Puerto Rico v. Franklin California Tax-Free Trust (II)

U.S. Supreme Court Holds that Federal Bankruptcy Law Preempts Puerto Rico’s Recovery Act

Term: 2015 Term
Oral Argument Date: Mar 22, 2016
Vote: 5-2
Opinion: Thomas
Questions Presented: 

Whether Chapter 9 of the federal Bankruptcy Code, which does not apply to Puerto Rico, nonetheless preempts a Puerto Rico statute creating a mechanism for the Commonwealth's public utilities to restructure their debts.

U.S. Chamber's Position: 

In its brief, the U.S. Chamber urged the Supreme Court to affirm that Puerto Rico’s Debt Enforcement and Recovery Act (“Recovery Act”), designed to provide special protection to Puerto Rico’s financially troubled public utilities, is preempted by federal bankruptcy law.  The brief argues that Section 903(1) of the Bankruptcy Code preempts Puerto Rico’s Recovery Act and explains that such state laws jeopardize bankruptcy uniformity and disrupt the national economy by deterring investment in infrastructure.  

William S. Consovoy and Bryan K. Weir of Consovoy McCarthy Park PLLC represented the U.S. Chamber of Commerce as co-counsel to the U.S. Chamber Litigation Center.

Outcome Content: 

The Supreme Court held that the federal Bankruptcy Code expressly preempts Puerto Rico’s Recovery Act.  The opinion relied on the Court’s previous decision in Chamber of Commerce of United States of America v. Whiting to conclude that the express preemption provision in Section 903 of the Bankruptcy Code prohibits Puerto Rico from taking matters into its own hands by implementing the Recovery Act.

Justices in Majority: 
Justices in Minority: 
Procedural History: 

Cert. petition granted 12/4/2015.

U.S. Chamber amicus brief filed 2/25/2016.

Argued 3/22/2016.

Decided 6/13/2016.