NLRB Ruling Expected to Impact Consumer Bureau Appointee, Former White House Counsel Says

By Fred Lucas | January 31, 2013 | 6:38 AM EST

Richard Cordray was recess-appointed to head the Consumer Financial Protection Board. (AP Photo)

( – Last week’s court decision finding the recess appointments of three National Labor Relations Board members unconstitutional could play a major role in a case challenging the constitutionality of the Consumer Financial Protection Bureau and its recess-appointed director Richard Cordray.

“It’s potentially very serious because our case is in the same circuit, in the (D.C.) District Court, not the court of appeals, but we’ll end up in the court of appeals within a year,” C. Boyden Gray, attorney for the plaintiffs challenging the CFPB’s constitutionality, told “And the law of that case will govern our case. Now the Supreme Court could reverse or alter (the NLRB case), so we don’t have the final word. The Supreme Court will have the final word.”

The Court of Appeals for the District of Columbia ruled last week that President Barack Obama’s three recess appointments to the NLRB were unconstitutional because the appointments were made when the Senate was not in recess. On the day Obama named the three NLRB members -- Jan. 4, 2012 – he also recess-appointed Cordray to head the CFPB.

The president re-nominated Cordray last week, leaving it up to the Senate to confirm him or not.

The appointment of Cordray to head the new consumer bureau is just one part of the lawsuit challenging the bureau’s constitutionality. The plaintiffs include the states of Michigan, Oklahoma and South Carolina, along with State National Bank of Big Spring, Texas, the free market think tank Competitive Enterprise Institute and the seniors’ group 60 Plus Association.

The lawsuit contends that the CFPB lacks congressional oversight, since its $550 million annual funding comes from the Federal Reserve, not a congressional appropriation. Further, the president cannot fire the CFPB director for policy disagreements, only for cause. The plaintiffs say the bureau “claims the power to nullify statutes” and “contends it can engage in after-the-fact lawmaking.”

“It doesn’t seem to belong to any branch. That’s what lies at the heart of our challenge. We’re saying it’s not accountable to any of the branches,” Gray said. “It’s physically in the Fed and paid for by the Fed, but the Fed itself, by statute, is precluded from interfering in anyway or having anything to say about what it does. So is it part of the Fed or not? If the Fed can’t do anything about it, I would argue that it’s not part of the Fed. If the White House can’t do anything about it, it’s not part of the White House, and if Congress can’t do anything about it, review its budget or anything like that, then it’s not part of Congress. So where is it?”

More states could be joining the lawsuit, said Gray, but he didn’t say which ones.

Gray, who served as White House counsel for President George H. W. Bush and as the U.S. ambassador to the European Union under President George W. Bush, said the case challenging the constitutionality of the CFPB makes the same argument about Corday’s appointment as that made by plaintiffs in the NLRB case.

“Cordray was nominated the same time as the NLRB appointees were nominated and our case does say his appointment was invalid,” Gray said. “Were the current decision to be upheld in the Supreme Court, that would cast a very, very deep shadow on everything that has happened at the agency since his appointment.

“But, our case involves more than just the vulnerability of his appointment,” Gray continued. “It has to do with the fact that there’s no congressional oversight. There’s no White House oversight. There’s very limited judicial oversight.”

Two of the plaintiffs wrote a letter to the Senate on Wednesday, citing the NLRB ruling, and asking that Cordray’s confirmation process be held up until after the legal issues are cleared.

The letter noted that CFPB Director Cordray “was given his recess appointment on the same day and in the same way as the three NLRB members whose appointments were invalidated by the court.”

“Given the massive power wielded by the Bureau, its head-in-the-sand attitude towards the court’s decision is the height of administrative arrogance,” said the letter from CEI and the 60 Plus Association to the Senate.

“Could it be that the Bureau’s insulation from congressional and presidential accountability, as described in the attachment to this letter, has led it to believe that it is similarly unaccountable to the third branch of government as well?” the letter continued. “For these reasons, we suggest that the Senate should withhold its confirmation of Mr. Cordray until the legal implications of the Noel Canning v. NLRB ruling become clear.”

CFPB spokeswoman Moira Vahey was quoted in several media reports Friday as saying the ruling in the NLRB case had no direct effect on the bureau.

When asked in a press briefing Friday if the NLRB had any bearing on the Cordray appointment, White House Press Secretary Jay Carney separated the two.

“The decision that was put forward today had to do with one case, one company, one court,” Carney said. “It does not have any impact, as I think the NLRB has already put out, on their operations or functions, or on the board itself.  It has no bearing on Richard Cordray.  And we, as I said, strongly disagree with it.”