In Title III debt restructuring proceedings brought pursuant to the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), Financial Oversight and Management Board for Puerto Rico filed motion for confirmation of modified eighth amended proposed joint plan of adjustment for Commonwealth of Puerto Rico, Employees Retirement System of the Government of the Commonwealth of Puerto Rico and the Puerto Rico Public Buildings Authority.
Creditors objected. The United States District Court for the District of Puerto Rico overruled objections, and confirmed plan. Teachers’ associations appealed and filed motions for stay pending appeal. The District Court denied stay motions.
In a case of first impression, the Court of Appeals held that:
- Forward-going teachers’ pension obligations under existing retirement regime were a contractual commitment which Commonwealth could reject;
- Notice and hearing was properly provided for rejection of teachers’ pension obligations in joint plan of adjustment;
- PROMESA preempted Commonwealth laws calling for forward-going teachers’ pension obligations under existing retirement regime;
- Lack of specific legislation permitting the plan to modify Commonwealth’s pension obligations to public school teachers did not bar confirmation of plan; and
- New bond legislation authorized issuance of new bonds, conditioned on further accruals or cost-of-living eliminations for participants in teachers’ pension plan.
In Title III debt restructuring proceedings brought pursuant to the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), forward-going teachers’ pension obligations under existing retirement regime, while effected by statute, were a contractual commitment as between the Commonwealth of Puerto Rico and its covered employers, which Commonwealth could reject in joint plan of adjustment for Commonwealth of Puerto Rico, Employees Retirement System of the Government of the Commonwealth of Puerto Rico and the Puerto Rico Public Buildings Authority.
In confirming proposed joint plan of adjustment for Commonwealth of Puerto Rico, Employees Retirement System of the Government of the Commonwealth of Puerto Rico and the Puerto Rico Public Buildings Authority, in Title III debt restructuring proceedings, Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) preempted Commonwealth laws calling for forward-going teachers’ pension obligations under existing retirement regime.
In Title III debt restructuring proceedings brought pursuant to the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), lack of specific legislation permitting the plan to modify Commonwealth of Puerto Rico’s pension obligations to public school teachers did not bar confirmation of proposed joint plan of adjustment for Commonwealth of Puerto Rico, Employees Retirement System of the Government of the Commonwealth of Puerto Rico and the Puerto Rico Public Buildings Authority; PROMESA only required any approval necessary under applicable law and did not by its plain terms require enabling legislation for every component of the plan, and plan’s adjustment of pension obligations was in fact authorized by enabling legislation.
In Title III debt restructuring proceedings brought pursuant to the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), new bond legislation authorized issuance of new bonds, conditioned on further accruals or cost-of-living eliminations for participants in teachers’ pension plan, in joint plan of adjustment for Commonwealth of Puerto Rico, Employees Retirement System of the Government of the Commonwealth of Puerto Rico and the Puerto Rico Public Buildings Authority.