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In sweeping ruling, D.C. Circuit declares NLRB appointments unconstitutional

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    In sweeping ruling, D.C. Circuit declares NLRB appointments unconstitutional By Mike Scarcella and Jenna Greene The National Law Journal January
    Message 1 of 1 , Jan 25, 2013
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      In sweeping ruling, D.C. Circuit declares NLRB appointments
      unconstitutional
      By Mike Scarcella and Jenna Greene The National Law Journal
      January 25, 2013























      Gibson Dunn & Crutcher's Miguel Estrada
      Photo: Diego M. Radzinschi / NLJ





      Jones Day's Noel J. Francisco
      Photo: Diego M. Radzinschi / NLJ



      A federal appeals court in Washington has declared unconstitutional
      President Barack Obama's recess appointments to a labor board in a sweeping
      decision that curtailed executive power and undermined the legitimacy of a
      high-profile, controversial appointment to the administration's consumer
      financial protection agency.

      The unanimous decision of a three-judge panel of the U.S. Court of Appeals
      for the D.C. Circuit set up a potential showdown in the U.S. Supreme Court
      over the scope of the power of the president to fill vacancies through
      recess appointments. The court's ruling marked a significant blow for the U.S.
      Justice Department, which had defended the recess appointments to the
      National Labor Relations Board as a valid, historical exercise of presidential
      authority.

      The central question the D.C. Circuit confronted is whether the U.S.
      Senate was in recess in January 2012, when Obama appointed three people to the
      labor board—personnel moves that enabled the board to continue to function
      with a quorum. The appeals court determined that the Senate had not in fact
      recessed, rendering the presidential appointments an unlawful sidestep of
      the role of the Senate to review and vote on candidates for office.

      The ruling cast doubt on the legitimacy of Obama's appointment, also in
      January 2012, of Richard Cordray to lead the Consumer Financial Protection
      Bureau. Republicans were opposed to Cordray, whose appointment is facing a
      challenge in a case pending in U.S. District Court for the District of
      Columbia.

      The appeals court in Washington said in its January 25 ruling that the
      president has power to make appointments only during "the recess" of the Senate
      —that is, the period between the sessions of the Senate when it is not in
      session and therefore unavailable to assess and vote on presidential
      nominations.

      Extending its analysis of the constitution's recess appointments clause,
      two judges on the court—Chief Judge David Sentelle and Judge Karen LeCraft
      Henderson—also determined that the vacancy must "arise" during a recess and
      not merely exist at the time. (Judge Thomas Griffith agreed that the NLRB
      appointments were invalid; he said the analysis should have ended there,
      however.)

      "The power of a written constitution lies in its words," Sentelle said in
      the opinion. "It is those words that were adopted by the people. When those
      words speak clearly, it is not up to us to depart from their meaning in
      favor of our own concept of efficiency, convenience, or facilitation of the
      functions of government."

      A DOJ spokeswoman said in a statement that Obama's recess appointments are
      "constitutionally sound." The department didn't immediately announce
      whether it will ask the full appeals court to hear the dispute. White House
      spokesman Jay Carney called the ruling "novel and unprecedented," saying that
      it "contradicts 150 years of practice by Democratic and Republican
      administrations."

      Gibson, Dunn & Crutcher partner Miguel Estrada, who represented and argued
      for Senate Republican Leader Mitch McConnell and 41 other senators,
      described the D.C. Circuit decision as "a major milestone in safeguarding the
      separation of powers."
      "The appointments that the court invalidated here are only the latest in a
      long-running campaign by the executive to encroach on the Senate's
      constitutionally prescribed role in the appointments process and to transform
      appointments into a one-man show," Estrada said in a statement.
      At the time of the labor board recess appointments, the Senate was meeting
      every three business days in "pro forma" sessions. Obama concluded the
      Senate was in recess. In announcing the recess appointments, he said: "I am
      not going to stand by while a minority in the Senate puts party ideology
      ahead of the people we were elected to serve."
      The appeals court rejected several interpretations of the words "the
      recess," as they appear in the constitution, including whether the phrase refers
      to "some substantial passage of time, such as a ten- or twenty-day break."
      Defining "the recess" as an adjournment of more than three days, the
      appeals court said, "lacks any constitutional basis."
      "We will not do violence to the Constitution by ignoring the Framers'
      choice of words," Sentelle wrote.
      DOJ's Office of Legal Counsel determined in its review of presidential
      recess appointment authority that Obama had discretion to declare that the
      pro-forma sessions amounted to a Senate recess. The D.C. Circuit rejected the
      government's position.
      "This will not do," Sentelle wrote. "Allowing the President to define the
      scope of his own appointments power would eviscerate the Constitution's
      separation of powers."
      The D.C. Circuit decision flowed from a dispute between bottling company
      Noel Canning, a division of The Noel Corp., and the labor board. Noel
      Canning was challenging, on appeal, an NLRB order that required the Yakima,
      Washington-based company to accept a collective bargaining agreement. The
      appeals court voided the labor board's order.
      Jones Day litigation partner Noel Francisco, who argued for Noel Canning
      and the U.S. Chamber of Commerce in the dispute in the appeals court,
      heralded the D.C. Circuit, saying Obama "clearly transgressed" his authority.
      "The D.C. Circuit has held the president accountable for it," Francisco said.
      The D.C. Circuit's ruling carries the potential to have sweeping effect.
      For the NLRB, the decision "throws into doubt the validity of many
      significant NLRB decisions in the last year," said Nelson Cary, a labor and
      employment partner at Vorys, Sater, Seymour and Pease.
      Among them, Cary said, is the NLRB's first decision on whether Facebook
      rants against co-workers are protected, concerted activity; whether an
      employer must continue to deduct union dues after a labor contract expires;
      numerous decisions holding various employee handbook provisions unlawful and
      decisions impacting the confidentiality of workplace investigations.
      Still, Cary noted that the reach—at least for now—of the DC Circuit
      ruling is limited. "NLRB decisions that go before different courts of appeals
      may be upheld if those courts disagree with the DC Circuit's reasoning," he
      said.
      Proskauer Rose partner Ronald Meisburg, who was general counsel of the
      NLRB from 2006 until 2010, said the D.C. Circuit decision leaves the board "in
      limbo…there is a big cloud over the board's ability to decide any cases."
      Meisburg, however, noted that the NLRB general counsel's office will still
      continue to investigate charges and administrative law judges will still
      hear cases. What's less clear, he said, is whether the board will continue
      to make the final decision on agency cases.
      In a way, it's familiar ground for the NLRB, which from 2007 to 2009 had
      only two members out of five. The board's actions were challenged for lack
      of a quorum, and in 2010, the U.S. Supreme Court invalided more than 600
      NLRB decisions.
      NLRB Chairman Mark Gaston Pearce in statement said that the board
      "respectfully disagrees with today's decision and believes that the President's
      position in the matter will ultimately be upheld." In the meantime, he said
      that the board will "continue to perform our statutory duties and issue
      decisions."
      The decision now leaves the NLRB with just one board member. "In short,
      there's no one there to answer the door," said Howard Bernstein, a partner in
      Neal, Gerber & Eisenberg's labor & employment group.
      At the same time that Obama made the three recess appointments to the
      NLRB, he also appointed Richard Cordray as head of the consumer protection
      agency. Cordray's appointment was not directly challenged in the suit in the
      appeals court, but the D.C. Circuit decision will likely have a profound—if
      indirect—impact on the agency.
      The recess appointment of Cordray is being contested in a case pending in
      Washington's federal trial court. The State National Bank of Big Spring,
      represented by O'Melveny & Myers, sued the U.S. Treasury Department and other
      agencies, alleging in part the "unconstitutional formation and operation"
      of the consumer protection agency. The government's motion to dismiss the
      case is pending.
      The validity of Cordray's appointment "will be the threshold issue in any
      challenge to a final agency action by the CFPB until the Supreme Court
      resolves the issue," said Venable partner Jonathan Pompan, a CFPB specialist.
      In order for the CFPB to exercise its full powers under the Dodd-Frank
      Act, such as supervision of nonbanks, it was required by statute to have a
      director in place.
      While Cordray, the former attorney general of Ohio, did not arouse the
      level of opposition from Republicans in Congress as Elizabeth Warren, the
      original architect of the agency, Republicans nonetheless refused to consider
      his nomination unless the CFPB was radically restructured. The
      administration solved the problem—or so it thought—with a recess appointment.
      "The invalidation of Richard Cordray's recess appointment would cause
      incredible disruption inside of the CFPB," said Ronald Rubin, a partner at
      Hunton & Williams who previously worked as an enforcement attorney. "Although
      the bureau's lawyers did a lot of internal research during 2011 into what
      the agency could and could not do without a director, they would have to
      revisit those issues and evaluate the implications for most of the work the
      CFPB did in 2012."
      Just one day before the D.C. Circuit decision, Obama renominated Cordray
      to continue as the leader of the consumer protection bureau. Cordray said in
      remarks then that "we all thank you and the Congress for the opportunity
      and the honor to serve our country in this important way."
      A reporter asked Obama during the announcement whether he'd use his recess
      appointment power if his nominees are not confirmed. The president did not
      answer.

      Mike Scarcella can be contacted at _mscarcella@..._
      (javascript:location.href='mailto:'+String.fromCharCode(109,115,99,97,114,99,101,108,108,97,64,
      97,108,109,46,99,111,109)+'?') and Jenna Greene at _jgreene@..._
      (javascript:location.href='mailto:'+String.fromCharCode(106,103,114,101,101,110,1
      01,64,97,108,109,46,99,111,109)+'?') .


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