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D.C. Circuit may soon invalidate President Obama’s NLRB recess appointments: implications for CFPB

Posted in CFPB General

Earlier today, we reported on the panel discussion of the lawsuit filed by State National Bank of Big Spring that took place at the ABA Committee on Consumer Financial Services in Naples, Florida during a session entitled “State National Bank of Big Spring, et al. v. Geithner, et al. – Is the CFPB Constitutional?”  Even more interesting to me than the discussion of that lawsuit was what one of the panelists, Deepak Gupta, had to say about the case pending before the U.S. Court of Appeals for the D.C. Circuit which deals with the legality of President Obama’s recess appointments to the NLRB, Noel Canning v. NLRB, No. 12-1115. 

The NLRB appointments took place on January 4, 2012, the same day the President appointed Richard Cordray to be CFPB Director.  In making all of these appointments, the President took the same legal position – namely, that the Senate was in a de facto recess despite the pro forma Senate sessions held twice a week during the holiday season when the Senators were not actually present in the Senate Chamber.  Deepak observed that the panel which heard oral argument on December 5, 2012, Judges Sentelle, Henderson and Griffith, are quite conservative.  It is my understanding that the panel questioned the government lawyer quite intensively.

If the D.C. Circuit were to hold that the President’s NLRB appointments are invalid, then the President’s appointment of Mr. Cordray would also be invalid.  The Third and Fourth Circuits will also soon address the legality of the President’s NLRB appointments. NLRB v. New Vista Nursing, No. 11-3440 (3rd Cir.) and Nestle Dreyer’s Ice Cream Company v. NLRB, Nos. 12-1684 and 12-1783 (4th Cir.).  It is conceivable that the legality of these appointments may end up in front of the U.S. Supreme Court later this year.  In the meantime, a holding by any Circuit Court that the NLRB appointments are invalid would result in chaos at the CFPB. 

Would any or all of the CFPB’s actions since Mr. Cordray was appointed be invalid?  How do you unscramble the egg?  What about future CFPB actions?  Would the CFPB still be able to supervise large banks? Would the CFPB’s new remittances and mortgage regulations be valid? Would the CFPB be able to issue any new regulations? Would President Obama be able to get the “new” Senate to confirm Mr. Cordray or some other nominee?  Would the President agree to support the demand of many Republican Senators to amend Title X of Dodd-Frank to substitute a 5-member commission for a single director and to subject the CFPB to the Congressional appropriations process?

I don’t think we should get too far ahead of ourselves.  However, there is a real risk that a Circuit Court could invalidate the President’s recess appointments.  Hopefully, the CFPB is planning for that possibility.