- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 2023-2100 (Federal Circuit, Jul 31,2025) Published
- Tag(s):
-
- Ruling:
- The United States Court of Federal Claims determined it had subject matter jurisdiction over their action but nevertheless dismissed it for failure to state a claim upon which relief could be granted. The Court affirmed the dismissal of the complaint.
- Procedural context:
- Plaintiffs-Appellants filed a class-action lawsuit against the United States in the United States Court of Federal Claims (“Claims Court”) alleging that the United States effected a taking under the Fifth Amendment when it enacted the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”). Pub. L. No. 114-187, 130 Stat. 549 (codified at 48 U.S.C. § 2101 et. seq.).
- Facts:
- Plaintiffs-Appellants own bonds issued by the Puerto Rico Sales Tax Financing Corporation, the Corporación del
Fondo de Interés Apremiante (“COFINA”). They allege that they “lost a significant portion of the principal and interest” of their bonds because COFINA restructured its debts pursuant to PROMESA’s debt restructuring provision.
The Congress excluded Puerto Rico from being a debtor under Chapter 9 of the Bankruptcy Code, under which municipalities restructure their debts. 11 U.S.C. § 101(52). Congress enacted PROMESA to create “a system for overseeing Puerto Rico’s finances, while also enabling the Commonwealth to gain bankruptcy protections similar to those available under the [Bankruptcy] Code” to address the “fiscal emergency” in the Commonwealth. PROMESA established a seven-member Financial Oversight and Management Board for Puerto Rico (the “Oversight Board”) “to provide a method for a covered territory to achieve fiscal responsibility and access to the capital markets.” 48 U.S.C. § 2121. The Oversight Board designated COFINA as a covered instrumentality subject to the requirements of PROMESA and eligible to qualify as a debtor under Title III. COFINA bondholders and the Commonwealth disputed who had superior rights in the SUT revenues deposited in the DSTF used to repay principal and interest on COFINA bonds as they became due. The parties eventually reached an agreement resolving the dispute based on arm’s-length negotiations between the appointed agents, which allocated the disputed SUT revenues as follows: 53.65% to COFINA, and 46.35% to the Commonwealth. The Oversight Board then applied this framework in formulating COFINA’s plan of adjustment. Plaintiffs-Appellants then brought suit on behalf of a class of COFINA bondholders, alleging that Congress took their interests in COFINA bonds when it enacted PROMESA. The Claims Court granted the Government’s motion to dismiss for failure to state a claim, explaining that “Congress’s enactment of PROMESA is not sufficient federal government action to constitute a taking” because “plaintiffs cannot complete their claim here without relying on what turn out to be the actions of independent actors.” The court concluded when the Oversight Board initiates bankruptcy proceedings, “it acts not on behalf of the United States, but on behalf of, and in the interests of, Puerto Rico.”
- Judge(s):
- MOORE, STOLL, and GILSTRAP
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