Fin. Oversight & Mgmt. Bd. for Puerto Rico v. Aurelius Inv., LLC.

The Appointments Clause of the Constitution, Art. II, §2, cl. 2, applies to the appointments of some territorial officials, but not to officials whose powers and duties are primarily local.

Congress created the Financial Oversight and Management Board in response to Puerto Rico’s debt crisis.  After the Board filed for bankruptcy on behalf of Puerto Rico and some of its entities, Respondents (a group of creditors) argued all proceedings should be dismissed because the members of the Board were selected by the President without the advice and consent of the Senate, in violation of the Appointments Clause.  The bankruptcy court rejected Respondents’ argument, but the First Circuit reversed.  On appeal, the Supreme Court of the United States reversed the First Circuit’s ruling and held that the Appointments Clause does not apply to the Board, because the Board’s powers and duties are local in nature.  The Supreme Court reasoned that the Appointments Clause applies to all appointments of federal officials, including those dealing with Puerto Rico.  However, the history of American territories reflects that officials with primarily local powers and duties are not subject to the Appointments Clause.  The powers and duties of the Board are primarily local because the Board’s purpose is to benefit Puerto Rico.  Further, the Board’s power derives from Puerto Rican law, not federal law.  In a roughly analogous case, the Supreme Court held that Article III protections do not apply to courts dealing with primarily local matters. Palmore v. United States, 411 U.S. 389 (1973).  REVERSED and REMANDED.