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Supreme Court Considers PROMESA Board

The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), which passed in 2016, set up the Financial Oversight and Management Board (FOMB) to keep track of Puerto Rico’s fiscal recovery and to help reorganize the Island’s debt. Throughout its existence, the board has been struggling with questions of whether to favor the territory’s creditors or the people of Puerto Rico. There has been conflict between the government of Puerto Rico and the board, skirmishes between the board and Congress, and protests against the board in the streets of Puerto Rico.

The Appointments Clause

Now the Supreme Court is examining a question relating to the board, brought by one of the creditors.  Aurelius Investment is claiming that the board was not properly organized, and that the appointments to the board should have been approved by the U.S. Senate. At issue is the Appointments Clause of the U.S. Constitution, which says that “[the President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States.”

Congress is allowed to delegate appointments of “such inferior Officers, as they think proper” to the president or other officials without Senate confirmation. That’s what happened with the FOMB. The board consists of seven members. Six were chosen from a list developed by Congress and the seventh was chosen directly by the president.

Aurelius is arguing that the FOMB members are “Officers of the United States,” and the board is arguing that the FOMB is just a local group, acting on behalf of Puerto Rico, not as Officers of the United States at all.

“The question in this case,” said the FOMB’s attorney, “is whether members of the Financial Oversight Board are officers of the United States who must be selected in the manner that the Appointments Clause prescribes or whether they are instead territorial officers who do not have to be selected in that manner… It comes down to whether Congress has vested the Board with the executive power of the national government or, instead, vested the Board with the territorial executive power.”

The Territorial Clause

The Territorial Clause says that Congress can make all the laws for a territory. The Board argued that this makes a difference in the case of the FOMB. Congress, they said, was just making laws for a territory when they chose the members of the Board, not choosing Officers of the United States.

Justice Sotomayor suggested that the Board was treating the Territorial Clause like “a magic wand.” But the Board argued that Congress had not overstepped Article 4 (the Territorial Clause) with PROMESA.

“[Congress] didn’t do anything Article IV didn’t give it the power to do,” their attorney said. He went on to say that the Board had not taken on control of any national issues, or anything that the Governor of Puerto Rico (not a U.S. Officer) could not have done.

The attorney for Aurelius disputed that claim. The Justices then asked whether the case was really about money. The attorney insisted that the Board members are “principal officers of the United States, not inferior officers,” regardless of the financial interests involved.

The Insular Cases

The ACLU filed a request that the Supreme Court also look at the Insular Cases, a set of Supreme Court decisions about Puerto Rico and other island territories. These decisions, made at the turn of the 20th century, hold that the U.S. Constitution doesn’t really apply in unincorporated territories.

Chief Justice Roberts said that he didn’t see the connection between the Insular Cases and the question based on the Appointments Clause. Justice Breyer said, “I agree they’re a dark cloud, but it doesn’t matter here because the provision of the Constitution does apply.”

The upshot

The Board said that they were sure that Aurelius, if they were able to discredit the FOMB in court, would spend years in court questioning any new board as well as the decisions the current board has already made. Aurelius Investment, they said, is unhappy with the current Board and is hoping to get a better deal. The Supreme Court is expected to make a decision in this case next year, but is not expected to rule on the Insular Cases.

Read the court transcript.

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