Pierluisi v. FOMB, 37 F.4th 746

Background

Congress enacted PROMESA to address Puerto Rico's fiscal crisis and created the Financial Oversight and Management Board (the Board) with authority to certify fiscal plans, review enacted laws, and block implementation of laws that "impair or defeat" PROMESA's purposes.
Section 204(a) requires the Governor to submit to the Board, within 7 business days of enactment, a formal estimate of a law's expenditure/revenue impact and a certification whether the law is "significantly inconsistent" with the fiscal plan; the Board may direct supplementation and, if not complied with, may prevent enforcement under §2144(a)(5).
Four challenged laws: Act 82 (PBM/PBA pharmacy reimbursement), Act 138 (health-insurance provider protections), Act 176 (restoring higher accrual rates for vacation/sick leave), and Act 47 (expanding tax incentives for healthcare professionals).
The Commonwealth submitted conclusory or late certifications/estimates for Acts 82 and 138; the Board pressed for more formal, quantified analyses. For Acts 176 and 47 the Board concluded the laws would materially harm the fiscal plan.
The district court applied arbitrary-and-capricious review, concluded the Board's actions were reasonable (finding noncompliance with §204(a) for Acts 82 and 138 and that Acts 176 and 47 would "impair or defeat" PROMESA), enjoined the laws, and the Commonwealth appealed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Proper standard of review for Board determinations	Apply administrative-law apparatus (explain reasons, bar post-hoc rationalizations)	Board not a federal agency; full APA apparatus need not apply	Arbitrary-and-capricious review applies; core admin principles inform review but full APA machinery need not be rigidly imposed
Use of litigation-time declarations / post-hoc rationales	Court should ignore Board declarations offered in litigation as improper post-hoc justification	Board may elaborate during litigation given Commonwealth cut the section 204(a) process short	Court may, case-by-case, accept supplemental litigation rationales; district court did not err in relying on the Board's supplementary materials here
Whether Commonwealth complied with §204(a) formal-estimate/certification (Acts 82 & 138)	Submitted certifications satisfied §204(a) (good-faith, agency-prepared estimates; deference)	Submissions were conclusory, late, lacked multi-year fiscal-plan coverage and supporting analysis	Board reasonably determined Commonwealth failed to comply with §204(a); district court properly enjoined implementation
Whether Acts materially "impair or defeat" PROMESA's purposes (Acts 176 & 47)	Impacts are speculative or de minimis; Board failed to articulate such bases pre-litigation	Acts would materially increase expenditures (176) or reduce revenues by tens of millions without offsets (47), undermining fiscal plan	Board reasonably concluded Acts 176 and 47 would impair/defeat PROMESA; injunctions affirmed

Key Cases Cited

In re Fin. Oversight & Mgmt. Bd. for P.R., 403 F. Supp. 3d 1 (D.P.R. 2019) (Law 29 I) (formal-estimate must cover revenue and expenditure effects over the fiscal-plan period)
In re Fin. Oversight & Mgmt. Bd. for P.R., 616 B.R. 238 (D.P.R. 2020) (Law 29 II) (Board determinations reviewed under arbitrary-and-capricious standard)
Fin. Oversight & Mgmt. Bd. for P.R. v. Aurelius Inv., LLC (In re Fin. Oversight & Mgmt. Bd. for P.R.), 140 S. Ct. 1649 (2020) (Supreme Court decision addressing Board's status for Appointments Clause issues)
Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (standard that agency decisions be reasoned and not arbitrary or capricious)
Regents of the Univ. of Cal. v. Dept. of Homeland Security, 140 S. Ct. 1891 (2020) (courts limited to grounds the agency invoked; post-hoc rationalizations disfavored)
SEC v. Chenery Corp., 332 U.S. 194 (1947) (review must judge agency action by the grounds invoked by the agency)
Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971) (post-hoc affidavits are insufficient grounds for review)