Despite Senate moves, lawyers eye recess appointment case

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The recent Senate confirmation of Richard Cordray as director of the Consumer Financial Protection Bureau and the forward motion on the nominations to the National Labor Relations Board could ultimately lessen the blow of a potential U.S. Supreme Court decision invalidating the president’s recess appointments to those agencies.

But next year’s high court ruling in NLRB v. Noel Canning could still land a punch in the business community, keeping employers, workers and labor and employment lawyers watching closely.

On July 16, nearly two years after his nomination was blocked by GOP lawmakers angered by the structure of the new consumer watchdog agency, Cordray was confirmed to head the agency on a 66-34 vote, with 12 Republicans supporting the nomination. In addition, as part of an agreement to avoid a broader partisan fight over a proposed change to rules governing how confirmation votes are held, lawmakers agreed to move on pending NLRB nominations after President Barack Obama withdrew the nominations of recess-appointed NLRB members Sharon Block and Richard F. Griffin Jr. and nominated Democrats Kent Yoshiho Hirozawa and Nancy Jean Schiffer in their place. A Senate committee hearing on the new nominees is scheduled for July 24.

While the Senate action could ultimately save the board from falling below a quorum and thus becoming statutorily inoperable, it still leaves the high court to decide exactly when the president has the power to make appointments without Senate consent. In addition to the larger issues of congressional and executive power the case presents, labor and employment attorneys are trying to minimize the potential fallout of the Noel Canning ruling for their clients.

Recent appellate rulings in the D.C. Circuit have largely favored employers and struck down some board actions that were seen as union-friendly, but those decisions cannot be relied upon until the justices have their say next term.

“The NLRB is still going to be following the same rules,” said Michael J. Moberg, a shareholder in the Minneapolis office of Briggs and Morgan PA and a member of the firm’s Employment, Benefits and Labor section. “Unless and until those NLRB decisions are declared invalid by the Supreme Court, the [NLRB] regional directors are going to follow them, as are the administrative law judges at trial.”

Broad constitutional ruling

The Noel Canning case involves a collective bargaining dispute between a soft drink canning and bottling company and a local Teamsters union. Management appealed an NLRB ruling in the union’s favor to the D.C. Circuit.

The court found that the ruling was invalid because three of the five board members were improperly installed to the board by the president.

In the months leading up the appointment, Senate Republicans — angered over NLRB decisions and rulemaking that lawmakers saw as hostile to businesses — vowed to block pending NLRB nominees from confirmation. Meanwhile, in late 2011 and early 2012 GOP House members gaveled in a series of intermitted pro forma sessions, where no business was conducted, to prevent Congress from falling into recess and giving the president the opportunity to make recess appointments. The approach was similar to that taken by Democratic lawmakers during the Bush administration.

In January 2012, during a brief congressional break, Obama made the appointments anyway, and a number of lawsuits followed, challenging his authority to do so. Ultimately the D.C. Circuit held in Noel Canning that the move was unconstitutional.

But rather than a narrow holding that a short break in between pro forma sessions was too brief to qualify as a recess for the purposes of making appointments, the court went much farther, deciding that recess appointments can only be made for vacancies that occur during the recess period between two sessions of Congress, and such appointments can only be made during that same intersession recess period.

“The Recess Appointments Clause … provides that ‘[t]he President shall have Power 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,’” Chief Judge David B. Sentelle wrote. “[A]s a matter of cold, unadorned logic, it makes no sense to adopt the Board’s proposition that when the Framers said ‘the Recess,’ what they really meant was ‘a recess.’ This is not an insignificant distinction. In the end it makes all the difference. … Considering the text, history, and structure of the Constitution, these appointments were invalid from their inception.”

CFPB issue resolved, but NLRB uncertainty remains

While the Noel Canning case did not directly involve a challenge to the validity of Cordray’s actions as the recess-appointed director of the CFPB, it had the potential to have a direct effect on that agency — until Tuesday. With his confirmation vote, it’s likely that the agency will move quickly to revalidate the actions he has taken over the last two years to avoid any constitutional challenges.

But for the NLRB, it won’t be so easy. Two of the three members of the current board were recess appointed, and even if the Senate moves to confirm at least two of the pending nominees, a cloud of uncertainty will still hang over hundreds of decisions and rulemaking actions that have been handed down over the last year and a half.

And if the recent signs of bipartisan cooperation vanish in the weeks and months ahead, GOP lawmakers could once again stall the nominations, leaving open the possibility that the agency could fall below the statutory minimum of three members and become inoperable. If the Supreme Court then upholds the D.C. Circuit’s ruling, that would void hundreds of decisions without a board in place to begin re-adjudicating the matters.

On the other hand, if a valid board is in place at the time of the high court’s decision, the NLRB will be in a similar position as it was in the aftermath of the 2010 decision in New Process Steel v. NLRB, when the justices ruled that hundreds of opinions that had been handed down when the board had only two members were invalid. Those matters were either re-adjudicated or disposed in another manner.

A third option would be for the court to reverse the D.C. Circuit and hold the recess appointments constitutional.

Those potential scenarios have management-side attorneys advising their clients cautiously, urging them to preserve any recess appointment-related argument they may have while still operating as though the NLRB’s rules remain the law.

“I’ve been telling my clients to preserve their ability to challenge [adverse rulings] on the basis of a lack of quorum,” said Lori Rittman Clark, of counsel in the Andover, Mass., office of Schwartz Hannum PC. “They can file an appeal before the D.C. Circuit, if they are able. Of if they are appearing before the NLRB, at least drop a footnote [in the pleadings] arguing a lack of jurisdiction or a lack of quorum.”