Financial Oversight and Management Bd. for Puerto Rico v. Aurelius Investment, LLC

Procedural entryThis page is a short order in Financial Oversight and Management Bd. for Puerto Rico v. Aurelius Investment, LLC. Read the opinion of the Court — 590 U.S. 448
Supreme Court of the United States·Decided June 5, 2020·No. 18-1334·Published

Opinion

the people of Puerto Rico for approval. Id., at 223.

In 1952, “both Puerto Rico and the United States ratified Puerto Rico’s Constitution.” Sánchez Valle, 579 U. S., at ___ (BREYER, J., dissenting) (slip op., at 8). The people of Puerto Rico first approved the draft Constitution in a referendum . Congress then approved the draft Constitution with modifications, noting the caveat that it “shall become effective” only when Puerto Rico “declare[s] in a formal resolution its acceptance.” 66 Stat. 327–328. Finally, the constitutional convention approved the modified Constitution. Thus, although the terms of the compact provided for Congress ’ approval, “when such constitution did go into effect pursuant to the resolution of approval by the Congress, it became what the Congress called it, a ‘constitution’ under which the people of Puerto Rico organized a government of their own adoption.” Figueroa v. Puerto Rico, 232 F. 2d 615, 620 (CA1 1956) (citation omitted). “The Commonwealth’s power, the [Puerto Rico] Constitution proclaims, ‘emanates from the people and shall be exercised in accordance with their will, within the terms of the compact agreed upon between the people of Puerto Rico and the United States.’ ” Sánchez Valle, 579 U. S., at ___ (slip op., at 4).

With the passage of Public Law 600 and the adoption and recognition of the Puerto Rico Constitution, “the United States and Puerto Rico . . . forged a unique political relationship , built on the island’s evolution into a constitutional democracy exercising local self-rule.” Id., at ___ (slip op., at 2); cf. Calero-Toledo, 416 U. S., at 672 (noting with approval the view that, after Public Law 600, Puerto Rico became “a political entity created by the act and with the consent of the people of Puerto Rico and joined in union with the United States of America under the terms of the compact” (quoting Mora v. Mejias, 206 F. 2d 377, 387 (CA1 1953))).

Of critical import here, the Federal Government “relinquished its control over [Puerto Rico’s] local affairs[,]

grant[ing] Puerto Rico a measure of autonomy comparable to that possessed by the States.” Examining Bd. of Engineers , Architects and Surveyors v. Flores de Otero, 426 U. S. 572, 597 (1976). Indeed, the very “purpose of Congress in the 1950 and 1952 legislation was to accord Puerto Rico the degree of autonomy and independence normally associated with States of the Union.” Id., at 594; see also S. Rep. No. 1779, 81st Cong., 2d Sess., 2 (1950) (Public Law 600 was “designed to complete the full measure of local self-government in” Puerto Rico); H. R. Rep. No. 2275, 81st Cong., 2d Sess., 6 (1950) (Public Law 600 was a “reaffirmation by the Congress of the self-government principle”).1 The upshot is that “Puerto Rico, like a State, is an autonomous political entity, ‘ “sovereign over matters not ruled by the [Federal] Constitution.” ’ ” Rodriguez v. Popular Democratic Party, 457 U. S. 1, 8 (1982) (quoting Calero-Toledo, 416 U. S., at 673). And only by holding out that guarantee to the United Nations has the Federal Government been able to disclaim certain continuing obligations it previously owed with respect to Puerto Rico under the United Nations Charter. See infra, at 11–12.

B

In the decades that followed, Puerto Rico underwent further changes as a Commonwealth. For many years, the island experienced dynamic growth, increasing its gross national product more than fourfold from 1950 to 1971. Cheatham, Council on Foreign Relations, Puerto Rico: A U. S. Territory in Crisis (Feb. 13, 2020). In 1976, after the

revised Federal Tax Code conferred preferential tax treatment on productive industries in Puerto Rico, Puerto Rico developed robust pharmaceutical and manufacturing sectors . Issacharoff, Bursak, Rennie, & Webley, What Is Puerto Rico? 94 Ind. L. J. 1, 27 (2019).

Eventually, however, the island and its people confronted several economic setbacks. Congress repealed Puerto Rico’s favorable tax credits, and manufacturing growth deflated, precipitating a prolonged recession. Steady outmigration correlated with persistently high unemployment rates greater than 8 percent. Dept. of Labor, Bureau of Labor Statistics, Databases, Tables & Calculators by Subject (May 28, 2020). Deprived of its primary sources of income, the Commonwealth began borrowing heavily. The island’s outstanding debts rose to approximately $70 billion, a sum greater than its annual economic output. Puerto Rico’s credit ratings were downgraded to junk levels, D. Austin, Congressional Research Service, Puerto Rico’s Current Fiscal Challenges 4, 13 (June 3, 2016), rendering borrowing practically impossible. Without any realistic ability to set its finances on the right course, the island declared bankruptcy in 2016.

Months later, Hurricane Maria made landfall, causing immense devastation and a humanitarian emergency the likes of which had not been seen in over a century. The island suffered thousands of casualties and an estimated $90 billion in damages. Most recently, significant earthquakes have further rattled an already shaken population and economy still recovering from the impact of Hurricane Maria. Robles, Months After Puerto Rico Earthquakes, Thousands Are Still Living Outside, N. Y. Times, Mar. 1, 2020.

C

Congress passed the Puerto Rico Oversight, Management , and Economic Stability Act (PROMESA), 130 Stat.

549, 48 U. S. C. §2101 et seq., in the midst of Puerto Rico’s dramatic reversal of fortune, with the aim of mitigating the island’s “severe economic decline,” see 48 U. S. C. §2194(m)(1). To that end, the statute establishes a Financial Oversight and Management Board to oversee the island ’s finances and restructure its debts. See ante, at 3–4; Issacharoff, 94 Ind. L. J., at 30–31.

The Board’s decisions have affected the island’s entire population, particularly many of its most vulnerable citizens . The Board has ordered pensions to be reduced by as much as 8.5 percent, a measure that threatens the sole source of income for thousands of Puerto Rico’s poor and elderly . Walsh & Russell, $129 Billion Puerto Rico Bankruptcy Plan Could Be Model for States, N. Y. Times, Sept. 29, 2019. Other proposed cuts take aim at already depleted healthcare and educational services. It is under the yoke of such austerity measures that the island’s 3.2 million citizens now chafe.

PROMESA does not provide for the appointment of Board members according to the straightforward methods set out in the Appointments Clause. U. S. Const., Art. II, §2, cl. 2 (requiring principal “Officers of the United States” to be nominated by the President, with Senate advice and consent ). Instead, the statute prescribes a labyrinthine procedure by which the Speaker of the House, majority leader of the Senate, minority leader of the House, and minority leader of the Senate each submit to the President separate lists with any number of candidates; and the President, in turn, selects individuals from each of those lists, plus an individual in his sole discretion. See §101(e), 130 Stat. 554– 555.2 With only one exception, then, the President is not

“singly and absolutely” responsible for any members of the Board. The Federalist No. 77, p. 461 (C. Rossiter ed. 1961) (A. Hamilton) (Appointments Clause ensures that “[t]he blame of a bad nomination . . . fall[s] upon the President singly and absolutely”). And with no exceptions, the Senate fails to advise or consent to the President’s selections.

Despite the Board’s wide-ranging, veto-free authority over Puerto Rico, the solitary role PROMESA contemplates for Puerto Rican-selected officials is this: The Governor of Puerto Rico sits as an ex officio Board member without any voting rights. §101(e)(3), 130 Stat. 555. No individual within Puerto Rico’s government plays any part in determining which seven members now decide matters critical to the island’s financial fate.

II

A

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