Three prominent former members of Puerto Rico’s federal oversight board have filed a lawsuit against former President Donald Trump, challenging their abrupt dismissals and raising fresh questions about the balance of power between the White House and U.S. territorial governance. The case, filed in the United States District Court for the District of Puerto Rico on September 19, 2025, could have sweeping implications—not just for Puerto Rico’s ongoing debt restructuring, but for the legal boundaries of presidential authority in U.S. territories.
The plaintiffs—Arthur J. Gonzalez, a retired U.S. bankruptcy judge; Betty A. Rosa, New York State’s commissioner of education; and Andrew G. Biggs, a Stanford University economic policy fellow—were all recently removed from their posts on the Puerto Rico Oversight Board. Their lawsuit, as reported by Associated Press and Legaltech News, alleges that President Trump’s administration violated federal law and the U.S. Constitution by firing them without cause or due process.
“This is a case about power over the board and over Puerto Rico,” said Eduardo Santacana, an attorney with Cooley LLP, one of several law firms representing the dismissed board members. “The president is attempting to exert a lot of power here that he does not have.”
The controversy erupted in early August 2025, when five members of the board—including Gonzalez and Rosa—received terse, two-sentence emails from the U.S. presidential personnel office, notifying them they had been removed. Two weeks later, Biggs received a similar message. According to the lawsuit, none of the emails provided any cause or justification for the dismissals. “Neither email articulated any ‘cause’ or provided any other justification for the removals,” the complaint stated. “Those purported removals were unlawful.”
The board, formally known as the Financial Oversight and Management Board for Puerto Rico, was created in 2016 under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) after the island territory announced it could not pay its staggering $70 billion public debt. Since then, the board has been responsible for overseeing a bankruptcy-like process, including the largest municipal bankruptcy in U.S. history filed in 2017, and negotiating with bondholders over more than $9 billion in debt tied to Puerto Rico’s Electric Power Authority.
Until the recent dismissals, the board had insisted on a $2.6 billion payment to settle with bondholders—a figure far below the $8.5 billion demanded by creditors. The shake-up has fueled anxiety among observers and creditors alike, with many speculating that new Trump-appointed members might push for terms more favorable to bondholders.
“The stakes of this case could not be higher: If the President can violate the laws that Congress passed establishing local governments in the territories, he could remove any territorial officer tomorrow. On that theory, he may also be able to remove officers from the District of Columbia,” the lawsuit argued.
The suit names Trump; Sergio Gor, director of the White House personnel office; John E. Nixon, the lone remaining board member; and Robert F. Mujica, the board’s executive director, as defendants. Four of the six recently dismissed board members are Democrats, while Nixon, the only remaining member, is a Republican.
Legal experts suggest the outcome of this lawsuit could have far-reaching consequences. Phillip Escoriaza, a partner at Feldesman LLP, told The Bond Buyer that “the president has the upper hand in this dispute with the fired members because the law is purposefully murky on this.” Still, Puerto Rico attorney John Mudd noted that the plaintiffs “may win,” especially if the courts find the dismissals violated PROMESA’s explicit requirement that board members can only be removed “for cause.”
“A lawsuit like this is probably critical for any future settlements or agreements, because it will (maybe) determine up front if the incoming [board] members, and thus whatever agreements they sign, are valid or not,” said Matt Fabian, a partner at Municipal Market Analytics. “Without this, the inevitable future litigation cycle in Puerto Rico will last even longer than it otherwise would.”
At the heart of the legal dispute is the question of whether the president has inherent authority to remove board members. The plaintiffs argue that, under PROMESA, board members are not officers of the U.S. executive branch, but are instead part of Puerto Rico’s territorial government—a distinction affirmed by the U.S. Supreme Court. As such, they contend, only Congress has the power to set conditions for their removal, and those conditions require both cause and due process, including notice and a hearing.
The complaint further alleges that the terminations breached not only PROMESA, but also the Fifth Amendment’s guarantee of due process, and violated sections of the Constitution that give Congress, not the president, authority over appointments and removals in U.S. territories. “Trump may claim that the president has inherent authority under Article II of the Constitution to terminate Judge Gonzalez, Dr. Biggs or Dr. Rosa,” the complaint stated. “But the U.S. Supreme Court found the board members are not officers of the United States but part of Puerto Rico’s territorial government, established under Article IV of the Constitution.”
The lawsuit asks the court to reinstate the three plaintiffs and seeks a jury trial. The legal team includes Indiano & Williams, Washington Litigation Group, Democracy Defenders Fund, and Cooley LLP. As of publication, the White House press office had not responded to requests for comment, and a spokeswoman for the Oversight Board declined to comment.
Gonzalez, who served as board chairman until his removal, is well known for his work on high-profile bankruptcy cases. Rosa, in addition to her role as New York State’s top education official, is president of the University of the State of New York. Biggs is recognized for his expertise in Social Security reform and economic policy. Their combined credentials underscore the gravity of the dispute and the importance of the board’s work in steering Puerto Rico through its ongoing fiscal crisis.
The board, by statute, is supposed to have seven members, each serving a three-year term and removable only for cause. The recent wave of firings—six members in total—has left only Nixon in place, further complicating efforts to finalize debt restructuring agreements and raising concerns about the board’s legitimacy and effectiveness.
As the lawsuit moves forward, its outcome will be closely watched not just by Puerto Ricans and bondholders, but by legal scholars and policymakers across the United States. The case could set a precedent for how much control the executive branch can exert over independent agencies in U.S. territories—and by extension, over the local governments that depend on them for stability and oversight.
For now, the future of Puerto Rico’s financial recovery hangs in the balance, with the fate of its oversight board—and the legality of its actions—set to be determined in federal court.
