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Feb. 07, 2015

Kramer Levin Clients Franklin and Oppenheimer Have Big Win With Puerto Rico Recovery Act Declared "Unconstitutional"

Kramer Levin clients Franklin Mutual and Oppenheimer Funds scored an enormous win when Judge Francisco Besosa of the United States District Court for the District of Puerto Rico issued a decision on February 6 striking down the Puerto Rico Public Corporation Debt Enforcement and Recovery Act.

Judge Besosa ruled that the Recovery Act – a commonwealth law under which certain Puerto Rico public corporations were authorized to restructure their debts – was preempted by the federal Bankruptcy Code and therefore void pursuant to the Supremacy Clause of the United States Constitution. The court ruled that despite the “high bar” for a preemption challenge, “this is not a close case.”

The ruling came after Kramer Levin filed a lawsuit challenging the constitutionality of the Recovery Act within hours of its enactment in June, 2014. Kramer Levin partner Amy Caton hailed Judge Besosa’s decision as “a major victory for municipal bondholders,” noting “we are greatly appreciative of the judge’s thoughtful decision.”

The Kramer Levin litigation team who worked on the matter included Thomas Moers Mayer, Amy Caton, P. Bradley O’Neill, Philip Bentley, David Blabey Jr., Alice J. Byowitz, Jason S. Rappaport, Rachael Ringer and David Mayo.

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