IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 23-1045 23-1046 23-1047 23-1048 23-1049 (c0nsolidated) (1st Circuit, Feb 09,2024) Published
- Tag(s):
-
- Ruling:
- The pre-petition work claims were not for "back pay attributable to any period of time occurring after commencement of the case" and thus did not qualify for administrative-expense priority under § 503(b)(1)(A)(ii). And, the Title III court's decision to defer a ruling on whether the post-petition claims qualify as administrative expenses until a later time, if the Puerto Rico courts or agencies determine that the public employers are liable for the back pay, was a decision within the Court's discretion.
- Procedural context:
- In June 2022, the Five Groups moved the Title III court for administrative-expense priority for their claims for back pay
for work performed both before and after the 2017 Title III petition date. The Title III court held that only claims attributable to the post-petition period can qualify as administrative expenses.
First, the court denied the requests to the extent they sought immediate payment of back pay for claims still pending/lacking final judgment in the underlying commonwealth court and agency proceedings, reasoning that "administrative expense claimants have the burden of conclusively establishing the liability of the debtor before seeking a ruling on entitlement to priority treatment. "Second, the court declined to rule on whether any of the claims arising from work performed post-petition qualified for administrative-expense status because those claims were contingent on appellants obtaining judgments in the still-pending underlying commonwealth court and agency actions. Third, the court also denied the motion to the extent that it sought administrative-expense priority for back pay claims arising from pre-petition work by the Cruz-Hernandez Group (the group that had already obtained a judgment).
The Court also denied the requests for a "comfort order" that appellants' post-petition wage claims would count as
administrative expenses should they win the underlying still-pending cases (at a future date).
- Facts:
- In various litigation and administrative actions separate from the Title III case, appellants have claimed that their public employers' decisions to adjust upward the wages paid to other employees who previously were paid below the minimum wage while leaving appellants' wages unchanged eliminated merits-based distinctions and rendered inoperative the progressive compensation system mandated by Puerto Rico law. Each of the Five Groups
previously sued their public employers (in Puerto Rico commonwealth courts, not federal courts) for back pay to compensate for the employers' failure to adjust appellants' wages upward. The Five Groups moved the Title III court
for administrative-expense priority for their claims for back pay for work performed both before and after the 2017 Title III petition date.
Appellants' only argument as to how the pre-petition work claims could qualify as "attributable to any period of time
occurring after commencement" of the Title III case is that because the back pay remains unpaid, damages "continue[d] to flow to [a]ppellants" after the petition date.
- Judge(s):
- Montecalvo, Lipez, and Thompson,
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