(CN) – The Supreme Court agreed to review an appeals court ruling invalidating former President Barack Obama’s appointments to an oversight board managing Puerto Rico’s financial crisis, a decision the board has called “profoundly wrong and deeply destabilizing.”
Puerto Rico’s oversight board has been tasked with restructuring $120 billion in the commonwealth’s debt and pension liabilities. The New York-based hedge fund Aurelius Capital Management, run by Republican donor Mark Brodsky, argued that the Senate should have confirmed Obama’s appointments.
Last July, U.S. District Judge Laura Taylor Swain rejected that challenge.
“PROMESA does not require presidential nomination and Senate confirmation for the president’s discretionary appointees and members chosen from the congressional lists,” Swain wrote at the time, referring to the Puerto Rico Oversight, Management and Economic Stability Act. “However, in the event that the President appoints members that are not named on the congressional lists, Senate confirmation is required under PROMESA.”
Six of the seven voting members appointed by Obama came from congressional lists.
The First Circuit reversed Swain’s decision in February, finding the board’s members should have been appointed “with the advice and consent of the Senate.”
In its petition to the U.S. Supreme Court, the oversight board warned that upholding that ruling would exacerbate a humanitarian crisis.
“The court of appeals has invalidated an act of Congress and thereby rendered unlawful the appointments of the Board’s members, who are responsible for managing Puerto Rico’s financial and humanitarian crisis,” the petition states.
On Thursday, the Supreme Court set arguments in the case for the second week of the October 2019 session.
Chief Justice John Roberts had appointed Swain, a judge from the Southern District of New York, in 2017 to oversee Puerto Rico’s bankruptcy litigation.
Aurelius Capital Management has been labeled a “vulture fund” by its critics for its record of gobbling up distressed debt from struggling governments and demanding full repayments. The hedge fund previously wrangled with the Argentinian government in Manhattan federal court, before reaching a settlement with the successor of then-President Cristina Fernandez de Kirchner.
President Donald Trump renominated the board’s current seven members earlier this month.