Assured Guaranty Corp. v. Commonwealth of Puerto Rico

United States Court of Appeals
For the First Circuit

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; THE FINANCIAL
OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS
REPRESENTATIVE FOR THE PUERTO RICO PUBLIC BUILDINGS AUTHORITY,

Debtors.

No. 20-1930

ASSURED GUARANTY CORPORATION; ASSURED GUARANTY MUNICIPAL
CORPORATION; AMBAC ASSURANCE CORPORATION; THE FINANCIAL GUARANTY
INSURANCE COMPANY; NATIONAL PUBLIC FINANCE GUARANTEE
CORPORATION,

Movants, Appellants,

v.

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,

Debtors, Appellees,

v.

PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY,
 Respondent, Appellee,

OFFICIAL COMMITTEE OF UNSECURED CREDITORS; AMERINATIONAL
COMMUNITY SERVICES, LLC, as servicer for the GDB Debt Recovery
Authority; CANTOR-KATZ COLLATERAL MONITOR LLC, as collateral
monitor for the GDB Debt Recovery Authority,

Interested Parties, Appellees.

No. 20-1931

ASSURED GUARANTY CORPORATION; ASSURED GUARANTY MUNICIPAL
CORPORATION; AMBAC ASSURANCE CORPORATION; FINANCIAL GUARANTY
INSURANCE COMPANY; U.S. BANK TRUST NATIONAL ASSOCIATION, as
successor Trustee,

Movants, Appellants,

v.

FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, AS
REPRESENTATIVE FOR THE COMMONWEALTH OF PUERTO RICO,

Debtor, Appellee,

v.

PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY,

Respondent, Appellee,

BACARDI INTERNATIONAL LIMITED; BACARDI CORPORATION; DESTILERIA
SERRALLES, INC.; OFFICIAL COMMITTEE OF UNSECURED CREDITORS,

Interested Parties, Appellees.

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

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

* Of the Southern District of New York, sitting by
designation.
 Before

Lynch, Lipez, and Thompson,
Circuit Judges.

Neal Kumar Katyal, with whom Sean Marotta, Mitchell P. Reich,
Reedy C. Swanson, Nathaniel A.G. Zelinsky, and Hogan Lovells US
LLP were on brief, for appellants Assured Guaranty Corp., Assured
Guaranty Municipal Corp., Ambac Assurance Corporation, National
Public Finance Guarantee Corporation, and Financial Guaranty
Insurance Company.
Atara Miller, with whom Dennis F. Dunne, Grant R. Mainland,
John J. Hughes, III, Jonathan Ohring, Milbank LLP, Roberto Cámara-
Fuertes, and Ferraiuoli LLC were on brief, for appellant Ambac
Assurance Corporation.
Mark C. Ellenberg, Howard R. Hawkins, Jr., William J. Natbony,
Thomas J. Curtin, Casey H. Servais, Cadwalder, Wickersham & Taft,
Heriberto Burgos Pérez, Ricardo F. Casella-Sánchez, Diana Pérez-
Seda, and Casellas Alcover & Burgos P.S.C. on brief, for appellants
Assured Guaranty Corp. and Assured Guaranty Municipal Corp.
Gregory Silbert and Weil, Gotshal & Manges LLP on brief for
appellant National Public Finance Guarantee Corp.
María E. Picó, Rexach & Pico, CSP, Martin A. Sosland, Jason
W. Callen, and Butler Snow LLP on brief for appellant Financial
Guaranty Insurance Company.
Ronald J. Silverman, Michael C. Hefter, Hogan Lovells US LLP,
Eric A. Tulla, Iris J. Cabrera-Gómez, and Rivera, Tulla and Ferrer,
LLC on brief for appellant U.S. Bank Trust National Association.
Michael T. Mervis and Martin J. Bienenstock, with whom Timothy
W. Mungovan, John E. Roberts, Elliot R. Stevens, Adam L. Deming,
Michael A. Firestein, Lary Alan Rappaport, Jeffrey W. Levitan,
Mark D. Harris, Margaret A. Dale, Ehud Barak, David A. Munkittrick,
Daniel D. Desatnik, and Proskauer Rose LLP were on brief, for
appellee Financial Oversight and Management Board for Puerto Rico.
Arturo J. García-Solá, with whom Alejandro José Cepeda-Díaz,
Nayuan Zouairabani, and McConnell Valdes LLC were on brief, for
interested party AmeriNational Community Services, LLC.
Elizabeth L. McKeen, with whom Ashley M. Pavel, John J.
Rapisardi, Peter Friedman, and O'Melveny & Myers LLP were on brief,
for appellee Puerto Rico Fiscal Agency and Financial Advisory
Authority.
Luc A. Despins, with whom Paul Hastings LLP was on brief, for
interested party Official Committee of Unsecured Creditors.
Douglas S. Mintz, with whom Douglas I. Koff, Abbey Walsh,
Schulte, Roth & Zabel, Robert M. Loeb, Sarah H. Sloan, Peter Amend,
and Orrick, Herrington & Sutcliffe LLP were on brief, for
interested party Cantor-Katz Collateral Monitor LLC.
Laura E. Appleby, Kyle R. Hosmer, Faegre Drinker Biddle &
Reath LLP, and Kevin Carroll, on brief for amicus curiae Securities
Industry and Financial Markets Association.

March 3, 2021
 LYNCH, Circuit Judge. These companion cases from the

Puerto Rico Oversight, Management, and Economic Stability Act

("PROMESA") Title III court in Puerto Rico involve bonds issued by

the Puerto Rico Highways and Transportation Authority ("HTA") and

the Puerto Rico Infrastructure and Financing Authority ("PRIFA").

Appellants Ambac Assurance Corporation, Assured Guaranty

Corporation, Assured Guaranty Municipal Corporation, and Financial

Guaranty Insurance Company (collectively, the "Monolines") had

insured hundreds of millions of dollars of these HTA and PRIFA

bonds against default. HTA and PRIFA defaulted on these bonds in

2015, causing the Monolines to make payments to their insureds.

As a result, the Monolines brought claims against Puerto Rico,

HTA, and PRIFA. In 2017, Puerto Rico and HTA filed voluntary

petitions to begin Title III proceedings under PROMESA, triggering

an automatic stay of certain claims against them pursuant to 11

U.S.C. § 362(a) as incorporated by PROMESA. See 48 U.S.C. §§ 2161-

2177. In 2020, the Monolines amended their earlier 2019 petitions

to the Title III court for relief from the automatic stay under 11

U.S.C. § 362(d) also as incorporated by PROMESA. See id. The

Title III court denied these petitions, and the Monolines now

appeal from this ruling. We hold that the Title III court did not

abuse its discretion in denying relief from the § 362 stay.

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 I. Facts and Procedural History

A. PRIFA Bonds

In 1988, Puerto Rico established PRIFA to facilitate

"[t]he construction, rehabilitation, acquisition, repair,

preservation and replacement of the infrastructure of the

Commonwealth." See P.R. Laws Ann. tit. 3, § 1901. Puerto Rico

funded PRIFA in part using proceeds from excise taxes on rum (the

"Rum Excise Taxes") produced in the Commonwealth and exported to

the United States.1 PRIFA's Enabling Act says that some portion

of these excise taxes "shall be covered into a Special Fund to be

maintained by or on behalf of [PRIFA]." Id. § 1914.

PRIFA is authorized to issue bonds and has done so. Id.

§ 1906(l). To repay its bonds, it can pledge "all or any portion

of the federal excise taxes or other funds which should have been

transferred by the Commonwealth to [PRIFA]." Id. § 1906(m). If

PRIFA pledges funds it receives from the Commonwealth to repay its

bonds, the pledge is subject to article VI, section 8 of Puerto

Rico's Constitution. See id. § 1907(a). Section 8 says that if

Puerto Rico's available revenues cannot meet the appropriations it

has made in a given year, it must first pay its public debt before

1 The United States imposes an excise tax on rum produced
in Puerto Rico and sold in the United States. The proceeds from
this tax are "covered into the treasury of Puerto Rico." See 26
U.S.C. § 7652(a)(3).

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making "other disbursements . . . in accordance with the order of

priorities established by law." P.R. Const. art. VI, § 8. Puerto

Rico is not liable for PRIFA's bonds. P.R. Laws Ann. tit. 3,

§ 1910.

PRIFA issued bonds in 1988 under a trust agreement.2 It

agreed to pay the principal and interest on the bonds using Pledged

Revenues. The trust agreement defines Pledged Revenues as "Special

Tax Revenues and any other moneys that have been deposited to the

credit of the Sinking Fund." "Special Tax Revenues" are "the [Rum

Excise Taxes] deposited to the credit of the Puerto Rico

Infrastructure fund pursuant to the [PRIFA Enabling Act]." The

Sinking Fund is a series of accounts created by the trust agreement

to house the money used to make payments on PRIFA's bonds.3

B. HTA Bonds

In 1965, Puerto Rico established HTA to construct,

operate, and manage the Commonwealth's transit and transportation

facilities. See id. tit. 9, §§ 2001-2035. To fund its operations,

HTA collects tolls (the "Toll Revenues"). Id. § 2004. Puerto

Rico has also passed laws allocating certain taxes and fees to HTA

2 U.S. Bank currently serves as the indenture trustee.
Along with the Monolines, it is an appellant in the litigation
concerning the PRIFA bonds.
3 The term "sinking fund" generally describes "[a] fund
consisting of regular deposits that are accumulated with interest
to pay off a long-term corporate or public debt." Fund, Black's
Law Dictionary (11th ed. 2019).

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(the "HTA Allocable Revenues"). See id. §§ 2021, 5681-5682 (motor

vehicle license fees); id. tit. 13, §§ 31626, 31751(a)(1)

(gasoline, gas oil, crude oil, and diesel oil excise taxes); id.

§§ 31625, 31751(a)(4) (cigarette tax).

Like PRIFA, HTA is authorized to and has issued bonds.

Id. tit. 9, § 2004(l). It can secure its bonds with revenue it

generates and can pledge the "proceeds of any tax or other funds

which may be made available to [HTA] by the Commonwealth" to pay

the principal and interest on its bonds. Id. Again like PRIFA,

if HTA pledges funds made available to it by the Commonwealth to

repay its bonds, the pledge is subject to article VI, section 8 of

Puerto Rico's Constitution. Id. Puerto Rico is not liable for

HTA's bonds. Id. § 2012(h).

HTA issued bonds under general bond resolutions it

adopted in 1968 and 1998. Approximately $815 million in 1968 bonds

and $3.36 billion in 1998 bonds remain outstanding. Under the

resolutions, HTA agreed to deposit the Toll Revenues and HTA

Allocable Revenues into sinking funds (the "Resolution Funds") and

to use those funds to service its debt. The accounts were to be

held "in trust . . . subject to a lien and charge in favor of the

holders of the bonds."

C. Puerto Rico's Debt Crisis and PROMESA

In November 2015, the Governor of Puerto Rico issued an

administrative bulletin ordering Puerto Rico's Treasury Secretary

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to stop transferring the HTA Allocable Revenues to HTA and the Rum

Excise Taxes to PRIFA. In April 2016, Puerto Rico enacted the

Puerto Rico Emergency Moratorium and Financial Rehabilitation Act.

2016 P.R. Laws Act 21. Under this law, the Governor issued a

series of additional administrative bulletins preventing HTA and

PRIFA from making certain payments on their debt.

The Monolines had insured PRIFA and HTA bonds against

default. After PRIFA and HTA defaulted on their bonds, the

Monolines began making payments to the bondholders. They brought

suit in federal district court in Puerto Rico challenging the

Governor's executive orders and attempting to force PRIFA and HTA

to make payments on their debt. See Assured Guar. Corp. v. García-

Padilla, No. 3:16-cv-01037 (D.P.R. filed Jan. 7, 2016).

In 2016, Congress enacted PROMESA to help Puerto Rico

"achieve fiscal responsibility and access to the capital markets."

48 U.S.C. § 2121(a). Title I of PROMESA created the Financial

Oversight and Management Board ("FOMB") to approve fiscal plans

and budgets for Puerto Rico. See id. §§ 2121, 2141-2142. Title

III of PROMESA incorporated many sections of the Bankruptcy Code

and established a procedure for Puerto Rico and its

instrumentalities to restructure their debt. Id. §§ 2161-2177.

Upon enactment, PROMESA triggered a temporary stay of

certain actions, including the Monolines' suit in federal court,

against Puerto Rico and its instrumentalities. See id. § 2194(b).

- 9 -
Some of the Monolines, along with some HTA bondholders,

unsuccessfully sought relief from the PROMESA stay as it applied

to claims related to HTA bonds. See Peaje Invs. LLC v. García-

Padilla, 845 F.3d 505, 514, 516 (1st Cir. 2017).

The PROMESA stay expired on May 1, 2017. See In re Fin.

Oversight & Mgmt. Bd. for P.R., 914 F.3d 694, 721 (1st Cir. 2019).

The next day, the Monolines filed additional suits in federal court

in Puerto Rico and the District of Columbia seeking payment on the

PRIFA and HTA bonds. See Ambac Assurance Corp. v. Commonwealth of

Puerto Rico, No. 3:17-cv-01568 (D.P.R. filed May 2, 2017 and stayed

May 17, 2017); Ambac Assurance Corp. v. U.S. Dep't of Treasury,

No. 1:17-cv-00809 (D.D.C. filed May 2, 2017 and stayed May 25,

2017).

D. Title III Proceedings

On May 3, 2017, FOMB, on behalf of Puerto Rico, began

PROMESA Title III proceedings in the United States District Court

for the District of Puerto Rico. See 48 U.S.C. § 2164(a). On May

21, 2017, FOMB also petitioned for Title III relief on behalf of

HTA. The filing of these petitions triggered a new stay of claims

against Puerto Rico and HTA. See 11 U.S.C. §§ 362, 922; 48 U.S.C.

§ 2161 (incorporating §§ 362 and 922 of the Bankruptcy Code). No

party contests that the PRIFA actions are also stayed.

The Monolines continued to pursue their claims before

the Title III court. In an adversary proceeding related to the

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HTA bonds, some Monolines argued that, under § 922(d) of the

Bankruptcy Code, the § 362 and § 922(a) stays did not apply to

them because their bonds were secured by "pledged special

revenues." See 11 U.S.C. § 922(d). The Title III court rejected

that argument on January 30, 2018, see In re Fin. Oversight & Mgmt.

Bd. for P.R., 582 B.R. 579, 596 (D.P.R. 2018), and this court

affirmed on March 26, 2019, see In re Fin. Oversight & Mgmt. Bd.

for P.R. ("Assured"), 919 F.3d 121, 129 (1st Cir. 2019), cert.

denied sub nom. Assured Guar. Corp. v. Fin. Oversight & Mgmt. Bd.

for P.R., 140 S. Ct. 855 (2020).

Another Monoline, Ambac, sought an injunction to compel

Puerto Rico to pay the HTA Allocable Revenues to HTA and a

declaration that Puerto Rico's diversion of funds away from HTA

bondholders was unconstitutional, preempted by PROMESA § 303,4 and

forbidden by the Bankruptcy Code. The Title III court denied the

requested relief and dismissed Ambac's claims on February 27, 2018.

In re Fin. Oversight & Mgmt. Bd. for P.R., 297 F. Supp. 3d 269,

297 (D.P.R. 2018). On June 24, 2019, this court affirmed because

"the text of section 305 bars the Title III court from granting

Ambac . . . relief absent consent from the [FOMB] or unless the

Fiscal Plan so provides."5 In re Fin. Oversight & Mgmt. Bd. for

4 PROMESA § 303(3) places some limits on Puerto Rico's
ability to pass laws or issue executive orders interfering with
creditors' rights. See 48 U.S.C. § 2163.
5 PROMESA Section 305 says that "unless the [FOMB]

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P.R., 927 F.3d 597, 602-03 (1st Cir. 2019) ("Ambac"), cert. denied

sub nom. Ambac Assurance Corp. v. Fin. Oversight & Mgmt. Bd. for

P.R., 140 S. Ct. 856 (2020). In so holding, this court said that

"nothing in [its] holding . . . suggests that Ambac cannot seek

traditional stay relief pursuant to 11 U.S.C. § 362 and raise its

constitutional and statutory arguments in a separate action." Id.

at 605.

On January 16, 2020, the Monolines moved to lift the

automatic stay of their claims related to the HTA bonds. On

January 31, 2020, they made a similar motion related to the PRIFA

bonds.6 In both motions (collectively the "PRIFA and HTA Stay

Relief Motions"), they argued that they had a "colorable claim,"

as that term is used in Grella v. Salem Five Cent Savings Bank, 42

F.3d 26, 32-33 (1st Cir. 1994), to property held by Puerto Rico

and were entitled to relief from the stay under § 362(d).

Also in January 2020, FOMB began adversary proceedings

before the Title III court (the "Revenue Bond Adversary

Proceedings") by filing complaints objecting to proofs of claim as

to the HTA and PRIFA bonds the Monolines had filed. The Monolines

consents or the plan so provides, the court may not, by any stay,
order, or decree, in the case or otherwise, interfere with . . .
(2) any of the property or revenues of the debtor; or (3) the use
or enjoyment by the debtor of any income-producing property." 48
U.S.C. § 2165.
6 These motions amended earlier 2019 motions requesting
relief from the § 362 stay.

- 12 -
had made many arguments in support of their proofs of claim,

including that various executive orders, laws, and FOMB plans and

budgets impairing the PRIFA and HTA bonds were either

unconstitutional or preempted by PROMESA. On March 10, 2020, the

Title III court stayed the Revenue Bond Adversary Proceedings but

allowed the parties to engage in limited summary judgment motion

practice addressing certain counts. It noted that some of the

counts "may be determined by decisions of the Court in connection

with the [PRIFA and HTA Stay Relief] Motions."

The Title III court ordered limited discovery on the

Monolines' PRIFA and HTA Stay Relief Motions and held a hearing on

June 4, 2020. On July 2, 2020, it denied the PRIFA Stay Relief

Motion "to the extent that it seeks stay relief or adequate

protection with respect to the Rum Tax Remittances other than those

Rum Tax Remittances that have been deposited into the Sinking

Fund." In re Fin. Oversight & Mgmt. Bd. for P.R., 618 B.R. 362,

380 (D.P.R. 2020) ("PRIFA Order I"). That same day, it denied the

HTA Stay Relief Motion "to the extent it seeks stay relief or

adequate protection with respect to liens or other property

interests in Revenues other than those that have been deposited in

the Resolution Funds." In re Fin. Oversight & Mgmt. Bd. for P.R.,

618 B.R. 619, 641 (D.P.R. 2020) ("HTA Order I").

In both orders, the Title III court explained that when

"a movant seeks relief from the automatic stay to pursue remedies

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with respect to assets allegedly securing obligations," the court

does not "fully and finally adjudicate the merits of the parties'

underlying claims of security or beneficial interests" when ruling

on the motion. Id. at 630; PRIFA Order I, 618 B.R. at 372.

Instead, it first decides whether the movants have a "colorable

claim" to property held by the debtor. See HTA Order I, 618 B.R.

at 630 (citing Grella, 42 F.3d at 33).

As to the PRIFA bonds, the Title III court held that

"[t]he PRIFA Enabling Act does not . . . include any pledge of

security" to the bondholders, PRIFA Order I, 618 B.R. at 374, and

that the PRIFA trust agreement "imposes trust and pledge

obligations in favor of PRIFA's bondholders only with respect to

funds actually deposited into the Sinking Fund," id. at 377. It

rejected the Monolines' arguments that PRIFA is the equitable owner

of a portion of the Rum Excise Taxes, that Puerto Rico holds these

tax revenues in a fiduciary capacity for PRIFA and its bondholders,

and that PRIFA has an equitable lien on the revenues. Id. at 377-

80. It held that the Monolines "failed to establish that they

have the requisite colorable claim" and "cannot meet their burden

of showing cause for relief from the automatic stay." Id. at 379-

80.

On the HTA bonds, the Title III court held that the HTA

Movants did not have colorable claims to statutory liens against

HTA assets or to statutory liens encumbering Puerto Rico's assets.

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See HTA Order I, 618 B.R. at 631-35. The court also held that the

Monolines had no "colorable claim to equitable or beneficial

ownership interests in the Excise Taxes that have not been

transferred to HTA and deposited in the Resolution Funds," id. at

637, and rejected the Monolines' argument, based on language in

the HTA bond resolutions, that they had a colorable claim to a

security interest in the HTA Allocable Revenues, id. at 637-40.

At the end of both orders, the Title III court directed

the parties to "meet and confer and file a joint report as to their

positions on the nature, scope and scheduling of further

proceedings that they may believe are necessary in connection with"

the PRIFA and HTA Stay Relief Motions. PRIFA Order I, 618 B.R. at

380; HTA Order I, 618 B.R. at 641.

On July 9, 2020, the parties filed a joint status report

telling the Title III court that they "were unable to reach any

agreements regarding next steps." The Monolines took the position

that "additional proceedings are necessary before the Stay Relief

Motions will be fully resolved" because the Title III court had

not addressed whether there was "cause" to lift the stay pursuant

to 11 U.S.C. § 362(d)(1). They argued that, because the First

Circuit had held in Ambac that PROMESA § 305 prevented the Title

III court from adjudicating some of the Monolines' constitutional

and statutory arguments without FOMB's consent, refusing to lift

the stay so that they could litigate in an alternate forum would

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deny them due process. In contrast, FOMB argued that it "desire[d]

to proceed as scheduled with the [Revenue Bond] [A]dversary

[P]roceedings" to avoid undue delay and that "[t]here is no reason

for further proceedings" on the PRIFA and HTA Stay Relief Motions.

The next day, the Title III court ordered the parties to brief

"whether 'cause' exists under 11 U.S.C. § 362(d)(1) to lift the

automatic stay" in connection with the PRIFA and HTA Stay Relief

Motions.7

On September 9, 2020, the Title III court denied the

PRIFA and HTA Stay Relief Motions. In re Fin. Oversight & Mgmt.

Bd. for P.R., No. 17 BK 3567-LTS, 2020 WL 5430317, at *8 (D.P.R.

Sept. 9, 2020) ("PRIFA and HTA Order II"). In addition to the

reasons it gave in PRIFA Order I and HTA Order I, it gave two

additional reasons for denying the Stay Relief Motions as to some

of the Monolines' claims: (1) PROMESA § 305 and this court's

observation in Ambac "do not provide a mandatory, standalone basis

for the Court to lift the automatic stay at this juncture" given

the ongoing Revenue Bond Adversary Proceedings, see id. at *5, and

(2) the Sonnax factors, see Sonnax Indus. v. Tri Components

7 The court's order also addressed a stay relief motion
related to bonds issued by the Puerto Rico Convention Center
District Authority ("CCDA"). The CCDA Stay Relief Motion is not
at issue in this appeal. For that motion, in addition to briefing
on whether "cause" existed under 11 U.S.C. § 362(d)(1), the Title
III court ordered the parties to brief whether stay relief was
warranted under 11 U.S.C. § 362(d)(2) and whether other litigation
related to the CCDA bonds would remove the need for stay relief.

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Products Corp., 907 F.2d 1280, 1286 (2d Cir. 1990), do not weigh

in favor of lifting the stay, see PRIFA and HTA Order II, 2020 WL

5430317, at *6-8.

On the first basis, the court rejected the Monolines'

argument that "the automatic stay must be lifted to allow them to

assert causes of action under the Contracts, Due Process, and

Takings Clauses of the Constitution of the United States, and under

section 303 of PROMESA." Id. at *3. It held that, because it was

unclear whether FOMB would even invoke PROMESA § 305 in the Revenue

Bond Adversary Proceedings8 and because a grant of summary judgment

to FOMB in those proceedings would moot some of the Monolines'

claims, "the circumstances upon which [the Monolines'] due

process-related concerns are based . . . do not currently exist

and may never materialize." Id. at *5. It said that it could

adjudicate the Revenue Bond Adversary Proceedings and, if FOMB is

unsuccessful, lift the stay. Id. at *5 & n.13.

On the second basis, the Title III court rejected the

Monolines' argument that there was "cause" to lift the stay under

§ 362(d). Id. at *6. The court focused9 on five of the twelve

8 The Title III court also noted that, even if FOMB did
invoke PROMESA § 305, the Monolines were arguing that FOMB had
partially waived its ability to do so by commencing the adversary
proceedings. PRIFA and HTA Order II, 2020 WL 5430317, at *5.
9 In a footnote, the court explained why other Sonnax
factors weighed against granting stay relief. Id. at *7 n.16.

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Sonnax factors10 the Monolines agreed were "[of] particular

relevance to the instant case." Id. This court has previously

held that the Sonnax factors "provide a helpful framework for

considering whether the Title III court should permit litigation

to proceed in a different forum." In re Fin. Oversight & Mgmt.

Bd. for Puerto Rico ("In re PREPA"), 899 F.3d 13, 23 (1st Cir.

2018).

The court began by explaining why four of these factors

-- whether stay relief would result in partial or complete

resolution of the issues, whether it would promote judicial

economy, whether it would interfere with the bankruptcy case, and

whether the parties were ready for trial in the other proceeding

-- weighed against granting stay relief. It said that "lifting

the automatic stay . . . would interfere with, and would not

10 The twelve Sonnax factors are: "(1) whether relief would
result in a partial or complete resolution of the issues; (2) lack
of any connection with or interference with the bankruptcy case;
(3) whether the other proceeding involves the debtor as a
fiduciary; (4) whether a specialized tribunal with the necessary
expertise has been established to hear the cause of action; (5)
whether the debtor's insurer has assumed full responsibility for
defending it; (6) whether the action primarily involves third
parties; (7) whether litigation in another forum would prejudice
the interests of other creditors; (8) whether the judgment claim
arising from the other action is subject to equitable
subordination; (9) whether movant's success in the other
proceeding would result in a judicial lien avoidable by the debtor;
(10) the interests of judicial economy and the expeditious and
economical resolution of litigation; (11) whether the parties are
ready for trial in the other proceeding; and (12) impact of the
stay on the parties and the balance of harms." See Sonnax Indus.,
907 F.2d at 1286.

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promote, the interests of judicial economy" because "it would

result in fragmented and possibly premature litigation of factual

and legal issues, many of which are currently before the Court in

the Revenue Bond Adversary Proceedings, that are indisputably

central to the restructurings of the Commonwealth and its

instrumentalities." PRIFA and HTA Order II, 2020 WL 5430317, at

*6. It also said that "the parties would not be ready for trial

in the alternate forum if the Court were to grant stay relief, as

Movants contemplate commencing new litigation if relief is

granted." Id.

The last Sonnax factor discussed by the court was the

impact of the stay on the parties and the balance of harms. Id.

It held that the Monolines have "fail[ed] to demonstrate how the

hardship they would allegedly face from a continuation of the stay

renders them differently situated than virtually any other

creditor of a Title III debtor that is required to pursue its

claims exclusively in this Court." Id. at *7. It stated that,

"[t]o the extent that [the Monolines] have constitutionally

protected property interests derived from their statutory and

contractual rights, it would be unreasonable to conclude that those

rights alone provide a basis for stay relief" because, if that

were so, any unsecured creditor could "recast[] their claims in

constitutional terms and request[] stay relief," which would

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"disrupt[] . . . and undermin[e] the fundamental purpose of . . .

[the] Title III proceedings." Id. at *7.

The Monolines appeal from the Title III court's denial

of the PRIFA and HTA Stay Relief Motions.

II. Analysis

We review an order denying relief from a § 362 stay for

abuse of discretion. See In re Fin. Oversight & Mgmt. Bd. for

Puerto Rico ("Gracia-Gracia"), 939 F.3d 340, 346 (1st Cir. 2019).

The Title III court abuses its discretion "if it ignores 'a

material factor deserving of significant weight,' relies upon 'an

improper factor' or makes 'a serious mistake in weighing proper

factors.'" Id. (quoting In re Whispering Pines Ests., Inc., 369

B.R. 752, 757 (B.A.P. 1st Cir. 2007)).

Section 362(d) of the Bankruptcy Code says:

(d) On request of a party in interest and after
notice and a hearing, the court shall grant
relief from the stay provided under subsection
(a) of this section, such as by terminating,
annulling, modifying, or conditioning such
stay--

(1) for cause, including the lack of
adequate protection of an interest in
property of such party in interest;

(2) with respect to a stay of an act
against property under subsection (a) of
this section, if--

(A) the debtor does not have an
equity in such property; and

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 (B) such property is not necessary
to an effective reorganization;

11 U.S.C. § 362(d).

As the Supreme Court recently explained in Ritzen, a

stay relief motion "initiates a discrete procedural sequence,

including notice and a hearing, and the creditor's qualification

for relief turns on the statutory standard, i.e., 'cause' or the

presence of specified conditions." Ritzen Grp., Inc. v. Jackson

Masonry, LLC, 140 S. Ct. 582, 589 (2020). Stay relief motions

"can have large practical consequences," like determining "whether

a creditor can isolate its claim from those of other creditors" or

"the manner in which adversary claims will be adjudicated." Id.

at 590. Relief from stay proceedings are distinct from adversary

proceedings and "do not involve a full adjudication on the merits

of claims, defenses, or counterclaims." Grella, 42 F.3d at 32;

see Ritzen, 140 S. Ct. at 589 ("Adjudication of a stay-relief

motion . . . occurs before and apart from proceedings on the merits

of creditors' claims . . . ."); H.R. Rep. No. 95–595, 344 (1977),

reprinted in 1978 U.S.C.C.A.N. 5963, 6300 (analogizing a motion

for relief from the automatic stay to a preliminary injunction).

"[T]he hearing on a motion for relief from stay is meant to be a

summary proceeding, and the statute requires the bankruptcy

court's action to be quick." Grella, 42 F.3d at 31 (first citing

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In re Vitreous Steel Products Co., 911 F.2d 1223, 1232 (7th Cir.

1990); and then citing 11 U.S.C. § 362(e))

FOMB primarily argues that it was within the Title III

court's discretion to deny the PRIFA and HTA Stay Relief Motions

for the reasons it gave in PRIFA and HTA Order II. According to

FOMB, the court's holding that there was no "cause" to lift the

stay provides an independent basis for the Title III court's

refusal to lift the stay and we do not need to decide whether the

Monolines have a "colorable claim," the subject of PRIFA Order I

and HTA Order I.

Rather than challenging the Title III court's analysis

in PRIFA and HTA Order II directly, the Monolines argue that we

must reach the "colorable claim" issue. In other words, they

assert that we must determine whether they have satisfied the

threshold for stay relief set forth in Grella: establishing "a

colorable claim to property of the estate." 42 F.3d at 33.

Collectively, they make three main arguments: (1) because § 362(d)

says that a court "shall" grant stay relief under certain

conditions, the Title III court had no discretion to deny their

motions if the Monolines had a colorable claim and § 362(d)'s

conditions were met; (2) FOMB is attempting to "forestall appellate

review" of the colorable claim issue; and (3) the Title III court's

"efficiency rationale [in PRIFA and HTA Order II] related only to

. . . stay relief on grounds other than a colorable claim to a

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property interest or trust." We hold that, because of the

reasoning in PRIFA and HTA Order II, there was no abuse of

discretion in the denials of the motions to lift the stay.

Turning to the Monolines' first argument, nothing in the

text of § 362(d) says that, if the Monolines have a colorable claim

and meet the other § 362(d) requirements, the Title III court must

lift the stay and allow the Monolines to pursue their claims in

another forum. The statute says that the court must grant "relief

. . . such as by terminating, annulling, modifying, or conditioning

such stay." 11 U.S.C. § 362(d) (emphasis added); cf. Bragdon v.

Abbott, 524 U.S. 624, 639 (1998) (in interpreting text, "the use

of the term 'such as' confirms [that a] list is illustrative, not

exhaustive"). As a leading treatise explains, this language

underscores "the flexibility of section 362" and "permit[s] the

court to fashion the relief to the particular circumstances of the

case." 3 Collier on Bankruptcy ¶ 362.07 (16th ed. 2020). For

example, the court could "permit[] the exercise of some but not

all of the party's rights." Id. Therefore, even assuming the

Monolines did have a colorable claim and the conditions of § 362(d)

were met, they would not be entitled to the exact relief they seek.

The Title III court retains discretion to institute other forms of

appropriate stay relief.

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 Whatever the conclusion of the Title III court as to

whether certain asserted claims are colorable,11 it would still

have had to consider whether there was "cause" to lift the stay

under § 362(d)(1) and/or whether the conditions of § 362(d)(2)

were satisfied.12 See Gracia-Gracia, 939 F.3d at 352; In re Old

Cold, LLC, 602 B.R. 798, 824 (B.A.P. 1st Cir. 2019), aff'd sub

nom. In re: Old Cold, LLC, 976 F.3d 107 (1st Cir. 2020).

There was no abuse of discretion in the court's

consideration of the Sonnax factors to determine that there was no

"cause" to lift the stay. See In re PREPA, 899 F.3d at 23 (holding

that the Sonnax factors "provide a helpful framework" for

11 Contrary to one of the Monolines' arguments at oral
argument, Gracia-Gracia does not say that it is a per se "abuse of
discretion to deny stay relief based on an erroneous adjudication
of interests." Gracia-Gracia requires "the Title III court . . .
to make at least a preliminary determination of the parties'
respective property interests," Gracia-Gracia, 939 F.3d at 352,
because "the parties' respective property interests . . . [are]
'material factor[s] deserving of significant weight' in deciding
to grant or deny the requested stay relief," id. at 350 (quoting
In re Whispering Pines Ests., Inc., 369 B.R. at 757). It is an
abuse of discretion to "ignore[] 'a material factor deserving of
significant weight,'" id. at 346 (emphasis added), and the court
in Gracia-Gracia abused its discretion because it failed to
consider the parties' property interests at all, id. at 348.
12 The Title III court did not specifically say that the
Monolines were not entitled to relief under § 362(d)(2), but one
of the Sonnax factors the court found "weighs heavily against stay
relief," PRIFA and HTA Order II, 2020 WL 5430317, at *6, was
whether there would be "lack of . . . interference with the
bankruptcy case," Sonnax, 907 F.2d at 1286. In an earlier PROMESA
case, this court noted that this Sonnax factor is "the functional
equivalent of [one of] the prerequisites for stay relief under
subsection 362(d)(2)." Gracia-Gracia, 939 F.3d at 350.

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determining whether to grant stay relief under § 362(d)). Indeed,

in their briefs to us, the Monolines do not directly challenge the

court's application of Sonnax. We have already summarized the

Title III court's Sonnax analysis and do not repeat it here.

In holding that there was no abuse of discretion, we

emphasize that, as one of the Monolines recognized at oral

argument, the Title III court will eventually decide on a final

basis whether the Monolines have a property interest in the Revenue

Bond Adversary Proceedings.13 This issue is being actively

adjudicated in those proceedings. Motions for summary judgment on

some of the Monolines' claims have already been filed. The Title

III court held a hearing on these motions on September 23, 2020,

and on January 20, 2021, it issued discovery orders at the

Monolines' request. In those proceedings, the Title III court

will not and cannot treat its earlier, summary determination about

whether the Monolines had a colorable claim as conclusive. See

Grella, 42 F.3d at 34. It will have a more complete record on

which to make its final determination and, if necessary, can "lift

13 The Monolines also argue that the Title III court cannot
grant them injunctive or declaratory relief on some of their claims
under § 305 and Ambac. But, as the Title III court held, it can
take appropriate action to resolve this concern if it ever becomes
relevant. See PRIFA and HTA Order II, 2020 WL 5430317, at *5
("[T]his Court has power to consider at an appropriate juncture
whether resolution of a claim or defense . . . is subject to an
unwaived section 305 impediment . . . and can take appropriate
action with respect to the automatic stay.").

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the stay . . . if [FOMB] is unsuccessful." PRIFA and HTA Order

II, 2020 WL 5430317, at *5. Under these circumstances, it was not

an abuse of discretion for the Title III court to conclude that

lifting the stay would "interfere with the bankruptcy case" and

would not serve "the interests of judicial economy and the

expeditious and economical resolution of litigation." Sonnax, 907

F.2d at 1286.

The Monolines' second argument -- that FOMB, by asking

us to affirm the denial of stay relief, is delaying resolution of

their claims14 -- is related to two other Sonnax factors the Title

III court considered: "the impact of the stay on the parties" and

"whether the parties are ready for trial in the other proceeding."

Id. The stay's impact on the Monolines is minimal given that, as

FOMB stated at oral argument, Puerto Rico has already put up $2.9

billion, more than the debt service on the PRIFA and HTA bonds

that the Monolines would be entitled to if their claims are

successful.15 The remedy the Monolines seek is also inconsistent

14 At oral argument and in a reply brief, one of the
Monolines expressed concern that FOMB is attempting to delay so
that it can later argue that the Monolines' claims are equitably
moot. No issue of plan confirmation or equitable mootness is
before us. See In re Fin. Oversight & Mgmt. Bd. for P.R. ("Pinto-
Lugo"), 2021 WL 438891, at *7-9 (1st Cir. Feb. 8, 2021).
15 In its brief to us, one of the Monolines also states
that Puerto Rico has $9.5 billion in its central bank account and
that Puerto Rico and its instrumentalities have more than $20
billion in cash on hand.

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with avoiding delay. They argue that they want to lift the stay

so they can bring certain claims characterized as constitutional

claims anew in a separate court. But lifting the stay so that

they can restart proceedings elsewhere will not be faster than

adjudicating their claims in the Revenue Bond Adversary

Proceedings, where motions for summary judgment have already been

filed. It was not an abuse of discretion for the Title III court

to weigh "whether the parties are ready for trial in the other

proceeding" against them. PRIFA and HTA Order II, 2020 WL 5430317,

at *6.

Turning to the Monolines' third argument, they say that

PRIFA and HTA Order II addressed only whether the stay should be

lifted as to the constitutional and statutory claims the Title III

court, under Ambac, would be barred from deciding if FOMB were to

successfully invoke PROMESA § 305. Because of the second order's

limited scope, they argue, it cannot serve as a basis for the

court's decision not to lift the stay as to all of their claims.

But even so, almost all16 of the reasons the Title III court gave

16 The only reasons that would be inapplicable to all of
the Monolines' claims are those related to PROMESA § 305. See,
e.g., PRIFA and HTA Order II, 2020 WL 5430317, at *6 (rejecting
the Monolines' argument that "only stay relief can result in . .
. complete resolution of the issues" in part because "[FOMB] . .
. has not contended to date that section 305 precludes
consideration of the issues that Movants have raised in the context
of their opposition to the summary judgment motion practice").
But most of the reasons the Title III court gives in its Sonnax
analysis are unrelated to PROMESA § 305.

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for why the Sonnax factors did not weigh in favor of granting stay

relief are applicable to all of the claims in the PRIFA and HTA

Stay Relief Motions. See In re Hoover, 828 F.3d 5, 8 (1st Cir.

2016) ("We may . . . affirm 'on any ground supported by the record

. . . .'" (quoting Doe v. Anrig, 728 F.3d 30, 32 (1st Cir. 1984))).

As the Title III court recognized, the Monolines' constitutional

and statutory claims "plainly stem from their bond claims and,

although styled as requests for declaratory relief, ultimately are

vehicles for asserting rights to payment of amounts outstanding

under various bond issues." PRIFA and HTA Order II, 2020 WL

5430317, at *7. Lifting the stay as to any of the Monolines'

claims would not serve the interests of judicial economy and would

interfere with the bankruptcy proceedings for the same reasons

related to the Revenue Bond Adversary Proceedings already

described. Compared to the Monolines' constitutional and

statutory claims, the Monolines are no closer to trial on any of

their other claims. And the impact of the stay is similar. There

is no cause to lift it as to any of the Monolines' claims.

III.

Affirmed.

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