Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment, LLC

In 2016, Congress enacted PROMESA to address Puerto Rico's fiscal crisis, creating a Financial Oversight and Management Board with seven voting members appointed by the President without Senate confirmation. After President Obama selected the members, the Board filed bankruptcy petitions on behalf of Puerto Rico and five of its entities. Several creditors led by Aurelius Investment, LLC moved to dismiss the proceedings, arguing that the Board members' selection violated the Constitution's Appointments Clause, which requires Senate advice and consent for Officers of the United States. The district court denied the motions, but the First Circuit reversed, holding that the appointments violated the Appointments Clause while upholding prior Board actions under the de facto officer doctrine. The Supreme Court granted certiorari.

The Supreme Court reversed the First Circuit's judgment in a unanimous 9-0 decision authored by Justice Breyer on June 1, 2020. The Court held that the Appointments Clause does not restrict the appointment or selection of Board members because they are territorial officers exercising primarily local duties, not Officers of the United States. Justices Thomas and Sotomayor filed concurring opinions.

Whether the Appointments Clause of Article II, Section 2 of the U.S. Constitution governs the appointment of members of the Financial Oversight and Management Board for Puerto Rico, thereby requiring presidential nomination and Senate confirmation.

The decision allowed Puerto Rico's Title III debt adjustment proceedings under PROMESA to proceed, preserving the Board's prior actions and preventing disruption to the territory's fiscal restructuring. The ruling reinforced Congress's authority to create territorial offices not requiring Senate confirmation for positions with primarily local duties. However, the case also highlighted the ongoing debate over the constitutional status of Puerto Rico and other unincorporated territories, with commentators noting that the decision left intact the Insular Cases framework that treats territorial residents as subject to a second-class constitutional status.