Aurelius Capital Management is challenging the constitutionality of the oversight board managing Puerto Rico's fiscal crisis and debt holder claims, in documents filed Monday in U.S. District Court in San Juan.
Aurelius is challenging the board's authority under the 2016 Puerto Rico Oversight, Management and Economic Stability Act, which includes provisions for actions that mirror bankruptcy protection, and asking relief from a litigation stay. The challenges "call into question the constitutionality (of PROMESA) on the grounds that the appointment of the board members" violates the appointments clause of the U.S. Constitution and the separation of powers, the court filing said.
Citing the lack of historical precedent, Aurelius lawyers, including former U.S. Solicitor General Ted Olsen, argued that the oversight board "derives its existence and authority entirely from PROMESA, and it controls almost every aspect of the commonwealth's finances pursuant to that federal law," yet the seven voting members have no superior officer except the president, and were not confirmed by the Senate.
"Moreover, six of them were effectively hand-picked by individual members of Congress pursuant to an intricate system of Balkanized lists designed to severely constrain the president's appointment powers," they argued.
Aurelius Capital Management holds $470.9 million of general obligation bonds and $2.5 million of Highways and Transportation Authority bonds.