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Aurelius Inv., LLC v. Puerto Rico - 915 F.3d 838 (1st Cir. 2019)

Rule:

Because Congress created the Financial Oversight and Management Board of Puerto Rico pursuant to the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C.S. § 2101 et seq., the Board's members were principal federal officers that must be appointed pursuant to the Appointments Clause, U.S. Const. art. IV, § 3, cl. 2.

Facts:

Puerto Rico's public debt was restructured under the 2016 Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Title III of PROMESA authorized the Board to initiate debt adjustment proceedings on behalf of the Puerto Rico government, and the Board exercised this authority in May 2017. Aurelius Investment, LLC and Assured Guaranty Corporation sought to dismiss the Title III proceedings, claiming the Board lacked authority to initiate them given that the Board Members were allegedly appointed in contravention of the Appointments Clause.

Issue:

Are members of the Financial Oversight and Management Board created by PROMESA considered "Officers of the United States" subject to the U.S. Constitution's Appointments Clause?

Answer:

Yes

Conclusion:

The Court held that Puerto Rico's financial oversight board, created pursuant to the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C.S. § 2101 et seq., was not properly constituted because the board's members were principal federal officers that should have been appointed pursuant to the Appointments Clause, U.S. Const. art. IV, § 3, cl. 2, and the Territorial Clause, U.S. Const. art. IV, § 3, cl. 2, which permitted Congressional delegation of certain powers, did not provide an exception to that constitutional mandate. Because the PROMESA process for appointment of board members was unconstitutional, the court fashioned an appropriate remedy designed to reduce disruption, severing 48 U.S.C.S. § 2121(e) from PROMESA because PROMESA contained an express severability clause.

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