915 F.3d 838
1st Cir.2019Background
- Congress enacted PROMESA (2016) under the Territorial Clause to create a seven‑member Financial Oversight and Management Board (the Board) to supervise Puerto Rico's finances and to file Title III debt‑adjustment proceedings on behalf of the Commonwealth.
- PROMESA provides that six members be appointed by the President from lists submitted by congressional leaders (no Senate consent required if President selects from the lists); one member is presidentially chosen at the President's discretion.
- The Board filed Title III petitions in 2017 to restructure Puerto Rico and several instrumentalities; challengers (Aurelius, UTIER) moved to dismiss, arguing Board appointments violated the Appointments Clause.
- The district court held the Board is a territorial entity created under Article IV, its members are territorial (not federal) officers, and the Appointments Clause therefore does not apply; it denied dismissal of Title III petitions.
- The First Circuit reversed in part: it held the Territorial Clause does not displace the Appointments Clause; non‑ex officio Board members are "Officers of the United States" and principal officers who must be appointed by the President with Senate advice and consent; but the court applied de facto‑officer doctrine and severed the non‑consensual appointment provision rather than vacating past Board acts or dismissing Title III cases.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Article IV (Territorial Clause) displaces the Appointments Clause in Puerto Rico | Appellants: Appointments Clause applies; Article IV cannot override explicit structural rules for federal appointments | Board/U.S.: Article IV plenary power allows Congress to create territorial offices without Appointments Clause constraints | Held: Territorial Clause does not trump the Appointments Clause; specific constitutional provisions govern appointments (generalia specialibus non derogant) |
| Whether Board members are "Officers of the United States" | Appellants: Board members occupy continuing federal positions, exercise significant authority under federal law | Board/U.S.: Board members are territorial officers exercising local power; not federal officers | Held: Board members (except ex officio Governor designee) are Officers of the United States (continuing positions, significant authority, exercising powers pursuant to U.S. law) |
| Whether Board members are principal or inferior officers (appointment method required) | Appellants: Their powers, tenure, and independence make them principal officers requiring presidential nomination and Senate confirmation | Board/U.S.: Members are inferior or territorial, so Senate consent not required under PROMESA scheme | Held: Board members are principal officers (not directed/supervised by a Senate‑confirmed superior) and therefore required appointment by President with Senate advice and consent |
| Appropriate remedy for Appointments Clause violation | Appellants: Void the Board’s Title III filings and actions; reconstitute Board; sever unconstitutional text | Board/U.S.: Relief should preserve Title III and past actions to avoid disruption | Held: Severed the non‑consensual appointment mechanism (statute requires Senate consent absent list appointment); applied de facto‑officer doctrine to preserve Board acts to date; stayed mandate 90 days to allow proper appointments or reconstitution; denied dismissal of Title III petitions |
Key Cases Cited
- Lucia v. SEC, 138 S. Ct. 2044 (2018) (administrative adjudicators are Officers when they exercise significant authority under federal law)
- Freytag v. Comm'r, 501 U.S. 868 (1991) (test for officers: continuing position, significant authority, pursuant to U.S. law)
- Buckley v. Valeo, 424 U.S. 1 (1976) (Appointments Clause structural role; past acts of improperly constituted commission upheld under de facto doctrine)
- Edmond v. United States, 520 U.S. 651 (1997) (distinguishing principal vs. inferior officers; supervision test)
- Morrison v. Olson, 487 U.S. 654 (1988) (factors for inferring inferior officer status: tenure, duties, jurisdiction, removability)
- Reid v. Covert, 354 U.S. 1 (1957) (limits on expanding Insular Cases; Constitution’s core guarantees apply in territories)
- Boumediene v. Bush, 553 U.S. 723 (2008) (Constitutional protections cannot be contracted away by Congress or the President)
- Downes v. Bidwell, 182 U.S. 244 (1901) (Insular Cases foundational opinions on territorial status; discussed and limited in this opinion)