Obama Recess Appointments Slapped Down by DC Circuit, CFPB At Risk

What can only be described as a blockbuster opinion was just handed down by the DC Circuit in the case of Canning v NLRB, the validity of President Obama’s recess appointments has been slapped down. Here is the full opinion. The three judge panel was Chief Judge David Sentelle, Karen Henderson and Thomas Griffith, all Republican appointees (one from each Bush and one Reagan).

The immediate effect of the court’s decision is, of course, on the National Labor Relations Board (NLRB). Noel Canning was aggrieved by a decision of the NLRB and petitioned for review, the NLRB cross-petitioned to have its decision upheld. Fairly standard stuff – except the quorum on the NLRB Board was met only because of the fact Barack Obama controversially recess appointed three members in January 2012, as well as concurrently recess appointing Richard Cordray to be the Director of the Consumer Finance Protection Bureau. So, three out of the five members of the NLRB Board were, according to Canning’s argument, not validly sitting and therefore their decision was invalid as to him

Canning had merits arguments on the specific facts of his individual case, but the court found those non-compelling and proceeded on the Constitutional arguments surrounding the validity of the recess appointments. And the Court agreed with Canning that Obama’s recess appointments were invalid. The discussion by the court can be gleaned from these passages:

All this points to the inescapable conclusion that the Framers intended something specific by the term “the Recess,” and that it was something different than a generic break in proceedings.
….
It is universally accepted that “Session” here refers to the usually two or sometimes three sessions per Congress. Therefore, “the Recess” should be taken to mean only times when the Senate is not in one of those sessions. Cf. Virginia v. Tennessee, 148 U.S. 503, 519 (1893) (interpreting terms “by reference to associated words”). Confirming this reciprocal meaning, the First Congress passed a compensation bill that provided the Senate’s engrossing clerk “two dollars per day during the session, with the like compensation to such clerk while he shall be necessarily employed in the recess.” Act of Sept. 22, 1789, ch. 17, § 4, 1 Stat. 70, 71.

Not only logic and language, but also constitutional history supports the interpretation advanced by Noel Canning, not that of the Board. When the Federalist Papers spoke of recess appointments, they referred to those commissions as expiring “at the end of the ensuing session.” The Federalist No. 67, at 408 (Clinton Rossiter ed., 2003). For there to be an “ensuing session,” it seems likely to the point of near certainty that recess appointments were being made at a time when the Senate was not in session — that is, when it was in “the Recess.” Thus, background documents to the Constitution, in addition to the language itself, suggest that “the Recess” refers to the period between sessions that would end with the ensuing session of the Senate.
….
The Constitution’s overall appointments structure provides additional confirmation of the intersession interpretation. The Framers emphasized that the recess appointment power served only as a stopgap for times when the Senate was unable to provide advice and consent. Hamilton wrote in Federalist No. 67 that advice and consent “declares the general mode of appointing officers of the United States,” while the Recess Appointments Clause serves as “nothing more than a supplement to the other for the purpose of establishing an auxiliary method of appointment, in cases to which the general method was inadequate.” The Federalist No. 67, supra, at 408. The “general mode” of participation of the Senate through advice and consent served an important function: “It would be an excellent check upon a spirit of favoritism in the President, and would tend greatly to prevent the appointment of unfit characters from State prejudice, from family connection, from personal attachment, or from a view to popularity.” The Federalist No. 76, supra, at 456.

Then the blow was delivered:

In short, the Constitution’s appointments structure — the general method of advice and consent modified only by a limited recess appointments power when the Senate simply cannot provide advice and consent — makes clear that the Framers used “the Recess” to refer only to the recess between sessions.

and:

In short, we hold that “the Recess” is limited to intersession recesses. The Board conceded at oral argument that the appointments at issue were not made during the intersession recess: the President made his three appointments to the Board on January 4, 2012, after Congress began a new session on January 3 and while that new session continued. 158 Cong. Rec. S1 (daily ed. Jan. 3, 2012). Considering the text, history, and structure of the Constitution, these appointments were invalid from their inception. Because the Board lacked a quorum of three members when it issued its decision in this case on February 8, 2012, its decision must be vacated.

But the court did not stop there, although it well could have. Instead, Sentelle’s opinion proceeds to also gut the foundation of Obama’s recess appointments by determining the meaning of the word “happen” in the Recess Appointment Clause contained in Article II, Section 2, Clause 3 of the Constitution. That consideration is described by this discussion:

Although our holding on the first constitutional argument of the petitioner is sufficient to compel a decision vacating the Board’s order, as we suggested above, we also agree that the petitioner is correct in its understanding of the meaning of the word “happen” in the Recess Appointments Clause. The Clause permits only the filling up of “Vacancies that may happen during the Recess of the Senate.” U.S. Const. art. II, § 2, cl. 3. Our decision on this issue depends on the meaning of the constitutional language “that may happen during the Recess.” The company contends that “happen” means “arise” or “begin” or “come into being.” The Board, on the other hand, contends that the President may fill up any vacancies that “happen to exist” during “the Recess.” It is our firm conviction that the appointments did not occur during “the Recess.” We proceed now to determine whether the appointments are also invalid as the vacancies did not “happen” during “the Recess.”

As you might guess from the direction so far, the court determined that “Our understanding of the plain meaning of the Recess Appointments Clause as requiring that a qualifying vacancy must have come to pass or arisen “during the Recess””. Sentelle then, in pages 23-27 of the opinion, went through and crucified the four variations of their theme the Administration argued, including a battering ot the OLC opinion on recess appointments dated January 6, 2012 and hand crafted and signed by Virginia Seitz. Tough day for both Seitz and Obama.

The court also went on to say that maintaining the consistent with the Article I Legislative Branch prerogative of the “Power of the Purse”:

The Framers placed the power of the purse in the Congress in large part because the British experience taught that the appropriations power was a tool with which the legislature could resist “the overgrown prerogatives of the other branches of government.” The Federalist No. 58, supra, at 357. The 1863 Act constitutes precisely that: resistance to executive aggrandizement.

While this was interpretive of the ability to pay recess appointments and what that portended to the Framer’s intent, it is also a pretty clear shot at maintaining the inherent separation of power in the assignment of the Purse Power to Congress and not the executive, something lost recently on the Platinum Coin crowd.

So, the net result is that Canning’s NLRB decision against him is void. Further, it would appear that any other decision of the NLRB taken by the Board depending on the three Obama recess appointments is also void. That is a major problem because it leaves the NLRB with only one single validly appointed member at this point, and will affect literally hundreds of opinions rendered.

The effect of today’s decision, however, most certainly is not limited to the NLRB. In fact, the effect on the NLRB may, in the long run, be the least damaging result. That is because, of course, on the same day Barack Obama made the three NLRB recess appointments, he also recess appointed Richard Cordray to lead the CFPB.

The reason I took up so many column inches laying out the nature and strength of the court’s opinion is because it is the deepest judicial review of this issue ever, by far, is devastating in nature and, honestly, is pretty strong and compelling. And it without any question will be the same decision as will be applied to Richard Cordray’s status the second a case and controversy hits it challenging Cordray’s status. And one will.

The challenge to Cordray, however, is not nearly so clean an issue as the sudden facial validity of a finite number of NLRB opinions. The CFPB was a brand new agency, and one of the reasons getting a permanent director was so critical was that many of the powers and, particularly rule making powers, did not vest to the entity without one. But other powers had already transferred without Cordray being installed.

There is a CRS memorandum detailing much of the problem in scattered vesting of CFPB power:

Not all of the CFPB’s powers become effective at the same time. Some of the Bureau’s authorities took effect when the Dodd-Frank Act was signed into law on July 21, 2010. However, most of the Bureau’s authorities will go into effect on the “designated transfer date”—a date six to 18 months after enactment, as determined by the Secretary of the Treasury (Secretary). Currently, the designated transfer date is July 21, 2011.

In addition to the effective dates set out in the CFP Act, the authority to exercise the Bureau’s powers may be affected by the appointment of a CFPB Director. The Bureau is designed to be headed by a single Director, who is to be nominated by the President and subject to the advice and consent of the Senate. If a Director is appointed before the designated transfer date, he will be able to exercise all of the powers provided to the Bureau pursuant to the CFP Act. However, a Bureau Director has not yet been appointed. Until a CFPB Director is appointed, the CFP Act provides the Secretary the authority to exercise some, but not all of the Bureau’s authorities. Although not beyond debate, the CFP Act appears to provide the Secretary the authority to exercise the Bureau’s transferred powers, but not the authority to exercise the Bureau’s newly established powers.

As I noted back at the time the recess appointments were made in January of 2012, the inconsistent, and sometimes incongruent, vesting of power in CFPB was a particular issue in relation to the debatable nature of Cordray’s recess appointment.

In fairness, I thought the recess appointments would minimally stand up under the logic expressed by the 11th Circuit in Evans v. Stephens. Well, Sentelle and the DC Circuit took that argument apart with every bit the vigor it did Seitz’s OLC Opinion argument. As I said then:

Normally a confirmed appointee and a recess appointee have the same legal authority and powers but, to my knowledge, there is no other situation in which substantive power for an agency flows only through its specific “confirmed” director.

Well, today’s decision in Canning is going to put all those questions into play when a CFPB case hits the DC Circuit. Oh, and one is on the way – State National Bank Of Big Spring et al v. Geithner et al, 12-cv-01032 (complaint here). This is a big truckload of trouble heading dead on for the Obama Administration.

Here is the next glaring trouble spot from today’s Canning decision. Just yesterday, Obama formally nominated Richard Cordray for regular confirmation as head of the CFPB. It was a nice little ceremony carried on television and everything. And then Harry Reid, Carl Levin, Pat Leahy and the old school Senate Democrats went out and killed every possible ability for Obama to actually get Cordray through the Senate Republican filibuster gauntlet when they refused to meaningfully reform the filibuster (see: here and here).

Actions have consequences, and so do crustacean like inaction and fear as exhibited by the Old School Dems and the White House. You think the Senate No Men led by Mitch McConnell were obstructive of the CFPB and NLRB before? Just wait until now when they smell the agencies’ blood in the water.

Surely the Obama Administration will correct all this with a request for en banc consideration by the DC Circuit or an appeal to the Supreme Court, right? Well, no and yes. The DC Circuit effectively does not do en banc considerations in the first place, and even if they wanted to (they won’t) they may not even have enough active judges to pull it off (note that DC Circuit is down yet another active judge since that article was written).

So, there will be no en banc to pin hopes for. There will almost certainly, however, be an appeal to the Supreme Court. And there being at least an argument that there is now a circuit split between the DC Circuit’s Canning decision and the 11th Circuit’s Evans decision, there may even be a good chance that SCOTUS grants cert.

That is where the good news may end though. I expect the appeal to be on several issues and, as John Ellwood at Volokh Conspiracy notes, the Canning decision is MUCH broader than expected and, really, will preclude almost all recess appointment power as has been used in the last century.

It is possible that SCOTUS could craft a middle ground not so restrictive of the Presidential recess appointment power, but it is fairly easy to see them still disallowing Obama’s January 2012 recess appointments of the NLRB members and Cordray. In fact, I would be shocked if they did otherwise at this point.

As Lyle Denniston at SCOTUSBlog notes:

The main Circuit Court opinion was written by Chief Judge David B. Sentelle, and it was a strong affirmation of the “original meaning” mode of interpreting the Constitution — that is, analyzing a constitutional issue in terms of what the words of the document meant at the time they were first written. The Sentelle opinion was filled with recollections of early government history, and of what the earliest generations believed they had put into the presidential appointments clause of the document.

It was certainly that, and such framing is designed to play straight into the heart of the conservative bloc love of “original intent” in Constitutionalism. They may walk back Canning a little, but on the critical Obama appointments, it is hard to see them not affirming.

This is a very ugly and humbling day for the Obama Administration.

Bmaz is a rather large saguaro cactus in the Southwestern Sonoran desert. A lover of the Constitution, law, family, sports, food and spirits. As you might imagine, a bit prickly occasionally. Bmaz has attended all three state universities in Arizona, with both undergraduate and graduate degrees from Arizona State University, and with significant post-graduate work (in physics and organic chemistry, go figure) at both the University of Colorado in Boulder and the University of Arizona. Married, with both a lovely child and a giant Sasquatch dog. Bmaz has been a participant on the internet since the early 2000’s, including active participation in the precursor to Emptywheel, The Next Hurrah. Formally joined the Emptywheel blog as an original contributing member at its founding in 2007. Bmaz grew up around politics, education, sports and, most significantly, cars; notably around Formula One racing and Concours de Elegance automobile restoration and showing. Currently lives in the Cactus Patch with his lovely wife and beast of a dog, and practices both criminal and civil trial law.
30 replies
  1. bittersweet says:

    Wow.
    So what happens to the rules enacted by the CFPB? How soon do the banks reap these benefits?
    Given Obama’s nominee for SEC, how much does the Obama Administration really care about this decision?
    Since Obama’s Department of Justice does not seem to consider anytime the banks break the rules to be a “crime”, why would Obama care if the CFPB just lost its ability to make any rules?
    Obama seems to care about Executive Power, but mostly in terms of his war powers.
    Should be interesting watching.

  2. sihlkee says:

    bmaz,

    Your separation of powers argument over the high value platinum coin is still bullshit. Congress wrote the laws that allow its use.

    As you said, you’re at a stubborn, baseless impasse on that issue.

  3. What Constitution? says:

    No real problem here — Obama will just need to be more “bipartisan” in his nominations so they can sail through without being obstructed. You know, appoint Mozillo, Keating and, oh, maybe Lanny Breuer to CFPB, that sort of thing. For every problem, there is a solution.

  4. bmaz says:

    @sihlkee: Sure. That’s totally why courts note such arguments and Administrations use them. But, hey, don’t let a little thing like the Constitution get in the way of gimmicky fantasies.

  5. grayslady says:

    I’m glad you brought up the issue of the filibuster decision. As I understand it, not only are there high profile nominations coming up, but don’t we still have hundreds of Federal judges seats empty because Repubs have refused to allow Obama’s nominations?

  6. sihlkee says:

    @bmaz:

    No, I don’t mean that “separation of powers” arguments can’t be valid… just that yours isn’t on that issue.

    The Constitution wouldn’t get in the way of my “gimmicky fantasies”… we’ve got morons like Ezra Kline (and you for being persuaded by his idiotic argument) and power-serving assholes like Obama to do that for us. The SC will never rule on it because the system of currency creation we have now works for our Masters of Finance, and what works for those Untouchables works for Obama.

  7. geoschmidt says:

    It’s over my head quite a bit, but sounds like “good cop/ bad cop” everybody happy, nothing gets done.

    Where’s the squack from the bully pulpit? crickets. ha.

    NLRB, CFPB, ain’t that about labor, and consumers, not enough cache with the Chicago boys!

  8. John Casper says:

    Would be nice if someone had the resources to “buy” consumer claims at the CFPB the way law firms/collection agencies buy judgements/debt hoping for a bigger pay day in the future.

    Once you’ve got some, will Wall Street/ Hedge Fund/Dark money look at securetizing them? Might be part of a longer strategy to short the TBTF banks. That would give you operating capital to at least try and file against other government agencies, FINRA, SEC ,…. because CFPB is shut down.

    If you could get a big fish like James Chanos to even say he’s exploring such an idea, it might get some traction.

    http://en.wikipedia.org/wiki/James_Chanos

    If not done carefully, I’m sure there are all kinds of way, the little people at the bottom of those cases could be hurt even worse.

  9. Peterr says:

    Bmaz, I haven’t had time to read through the opinion here yet, but I remember SCOTUS weighing in on a similar case involving vacancies at the NLRB in 2010 in New Process Steel v NLRB. There, the court sided with NPS in saying that the MLRB acted without a quorum when only two members took part.

    The reason this case stuck in my head was that in the oral arguments, Chief Justice Roberts skewered the Obama administration for NOT using the recess appointment process.

    JUSTICE SCALIA: Do — do we have any notion when — when the board will reduce to one?

    (Laughter)

    JUSTICE SCALIA: When — when — when is one of the two’s term over?

    MR. KATYAL: In the absence of any further confirmations or other appointments, one of the members, Member Schaumber, will leave on August 27th of this year.

    JUSTICE SCALIA: Of this year. At which point there will be some pressure on Congress, I guess, right?

    MR. KATYAL: There will.

    JUSTICE GINSBURG: There are — there are two nominees, are there not?

    MR. KATYAL: There are three nominees pending right now.

    JUSTICE GINSBURG: Three?

    MR. KATYAL: Yes. And they have been pending. They were named in July of last year. They were voted out of committee in October. One of them had a hold and had to be renominated. That renomination took place. There was a failed quorum — a failed cloture vote in February. And so all three nominations are pending. And I think that underscores the general contentious nature of the appointment process with respect to this set of issues.

    CHIEF JUSTICE ROBERTS: And the recess appointment power doesn’t work why?

    MR. KATYAL: The — the recess appointment power can work in — in a recess. I think our office has opined the recess has to be longer than 3 days. And — and so, it is potentially available to avert the future crisis that — that could — that could take place with respect to the board.
    If there are no other questions —

    CHIEF JUSTICE ROBERTS: Thank you, counsel.

    (transcript here, see pp. 48-50)

    SCOTUS may not have ruled on the legality of recess appointments as they were done here, but they scolded the Obama administration for not using that vehicle to deal with the problem of vacancies at NLRB, rather than trying to void the issue of a quorum.

    I know that was in the oral arguments, not the final opinion of the court. Still, it strikes me that SCOTUS seemed to be operating with an assumption that there has to be more than a two day window every two years when the Senate is in recess. Otherwise, the recess appointment clause is effectively void — which was not the sense of the exchange above.

    Unless you think Roberts was fishing for Katyal to offer the logic put forward by the appeals court here.

  10. John Casper says:

    SARCASM

    Amazing coincidence that this decision is announced the day after Harry gives away filibuster reform.

    /sarcasm

  11. TarheelDem says:

    A kinda dumb question. What decisions by conservative recess appointees could be challenged under this decision? How long a list are they? Which conservative members of the judiciary were recess-appointed outside the rules of this decision?

    How far do the ripples go in affecting the conservative agenda?

  12. bmaz says:

    @Peterr: Pretty good point, I had forgotten about that. Still, I think the separation of powers argument in relation to the Executive just unilaterally dismissing as inadequate designed measures by Congress, especially as to 3 day or less periods, is probably going to resonate with all of the Roberts bloc, including Roberts and AMK.

    Peter, you may remember, I was like the original proponent of the “fuck the 3 day bullshit; Evans v Stephens sets not limits” argument. I started mentioning it as far back as Dawn Johnsen as an answer to people who didn’t believe me that there were 60 votes for her.

    Everybody I pitched it to said I was nuts…..until the Warren/Cordray thing and Obama actually went for a hybrid version of it. And, to be honest, while the Canning court bounced both of them, I remain convinced the straight up Evans argument was sounder than the path marked out by Seitz.

    All that said, when I see the separation of powers argument in black and white, my Evans path was probably ill considered, at least to the extent that this SCOTUS would consider it.

  13. masaccio says:

    This is a political question: it has to do with the rules of the Senate, which are solely under the control of the Senate. End of Story. It wouldn’t be heard by any court besides the hacks in the Fourth Circuit.

  14. matt carmody says:

    Ah, I’m so glad we have a constitutional law professor as president.
    This country and the world suffered the indignity at the UN that is the neanderthal John Bolton who Shrub recess-appointed.
    Can’t wait for that troglodyte to surface again when the next Bush cabal is installed by SCOTUS.

  15. bmaz says:

    @masaccio: For starters, this is the DC Circuit, not the Fourth.

    Secondly, it is absolutely not a pure political question between adversary branches and/of interests of government as was the “platinum coin”. Instead, there are concrete case and controversy interests in the form of an individual and the employer. It is truly not a real political question in any sense of the term.

  16. bmaz says:

    @masaccio: If so, then Obama has no right to unilaterally invade their province from the Executive Branch. That is pretty much the point of the DC Circuit. That, unfortunately, is exactly what Sentelle is saying.

  17. phred says:

    Excellent post bmaz, thanks. This pins the tail directly on the Senate donkey. (Hmmm, unintended, but the symoblic reference to Senate Dems is apropos in light of recent events.)

    The fundamental problem here is the unwillingness of the Senate to do its job. The filibuster is intended to prevent work from proceeding. At some point the Senate needs to be shamed into doing their damn job. Vote on the appointments. Don’t like ’em? Vote ’em down. Demand a new list from the President.

    But to not even consider appointments is entirely unacceptable.

    I’m glad the DC Circuit gave a solid smack upside the head to the Senate. They are the problem here. Harry Reid owns this for enabling the corrupt rules of the Senate to persist making it impossible for that body to function.

    The Senate is in dire need of new leadership (both majority and minority) comprised of members who understand it is their responsibility to make the Senate work.

  18. cregan says:

    @bmaz

    Good post bmaz. I really like this decision because it restores the way Congress and the President should work together.

    The GOP will not be able to appoint executives that Democrats in the Senate find too wild–for WHATEVER reason–and Democrats the same.

    Does that mean the appointments will end up being a meld of the two sides? yes. In GOP Presidential times, that is good. In Democratic times, it is also good.

    Bottom line, they will actually have to work it out. Like everybody else. the days of the end run, on both sides, is over.

  19. DonS says:

    Isn’t this going to require quite a ‘fix’ since so many appointments are potentially involved, not the least, many many under the rethug cloak? Unless we think the courts are prepared to roll back absolutely as much as they can in the spirit of originalism?

  20. bmaz says:

    None of Bush’s recess appointments were made inside 3 day window gaps when there were pro forma sessions being gaveled in. I do think the Supreme Court will dial back a lot of this decision, but I worry that they will still find Obama’s tact of unilaterally declaring the right to do it in the face of the pro forma sessions and three day windows, unconstitutional.

    That said, a discussion of all the other things that would be in play should all those prior recess appointments be void would be a good thing I think.

    Lastly, even if SCOTUS were to say Obama’s (and prior recess appointments too) were void, it is possible that they could still say that all the work done while those people had apparent right to be in office was still valid. This would have to be done through something known as the Defacto Officer Doctrine. Now, honestly, this is fairly obscure, so much so that the DC Circuit did not even discuss it so we shall see.

    Bottom line is, even under the best prospective circumstances, this is still a major clusterfuck.

  21. DonS says:

    “defacto officer doctrine”, eh. That addresses a lot of possibilities. Hard to imagine the court(s), which I’m assuming would be appplying the doctrine, would not be so crass as to pick and choose exactly which prior work would stand and which was void along party lines. Wouldn’t it just be easier for the court to apply the ruling prospectively — look forward not back and all that.

  22. masaccio says:

    @bmaz: As you know, the political question doctrine is that the Court doesn’t interfere with fights between the other two branches. If the Senate doesn’t like what the President did, they should fight their own fights instead of running to Scalia and the rest of the hacks.

  23. bmaz says:

    @masaccio: Under the court’s guidance on the political question doctrine in both Baker v. Carr and INS v. Chadha, and due to the clearly justiciable case and controversy of the underlying case demanding the ruling, this was quite clearly not a prohibited political question.

  24. cregan says:

    @masaccio:
    I am not sure at all you would say that if the President doing the end run were GOP.

    Which is the problem with “principles” these days.

    I say no President, GOP or Democrat, should have the option to get around the Senate on appointments.

    The recess appointment clause was not put in to say, “Well, if you just can’t get the Senate or parts of the Senate to agree with you, just go do what you want.”

    If both sides knew they couldn’t end run, you would be sure they would appoint people in the first place who had wide agreement.

    The entire Constitution was basically designed to shove everything as much toward the middle as possible. Not liking that aspect of it is something upon which right wingers and left wingers have common ground.

  25. Mike D. says:

    Ugly I get. Humbling why? They shouldn’t have tried the appointments over the pro forma sessions? Or on the filibuster reform front? That’s fair, though I’m not clear what they could have done to shore up Reid when he clearly didn’t want to be shored up. I’m not clear what you mean there. Friday just seems like it was a *bad*, or, yes, ugly, day for them to me.

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