Cordray appointment shadows court appeal

On April 25, 2013, the U.S. Department of Justice appealed the U.S. Supreme Court to overturn a lower court ruling that three so-called recess appointments made by President Barack Obama on Jan. 4, 2012, were unconstitutional. Richard Cordray, Director of the Consumer Financial Protection Bureau, which has regulatory authority over the prepaid card industry, was another appointment made by Obama on that day.

The Justice Department said that the ruling earlier this year by a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit undermines the president's recess appointment power. At issue is whether the U.S. Congress was in recess (as defined by the U.S. Constitution) on that day last year.

The appeals court ruled that Obama's recess appointments of three new members to the National Labor Relations Board were unconstitutional because Congress was not in recess, but in a period of inactivity while still in session. By ruling that the appointments were unconstitutional, the actions taken by the NLRB since the day the appointments were made were also unconstitutional, the judges said. Because the NLRB needs a constitutionally-mandated majority of its members to make decisions and conduct business, and because three of its five members were unconstitutionally appointed, the panel said the NLRB's decisions should be voided.

On the same day Obama appointed the three NLRB members, the president also named Cordray to Director of the CFPB. A separate lawsuit working its way through the court system concerns the constitutionality of Cordray's appointment. If his appointment to the CFPB should ultimately be ruled unconstitutional by the Supreme Court, the actions taken by the bureau since January 2012 to bring reforms to the financial services sector, including the prepaid card industry, could theoretically be nullified.

The NLRB case is reportedly not likely to be addressed in the next session of the Supreme Court, which convenes in October 2013.

Editorial Note:

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