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Attorney to U.S. Supreme Court: Keeping Puerto Rico out Bankruptcy Code Protections is Unconstitutional

By on January 28, 2016

SAN JUAN – Pro-statehood attorney Gregorio Igartúa urged the U.S. Supreme Court in a friend of the court brief to rule that Puerto Rico is an “incorporated territory” of the United States to stop the “discriminatory treatment” against the island and rule in favor of the applicability of Chapter 9 of the federal bankruptcy code to the island.

Igartúa said that keeping the Puerto Rico out of bankruptcy code protections is unconstitutional because it violates the equal protection clause of the Constitution.

“Where is the discriminatory treatment toward Puerto Rico as if it is a non-incorporated territory? It consists in denying an alternative provided to all states for bankruptcy proceedings. Puerto Rico has been left defenseless against its creditors, like no other U.S. jurisdiction. The Appeals Court proposal that Puerto Rico can recur to Congress for assistance is an exercise in futility,” he said.

The U.S. Supreme Court will review later this year the constitutionality of the so-called “criollo,” or local bankruptcy law, known as the Public Corporation Debt Enforcement and Recovery Act. The top court will answer the question of whether Chapter 9 of the federal bankruptcy code, which does not apply to Puerto Rico, nonetheless preempts the local statute creating a mechanism for public utilities to restructure their debts.

Igartúa urged the top court to revoke the Insular Cases, a series of opinions by the Supreme Court from the early 2the century about the status of U.S. territories acquired after the Spanish–American War. The Insular Cases declared Puerto Rico an “unincorporated territory” causing “discriminatory and arbitrary” actions by U.S. Government Officials, and the courts, Igartúa said. An unincorporated territory in U.S. law is an area controlled by the government “where fundamental rights apply as a matter of law, but other constitutional rights are not available.”

The First Circuit Court of Appeals in Boston upheld a lower court ruling that declared the local bankruptcy law unconstitutional, leaving Puerto Rico without any recourse to restructure its debt.

“Moreover, the Appeals Court, by denying the applicability of chapter 9 of the Bankruptcy Code to Puerto Rico, has denied the equal protection of the laws to the loyal American citizens of Puerto Rico. In consequence, the opinion of the Appeals Court should be revoked,” he said in a “Puerto Rico v. Franklin California Tax Free Trust” brief.

Igartúa, who filed his amicus curiae as a practicing attorney with knowledge of the consequences of the non-incorporation qualifications on Puerto Rico, noted that the economic crisis of Puerto Rico is “too vital and important of an issue to allow it to go unnoticed and/or unanswered.”

Igartúa urged the top court to examine First Circuit Court of Appeals Judge Juan Torruella’s concurrence in the decision. Torruella argued that the 1984 amendments excluding Puerto Rico from equal treatment under the code do not meet rational scrutiny under the Equal Protection Clause.

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