Congress Holds Keys To Puerto Rico's Comprehensive Relief
Law360, New York (March 24, 2016, 2:38 PM EDT) -- On Tuesday, March 22, 2016, the U.S. Supreme Court heard oral arguments in Puerto Rico v. Franklin California Tax-Free Trust and Acosta-Febo v. Franklin California Tax-Free Trust, which address the constitutionality of Puerto Rico's June 2014 Debt Enforcement and Recovery Act (the "Recovery Act"). The Recovery Act created a bankruptcy-like regime through which select Puerto Rican public corporations could restructure their debt obligations without unanimous creditor consent. The federal district court and the First Circuit concluded that the Recovery Act was preempted in its entirety by Section 903(1) of the U.S. Bankruptcy Code, which prohibits a "state" from enacting laws that bind nonconsenting creditors of the state's municipalities to the terms of a debt restructuring....
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