PROMESA and the Bankruptcy Clause: A Reminder About Uniformity

Brook. J. Corp., Fin. & Com. Law (Forthcoming)

Seton Hall Public Law Research Paper

25 Pages Posted: 13 Jul 2017  

Stephen J. Lubben

Seton Hall University - School of Law

Date Written: July 5, 2017

Abstract

The Bankruptcy Clause – Article I, section 8, clause 4 –provides that “The Congress shall have power... [t]o establish … uniform Laws on the subject of Bankruptcies throughout the United States....” Thus bankruptcy, along with nationalization, of all things, is subject to a special requirement of “uniformity,” Congress having no ability to pass non-uniform laws on these subjects.

And now Congress has just enacted a bankruptcy law that applies to a single American territory. In early May 2017, Puerto Rico and one affiliated entity filed a petition under this new law. In late May, the Employees Retirement System commenced a case, along with the Puerto Rico Highway and Transportation Authority. Other Puerto Rican sub-entities are expected to follow.

I use this short paper to examine the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), which contains the new bankruptcy law made for Puerto Rico alone, and its place in the Court’s rather confused Bankruptcy Clause jurisprudence.

In sum, I argue that title III of PROMESA violates the Bankruptcy Clause, because it applies too narrowly. I also submit that its statutory “savings clause” is a cure worse than the disease it purports to address.

Keywords: PROMESA, Puerto Rico, chapter 9, bankruptcy, title III, municipal finance, sovereign financial distress, bankruptcy clause, constitution

Suggested Citation

Lubben, Stephen J., PROMESA and the Bankruptcy Clause: A Reminder About Uniformity (July 5, 2017). Brook. J. Corp., Fin. & Com. Law (Forthcoming); Seton Hall Public Law Research Paper. Available at SSRN: https://ssrn.com/abstract=2997553

Stephen J. Lubben (Contact Author)

Seton Hall University - School of Law ( email )

One Newark Center
Newark, NJ 07102-5210
United States
973-642-8857 (Phone)

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