The United States Supreme Court held today that three recess appointments President Barack Obama made to the National Labor Relations Board (NLRB) were unconstitutional, upholding an earlier D.C. Circuit ruling. The case, National Labor Relations Board v. Noel Canning., could call into question the validity of the actions of any federal officer who was appointed in the same manner. 

In Noel Canning, the respondent, a distributor for Pepsi-Cola, disputed the validity of an order by the NLRB, saying that the Board lacked a quorum because three of the Board’s five members were appointed in violation of the Constitution. The board members in question had been appointed during a three-day adjournment between two pro forma Senate sessions in early 2012, during which time no business was transacted. The NLRB argued that the board members were validly appointed in accordance with the President’s power to fill vacancies during a recess of the Senate.

The Supreme Court upheld the D.C. Circuit’s ruling the Board’s order was void because the three recess appointments were unconstitutional. Unlike the D.C. Circuit, which held that the President could only appoint officials during recesses between enumerated sessions of Congress, the Supreme Court held that the President could also appoint officials during intrasession recesses. However, the Supreme Court held that because the Senate was in session during its pro forma sessions, a three-day break was insufficient to trigger the Recess Appointments Clause.

The Court’s decision means that over 100 NLRB cases that were decided without a proper quorum would need to be redecided. Additionally, the case calls into question the validity of actions taken by all government officials who were appointed the same way as the NLRB members. 

As it relates to the CFPB and Director Richard Cordray, financial services companies should be aware that this decision will not likely impact any of the actions undertaken by Director Cordray since he was installed as Director of the CFPB.  Although this case could have posed significant questions concerning CFPB authority because Mr. Cordray originally was appointed in the same manner as the three NLRB Board members whose recess appointments were invalidated, the United States Senate subsequently confirmed Mr. Cordray on July 16, 2013.  Subsequent to that confirmation, on September 3, 2013, the CFPB published its “Notice of Ratification” in the Federal Register.  In that Notice, Director Cordray declared that “[t]o avoid any possible uncertainty . . . I hereby affirm and ratify any and all actions I took during [the] period” in which he acted pursuant to the recess appointment, rather than his formal appointment.  We believe that such ratification should eliminate any questions that otherwise would have been presented concerning the impact of the Noel Canning decision in questioning Mr. Cordray’s and the CFPB’s authority during the period in which he was acting pursuant to his recess appointment.