Bondholders waived their right to a hearing on stay relief by accepting litigation schedule
Bondholders waived their right to a hearing on stay relief by accepting litigation schedule
Sometimes one has to object to the point of risking alienating the district judge in order to prevent waiver of the argument on appeal, even if it seems pointless Section 362(e)(1) grants creditors the right to a prompt hearing on requests for relief from the automatic stay.
Once a party requests such relief, the stay terminates in thirty days unless the court "after notice and a hearing, orders such stay continued in effect pending the conclusion of, or as a result of, a final hearing and determination [of the motion's merits]." 11 U.S.C. § 362(e)(1).
Any such continuance, though, lasts for only thirty days after the preliminary hearing, unless either the parties agree otherwise or the court finds that "compelling circumstances" justify some other specified delay. Id.
The Title III court denied the motion in September 2017, concluding that PROMESA barred a Title III court from letting PREPA fall into receivership. The court also found that, in any event, there was no cause to lift the stay. On appeal, this court partially reversed, holding that PROMESA did not foreclose PREPA entering receivership.
In re Fin. Oversight & Mgmt. Bd. for P.R., 899 F.3d at 21–22.
We then remanded the case so the Bondholders could file an updated lift-stay motion. Id. at 24.
Syncora filed the second lift-stay motion in October 2018.1 The second lift-stay motion's arguments were substantially identical to those in the first motion. Ultimately, Syncora did not prosecute the second lift-stay motion. Instead, Syncora and other PREPA creditors concluded a restructuring agreement with the Board in September 2019.
At the parties' request, the Title III court indefinitely stayed the second lift- stay motion. Syncora eventually abandoned it entirely.
Three years passed. Then, in September 2022, the Puerto Rico Financial Advisory and Fiscal Agency Authority terminated the 2019 restructuring agreement. That termination triggered two separate proceedings.
First, the Board moved to reanimate a previously-stayed adversary proceeding (the "Adversary Proceeding"), in which the Board challenged the Bondholders' claims to possess enforceable property interests in PREPA's estate.
Second, a group of creditors that included Syncora and GoldenTree filed a joint motion to dismiss the Adversary Proceeding. The Bondholders argued that if the court did not grant the motion to dismiss, it should alternatively lift the automatic stay so the Bondholders could seek appointment of a receiver. We refer to this alternative request as the "third" motion for relief from the automatic stay.