Second Ruling against NLRB Recess Appointments Raises More Questions for CFPB

by Ballard Spahr LLP
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A second circuit court ruling invalidating one of President Obama’s recess appointments to the National Labor Relations Board could provide additional ammunition to anyone inclined to challenge the validity of his choice to lead the Consumer Financial Protection Bureau. In NLRB v. New Vista Nursing and Rehabilitation, a divided Third Circuit panel invalidated an NLRB order against New Vista. The panel held that Board member Craig Becker, who participated in the NLRB order, had been improperly appointed under the Recess Appointment Clause (RAC) of the Constitution on March 27, 2010, during a two-week Senate adjournment. 

Earlier this year, the U.S. Court of Appeals for the D.C. Circuit concluded in Noel Canning v. NLRB that the President acted unconstitutionally when he made three “recess” appointments to the NLRB in 2012. Challenges to NLRB recess appointments are pending in other circuits as well, and the Solicitor General has filed a petition for certiorari in the D.C. Circuit case.

The decisions of both the D.C. Circuit and the Third Circuit panel also have implications for the CFPB, since its director, Richard Cordray, was similarly appointed during a Senate recess. Both decisions increase the likelihood that the U.S. Supreme Court will grant certiorari in Noel Canning, as well as the likelihood that CFPB actions will be challenged based on Mr. Cordray’s appointment.

Both decisions hold that the RAC applies only to intersession recesses, not to intrasession recesses. There are, however, some key differences. First, New Vista deals with the recess appointment of a single NLRB member back in 2010, the latter with the recess appointments of three NLRB members in 2012.  Second, New Vista’s holding is limited to the meaning of “the Recess of the Senate” in the RAC. Noel Canning also held, as a separate basis for invalidation, that the word “happen” requires that the vacancy arise during the intersession recess in which the appointment is made. 

Third, while both courts held that “the Recess of the Senate” refers solely to an intersession recess, the reasoning is somewhat different. The D.C. Circuit found it significant that language used by the founding fathers refers to “the” Recess rather than “a” Recess. The court contrasted this with several places where the word “adjournment” appeared in the Constitution, none of which was preceded by the word “the.” The Third Circuit, in contrast, found the use of that word inconclusive. In addition, it found other Constitutional provisions such as the “Adjournment Clause” irrelevant to the interpretation of the RAC. 

Both courts, however, found significance in what constitutes “the Recess” in the context of a “Session.” Both found untenable a construction that sometimes permitted intrasession recesses to count and sometimes not. The Third Circuit in particular noted that nothing in the Constitution specifies “a link between ‘the Recess of the Senate’ and any particular length of time.”

In reaching its decision, the Third Circuit firmly rejected arguments based on a “functional” interpretation of the RAC, 20th-century Attorney General opinions, and presidential practice from the Reagan era to the present. The decision also confirmed that the court believes the question of what constitutes “the Recess” is an appropriate one for it to decide, rather than a political question that it should avoid. It rejected in no uncertain terms “friend of the court” arguments that the court should decline to define the word “Recess” in the RAC as a nonjusticiable political question. 

Ballard Spahr’s Consumer Financial Services Group produces CFPB Monitor, a blog that focuses exclusively on important CFPB developments. To subscribe, use the link provided to the right. The group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, or Keith R. Fisher at 202.661.2284 or fisherk@ballardspahr.com.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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