DEBTOR AND CREDITOR

Issues

Many of Puerto Rico’s municipalities are in financial crisis, and public utility companies are facing insolvency. In this consolidated case, the Supreme Court will determine whether Chapter 9 of the federal Bankruptcy Code preempts Puerto Rican laws permitting distressed municipalities to restructure their debt. Puerto Rico and its Government Development Bank assert that Puerto Rico is not prevented from passing local bankruptcy laws because Congress has not directly addressed territorial law in this area. But public utility creditors Franklin California Tax-Free Trust and BlueMountain Capital Management, LLC, argue that Congress preempted any state or territorial municipal bankruptcy legislation in an effort to ensure a uniform federal bankruptcy standard. The Court’s ruling will impact Puerto Rican municipalities’ ability to provide essential services to their residents, and the rights of creditors to collect on their debt. 

Questions as Framed for the Court by the Parties

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