Carlos Giusti/AP Photo
A Puerto Rican flag flies on an empty beach at Ocean Park, in San Juan, Puerto Rico, May 21, 2020.
A woman nominated for a federal judgeship by President Biden last week served as a top counsel on behalf of Puerto Rican bondholders who sought to maximize recovery of money during the island’s debt crisis. Her work inspired other investors to file their own cases seeking money from the struggling territory.
Reviews of legal filings show that Sparkle Sooknanan, currently a deputy in the Justice Department Civil Rights Division, was lead counsel for a series of hedge funds while working at Jones Day, the large global law firm. These hedge funds included Altair Global Credit, Claren Road Asset Management, Glendon Capital Management, Nokota Capital, Oaktree Capital Management, Ocher Rose LLC, and Centerbridge Partners.
The nomination of a lawyer who literally worked for hedge fund managers trying to squeeze money from an impoverished U.S. colony shows how the Biden administration’s expressed desires to diversify the federal bench in terms of identity and life experience do not always move the needle in terms of pulling away from the influence of BigLaw and big money.
Lawyers make the best arguments to serve their clients, a valid statement that is often expressed when someone seeking higher office has a troubling litigation record in their past. But Sooknanan did eventually reach a breaking point, when she showily resigned from Jones Day after it represented Donald Trump in lawsuits that attempted to overturn the 2020 election results in Pennsylvania. “This lawsuit was brought for no other reason than to deprive poor people of the right to vote,” Sooknanan was quoted as saying in The New York Times.
So Sooknanan’s moral code was such that there were arguments she was not willing to make in federal court, and not willing to be associated with at her law firm. The Prospect asked her if that extended to representing hedge funds seeking money from Puerto Rico. There was no response.
Sooknanan worked for hedge funds that owned a particular type of Puerto Rican debt secured by contributions into the island’s employee retirement system (ERS). Hedge funds, often called vulture funds on the island, owned roughly $1.4 billion in ERS bonds.
The ERS bondholders argued that they should be exempt from the automatic stay on collections put in place by the bankruptcy-like process outlined into the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), of 2016. It was one of the numerous legal rulings intended to move certain bonds out of the automatic stay and to maximize the amounts hedge funds could extract from Puerto Rico, which faced an overwhelming debt burden due to internal mismanagement and Wall Street enticement.
The Biden administration’s expressed desires to diversify the federal bench do not always move the needle in terms of pulling away from the influence of BigLaw and big money.
As Jones Day explained when Sooknanan was named a “rising star” by The National Law Journal in 2020, “Ms. Sooknanan spearheaded a unique litigation plan, including filing a constitutional ‘takings’ claim to recover more than $1 billion from the United States for the confiscation of property.” The claim argued that keeping the secured debt under the stay would require just compensation, as an eminent domain taking would. Similar arguments have been used in attempts to get government compensation for pollution regulations that cut into corporate profits.
“When the government sought dismissal,” Jones Day continued, Sooknanan “presented oral argument and won a key jurisdictional ruling. Since then, other creditors have filed almost identical lawsuits.”
The case went on for several years, reaching the First Circuit on multiple occasions before being extinguished. Puerto Rico finally secured a significant haircut on its debt in early 2022, but the actions of the bondholders delayed this relief for years, and the oversight board running Puerto Rico meanwhile instituted significant austerity on the backs of the island’s citizens.
Sooknanan, named to fill an open seat on the D.C. District Court on February 21, has a compelling personal life story. She left her birthplace of Trinidad and Tobago to attend college when she was just 16, and worked full-time while finishing a law degree at Brooklyn College, going on to clerk for a number of judges, including Supreme Court Justice Sonia Sotomayor.
She joined Jones Day after the Sotomayor clerkship ended in 2014, rising to become a partner. Among the cases she worked on was a litigation on behalf of the city council of Charlottesville, Virginia, arguing that statues of Robert E. Lee and Stonewall Jackson in the city violated the equal protection clause of the Constitution. After the city council initially lost in circuit court, the statues were removed in 2021, once the Virginia Supreme Court ruled in the council’s favor. (Sooknanan had left Jones Day, and therefore the case, by then.)
The White House had made a commitment to diversifying the federal bench at the start of President Biden’s term, and they have asked senators for additional names when their nominees were plainly lacking diversity of professional experience. To its credit, the administration has placed labor lawyers, public defenders, and reproductive rights attorneys on the federal bench.
But some liberal legal experts have criticized the administration for ignoring corporate power in these judicial nominations. A female nominee of color who works on civil rights measures has an attractive résumé to elevate to a judgeship. But working for hedge funds in Puerto Rico represents something of a blind spot, one that we’ve seen replicated by other Biden nominees.
Brian Fallon, who previously worked at Demand Justice, told me last August, “We’re still as a party having a war between the old neoliberal approach and the new progressive movement. A lot of the people ready for a judgeship are relics of an old system … The next frontier is that we have had for too long Democratic appointees on worker power and antitrust law that are indistinguishable from conservatives.”
