Supreme Court Agrees to Hear Puerto Rico's Restructuring Appeal

The U.S. Supreme Court agreed to hear Puerto Rico v. Franklin California Tax-Free Trust. The case considers whether Chapter 9 ("Adjustments of Debts of a Municipality") of the Federal Bankruptcy Code preempts a Puerto Rico statute that creates a mechanism for the commonwealth's public authorities to restructure their debts. Since 1984, the federal Bankruptcy Code has precluded Puerto Rico from restructuring municipal debt under Chapter 9 of the Code. The petitioners assert that there is no basis "to conclude that the exclusion of Puerto Rico from Chapter 9 represents a limitation on the Commonwealth’s power to create its own mechanism for restructuring the debts of its public utilities."