Legal Docket: Financial oversight for Puerto Rico

MARY REICHARD, HOST: It’s Monday February 20th. Glad to have you along for today’s edition of The World and Everything in It. Good morning. I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. It’s time for Legal Docket.

The Supreme Court was on winter recess last week and so heard no oral arguments. Nor did the justices announce any opinions.

But the court did say it may release opinions next week.

We’re still catching up on cases the court heard last month. Today, just one oral argument.

And for that, we turn to legal reporter Jenny Rough to set this up.

JENNY ROUGH, REPORTER: Right, Nick and Mary, today’s case concerns the Financial Oversight Board set up to help Puerto Rico. Help it through its economic crisis.

And the issue before the Supreme Court centers on a legal doctrine known as sovereign immunity. It refers to the fact that the government cannot be sued without its consent.

The doctrine is rooted in British common law, the idea that the King could do no wrong. You couldn’t sue the king! Of course, we don’t have a king. But we do have the Eleventh Amendment that prohibits lawsuits against states and the federal government in federal court. And also to Indian tribes under other laws.

There are exceptions. One of those exceptions is that Congress can enact a statute that abolishes sovereign immunity for certain types of lawsuits.

REICHARD: Right, but this case doesn’t involve a state, the federal government, or a tribe. It involves a U.S. territory: And that’s what Puerto Rico is.

I’ll list out the facts here: For decades, Puerto Rico has had money problems. By 2015, the island had accumulated over $70 billion of public debt. It couldn’t even provide essential services to its residents.

So Congress enacted the Puerto Rico Oversight, Management, and Economic Stability Act. Known by the acronym PROMESA. It aimed to try to fix some of the problems. PROMESA established a board of seven people tasked with negotiating with the island’s creditors and working toward a restructuring plan.

ROUGH: Well, that board created documents about what it was doing, and a media company wanted access to them. Everything from financial statements to emails to text messages. The board turned over some documents, but not everything the company requested. So the media outlet sued the board in federal district court.

The board argues the case should be dismissed.

REICHARD: Two legal issues come into play here. One: Whether Puerto Rico—as a territory— has sovereignty, analogous to state sovereignty. Two, whether Congress abolished that sovereignty when it enacted PROMESA.

The Supreme Court took up the case only to decide the second issue. But oddly, almost the entire oral argument focused on the first question.

ROUGH: Lawyer Mark Harris argued on behalf of the board. When he refers to CPI, he’s talking about the media company suing to get the board’s documents.

HARRIS: ​​In 2016, Congress established the oversight board and assigned it the critical task of leading Puerto Rico back to fiscal health. CPI has raised the issue of whether Puerto Rico and, therefore, the Board is entitled to sovereign immunity. The Court has repeatedly held for more than a hundred years that Puerto Rico has immunity. It held that way before Puerto Rico's constitutional assembly in the 1950s. And, since then, it has said that Puerto Rico has a degree of autonomy comparable to a state.

Comparable to a state.

Chief Justice John Roberts wanted to know if Puerto Rico’s status as a territory made a difference.

ROBERTS: You analogize in your argument to the sovereign immunity of states, the sovereign immunity of tribes, and I wonder if Puerto Rico's situation, though, is significantly different. Puerto Rico, obviously, at points in the past, had the sovereignty of Spain, but that did not carry over in any sense. So the question would be not the extent to which the Constitution recognized the existing sovereignty. The question would be did the Constitution, in any way confer sovereignty, create sovereignty, with respect to Puerto Rico?

HARRIS: The question of whether or not there is sovereign immunity, again, I think there's two steps that are involved. One of them is that Congress has to confer attributes of sovereignty onto the entity. Usually, it does that by an organic act. Here, there were several organic acts. But then even more important than that was the constitutional assembly in the 1950s, which, as this Court has said many times, really made Puerto Rico unique and gave it—

ROBERTS: Well, that's right. That's sort of my point, unique, and so I'm just wondering how far you can stretch the analogy.

Justice Sonia Sotomayor, who was born to Puerto Rican parents, helped the board’s lawyer out. She brought up other territories that have been granted immunity from lawsuits.

SOTOMAYOR: Territories like Louisiana and others didn't have their own sovereignty before they became territories of the United States, correct?

HARRIS: Correct.

SOTOMAYOR: They had sovereignty of France or of other countries, correct?

HARRIS: In most cases, yes.

SOTOMAYOR: And, historically, no territory was dragged into federal or state or territorial courts unless their sovereignty had been waived, correct?

HARRIS: Yes.

SOTOMAYOR: So, in 200 years of our history … no sovereign, which I think we have given to mean no governing entity, would be dragged into a court without the consent of the sovereign, correct?

HARRIS: Yes.

But Justice Elena Kagan said that for the court to just assume Puerto Rico and by extension its financial oversight board has sovereignty immunity presents a strange problem. Typically, when the court assumes something, it’s because it doesn’t matter. The assumption won’t affect the outcome one way or the other. But here, it would.

KAGAN: And that's a funny kind of posture, you know, because the assumption will essentially determine the disposition of the case. You're going to get immunity but only because we've assumed that you should get immunity. And I wonder if you have any precedent for that, any cases in which we've done something similar, any authority to suggest it's appropriate. I don’t know of any authority to say it’s inappropriate. It just seems quite weird to me.

HARRIS: We were not able to find a case where it seemed that the existence of immunity would not have mattered to the outcome where the Court just assumed it. Nevertheless...

Lawyer Sarah Harris argued for the other side on behalf of the media company that seeks the board’s documents. She said Puerto Rico’s board isn’t immune from being sued because the Act explicitly says any action against the board shall be brought in federal court. The statute then lists a couple of exceptions.

In other words, she argued it wouldn’t make sense for the act to say federal courts can hear cases against the board only for the federal courts to say they can’t hear cases against the board.

HARRIS: The board is not immune because PROMESA’s text clearly says the board will be a defendant in all kinds of actions, especially constitutional ones. Congress created a forum for the board to face suit.

Justice Amy Coney Barrett had an idea of how this case might be resolved.

BARRETT: Ms. Harris, why not just vacate and remand to the First Circuit, given the complexities of this question? You raise good points, the government's raised good points, on this common law immunity question and the question of whether territories have it. Why not just vacate and let the First Circuit, you know, which has this long line of precedent, but it hasn't really fully engaged the question? Why not let them do it?

HARRIS: Well, I think it would be unfair to give the other side a mulligan. We've argued all along that Puerto Rico doesn’t have Eleventh Amendment immunity. It is their affirmative burden to show that there is immunity.

That might be the route the court takes, even if the parties don’t want it. And that’s this week’s Legal Docket.

I’m Jenny Rough.

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