Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment (FOMB)
Whether the members of the Financial Oversight and Management Board for Puerto Rico, created by Congress under PROMESA, were 'Officers of the United States' subject to the Appointments Clause of the Constitution, requiring presidential nomination and Senate confirmation.
The Decision
9-0 decision · Opinion by Stephen Breyer · 2020
Majority Opinion— Stephen Breyerconcurring ↓
The Supreme Court ruled unanimously, 9–0, in favor of the Financial Oversight and Management Board, reversing the First Circuit and holding that the board members' appointments did not violate the Appointments Clause. Justice Stephen Breyer authored the opinion of the Court.
The Court's central reasoning rested on a long historical tradition under the Territory Clause of the Constitution (Article IV, Section 3), which grants Congress the power to 'make all needful Rules and Regulations' for U.S. territories. Justice Breyer's opinion traced this history back to the earliest days of the Republic, showing that Congress had routinely established offices in territories — including governors, judges, and other officials — and prescribed methods of appointment that did not conform to the Appointments Clause procedures of presidential nomination and Senate confirmation. This practice was widespread, longstanding, and had been recognized by courts and political branches alike for well over a century.
The Court reasoned that the Appointments Clause governs 'Officers of the United States,' a term that historically has not encompassed officials whose duties are primarily local and territorial in nature, even when those officials are created by federal statute and appointed by the President. Because the FOMB's members exercised authority over the local affairs of Puerto Rico — a U.S. territory — they fell within the established category of territorial officers, not officers of the United States.
The Court acknowledged the significant power the board wields but emphasized that the scope of an official's authority does not, by itself, transform a territorial officer into a federal officer for Appointments Clause purposes. What mattered was the nature and source of the authority: the board operated within the framework of territorial governance that the Constitution entrusts to Congress. The Court therefore concluded that PROMESA's appointment mechanism was constitutionally permissible, and the board's actions were valid.
Concurring Opinions
Justice Thomas, joined by Justice Gorsuch, concurred in the judgment but wrote separately to argue that the majority's lengthy historical analysis was unnecessary; he would have simply held that the board members occupied offices created under territorial law and thus were not 'Officers of the United States' as a textual matter. Justice Sotomayor, joined by Justice Ginsburg, also concurred but wrote separately to express deep concern about the implications for Puerto Rico's democratic self-governance, emphasizing that the island's residents had no meaningful say in selecting the board members who exercise vast control over their daily lives, and cautioning against reading the Territory Clause as a license to treat territories and their people as combust to unchecked congressional authority.
Background & Facts
In 2016, Puerto Rico was in the midst of a devastating fiscal crisis, carrying roughly $70 billion in bond debt and over $50 billion in unfunded pension obligations. Unable to declare bankruptcy under existing federal law and struggling to restructure its debts, the territory faced an economic emergency. In response, Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act, known as PROMESA, which created a seven-member Financial Oversight and Management Board (FOMB) empowered to oversee Puerto Rico's finances, approve budgets, and initiate debt-restructuring proceedings in federal court.
The process for selecting board members was unusual. Rather than following the traditional route for senior federal officers — presidential nomination and Senate confirmation — PROMESA directed the President to appoint board members from lists submitted by congressional leaders, including the Speaker of the House and the Senate Majority Leader. The President could select only from those lists for most of the seats, and the Senate played no confirmation role.
Aurelius Investment, LLC, a hedge fund holding Puerto Rican bonds, along with other creditors and the official committee of unsecured creditors, challenged the constitutionality of the board's composition. They argued that the board members wielded enormous governmental authority — controlling billions of dollars in public finances and restructuring government debt — and therefore qualified as 'Officers of the United States' under the Constitution's Appointments Clause. If so, their appointments without Senate confirmation were unconstitutional, potentially invalidating all of the board's actions.
The U.S. Court of Appeals for the First Circuit agreed with the challengers, holding that the board members were indeed federal officers whose appointments violated the Appointments Clause. However, to avoid chaos, the First Circuit stayed its ruling to give the President and Senate time to properly reappoint the members. Given the enormous practical and constitutional stakes — for Puerto Rico's fiscal recovery, for billions of dollars in debt, and for Congress's longstanding authority over territories — the Supreme Court agreed to hear the case.
The Arguments
The Board argued that its members were territorial officers, not 'Officers of the United States,' and therefore the Appointments Clause did not apply to their selection. Because Congress has broad authority under the Territory Clause of the Constitution to govern territories, it could structure the appointment of territorial officials however it saw fit.
- For over a century, Congress has appointed or authorized the appointment of territorial officials — including governors and judges — without following Appointments Clause procedures, establishing a deeply rooted historical practice.
- The board members' authority was limited to Puerto Rico, a U.S. territory, and they exercised powers that were fundamentally local and territorial in nature, not federal.
- Invalidating the board's composition would throw Puerto Rico's entire debt-restructuring process into disarray and call into question decades of congressional practice in governing territories.
Aurelius argued that the board members exercised significant authority under federal law, making them 'Officers of the United States' who constitutionally must be nominated by the President and confirmed by the Senate. The unusual appointment process — relying on congressional leaders to generate candidate lists — circumvented these constitutional requirements.
- The board members exercised sweeping control over Puerto Rico's finances, including the power to approve or reject budgets, file for debt restructuring in federal court, and override decisions of elected Puerto Rican officials.
- PROMESA was a federal statute, the board was created by Congress, and its members were appointed by the President — all hallmarks of federal officers subject to the Appointments Clause.
- Allowing Congress to bypass the Appointments Clause simply by labeling officers as 'territorial' would create a dangerous loophole undermining the Constitution's structural protections against concentrated power.