June 1, 2020

Unanimous Supreme Court Victory for Puerto Rico’s Financial Oversight and Management Board

On June 1, 2020, the United States Supreme Court ruled 9-0 in favor of Munger, Tolles & Olson’s client, the Financial Oversight and Management Board for Puerto Rico, rejecting a constitutional challenge to the Board’s authority.

The Oversight Board was created in 2016 by Congress in the PROMESA statute, which was a comprehensive program to deal with Puerto Rico's financial collapse and $125 billion in debt. A hedge fund creditor of Puerto Rico, Aurelius, challenged the Board's authority on the ground that its members should be treated as federal officials who had to be appointed as required by the Constitution's Appointments Clause, rather than officials of the Puerto Rico government, as Congress designated them. A ruling invalidating the Board's work would have thrown the process of reorganizing Puerto Rico's finances into chaos and destroyed the progress that the Board has made to restoring fiscal stability.  

Therefore, the ruling not only removed challenges to the Board’s authority, but it will help preserve the Board’s work in restructuring the finances of Puerto Rico, which were devastated by the 2008 financial crisis and a succession of hurricanes, and made worse by the present economic crisis.   
Interestingly, there was no precedent addressing the issue of how the Appointments Clause applies to officers of territorial governments and, as a result, creative lawyering was required from the entire Munger Tolles team. Fueled by the challenge, the team dove deep into the Board’s history from the founding era onward to develop an argument based on historical practice and tradition, gaining a real mastery of separation-of-powers principles and drawing strong analogies for the court in order to achieve this unanimous victory.

The Munger, Tolles & Olson team was led by Partner Donald Verrilli who argued the case to the Supreme Court against Ted Olson. The team included Ginger Anders who led the briefing effort, Adele El-Khouri, Rachel Miller-Ziegler, Jordan Segall, Mark Yohalem, Ben Horwich and Elaine Goldenberg.