Relevant Document:Opinion and Order
Judge Laura Taylor Swain issued an opinion this morning denying Aurelius’
motion to dismiss the commonwealth's Title III petition as well as its motion for relief from the automatic stay. Aurelius’ motion to dismiss is “denied in its entirety,” and the stay relief motion is denied “for failure to show cause.” Noting that the “principal question” presented in the motion to dismiss was whether the U.S. Constitution required compliance with the Appointments Clause in the appointment of PROMESA oversight board members, Judge Swain determines that the members of the oversight board are not “Officers of the United States” subject to the Appointments Clause. The court rejects Aurelius’ argument that the Title III petition should be dismissed because the oversight board lacked authority to file it.
Judge Swain writes, “Affording substantial deference to Congress … the Court finds that the Oversight Board is an instrumentality of the territory of Puerto Rico, established pursuant to Congress’s plenary powers under Article IV of the Constitution, that its members are not ‘Officers of the United States’ who must be appointed pursuant to the mechanism established for such officers by Article II of the Constitution, and
that there is accordingly no constitutional defect in the method of appointment provided by Congress for members of the Oversight Board” (emphasis added). The court concludes that the Aurelius motion to dismiss must be denied because the “alleged defect” in the appointment method was the only ground upon which Aurelius argued that the commonwealth’s Title III petition failed to comply with the requirements of PROMESA.
The
U.S. government and the
oversight board opposed Aurelius’ request to dismiss the Title III cases, arguing that the Appointments Clause does not apply to territorial officials. Judge Swain heard
oral argument on Aurelius’ motion to dismiss during a Jan. 10 hearing.
Motion to Dismiss Arguments and Key Question
According to the opinion, Aurelius argues that the requirements of Title III are “not satisfied in this case because the Oversight Board, as currently constituted, is itself an unlawful entity.” Aurelius, according to the opinion, contends that “the selection mechanism established under PROMESA for members of the Oversight Board is unconstitutional under the Appointments Clause, such that the existing Oversight Board could not lawfully make the requisite certifications and file the petition commencing the Commonwealth’s Title III proceeding.” Aurelius, requesting to dismiss the Title III petition, principally argues, according to the opinion, that the Appointments Clause procedures were mandatory because the board members “are either (i) principal ‘Officers of the United States’ who could be validly appointed only through presidential nomination and Senate confirmation or, in the alternative, (ii) inferior officers of the United States whose appointment was improperly delegated to the President.”
On the other hand, the United States opposed Aurelius’ motion to dismiss, the decision observes. The U.S. argued that PROMESA’s appointment mechanism is not subject to the Appointments Clause “because (i) the Oversight Board members are territorial officers rather than ‘Officers of the United States,’ and (ii) the Appointments Clause does not govern the appointment of such territorial officers.” Additionally, the opinion says, the board contends: “(i) the Appointments Clause does not constitute a ‘fundamental’ constitutional provision and, as such, it does not apply to Puerto Rico, and (ii) even if the Appointments Clause is applicable, the Oversight Board members were properly appointed.”
Accordingly, Judge Swain says:
“The principal question thus presented for the Court on this motion practice is whether the Constitution required compliance with the Appointments Clause in the appointment of the Oversight Board members” (emphasis added). If such compliance was required, she adds, the court “must examine whether the process that was undertaken pursuant to PROMESA was sufficient to meet the constitutional requirement and, if the process was not compliant, whether the Petition must be dismissed as noncompliant with PROMESA.” The opinion says that the court “looks first to the text and historical interpretation and application of the Territories Clause,” because Puerto Rico is a territory of the United States and because Congress identified the Territories Clause as the source of its authority in enacting PROMESA.
Congressional Power Under the Territories Clause
The opinion then turns to Congress’ power under the Territories Clause of the Constitution. The Territories Clause vests Congress with the “power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States,” Judge Swain notes. The ruling observes that the constitutional division between state sovereignty over affairs within state borders and affairs ceded to the federal government pursuant to the Constitution is “not applicable to territories, whose governments are ‘the creations, exclusively, of [Congress], and subject to its supervision and control.’” The court says that with respect to territorial governance, Congress exercises the governance powers reserved under the Constitution to the people in respect of state matters. As a result of this unique role, in matters of territorial governance, Congress may act “in a manner that would exceed its powers, or at least would be very unusual, in the context of national legislation enacted under other powers delegated to it,” the opinion adds.
Addressing Puerto Rico specifically, Judge Swain says Congress has long exercised its plenary power under Article IV of the Constitution to structure and define governmental entities for the island. “In summary, Congress has plenary power under the Territories Clause 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,” Judge Swain writes. Congress purported to delegate its authority to the people of Puerto Rico by creating the oversight board as an entity of the territorial government of Puerto Rico, she adds.
Characteristics of the Oversight Board
Next, the court considers the question of whether the oversight board is a territorial entity whose members are officers of the territorial government, or whether its members are officers of the United States who must be appointed pursuant to procedures consistent with the requirements of the Appointments Clause. Judge Swain highlights that Congress “explicitly invoked the Territories Clause, and only the Territories Clause,” as its source of authority in enacting PROMESA. Aurelius nonetheless argued that the appointment of oversight board members is governed by Article II of the Constitution and that oversight board members were principal officers of the United States who should have been nominated by the president and confirmed by the Senate, says the opinion.
The court rejects Aurelius’ arguments relating to the Appointments Clause. Judge Swain concludes that “Congress’s invocation of the Territories Clause is consistent with the entity it purported to create, that the method of selection that Congress fashioned for the membership of the Oversight Board is consistent with the exercise of plenary congressional power under that Clause, and that neither Presidential nomination nor Senate confirmation of the appointees to the Oversight Board is necessary as a constitutional matter to legitimize the exercise of the Oversight Board’s powers under PROMESA because the members of the Oversight Board are not ‘Officers of the United States’ subject to the Appointments Clause.”
In reaching her conclusion, Judge Swain says that Congress’ determination - that it was acting under its Article IV territorial powers in creating the oversight board as an entity of the government of Puerto Rico - “is entitled to substantial deference.” This factor weighs in favor of concluding that Congress was authorized to create the board, the judge writes. The court also disagrees with Aurelius’ view that individuals appointed to their office by the federal government are federal officers, and that only Puerto Rico itself could have created an entity that was not effectively part of the federal government. Under Supreme Court precedent and historical practice, Congress is empowered to create a territorial office or entity, and it is not the case that “federal appointment necessarily renders an appointee a federal officer,” she says.
Continuing, the opinion considers whether the federal government controls and supervises the oversight board. Judge Swain disagrees with Aurelius’ view that, because, among other factors, the oversight board reports to the president and Congress, and oversight board members may be removed by the president, the board is subject to the federal government’s control. The fact that members of the oversight board may not be removed by the governor or the Legislature and are, instead, removable only by the president “for cause” is “indicative of the autonomy and independence that Congress intended” for the board, Judge Swain says. Further, the opinion states that the oversight board’s statutory objectives and scope of authority “mark its character as territorial rather than federal.” The ruling notes that the oversight board is funded by Puerto Rico instead of the federal government, and the oversight board acts as Puerto Rico’s representative. In addition, the president’s role in the selection process for oversight board members “does not change the fundamental nature of the Oversight Board, which is a territorial entity,” the judge writes.
Motion for Relief from the Automatic Stay
Turning to Aurelius’ motion to lift the automatic stay, which was filed in connection with the motion to dismiss, the opinion says that for the reasons detailed in its denial of the motion to dismiss, “Aurelius has failed to demonstrate any prospect of entitlement to injunctive relief.” The court concludes that Aurelius has not demonstrated “cause” for relief from the automatic stay to pursue an injunction, and the lift stay motion is “denied in its entirety.”