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Puerto Rico: Supreme Court Argument

posted by Stephen Lubben

The transcript can be found here.  Based on my initial read, it seems like the First Circuit might be reversed, which opens up all the issues Jacoby noted earlier (namely, will the statute pass Contracts Clause review – assuming the Clause even applies to the Commonwealth).


Justice Sotomayor's remark summed up ALL the issues with one question.

JUSTICE SOTOMAYOR: It's like the Tenth
Amendment right of States to deal with their municipalities consistent with the Constitution. Where
does that leave you can make uniform­ bankruptcy laws,but nothing about that permits you to impair the rights of States so drastically?

I interpret this to mean Puerto Rico is a State which can enact its own insolvency law but not impair contracts.

I agree; reversal is likely.

Puerto Rico is no a "state." It's a U.S. territory over which the U.S. Congress has broad oversight powers granted by the U.S. Constitution and the law of the land.

Superman, I don’t make this stuff up - honest.

Puerto Rico is “DEFINED” as a “STATE” for the purpose of the “BANKRUPTCY CODE”.

11 U.S. Code § 101 - Definitions
(52) The term “State” includes the District of Columbia and Puerto Rico, except for the purpose of defining who may be a debtor under chapter 9 of this title.

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