Board (including its employees and contractors) by the Commonwealth be returned, and that any amounts not returned be accounted for and repaid by the United States. (Am. Compl. at 70-71.)
The Third Cause of Action asserts that PROMESA violates the constitutional guarantee of due process by granting the Oversight Board the authority to override certain budget and policy decisions made by the Commonwealth government without accountability to Plaintiffs and the people of Puerto Rico. The Amended Complaint further alleges that PROMESA imbues the Oversight Board with "executive, fiscal, and legislative powers" in a manner that violates the principle of separation of powers, and that the Oversight Board is subject to conflicting fiduciary duties resulting from an agglomeration of wide-ranging powers in a single body. Plaintiffs contend that the "broad concentration of functions, power, and authority, without any separation of powers and accountability mechanisms" deprives Plaintiffs and the people of Puerto Rico generally of procedural and substantive due process and the equal protection of the laws in violation of the Fifth and Fourteenth Amendments of the United States Constitution. The Third Cause of Action seeks substantially the same relief as that sought in the First and Second Causes of Action. (Am. Compl. at 75-76.)
Plaintiffs' Fourth Cause of Action alleges that the Oversight Board has refused to audit Puerto Rico's debt notwithstanding its authorization to do so pursuant to Section 104(o) of PROMESA, its role as representative of the Commonwealth under Section 315 of PROMESA, and the "ultimate legislative purpose of PROMESA, which is, or should be, to bring about the economic ‘stability of Puerto Rico’." (Am. Compl. at 76-78.) It further alleges that the Commonwealth's government, including the Governor, has a fiduciary duty to undertake an audit of Puerto Rico's debt. (Am. Compl. at 79.) The Fourth Cause of Action therefore seeks an order staying negotiations, restructuring, or adjudications with respect to the Commonwealth's public debt until an "independent legal and forensic audit" of Puerto Rico's debt is conducted, including an examination of "all contracts for the issuance of Puerto Rico government bonds, the use of the money borrowed, the programs and projects undertaken with those funds, any and all legal, accounting and financial matters pertaining to any and all transactions and the socioeconomic, financial, and environmental impact of the use of the funds from fiscal year 1972-73." (Am. Compl. at 90-91.) Plaintiffs also seek a judgment removing two members of the Oversight Board— José Ramón González and Carlos García—due to their prior affiliations with the Government Development Bank for Puerto Rico and certain affiliates of the Santander Group. (Am. Compl. at 82-83.)
Plaintiffs' Fifth Cause of Action argues that, notwithstanding the United States federal government's exercise of "complete control over Puerto Rico's political and socio economic system" and its alleged failure to provide the people of Puerto Rico with fundamental rights to democracy and self-determination required by the Declaration of Independence, the United States Constitution, the U.N. Charter, and the Universal Declaration of Human Rights, the United States has allowed the Commonwealth to mismanage its finances. Plaintiffs argue that Puerto Rico's public debt should be the responsibility of the United States federal government. The Fifth Cause of Action asserts that Congress has no authority to shield the United States from responsibility for such debts as doing so would be "unconscionable" and contrary to the Declaration of Independence and provisions of the Constitution and certain international covenants. (Am. Compl. at 95.) The Fifth Cause of Action therefore seeks to compel the United States to assume the Commonwealth's public debt. (Am. Compl. at 97.) It further asks that the Court "declare the Act of Congress in 1984 removing Puerto Rico from the provisions of the Bankruptcy Code unconstitutional to the extent that such action was undertaken based on the Territorial or Property Clause of the Constitution of the United States." (Am. Compl. at 97-98.)
Plaintiffs' Sixth Cause of Action asserts that the Commonwealth intends to sell or privatize PREPA without accountability to the people of Puerto Rico and in contravention of the rights of Plaintiffs and the people of Puerto Rico. Plaintiffs allege that entering into such transactions without "transparency, accountability, and participation by the People of Puerto Rico and Plaintiffs" would violate the Puerto Rican people's right of free expression under the First Amendment and their right to due process under the Fifth Amendment, as well as equivalent provisions of the Constitution of Puerto Rico. (Am. Compl. at 102.) The Sixth Cause of Action asks that the "proposed sale of the assets of PREPA ... be strictly scrutinized by" the Court and that the Governor and Oversight Board be barred from pursuing the sale of PREPA assets without a "a transparent, public ... process ... pursuant to which the public ... [is] given a meaningful opportunity to express [its] consent or dissent" (Am. Compl. at 103-04.) The Amended Complaint further asks the Court to void the employment contract of the Executive Director of PREPA because "the amount of money the appointed Executive Director will be paid[ ] is unconscionable ...." (Am. Compl. at 104.) Finally, Plaintiffs allege that the Oversight Board and the Commonwealth are unlawfully "intervening" with respect to the University of Puerto Rico ("UPR"). The Sixth Cause of Action asks that the Oversight Board and Commonwealth be "stopped from illegal[l]y weakening, breaking down, and selling" UPR. (Am. Compl. at 105-06.)
II.
DISCUSSION
Defendants move pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) to dismiss Plaintiffs' Amended 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 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). 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, ––– U.S. ––––, 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). The injury in fact must be one that "affect[s] the plaintiff in a personal and individual way" that is distinct from a claimed injury to a broad group or class. Spokeo, Inc., 136 S. Ct. at 1548 (quoting Lujan, 504 U.S. at 560 n.1, 112 S.Ct. 2130 ).
1. First Cause of Action: International Covenants
Plaintiffs' First Cause of Action seeks a judicial declaration that the Oversight Board is unconstitutional, a determination that all of its actions are null and void, a stay of all proceedings arising under PROMESA, and an order compelling the Oversight Board to return all funds paid to it by the Commonwealth. (See Am. Compl. at 63-64.) Defendants argue that Plaintiffs have failed to allege specific and particularized injuries that have resulted from Defendants' conduct and, accordingly, move to dismiss these claims pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. (See U.S. Mot. at 7-8; FOMB Mot. at 9-13; Governor's Mot. at 4-7.)
As an initial matter, the First Cause of Action does not allege injurious conduct by the Governor nor seek relief from the Governor and therefore must be dismissed as to the Governor. Furthermore, to the extent that the First Cause of Action raises broad grievances concerning the United States' treatment of the Commonwealth as a territory, such complaints cannot be redressed by nullification of the Oversight Board nor any of the other relief sought in the First Cause of Action and therefore the First Cause of Action must be dismissed.
Because, as explained below, Plaintiffs have failed to demonstrate that they have standing to pursue their claims, the Court need not address their argument that the Governor, as head of the Commonwealth's executive branch, is an indispensable party to this litigation.
The Court will next address the connections between the Plaintiffs and the allegations that Plaintiffs have pleaded in the First Cause of Action.
The First Cause of Action focuses principally on allegations that the United States federal government's relationship with the Commonwealth—including the enactment of PROMESA and the establishment of the Oversight Board—deprives the people of Puerto Rico of rights under the U.N. Charter, the Universal Declaration of Human Rights, and the International Covenant on Civil and Political Rights. These allegations frame claims of injuries that are common to the People of Puerto Rico as a whole and thus fail to meet Plaintiffs' burden of pleading particularized and individual redressable injuries that are fairly traceable to the conduct challenged in the Amended Complaint.
According to the Amended Complaint, Plaintiff Pinto-Lugo has standing to sue as a result of his ownership of bonds issued by the Commonwealth and PREPA. (Am. Compl. at 8, 16.) The Amended Complaint does not, however, allege any specific decision by the United States, the Governor, or the Oversight Board that has caused him an injury in his capacity as a bondholder. Rather, the Amended Complaint avers generally that, as a bondholder, Pinto-Lugo is "subject to the decisions made and that will continue to be [made by] the [Oversight Board]." (Am. Compl. at 19.) The Amended Complaint describes in broad terms certain powers allegedly granted to the Oversight Board by PROMESA, but it does not allege any specific manner in which the application of those powers has resulted in pecuniary losses or other injuries to Plaintiff Pinto-Lugo personally. (See Am. Compl. at 16.) Cf. Rivera-Schatz v. Fin. Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R.), 327 F. Supp. 3d 364, 370–71 (D.P.R. 2018) (holding that President of the Senate's and Speaker of the House's challenge to application of a provision of PROMESA in the abstract "fails to frame a case or controversy of the requisite degree of immediacy and reality" and therefore seeks "no more than a general advisory opinion regarding the meaning and effect of a section of the statute"), aff'd, 916 F.3d 98 (1st Cir. 2019).
The Amended Complaint alleges that
Such decisions have included and will include the power, among others, to subject the Government of the Commonwealth of Puerto Rico and any of its public corporations and public entities to the bankruptcy (debt restructuring) procedures set forth by the PROMESA Act, and to establish fiscal plans and government budgets, to negotiate agreements with creditors, in particular institutional creditors, and to impose policies through the fiscal plans and budget determinations that have had and will ultimately have an impact on the economy of Puerto Rico, its government, and the financial condition of PREPA, and Pinto-Lugo's contractual, legal, and constitutional rights as a bond holder.
(Am. Compl. at 16.)
Plaintiffs have also failed to plead a particularized and redressable injury with respect to Plaintiff VAMOS. Plaintiffs allege that VAMOS provides support for community organizations and individuals through educational, organizing, and philanthropic efforts. However, the Amended Complaint does not specify any relationship between those activities and the powers of the Oversight Board that are challenged in Plaintiffs' First Cause of Action beyond a generalized and conclusory statement that "communities" supported by VAMOS "are being adversely affected by the policies and actions undertaken by the [Oversight Board]." (See Am. Compl. at 16-17.)
The allegations of injuries to the Union Plaintiffs are similarly non-specific. With respect to each of the Union Plaintiffs, the Amended Complaint alleges principally that the Commonwealth and relevant Commonwealth instrumentalities "have undertaken unilateral actions to freeze and stay several economic and non-economic provisions of the CBA and other rights recognized by Puerto Rican statutes allegedly because of the fiscal crisis of the government of Puerto Rico." (Am. Compl. at 9-13.) It further proffers general allegations that the unspecified collective bargaining agreement violations by the Commonwealth and its instrumentalities are "pursuant to policies, plans, and budgets recommended and/or imposed by the FOMB" and "undertaken as suggested, proposed, and/or imposed by the FOMB or as a result of its determinations ...." (Am. Compl. at 17.)
The allegations of injuries in the Amended Complaint are generally the same with respect to each of the Union Plaintiffs, but the Amended Complaint adds further conclusory statements with respect to certain of the Union Plaintiffs. (See, e.g., Am. Compl. at 11 (alleging that collective bargaining agreement violations "have caused damages to the Union members that are estimated in millions of dollars and have constituted a breach of the CBA and a violation of statutory, constitutional and civil rights of the Union members").)
The Amended Complaint does not describe the alleged injuries—the violation of collective bargaining agreements—with the level of specificity necessary to present a non-abstract dispute for resolution by the Court. Additionally, the Amended Complaint lacks concrete allegations that tie the asserted injury—the alleged violation of collective bargaining agreements—to the relief sought in the First Cause of Action. The First Cause of Action alleges, generally, that the Oversight Board has exercised authority under PROMESA in a manner that deprives Plaintiffs of "their right to due process, to the equal protection of the laws, and to self determination," (Am. Compl. at 63), but the Amended Complaint suggests that at least some of the collective bargaining agreement violations may have been the result of policies that were merely "recommended," "proposed," or "suggested" by the Oversight Board. (Am. Compl. at 17.) Such allegations fail to plead particular legal wrongs that the Court can redress by granting the relief sought in the First Cause of Action.
With respect to the other Plaintiff, AJAEE, the Amended Complaint similarly lacks a specific link between an injury—PREPA's alleged failure to make pension benefit payments (Am. Compl. at 19)—and the exercise of challenged powers under PROMESA. The Complaint's general allegations that pension beneficiaries are subject to decisions made by the Oversight Board are insufficient to plead a redressable injury. (See Am. Compl. at 19.)
The examples of events and Oversight Board and Commonwealth actions proffered on pages 53 through 55 of the Amended Complaint do not remedy the insufficiency of the Amended Complaint with respect to any of the Plaintiffs. Although such examples are somewhat more specific, they fail to plead particularized injuries to Plaintiffs that would be redressable by the relief sought in the First Cause of Action.
Plaintiffs' Opposition proffers further allegations concerning the effects of Act 3 and Act 26 on their rights under collective bargaining agreements. (See Pls.' Opp. at 21-22.) However, the new allegations concerning Act 3 and Act 26 contained in Plaintiffs' Opposition are insufficient to demonstrate that the Court has subject matter jurisdiction of the First Cause of Action, as the allegations do not definitively link the alleged breaches of collective bargaining agreements pursuant to Act 3 and Act 26 to powers exercised pursuant to PROMESA. Rather, Plaintiffs' Opposition alleges only that, "to meet the recommendations and demands of the FOMB as set forth in the Statement of Purposes of statutes in 2017, the Government of Puerto Rico approved [Act 3 and Act 26]." (Pls.' Opp. at 21-22.) The bare allegation of Oversight Board "recommendations and demands," absent any specific description of the allegedly injurious exercise of power granted by PROMESA, falls short of alleging injuries caused by PROMESA that can be redressed by nullification of actions undertaken by the Oversight Board pursuant to PROMESA.
Finally, the case law cited by Plaintiffs fails to provide the requisite support for Plaintiffs' claim of Article III standing. (See Pls.' Opp. at 64 (citing Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976) ; New York Times v. United States, 403 U.S. 713, 91 S.Ct. 2140, 29 L.Ed.2d 822 (1971).) The cases cited by Plaintiffs stand for the proposition that deprivation of rights under the First Amendment can constitute an irreparable injury. The plaintiffs in both cases had, however, clearly suffered specific individualized injuries arising from government action (job dismissal for partisan reasons in Elrod and attempted restraint on publication of particular material in New York Times ). Thus, neither demonstrates that Plaintiffs have adequately pleaded an injury to their own First Amendment rights nor pleaded, as described above, the necessary links between such injury and challenged conduct.
Accordingly, the First Cause of Action is dismissed for lack of subject matter jurisdiction.
2. Second Cause of Action: The Declaration of Independence and Bill of Rights
Plaintiffs' Second Cause of Action seeks substantially the same relief as the First Cause of Action based upon similar allegations that the Oversight Board's exercise of powers violates rights set forth in the Declaration of Independence and the First, Fifth, and Fourteenth Amendments to the United States Constitution. The relief sought in the Second Cause of Action is substantially the same as that sought in the First Cause of Action, and the deficiencies are substantially the same as those identified above with respect to the First Cause of Action.
Accordingly, the Second Cause of Action is dismissed for lack of subject matter jurisdiction.
3. Third Cause of Action: The Due Process Clauses of the Fifth and Fourteenth Amendments
Plaintiffs' Third Cause of Action seeks substantially the same relief as the First Cause of Action based upon allegations that the Oversight Board's exercise of powers violates the rights to due process under the Fifth and Fourteenth Amendments to the United States Constitution. The relief sought in the Third Cause of Action is substantially the same as that sought in the First Cause of Action, and the deficiencies are substantially the same as those identified above with respect to the First Cause of Action.
Accordingly, the Third Cause of Action is dismissed for lack of subject matter jurisdiction.
4. Fourth Cause of Action: Conflicts of Interest
Plaintiffs' Fourth Cause of Action alleges that the Commonwealth, the Governor, and the Oversight Board are obligated to conduct audits of Puerto Rico's debt. The Amended Complaint asserts that such an audit would allow the true amount of the Commonwealth's valid debt to be determined and that, absent such an audit, the people of Puerto Rico will be responsible for paying the accumulated public debt. (Am. Compl. at 84-86.) Plaintiffs therefore request a stay of negotiations and restructuring regarding the Commonwealth's debt pending the completion of such an audit. In addition, the Fourth Cause of Action seeks the dismissal of two members of the Oversight Board— José Ramón González and Carlos García—due to their prior affiliations with the Government Development Bank for Puerto Rico and certain affiliates of the Santander Group.
The Fourth Cause of Action does not allege actions or omissions of the United States and thus fails to identify any particularized injury attributable to conduct of the United States.
Although the Fourth Cause of Action does allege an injury—payment of allegedly invalid debt—that would allegedly be borne by Plaintiffs as residents of Puerto Rico, it is not the kind of particularized injury that is cognizable under Article III of the Constitution. Plaintiffs lack standing to assert such claims because their interest in limiting governmental debt is not "distinct from that of every other citizen or taxpayer." Daggett v. Comm'n on Governmental Ethics & Election Practices, 172 F.3d 104, 110 (1st Cir. 1999) ; see also DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342-43, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006) ("[S]tate taxpayers have no standing under Article III to challenge state tax or spending decisions simply by virtue of their status as taxpayers").
With respect to Plaintiffs' request for the dismissal of certain members of the Oversight Board, Plaintiffs fail to allege a particularized injury resulting from those individuals' roles as members of the Oversight Board. Thus, for substantially the reasons explained above with respect to Plaintiffs' First Cause of Action, the Court lacks subject matter jurisdiction of Plaintiffs' demand for the termination of certain members of the Oversight Board.
Accordingly, the Fourth Cause of Action is dismissed for lack of subject matter jurisdiction.
5. Fifth Cause of Action: Assumption of Puerto Rico's Debt
Plaintiffs' Fifth Cause of Action seeks to compel the United States federal government to assume Puerto Rico's public debt and contends that Section 210 of PROMESA, 48 U.S.C. § 2150 —which provides that the United States is not responsible for payment of debts issued by covered territories and their instrumentalities—is unconstitutional, inconsistent with the Declaration of Independence, and "unconscionable considering the powers exercised over Puerto Rico by the USA for more than a century." (Am. Compl. at 95-96.) In addition, it seeks a judicial declaration that the United States violated the Constitution by removing the Commonwealth from the scope of the Bankruptcy Code in 1984. (Am. Compl. at 97-98.)
The Amended Complaint seeks relief in the Fifth Cause of Action against only the United States. Plaintiffs have not, however, pleaded a particularized injury that would be redressable via the relief sought in the Fifth Cause of Action. While the obligation to pay the Commonwealth's debt is an obligation indirectly borne by the people of Puerto Rico, Plaintiffs' interests in having the United States assume that debt are the same as the interests of all other residents of Puerto Rico, and thus Plaintiffs lack standing under Article III to assert such claims. See DaimlerChrysler Corp. v. Cuno, 547 U.S. at 342-43, 126 S.Ct. 1854.
Plaintiffs also fail to specifically allege any injury resulting from the removal of Puerto Rico from the Bankruptcy Code.
Accordingly, the Fifth Cause of Action is dismissed for lack of subject matter jurisdiction.
6. Sixth Cause of Action: PREPA and UPR
Plaintiffs' Sixth Cause of Action requests intervention from the Court with respect to the governance of PREPA and UPR. In particular, Plaintiffs seek to "bar the FOMB and the government of Puerto Rico from pursuing the sale of PREPA" (Am. Compl. at 105), "to compel[ ] the FOMB and the Government of Puerto Rico to provide for the corresponding participation by the People of Puerto Rico prior to the execution of any sale of PREPA" (Am. Compl. at 105), to "scrutinize[ ] and void[ ]" the salary of PREPA's Executive Director (Am. Compl. at 105), and to "stop [the Oversight Board and the Government of Puerto Rico] from illegal[l]y weakening, breaking down, and selling" the University of Puerto Rico (Am. Compl. at 106). The Sixth Cause of Action does not present a dispute of which this Court has subject matter jurisdiction. To the extent that it challenges potential government action with respect to PREPA or UPR (or an alleged lack of public participation with respect to such actions), the Sixth Cause of Action presents a dispute that is not ripe. The Amended Complaint has not alleged that there are specific proposals for the privatization or sale of PREPA or UPR; the Amended Complaint alleges only that the Oversight Board "intends to pursue the sale and/or privatization of assets," that the Governor submitted an unidentified bill to the legislature, and that the Governor made a public speech about the sale of PREPA assets. (Am. Compl. at 99.) Absent a non-abstract pending proposal, Plaintiffs effectively ask the Court to render an advisory opinion concerning a potential future transaction.
The Sixth Cause of Action does not allege actions or omissions of the United States and thus fails to allege any particularized injury attributable to conduct of the United States.
Furthermore, to the extent that the Amended Complaint challenges unspecified financial decisions reflected in one or more fiscal plans certified by the Oversight Board with respect to PREPA or UPR, Section 106(e) of PROMESA, 48 U.S.C. § 2126(e), precludes this Court's exercise of jurisdiction over such challenges. Méndez-Núñez v. Fin. Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R. ), 916 F.3d 98, 112 (1st Cir. 2019).
Plaintiffs have also failed to plead a basis for Article III standing with respect to their Sixth Cause of Action. As explained above with respect to the First Cause of Action, Article III standing requirements are not met when Plaintiffs fail to plead a specific connection between a concrete and particularized injury that they face and the relief that they seek from the Court. The injuries alleged in the Sixth Cause of Action lack a specific connection to any of the Plaintiffs. Rather, the Amended Complaint proffers general and non-particularized statements concerning the possibility of selling or privatizing PREPA assets. (See, e.g., Am. Compl. at 102 (alleging that the sale or privatization of assets would "be unconscionable considering not only the existing socioeconomic circumstances of Puerto Rico, but also the way its population is subject to certain limitations as far as the production and distribution of energy is concerned").)
Accordingly, the Sixth Cause of Action is dismissed for lack of subject matter jurisdiction.
III.
CONCLUSION
For the foregoing reasons, Defendants' motions to dismiss the Complaint are granted. Plaintiffs' First through Sixth Causes of Action are dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1). Plaintiffs, who requested an opportunity to replead in the event that their Amended Complaint was found insufficient, are hereby granted leave to file a motion for leave to further amend their Complaint within twenty-one (21) days of the date of this Opinion and Order. Any such motion must be filed in compliance with all applicable rules and must include a memorandum of law and a blacklined copy of the proposed Second Amended Complaint highlighting all of the proposed amendments. If no such motion is timely filed, judgment dismissing the Amended Complaint for lack of subject matter jurisdiction will be entered without further advance notice. If such motion is timely filed, opposition papers must be filed within fourteen (14) days of the filing of the motion, and any reply must be filed within seven (7) days of the filing of the opposition papers. This Opinion and Order resolves Docket Entry Nos. 34, 36, and 38 in Adv. Proc. No. 18-00041-LTS.
SO ORDERED.