Financial Oversight and Management Board For Puerto Rico v. Aurelius Investment, LLC, 060120 FEDSC, 18-1334

Docket Nº:18-1334, 18-1475, 18-1496, 18-1514, 18-1521
Opinion Judge:BREYER, JUSTICE
Party Name:FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, PETITIONER v. AURELIUS INVESTMENT, LLC, ET AL. AURELIUS INVESTMENT, LLC, ET AL., PETITIONERS v. COMMONWEALTH OF PUERTO RICO, ET AL. OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF ALL TITLE III DEBTORS OTHER THAN COFINA, PETITIONER v. AURELIUS INVESTMENT, LLC, ET AL. UNITED STATES, PETITION...
Judge Panel:BREYER, J., delivered the opinion of the Court, in which ROBERTS, C. J., and GlNSBURG, Alito, Kagan, GORSUCH, and Kavanaugh, JJ., joined. THOMAS, J., and Sotomayor, J., filed opinions concurring in the judgment. Justice Thomas, concurring in the judgment. JUSTICE Sotomayor, concurring in the judg...
Case Date:June 01, 2020
Court:United States Supreme Court
 
FREE EXCERPT

FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, PETITIONER

v.

AURELIUS INVESTMENT, LLC, ET AL.

AURELIUS INVESTMENT, LLC, ET AL., PETITIONERS

v.

COMMONWEALTH OF PUERTO RICO, ET AL.

OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF ALL TITLE III DEBTORS OTHER THAN COFINA, PETITIONER

v.

AURELIUS INVESTMENT, LLC, ET AL.

UNITED STATES, PETITIONER

v.

AURELIUS INVESTMENT, LLC, ET AL.

UNIÓN DE TRABAJADORES DE LA INDUSTRIA ELÉCTRICA Y RIEGO, INC., PETITIONER

v.

FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, ET AL.

FINANCIAL OVERSIGHT AND MANAGEMENT BD. FOR PUERTO RICO v. AURELIUS INVESTMENT, LLC

Nos. 18-1334, 18-1475, 18-1496, 18-1514, 18-1521

United States Supreme Court

June 1, 2020 [*]

Argued October 15, 2019

ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT No. 18-1334.

In 2016, in response to a fiscal crisis in Puerto Rico, Congress invoked its Article IV power to "make all needful Rules and Regulations respecting the Territory . . . belonging to the United States," §3, cl. 2, to enact the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). PROMESA created a Financial Oversight and Management Board, whose seven voting members are to be appointed by the President without the Senate's advice and consent. Congress authorized the Board to file for bankruptcy on behalf of Puerto Rico or its instrumentalities, to supervise and modify Puerto Rico's laws and budget, and to gather evidence and conduct investigations in support of these efforts.

After President Obama selected the Board's members, the Board filed bankruptcy petitions on behalf of the Commonwealth and five of its entities. Both court and Board had decided a number of matters when several creditors moved to dismiss the proceedings on the ground that the Board members' selection violated the Constitution's Appointments Clause, which says that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint ... all . . . Officers of the United States . . . ." Art. II, §2, cl. 2. The court denied the motions, but the First Circuit reversed. It held that the Board members' selection violated the Appointments Clause but also concluded that any Board actions taken prior to its decision were valid under the "de facto officer" doctrine.

Held:

1. The Appointments Clause constrains the appointments power as to all officers of the United States, even those who exercise power in or in relation to Puerto Rico. The Constitution's structure provides strong reason to believe that this is so. The Appointments Clause reflects an allocation of responsibility, between President and Senate, in cases involving appointment to high federal office. Concerned about possible manipulation of appointments, the Founders both concentrated the appointment power and distributed it, ensuring that primary responsibility for important nominations would fall on the President while also ensuring that the Senate's advice and consent power would provide a check on that power. Other, similar structural constraints in the Constitution apply to all exercises of federal power, including those related to Article IV entities. Cf, e.g., Metropolitan Washington Airports Authority v. Citizens for Abatement of Aircraft Noise, Inc., 501 U.S. 252, 270-271 (MWAA). The objectives advanced by the Appointments Clause counsel strongly in favor of applying that Clause to all officers of the United States, even those with powers and duties relatedto Puerto Rico. Indeed, the Clause's text firmly indicates that it applies to the appointment of all "Officers of the United States." And history confirms this reading. Congress' longstanding practice of requiring the Senate's advice and consent for territorial Governors with important federal duties supports the inference that Congress expected the Appointments Clause to apply to at least some officials with supervisory authority over the Territories. Pp. 5-9.

2. The Appointments Clause does not restrict the appointment or selection of the Board members. Pp. 9-21.

(a) The Appointments Clause does not restrict the appointment of local officers that Congress vests with primarily local duties. The Clause's language suggests a distinction between federal officers-who exercise power of the National Government-and nonfederal officers- who exercise power of some other government. Pursuant to Article I, §8, cl. 17, and Article IV, §3, Congress has long legislated for entities that are not States-the District of Columbia and the Territories. In so doing, Congress has both made local law directly and also created local government structures, staffed by local officials, who themselves have made and enforced local law. This suggests that when Congress creates local offices using these two unique powers, the officers exercise power of the local government, not the Federal Government. Historical practice indicates that a federal law's creation of an office does not automatically make its holder an officer of the United States. Congress has for more than two centuries created local offices for the Territories and District of Columbia that are filled through election or local executive appointment. And the history of Puerto Rico-whose public officials with important local responsibilities have been selected in ways that the Appointments Clause does not describe-is consistent with the history of other entities that fall within Article IV's scope and with the history of the District of Columbia. This historical practice indicates that when an officer of one of these local governments has primarily local duties, he is not an officer of the United States within the meaning of the Appointments Clause. Pp. 9-14.

(b) The Board members here have primarily local powers and duties. PROMESA says that the Board is "an entity within the territorial government" that "shall not be considered a department, agency, establishment, or instrumentality of the Federal Government," §101(c), 130 Stat. 553, and Congress gave the Board a structure, duties, and related powers that are consistent with this statement. The Board's broad investigatory powers-administering oaths, issuing subpoenas, taking evidence, and demanding data from governments and creditors alike-are backed by Puerto Rican, not federal, law. Its powers to oversee the development of Puerto Rico's fiscal and budgetary plans are also quintessentially local. And in exercising its power to initiate bankruptcy proceedings, the Board acts on behalf of, and in the interests of, Puerto Rico. Pp. 14-17.

(c) Buckley v. Valeo, 424 U.S. 1, Freytag v. Commissioner, 501 U.S. 868, and Lucia v. SEC, 585 U.S., do not provide the relevant legal test here, for each considered an Appointments Clause problem concerning the importance or significance of duties that were indisputably

federal or national in nature. Nor do Lebron v. National Railroad Passenger Corporation, 513 U.S. 374, or MWAA, 501 U.S. 252, help. Lebron considered whether Amtrak was a governmental or a private entity, but the fact that the Board is a Government entity does not answer the "primarily local versus primarily federal" question. And the MWAA Court expressly declined to address Appointments Clause questions. However, the Court's analysis in O'Donoghue v. United States, 289 U.S. 516, and Palmore v. United States, 411 U.S. 389, does provide a rough analogy. In O'Donoghue, the Court found that Article Ill's tenure and salary protections applied to judges of the District of Columbia courts because those courts exercised the judicial power of the United States. But the Court reached the seemingly opposite conclusion in Palmore, a case decided after Congress had altered the nature of the District of Columbia local courts so that its judges adjudicated primarily local issues. Pp. 17-21.

3. Given the conclusion reached here, there is no need to consider whether to overrule the "Insular Cases" and their progeny, see, e.g., Dowries v. Bidwell, 182 U.S. 244, 287, to consider the application of the de facto officer doctrine, see Ryder v. United States, 515 U.S. 177, or to decide questions about the application of the Federal Relations Act and Public Law 600. Pp. 21-22.

915 F.3d 838, reversed and remanded.

BREYER, J., delivered the opinion of the Court, in which ROBERTS, C. J., and GlNSBURG, Alito, Kagan, GORSUCH, and Kavanaugh, JJ., joined. THOMAS, J., and Sotomayor, J., filed opinions concurring in the judgment.

OPINION

BREYER, JUSTICE

The Constitution's Appointments Clause says that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States Art. II, §2, cl. 2 (emphasis added).

In 2016, Congress enacted the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). 130 Stat. 549, 48 U.S.C. §2101 et seq. That Act created a Financial Oversight and Management Board, and it provided, as relevant here, that the President could appoint its seven members without "the advice and consent of the Senate," i.e., without Senate confirmation.

The question before us is whether this method of appointment violates the Constitution's Senate confirmation requirement. In our view, the Appointments Clause governs the appointments of all officers of the United States, including those located in Puerto Rico. Yet two provisions of the Constitution empower Congress to create local offices for the District of Columbia and for Puerto Rico and the Territories. See Art. I, §8, cl. 17; Art. IV, §3, cl. 2. And the Clause's term "Officers of the United States" has never been...

To continue reading

FREE SIGN UP