After a long wait, a unanimous court upholds Puerto Rico Oversight Board

The above link to a plain English analysis at Scotusblog.

Link to Opinion of the Court and concurrences. Justice Breyer wrote the Opinion of the Court. All 9 Justices concurred in the Judgement, but only 7 concurred in the Opinion. Justice Thomas and Justice Sotomayor each wrote a separate concurrence, joining in the Judgement of the Court, but taking a separate approach to reaching that Judgement.

I have included the full syllabus of the Opinion below, but I will summarize briefly. I will also bump my previous thread on this subject, which has background information on this subject.

  1. The Supreme Court DECLINED to rule on the Insular Cases in any manner.

  2. The Supreme Court HELD that the powers of the Officers in question are local to Puerto Rico, not Federal, thus the Officers are not Officers of the United States and thus not subject to the Appointments Clause. Therefore, their previous appointment under President Obama was lawful and consequently all actions taken by the Board are lawful.

  3. Since the Supreme Court upheld the manner of appointment of the Board, it was unnecessary for the court to address the secondary question regarding the “de facto officer doctrine.”

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 are 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, which says that the President “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . all . . . Officers of the United States . . . .” Art. II, §2, cl. 2. 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.

Held:

  1. The Appointments Clause constrains the appointments power as to all officers of the United States, even those who exercise power in or in relation to Puerto Rico. The Constitution’s structure provides strong reason to believe that this is so. The Appointments Clause reflects an allocation of responsibility, between President and Senate, in cases involving appointment to high federal office. Concerned about possible manipulation of appointments, the Founders both concentrated the appointment power and distributed it, ensuring that primary responsibility for important nominations would fall on the President while also ensuring that the Senate’s advice and consent power would provide a check on that power. Other, similar structural constraints in the Constitution apply to all exercises of federal power, including those related to Article IV entities. Cf., e.g., Metropolitan Washington Airports Authority v. Citizens for Abatement of Aircraft Noise, Inc., 501 U. S. 252, 270–271 (MWAA). The objectives advanced by the Appointments Clause counsel strongly in favor of applying that Clause to all officers of the United States, even those with powers and duties related to Puerto Rico. Indeed, the Clause’s text firmly indicates that it applies to the appointment of all “Officers of the United States.” And history confirms this reading. Congress’ longstanding practice of requiring the Senate’s advice and consent for territorial Governors with important federal duties supports the inference that Congress expected the Appointments Clause to apply to at least some officials with supervisory authority over the Territories. Pp. 5–9.

  2. The Appointments Clause does not restrict the appointment or selection of the Board members. Pp. 9–21.

(a) The Appointments Clause does not restrict the appointment of local officers that Congress vests with primarily local duties. The Clause’s language suggests a distinction between federal officers—who exercise power of the National Government—and non federal officers—who exercise power of some other government. Pursuant to Article I, §8, cl. 17, and Article IV, §3, Congress has long legislated for entities that are not States—the District of Columbia and the Territories. In so doing, Congress has both made local law directly and also created local government structures, staffed by local officials, who themselves have made and enforced local law. This suggests that when Congress creates local offices using these two unique powers, the officers exercise power of the local government, not the Federal Government. Historical practice indicates that a federal law’s creation of an office does not automatically make its holder an officer of the United States. Congress has for more than two centuries created local offices for the Territories and District of Columbia that are filled through election or local executive appointment. And the history of Puerto Rico—whose public officials with important local responsibilities have been selected in ways that the Appointments Clause does not describe—is consistent with the history of other entities that fall within Article IV’s scope and with the history of the District of Columbia. This historical practice indicates that when an officer of one of these local governments has primarily local duties, he is not an officer of the United States within the meaning of the Appointments Clause. Pp. 9–14.

(b) The Board members here have primarily local powers and duties. PROMESA says that the Board is “an entity within the territorial government” that “shall not be considered a department, agency, establishment, or instrumentality of the Federal Government,” §101©, 130 Stat. 553, and Congress gave the Board a structure, duties, and related powers that are consistent with this statement. The Board’s broad investigatory powers—administering oaths, issuing subpoenas, taking evidence, and demanding data from governments and creditors alike—are backed by Puerto Rican, not federal, law. Its powers to oversee the development of Puerto Rico’s fiscal and budgetary plans are also quintessentially local. And in exercising its power to initiate bankruptcy proceedings, the Board acts on behalf of, and in the interests of, Puerto Rico. Pp. 14–17.

© Buckley v. Valeo, 424 U. S. 1, Freytag v. Commissioner, 501 U. S. 868, and Lucia v. SEC, 585 U. S. ___, do not provide the relevant legal test here, for each considered an Appointments Clause problem concerning the importance or significance of duties that were indisputably federal or national in nature. Nor do Lebron v. National Railroad Passenger Corporation, 513 U. S. 374, or MWAA, 501 U. S. 252, help. Lebron considered whether Amtrak was a governmental or a private entity, but the fact that the Board is a Government entity does not answer the “primarily local versus primarily federal” question. And the MWAA Court expressly declined to address Appointments Clause questions. However, the Court’s analysis in O’Donoghue v. United States, 289 U. S. 516, and Palmore v. United States, 411 U. S. 389, does provide a rough analogy. In O’Donoghue, the Court found that Article III’s tenure and salary protections applied to judges of the District of Columbia courts because those courts exercised the judicial power of the United States. But the Court reached the seemingly opposite conclusion in Palmore, a case decided after Congress had altered the nature of the District of Columbia local courts so that its judges adjudicated primarily local issues. Pp. 17–21.

  1. Given the conclusion reached here, there is no need to consider whether to overrule the “Insular Cases” and their progeny, see, e.g., Downes v. Bidwell, 182 U. S. 244, 287, to consider the application of the de facto officer doctrine, see Ryder v. United States, 515 U. S. 177, or to decide questions about the application of the Federal Relations Act and Public Law 600. Pp. 21–22.

915 F. 3d 838, reversed and remanded.

BREYER, J., delivered the opinion of the Court, in which ROBERTS, C. J., and GINSBURG, ALITO, KAGAN, GORSUCH, and KAVANAUGH, JJ., joined. THOMAS, J., and SOTOMAYOR, J., filed opinions concurring in the judgment

I had fully expected this outcome after oral arguments. At oral arguments, the Justices did not address the Insular Cases at all and seemed to be in favor of an outcome that preserved the Board as is.

I would like to have seen the Insular Cases overruled, but it simply was not in the card given the nature of these cases. And the result is consistent with previous Appointments Clause jurisprudence.