On Friday February 15, 2019, the First Circuit finally came down with its decision on the Aurelius-Utier challenge to the Board appointments. As predicted, the Circuit reversed Judge Swain for the fifth straight time. The 55 page decision examined PROMESA carefully, going through the Board’s powers and the Governor and Legislature’s inability to exercise power over the “territorial entity.”The Circuit summarized some of the Board’s arguments which have great importance to the relationship between Congress and Puerto Rico and said at page 18:
The Board further argued that, in
any event, the Appointments Clause did not apply even if the individual members
were federal officers, because they exercised authority in Puerto Rico, an
unincorporated territory where the Territorial Clause endows Congress with
plenary powers. This, according to the Board, exempted Congress from complying
with the Appointments Clause when legislating in relation to Puerto Rico.
Circuit further explained what the District Court’s reasoning was, at pages
The district court based its ruling
on the premise that “the Supreme Court has long held that Congress’s power
under [the Territorial Clause] is both ‘general and plenary.'” Such a
plenary authority is what, according to the district court, allows Congress to
“establish governmental institutions for territories that are not only
distinct from federal government entities but include features that would not
comport with the requirements of the Constitution if they pertained to the
governance of the United States.” The district court further pronounced
that Congress “has exercised [its plenary] power with respect to Puerto
Rico over the course of nearly 120 years, including the delegation to the
people of Puerto Rico elements of its . . . Article IV authority by authorizing
a significant degree of local self-governance.” . . .
Turning to the relationship between Congress and Puerto Rico, the district court noted that “Congress has long exercised its Article IV plenary power to structure and define governmental entities for the island,” in reference to the litany of congressional acts that have shaped Puerto Rico’s local government since 1898, including the Treaty of Paris of 1898, the Foraker Act of 1900, the Jones-Shafroth Act of 1917, and Public Law 600 of 1950. Furthermore, with regards to PROMESA and its Board, the district court afforded “substantial deference” to “Congress’s determination that it was acting pursuant to its Article IV territorial powers in creating the . . . Board as an entity of the government of Puerto Rico.” The district court then proceeded to consider whether Congress can create an entity that is not inherently federal. It concluded in the affirmative, because finding otherwise would “ignore both the plenary nature of congressional power under Article IV and the well-rooted jurisprudence . . . establish[ing] that any powers of self-governance exercised by territorial governments are exercised by virtue of congressional delegation rather than inherent locals sovereignty.” Accordingly, the district court found that the”creation of an entity such as the . . . Board through popular election would not change the . . . Board’s ultimate source of authority from a constitutional perspective.”
Torruella, author of the opinion and a scholar on Puerto Rico’s relationship
with the Supreme Court, quickly dispelled these findings at pages 24-25:
However much Article IV may broaden
the reach of Congress’s powers over a territory as compared to its power within
a state, this case presents no claim that the substance of PROMESA’s numerous
rules and regulations exceed that reach. Instead, appellants challenge the way
the federal government has chosen the individuals who will implement those
rules and regulations. This challenge trains our focus on the power of Congress
vis-à-vis the other branches of the federal government. Specifically, the Board
claims that Article IV effectively allows Congress to assume what is otherwise
a power of the President, and to share within the two bodies of Congress a
power only assigned to the Senate.
We reject this notion that Article
IV enhances Congress’s capabilities in the intramural competitions established
by our divided system of government. First, the Board seems to forget — and
the district court failed to recognize and honor — the ancient canon of
interpretation that we believe is a helpful guide to disentangle the interface
between the Appointments Clause and the Territorial Clause: generalia
specialibus non derogant (the “specific governs the general”). . .
The Territorial Clause is one of
general application authorizing Congress to engage in rulemaking for the
temporary governance of territories. See Reid v. Covert, 354 U.S. 1, 14 (1957)
(plurality opinion). But such a general empowerment does not extend to areas
where the Constitution explicitly contemplates a particular subject, such as
the appointment of federal officers. Nowhere does the Territorial Clause
reference the subject matter of federal appointments or the process to
effectuate them. On the other hand, federal officer appointment is, of course,
the raison d’etre of the Appointments Clause. It cannot be clearer or more
unequivocal that the Appointments Clause mandates that it be applied to
“all . . . Officers of the United States.” U.S. Const. art II, § 2,
cl. 2 (emphasis added).
Torruella, who is an acerbic critic of the Insular cases, made it clear that
they did not support the Board at pages 33-34:
Finally, nothing about the
“Insular Cases” casts
doubt over our foregoing analysis. This discredited lineage of cases, which ushered the
unincorporated territories doctrine, hovers like a dark cloud over this case.
To our knowledge there is no case even intimating that if Congress acts
pursuant to its authority under the Territorial Clause it is excused from
conforming with the Appointments Clause, whether this be by virtue of the
“Insular Cases” or otherwise. Nor could there be, for it would amount
to the emasculation from the Constitution of one of its most important
structural pillars. We thus have no trouble in concluding that the
Constitution’s structural provisions are not limited by geography and follow
the United States into its unincorporated territories.
Torruella also announced the Circuit’s position as to the insular cases and
said “[t]he only course, therefore, which
we are allowed in light of Reid is to no
further expand the reach of the “Insular Cases.”(Page 36, bold added)
Is this a harbinger of the Circuit’s treatment to the series of cases by Judge
Gelpí on SSI and Medicaid? We can only hope.
an interesting finding by the Court at page 38 where it said:
The Board Members’ federal
authority includes the power to veto, rescind, or revise Commonwealth laws and
regulations that it deems inconsistent with the provisions of PROMESA or the
fiscal plans developed pursuant to it. See 48 U.S.C. § 2144 (“Review of activities
to ensure compliance with fiscal plan.”).
I have insisted that the Board has this power, its members have been very
reluctant to put it into effect. Based on this, the Board will be hard pressed
to justify allowing the Commonwealth to have thousands of publicity contracts
while not paying debt. So the next 90 days will be interesting to see what the
Board does and will they cram down anything against the PR Government, the
Legislature or the creditors? A new Board could take a different view. Also relevant to the new adversary proceeding
against the Senate seeking information on its bank accounts and which Mr.
Rivera Schatz insists it exceeds the Board’s authority. At page 39, it states “Board Members’ investigatory and enforcement
powers, as carried out collectively by way of the Board, exceed or are at least
equal to those of the judicial officers the Supreme Court found to be ‘Officers
of the United States.’” Seems Judge Swain will have little leeway to agree
with Mr. Rivera Schatz. As to the role of the Board, Judge Torruella, ever the historian,
said at page 40 “[t]he Board Members are,
in short, more like Roman proconsuls picked in Rome to enforce Roman law and
oversee territorial leaders than they are like the locally selected leaders
that Rome allowed to continue exercising some authority.” A quote for the
Torruella also discussed the difference of Board members with PR elected
officials and said at page 45:
The Board’s basic point (and the
United States’ basic point as well) is this: If we find that the Board Members
must be selected by presidential nomination and Senate confirmation, then that
would mean that, for example, all elected territorial governors and legislators
have been selected in an unconstitutional manner.
We disagree. The
elected officials to which the Board and the United States point — even at the
highest levels – are not federal officers. They do not “exercise
significant authority pursuant to the laws of the United States.” See
Lucia, 138 S. Ct. at 2051; Freytag, 501 U.S. at 881; Buckley, 424 U.S. at 126;
see also United States v. Germaine, 99 U.S. 508, 511-12 (1878). Rather, they
exercise authority pursuant to the laws of the territory. Thus, in Puerto Rico
for example, the Governor is elected by the citizens of Puerto Rico, his
position and power are products of the Commonwealth’s Constitution, see Puerto
Rico Const. art. IV, and he takes an oath similar to that taken by the governor
of a state, id.
It is true that the Commonwealth laws are themselves the product of authority Congress has delegated by statute. See Puerto Rico v. Sánchez Valle, 136 S. Ct.1863, 1875 (2016). So the elected Governor’s power ultimately depends on the continuation of a federal grant.But that fact alone does not make the laws of Puerto Rico the laws of the United States, else every claim brought under Puerto Rico’s laws would pose a federal question.(Bold added)
statement on Governor’s power is telling. In other words, the Governor’s power
and the whole apparatus of the PR Government depends on Congress not changing
Law 600. Or as the Court in Downes v.
Bidwell, 182 U.S. 244, 289-290 (1901) said:
The Constitution has
undoubtedly conferred on Congress the right to create such municipal
organizations as it may deem best for all the territories of the United States,
whether they have been incorporated or not, to give to the inhabitants as
respects the local governments such degree of representation as may be
conducive to the public wellbeing, to deprive such territory of representative
government if it is considered just to do so, and to change such local
governments at discretion.”
The current governor should read this passage a few times.
Utier pushed the issue of invalidity of the Board’s actions, Judge Torruella
would have none of it. At pages 52-53 stated:
Here, the Board Members were acting
with the color of authority — namely, PROMESA — when, as an entity, they
decided to file the Title III petitions on the Commonwealth’s behalf, a power
squarely within their lawful toolkit. And there is no indication but that the
Board Members acted in good faith in moving to initiate such proceedings. See
Leary v. United States, 268 F.2d 623, 627 (9th Cir. 1959). Moreover, the Board
Members’ titles to office were never in question until our resolution of this appeal.
further counsel for our application of the de facto officer doctrine. We fear
that awarding to appellants the full extent of their requested relief will have
negative consequences for the many, if not thousands, of innocent third parties
who have relied on the Board’s actions until now. In addition, a summary
invalidation of everything the Board has done since 2016 will likely introduce
further delay into a historic debt restructuring process that was already
turned upside down once before by the ravage of the hurricanes that affected
Rico in September 2017.
mean that Utier or maybe Aurelius will seek certiorari from the Supreme Court
of the United States. Given that less than 1% of the certioraris requested are
granted, it will probably not happen.
at page 54, the Court decided:
Finally, our mandate in these
appeals shall not issue for 90 days, so as to allow the President and the
Senate to validate the currently defective appointments or reconstitute the
Board in accordance with the Appointments Clause. Cf. Weinberger v.
Romero-Barceló, 456 U.S. 305, 312-313 (1982). During the 90-day stay period,
the Board may continue to operate as until now.
Torruella summarized the Court’s decision at pages 54-55:
In sum, we hold that the Board
Members (other than the ex officio Member) must be, and were not, appointed in
compliance with the Appointments Clause. Accordingly, the district court’s
conclusion to the contrary is reversed. We direct the district court to enter a
declaratory judgment to the effect that PROMESA’s protocol for the appointment
of Board Members is unconstitutional and must be severed. We affirm, however,
the district court’s denial of appellants’ motions to dismiss the Title III
decision is nothing short of monumental. The whole Board may be changed,
although of course President Trump has the choice of re-nominating the same
members but will have a tough time getting them through the Senate. This may
mean more debt payment, dismissal of the Title III, more intervention with the
PR Government. We will have to wait and see what transpires but first I would
like to comment on the wild speculation I have seen in both the main stream
media and social media.
Torruella’s decision does not mean that PROMESA has to be amended. The opinion
states at page 51:
Accordingly, we hold that the
present provisions allowing the appointment of Board Members in a manner other
than by presidential nomination followed by the Senate’s confirmation are
invalid and severable. We do not hold invalid the remainder of the Board membership
provisions, including those providing the qualifications for office and for
appointment by the President with the advice and consent of the Senate.
PROMESA does not NEED to be amended, it is unlikely the Board can secure more
powers. Democrats are leery of the
Board’s handling of the PR Government and are reluctant to give it more power.
Also, given the contentious nature of Governor Rosselló with President Trump
and his campaigning for democratic candidates in Florida, he is unlikely to
have much influence on who is appointed.
The Claims Committee of the Board will continue to exist until May 16,
2019, when the 90-day period expires. What will happen to the Board’s objection
to 2012 and 2014 GO’s? Not clear but even if the new Board does not want to
continue the case, the UCC is likely to want to do so and it probably could
pursuant to section 926(a) of the Bankruptcy Code, also adopted in PROMESA.
Judge Swain do? Not much. She can continue to act until May 16 but in the back of
her head she must realize it all could be for naught. Moreover, she must not be
feeling very good since this is the 5th straight time she has been
reversed. I am sure she will be sustained in other cases that have been argued
before the Circuit but those will have to wait. Finally, the Republican
President and Republican Senate will be involved in naming the next Board. Only
51 votes are needed (Republicans have 53) for the new members. In any event, I
don’t see a filibuster unless a candidate is someone extreme. We will have to wait and see.