Fin. Oversight & Mgmt. Bd. for P.R. v. Aurelius Inv., LLC - 140 S. Ct. 1649 (2020)

Rule:

The Appointments Clause, U.S. Const. art. II, § 2, cl. 2, 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. U.S. Const. art. I, § 8, cl. 17; U.S. Const. art. IV, § 3, cl. 2. And the Clause’s term “Officers of the United States” has never been understood to cover those whose powers and duties are primarily local in nature and derive from these two constitutional provisions. The Financial Oversight and Management Board’s statutory responsibilities consist of primarily local duties, namely, representing Puerto Rico in bankruptcy proceedings and supervising aspects of Puerto Rico’s fiscal and budgetary policies. The U.S. Supreme Court therefore finds that the Board members are not “Officers of the United States.” For that reason, the Appointments Clause does not dictate how the Board’s members must be selected.

Facts:

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 were 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. 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.

Issue:

Did the Appointments Clause restrict the appointment or selection of the Financial Oversight and Management Board members?

Answer:

No.

Conclusion:

While the Appointments Clause, U.S. Const. art. II, § 2, cl. 2, did restrict the appointment of “Officers of the United States” with duties in or related to the District of Columbia or an Article IV entity, the Court held that it did not restrict the appointment of local officers that Congress vested with primarily local duties under U.S. Const. art. IV, § 3, or U.S. Const. art. I, § 8, cl. 17. According to the Court, the Appointments Clause did not dictate how the Financial Oversight and Management Board for Puerto Rico’s members must have been selected because the Board members were not “Officers of the United States” as the Board’s statutory responsibilities consisted of primarily local duties, namely, representing Puerto Rico in bankruptcy proceedings and supervising aspects of Puerto Rico’s fiscal and budgetary policies.