945 F.3d 3
1st Cir.2019Background
- PROMESA created the Financial Oversight and Management Board (the Board) and authorized it to develop and certify fiscal plans and budgets for Puerto Rico under §§ 201–202.
- For FY 2019–2020 the Board certified a fiscal plan and budget that included a provision barring "reprogramming" (spending previously authorized but unspent funds from prior years).
- The Governor (substituted on appeal) and the Puerto Rico Fiscal Agency sued, challenging multiple provisions; the district court dismissed the claims insofar as they challenged the Board's ability to (a) adopt recommendations after the Governor rejected them and (b) bar reprogramming.
- The district court ruled that certification gives the Board unilateral authority to preclude off-budget reprogramming and that a certified budget has "full force and effect," precluding spending not authorized in the certified budget.
- The district court certified those rulings for interlocutory appeal; the First Circuit accepted jurisdiction under PROMESA § 306(e)(3) and reviewed the 12(b)(6) dismissal de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Board loses unilateral authority by first recommending a policy that the Governor rejects | Governor: by recommending a ban under §205 and being rejected, Board cannot later impose that ban | Board: nothing in PROMESA says seeking agreement forfeits its independent statutory authority | Court: Rejects Governor; seeking input does not strip Board of its statutory powers |
| Whether PROMESA permits the Board to bar reprogramming of prior-year authorized but unspent funds | Governor: §204(c) allows the territorial government to "seek reprogramming," so a categorical ban is inconsistent with PROMESA | Board: A certified budget has "full force and effect" under §202 and precludes spending not in that budget; §204(c) only allows requests to the Board | Court: Affirms district court; certified budget precludes off-budget reprogramming absent Board approval |
| Whether the reprogramming suspension conflicts with Puerto Rico law or is an impermissible substantive budget resolution | Governor: The suspension violates local statutes and the Puerto Rico Constitution and exceeds Board authority | Board: PROMESA preempts inconsistent territorial law; the budget's exclusivity governs | Court: Reprogramming bar is consistent with PROMESA and preempts contrary territorial law; any fiscal-plan language may be superfluous but valid |
Key Cases Cited
- Cardigan Mountain Sch. v. N.H. Ins. Co., 787 F.3d 82 (1st Cir. 2015) (standard of review for Rule 12(b)(6) dismissals)
- Evergreen Partnering Grp., Inc. v. Pactiv Corp., 720 F.3d 33 (1st Cir. 2013) (pleading: accept well-pled facts and draw inferences for plaintiff)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must state a plausible claim for relief)
- In re Financial Oversight & Management Bd. for P.R., 330 F. Supp. 3d 685 (D.P.R. 2018) (district court's analysis that a certified budget has full force and effect and precludes off-budget reprogramming)