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Supreme Court: Puerto Rico fiscal board members ‘are not Officers of the United States’

By on June 1, 2020

(CB file)

Maintains the oversight panel’s work is local in nature

SAN JUAN — The Financial Oversight and Management Board for Puerto Rico welcomed Monday the U.S. Supreme Court’s unanimous decision that the congressionally created panel’s members are not federal officers whose appointment would require Senate confirmation.

The top court reversed and remanded, 9-0, in an opinion by Justice Stephen Breyer that the Constitution’s Appointments Clause does not restrict the appointment or selection of members of the fiscal board, who are appointed by the president, after asset manager Aurelius Investments LLC and Irrigation & Electrical Workers Union (Utier by its Spanish acronym) claimed their tenure was unconstitutional.

The decision, the board said in a statement Monday, confirms that the Puerto Rico Oversight, Management and Economic Stability Act (Promesa) established the board as an entity that is part of the government of Puerto Rico.

“The Board’s statutory responsibilities consist of primarily local duties, namely, representing Puerto Rico in bankruptcy proceedings and supervising aspects of Puerto Rico’s fiscal and budgetary policies,” Justice Breyer said in his opinion. “We therefore find that the Board members are not ‘Officers of the United States.”

The fiscal board said Promesa created a bipartisan panel, “ensuring balanced decisions to help Puerto Rico recover and prosper.”

The board added that it has “an important mandate: to help Puerto Rico recover from an unsustainable debt burden and decades of fiscal mismanagement. The Oversight Board has been renegotiating Puerto Rico’s debt and has been steadily working towards instituting long term fiscal planning and balanced budgeting,” and is “looking forward to continuing its work in the interest of the people of Puerto Rico. It is paramount that we turn the corner from this crisis as soon as we can.”

Attorney Rolando Emmanuelli, who represents Utier in the case, told Caribbean Business that the unanimous ruling by the U.S. high court justices showed that they did not want to “alter the foundations of the colonial relationship between Puerto Rico and the United States, and they interpreted Promesa, which has destroyed all of the prerogative of local laws, in a way that avoided facing these issues.”

The ruling “validates the basically absolute authority the Congress has over the territories. It is bad news for Puerto Rico and the other [U.S.] territories because the court did not want to place limits to this authority exerted by the Congress, dramatically limiting the space territories have to lead a local and democratic life,” the attorney said. “The decision belittles the wide-ranging powers the oversight board has over Puerto Rico, which include the power to annul the laws approved by the legislative assembly. The ruling amplifies the all-encompassing powers of the oversight board under the Territorial Clause.”

Emmanuelli added that the ruling is “the last reincarnation of the discredited jurisprudence of the Insular Cases because it validates the broad powers of Congress over the territories,” and went as far as saying that a constitutional clause such as the Appointments Clause does not apply. He said this implies that when Congress legislates under the Territorial Clause, it has more power than the president regarding appointments, because it can exclude “officials with a lot of power” from the rigors of the Appointments Clause.

The Insular Cases are a series of U.S. Supreme Court opinions in 1901 about the status of U.S. territories acquired in the Spanish–American War and afterward. At the time, the court decided that the U.S. Constitution does not apply fully to unincorporated territories, such as Puerto Rico, because it was determined that they were not on the path to statehood.

“The court followed the route that was more accommodating to the United States in terms of its territories,” the attorney said, noting that the Utier-backed legal action sought to overturn the “racist” jurisprudence of the Insular Cases, which he noted allows an oversight board unelected by the people of Puerto Rico to make decisions that affect them. “But they avoided entering into difficult subjects of limiting the powers of Congress over the territories.”

Emmanuelli said, nonetheless, that he holds out hope that Justice Sotomayor’s opinion in the case could open up challenges to the Insular Cases down the road.

“In short,” the opinion reads, “the Board possesses considerable power—including the authority to substitute its own judgment for the considered judgment of the Governor and other elected officials. But this power primarily concerns local matters.”

“Moreover, the court noted, two provisions of the Constitution give Congress authority to legislate for the District of Columbia and U.S. territories; both the text and structure of the Constitution and history indicate that when Congress has created local offices using this power, those officials have been regarded as exercising local government power, rather than federal power,” former SCOTUSblog editor Amy Howe wrote.

Puerto Rico’s resident commissioner in Congress, Jenniffer González Colón, rejected the ruling, saying the “Supreme Court reiterates that we are a colony without political or economic power.”

The island’s U.S. congresswoman said the opinion reasserts “the broad capacity of Congress to legislate on this matter. As has been the case since the Foraker Act, Congress can impose laws on the Territory and impose the bodies to implement them and that the territory be the one that pays for it. The court again refuses to address either the insular cases or the alleged compact of Act 600, judging that they do not affect the fundamentals” of the case.

The decision, she said, “shows once again that if Puerto Rico wants to have control of local affairs, it must become a state,” adding that the island “needs its two senators and five representatives with voice and vote to advance our economic progress.”

In a separate opinion, Justice Sotomayor, who is of Puerto Rican descent, said she reluctantly concurred with the court’s judgment, and emphasized “the extent to which ‘Puerto Rico, like a State, is an autonomous political entity.’ Despite that autonomous status, she continued, the board has ‘wide-ranging, veto-free authority over Puerto Rico,’ with Puerto Rico’s governor limited to a nonvoting role on the board. As a result, she concluded, the court’s ruling ‘seems anomalous’: The board exists ‘in a twilight zone of accountability, neither selected by Puerto Rico itself nor subject to the strictures of the Appointments Clause,'” Howe quoted the associate justice as saying.

“I am skeptical that the Constitution countenances this freewheeling exercise of control over a population that the federal government has explicitly agreed to recognize as operating under a government of their own choosing, pursuant to a constitution of their own choosing,” Justice Sotomayor wrote. “Surely our Founders, having labored to attain such recognition of self-determination, would not view that same recognition with respect to Puerto Rico as a mere act of grace.”

See the opinion issued over Financial Oversight and Management Bd. for Puerto Rico v. Aurelius Investment, LLC (06/01/2020)Download

— Reporter José Alvarado contributed.

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