Insurance PROMESA Stay.

Byline: Mass. Lawyers Weekly Staff

Where (1) the commonwealth of Puerto Rico reached a settlement with plaintiff motor vehicle owners and operators who paid duplicate premiums and (2) Congress then enacted the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), which triggered an automatic stay of collection actions against the commonwealth, the lower court should have made at least a preliminary determination of the parties' respective property interests in the disputed funds before ruling that the stay precluded the plaintiffs from collecting against the commonwealth.

Affirmed in part and reversed in part.

"The plaintiffs in this case are motor-vehicle owners and operators who paid duplicate premiums to the Commonwealth of Puerto Rico in accordance with the Commonwealth's compulsory automobile-insurance law, P.R. Laws Ann. tit. 26, 8053. The plaintiffs have waged a decades-long campaign to retrieve the funds that they overpaid to the Commonwealth. After we issued several opinions favorable to the plaintiffs' claims, the parties eventually entered into a settlement agreement in which the Commonwealth agreed to establish a notice and claim-resolution process for motorists who paid duplicate premiums from 1998 to 2010. Shortly thereafter, the Financial Oversight and Management Board for Puerto Rico initiated Title III debt-adjustment proceedings on behalf of the Commonwealth pursuant to the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C. 21012241, which triggered an automatic stay of collection actions against the Commonwealth. The Commonwealth, citing the automatic stay, then halted its implementation of the settlement agreement's notice and claim-resolution process. Never relenting, the plaintiffs petitioned the Title III court for relief from the automatic stay to allow them to bring an enforcement action against the Commonwealth in a separate proceeding. The Title III court largely denied that petition.

"Plaintiffs' claim to relief rests on their contention that the funds they seek are their own and are being held by the Commonwealth only as a trustee that lacks any equitable interest in the property. In short, plaintiffs argue not that they are creditors who are owed damages to be paid from the Commonwealth's coffers; rather, they argue that they are seeking the rightful return of their own assets.

"On appeal, the plaintiffs argue that the Title III court abused its discretion by...