New Recess Appointments Case Roils NLRB and CFTC

Ruling Affects Appointments

The three appointments, made on Jan. 4, were held unconstitutional by Noel Canning. The court held that when the Senate refuses to appoint a given nominee, the Constitution allows the President to make a recess appointment, a temporary appointment without the Senate's consent only when a vacancy occurs during a recess of the Senate. See U.S. Const. art. II, ' 2, cl. 3. The crucial language is: “The 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.”

'Recess of the Senate'

Because the Constitution refers to “the Recess of the Senate,” Noel Canning held this could only refer to the period between one session and the next during which the Senate could not act on the nomination. In this case, the Senate had declared that it was in pro forma session between the first and second sessions in 2011-2012.

The ruling explicitly holds that the Senate's determination that it was in session pro forma trumped the President's attempt to imply that the pro forma session was de facto a recess. Thus, the President's attempt to create three recess appointments during the pro forma recess was illegal.

In addition, although the majority recognized that this ruling was not necessary to decide the case, it ruled that a recess appointment must be predicated on a vacancy occurring during a Senate recess. This is an interpretation of the phrase referring to vacancies “that may happen during the Recess ' “

The Noel Canning decision invalidated the three appointments on both grounds. In particular, the court found that the Senate's determination of whether it was in recess controlled as to the recess appointment process. Moreover, even if a recess had existed, the vacancies had not arisen during the recess.

Consequences for the NLRB

The consequences for the NLRB are so potentially catastrophic that the Board must of necessity must seek certiorari from the Supreme Court. The NLRB, being authorized five members, cannot statutorily act without a three-member quorum.

See 29 USC ''153(b). Without the participation of at least one of the recess appointments, the NLRB could not have its quorum and could not render and continue to legally render decisions or otherwise act, from Aug. 27, 2011 rather than from Jan. 4, 2012. See New Process Steel v. NLRB, 130 S. Ct. 2635 (2010).

This is because the Board lost its quorum on Aug. 27, 2011 through the expiration of two validly-appointed members' terms. On that day, the terms of Chairman Wilma Liebman and Member Peter Schaumber expired. This left a three-person Board consisting of members Mark Pearce, Brian Hayes, and Craig Becker. The latter was a recess appointment affected by Noel Canning.

Hayes' term expired on Dec. 16, 2012. After this, the Board consisted of:

• Mark Pearce, named Chairman on Aug. 27, 2011. He was sworn in as a Board Member on April 7, 2010, following his recess appointment, and was confirmed by the Senate on June 22, 2010 to a term ending on Aug. 27, 2013.
• Members Sharon Block and Richard Griffin, sworn in as a Board Members on Jan. 9, 2012, following recess appointments by the President.
• Member Terrance F. Flynn, sworn in as a Board Member on Jan. 9, following a recess appointment. Flynn resigned on May 27, 2012.

Therefore, the present Board consists of Pearce, Block and Griffin, the latter two being recess appointments affected by Noel Canning.

A Recap

To review, from Aug. 27, 2011 forward, there were only two validly appointed members and a recess appointment on the Board. All decisions from this date, not the date of the current recess appointments, Jan. 4, are potentially void because there were only two available legitimate votes from Aug. 27.

Moreover, the effect of Noel Canning on Board membership in the near future is telling. Following the expiration of Hayes' term on Dec. 16, 2012, the Board lost Flynn, a recess appointment member, on May 27, 2012 through resignation.

The current composition of the Board is a validly appointed chair and two recess appointment members. That chair's term expires on Aug. 27, 2013. It appears that legitimate Board membership under Noel Canning from Dec. 16 to Aug. 27 is one member and after that, date it is none. See www.nlrb.gov/members-nlrb-1935.

Immediate Effect

The immediate effect of Noel Canning is the voiding of decisions issued by the Board in 2013. For example, DirectTV, 359 NLRB No. 54 (2013), a decision issued on Jan. 25, 2013, invalidated four work rules. The decision is directly void under Noel Canning because two of the three votes unholding the decision were made by recess appointees Griffin and Block. Assuming that the Supreme Court takes a year to issue its opinion, the NLRB will have been neutered for two years.

Moreover, if Noel Canning is correct, the vote of any individual holding an invalid recess appointment should be void, no matter when in our history that vote was cast. For example, on Jan. 3, 2012, the Board issued DR Horton, 357 NLRB No. 184 (2012), a decision by Pearce, Becker and Hayes that found it unlawful, as a condition of employment, to require an employee to agree not to file joint, class, or collective claims addressing their wages, hours, or other working conditions. Under Noel Canning, DR Horton is a nonentity because one of the Board votes was made by Hayes, a recess appointment.

An advocate could make an argument that DR Horton might still be in effect despite the fact that Noel Canning implies that decisions within its ambit are void, not voidable. However, if Noel Canning is somehow governed by principles analogous to Linkletter v. Walker, 381 U.S. 618, 636 (1965), the proper approach to a retroactivity decision is to “weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation.” Noel Canning leaves no doubt that the balance of these factors implies that prior decisions made by an imperfectly appointed Board are in serious doubt.

Implicating the Board

's Powers

Noel Canning

provides a basis for finding that its decision is wholly applicable to past decisions. In addressing the entirely different question of whether the court had jurisdiction to consider the validity of recess appointments because the issue had not been raised before the Board, the court found that extraordinary circumstances justified ruling on the issue. The court unanimously found that the issue implicated the very power of the Board to act and raised fundamental separation of powers concerns. Noel Canning, op. cit. at 11.

Assuming that these concerns make the retroactivity issue fruitless, some past decisions, long final, will be questionable as between the original parties or as precedent.

Conclusion

The final aspect to the Armageddon of Noel Canning may be in store for the CFPB, for its current director holds a recess appointment that is invalid in the same way that the NLRB appointments were invalid under Noel Canning. The prospect for the CFTC's issuance of final and binding Dodd-Frank regulations is problematic, as that agency has never had a validly appointed director, although it regards 41 of its regulations as “finalized.” See www.cftc.gov/lawregulation/doddfrankact/dodd-frankfinalrules/index.htm.

On Feb. 13, the President renominated Block and Griffin while the Senate was in session. See www.nytimes.com/2013/02/14/business/obama-resubmits-two-appointees-for-the-nlrb.html. Because the President has ordered the Board to continue its business as it did before Noel Canning, it appears the renominations are intended to induce Republicans to make two nominations of their own, allowing the Board to operate with five members. However, there is no obvious advantage to Republicans cooperating in reconstituting a wholly effective Board with a Democratic three-member majority.

The President has also renominated his CFPB director with the support of Senate Democrats. See LA Times (2/14/13), http://articles.latimes.com/2013/feb/14/business/la-fi-consumer-bureau-fight-20130215. In this case, the President appears to be reiterating his support for the nominee.

James Ching is a former Supervising Deputy Attorney General, California Department of Justice.

On Jan. 25, the DC Circuit issued an opinion, Noel Canning v. NLRB, No. 12-1153, slip. op. (DC Cir. 1/25/13), which stated that the Senate's current practice of never going into recess and instead being in recess pro forma until the next session barred the President from making recess appointments simply because no recess ever existed.

Noel Canning

is an exercise in the literal meaning of the words of the Constitution. The Constitution provides that the President shall nominate, and with the advice and consent of the Senate, appoint federal officers. See U.S. Const. art. II, ' 2, cl. 2. The President attempted to make three recess appointments to the NLRB after the Senate had agreed to continue its first session pro forma from Dec. 20, 2011 through Jan. 23, 2012, with Jan. 3 as the beginning of its second session.

Ruling Affects Appointments

The three appointments, made on Jan. 4, were held unconstitutional by Noel Canning. The court held that when the Senate refuses to appoint a given nominee, the Constitution allows the President to make a recess appointment, a temporary appointment without the Senate's consent only when a vacancy occurs during a recess of the Senate. See U.S. Const. art. II, ' 2, cl. 3. The crucial language is: “The 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.”

'Recess of the Senate'

Because the Constitution refers to “the Recess of the Senate,” Noel Canning held this could only refer to the period between one session and the next during which the Senate could not act on the nomination. In this case, the Senate had declared that it was in pro forma session between the first and second sessions in 2011-2012.

The ruling explicitly holds that the Senate's determination that it was in session pro forma trumped the President's attempt to imply that the pro forma session was de facto a recess. Thus, the President's attempt to create three recess appointments during the pro forma recess was illegal.

In addition, although the majority recognized that this ruling was not necessary to decide the case, it ruled that a recess appointment must be predicated on a vacancy occurring during a Senate recess. This is an interpretation of the phrase referring to vacancies “that may happen during the Recess ' “

The Noel Canning decision invalidated the three appointments on both grounds. In particular, the court found that the Senate's determination of whether it was in recess controlled as to the recess appointment process. Moreover, even if a recess had existed, the vacancies had not arisen during the recess.

Consequences for the NLRB

The consequences for the NLRB are so potentially catastrophic that the Board must of necessity must seek certiorari from the Supreme Court. The NLRB, being authorized five members, cannot statutorily act without a three-member quorum.

See 29 USC ''153(b). Without the participation of at least one of the recess appointments, the NLRB could not have its quorum and could not render and continue to legally render decisions or otherwise act, from Aug. 27, 2011 rather than from Jan. 4, 2012. See New Process Steel v. NLRB , 130 S. Ct. 2635 (2010).

This is because the Board lost its quorum on Aug. 27, 2011 through the expiration of two validly-appointed members' terms. On that day, the terms of Chairman Wilma Liebman and Member Peter Schaumber expired. This left a three-person Board consisting of members Mark Pearce, Brian Hayes, and Craig Becker. The latter was a recess appointment affected by Noel Canning.

Hayes' term expired on Dec. 16, 2012. After this, the Board consisted of:

• Mark Pearce, named Chairman on Aug. 27, 2011. He was sworn in as a Board Member on April 7, 2010, following his recess appointment, and was confirmed by the Senate on June 22, 2010 to a term ending on Aug. 27, 2013.
• Members Sharon Block and Richard Griffin, sworn in as a Board Members on Jan. 9, 2012, following recess appointments by the President.
• Member Terrance F. Flynn, sworn in as a Board Member on Jan. 9, following a recess appointment. Flynn resigned on May 27, 2012.

Therefore, the present Board consists of Pearce, Block and Griffin, the latter two being recess appointments affected by Noel Canning.

A Recap

To review, from Aug. 27, 2011 forward, there were only two validly appointed members and a recess appointment on the Board. All decisions from this date, not the date of the current recess appointments, Jan. 4, are potentially void because there were only two available legitimate votes from Aug. 27.

Moreover, the effect of Noel Canning on Board membership in the near future is telling. Following the expiration of Hayes' term on Dec. 16, 2012, the Board lost Flynn, a recess appointment member, on May 27, 2012 through resignation.

The current composition of the Board is a validly appointed chair and two recess appointment members. That chair's term expires on Aug. 27, 2013. It appears that legitimate Board membership under Noel Canning from Dec. 16 to Aug. 27 is one member and after that, date it is none. See www.nlrb.gov/members-nlrb-1935.

Immediate Effect

The immediate effect of Noel Canning is the voiding of decisions issued by the Board in 2013. For example, DirectTV, 359 NLRB No. 54 (2013), a decision issued on Jan. 25, 2013, invalidated four work rules. The decision is directly void under Noel Canning because two of the three votes unholding the decision were made by recess appointees Griffin and Block. Assuming that the Supreme Court takes a year to issue its opinion, the NLRB will have been neutered for two years.

Moreover, if Noel Canning is correct, the vote of any individual holding an invalid recess appointment should be void, no matter when in our history that vote was cast. For example, on Jan. 3, 2012, the Board issued DR Horton, 357 NLRB No. 184 (2012), a decision by Pearce, Becker and Hayes that found it unlawful, as a condition of employment, to require an employee to agree not to file joint, class, or collective claims addressing their wages, hours, or other working conditions. Under Noel Canning, DR Horton is a nonentity because one of the Board votes was made by Hayes, a recess appointment.

An advocate could make an argument that DR Horton might still be in effect despite the fact that Noel Canning implies that decisions within its ambit are void, not voidable. However, if Noel Canning is somehow governed by principles analogous to Linkletter v. Walker , 381 U.S. 618, 636 (1965), the proper approach to a retroactivity decision is to “weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation.” Noel Canning leaves no doubt that the balance of these factors implies that prior decisions made by an imperfectly appointed Board are in serious doubt.

Implicating the Board

's Powers

Noel Canning

provides a basis for finding that its decision is wholly applicable to past decisions. In addressing the entirely different question of whether the court had jurisdiction to consider the validity of recess appointments because the issue had not been raised before the Board, the court found that extraordinary circumstances justified ruling on the issue. The court unanimously found that the issue implicated the very power of the Board to act and raised fundamental separation of powers concerns. Noel Canning, op. cit. at 11.

Assuming that these concerns make the retroactivity issue fruitless, some past decisions, long final, will be questionable as between the original parties or as precedent.

Conclusion

The final aspect to the Armageddon of Noel Canning may be in store for the CFPB, for its current director holds a recess appointment that is invalid in the same way that the NLRB appointments were invalid under Noel Canning. The prospect for the CFTC's issuance of final and binding Dodd-Frank regulations is problematic, as that agency has never had a validly appointed director, although it regards 41 of its regulations as “finalized.” See www.cftc.gov/lawregulation/doddfrankact/dodd-frankfinalrules/index.htm.

On Feb. 13, the President renominated Block and Griffin while the Senate was in session. See www.nytimes.com/2013/02/14/business/obama-resubmits-two-appointees-for-the-nlrb.html. Because the President has ordered the Board to continue its business as it did before Noel Canning, it appears the renominations are intended to induce Republicans to make two nominations of their own, allowing the Board to operate with five members. However, there is no obvious advantage to Republicans cooperating in reconstituting a wholly effective Board with a Democratic three-member majority.

The President has also renominated his CFPB director with the support of Senate Democrats. See LA Times (2/14/13), http://articles.latimes.com/2013/feb/14/business/la-fi-consumer-bureau-fight-20130215. In this case, the President appears to be reiterating his support for the nominee.

James Ching is a former Supervising Deputy Attorney General, California Department of Justice.