Puerto Rico v. Sanchez: A Plethora of Repercussions

On October 1, 2015, the U.S. Supreme Court granted certiorari review of a case from the Supreme Court of Puerto Rico called Puerto Rico v. Sánchez. This case was decided on March 20, 2015 and issue is the very technical doctrine of Double Jeopardy. In synthesis, this doctrine states that you cannot be punished for the same facts more than once. The usual exception, however, is when a state and the Federal Government prosecute you for the same facts. The theory is that since they are different sovereigns, their power to accuse comes from different sources; see U.S. v. Wheeler, 435 U.S. 313 (1978). At the time of the cert petition, there was a conflict between the 1st and 11th Circuits on this issue and the PR Supreme Court decision.

In Puerto Rico v. Sánchez, the local Supreme Court faces several persons that plead guilty of certain crimes in Federal Court and are indicted in the Commonwealth Courts for other crimes. Upon reviewing the cases, the PR Supreme Court finds that one of the federal crimes has the same elements of the crimes they are accused of in Commonwealth Courts. The Court of First instance found that the power to prosecute of the Commonwealth comes from Congress and dismissed that indictment; the Appellate Court reversed based on U.S. v. López Andino, 831 F.2d 1164 (1st Cir. 1987) and the PR Supreme Court case of Puerto Rico v. Castro García, 120 D.P.R. 749 (1988) which state that after the 1952 Constitution, the sovereignty of the People of PR gave sovereign powers to the Commonwealth to accuse and hence no double jeopardy ensued.

Judge Martínez Torres in Puerto Rico v. Sánchez makes a rigorous and extensive analysis of the double jeopardy case law of the US Supreme Court from its origins to the present. His analysis makes it clear that the power of the territories to create crimes and prosecute them comes from Congress and since Congress makes federal laws, you cannot accuse a person in both federal and territorial courts for the same crimes. See, Grafton v. U.S., 206 U.S. 333 (1907) and Puerto Rico v. Shell Co., 302 U.S. 253 (1937). But, this doctrine changed in the First Circuit Court of Appeals, which handles federal appeals from PR, from López Andino on.

The decision in López Andino is peculiar. From the start, at page 1167, Judge Bownes makes clear that the federal crimes are different from the Commonwealth crimes and hence, there is no double jeopardy. The Court could have stopped there, as Judge Torruella’s concurrence points out but Judge Bownes continues for little less than a page to conclude that the Federal Government and Puerto Rico are two different sovereigns. See pages 1167-68. He concludes saying “Puerto Rico’s status is not that of a state in the federal union, but, its criminal laws, like those of a state, emanate from a different source than the federal laws.” Page 1168. Judge Bownes, quoting from quote from Examining Bd. of Eng’rs, Architects and Surveyors v. Flores de Otero, 426 U.S. 572, 594 (1976), continues to argue that Law 600, the Federal Relations Act relevant to PR, gave the PR “the degree of autonomy and independence normally associated with the states of the Union.” By contrast, Judge Torruella’s concurrence with the result makes it clear that double jeopardy did not ensue since the crimes were different and questions the Court’s discussion in the power to prosecute separate from Congressional power. Different from the majority, he spends almost 6 pages explaining his view, which can be synthesized as follows:

Not the least of the majority’s errors stem from the fact that it overlooks that the Puerto Rican Federal Relations Act (Pub.L. 600) is merely an act of Congress. It is not a treaty, and certainly not a part of the Constitution. Thus, under well-established constitutional precedent, as an act of Congress it does not bind future Congresses. Like any other act of Congress it may be repealed, modified, or amended at the unilateral will of future Congresses. Thus, as will be further discussed post, the ultimate source of power in Puerto Rico, even after the enactment of P.L. 600, is Congress, a situation that deprives Puerto Rico of the rudiments of sovereignty basic to the application of the “dual sovereignty” rule. (Citations omitted)

Judge Torruella continues with citations from the Congressional record where time and again, PR officials tell Congress that even after Law 600 was enacted, it would have the same power over PR as before, see pages 1173 on. The US Senate hearings show that is was “well understood” that the Constitution would have no effect on the territorial stats of the island. During the Senate hearings, the Committee’s legal counsel that “[i]t is our hope and it is the hope of the Government, I think, not to interfere with the relationship but nevertheless the basic power inherent in the Congress of the United States, which no one can take away, is in Congress.” Hearings before the Senate Committee on Interior and Insular Affairs on S.J. Res. 151, 82d Cong., 2d Sess., 40-47 (1952).

This shows us that the Andino opinion is not without critics The PR Supreme Court then continues to discuss the opinion by the 11th Circuit of U.S. v. Sánchez, 992 F.2d 1142 (11th Cir. 1993) (this Circuit covers, among others, the state of Florida) where the Court declined to adopt the Andino opinion and instead was persuaded by Judge Torruella’s concurrence. Judge Hill in his opinion states that Congress is the “source of prosecutorial authority for the territories and for the Federal Government and therefore prosecutions in the territorial courts are not protected by the dual sovereignty doctrine from application of the Double Jeopardy Clause.” US v. Sánchez, at page 1150. He defined the legal question as:

Our inquiry does not end here, however. The Florida district court concluded that the reasoning underlying the above-quoted portion of Puerto Rico v. Shell was overridden by the passage of the Puerto Rico Federal Relations Act, Pub.L. 600, ch. 446, 64 Stat. 319 (1950) (codified at 48 U.S.C. § 731 et seq. (1989)), and, implicitly, that Puerto Rico is no longer a territory as that term was understood in the early part of this century. We must decide, therefore, whether the creation of the Commonwealth of Puerto Rico pursuant to the Federal Relations Act so changed the status of Puerto Rico that it must now be considered a separate sovereign for the limited purpose of the dual sovereignty exception to the Double Jeopardy Clause. (pages 1050-51)

After a careful analysis from pages 1047-1153, Judge Hill concluded as follows:

The development of the Commonwealth of Puerto Rico has not given its judicial tribunals a source of punitive authority which is independent of the United States Congress and derived from an “inherent sovereignty” of the sort supporting the Supreme Court’s decisions involving the states (Heath, supra) and Native American tribes (Wheeler, supra). Congress may unilaterally repeal the Puerto Rican Constitution or the Puerto Rican Federal Relations Act and replace them with any rules or regulations of its choice. Despite passage of the Federal Relations Act and the Puerto Rican Constitution, Puerto Rican courts continue to derive their authority to punish from the United States Congress and prosecutions in Puerto Rican courts do not fall within the dual sovereignty exception to the Double Jeopardy Clause.

Interestingly, in the case of Franklin California v. Puerto Rico at page 47 , the Recovery Act controversy, decided on July 6, Judge Lynch quotes López Andino, but not from the majority opinion but Judge Torruella’s, saying that PR is constitutionally a territory. See also, Davila-Perez v. Lockheed Martin Corp., 202 F.3d 464, 468 (1st Cir. 2000). Maybe a change of heart in the First Circuit.

Judge Martínez Torres of the PR Supreme Court spends 36 pages in a historical/judicial study of the legal situation of PR. when he says that “[c]ontrary to Native-American tribes or to the states of the Union, Puerto Rico has never exercised an original or primary sovereignty” (opinion at 35) He takes us through the Foraker Act, the Jones Act, the testimony of Governor Muñoz Marín and Manuel Fernós Isern, Resident Commissioner before Congress where they repeatedly state that Law 600 and the Constitution did not change the power of Congress over Puerto Rico. See also, The Supreme Court and Puerto Rico: The Doctrine of Separate and Unequal by Juan R. Torruella 1985.

The Puerto Rico opinion continues its analysis with the SCOTUS opinions after the approval of the Constitution in 1952. It is in Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 672 (1974) where the SCOTUS says that PR “is a political entity created by the act and with the consent of the people of Puerto Rico and joined in union with the United States of America under the terms of the compact.” The Puerto Rico opinion continues explaining that the SCOTUS, even though what is had said in Calero-Toledo, showing that from then on and culminating with Harris v. Rosario, 446 U.S. 652 (1980), has treated PR as a territory and not as something especial. At pages 51-52 of the opinion, Judge Martínez Torres states as follows:

For its part, Sec. 2 of Art. I of the Constitution of the Commonwealth of Puerto Rico, which establishes that “[t]he government of the Commonwealth of Puerto Rico and its Legislative, Executive and Judicial Powers … will be equally subordinated to the sovereignty of the people of Puerto Rico,” does not mean that Puerto Rico has been invested with its own sovereignty or that Congress has lost its own. It only means that Congress delegated to Puerto Ricans the power to manage the government of the Island and its own internal affairs, subject to the will of the people. In that sense, the People of Puerto Rico is a sovereign only for purposes of local matters that are not governed by the Constitution of the United States. Nevertheless, that does not mean that Puerto Rico ceased to be, as a matter of constitutional law, a territory of the United States; there was never a transfer of sovereignty, only a delegation of powers. (citations and footnotes omitted)

The opinion continues at pages 57-58 explaining the implications of this delegation:

Nevertheless, far from representing an irrevocable renunciation of its power over the territory, those legal limitations approved by Congress are part of the exercise of said legislative power. Thus, in the same way that relations between the District of Columbia ceased to be subject merely to the will of Congress authorized by Art. I, § 8, Cl. 17 of the Constitution upon the approval of legislation giving the District an elective municipal government, relations between Puerto Rico and the federal government are governed not only by Art. I, § 8, of the Constitution, but also by the legislation approved by Congress. See District of Columbia Home Rule Act, D.C. Code §§ 1-201.01-1-207.71 (2001); Washington, D.C. Ass’n of Realtors, Inc. v. District of Columbia, 44 A.3d 299 (D.C. 2012). That delegation of power does not constitute an irrevocable renunciation nor a termination of the power of Congress. The People of the United States granted Congress, through the Constitution, ample power to manage the territories. For this reason, Congress cannot irrevocably renounce a power that was conferred on it by the People of the United States. See Clinton v. City of New York, 524 U.S. 417, 452 (1998) (“The Constitution is a compact enduring for more than our time, and one Congress cannot yield up its own powers, much less those of other Congresses to follow.”). (citations and footnotes omitted)

The opinion continues with the White House reports of President Bush, Jr and Obama PR task force that both state that PR is a territory under the territorial clause of the Federal Constitution. In the Obama task force report at page 26 it states:

Third, consistent with the legal conclusions reached by prior Task Force reports, one aspect of some proposals for enhanced Commonwealth remains constitutionally problematic—proposals that would establish a relationship between Puerto Rico and the Federal Government that could not be altered except by mutual consent. This was a focus of past Task Force reports. The Obama Administration has taken a fresh look at the issue of such mutual consent provisions, and it has concluded that such provisions would not be enforceable because a future Congress could choose to alter that relationship unilaterally.(Congress similarly could elect to enact legislation violating a treaty with a foreign country or to legislate over the opposition of one or more States.)

In synthesis, PR is subject to the political will and authority of Congress, opinion at 61. Judge Martínez Torres further concludes that the approval of the the PR Constitution did not change its relations with the United States and that is a territory subject to the territorial clause of the Federal Constitution.

This PR Supreme Court decision not only changes the parameters of double jeopardy in federal/commonwealth cases, but makes clear the island’s territorial status. For this reason, the Governing party, the PPD who created the Commonwealth in 1952 is defending its alleged sovereignty tooth and nail. For example, the Government’s brief, in its introduction claims the decision “strips PR of the ability to enforce its own criminal laws without federal interference” and the Federal Government of conducting a “monumental hoax”. See page 1 of PR brief. The PR Government’s position is that the People of Puerto Rico exercised its own sovereignty in order to enact the Constitution, brief at page 23. The problem with this interpretation is twofold: a) where did the sovereignty come from if not from Congress since PR never had it and b) since PR is neither a state, not an sovereign nation nor an Indian Tribe, it can only be a territory for Congress cannot create what is not in the Constitution. Hence, this idea is without merit

This case is of great importance for the correct understanding of the Commonwealth’s present status. The Supreme Court may hold that PR is a special case, neither state nor territory, but that would mean rewriting the Constitution, something the conservative side will not allow and since this is a case of an accused rights, you may have a curious mixture of conservative and liberal votes against this position. On the other hand, the Supreme Court could say that PR for the narrow purposes of double jeopardy is to be considered a state, thus adopting without much discussion the First Circuit’s position but that would leave multiple questions as to the elaborate opinions of the PR Supreme Court and the Eleventh Circuit, to say nothing of Harris v. Rosario, where it said in 1980 that PR was a non-incorporated territory of the United States. Finally, the Supreme Court will determine that PR has no sovereign powers separate from those delegated by Congress and that it remains a territory subject to its powers. This is in my opinion, the more likely scenario and the decision has to come down before June 30th 2016.

In conclusion, this decision could have a direct impact on a Congressional mandated Financial Control Board, which is the reason why the PR Government moved so swiftly to file this certiorari. If PR is nothing more than a territory, then Congress has the power to mandate the Board. If PR is something else, that power could be curtailed. But as I have said before, I cannot see the US Supreme Court rewriting the Constitution when it clearly gives Congress control over the territories.



Perception is Everything

The media has told us that PREPA has made a deal with Free Point Commodities, LLC, to buy fuel for its plants. It is clear from PREPA’s press release, that this contract was obtained through negotiations, not through a bidding process. So far, so good.

The problem is that Stone Point Capitol has investments in Free Point Commodities, LLC, AND in Millstein & Co., The problem is that Jim Millstein is also is the Chief Executive Officer of Millco Advisors, LP, and upon information and belief, also of Millstein & Co. The former has had many contracts with the PR Government Development Bank as a restructuring advisor. Mr. Millstein was also the MC of the PR Government’s presentation of Dr. Anne Krueger’s report earlier this year, see.

This information begs the question, is there some impropriety on this? I don’t know, but Millco Advisors’ contract clearly states in the 23rd paragraph:


The Consultant certifies that it has received copies of (a) Act No. 84, enacted on June 18, 2002, as amended, which establishes the Code of Ethics for Contractors, Suppliers and Applicants for Economic Incentives of the Executive Agencies of the Government of the Commonwealth of Puerto Rico and (b) the Government Ethics Law, Act No. 1, enacted on January 3,2015 as amended from time to time, and its implementing regulations. The Consultant agrees that it, as well as all personnel providing services under this Agreement, will comply with such acts.

This means the Ethics Office of Puerto Rico would have jurisdiction over this issue and its head, attorney Zulma Rosario, has a well-deserved reputation for fairness and zealousness in fulfilling her duties. A violation of the PR Ethics law would entail possible civil and criminal liabilities for Millco Advisors or Mr. Millstein or both.

millco stonepoint


Si Puerto Rico Impaga

Ayer el Gobernador indicó en su mensaje que iba a negociar con los bonistas para una moratoria a la deuda. Era de amplio conocimiento, sin embargo, que ya lo estaba haciendo. Se supo además, que el Departamento de Justicia estaba preparándose para una lluvia de demandas. Parece que el Gobernador está preparado ya para el impago, a pesar de que se pagaron los GO’s y PREPA parece que pagará sus $410 millones mañana.

De ser así, el Gobernador tendrá un tiempo para negociar, pero ya OppenheimerFunds indicó que no va a aceptar recorte a sus bonos. No sabemos si los otros bonistas estarán interesados en sentarse con el Gobernador. Si asumimos que algunos bonistas lo harán y hasta aceptarán la reestructuración. Los que no demandarán, ¿pero donde?

Puerto Rico no es una nación independiente ni es un estado de la Unión. Es un territorio no incorporado con gobierno propio, ver, Harris v. Rosario, 446 U.S. 651 (1980). Pero para propósitos de la 11ava Enmienda a la Constitución Federal es un estado, ver Fresenius Medical Care Cardiovascular Resources, Inc v. Puerto Rico and the Caribbean Cardiovascular Center Corp., 322 F.3d 56, 61 (1st Cir. 2003). Esta Enmienda fue incorporada a raíz de la decisión de Chisom v. Georgia, 2 U.S. (2 Dall.) 419 (1793), la cual determinó que se podía demandar a un estado de la Unión en la Corte Federal aún si no se podía hacer en sus cortes. Poco después, la 11ava Enmienda fue aprobada. Por lo tanto, Puerto Rico no puede ser demandada en Corte Federal sin su consentimiento. Puerto Rico ha dado su consentimiento a ser demandado en sus cortes en cobro de dinero, Ver, Hato Rey Stationery, Inc., v. Commonwealth of Puerto Rico, 119 D.P.R. 129 (1987) y Montalvo & Comas Electric Corp. v. Commonwealth of Puerto Rico, 107 D.P.R. 558 (1978), o sea el Tribunal de Primera Instancia. Bonos como los obligaciones generales (GO), que son respaldados por el crédito del ELA y constitucionalmente requeridos a ser pagadas antes que cualquier otra cosa, ver, Artículo VI, secciones 2 and 8 de la Constitución, solo se podrían cobrar en el Tribunal de Primera Instancia. Excepto al última emisión de marzo de 2014 donde PR renunció a su inmunidad soberana.

Además, corporaciones públicas como la Autoridad de Energía Eléctrica que generan sus propios fondos, son susceptibles a demandas en la Corte Federal por diversidad de ciudadanía, 28 U.S.C. sec. 1332. Pero esos serían los bonistas de fuera de PR. Los bonistas que viven en PR tendrían que recurrir al Tribunal de Primera Instancia para poder cobrar sus acreencias.

Contrario a lo que algunos analistas han dicho, no hay manera de que estos casos estatales vayan a un Multidistrict Federal. La legislación del Multidistrict no contempla el remover casos que estén en el Tribunal Estatal, por ende, todo caso en la Corte Estatal que no hay sido removido no va a ir a Multidistrict.

Este es un breve resumen de lo que puede pasar en las demandas por incumplimiento contra el ELA. Pero aún en las reclamaciones sobre GO’s podrían acabar en corte federal si algunas de mis ideas funcionan. Veremos que ocurre.