Court Relies Heavily on Compass Lexecon Senior Advisor Dr. Jonathan Arnold – Citing His Testimony Extensively in Support of Its Opinion
On November 15, 2016, Judge Francisco A. Besosa of the U.S. District Court for the Commonwealth of Puerto Rico, denied motions by multiple bondholders and a bond insurer seeking to lift automatic temporary stays.
Each of the plaintiffs (Brigade Leveraged Capital Structures Fund Ltd., et al; National Public Finance Guarantee Corporation; Dionisio Trigo-Gonzalez, et al., and U.S. Bank National Association) filed lawsuits against the Commonwealth in 2016 seeking multiple remedies. Collectively, the plaintiffs are exposed to over $5 billion in Puerto Rican debt (either through direct ownership or through bond insurance.)
Subsequently, Congress enacted PROMESA – The Puerto Rican Oversight, Management, and Economic Stability Act – which President Obama signed into law on June 30, 2016. PROMESA implemented an automatic temporary stay on a broad swath of litigation against the Commonwealth. The Court found, earlier in the year, that PROMESA applied to the instant complaints and stayed the cases. The Court also found that PROMESA permitted the automatic temporary stay to be lifted for cause and set a hearing.
The Court held a hearing commencing on September 21, 2016 in which it received testimony on a variety of topics relating to economic loss and irreparable harm. Dr. Arnold testified extensively on the question of whether the harm from maintaining the stay was likely to be irreparable. He also offered detailed testimony on whether and how market prices for bonds at issue responded to implementation of the stay.
Ultimately, the court found that the plaintiffs did not demonstrate sufficient cause to grant the plaintiffs motion for relief from the stay noting, among other things that the “Court nevertheless rejects plaintiffs’ attempts to pull the wool over its eyes” and goes on to quote Dr. Arnold’s testimony at length.
Compass Lexecon’s team was led by David Ross from Chicago and Michael Kwak and Mihir Gokhale from New York, along with Michael Keable and Anne Marie Yale. They supported Jonathan Arnold and assisted Puerto Rico’s trial team, which was led by Michael F. Williams, Peter A. Farrell, and Ronald K. Anguas, Jr. of Kirkland & Ellis LLP in Washington, DC and co-counsel Salvador Antonetti-Zequeira and Jose L. Ramirez-Coll of Antonetti Montalvo & Ramirez-Coll in San Juan, Purto Rico.