Puerto Rico

Keeping PROMESA?

The Supreme Court's decision to review the Puerto Rico bankruptcy case

|The Volokh Conspiracy |

Last February I noted that the First Circuit had invalidated the appointments to the Financial Oversight Management Board created by a statute called PROMESA to oversee the Puerto Rico bankruptcy. This was a big deal, and resulted in basically everybody involved asking the Supreme Court to review the case, and on Thursday the Supreme Court agreed.

The basic problem is that under the statute, most of the board members are appointed by the President from a series of lists given to him by the Speaker of the House, the Senate Majority Leader, and the House and Senate Minority Leaders. Article II, Section 2 of the Constitution, by contrast, says that "officers of the United States" must be appointed by the President with the advice and consent of the Senate, or if they are "inferior officers," they can be vested in the President alone. The statute doesn't do either one.

I'm sure the case will get a mountain of expert briefing this summer (not from me) and I think these issues are quite tricky. But this intersects with something I've been writing about and I've been trying to think through it, so I thought I'd lay out my own tentative views on several points:

First, territorial officers are not governed by the Appointments Clause I quoted above. That Clause applies only to offices "of the United States," while the officers (such as judges) of a territory or the Commonwealth of Puerto Rico exercise a different kind of power. They are officers "of the Commonwealth of Puerto Rico," or a particular territory and can exercise the executive/legislative/judicial power of that territory rather than of the United States. (I talk about this at pp. 10-20 of my draft on Adjudication Outside Article III.)

Second, I am simply unsure whether PROMESA board members are territorial officers. This turns, I think, on the scope of Congress's power over territories and the proper legislative jursidiction of territorial officers, which I just don't know enough about. But I am pretty confident that this is the right question to determine whether the Appointments Clause applies.

Third, but even if PROMESA board members are territorial officers, not governed by the Appointments Clause, their appointment might still be unconstitutional. In particular, the involvement of individual members of Congress as a formal part of the appointments process raises a serious constitutional question.

The appointment of territorial officers can be vested in a variety of territorial authorities, as territorial law sees fit. But if the President of the United States can be given the statutory power of appointment under PROMESA, it must be because that statutory power of appointment is an executive power, since the President is vested only with executive power. But if the statutory power is an executive one, then how can it be substantially shared with a member of the legislature as well, even though members of the House and Senate participate only in legislative power, not executive? The problem seems somewhat analogous to the problem of involving houses or committees of Congress in the administration of statutes that was invalidated in INS v. Chadha.

Here too, I'm sure there's a lot I don't know about the law and practice of non-appointments-clause appointments powers, but even if PROMESA board members are territorial officers, that doesn't mean there are no constitutional restrictions on their appointment.

Fourth and finally, the Supreme Court also agreed to review the First Circuit's holding that the actions of the unconstitutionally-appointed board members could be upheld under the "de facto officer doctrine." I'm somewhat familiar with this doctrine, but I had thought that it applied to collateral attacks on official action, not to somebody who directly challenged the constitutionality of an appointment. So the First Circuit's use of this doctrine seemed quite strange to me. Again, I might be missing something, but I'm glad that the Supreme Court also agreed to review this question.

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  1. IANAL by any means, but it sure does seem strange to name for legislators by position in addition to the President. On the other hand, there’s the succession rule of who takes over if the President etc die in office, which names various positions; doesn’t it even go so far down the line as to name a couple of Cabinet officers?

    It also seems strange to rule a law unconstitutional, but to let its fruit go ahead. “Nothing to see here, move along …”

    1. “…but it sure does seem strange to name for legislators by position in addition to the President.”

      Why?

      1. Because some of those roles don’t otherwise exist statutorily.

        For example: who is the House Minority Leader when there is a third party member in elected office? What about when there are equal numbers of members in the non-majority party?

        These roles are not statutorily defined, but are rather defined by convention for ease of identification of roles in a two party system, so there’s no way to determine who the correct member is when it’s contended.

        You may suggest that’s easily fixed by codifying those roles – I agree, but that’s not this statute, which must survive or fall as its written, not as it might have been written (channeling both Justice Gorsuch this week and Sec Def Rumsfeld from 15 years ago).

        1. “…who is the House Minority Leader when there is a third party member in elected office? ”

          I don’t know which “elected office” you had in mind. If you’re talking about the President, the answer is the person elected by the minority party in the House to be their leader.

          “What about when there are equal numbers of members in the non-majority party?”

          Why wouldn’t there just be minority leaders for both parties that share an equal minority membership? Or none? Why would either result present an issue?

          1. The minority leader is the leader of the largest non-majority party.

            The idea is to avoid giving whichever party happens to have an edge at the time the ability to effectively ignore dissent.

            Note: Bernie is a Senator, but he isn’t a Democrat (and he’s REALLY not a Republican). You can call him the “party leader” of the Senate Independents, but there’s no point in it and Bernie hangs out with the D’s anyway.

            1. You might want to talk to Senator King (I-Maine) before anointing Bernie the “party leader” of the Senate Independents. Of course he caucuses with the Democrats as well.

              1. Congress runs on seniority. Bernie’s been there for like 80 years.

    2. ” there’s the succession rule of who takes over if the President etc die in office, which names various positions; doesn’t it even go so far down the line as to name a couple of Cabinet officers?”

      All the cabinet officers are included in the succession. They are included in the order that their department was established. Apparently, the successor order was set by statute as early as 1792.

  2. even if PROMESA board members are territorial officers, not governed by the Appointments Clause, their appointment might still be unconstitutional. In particular, the involvement of individual members of Congress as a formal part of the appointments process raises a serious constitutional question.

    Well, it might be an interesting constitutional question to pick over, but it’s hard to see it as a serious one.

    1. You don’t think unlawful conversion of billions of dollars is a serious issue?

      If PROMESA falls, then Puerto Rico can’t discharge its debts lawfully, and the federal government would be converting that debt unlawfully. This might be narrow, but the stakes are high.

      1. I’m not talking about the unlawful conversion of billions of dollars.

        I’m talking about the legalistic details of the appointment process for the board. Yes, they should do it right. No, the ultimate conclusion is not going to have any material effect on the country in the future. It’s not as if either of the two processes under debate is particularly outrageous. It’s a technicality.

  3. “First, territorial officers are not governed by the Appointments Clause I quoted above. That Clause applies only to offices “of the United States,” while the officers (such as judges) of a territory or the Commonwealth of Puerto Rico exercise a different kind of power. They are officers “of the Commonwealth of Puerto Rico,” or a particular territory and can exercise the executive/legislative/judicial power of that territory rather than of the United States.”

    This smells a bit of sophistry, frankly. If they were officers of the Commonwealth of Puerto Rico, Puerto Rico would be choosing them. They’re officers of the United States given jurisdiction over Puerto Rico.

    1. I wondered about that too. Are their court decisions appealable through the regular circuits and to the Supreme Court? It would seem odd if not, and I vaguely recall some Guam court decisions being tossed by the Supreme Court. OTOH (you can really tell IANAL!) state court decisions are appealable through the circuits and to the Supreme Court, so the territorial ones should be also, whether or not they are Federal judges or territorial judges.

      1. State court decisions are only appealable federally if they include (and you’re appealing) a federal question.

        Purely state law issues cannot be appealed to the federal courts.

        1. “Purely state law issues cannot be appealed to the federal courts.”

          A federal court can still handle issues of state law in some circumstances. For example, they can if the case were removed to federal court because of diversity.

    2. This also caught my attention. The US Attorney for the Southern District of New York is an officer of the United States, not an officer of the Southern District of New York.

      1. This is because Congress does not “have Power to dispose of and make all needful Rules and Regulations respecting” the Southern District of New York. It does have such power in regards to Puerto Rico.

        1. That does contribute to the answer but it is a little more involved, as the Power cited doesn’t include exempting its actions from the Constitution. I think it works like this:
          1. That clause grants Congress the plenary legislative power that a state legislature would possess
          2. Supported by tradition and practice, Congress may constitute a territorial government and delegate powers to it, and when that government exercises those powers it does so as a separate actor from the federal government.
          3. PROMESA essentially organized a new territorial government, placing an appointed Board above the preexisting branches. Congress can do this because of 2.
          4. PROMESA also declares that the Board is a territorial entity, not a federal one.
          4 is where there may be some disagreement. The opinion seems to take the view that the Board quacks like a federal duck, because it is appointed by the President and is not answerable to the Puerto Rican government, in fact the governor’s seat on the board doesn’t come with a vote. But following 3 above, the alternative view is that the Board is the new Puerto Rican government. It is defensible, but it leaves open the question of whether this new appointed government still benefits from the distinctive territorial jurisdiction that traditional, more independent territorial governments did by action of 2.

  4. If the board members are selected from lists prepared by various legislators, and then confirmed by the Senate, does that violate anything?
    For a long time, judges were appointed from lists prepared by various people who are not the President.
    And cadets to the service academies are nominated by legislators. Granted, there’s a 4-year-delay before they become officers…

    1. I have to question why such a big deal is being made over the fact that Congress is proposing candidates for the president. He is choosing from their proposed candidates out of courtesy and respect for their evaluation.

      This only really comes into question if he chooses someone not on their list. Is that person legitimate, since the president can appoint lesser offices at will? Given Trump’s obstinacy and lack of popularity with Congress, this is a possibility.

  5. “This only really comes into question if he chooses someone not on their list.”

    Does the Senate then confirm, or do they say “not so fast, bub.”? Alas, that’s probably settled along partisan lines.

  6. But if the President of the United States can be given the statutory power of appointment under PROMESA, it must be because that statutory power of appointment is an executive power, since the President is vested only with executive power.

    Why would the fact that Congress gives the President a power in relation to a territory imply that the power must be part of the executive power?

    If the Congress used its powers under Article IV section 3 to grant the King of Spain the power to select Puerto Rican officers from lists provided by designated members of the Spanish Parliament, no one would reference definitions of the “executive power” determine if Congress could so limit the King of Spain’s power to choosing only from the list. For this purpose, the King of Spain and the named members of the Spanish Parliament would be exercising power not as holders of their positions in the Spanish state, but as holders of Puerto Rican government powers under a law governing Puerto Rico.

    Similarly, if these positions are genuinely officers of Puerto Rico, then the President and members of Congress are exercising the power to fill them not as holders of their positions in the US government, but as holders of Puerto Rican government powers under a law governing Puerto Rico.

    Essentially, the offices of “President of the United States” and “Appointer of PROMESA officials from a given list” are in personal union without being the same office, even though the holder of the latter office is designated as being the holder of the former.

    1. This might work if the statute actually created an “Appointer of PROMESA officials” office, but it doesn’t.

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