Puerto Rico v. Franklin Cal. Tax-Free Trust (15-233)
argument 15-233Puerto Rico v. Franklin Cal. Tax-Free Trust
Supreme Court of the United States
1h 0m
5 speakers
8 chapters
transcribed 7 days ago
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What constitutional question does the case raise about Puerto Rico’s access to Chapter 9 bankruptcy?
We'll hear argument next in case fifteen two three three, the Commonwealth of Puerto Rico versus Franklin, California Tax Free Trust and the Consolidated Case.
Mr.
Landau.
Thank you, Mr Chief Justice, and may it please the court. This case presents the question whether Congress has stripped Puerto Rico of access to any legal mechanism to restructure the debts of its public utilities which provide essential services to its citizens, like electricity and water. Respondents contend that Congress denied Puerto Rico access to Chapter nine altogether, but left Puerto Rico subject to Chapter nine's preemption provision. That anomalous result can't be squared with the statute's text and structure. Congress in nineteen eighty four defined the word state in the bankruptcy code, generally, to include Puerto Rico, except for the purposes of determining who may be a debtor under Chapter nine.
But that's just another way of saying that Puerto Rico's outside the scope of chapter nine. A state's only role in the Chapter nine regime is to authorize its municipalities to be debtors. Indeed, Chapter nine can't apply to Puerto Rico in light of the nineteen eighty four amendment. That amendment categorically precludes Puerto Rico from passing through the gateway into Chapter nine, which is located in Chapter One in Section one oh nine C two.
Mr. Landau, that's true. Don't you run up against uh with respect to the Puerto Rico Puerto Rico's legislation. The contract clause the the bar against impairing contracts. The Puerto Rico c can't impair the lenders contracts. So apart from so if there's o if we're dealing only with the Puerto Rico legislation. Doesn't that? In in re in requiring non consenting Landers. to give up or have their claims reduced. What do we go is violating the contract clause?
Your Honor, the respondents here have certainly brought contract clause claims. And if this court decides the preemption issue in our favor, then they would certainly be allowed to litigate those contract claims issues on appeal on remand. The the this Court has never addressed the question whether the contract clause applies to Puerto Rico, which, as this court is aware, is in a somewhat unique position in our uh federal structure. Uh that being said, the First Circuit has traditionally assumed that the uh without deciding that the contract clause applies to Puerto Rico, and again That is an issue for remand. The question presently before this Court is the antecedent question on which the courts below ruled against us, which is to say that
the the Congress's exclusion of Puerto Rico from Chapter nine nonetheless left them subject to Chapter nine's preemption provision.
Why would Congress preclude Puerto Rico from Chapter nine? In other words, what what is the background of this provision.
Sure, Your Honor. It is a black box to answer your question directly. There is no legislative history directly on point, either way. So either side here is going to be limited to speculation on that score. The one thing that we do know for sure is that the mere exclusion of an entity from Chapter 9 is not typically deemed to be a representation of intent by Congress to preclude a state law. And to answer your question more directly, again, I am admitting this is speculation, just as their position is speculation. One thing that Congress could have been wanting to do is to put Puerto Rico and D.C. in the same boat for Chapter 9 purposes as Guam and the Virgin Islands, the other territories that are not even within the definition of state in the bankruptcy code in the first place.
In other words, two some Somewhat unusual things happened in when this provision was added. And again, to go back to your question, I think, Mr. Chief Justice, this came about after 1978, when the definition of state that had been in the bankruptcy code going all the way back to 1898. uh fell out of the code. That definition broadly defines state to include territories and possessions. In nineteen seventy eight there was an overhaul of the bankruptcy code.
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Chapters
8 chapters
1
What constitutional question does the case raise about Puerto Rico’s access to Chapter 9 bankruptcy?
0:00–8:48
2
How did Congress’ 1984 amendment change the definition of “state” for bankruptcy purposes?
8:48–15:52
3
Why do the parties argue that the contract‑clause applies (or does not apply) to Puerto Rico?
15:52–23:22
4
What is the “gateway” provision in § 109 C 2 and how does it affect Puerto Rico’s ability to file Chapter 9?
23:22–30:59
5
How do the Justices interpret the relationship between the pre‑emption clause and the gateway provision?
30:59–38:24
6
Why might Congress have excluded Puerto Rico and D.C. from Chapter 9 while leaving the pre‑emption clause intact?
38:24–45:02
7
What historical precedents and statutory history do the advocates cite to support their reading of the text?
45:02–53:07
8
What are the practical implications for Puerto Rico’s public‑utility debt restructuring if the Court adopts the petitioners’ view?
53:07–1:00:50