The U.S. Supreme Court agreed Thursday to review an appeals court ruling that members of Puerto Rico's federally appointed oversight board were not properly appointed.
On Tuesday, President Donald Trump nominated the current seven members of Puerto Rico's Financial Oversight and Management Board while the legal challenge to the constitutionality of appointment unfolds.
Current oversight board members were appointed in 2016 by President Barack Obama on the recommendation of Congress and were not subject to Senate confirmation.
On Feb. 15, the 1st U.S. Circuit Court of Appeals in Boston ruled that oversight board members were not constitutionally appointed, and they should have been appointed "with the advice and consent of the Senate," under the appointments clause of the U.S. Constitution covering federal officers. In its petition for Supreme Court review, the oversight board called the decision "profoundly wrong and deeply destabilizing."
Board officials contend that PROMESA set up the board as an entity within the government of Puerto Rico, not the U.S., so the appointments clause does not apply. They also point to a July 2018 ruling by the judge overseeing Puerto Rico's Title III bankruptcy proceedings, U.S. District Judge Laura Taylor Swain, that the board's formation was proper.
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.
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. The appeals court did allow 90 days for the White House and Senate to constitutionally validate the board or reconstitute it, but that July 15 deadline is expected to come before the nomination process can be completed, and the board has asked the court to extend the stay.
Board actions taken in the meantime are proper, the appeals court said.
