UTIER v. PREPA, 7 F.4th 31

Background

PREPA, Puerto Rico's public power utility, entered Title III proceedings under PROMESA in 2017; FOMB acted as representative and filed for restructuring.
In 2020 PREPA contracted with LUMA to operate and manage PREPA's transmission & distribution system; contract included front‑end transition services (estimated costs plus a $60M flat fee) and required PREPA to seek administrative‑expense treatment for those costs.
UTIER (union) and SREAEE (pension trust) opposed treating the LUMA transition costs as administrative expenses, arguing §503(b)(1)(A) of the Bankruptcy Code does not apply in PROMESA Title III because there is no "estate."
The Title III court granted administrative‑expense priority for the front‑end transition costs (except late fees), concluding PROMESA incorporated §503 and that "estate" should be read to mean "property of the debtor." It declined to review challenges to FOMB's fiscal‑plan certification under §2126(e).
UTIER and SREAEE appealed; the First Circuit reviewed legal issues de novo and factual application for abuse of discretion.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Applicability of 11 U.S.C. §503(b)(1)(A) in PROMESA Title III	§503(b)(1)(A) cannot apply because Title III lacks an "estate."	PROMESA incorporated §503 in full and §2161(c)(5) supplies "property of the debtor," so "estate" should be read to mean the debtor's property.	§503(b)(1)(A) applies in Title III; "estate" can be understood as "property of the debtor" in this context.
Whether the front‑end transition costs meet the §503(b)(1)(A) test	Costs are not "necessary" or beneficial to PREPA; appellants challenged factual sufficiency.	FOMB/PREPA presented declarations showing services were necessary prerequisites and conferred present and future benefits.	Title III court did not abuse its discretion; the Marrero Declaration supported administrative‑expense priority.
Reviewability of FOMB's fiscal‑plan certification under §2141 and §2126(e)	Granting priority contravenes fiscal‑plan requirements to fund pensions/essential services; such challenge is reviewable.	Certification decisions are insulated from judicial review by §2126(e); the allocation of the fee in the fiscal plan is a certification issue.	§2126(e) bars federal‑court review of challenges to FOMB's certification; the Title III court correctly declined to decide the fiscal‑plan challenge.
Nondelegation challenge to FOMB's certification authority	Title III court's interpretation violates nondelegation doctrine.	Argument not preserved below.	Waived on appeal; court declined to consider it.

Key Cases Cited

Highmark Inc. v. Allcare Health Mgmt. Sys., 572 U.S. 559 (2014) (standard of review for legal conclusions and abuse of discretion explained)
Merit Mgmt. Grp., LP v. FTI Consulting, Inc., 138 S. Ct. 883 (2018) (text/structure statutory‑construction framework)
Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973 (2017) (definition and import of "estate" in bankruptcy context)
In re Hemingway Transp., Inc., 954 F.2d 1 (1st Cir. 1992) (two‑part test for administrative‑expense treatment)
City of Providence v. Barr, 954 F.3d 23 (1st Cir. 2020) (interpretive principle giving effect to incorporated Bankruptcy Code provisions)
Méndez‑Núñez v. Fin. Oversight & Mgmt. Bd. for P.R., 916 F.3d 98 (1st Cir. 2019) (§2126(e) bars judicial review of FOMB certification decisions)