Case No. 18-1334 | 1st Cir.
Preview by Sean Lowry, Online Editor*
In a set of consolidated cases, the Court will determine whether appointments to a congressionally designed fiscal oversight board for Puerto Rico are subject to the Constitution’s Appointments Clause.
In 2016, Congress enacted The Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) as part of measures to address the territory’s fiscal crisis. A key feature of PROMESA was the establishment of the Financial Oversight and Management Board for Puerto Rico (the “Board”), which holds broad powers to manage the territory’s debt, finances, and budget. Since enactment of PROMESA, the Board has prosecuted debt restructurings representing over $100 billion in claims.
The litigants in these consolidated cases represent a small portion of the broad categories of stakeholders in the Board’s decisions: hedge funds (like Aurelius Investment, LLC), municipal bond insurers, a labor organization that represents employees of the territory-owned power authority, and the federal government.
At the heart of these consolidated cases is PROMESA’s process for filling the Board with seven voting members. PROMESA provides that six of the seven Board members shall be selected by the President from the lists provided by House and Senate leadership, with PROMESA allowing the President to select the seventh member at their sole discretion. Senatorial advice and consent is not required if the President makes the appointment from one of the aforementioned lists. After enactment of PROMESA, President Obama selected six members from the House and Senate lists. Thus, Senate did not provide its “advice and consent” (vote) on any of the Board members after the President selected them.
The First Circuit found that this process violated the procedure in the Constitution’s Appointments Clause, which provides that the President “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . Officers of the United States” U.S. Const. art II, § 2, cl. 2. Based on analysis of a long lineage of case law, the First Circuit found that the Board members wielded powers making them “Officers of the United States,” and that Congress’s broad powers over regulating the U.S. territories set forth in Section 3, Article IV of the Constitution did not override the specific requirements of the Appointments Clause.
In its petition for certiorari, counsel for the Board focuses on the Article IV argument. Specifically, the argument is that case law supports the notion that Congress’s power to regulate the territories is plenary and that the members of the Board are not “Officers of the United States,” partly because PROMESA situates the Board within the territorial government of Puerto Rico. Counsel for Aurelius primarily urges the Court to affirm the holdings of the First Circuit.
*Sean Lowry is a 3LE (Class of 2021) and Analyst in Public Finance at the Congressional Research Service (CRS). The views expressed are those of the author and are not necessarily those of the Library of Congress or CRS.