Judges skeptical of PROMESA challenges

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U.S. Appeals Court judges heard two challenges to the Puerto Rico Oversight, Management, and Economic Stability Act at a Monday hearing, during which the judges expressed skepticism the law was unconstitutional, which the plaintiffs were suggesting.

The panel of judges from the First Circuit of the U.S. Court of Appeals listened to oral arguments on two cases brought by a pair of unions for the Puerto Rico State Insurance Fund (Fondo del Seguro del Estado). The fund is a public corporation that oversees Puerto Rico workers’ compensation for those injured on the job.

The unions — Hermandad de Empleados del Fondo del Seguro del Estado and Unión de Médicos de la Corporación del Fondo del Seguro del Estado — said local laws associated with PROMESA illegally abrogated their voting rights and their contractual rights.

The U.S. District Court had dismissed the cases by saying the unions lacked standing to file the challenges.

One judge said even if they declared PROMESA to be unconstitutional, the laws affecting the unions, passed in 2014 and 2017, would remain on the books. This is because it was the local legislature that passed the laws.

Union attorney Rolando Emmanuelli Jiménez said that without PROMESA and the Oversight Board, the local legislature would likely revoke the laws. He said the legislature had passed the laws because of directions from the Oversight Board.

Mark Harris — attorney for defendants, the United States government, Oversight Board, and Commonwealth of Puerto Rico — said the local legislature passed the first law the plaintiffs were objecting to in 2014, before PROMESA was in effect.

Harris said citizens don’t have the right to file lawsuits against constitutional changes to government unless there is a particular injury to them.

Benjamin Torrance, assistant U.S. attorney also representing the U.S. government, said the plaintiff’s arguments are similar to saying because the Environmental Protection Agency did something wrong, the EPA should be declared unconstitutional.

In his rebuttal, Emmanuelli Jiménez said his workers had pecuniary interests in PROMESA since some of them held bonds and all were participants in the pension system, both of which are undergoing restructuring in PROMESA’s Title III provision. This gives them standing to object to PROMESA’s constitutionality, he said.

He asked the judges to overturn the lower court’s decision and send the case back to it for consideration of the unions’ arguments.

Next, the court heard the unions’ case concerning the impairment of their contracts.

Attorney Jessica Méndez Colberg, representing the unions, said the laws they were objecting to violated the U.S. Constitution’s contract clause and the collective bargaining clause of the Puerto Rico Constitution.

She said the local legislature had the right to enact legislation affecting public corporations, generally. However, in this case it did so while changing the terms of the corporation’s contracts with employees. She said the legislature didn’t have the right to do that without giving a justification, which it didn’t provide.

Méndez Colberg said the laws impaired the workers’ fringe benefits and overtime pay and the transfer of accumulated vacation days when workers are shifted to other parts of Puerto Rico’s government.

Harris said the plaintiffs had argued that since the fund was solvent the government shouldn’t have made a cut to it. He responded by saying that it was common sense that if the Commonwealth is struggling financially, it should look to cut costs in all its parts.

A judge asked Méndez Colberg if the union had any members who had been transferred out of the fund or who might be transferred. She responded that the government’s new transfer policy hadn’t been implemented yet but that it was a possibility in the future.

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