IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

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FRANKLIN CALIFORNIA TAX-FREE TRUST (for
the FRANKLIN CALIFORNIA INTERMEDIATE-
TERM TAX FREE INCOME FUND)

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FRANKLIN NEW YORK TAX-FREE TRUST (for the
FRANKLIN NEW YORK INTERMEDIATE-TERM
TAX FREE INCOME FUND)

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FRANKLIN TAX-FREE TRUST (for the series
FRANKLIN FEDERAL INTERMEDIATE-TERM
TAX-FREE INCOME FUND, FRANKLIN DOUBLE
TAX-FREE INCOME FUND, FRANKLIN
COLORADO TAX-FREE INCOME FUND,
FRANKLIN GEORGIA TAX-FREE INCOME FUND,
FRANKLIN PENNSYLVANIA TAX-FREE INCOME
FUND, FRANKLIN HIGH YIELD TAX-FREE
INCOME FUND, FRANKLIN MISSOURI TAX-
FREE INCOME FUND, FRANKLIN OREGON TAX-
FREE INCOME FUND, FRANKLIN VIRGINIA
TAX-FREE INCOME FUND, FRANKLIN
ALABAMA TAX FREE INCOME FUND,
FRANKLIN FLORIDA TAX-FREE INCOME FUND,
FRANKLIN CONNECTICUT TAX-FREE INCOME
FUND, FRANKLIN LOUISIANA TAX-FREE
INCOME FUND, FRANKLIN MARYLAND TAX-
FREE INCOME FUND, FRANKLIN NORTH
CAROLINA TAX-FREE INCOME FUND,
FRANKLIN NEW JERSEY TAX-FREE INCOME
FUND and FRANKLIN ARIZONA TAX-FREE
INCOME FUND)

-and-

FRANKLIN MUNICIPAL SECURITIES TRUST (for
the series FRANKLIN CALIFORNIA HIGH YIELD
MUNICIPAL BOND FUND and FRANKLIN
TENNESSEE MUNICIPAL BOND FUND)
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CASE NO. 14-1518




DECLARATORY JUDGMENT

Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 1 of 15
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-and-

FRANKLIN CALIFORNIA TAX-FREE INCOME
FUND
-and-

FRANKLIN NEW YORK TAX-FREE INCOME
FUND
-and-

FRANKLIN FEDERAL TAX-FREE INCOME FUND

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OPPENHEIMER ROCHESTER FUND MUNICIPALS

-and-

OPPENHEIMER MUNICIPAL FUND (on behalf of its
series OPPENHEIMER ROCHESTER LIMITED
TERM MUNICIPAL FUND)

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OPPENHEIMER MULTI-STATE MUNICIPAL
TRUST (on behalf of its series OPPENHEIMER
ROCHESTER NEW JERSEY MUNICIPAL FUND,
OPPENHEIMER ROCHESTER PENNSYLVANIA
MUNICIPAL FUND, and OPPENHEIMER
ROCHESTER HIGH YIELD MUNICIPAL FUND)

-and-

OPPENHEIMER ROCHESTER OHIO MUNICIPAL
FUND
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OPPENHEIMER ROCHESTER ARIZONA
MUNICIPAL FUND

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OPPENHEIMER ROCHESTER VIRGINIA
MUNICIPAL FUND

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Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 2 of 15
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OPPENHEIMER ROCHESTER MARYLAND
MUNICIPAL FUND

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OPPENHEIMER ROCHESTER LIMITED TERM
CALIFORNIA MUNICIPAL FUND

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OPPENHEIMER ROCHESTER CALIFORNIA
MUNICIPAL FUND

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ROCHESTER PORTFOLIO SERIES (on behalf of its
series OPPENHEIMER ROCHESTER LIMITED
TERM NEW YORK MUNICIPAL FUND)

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OPPENHEIMER ROCHESTER AMT-FREE
MUNICIPAL FUND

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OPPENHEIMER ROCHESTER AMT-FREE NEW
YORK MUNICIPAL FUND

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OPPENHEIMER ROCHESTER MICHIGAN
MUNICIPAL FUND

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OPPENHEIMER ROCHESTER MASSACHUSETTS
MUNICIPAL FUND

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OPPENHEIMER ROCHESTER NORTH CAROLINA
MUNICIPAL FUND

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Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 3 of 15
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OPPENHEIMER ROCHESTER MINNESOTA
MUNICIPAL FUND,

Plaintiffs,

v.

THE COMMONWEALTH OF PUERTO RICO

-and-

THE PUERTO RICO ELECTRIC POWER
AUTHORITY

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ALEJANDRO GARCIA PADILLA,
in his capacity as Governor of the
Commonwealth of Puerto Rico

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JOHN DOE,
in his capacity as agent for the
Government Development Bank for Puerto Rico,

Defendants.
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COMPLAINT
TO THE HONORABLE COURT:

COMES NOW Plaintiffs Franklin California Tax-Free Trust (for the Franklin California
Intermediate-Term Tax Free Income Fund), Franklin New York Tax-Free Trust (for the Franklin
New York Intermediate-Term Tax Free Income Fund), Franklin Tax-Free Trust (for the series
Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin Double Tax-Free Income
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 4 of 15
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Fund, Franklin Colorado Tax-Free Income Fund, Franklin Georgia Tax-Free Income Fund,
Franklin Pennsylvania Tax-Free Income Fund, Franklin High Yield Tax-Free Income Fund,
Franklin Missouri Tax-Free Income Fund, Franklin Oregon Tax-Free Income Fund, Franklin
Virginia Tax-Free Income Fund, Franklin Alabama Tax Free Income Fund, Franklin Florida
Tax-Free Income Fund, Franklin Connecticut Tax-Free Income Fund, Franklin Louisiana Tax-
Free Income Fund, Franklin Maryland Tax-Free Income Fund, Franklin North Carolina Tax-Free
Income Fund, Franklin New Jersey Tax-Free Income Fund and Franklin Arizona Tax-Free
Income Fund), Franklin Municipal Securities Trust (for the series Franklin California High Yield
Municipal Bond Fund and Franklin Tennessee Municipal Bond Fund), Franklin California Tax-
Free Income Fund, Franklin New York Tax-Free Income Fund and Franklin Federal Tax-Free
Income Fund (together, the Franklin Funds), together with Oppenheimer Rochester Fund
Municipals, Oppenheimer Municipal Fund (on behalf of its series Oppenheimer Rochester
Limited Term Municipal Fund), Oppenheimer Multi-State Municipal Trust (on behalf of its
series Oppenheimer Rochester New Jersey Municipal Fund, Oppenheimer Rochester
Pennsylvania Municipal Fund and Oppenheimer Rochester High Yield Municipal Fund),
Oppenheimer Rochester Ohio Municipal Fund, Oppenheimer Rochester Arizona Municipal
Fund, Oppenheimer Rochester Virginia Municipal Fund, Oppenheimer Rochester Maryland
Municipal Fund, Oppenheimer Rochester Limited Term California Municipal Fund,
Oppenheimer Rochester California Municipal Fund, Rochester Portfolio Series (on behalf of its
series Oppenheimer Rochester Limited Term New York Municipal Fund), Oppenheimer
Rochester AMT-Free Municipal Fund, Oppenheimer Rochester AMT-Free New York Municipal
Fund, Oppenheimer Rochester Michigan Municipal Fund, Oppenheimer Rochester
Massachusetts Municipal Fund, Oppenheimer Rochester North Carolina Municipal Fund and
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 5 of 15
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Oppenheimer Rochester Minnesota Municipal Fund (collectively, the Oppenheimer Rochester
Funds, and together with the Franklin Funds, Plaintiffs), by and through their attorneys, and
very respectfully state, allege and pray as follows:
NATURE OF THIS ACTION
1. This is an action for a declaratory judgment brought pursuant to 28 U.S.C.
2201 and 2202 and Rule 57 of the Federal Rules of Civil Procedure for the purpose of
determining a substantial and actual controversy between the parties. As set forth more fully
below, Plaintiffs seek a declaration that the Public Corporation Debt Enforcement and Recovery
Act (the Act) enacted (or soon to be enacted) by the Commonwealth of Puerto Rico (the
Commonwealth) violates multiple provisions of the United States Constitution (the
Constitution).
2. Under the Constitution, the power to pass a law regarding bankruptcy is
exclusively vested in the Congress of the United States (the Congress). The Act is, in both
form and substance, a bankruptcy law enacted by the Commonwealth. The Act is therefore
unconstitutional in its entirety. Moreover, specific provisions of the Act, if enforced, would
inflict further constitutional injuries in violation of the Fifth and Fourteenth Amendments and
Article 1, section 10, of the Constitution.
THE PARTIES, JURISDICTION, AND VENUE
3. Plaintiffs Franklin Funds are Delaware corporations or trusts with their principal
place of business in San Mateo, California. Collectively, the Franklin Funds hold approximately
$907,195,000 of Power Revenue Bonds (the PREPA Bonds) issued by the Puerto Rico Electric
Power Authority (PREPA) pursuant to the Puerto Rico Electric Power Authority Act (Act
83) and the Trust Agreement between PREPA and U.S. Bank National Association as
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 6 of 15
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Successor Trustee (the Trustee), dated as January 1, 1974, as amended and supplemented
through August 1, 2011 (the Trust Agreement).
4. Plaintiffs Oppenheimer Rochester Funds are Delaware corporations or trusts with
their principal place of business in Rochester, New York. Collectively, the Oppenheimer
Rochester Funds hold approximately $821,440,000 of PREPA Bonds.
5. Defendant Commonwealth is a United States territory subject to the laws of the
United States and the plenary jurisdiction of the Congress.
6. Defendant Governor Alejandro Garca Padilla (the Governor) is the Governor
of the Commonwealth and is sued in his official capacity.
7. Defendant John Doe (the GDB Agent) is an employee or other agent of the
Government Development Bank for Puerto Rico (GDB) who is empowered to authorize or
direct a public corporation to seek relief under the Act on behalf of the GDB. On information
and belief, GDB is a public corporation organized under the laws of the Commonwealth that
serves as a bank, fiscal agent, and financial advisor to the Commonwealth. GDB is
headquartered in the Commonwealth.
8. On information and belief, defendant PREPA is a public corporation organized
under the laws of the Commonwealth that provides electrical power to residents and businesses
located in the Commonwealth.
9. This action arises under the Constitution, Article I, Section 8; Article I, Section
10; and the Fifth and Fourteenth Amendments. This Court may render a declaratory judgment
pursuant to 28 U.S.C. 2201 and 2202 and Fed. R. Civ. P. 57.
10. Venue is properly laid in this district pursuant to 28 U.S.C. 1391(b).
BACKGROUND
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 7 of 15
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11. On June 25, 2014, citing a fiscal emergency relating to certain of its public
corporations, the Commonwealths Senate (Senado) voted to approve the Act. The following
day, the Commonwealth House of Representatives (Cmara de Representantes) similarly voted
to approve the Act. Upon information and belief, the Governor has either signed the Act into
law or will do so imminently.
12. The Act purports to offer to certain public corporations within the Commonwealth
the ability, among other things, to invoke protections from creditors and modify debts. The Act
is expressly modeled on title 11 of the United States Code (the Bankruptcy Code).
13. The Act provides in sections 202(b) and 301(b) that the GDB (and, in certain
instances, the Governor) must authorize and/or direct a public corporation to seek relief under
the Act before such public corporation may invoke the protections afforded under the Act.
14. On or about June 26, 2014, the Rating Agency Fitch downgraded the PREPA
Bonds from BB to CC, based upon the introduction and passage of the Act.
15. On information and belief, since the Commonwealths Senate voted to approve
the Act, the trading prices of long-dated PREPA Bonds (those maturing in 20 years or more)
have dropped by an estimated 15 percent, while the trading prices for shorter dated PREPA
Bonds (those maturing over the next four years) have dropped by an estimated 35-40 percent.
16. On information and belief, PREPA will file for relief under the Act imminently.
For example, the legislative history to the Act notes that Public corporations of the
Commonwealth of Puerto Rico that provide essential public services, PREPA being the most
dramatic example, today face significant operational, fiscal, and financial challenges. See P. del
S. 1164 at 148.
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 8 of 15
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17. Accordingly, the legislative history to the Act makes clear that PREPA is to be its
inaugural candidate.
THE ACTUAL CONTROVERSY
18. By enacting the Act, the Commonwealth and the Governor purport to create legal
powers that would violate the Constitution to the detriment of Plaintiffs and other creditors of the
Commonwealths public corporations. If the Governor or the GDB Agent authorizes a
Commonwealth public corporation to seek relief under the Act, this will perpetuate the
constitutional violations described herein.
19. Article I, Section 8 of the Constitution provides that [t]he Congress shall have
the power . . . [t]o establish . . . uniform laws on the subject of Bankruptcies throughout the
United States . . . . (the Bankruptcy Clause). See U.S. CONST. art. I, 8, cl. 4. This power is
vested exclusively in the United States Congress.
20. The United States Congress has accordingly established uniform laws of
bankruptcy by its enactment of the Bankruptcy Code.
21. The legislative history to the Act indicates that [t]his Act is designed in many
respects to mirror certain key provisions of title 11 of the United States Code, and courts and
stakeholders are encouraged to review and consider existing precedent under title 11 of the
United States Code . . . when interpreting and applying this Act. See, e.g., P. del S. 1164 at 159.
22. The legislative history further states that, in enacting the Act, the legislature has
adopted a model similar to that of chapter 9 of title 11 of the United States Code and clearly
expresses its intent that jurisprudence interpreting the provisions of chapter 9 of title 11 of the
United States Code be used . . . for purposes of interpreting the provisions . . . of this Act. See
P. del S. 1164 at 164.
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 9 of 15
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23. Indeed, the Act purports to confer on eligible debtors numerous powers and
benefits that are similar or identical to those provided in the Bankruptcy Code, including, but not
limited to:
i. the ability to modify debt obligations and force creditors to accept partial
satisfaction of their claims in the event threshold levels of creditor support for a
restructuring plan can be obtained;
ii. the capacity to obtain debtor-in-possession financing by granting priority liens on
already encumbered property;
iii. an automatic stay of proceedings against the debtor;
iv. protection from the operation of contractual ipso facto clauses; and
v. the ability to reject contracts.
24. The Act also provides for the formation of statutory creditors committees, court
oversight of a plan of reorganization, and other features commonly associated with the federal
bankruptcy regime.
25. The Act is clearly a law on the subject of Bankruptcies within the meaning of
the Bankruptcy Clause and accordingly treads on the Congresss exclusive province in enacting
such legislation. It is therefore unconstitutional in its entirety as a wholesale violation of the
Bankruptcy Clause.
26. The Act also contains numerous provisions that, standing alone, exceed
defendants powers to enact and enforce legislation and therefore violate the Constitution.
27. First, the Act provides in section 322(c) that a debtor may obtain credit secured
by a senior or equal lien on the petitioners property that is subject to a lien if, among other
things, the proceeds are needed to perform public functions. This provision authorizes PREPA
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 10 of 15
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to seize the collateral securing Plaintiffs PREPA Bonds for the purpose of securing additional
lending for itself.
28. The Fifth Amendment to the Constitution provides that private property [shall
not] be taken for public use, without just compensation (the Takings Clause). See U.S.
CONST. amend. V. The Takings Clause applies to the states, and the Commonwealth, by virtue
of Section 1 of the Fourteenth Amendment. See U.S. CONST. amend. XIV, 1.
29. A grant of a superior lien on property that is already subject to a lien without just
compensation to existing lienholders, as authorized by section 322(c) of the Act, constitutes a
taking in violation of the Takings Clause.
30. Second, the Act provides in section 202 that a creditor may be forced to accept a
modification of its debt instrument provided that fifty percent of the creditors in a given class
vote on such a modification, and 75 percent of those who submit ballots vote in favor of such
modification. Thus, the Act would force Plaintiffs to accept partial payment on their PREPA
Bonds if other holders of PREPA Bonds vote to accept partial payment.
31. Worse, sections 312 and 315 provide that, upon acceptance by a single creditor
class and court approval, a public corporation may enforce a restructuring plan that extinguishes
creditors claims and may provide only partial satisfaction of such creditors claims. Thus, the
Act would force Plaintiffs to accept partial payment on the PREPA Bonds even if every single
PREPA bondholder voted against a restructuring plan that a small class of unrelated creditors
voted to accept.
32. Article 1, section 10 of the United States Constitution provides that No State
shall . . . pass any . . . Law impairing the Obligation of Contracts . . . . (the Contract Clause).
See U.S. CONST. art. I, 10, cl. 1.
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 11 of 15
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33. The mechanisms set forth in sections 202, 312, and 315 of the Act deprive
creditors of their contractual rights to payment in full of their claims, thus impairing contractual
obligations in violation of the Contract Clause.
34. To the extent these mechanisms also deprive secured creditors of the benefits of
their security interests, they also effectuate a violation of the Takings Clause.
35. Third, the Act provides in section 304 that a public corporations filing for relief
triggers an automatic stay of all proceedings against the corporation and any related proceedings
against the Commonwealth and any elected official or employee of the corporation.
36. However, pursuant to Donovan v. City of Dallas, 377 U.S. 408 (1964), and its
progeny, state courts lack any power under the Constitution to enjoin proceedings in federal
court. Thus, to the extent it is argued the seeking of relief under the Act creates an automatic
stay of any actions or proceedings in any federal court or any authority in a court of the
Commonwealth to impose or extend such a stay, such purported powers violate well-settled
constitutional limits on the power of state courts.
37. By the same token, the Commonwealth cannot pass a law that denies litigants
access to federal courts. To the extent any provision of the Act enjoins, stays, suspends or
precludes Plaintiffs from exercising their rights in federal court, including their right to challenge
the constitutionality of the Act itself in federal court, those provisions also violate the
Constitution.
CLAIM FOR RELIEF
38. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 37
of this complaint.
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 12 of 15
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39. The operation of the Act, as enacted by the Commonwealth and signed (or soon to
be signed) into law by the Governor, threatens to improperly impair Plaintiffs rights under the
PREPA Bonds in contravention to the Bankruptcy Clause, the Takings Clause, and the Contract
Clause.
40. Moreover, by authorizing a public corporation to seek relief under the Act, the
Governor or the GDB Agent would be furthering these violations of the Bankruptcy Clause, the
Takings Clause, and the Contract Clause.
41. An actual case or controversy exists between Plaintiffs and the Commonwealth
with respect to the constitutionality of the Act.
42. An actual case or controversy exists between Plaintiffs and the Governor with
respect to the constitutionality of the Act and the Governors authority to authorize any entity to
seek protection under the Act.
43. An actual case or controversy exists between Plaintiffs and the GDB Agent with
respect to the constitutionality of the Act and the GDB Agents authority to authorize any entity
to seek protection under the Act.
44. An actual case or controversy exists between Plaintiffs and PREPA with respect
to the constitutionality of the Act and PREPAs authority to seek protection under the Act.
45. Plaintiffs are entitled to a declaratory judgment pursuant to 28 U.S.C. 2201 and
Fed. R. Civ. P. 57 that the Act is unconstitutional.
46. No means exist to obtain the relief requested other than a declaratory judgment by
this Court.
WHEREFORE, Plaintiffs demand judgment:
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 13 of 15
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i. declaring that the Act in its entirety, and any prospective enforcement thereof or
authorization thereunder, violates Article I, Section 8 of the United States
Constitution as an improper exercise of bankruptcy legislation by a body other
than the Congress of the United States;
ii. declaring that the Act, and any prospective enforcement thereof or authorization
thereunder, violates Article I, Section 10, clause 1 of the United States
Constitution insofar as it permits the retroactive impairment of Plaintiffs rights
under the contracts governing the PREPA Bonds;
iii. declaring that the Act, and any prospective enforcement thereof or authorization
thereunder, violates the Fifth Amendment and the Fourteenth Amendment of the
United States Constitution insofar as it permits the taking of Plaintiffs interests in
the collateral securing the PREPA Bonds;
iv. declaring that the Act, and any prospective enforcement thereof or authorization
thereunder, violates the Constitution insofar as it authorizes any stay of federal
court proceedings;
v. awarding costs, including attorneys fees; and
vi. granting such other and further relief as the Court deems just and proper.

RESPECTFULLY SUBMITTED.

In San Juan, Puerto Rico, today June 28, 2014.








Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 14 of 15
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By: /s/ Laura R. Domnguez-Llerandi
LAURA R. DOMNGUEZ-LLERANDI
USDC-PR No. 219,114
30 Reparto Piero
Guaynabo, PR 00969-5650
Tel. (787) 528-7583
Fax. (787) 963-0677
E-mail: [email protected]

and

KRAMER LEVIN NAFTALIS & FRANKEL LLP
By: /s/ Amy Caton______
THOMAS MOERS MAYER
AMY CATON
1177 Avenue of the Americas
New York, New York 10036
Tel.: (212) 715-9100
Fax: (212) 715-8000
E-mail: [email protected]


Attorneys for Plaintiffs
Case 3:14-cv-01518 Document 1 Filed 06/28/14 Page 15 of 15