Supreme Court rules Puerto Rico financial oversight board is legal

(L-R) Natalie Jaresko Executive Director of for the Financial Oversight and Management Board for Puerto Rico ,Noel Zamot Revitalization Coordinator for the Financial Oversight and Management Board for Puerto Rico and Angel Perez Otero Mayor of the City of Guaynabo at the House Natural Resources Committee Hearing on Examining Challenges in Puerto Rico’s Recovery efforts on Capital Hill on November 7, 2017 in Washington, DC.

Tasos Katopodis | Getty Images

The Supreme Court on Monday ruled unanimously that appointments to Puerto Rico’s financial oversight board were lawful, finding that its members exercise “primarily local powers” and therefore do not require confirmation by the Senate under the constitution.

The case was brought by a hedge fund run by the investor Marc Brodsky and a local Puerto Rico labor union whose arguments that Puerto Rico’s financial oversight board was improperly constituted threatened to disrupt more than $100 billion in debt restructuring proceedings that the panel has carried out since it was established in 2016. 

Congress created the Financial Oversight and Management Board to address a fiscal crisis on the island that was exacerbated the following year by Hurricanes Maria and Irma, which destroyed much of Puerto Rico’s infrastructure. 

Aurelius Investment and UTIER, the workers union, alleged that appointments to the seven-member board were made unconstitutionally by President Barack Obama. 

They argued that the members of the board are federal officials who must be confirmed by the Senate under the Constitution’s Appointments Clause.

The oversight board, backed by the Trump administration’s Department of Justice, countered that the board members are local officers and therefore do not require Senate confirmation. 

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A federal appeals court sided against the board last year, but refused to erase its past actions on the basis that doing otherwise would have “negative consequences for the many, if not thousands, of innocent third parties.” 

President Donald Trump officially sent nominations of members of the board to the Senate last year following the ruling. Those nominations remain under consideration. 

Justice Stephen Breyer, who authored the opinion of the court, wrote that some of the board’s actions “of course, may have nationwide consequences.”

“But the same can be said of many actions taken by many Governors or other local officials. Taking actions with nationwide consequences does not automatically transform a local official into an ‘Officer of the United States,'” he wrote.

Breyer said that the law that established the oversight board gave it “a structure, a set of duties, and related powers all of which are consistent” with making the board a part of the local Puerto Rican government. 

“In short, 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,” Breyer wrote. 

Attorneys for Aurelius, UTIER and the oversight board did not immediately respond to requests for comment. 

The case is Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment, No. 18-1334.

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