United States Court of Appeals For the First Circuit

No. 19-1391

IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as Representative for the Commonwealth of Puerto Rico; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as Representative for the Puerto Rico Highways and Transportation Authority; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as Representative for the Puerto Rico Electric Power Authority (PREPA); THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as Representative for the Puerto Rico Sales Tax Financing Corporation, a/k/a Cofina; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as Representative for the Employees Retirement System of the Government of the Commonwealth of Puerto Rico,

Debtors.

COOPERATIVA DE AHORRO Y CREDITO DR. MANUEL ZENO GANDIA; COOPERATIVA DE AHORRO Y CREDITO DE JUANA DIAZ; COOPERATIVA DE AHORRO Y CREDITO DE RINCON,

Creditors, Appellants,

v.

THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as representative for the Commonwealth of Puerto Rico; THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as representative for the Puerto Rico Sales Tax Financing Corporation, a/k/a Cofina,

Debtors, Appellees,

PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY; ARISTEIA MASTER L.P.; ASIG INTERNATIONAL LIMITED; CANYON BALANCED MASTER FUND, LTD.; CANYON BLUE CREDIT INVESTMENT FUND, L.P.; CANYON DISTRESSED OPPORTUNITY INVESTING FUND II, L.P.; CANYON DISTRESSED OPPORTUNITY MASTER FUND II, L.P.; CANYON NZ- DOF INVESTING, L.P.; CANYON VALUE REALIZATION FUND, L.P.; CANYON VALUE REALIZATION MAC 18 LTD.; CANYON-ASP FUND, L.P.; CANYON-GRF MASTER FUND II, L.P.; CANYON-SL VALUE FUND, L.P.; CENTURYLINK INC. DEFINED BENEFIT MASTER TRUST; COMPASS ESMA LP; COMPASS TSMA LP; CORBIN ERISA OPPORTUNITY FUND, LTD.; CORBIN OPPORTUNITY FUND, L.P.; CREDIT FUND GOLDEN LTD.; DECAGON HOLDINGS 1, LLC; DECAGON HOLDINGS 2, LLC; DECAGON HOLDINGS 3, LLC; DECAGON HOLDINGS 4, LLC; DECAGON HOLDINGS 5, LLC; DECAGON HOLDINGS 6, LLC; DECAGON HOLDINGS 7, LLC; DECAGON HOLDINGS 8, LLC; DECAGON HOLDINGS 9, LLC; DECAGON HOLDINGS 10, LLC; EP CANYON LTD., f/k/a Permal Canyon 10 Ltd.; GN3 SIP LIMITED; GOLDENTREE ENTRUST MASTER SPC, on behalf of and for the account of Segregated Portfolio I; GOLDENTREE NJ DISTRESSED FUND 2015 LP; GOLD COAST CAPITAL SUBSIDIARY X LIMITED; GOLDENTREE 2017K-SC, LTD.; GOLDENTREE DISTRESSED FUND 2014 LP; GOLDENTREE DISTRESSED MASTER FUND 2014 LTD.; GOLDENTREE E DISTRESSED DEBT FUND II LP; GOLDENTREE E DISTRESSED MASTER FUND II LP; GOLDENTREE HIGH YIELD VALUE FUND OFFSHORE (STRATEGIC), LTD.; GOLDENTREE HIGH YIELD VALUE MASTER UNIT TRUST; GOLDENTREE INSURANCE FUND SERIES INTERESTS OF THE SALI MULTI-SERIES FUND, LP; GOLDENTREE MASTER FUND, LTD.; GOLDENTREE MULTI-SECTOR FUND OFFSHORE ERISA, LTD.; GOLDENTREE MULTI-SECTOR MASTER FUND ICAV - GOLDENTREE MULTI- SECTOR MASTER FUND PORTFOLIO A; GOLDENTREE STRUCTURED PRODUCTS - C LP; GOLDENTREE STRUCTURED PRODUCTS OPPORTUNITIES FUND EXTENSION HOLDINGS, LLC; GT NM, LP; GUADALUPE FUND, LP; HIGH YIELD AND BANK LOAN SERIES TRUST; LOUISIANA STATE EMPLOYEES' RETIREMENT SYSTEM; MA MULTI-SECTOR OPPORTUNISTIC FUND, LP; PANDORA SELECT PARTNERS, L.P.; ROCK BLUFF HIGH YIELD PARTNERSHIP, LP; SAN BERNARDINO COUNTY EMPLOYEES RETIREMENT ASSOCIATION; SB SPECIAL SITUATION MASTER FUND SPC-PORTFOLIO D; SCOGGIN INTERNATIONAL FUND, LTD.; SCOGGIN WORLDWIDE FUND LTD.; TACONIC MASTER FUND 1.5 LP; TACONIC OPPORTUNITY MASTER FUND LP; CANYON VALUE REALIZATION MASTER FUND, L.P.; PAROCHIAL EMPLOYEES' RETIREMENT FUND OF LOUISIANA; TILDEN PARK INVESTMENT MASTER FUND LP; WHITEBOX ASYMMETRIC PARTNERS, L.P.; WHITEBOX CAJA BLANCA FUND, LP; WHITEBOX INSTITUTIONAL PARTNERS, L.P.; WHITEBOX MULTI- STRATEGY PARTNERS, L.P.; WHITEBOX TERM CREDIT FUND I L.P.; WINDERMERE IRELAND FUNDS PLC; OFFICIAL COMMITTEE OF UNSECURED CREDITORS; ARISTEIA CAPITAL, LLC; CANYON CAPITAL ADVISORS, LLC; GOLDENTREE ASSENT MANAGEMENT LP; TACONIC CAPITAL ADVISORS, L.P.; TILDEN PARK CAPITAL MANAGEMENT LP; WHITEBOX ADVISORS LLC,

Movants, Appellees,

EDUARDO BHATIA-GAUTIER; JOSE L. DALMAU-SANTIAGO; ROSSANA LOPEZ- LEON; MIGUEL A. NADAL-POWER; CIRILO TIRADO-RIVERA; ANIBAL JOSE TORRES-TORRES; PETER C. HEIN; STEPHEN T. MANGIARACINA; SERVICE EMPLOYEES INTERNATIONAL UNION; UNITED AUTOMOBILE, AEROSPACE & AGRICULTURAL IMPLEMENT WORKERS OF AMERICA INTERNATIONAL UNION; PETER C. HEIN; GMS GROUP LLC; LAWRENCE B. DVORES; MARK ELLIOTT; COOPERATIVA DE AHORRO Y CREDITO DEL VALENCIANO; CAPITULO AUTORIDAD DE CARRETERAS; CAPITULO INSTITUTO DE CULTURA PUERTORRIQUENA; CAPITULO DE OFICINA DESARROLLO SOCIOECONOMICO Y COMUNITARIO; CAPITULO OFICINA DEL PROCURADOR DEL VETERANO; CAPITULO DE JUBILADOS; MOVIMIENTO DE CONCERTACION CIUDADANA INC.; RENE PINTO-LUGO; UNION DE EMPLEADOS DE OFICINA Y PROFESIONALES DE LA AUTORIDAD DE EDIFICIOS PUBLICOS; UNION INSULAR DE TRABAJADORES INDUSTRIALES Y CONSTRUCCIONES ELECTRICAS INC.; UNION INDEPENDIENTE DE EMPLEADOS DE LA AUTORIDAD DE ACUEDUCTOS Y ALCANTARILLADOS; UNION DE EMPLEADOS DE OFICINA COMERCIO Y RAMAS ANEXAS, PUERTOS; UNION DE EMPLEADOS PROFESIONALES INDEPENDIENTES; UNION NACIONAL DE EDUCADORES Y TRABAJADORES DE LA EDUCACION; ASOCIACION DE INNSPECTORES DE JUEGOS DE AZAR; MANUEL NATAL-ALBELO,

Movants.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Laura Taylor Swain,* U.S. District Judge]

Before

Howard, Chief Judge, and Kayatta, Circuit Judge.**

Guillermo J. Ramos-Luiña for appellants. Martin J. Bienenstock, with whom Stephen L. Ratner, Jeffrey W. Levitan, Brian S. Rosen, Mark. D. Harris, Timothy W. Mungovan, John E. Roberts, Adam L. Deming, Michael A. Firestein, Lary A. Rappaport, Proskauer Rose LLP were on brief, for debtors- appellees. Peter M. Friedman, with whom John J. Rapisardi, Suzzanne Uhland, and O'Melveny & Myers LLP were on brief, for appellee

* Of the Southern District of New York, sitting by designation. ** Judge Torruella heard oral argument in this matter and participated in the semble, but he did not participate in the issuance of the panel's decision. The remaining two panelists therefore issued the opinion pursuant to

(d). Puerto Rico Fiscal Agency and Financial Advisory Authority. David M. Cooper, with whom Susheel Kirpalani, Quinn Emanuel Urquhart & Sullivan LLP, Rafael Escalera, Sylvia M. Arizmendi, Carlos R. Rivera-Ortiz, Reichard & Escalera LLC were on brief, for movants-appellees.

March 2, 2021 KAYATTA, Circuit Judge. We consider another appeal

arising out of the Title III debt-restructuring proceedings

commenced by the Financial Oversight and Management Board for

Puerto Rico ("the Board") on behalf of the Puerto Rico Sales Tax

Financing Corporation (COFINA) under the Puerto Rico Oversight,

Management, and Economic Stability Act (PROMESA), 48 U.S.C.

§§ 2101–2241. Following the initiation of the Title III

proceedings, appellants -- various Puerto Rican credit unions

("the Credit Unions") -- filed an adversary proceeding against

several defendants, including the Commonwealth of Puerto Rico, the

Government Development Bank for Puerto Rico, and COFINA. While

that adversary proceeding was pending, the Board proposed a plan

of adjustment ("the Plan") restructuring COFINA's debt by, among

other things, resolving disputes between COFINA and the

Commonwealth of Puerto Rico and between the junior and senior

holders of COFINA's outstanding debt. As most relevant here, over

the Credit Unions' objection, the Plan as finally approved also

called for the dismissal with prejudice of all litigation against

COFINA that arose prior to the Plan's effective date. The Credit

Unions failed to seek a stay of the order approving the Plan and

dismissing their claims against COFINA. The Plan has now been

fully implemented for over two years and given rise to transactions

involving billions of dollars and tens of thousands of individuals.

- 5 - For the following reasons, we now dismiss this appeal as equitably

moot.

I.

We have previously chronicled the contentious fight over

Puerto Rico's sales and use tax revenues ("SUT revenues"), which

spurred the Title III proceedings to restructure COFINA. See

Pinto-Lugo v. Fin. Oversight & Mgmt. Bd., Nos. 19-1181 , 19-1182,

19-1960,

, at *1-4 (1st Cir. Feb. 8, 2021). So we

repeat only those facts critical to this appeal.

The Commonwealth of Puerto Rico has long been in the

midst of what Congress has described as a "fiscal emergency."

(m)(1). In 2006, to address its inability to fill

budget shortfalls by issuing general obligation bonds ("GO

bonds"), the Commonwealth passed Act 91, which established COFINA,

a public corporation independent from the Commonwealth with the

purpose of issuing non-recourse bonds. See P.R. Laws Ann. tit. 13,

§§ 11a–16. Act 91 financed COFINA bonds by pledging a certain

percentage of the Commonwealth's SUT revenues to the payment of

COFINA bondholders. Conflict over those SUT revenues eventually

led to litigation between the Commonwealth, COFINA bondholders,

and GO bondholders, the latter of whom claimed that the SUT

revenues were "available revenues" which must first be used to

satisfy general public debt under Puerto Rico's Constitution, P.R.

Const. art. VI, § 8. See Lex Claims, LLC v. Fin. Oversight & Mgmt.

- 6 - Bd.,

, 550–51 (1st Cir. 2017). To resolve this

dispute, the Board initiated Title III proceedings on May 5, 2017.

As of that date, the aggregate outstanding principal and interest

on COFINA bonds totaled over $17 billion, a significant portion of

the Commonwealth's sizeable public debt.

On March 22, 2018, while those Title III proceedings

were ongoing, the Credit Unions filed an adversary complaint. They

alleged that prior to the Title III proceedings, the Commonwealth,

COFINA, and other Puerto Rico government entities fraudulently

induced the Credit Unions to purchase COFINA bonds. The Credit

Unions later amended their complaint to add a claim alleging a

violation of the Takings Clause of the United States Constitution.

They also asserted that the claims raised in the adversary

proceeding are non-dischargeable because they alleged violations

of constitutional rights and conduct of a fraudulent nature.

Meanwhile, mediation in the Title III proceedings led to

a settlement between COFINA and the Commonwealth, which allocated

53.65% of the SUT revenues to COFINA and the remainder to the

Commonwealth, and between junior and senior COFINA bondholders,

resolving competing claims to the payments that a reorganized

COFINA would make in the future. Those settlements formed the

basis of the Plan, which provided for a complete restructuring of

COFINA's debt. The Plan also discharged all claims against COFINA

and provided for the dismissal with prejudice of all litigation

- 7 - arising from the COFINA restructuring. In that regard, the Plan

stated that "the releases, injunctions and exculpation . . .

constitute an essential component of the compromises reached and

are not severable from the other provisions of this Plan."

The Credit Unions objected to the Plan's discharge of

all claims against COFINA, arguing that the discharge should be

narrowed to exclude the claims they asserted against COFINA and

other governmental entities in their adversary proceeding, which

was (and remains) at the pleading stage. In response, the Plan

was amended to clarify that the Credit Unions were "entitled to

continue pursuit" of their adversary proceeding "against all

parties other than COFINA and Reorganized COFINA."

After hearing argument on January 16 and 17, 2019, the

Title III court overruled all objections to the Plan and, on

February 5, 2019, entered its final approval. Because no party

objected to the Plan's waiver of the typical fourteen-day stay or

otherwise asked the Title III court to stay approval pending any

appeal, the Plan was implemented beginning on February 12, 2019.

One week later, the Credit Unions moved for

reconsideration of the confirmation order, seeking to strike the

provision releasing the claims they asserted against COFINA in

their adversary proceeding. The Title III court denied the motion.

The court explained that the discharge of claims against COFINA

"is a fundamental component of the Plan and of restructuring

- 8 - proceedings in general" and found that removing the discharge

provision would cause COFINA "substantial" prejudice, "as the

uncertainty presented by pending litigation after confirmation of

a plan would frustrate the purpose of these Title III proceedings

and could adversely impact the marketability of new bonds issued

pursuant to the Plan." This appeal followed one month later.

II.

A.

The Board and an intervening coalition of senior COFINA

bondholders urge us to dismiss this appeal under the doctrine of

equitable mootness. Under that doctrine, we have long recognized

that "where a reorganization plan has been in place for an extended

period of time after thorough vetting and approval by the

bankruptcy court, there comes a point where 'the impracticability

of fashioning fair and effective judicial relief' cautions against

disturbing the reorganization plan." United Sur. & Indem. Co. v.

López-Muñoz (In re López-Muñoz),

(1st Cir. 2020)

(quoting Rochman v. Ne. Utils. Serv. Grp. (In re Pub. Serv. Co. of

N.H.),

, 471 (1st Cir. 1992)). And just recently, we

discussed the doctrine at length in Pinto-Lugo, a set of appeals

contesting the same plan of adjustment challenged by the Credit

Unions here. See

, at *4–11. As we explained in

Pinto-Lugo, the decision

- 9 - whether to reject an appeal of an order confirming a plan of reorganization because the plan has been implemented calls for us to consider at least three factors: "(1) whether the appellant pursued with diligence all available remedies to obtain a stay of execution of the objectionable order; (2) whether the challenged plan proceeded to a point well beyond any practicable appellate annulment; and (3) whether providing relief would harm innocent third parties."

(internal quotation marks and alterations omitted)

(emphasis in original) (quoting PPUC Pa. Pub. Util. Comm'n v.

Gangi,

(1st Cir. 2017)).

Analyzing those factors, we dismissed the Pinto-Lugo

objectors' challenges to the Plan as equitably moot. We found

that the first factor cut sharply against the objectors because

they "failed to object to the waiver of the automatic stay of

confirmation, did not seek any stay pending appeal, neither sought

to expedite the appeal nor objected to requests for extension, and

in fact sought to extend the briefing schedule themselves." Id.

at *9. As to the second factor, we explained that the Plan could

not feasibly be unwound:

Pursuant to the Plan and new bond legislation, upon consummation of the Plan old COFINA bonds worth over $17 billion were exchanged for reorganized COFINA bonds worth over $12 billion. Those new COFINA bonds have since changed hands tens of thousands of times on the open market for over a year, with many now held by strangers to these proceedings. In addition, COFINA distributed about $322 million to creditors, Bank of New York Mellon (BNYM), as trustee, transferred more

- 10 - than $1 billion in disputed SUT revenues to the Commonwealth and COFINA, and insurers of the old bonds have paid holders of old bonds under the Plan. Complicating matters further, claims have been released and all litigation arising from the restructuring has been dismissed with prejudice.

Id. at *8. The third factor also weighed in favor of equitable

mootness, given the "incalculable inequity" that unraveling the

plan would cause to "many thousands of innocent third parties who

have extended credit, settled claims, relinquished collateral and

transferred or acquired property in legitimate reliance on the

unstayed order of confirmation." Id. (quoting In re Pub. Serv.

Co. of N.H., 963 F.2d at 475).

This appeal suffers from the same problems. As in Pinto-

Lugo, the Credit Unions here were anything but diligent in seeking

to obtain a stay or prevent delay: They failed to object to the

waiver of the automatic stay of confirmation, to seek any stay

pending appeal, to request to expedite the appeal, or to object to

requests for extension. In fact, on multiple occasions the Credit

Unions sought to extend the briefing schedule themselves. As to

the second and third factors, the Credit Unions challenge the same

plan that the objectors in Pinto-Lugo sought to overturn, a plan

which has now been fully implemented for over two years and which

has led to tens of thousands of transactions worth billions of

dollars by third parties relying on it in good faith. Upsetting

- 11 - the Plan at this late date would throw those transactions into

doubt, harming those third parties.

B.

Notwithstanding the foregoing, the Credit Unions make

six arguments why equitable mootness is inapplicable to their

appeal. First, they contend that the doctrine is inapplicable to

proceedings under PROMESA. Yet we rejected this same argument in

Pinto-Lugo, explaining that nothing in PROMESA undercuts the

equitable nature of a proceeding to approve a plan of adjustment

and that the interests of finality and reliance that undergird the

doctrine in the context of Chapter 9 and 11 bankruptcies apply

with equal force to proceedings under Title III. See

, at *6.

Second, the Credit Unions argue that the nature of their

claims cautions against application of the doctrine. To the extent

the Credit Unions rely on the constitutional nature of their

claims, we have previously held that "the presence of underlying

constitutional claims does not act as a per se bar to the

applicability of the doctrine" of equitable mootness.

(applying the doctrine despite the presence of constitutional

claims). This is because a "'constitutional right,' or a right of

any other sort, 'may be forfeited in criminal as well as civil

cases by the failure to make timely assertion of the right before

a tribunal having jurisdiction to determine it.'" Henderson v.

- 12 - United States,

(2013) (quoting United States v.

Olano,

(1993)); see also Bennett v. Jefferson

Cnty.,

(11th Cir. 2018) (applying equitable

mootness despite the presence of state-based constitutional claims

and explaining that "the mere fact that a potential or actual

violation of a constitutional right exists does not generally

excuse a party's failure to comply with procedural rules for

assertion of the right"). Similarly, the Credit Unions' reliance

on the allegedly non-dischargeable nature of their claims goes to

the merits of their objections to plan approval rather than to the

ramifications of their failures to try to forestall plan

implementation. And while the merits of an objection may perhaps

play some role in weighing the pros and cons of the equitable

relief being sought, certainly the merits cannot be determinative.

Otherwise, equitable mootness would apply only when not needed.

See Pinto-Lugo,

, at *9.

Third, the Credit Unions contend that dismissing their

appeal as equitably moot would violate their due process right to

appeal. Suffice to say, if this were so, the doctrine of equitable

mootness -- which every circuit has adopted in some form, see

at *4 -- would not exist. More to the point, the Credit Unions

have not been denied any right to appeal. To the contrary, they

have briefed their case and presented oral argument on the various

issues raised by their appeal. Although in denying this appeal as

- 13 - equitably moot we will not reach the merits of those issues, that

does not amount to a denial of the Credit Unions' right to due

process, just as dismissal of a cause of action based on an

affirmative defense such as laches does not violate a litigant's

right to due process.

Fourth, the Credit Unions vaguely assert that the Plan's

confirmation was "steamrolled," presumably suggesting that the

Plan proponents have unclean hands. But, as noted, the Credit

Unions received notice of the Plan, objected to it in writing,

participated in the confirmation hearing, and had their objection

heard and addressed by the court. They were "steamrolled" only in

that they lost quickly.

Fifth, trying to fight fire with fire, the Credit Unions

argue that appellees are equitably estopped from asserting that

the Credit Unions' claims are equitably moot because appellees

"represented that in the confirmation process [the Credit Unions]

should have had the opportunity to assert them." Specifically,

the Credit Unions point to appellees' contention in the adversary

proceeding that "[u]ntil a plan of adjustment is filed that does

not provide for payment in full of any claims [the Credit Unions]

may have, any decisions on (or requests related to)

dischargeability are premature." That assertion, however, was

correct: Had the Plan allowed the Credit Unions' claims, there

would have been no need to litigate dischargeability. And, as we

- 14 - have repeatedly noted, the Credit Unions had ample opportunity to

object to the discharge before the Title III court.

Finally, the Credit Unions argue that their protection

and the protection of their members and depositors "would be

aligned with the policy objectives of a Plan of Adjustment," and

so the "failure to protect [them] and their members . . . would

defeat" the purpose of the Plan. But reversing the order approving

the Plan would by no means inevitably provide any benefit to the

Credit Unions and their members. It would imperil the roughly 50%

of bond value preserved by the Plan. See Pinto-Lugo,

, at *2. And it would leave the Credit Unions with a claim

against a debtor that could well have no assets with which to pay

unsecured claims. In any event, trying to undo the Plan at this

point would hardly further the Plan's policy objectives. To the

contrary, it would reverse or at least call into question the

"important forward motion" the Plan provides to "the

Commonwealth's economic recovery."

.

C.

Unable to show that the equitable mootness doctrine is

inapplicable to their case, the Credit Unions assert a variety of

reasons why the equitable mootness factors do not actually favor

dismissal.

As to "whether the appellant pursued with diligence all

available remedies to obtain a stay of execution of the

- 15 - objectionable order,"

(alteration omitted) (emphasis in

original) (quoting PPUC Pa. Pub. Util. Comm'n,

),

the Credit Unions do not contest that they repeatedly failed to

seek a stay of the confirmation order. Rather, they argue that

"preservation of [their] rights did not require staying the

Plan . . . but merely limiting the releases and discharge to be

granted to COFINA." This argument, however, ignores the fact that

the discharge could only be limited by modifying the Plan. The

Credit Unions also argue that they timely sought to challenge the

Plan through the filing of their objections and by their oral

presentation at the confirmation hearing. But objecting to the

merits of a Plan is simply not the same as asking that the Plan

approval order be stayed while those objections are considered on

appeal.

The Credit Unions next take issue with "whether

providing relief would harm innocent third parties." PPUC Pa.

Pub. Util. Comm'n,

. In that regard, they argue

that because "COFINA provides no public services, no

citizens . . . [would] be affected by the modification or delay of

the Plan." Along similar lines, they contend that the third

parties trading COFINA bonds, particularly certain hedge funds,

are not "innocent" parties but instead were "active participants

in the use of the bankruptcy proceeding to profit at the expense

of" COFINA and its "traditional investors." But the restructured

- 16 - COFINA bonds are traded on public markets and have changed hands

tens of thousands of times since confirmation of the Plan. It is

simply implausible that all, or even most, current COFINA

bondholders were involved in the Title III proceedings. And given

the existence of these numerous innocent third parties, whether

COFINA itself provides public services is irrelevant.

Undeterred, the Credit Unions point to provisions of the

Plan that exclude certain claims against BNYM, the bond trustee,

from the releases, and suggest that if those claims are

permissible, then the continuation of their claims against COFINA

would not disrupt the Plan. Those provisions, however, do not

permit any claims against COFINA. Indeed, every claim against

COFINA, to the extent not satisfied in full, was discharged by the

Plan. The fact that the Plan permits certain claims against BNYM,

just as it allows the Credit Unions' claims against non-COFINA

defendants, in no way suggests that permitting the Credit Unions

to pursue claims against COFINA would not disrupt the Plan or the

marketability of COFINA bonds.

The Credit Unions also contend that there is no

evidentiary support for the idea that permitting their claims would

upend the Plan. We long ago noted, however, that "substantial

consummation" of a plan of reorganization "raises a 'strong

presumption' that an appellate court will not be able to fashion

an equitable and effective remedy." In re Pub. Serv. Co. of N.H.,

- 17 - 963 F.2d at 473 n.13 (quoting In re AOV Indus., Inc.,

(D.C. Cir. 1986)). On top of that presumption, the

Plan states that "the releases, injunctions and exculpation . . .

constitute an essential component of the compromises reached and

are not severable from the other provisions of this Plan." See In

re Millennium Lab Holdings II, LLC,

(3d Cir.

2019) (holding that "striking the release provisions as to Voya

would certainly undermine the plan" because "the plan says that

the settlement payment . . . could not be compelled absent full

and complete releases from all of Millennium’s pre-bankruptcy

lenders, including Voya" (emphasis in original)); see also In re

Charter Commc’ns, Inc.,

(2d Cir. 2012) (noting

that, although "a nonseverability clause standing on its own cannot

support a finding of equitable mootness," such a clause "may be

one indication that a particular term was important to the

bargaining parties").

Additionally, in approving the Plan, the Title III court

found that the Plan

incorporates a complex series of interrelated compromises and settlements that resolve the most significant potential obstacle to confirmation of a plan of adjustment. Moreover, since the compromises and settlements are inextricably interwoven, they all hinge on one another and the approval of all of these compromises and settlements is required in order to satisfy the conditions to the Effective Date set forth in the Plan.

- 18 - And, as we have already explained, in denying the Credit Unions'

motion for reconsideration, the court further found that the

release of claims against COFINA "is a fundamental component of

the Plan" and that removing the release would cause COFINA

"substantial" prejudice, "as the uncertainty presented by pending

litigation after confirmation of a plan would frustrate the purpose

of these Title III proceedings and could adversely impact the

marketability of new bonds issued pursuant to the Plan."

The Credit Unions' only response to these findings is

that the financial value of the relief they seek amounts to only

four tenths of one percent of the restructured debt of COFINA. We

rejected a similar argument in Pinto-Lugo, declining to grant

relief involving amounts only slightly larger (in relation to the

$12 billion of restructured COFINA debt) than those claimed by the

Credit Unions. We did so because the Plan

rested at base on the [Title III] court's approval of a settlement between the Commonwealth and COFINA pursuant to which the Commonwealth retained 46.35% of SUT revenues. The Title III court could approve or disapprove the plan; no one explains how the Title III court could have successfully compelled the Commonwealth to settle its adversary proceeding against COFINA for less than the 46.35% provided for in the approved settlement. See

. So it would seem to follow that we, too, could not "tweak" the plan by ordering the Commonwealth to settle for 46.35% minus $316 million. In short, we face an up-or-down decision -- affirm or vacate Plan approval. And because no one sought a stay of the plan approval,

- 19 - vacating approval is precisely what would trigger a hopeless effort to unscramble the eggs.

at *10.

So too here, the Credit Unions fail to explain how the

Title III court could successfully compel COFINA to accept the

Plan without the release of all claims against it, particularly in

light of the COFINA-Commonwealth settlement's carefully calibrated

division of SUT revenues, which could be upset if the release were

modified as the Credit Unions request. See

. Nor

do the Credit Unions explain how their recovery from COFINA of a

judgment of many millions of dollars would not adversely affect

the thousands of innocent purchasers of new COFINA bonds. So it

would seem to follow that we face the same up-or-down decision we

faced in Pinto-Lugo -- affirm or vacate Plan approval. This

conclusion is further confirmed by the Credit Unions' own

description of relief they seek on appeal, which recognizes that

the "Judgment confirming COFINA's plan of adjustment must be

reversed" before any modification of the Plan would be possible.

But just as in Pinto-Lugo, because the Credit Unions failed to

seek a stay of the Plan's implementation, granting such relief

would be as futile as squeezing the toothpaste back into the tube.

See In re Specialty Equip. Cos.,

, 1049 (7th Cir. 1993)

(dismissing appeal as equitably moot because nullification of non-

- 20 - debtor third-party releases "would amount to imposing a different

plan of reorganization on the parties").

The Credit Unions also point to Samson Energy Resources

Co. v. Semcrude, L.P., in which the Third Circuit rejected an

attempt to dismiss an appeal as equitably moot.

(3d

Cir. 2013). In Samson, the appellants sought to modify a confirmed

Chapter 11 plan so that they could go forward with an adversary

proceeding. The amount at issue was only $207,300, approximately

0.13% of the funds set aside under the plan for the class to which

the appellants belonged and just 0.01% of the $2 billion

reorganized by the plan.

.1 Given the small amounts at

issue and the debtor's "robust financial health" post-bankruptcy,

, the court found that the debtor's financial well-being

would not be threatened by allowing appellant's claims to proceed,

, nor would any other third-party be negatively

impacted,

The court also found that there was no risk that

allowing the appellants' claims to proceed would lead to any other

claims against the debtor.

.

1 Although the appellants' adversary proceeding was a putative class action with potential liability of approximately forty to eighty million dollars, no class had been certified at the time of the appeal, nor was it clear how many of the class members' claims may have been precluded due to their acquiescence to the plan of reorganization.

Without more clarity about the class, the court found premature any fears of upending the plan of reorganization.

.

- 21 - Here, by contrast, there is no reason to expect that

COFINA would have anywhere near the available unpledged funds

necessary even to begin paying the Credit Unions' claims. There

would also be no principled basis for allowing the Credit Unions'

claims to proceed and not allowing, for example, the claims of the

Elliott objectors in Pinto-Lugo. While the sums claimed by the

Credit Unions and the Elliott objectors are small in relation to

the amount of pledged revenues that flow through COFINA, they could

still result in liability on the order of nine figures. Such

substantial liability might well threaten COFINA's solvency, given

its inability to divert pledged SUT revenues, thereby upsetting

the central aim of the Plan. And, as set forth above, the Title III

court specifically found that permitting the Credit Unions' claims

could disrupt the marketability of the restructured COFINA bonds,

which would harm tens of thousands of innocent bondholders and

threaten the Commonwealth's economic recovery. Furthermore, if

the claims are valid, then the Credit Unions offer no reason why

liability would not inure to the Commonwealth, which would be more

likely to have assets to pay than would COFINA. Because, as we

have noted, the Plan does not bar proceeding against anyone other

than COFINA, the practical harm to the Credit Unions would appear

to be speculative.

Finally, the Credit Unions argue that one of the purposes

of equitable mootness -- finality of confirmed plans of

- 22 - reorganization -- would not be served by denial of this appeal

because "Puerto Rico's fiscal crisis will not be resolved by

COFINA’s Plan of Adjustment." Expanding on this argument, the

Credit Unions note that Title III proceedings regarding the

Commonwealth and other governmental agencies are ongoing and that

unspecified issues surrounding COFINA's plan of adjustment are

still being litigated. Similarly, the Credit Unions argue that

"[m]arket participants are aware that finality is only achieved

upon exhaustion of all legal remedies and expiration of all

applicable terms" and that restructured COFINA bonds are "subject

to market risks." Yet we have long affirmed the "important public

policy favoring orderly reorganization and settlement of debtor

estates by 'affording finality to the judgments of the bankruptcy

court.'" In re Pub. Serv. Co. of N.H., 963 F.2d at 471–72 (quoting

In re AOV Indus., Inc.,

). Furthermore, that other

proceedings may be ongoing or that Puerto Rico's fiscal recovery

remains a work in progress does not change the fact that the Plan

has been fully implemented for over two years. Whatever risks

market forces or those other proceedings may pose to Puerto Rico's

recovery, we decline to add to those risks by ruling in favor of

parties who, by their inaction, rendered the relief they seek

impossible without causing harm to many other innocent parties and

the public.

- 23 - III.

For the foregoing reasons, we dismiss as equitably moot

the Credit Unions' challenge to the Title III court's confirmation

of the Plan.

- 24 -