Process running on compressed timelines
With fact discovery set to close on July 17, the PREPA bankruptcy case is straining under a crush of unresolved disputes, late document productions, shifting witness availability, and mounting privilege fights — all of which erupted into view during Thursday’s omnibus hearing before Judge Laura Taylor Swain and Magistrate Judge Judith Gail Dein.
The hearing revealed a discovery process running on compressed timelines and with frayed coordination, particularly regarding third‑party productions from LUMA Energy, KPMG, BDO, COR3, and Genera. Bondholders told the court that key witnesses were suddenly unavailable, that others lacked knowledge of the topics for which they were designated, and that thousands of pages of auditor workpapers arrived only days before the cutoff. The Oversight Board countered that bondholders were contributing to the crunch by delaying decisions on whether to proceed with scheduled depositions.
The tension was evident as counsel described a cascade of last‑minute developments. Glenn Kurtz of White & Case, speaking for GoldenTree, Syncora, and other bondholders, informed the court that LUMA’s designated witness on monthly operating reports “doesn’t really have any knowledge,” forcing the parties to scramble for a substitute. Another LUMA witness was on vacation and could not testify until the following week. A third witness might or might not be needed, depending on the bondholders’ review of documents — a decision Kurtz promised to deliver by 5 p.m.
Margaret Dale of Proskauer, for the Oversight Board, pressed for clarity. She told the court that two LUMA depositions had been scheduled for the next day and that the Board needed to know immediately whether bondholders intended to proceed. “If they are going to take them, we need to know today,” Dale said, noting that the Board’s own Rule 30 deposition of the bond trustee was set for Friday. She agreed not to oppose a single LUMA deposition spilling into next week due to the witness’s vacation, but insisted that any other slippage would undermine the court‑ordered schedule.
The most complex dispute involved KPMG’s production of PREPA’s 2018 audit file. Assured’s counsel, William Natbony, told the court that PREPA had asserted privilege over several hundred documents and that the bondholders had yet to receive a privilege log. Local counsel Diana Pérez explained that KPMG produced its entire 2018 audit file — nearly 4,000 documents — because it was faster than filtering by category. PREPA then conducted a rapid privilege review, withholding 139 documents, including 51 on the basis of accountant‑client privilege. Pérez said bondholders were still seeking confirmation from KPMG about whether later audit years contained relevant materials.
PREPA’s counsel, Maria DeConza, added that the 2018 audit was unique because it included a supplemental schedule tied to the Trust Agreement, absent from later years. She told the court the privilege log would be delivered that morning and that additional documents previously withheld were being released.
Judge Swain urged the parties to resolve the KPMG issue without court intervention, allowing for a short extension of the deposition if necessary. “I’m comfortable with you trying to continue to work things out,” she said, while Judge Dein noted that a brief extension “might still be necessary” given the timing of the production.
Only after navigating these discovery disputes did the court turn to the broader litigation strategy. Judge Swain outlined the legal issues she expects to be addressed in the upcoming partial summary judgment motions — including how to calculate PREPA’s net revenues under the Trust Agreement and Section 928 of the Bankruptcy Code, which preserves bondholders’ lien on special revenues but limits it to net revenues after operating expenses. Partial summary judgment allows the court to resolve these legal questions now, without waiting for a full evidentiary record, so long as no material facts are in dispute.
Swain emphasized that the first phase of litigation will focus on methodology rather than dollar amounts, and confirmed that cross‑motions will be filed in September with argument tentatively set for November.
But the immediate pressure point remains discovery. With the July 17 deadline only days away, the parties must finalize witness schedules, complete privilege reviews, and determine whether any remaining disputes require emergency intervention from Judge Dein. The court made clear that the overall schedule — including expert reports and summary judgment briefing — will not be moved.
The next omnibus hearing is scheduled for September 16, by which time the discovery record will be closed and the accounting counterclaim will enter its dispositive phase.
