Judge Swain: Class action suit against LUMA must be heard in local court
U.S. District Court Judge Laura Taylor Swain
By THE STAR STAFF
A class action suit against LUMA Energy that seeks over $800 million in damages will have to be heard in a Puerto Rico court instead of in the U.S. District Court as it has no impact on the bankruptcy case, U.S. District Court Judge Laura Taylor Swain has decided.
The judge overseeing Puerto Rico’s Title III bankruptcy cases overruled LUMA’s objections to removing the suit from federal court with her decision issued Wednesday.
LUMA Energy assumed the operation of the Puerto Rico Electric Power Authority’s (PREPA) transmission and distribution (T&D) system on June 1, 2021. On April 13, 2022, the plaintiffs filed the case captioned Ismael Herrero Domenech and the Class Composed by all Residential Electric Energy Consumers, Customers of LUMA Energy LLC of Puerto Rico v. LUMA Energy, LLC and underwriters. On April 25, 2022, plaintiffs filed the case captioned Wendco of Puerto Rico Inc.; MultiSystem Restaurant Inc.; Restaurant Operators Inc.; Apple Caribe Inc. also sued LUMA et al on behalf of all merchants doing business on the island. On May 17, 2022, the first and the second civil actions were consolidated as a class action suit.
The case centers around ratepayers who have sought class action status in a suit in which they seek $800 million from LUMA Energy alleging that it failed to maintain PREPA’s equipment, resulting in an islandwide blackout in April 2022.
The suit was later removed to federal court because PREPA is in bankruptcy. Magistrate Judge Judith Dein in a report to the court said the case should be remanded back to the local jurisdiction, but LUMA objected.
LUMA had argued that Dein’s report erroneously concluded that the removed action would not affect the efficient administration of PREPA’s bankruptcy and that the legal issues raised in the removed action were not relevant to PREPA’s bankruptcy case “notwithstanding the fact that LUMA alleges that PREPA’s conduct and potential liability are at the center of the Removed Action.”
Swain agreed with Dein’s recommendations that a local court was a more appropriate forum for the case. While the size of the claim was significant to PREPA’s estate, if plaintiffs win and LUMA is able to get PREPA to indemnify LUMA, it doesn’t mean it will affect the administration of the case, Swain noted.
Swain said “LUMA has not proffered any reason why the forum in which the Removed Action is adjudicated will be significant to the administration of PREPA’s Title III case.”
In another PREPA ruling, Swain said PREPA’s dispute with Cobra Acquisitions over a $200 million claim will remain stayed until at least July 31 while the bankruptcy is resolved. Cobra, whose president was convicted on bribery charges related to his work in Puerto Rico, asked the court in January to lift the stay so that the claims could be litigated.