Victory is fleeting. Losing is forever.
— Billy Jean King
It was Friday, December 4, 2015, close to three in the afternoon. I had just had a pleasant lunch in the Río Piedras section of San Juan. Now back at the office, my mobile phone rang. It was José, the colleague who paid my salary, whom I consider a friend. Wal-Mart Puerto Rico, a subsidiary of the juggernaut known as Walmart, had just sued the Treasury Secretary of Puerto Rico in federal court, challenging the constitutionality of a tax that had been implemented earlier that year. We were assigned the defense of the Secretary. José had just sent me the complaint by e-mail.
“Don’t challenges to taxes belong in state courts?” I asked, suddenly remembering a principle which was, somehow, in the back of my mind. “Yes, they do,” he answered.
It would turn out to be more complicated than that.
A Mean Judge
The case had been assigned to Aida Delgado, then chief judge of the United States District Court for the District of Puerto Rico. On Monday, December 7, I had written a memo that would be the basis for a motion to dismiss for want of jurisdiction. I went to José’s office to discuss it. At some point I uttered, for no apparent reason: “We’re lucky that the case was not assigned to Fusté.” José, his eyes getting bigger, just nodded. District Judge José A. Fusté was five months away from being forced to resign amid a sexual harassment scandal that rocked the federal court in Puerto Rico. As far as I was concerned, it was five months too late.
The action was somehow reassigned to Fusté a few days later. (Talk about calling out the devil!) We knew of the reassignment in the worst way: by an order signed by Fusté, shortening by seven days the period to answer the 30-page complaint, scheduling a hearing for December 23, and warning the parties to expect a trial date by January, 2016! What was the rush? The case was not about life or death. It was about money, and the plaintiff had plenty of it.
On December 21—the day the judge set for the filing of the answer to the complaint—we submitted the dismissal motion, which Fusté did not receive well, as he issued yet another order, this time threatening sanctions if the complaint was not answered by midnight of December 22. It did not matter to him that we pointed to case law stating that a dismissal motion was a valid substitute to an answer to the complaint, and that a challenge to the court’s jurisdiction is a threshold question that the court must rule upon before everything else. It was vintage Fusté—curt, abrasive, never pleasant, always intent on intimidating, as if in a constant need to remind everyone that he was in charge, that things will be done his way. Everyone else was there to serve his vision of how the litigation was to proceed. A Reagan appointee who was 30 years on the federal bench, he always struck me as a bully in a judicial robe.
The Mean Judge is Validated
Losing is bad enough. Not standing a chance from the outset is another thing altogether. In the December 23 hearing, the esteemed judge imposed a discovery schedule of a meager 39 days, insisting that he needed information to decide whether he had jurisdiction. Regardless of whether it was by design, that frantic pace could only prejudice the Commonwealth. The judge even instructed Walmart to take depositions and told it who it must depose, even though Walmart’s counsel had expressed that they needed no depositions.
After discovery, Fusté did not require summary judgment motions concerning the jurisdictional issue, but went directly to holding a full-dressed trial, which took place between February 2 and 5, 2016—two months after the filing of the complaint! As I expected from the moment he took over, the judge ruled against the Puerto Rico government, enjoining it from collecting the disputed tax. That ruling was affirmed by the Court of Appeals for the First Circuit, though.
The jurisdictional issue was always about which forum would decide in first instance the challenge: federal or state courts. The case could end up in the Supreme Court either way, as federal questions were the basis of the challenge. Here, the federal forum saw itself justified in exercising its authority in first instance, because Puerto Rico could not provide a “plain, speedy and efficient” remedy.
Why? Not because it may take too long to decide the challenge, but because the fiscal situation of the Commonwealth and recent legislation would translate into decades before Walmart received a refund of the monies it paid to comply with an unconstitutional tax. Indeed, Puerto Rico had approved a statute that limited to three million dollars a year any payment it owed due to 20 million-plus court judgments, and even such partial payment would depend on availability of funds in its treasury.
The tax in question was substantial enough, the judges found, to make likely a scenario of no refund or of a much-too-slow repayment. That was not deemed as an adequate remedy, so the First Circuit ruled that the district court properly exercised jurisdiction. The appellate judges also found that the tax discriminated against interstate transactions. Puerto Rico, they reasoned, failed to show that there were no less burdensome means of satisfying an important state interest. Thus, the tax was declared unconstitutional under the Commerce Clause of the U.S. Constitution, which applies to Puerto Rico, a place for profit-making, not for taxing mega-capitalists—and you’ve got to know your place.
What Does It All Mean?
The Wal-Mart Puerto Rico decision was another instance of stripping the government of Puerto Rico of the little autonomy it seemingly had. It is part of a trend to roll back, with glee, an epoch when federal courts strived to treat the so-called Commonwealth of Puerto Rico with as much deference as possible, which often meant treating it more like a U.S. state and less like a dependency or “colony,” unable to govern itself. That return to crude colonialism is also palpable in Congress and in the U.S. executive branch.
Then there is the current social, economic, and ecological devastation, caused by 120 years of colonial rule privileging American capitalists over other considerations; and by a Puerto Rican political and financial elite, servile to U.S. domination for self-centered reasons. The current, well-known “debt crisis” is the result of several factors, including the failure of the “colonial experiment,” and the same Wall Street mentality and practices which caused the subprime mortgage debacle in 2008. The austerity medicine prescribed by the congressional Financial Board, bitter and criminal, has plunged the socioeconomic crisis to new depths, while the downward spiral accelerates, unimpeded. The lack of jobs, or the abundance of poorly paid ones, cannot provide enough revenue for the Treasury, or purchasing power to fuel the consumerist machine.
Coda
At the hearing of December 23, 2015, counsel for Walmart suggested depositing with the Court their client’s upcoming estimate tax payment. Judge Fusté readily agreed. When counsel for the Secretary objected with good, common sense arguments, the judge changed the tune, uttering that “Walmart is a big boy. They will decide on their own whether they want to dump 25 million into your accounts.”
That the judge, a lifelong Puerto Rico resident, characterized the Puerto Rico Treasury as a dumping-place speaks volumes about the lack of respect afforded to the Puerto Rico government—it also suggests that the game was rigged from the outset against such government. Justified or not, that attitude harms Puerto Ricans, clinging to a dim hope of a dignified life on the Island. The institutional and image debacle of the Commonwealth is joined by the contempt and hostility of the entire U.S. federal government. It is all part of a perfect storm, a recipe for the current disaster.
As the aftermath of Hurricane María and the earthquakes of early 2020 showed, the Trump administration has strived to do as little as possible in favor of the victims of those natural disasters. Its resistance to assist has been joined by the same condescension and outright hostility displayed by ugly Americans of the past, such as E. Montgomery Reilly and Blanton Winship, both governors of Puerto Rico in an era of naked, in-your-face colonial domination.
In Puerto Rico, colonialism has come full circle. With no Cold War, no worldwide anti-colonial movement, and predatory, global capitalism in full swing, there is no need to keep appearances. Arguably, the gloves have been off for close to 20 years.
Neoliberalism and financial speculation always take from the vulnerable to give to the wealthy. Puerto Rico, prostrate and paralyzed—like it was after the San Ciríaco hurricane of 1899—will continue to depopulate and depress, to the delight of John Paulson and others buying on the cheap the best land and real estate.
In the long colonial nightmare, the bells have been tolling all along for us Puerto Ricans, including that know-it-all, former federal judge Fusté. Today, after 120 years of colonial domination, it must be clear that we never stood a chance.
