This Report summarizes cases granted review on October 3, 2022

Case Granted Review: Financial Oversight and Mgmt. Board for Puerto Rico v. Centro de Periodismo Investigativo, 22-96

Financial Oversight and Mgmt. Board for Puerto Rico v. Centro de Periodismo Investigativo, 22-96. Congress enacted the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) to address what it found to be a “fiscal emergency” in Puerto Rico. 48 U.S.C. §2194(m)(1). PROMESA created the Financial Oversight and Management Board for Puerto Rico as an entity within the territorial government and instructed that it devise a “method for [Puerto Rico] to achieve fiscal responsibility and access to the capital markets.” 48 U.S.C. §2121(a), (c). To that end, Congress gave the Board power over Puerto Rico’s laws, budgets, and long-term fiscal plans and authorized it to bring debt-restructuring cases on behalf of Puerto Rico. PROMESA instructed that generally, “any action” against the Board or under PROMESA had to be brought in federal district court. 48 U.S.C. §2126(a). This case raises the question whether that statute granting federal courts subject-matter jurisdiction over claims against the Board abrogates the Board’s sovereign immunity—if the Board and Puerto Rico possess sovereign immunity.

Respondent, a news organization, sued the Board in federal district court seeking documents that it argued the government was required to disclose under the Puerto Rico Constitution. The Board moved to dismiss on sovereign immunity and other grounds. The district court denied the motion, holding that Congress abrogated the Board’s sovereign immunity when it required that actions against it or claims under PROMESA had to be brought in federal district court. The First Circuit agreed. 35 F.4th 1. It noted that it has long treated Puerto Rico like a state for sovereign immunity purposes, although the Supreme Court has reserved that question. It assumed without deciding that the Board is an arm of the commonwealth entitled to sovereign immunity because the parties had not briefed the question, and both parties referred to the Board as an entity within the commonwealth’s government. Next, it held that “Congress unequivocally stated its intention that the Board could be sued for ‘any action . . . arising out of [PROMESA],’ but only in federal court,” and that this indicated an intent to waive sovereign immunity. Although the statute does not expressly waive immunity, as some federal statutes do, the First Circuit observed that the Supreme Court has never required “magic words” to accomplish that goal. Finally, it held, the words “any action” in 48 U.S.C. §2126(a) waive immunity for both federal claims and claims—like respondent’s—that are based in Puerto Rico law.

Petitioner (the Board) contends that Puerto Rico and the Board are entitled to sovereign immunity. It argues that the First Circuit erred in holding that PROMESA abrogated that immunity because the statute does not expressly discuss sovereign immunity and the Supreme Court has held that statutory abrogation of sovereign immunity must be clear and unmistakable—which this is not. Petitioner argues that other circuits have correctly held that statutes like PROMESA, which simply confer jurisdiction on federal courts, do not abrogate sovereign immunity. Finally, it argues, the decision below is incorrect and unprecedented in abrogating sovereign immunity with respect to territorial-law actions notwithstanding the Pennhurst doctrine, which divests federal courts of jurisdiction to hear suits against a state under its own laws. Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 106 (1984).