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The Supreme Court on Monday upheld the authority of a special government board with oversight to deal with Puerto Rico’s debt restructuring, which came after a devastating financial crisis.
The court unanimously ruled that the board members were not federal officers whose appointments required Senate confirmation because their duties were locally focused.
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“The 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,” Justice Stephen Breyer wrote in the court’s opinion. “We therefore find that the Board members are not 'Officers of the United States.'”
The court likened this to when Congress creates local government offices in Puerto Rico.
“Congress has both made local law directly and also created structures of local government, staffed by local officials, who themselves have made and enforced local law,” Breyer’s opinion said. “This structure suggests that when Congress creates local offices using these two unique powers, the officers exercise power of the local government, not the Federal Government.”
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Several hedge funds that had invested in the commonwealth’s bonds had challenged the makeup and the oversight responsibilities of the board. The First Circuit Court of Appeals ruled that the board’s appointment was unconstitutional but that their actions prior to the legal challenge would remain in effect.
The Supreme Court now reverses the First Circuit, allowing the board to move ahead and try to help the island territory recover from the largest municipal bankruptcy in U.S. history.
Fox News’ Bill Mears contributed to this report.
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