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Puerto Rico Seeks Help From the Supreme Court

posted by Melissa Jacoby

CertPetitionPuerto Rico is asking the U.S. Supreme Court to review the First Circuit decision that Puerto Rico's Recovery Act is preempted and thus unconstitutional. Here's the petition. In addition to parsing the legal issues, the petition is framed around Puerto Rico's financial emergency, the need for the Supreme Court to step in notwithstanding the lack of circuit split (or even a dissent to the First Circuit ruling). It makes sense that Puerto Rico would challenge a ruling making it harder for the Commonwealth, in a nebulous legal zone, to write laws to solve its problems. The difficulty with the financial crisis framing is that even if (1) the Supreme Court agreed to hear the matter, (2) heard the matter quickly, (3) decided the matter quickly, and (4) actually reversed the First Circuit - a chain of tough "even ifs"  - public corporations in Puerto Rico will not be able to start using the law because another formidable constitutional challenge is still alive: whether the Recovery Act can survive scrutiny under the Contracts Clause. That hotly contested fight would be fact intensive in a way that the preemption dispute was not. A fix from the federal government must come from one of the other two branches. Speaking of which, the persuasive argument against H.R. 870/S.1774 continue to be underwhelming. For example, the fact that chapter 9 would not be a complete solution for, say, PREPA, is really beside the point.

If the Supreme Court agreed to review the First Circuit's decision, then fellow Slipster Stephen Lubben's work on Puerto Rico and the Bankruptcy Clause would become even more important than it is already. While I am not on board with Stephen's conclusions regarding preemption, his research and arguments are central to this debate. So check out his article if you haven't already.


I can't see why Contracts Clause litigation should be all that fact-specific. The Contracts Clause applies to states. Is Puerto Rico a state, for purposes of the Contracts Clause? This isn't particularly fact-dependent.

Puerto Rico has its own domestic version of the Contracts Clause, but this is not a matter for the federal courts.

Ebenezer Scrooge: It is the Q of whether a substantial impairment is "reasonable and necessary" and thus permissible that is fact intensive. MBJ

I admit that "reasonable and necessary" is heavily fact-bound. But it is probably not a federal issue, since I doubt that the Contracts Clause applies to Puerto Rico. The First Circuit let the mask slip--Puerto Rico is a colony, not a state. The Contracts Clause clearly doesn't apply to DC (at least if the DC Circuit is to be believed), so I don't see why it should apply to Puerto Rico.

There was a Philippine case in which SCOTUS held that the Philippine government could coin money. This power is also explicitly denied to the states. The First Circuit has ducked the Contracts Clause issue at least twice, but I don't see how it could wriggle out of it if squarely presented.

The Recovery Act could be attacked in Puerto Rico courts, since Puerto Rico has its own mini-Contracts Clause (as does DC). Maybe an Article III court would also have subject-matter jurisdiction (I don't know.) But I don't see how it's an issue under the US Constitution.

Based on the pleadings in the district court action, I don't think Puerto Rico is contesting that the federal Contracts Clause applies to Puerto Rico. Either way, though, as you point, out, some court will have to wrestle with one or both contracts clauses.

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