WAPA has filed an emergency motion in Puerto Rico District Court seeking to stay an order that would see some $6.8 million from its FirstBank account disbursed on Monday to a creditor that sued the utility and won, saying it plans to appeal the decision.
WAPA wants the funds to remain in the bank until its appeal concludes, which could take one to two years, and to forego posting a bond to guarantee the amount “as there is no risk to the parties pending the appeal because the funds are in possession of FirstBank,” according to the motion. If a bond is required, it is asking that the amount be “for very minimal costs” because paying anything will result in a hardship — and possibly rolling blackouts for customers of the cash-strapped utility that is operating under a local State of Emergency.
Power Rental Op Co., LLC sued WAPA in February 2020 in Florida District Court over $14.2 million it alleges was owed under a rental agreement for power generation equipment and water treatment systems. It prevailed and WAPA was ordered to pay $6.5 million and another $349,279 for attorney fees and costs. The company subsequently removed the case to Puerto Rico, where it registered its judgment from Florida in February and in March was granted writs of execution to collect on its debts.
WAPA’s bank accounts were frozen on April 16 when the U.S. Marshal served the writ “on First Bank Virgin Islands in Puerto Rico, levying approximately $6.9 million of WAPA’s funds,” as well as $1.4 million in a Banco Popular account, according to an emergency motion to quash the order that the utility filed two days later, on April 18.
On May 8, the court granted WAPA’s emergency motion in part — quashing the writ pertaining to Banco Popular but leaving it in place for FirstBank. Because the writ was for some $6.8 million (with interest accruing), and the FirstBank account contains sufficient funds to cover that amount, there was no need to also freeze the Banco account, Judge Maria Antongiorgi-Jordan ruled.
The judge subsequently issued her opinion and order on May 31, meaning an automatic 30-day stay under the Federal Rules of Civil Procedure will expire on Monday, freeing up the money that Power Rental says it is due.
The likelihood that WAPA will be “irreparably injured absent a stay is substantial and undeniable,” the emergency motion that was filed on Wednesday states. “It is not only likely that once the funds are released to Plaintiff, WAPA may never be able to recover the funds from Plaintiff and will have to spend funds on collection (if it even has such funds) that should be allocated to providing utilities to the people of the Virgin Islands,” it says, but “the posting of a bond will further exacerbate the ongoing energy crisis facing the Virgin Islands.”
According to a declaration by WAPA Interim Chief Financial Officer Lorraine J. Kelly that was filed in support of the motion, having to post a bond “will hamper the Authority’s ability to fund fuel purchases among other operations, resulting in significant damages not only to WAPA but, as the sole utility for the Virgin Islands, to the Health, Safety and Welfare of the people of the Territory and to WAPA’s creditors.”
Beyond powering the territory’s generators, fuel also is required for the desalination process that provides drinking water to the citizenry, said Kelly, and other payments need to be made, such as to Seven Seas to purchase the water it produces, to Aggreko for the lease of generator equipment, and for the repair and maintenance of assets and equipment used to produce services for the utility’s customers.
“Furthermore, WAPA likely does not have the funds for a bond,” according to the declaration. It would only be able to post one from its operating account that it needs to fund utility services for residents because much of its money, such as from the Federal Emergency Management Agency, is restricted by the government for specific purposes, said Kelly.
WAPA has argued that the writs should be dissolved, claiming that its bank accounts are located outside of Florida, operate solely in the U.S. Virgin Islands, and are protected under the territory’s sovereign immunity laws.
Kelly’s declaration and the latest emergency motion make frequent mention of the local State of Emergency over WAPA that Gov. Albert Bryan Jr. declared on April 22 — and which the V.I. Legislature voted to extend for 90 days on Monday. Both state that “it is more critical than ever that WAPA have access to its funds to facilitate its fuel purchases and that such funds are not tied up in an unnecessary bond.”
Averting an energy crisis is precisely why the subject funds are exempt under Virgin Islands law, according to the motion.
Moreover, “WAPA has made a strong showing that it is likely to succeed on the merits” of its appeal to the First Circuit Court of Appeals, the motion states.
While Antongiorgi-Jordan’s opinion focused largely on not wanting to disturb the final judgment issued by the District Court for the Middle District of Florida in the Power Rental case, “the central issue is whether or not the District Court of Puerto Rico lacks jurisdiction to levy funds that are local to the Virgin Islands, not to Puerto Rico,” it says.
“As there is no case law in this jurisdiction yet to support the Order and the separate entity rule and related rules have long been the utilized standard throughout the United States for analyzing whether a court has jurisdiction over funds, it is likely that the First District Court of Appeal may rule differently,” the motion states.
The court had not ruled on WAPA’s emergency motion as of Thursday evening.
