The constitutionality of the federal oversight board for Puerto Rico will get an expedited hearing when the Supreme Court convenes for its fall session in October.
The Supreme Court will hear arguments Oct. 15 in a case that it agreed to take June 20, reviewing an appeals court ruling that members of Puerto Rico's federally appointed oversight board were not properly appointed.
The timing is critical because the legitimacy of the way the current seven members of Puerto Rico's Financial Oversight and Management Board were installed has been challenged in court, which could also jeopardize agreements with bondholders and creditors, including pensioners, that are close to being finalized as part of the commonwealth's bankruptcy restructuring.
The oversight board was created by the Puerto Rico Oversight, Management and Economic Stability Act in 2016 to help Puerto Rico achieve fiscal responsibility and gain access to the capital markets. Current oversight board members were appointed in 2016 by President Barack Obama on the recommendation of Congress and were not subject to Senate confirmation.
The case challenging the board's authority was brought by Aurelius Capital Management and Assured Guaranty Corp. in an unsuccessful bid to dismiss Puerto Rico's bankruptcy cases involving bondholders and other creditors.
On Feb. 15, the 1st U.S. Circuit Court of Appeals in Boston ruled that oversight board members were not constitutionally appointed.
The appeals court allowed time for the White House and Senate to constitutionally validate the board or reconstitute it, or for the Supreme Court to resolve the issue. Board actions taken in the meantime are proper, the appeals court said.