The U.S. Supreme Court is poised to consider a challenge to the oversight board responsible for pulling Puerto Rico out of its record bankruptcy, hearing a case that could mean a new phase of uncertainty for an island still recovering from a devastating 2017 hurricane, Bloomberg News reported. The High Court will hear arguments today from bondholders who say that the seven members of the Financial Oversight and Management Board were appointed in violation of the Constitution because they weren’t confirmed by the U.S. Senate. The bondholders, led by Aurelius Investment LLC, are seeking to unravel much of the board’s work and eventually get more for their stakes than the oversight panel is offering. The argument takes place less than three weeks after the board filed its plan with a federal bankruptcy court for restructuring $35 billion in debt and other liabilities. The proposal would cut that sum, which includes $17.8 billion in commonwealth-guaranteed debt, by 65 percent to $12 billion. It would also address a pension system that owes current and future retirees $50 billion. Read more.
The Constitution’s appointments clause provides that the president nominates, but the Senate must confirm, principal “Officers of the United States,” although Congress can also give the president the power to appoint “inferior Officers.” The Supreme Court will hear oral argument today on the scope of both this clause and the ancient remedy known as the “de facto officer” doctrine, which blesses an official’s actions even when his appointment is later discovered to have been invalid, according to a SCOTUSBlog analysis. The threshold question before the justices is whether the appointment of the board’s members must comply with the appointments clause. The board, the federal government and others argue that the appointments clause only applies to “officers of the United States,” which means officers of the federal government. It does not extend to the local government of a territory like Puerto Rico, as confirmed by the fact that other words in the appointments clause (such as Congress and the president) also refer to the national government. Read the full analysis.
For more on the case, including petitions, briefs and insight from ABI Editor-at-Large Bill Rochelle, please click here.
