Hedge Fund Sues to Have Puerto Rico’s Bankruptcy Case Thrown Out<br />The board members were instead “handpicked by individual members of Congress,” it said, through “an intricate<br />system of Balkanized lists, designed to severely constrain the president’s appointment powers.”<br />No Senate confirmation proceedings occurred, although senators of both parties were among the members<br />of Congress who made recommendations last year to President Barack Obama for the board.<br />Title III of Promesa, which is similar to Chapter 9 municipal bankruptcy, gives Puerto Rico the power to abrogate contracts unilaterally —<br />but it has no access to Title III without the oversight board’s authorization.<br />In a lawsuit filed in United States District Court in San Juan, the hedge fund, Aurelius Capital, cited the “appointments clause” of the United States<br />Constitution, which calls for all principal officers of the federal government to be appointed by the president, and then confirmed by the Senate.<br />That did not happen when the seven members of the Financial Oversight<br />and Management Board for Puerto Rico were selected, Aurelius said in its motion to dismiss the bankruptcy-like proceedings.<br />After a number of hearings, and even expedited arguments before the United States Supreme Court, Congress last year enacted<br />a law called Promesa, which gives insolvent territories a way to seek court protection from their creditors.<br />Work then began on a five-year fiscal reform plan, and Puerto Rico’s Title III proceedings began last May.
