D.C. Circuit Hands The CFPB A Setback?

At the end of last week, the U.S. Court of Appeals for the District of Columbia Circuit issued its decision in Noel Canning v. National Labor Relations Board, holding that President Obama's recess appointments to the National Labor Relations Board ("NLRB") were invalid.1 The rationale of Noel Canning also calls into question the validity of Richard Cordray's recess appointment to Director of the Bureau of Consumer Financial Protection (the "Bureau") and many of the Bureau's activities to date. Bureau activities that are now uncertain include several final rules that the Bureau has issued and supervisory actions that the Bureau has taken. Noel Canning could also prompt future reforms to the Bureau's governance or funding.

WHAT DID THE D.C. CIRCUIT HOLD?

A three-judge panel of the D.C. Circuit ruled that three appointments that President Obama made to the NLRB on January 4, 2012, were not made in accordance with the Recess Appointments Clause of the U.S. Constitution2 because they were not made during a recess that occurred between sessions of Congress (i.e., an "intersession" recess). The Administration had argued that the appointments were valid because the Senate was meeting only in pro forma sessions every three business days between December 20, 2011, and January 23, 2012, during which time no legislation was passed, no votes were held, and no nominations were considered. But the second session of the 112th Congress had begun on the day before the appointments, January 3, 2012. The D.C. Circuit held that the President may make recess appointments only during the recess that occurs between separate sessions of Congress, not during breaks that occur during a session. The court stated that the language of the Constitution "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."3 The court also held that recess appointments may be made only to fill vacancies that occur during intersession recesses, not vacancies that simply remain unfilled during a recess.

The Administration may now petition the D.C. Circuit for rehearing en banc within 45 days. If rehearing en banc is granted, the full D.C. Circuit would hear the case. If rehearing en banc is denied, or if the Administration decides to bypass asking for rehearing, then the Administration has 90 days to petition the Supreme Court for certiorari review. It is believed...