In a decision issued June 1, the U.S. Supreme Court missed an opportunity to address an important question: Does the abuse of federal power require a meaningful remedy?
The case, Federal Oversight & Management Board for Puerto Rico v. Aurelius Investment, 2020 DJDAR 5167, arose out of Puerto Rico's recent financial meltdown. For decades, the island's territorial government issued unfunded bonds and racked up unfunded pension liability. That led to a crisis in 2014, when it became clear that Puerto Rico could not repay its more than 100 billion dollars in outstanding obligations.
In response, Congress passed the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). The act created a seven-member board tasked with cleaning up Puerto Rico's economic mess. One of the board's first orders of business was initiating federal bankruptcy-like proceedings aimed at reducing the territory's debt.
The board's debt-restructuring efforts were opposed by bond purchasers and a local labor union, who objected that the board's structure violates the Constitution's appointments clause. That clause requires all "Officers of the United States" to be appointed by the president, with the advice and consent of the Senate. Under PROMESA, however, none of the board appointees were selected by the president with the advice and consent of the full Senate. Instead, six board seats were filled from lists prepared by the majority and minority leaders of the House and Senate, and the seventh seat was filled by the president in his sole discretion.
The 1st U.S. Circuit Court of Appeals agreed that this arrangement was unconstitutional and invalidated the appointments. However, it upheld all the challenged past board actions using the "de facto officer" doctrine -- under which an official's acts can sometimes be enforced even if the official's appointment is later found defective -- because the court felt that overturning those board actions would be too disruptive. In an unprecedented extension of the doctrine, the 1st Circuit even allowed the board a several-month grace period to continue its work, until Congress decided whether to rewrite the statute.
In other words, the 1st Circuit found that PROMESA violated the Constitution's structural protections but refused to provide any remedy for those who claimed to have been injured by the violation. Even worse, the court had no problem allowing the violation to continue until Congress could try again.
Both sides appealed to the Supreme Court, raising two questions: (1) Did the board appointments violate the Constitution and (2) if so, could the board's actions be upheld under the de facto officer doctrine? The Supreme Court answered "no" to the first question. Writing for the court, Justice Stephen Breyer concluded that even though the board was created by Congress and is not accountable to either Puerto Rico's elected officials or its people, the board members exercise "primarily local power" and are therefore not "officers of the United States" that need to be appointed consistent with the appointments clause. Reversing the 1st Circuit, the court therefore held that the selection of board members under PROMESA did not violate the appointments clause.
Unfortunately, the court entirely sidestepped the second question, which was whether the de facto officer doctrine applied. Neither Justice Breyer's opinion, nor the concurring opinions of Justices Clarence Thomas and Sonia Sotomayor, even discussed the 1st Circuit's decision to approve both past and future actions of a board that it had held was unconstitutionally structured. Even if it was not strictly necessary to answer this second question, given the Supreme Court's reversal as to the appointments clause question, it is concerning that no justice took issue with the 1st Circuit's application of the de facto officer doctrine.
By leaving unaddressed the 1st Circuit's failure to provide a remedy for a constitutional wrong, the Supreme Court's decision means that litigants risk having successful legal challenges turned into meaningless Pyrrhic victories. That risk makes it less likely that constitutional requirements will be protected. If winning brings no meaningful relief, why undergo the expense and difficulty of a legal challenge?
The 1st Circuit's desire to avoid further disruption of Puerto Rico's economy is understandable. But when a serious, structural violation is at stake, the value of constitutional government should override the risk of the disruption. The federal courts should never be in the business of sanctioning violations of the Constitution.
Hopefully, the Supreme Court will take the opportunity to make that clear in a future case.