Agency Authority,  Constitutional Issues in Regulations

SCOTUS Holds Obama Made Unconstitutional NLRB Recess Appointments – Regulations and Adjudications at Risk

The United States Supreme Court (SCOTUS), in NLRB v. Noel Canning,  today affirmed the United States Court of Appeals for the District of Columbia decision that President Obama (POTUS) unconstitutionally appointed members of the National Labor Relations Board (NLRB) as “recess appointments” when the Senate was not in recess.  SCOTUS unanimously affirmed on narrower grounds than the D.C. Circuit decision, and requires POTUS to respect the Senate’s prerogative to hold pro forma sessions every three days – a longer recess is required.  Much of the impact of this decision may have already been mitigated, but the potential damage to a substantial regulatory program remains – and will likely be the subject of further litigation in the lower courts.

Background:  The Recess Appointments Clause of the United States Constitution (Art. II, § 2, cl. 3) permits POTUS “to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.”  On January 4, 2012, POTUS filled three vacancies on the NLRB while the Senate was in a “pro forma” recess.  The Board decided the labor dispute known as Noel Canning, who then petitioned for judicial review of the decision arguing that the NLRB lacked a quorum to act because the recess appointments were invalid.

As previously discussed here, the D.C. Circuit ruled that the NLRB lacked a quorum to act under its organic statute because Presidential “recess” appointments of three NLRB members were invalid.  The court found that the United States Senate was not in “the” recess contemplated by the United States Constitution’s “recess appointments clause.”  The Third Circuit, in NLRB v. New Vista Nursing and Rehabilitation, stuck down the recess appointments on different reasoning, and the Fourth Circuit reached the same result in NLRB v. Enterprise Leasing.  Together, the result is simply that the NLRB had no quorum and no authority to act with members appointed in violation of the recess appointments clause, however that constitutional provision is interpreted.  In effect, NLRB decisions between the date of the recess appointments, and the date on which appointments filled a quorum based on nominations and the advice and consent of the Senate (January 2012 – July 2013) could not be enforced.

Decision:  SCOTUS, according to the majority, answers three questions of Constitutional import:

  1. The “recess of the Senate” applies to both inter-session (i.e., a break between formal sessions of Congress), and intra-session recesses (i.e. a summer recess, an election recess, etc.).
  2. ”Vacancies” under the recess appointments clause vacancies that first come into existence during a recess and vacancies that arise prior to a recess but continue to exist during the recess.
  3. SCOTUS, and therefore POTUS, cannot ignore the “pro forma session” of the Senate when “no business . . . transacted,” on a three-day rotating schedule that conforms with the requirement that neither House of Congress may recess for more than three days without the consent of the other House.

Our answer to the third question means that, when the appointments before us took place, the Senate was in the midst of a 3-day recess.  Three days is too short a time to bring a recess within the scope of the Clause.  Thus we conclude that the President lacked the power to make the recess appointments here at issue.

The “3-day recess” metric derives directly from Constitution.  Neither the House of Representatives nor Senate may recess for more than three days without the concurrence of the other body under the Constitution (Art. I, § 5, cl. 4), and, therefore, recess appointments may not be made unless both the Senate and House agree to allow them.

This short answer summarizes a 54-page opinion.  The majority of Justices rely heavily on past practice, which they find consistent, but the four Justices concurring in the judgment (in 49 pages) criticized the majority’s reliance on historical practice, and would base the decision on the Constitutional text, reaching the same result.  In any event, the key to the affirmance lies in these three interpretations.

Impact:  Noel Canning represents a second lapse in NLRB authority.  SCOTUS effectively invalidated over 600 NLRB decisions from January 2008 through April 2010 in New Process Steel, L.P. v. NLRB, ruling that the National Labor Relations Act (NLRA) prevented the NLRB from exercising its powers without a statutory quorum of three or more Members.  The practical impact (in terms of decisions affected) of Noel Canning may be even greater than the impact of New Process Steel.  The affected decisions are not only adjudicatory, but regulatory – and a lapse in quorum could undo much more.  Fully staffed, however, and with the experience of New Process Steel, the NLRB can attempt to resolve remaining doubts perhaps quickly.

The D.C. Circuit decision in Noel Canning, and its followers, cast serious doubt on the efficacy of decisions of the Consumer Financial Protection Bureau (CFPB) because its Director was appointed by the same means on the same day by POTUS – an invalid recess appointment.  Today’s SCOTUS decision affects that appointment as well, and, at least theoretically, could invalidate all of the CFPB regulations adopted by the Director under that recess appointment.  Today’s decision makes clear that CFPB actions between the date of the Director’s recess appointment and the date of the Director’s appointment pursuant to the advice and consent of the Senate are – for that period at least – invalid, but that effect may already have been mitigated.

Limitations:  Two distinct limitations may apply in future cases that SCOTUS was not required to address here, but that an Administration may argue to protect the decisions made by an unconstitutional recess appointee.

Subsequent ratification by a principal of invalid actions by its agent, a doctrine derived from common “agency” law not to be confused with administrative agency law, could be applied in certain instances to validate the future effect of past actions.  Shortly after his Senate confirmation, Director Cordray ratified his prior decisions.  This ratification may insulate the future effect of the prior decisions from the date of ratification as if the agency adopted it on the date of ratification, but does not resolve issues and applications arising in the interim.  Rights that lapsed and limitations that have run during the lack of authority are not revived; the decisions made cannot be enforced, either directly or as precedent in other cases.

The “de facto officer” doctrine confers validity upon acts performed by a person acting under the color of official title even though it is later discovered that the legality of that person’s appointment to office is deficient.  This narrow doctrine guards against the chaos that could result from a deluge of litigation challenging each action taken by every official found to be appointed contrary to law and protects the orderly functioning of the government despite technical defects in an appointment.  Note, however, that the doctrine is vague and relatively undeveloped; it might not support adverse consequences to private parties.

The details of how this plays out will be fought out in the lower courts – and a careful reading of Noel Canning.

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