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Federal Government Plans Appeal of Recess Appointment Ruling
On March 12, the National Labor Relations Board (NLRB) announced that it will seek, in consultation with the Department of Justice, U.S. Supreme Court review of the D.C. Circuit Court’s decision invalidating the appointment of certain NLRB members. On January 25, 2013, the U.S. Court of Appeals for the D.C. Circuit held that appointments to the NLRB made by President Obama in January 2012 during a purported Senate recess were unconstitutional. CFPB Director Richard Cordray was appointed in the same manner and on the same day as the NLRB members, and his appointment is the subject of a lawsuit currently pending in the U.S. District Court for the District of Columbia. The NLRB’s petition is due on April 25, 2013.
Defendants in CFPB Enforcement Action Renew Challenge to Validity of Director's Appointment
On February 11, a law firm and related parties sued by the CFPB for allegedly deceiving consumers through a network of mortgage loan modification businesses filed a brief in which they renewed a challenge to the CFPB Director's appointment. Opp. to Receiver's Request for Payment, CFPB v. Chance Edward Gordon, No. 12-6147 (C.D. Cal., filed Feb. 11, 2013). The defendants cite a recent opinion from the U.S. Court of Appeals for the D.C. Circuit that held appointments to the National Labor Relations Board made by President Obama in January 2012 during a purported Senate recess were unconstitutional, and argue that CFPB Director Cordray was appointed on the same day, and in the same manner found to be constitutionally invalid by the D.C. Circuit Court. The defendants stated in their motion that they have propounded Requests for Admissions regarding the date and nature of Mr. Cordray's appointment, and likely will follow with a motion for summary judgment.
Additional State AGs Join Challenge to Dodd-Frank Act Provisions
On February 13, the plaintiffs in a case challenging portions of the Dodd-Frank Act sought leave to file a second amended complaint to add as plaintiffs the state attorneys general (AGs) of Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas, and West Virginia. Motion for Leave to File Second Amended Complaint, State Nat'l Bank of Big Spring v. Wolin, No 12-1032 (D.D.C., filed Feb. 13, 2013). The new state AGs join the AGs of Michigan, Oklahoma, and South Carolina, who previously joined the suit and claim that the "orderly liquidation authority" (OLA) for financial institutions provided to the Treasury Secretary by the Dodd-Frank Act violates the separation of powers doctrine, as well as the Fifth Amendment's bar against the taking of property without due process. The case also involves private party plaintiffs who, in addition to challenging the OLA, challenge as unconstitutional (i) the formation and operation of the CFPB, (ii) the appointment of CFPB Director Richard Cordray, and (iii) the operation of the Financial Stability Oversight Council. The plaintiffs were due to respond to a pending government motion to dismiss, but asked the court to stay briefing on that motion pending resolution of the motion to file a second amended complaint.
D.C. Circuit Declares President Obama's NLRB Recess Appointments Unconstitutional
On January 25, the U.S. Court of Appeals for the D.C. Circuit held that appointments to the National Labor Relations Board (NLRB) made by President Obama in January 2012 during a purported Senate recess were unconstitutional, and vacated an order of the NLRB as constituted with those improperly appointed members. Noel Canning v. NLRB, No. 12-1115, slip. op (D.C. Cir. Jan. 25, 2013). The court, making a distinction between recesses generally and “the Recess” as used in the Constitution, held that the President can only make recess appointments during intersession recesses, and not during intrasession recesses. The court explained that the President's NLRB appointments were made during an intrasession recess, as the Senate was operating pursuant to a unanimous consent agreement that provided it would meet in pro forma sessions. Moreover, the court held that the President may only fill vacancies that arise or begin during such intersession recesses, as opposed to vacancies that happen to exist during such recesses. The court determined that the vacancies at issue here existed well before the recess. The court held that the appointments were constitutionally “invalid from their inception” and therefore the NLRB lacked a quorum to issue the NLRB order challenged on appeal. The court vacated the NLRB’s order at issue. The President appointed CFPB Director Richard Cordray as a recess appointment on the same day the President appointed the NLRB members. Mr. Cordray’s appointment is the subject of a lawsuit currently pending in the U.S. District Court for the District of Columbia.
President Obama Re-nominates Richard Cordray for CFPB Director, Nominates Mary Jo White for SEC Chair
On January 24, President Obama announced his re-nomination of current CFPB Director Richard Cordray. Mr. Cordray has led the Bureau since January 2012 when President Obama used his recess appointment authority to install the CFPB director. Absent Senate confirmation, Mr. Cordray’s recess appointment expires at the end of this year. Further, the constitutionality of that appointment may be called into question by a recent federal appellate court decision addressing other recess appointments. Also on January 24, President Obama nominated Mary Jo White for Senate confirmation to serve as Chairman of the SEC. Ms. White is a former U.S. Attorney for the Southern District of New York, during which time she led high-profile prosecutions of organized crime members and terrorists. Most recently she was in private practice.
Three State AGs Join Challenge to Dodd-Frank Act and CFPB Appointment
On September 20, the Attorneys General (AGs) of Michigan, Oklahoma, and South Carolina joined an earlier-filed lawsuit in the U.S. District Court for the District of Columbia that challenges aspects of the Dodd-Frank Act, including the CFPB and its director. The AGs joined an amended complaint that seeks to challenge as unconstitutional the “formation and operation” of the CFPB, and that argues the President side-stepped constitutional checks and balances by refusing to submit his nominee for CFPB Director to the Senate. The AGs also charge that the “orderly liquidation authority” (OLA) for financial institutions provided to the Treasury Secretary by the Dodd-Frank Act violates the separation of powers doctrine, as well as the Fifth Amendment’s bar against the taking of property without due process. The AGs cite their state pension funds—each of which is invested in “a variety of institutions” subject to the OLA—as their basis for standing, claiming that the OLA exposes the states and their funds to “the risk that their credit holdings could be arbitrarily and discriminatorily extinguished.” Finally, the private plaintiffs that originally filed the suit also contest based on a separation of powers argument the “unconstitutional creation” of the Financial Stability Oversight Council.
President Obama Appoints Richard Cordray CFPB Director; CFPB Fills Other Top Positions
On January 4, President Obama invoked his office's recess appointment authority and appointed former Ohio Attorney General Richard Cordray as Director of the CFPB. Mr. Cordray had been serving as Assistant Director for Enforcement at the CFPB while his nomination for Director was pending in the Senate. Although approved by the Senate Banking Committee, Mr. Cordray's confirmation had been blocked by lawmakers seeking to make substantive changes to the CFPB, such as replacing the director structure with a five-member commission. Republican senators objected to Cordray's appointment on constitutional grounds. They have argued that because the Senate has been holding "pro forma" sessions during its recess, President Obama lacked the authority to make a recess appointment. Click here for additional explanation from the White House.
On January 6, Mr. Cordray appointed Raj Date as Deputy Director of the CFPB. Most recently, Mr. Date, as Special Advisor to the Treasury Secretary, was responsible for operation of the CFPB pending confirmation of a director. Additionally, Mr. Cordray elevated Kent Markus to Assistant Director of the Office of Enforcement. Mr. Markus had been the CFPB Deputy Assistant Director of the Office of Enforcement.