Puerto RICO v. Franklin California Tax Free Trust (579 U.S. 115)
U.S. Supreme Court · decided June 13, 2016 · Supreme Court Database (Spaeth)
- Citation
- 579 U.S. 115 · 136 S. Ct. 1938
- Decided
- June 13, 2016
- Term
- October Term 2015
- Vote
- 5–2
- Majority author
- Justice Thomas
- Issue area
- Economic Activity
- Disposition
- Affirmed
- Outcome
- Petitioning party lost
- Ideological direction
- Conservative
Opinion excerpt
Justice THOMAS delivered the opinion of the Court. The Federal Bankruptcy Code preempts state bankruptcy laws that enable insolvent municipalities to restructure their debts over the objections of creditors and instead requires municipalities to restructure such debts under Chapter 9 of the Code. 11 U.S.C. § 903(1). We must decide whether Puerto Rico is a “State” for purposes of this pre-emption provision. We hold that it is. The Bankruptcy Code has long included Puerto Rico as a “State,” but in 1984 Congress amended the definition of “State” to exclude Puerto Rico “for the purpose of defining who may be a debtor under chapter 9.” Bankruptcy Amendments and Federal Judgeship Act, § 421(j)(6), 98 Stat. 368, now'codified at 11 U.S.C. § 101(52). Puerto Rico interprets this amended definition to mean that Chapter 9 no longer applies to it, so it is no longer a “State” for purposes of Chapter 9’s pre-emption provision. We hold that Congress’ exclusion of Puerto Rico from the definition of a “State” in the amended definition does not sweep so broadly. By excluding Puerto Rico “for the purpose of defining who may be a debtor under chapter 9,” § 101(52) (emphasis added), the Code prevents Puer-to Rico from authorizing its municipalities to seek Chapter 9 relief. Without that authorization, Puerto Rico’s municipalities cannot qualify as Chapter 9 debtors. § 109(c)(2). But Puerto Rico…
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