916 F.3d 98
1st Cir.
2019
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Background

  • PROMESA created a Financial Oversight and Management Board (the Board) with exclusive authority to develop, approve, and certify Fiscal Plans (§201) and Territory Budgets (§202) for Puerto Rico after Congress found a fiscal emergency.
  • For FY2019 the Governor submitted multiple proposed Fiscal Plans; the Board rejected them and, after the Governor failed to produce a compliant plan on time, the Board developed and certified its own Fiscal Plan (Apr. 19, 2018), which included a labor-reform package (e.g., shift to at‑will employment) and proposed cuts to the Legislative Assembly budget.
  • The Board revised the Plan in May (removing the Legislative Assembly cuts and conditioning some funding on repeal of Law 80), but when the Legislature did not fully repeal Law 80 the Board certificated a June Fiscal Plan that removed projected labor‑reform revenues and reinstated the April-level cuts to the Legislature and judiciary.
  • The Legislative Assembly submitted a different Territory Budget on June 30, 2018; the Board found it noncompliant and by operation of PROMESA certified a Board-developed Territory Budget that reduced Legislative Assembly funding.
  • The Speaker of the House (Méndez‑Núñez) and Senate President (Rivera‑Schatz), on behalf of the Legislative Assembly, sued for declaratory and injunctive relief, alleging (inter alia) that the Board exceeded its authority, unlawfully compelled repeal of Law 80, punished the Legislature, and that the Board’s certified Territory Budget was void. The district court dismissed for lack of jurisdiction and failure to state a claim; the First Circuit affirmed.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Article III jurisdiction for declaratory relief (¶79) Plaintiffs sought a declaration that Board recommendations in Fiscal Plans are non‑binding and the Legislature cannot be compelled; they argued a justiciable controversy exists about the Board’s power to force policy. Board argued the request was abstract/hypothetical and not a concrete case or controversy. Court: No Article III jurisdiction—request was advisory/hypothetical and lacked immediacy and reality.
Reviewability of Board certification determinations under PROMESA §106(e) Plaintiffs contended Board erred in its chain of certification decisions (re: Senate Bill 1011, June Plan, Legislative Budget noncompliance, Board Budget) and those errors are judicially reviewable. Board argued §106(e) flatly bars district-court review of certification determinations under PROMESA. Court: §106(e) bars district-court review of certification determinations; dismissal for lack of statutory jurisdiction affirmed.
Whether Board exceeded PROMESA §§204/205 (legislative‑process limits) Plaintiffs argued the Board invalidated or effectively nullified Law 80 and unlawfully compelled legislative action, exceeding §§204–205 authorities. Board argued it never prevented enforcement of Law 80, its actions were authorized by PROMESA, and it only made recommendations or conditioned funding consistent with statutory authority. Court: Failure to state a claim—factual premise (that Board nullified Law 80) is incorrect; §§204–205 do not show unlawful overreach here.
Constitutional/Preemption challenge (encroachment on Legislature under Puerto Rico Constitution) Plaintiffs argued the Board’s certification of its Budget usurped the Legislative Assembly’s constitutionally reserved powers. Board relied on PROMESA’s preemption clause and congressional authority under the Territorial Clause to vest these powers in the Board; PROMESA limits Puerto Rico powers in Titles I–II. Court: PROMESA preempts inconsistent territorial constitutional provisions; Board acted under express PROMESA authority—no claim.

Key Cases Cited

  • Aurelius Inv., LLC v. Commonwealth of P.R., 915 F.3d 838 (1st Cir. 2019) (addressing Board appointment procedure and effect on prior Board actions)
  • Fin. Oversight & Mgmt. Bd. for P.R. v. Ad Hoc Grp. of PREPA Bondholders (In re Fin. Oversight & Mgmt. Bd. for P.R.), 899 F.3d 13 (1st Cir. 2018) (interpreting aspects of PROMESA Title III powers)
  • Peaje Invs. LLC v. García‑Padilla, 845 F.3d 505 (1st Cir. 2017) (PROMESA Title III related precedent)
  • Lex Claims, LLC v. Fin. Oversight & Mgmt. Bd., 853 F.3d 548 (1st Cir. 2017) (PROMESA Title III precedent)
  • Altair Glob. Credit Opportunities Fund, LLC v. The Emps. Ret. Sys. (In re Fin. Oversight & Mgmt. Bd. for P.R.), 914 F.3d 694 (1st Cir. 2019) (discussion of PROMESA’s enactment and Board powers)
  • United States v. Maldonado‑Burgos, 844 F.3d 339 (1st Cir. 2016) (federal law preempts Puerto Rico constitutional provisions when in conflict)
  • Aetna Life Ins. Co. v. Haworth, 300 U.S. 227 (1937) (standards for declaratory-judgment justiciability)
  • MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (Article III case-or-controversy requirement for declaratory relief)
  • Leedom v. Kyne, 358 U.S. 184 (1958) (narrow exception allowing judicial review where an agency acts contrary to clear statutory mandate)
  • McNary v. Haitian Refugee Ctr., Inc., 498 U.S. 479 (1991) (permitting constitutional-procedure claims despite statutory review bars)
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