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Clash of the Titans

On December 3, the First Circuit (Judges Torruella, Thompson and Kayatta) heard another appeal emanating from the much-litigated federal Promesa legislation enacted in 2016 addressing Puerto Rico’s restructuring (i.e., essentially bankruptcy).  A LOT of money is involved – Puerto Rico’s public debt exceeds $70 billion.  So each side brought out big guns.  You may have heard of two lawyers arguing in this matter:  Ted Olson and Donald Verrilli.  Here’s the argument.  Aurelius Investments, LLC v. Commonwealth of Puerto Rico, Case No. 18-1671

The issue presented in this appeal is a particularly important (and interesting) one, because it could affect every decision made under PROMESA (and beyond).  Under that statute, Congress appointed six members to an oversight board for Puerto Rico; Obama added the 7th.    The Board was given the authority to put Puerto Rico into restructuring, which it did.  Olson’s client holds hundreds of millions of dollars of Puerto Rican debt.  His client’s position is that the Board members are federal officers, so under the Appointment Clause, they need to be appointed by the President and confirmed by Senate.  If his side prevails, then the consequence could be a need to re-do all the Board’s restructuring decisions under a new board appointed by the current President, Donald Trump (as well as some pretty grave potential consequences for the Governments of Guam and the Virgin Islands – check out the Olson-Judge Kayatta colloquy in the rebuttal).

The Board hired its own ex-Solicitor General, Donald Verrilli (Obama’s).  The Board’s position is that they are territorial officers, so their appointment by Congress was fine.

Finally, another lawyer, Jeffrey Wall, argued, supporting the Board’s position as Principal Deputy Solicitor General of the U.S.  He’s no slouch at the podium either.

Below, the district court (of Puerto Rico, but a judge from the district of New York) decided in favor of the Board.   In re The Financial Oversight and Management Board for Puerto Rico as representative of Commonwealth of Puerto Rico, Case No. 17 BK 3283-LTS (P.R. July 13, 2018).

Conversely, a Court of Claims judge has stayed final judgment in a takings claim until this appeal is decided, but in doing so concluded that the Board was an entity of the federal government.  Altair Global Credit Opportunities Fund (A), LLC v. United States, Case No. 17-970C (Fed. Claims, July 13, 2018)

If you are a history buff, this case is catnip for you.  Note Olson’s invocation of Marbury v. Madison, and Verrilli’s invocation of another Marshall decision from 1828 (American Ins. Co. v. Cantor).  Obviously, this one is going up to the Supreme Court; let’s see what the First Circuit says on its way there.

©2018 Pierce Atwood LLP. All rights reserved.

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Cathy Connors Pierce Atwood Law Firm Appellate Attorney
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Cathy Connors is an appellate lawyer, handling civil and criminal litigation matters in federal and state courts, as well as petitions for review of administrative decisions. Cathy has argued more than 100 appeals, primarily in the United States Courts of Appeals and the Maine Supreme Judicial Court. Cathy also leads Pierce Atwood's partnership with the Gay & Lesbian Advocates & Defenders (GLAD) and filed an amici brief in the United States Supreme Court on behalf of 23 historians and the American Historians Association in support of striking down the Defense of...

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