Lawsuits put NLRB, CFPB in state of flux

Lawsuits challenging the validity of President Barack Obama’s recess appointments to two major federal agencies have cast a cloud of uncertainty over opinions and regulations being handed down and could result in years of additional litigation that will harm American businesses, according to lawmakers and attorneys.

Obama installed Richard Corday as director of the Consumer Financial Protection Bureau in a recess appointment in January after Senate Republicans filibustered Cordray’s nomination in protest over the structure of the new agency.

On the same day, Obama installed three members of the National Labor Relations Board in recess appointments, preventing the board from dropping to just two members due to term expirations.

If the board had fallen to two members, it would have lost its statutory authority to act according to recent Supreme Court precedent.

But several business groups have filed suit challenging the validity of the appointments, claiming that because members of the House and Senate gaveled in pro forma sessions every three days during the holiday break, Congress was not officially in recess and therefore Obama exceeded his executive authority.

Several members of Congress as well as attorneys testifying before the House Committee on Oversight and Government Reform have warned of the legal and practical problems that will ensue from actions taken by the two agencies before the issue of the recess appointments’ constitutionality is settled by the courts.

The NLRB has issued a number of opinions since the recess appointments were made, and both agencies are engaged in rulemaking.

If a court finds the appointments to be unconstitutional months or years down the line, those actions will be invalidated, which will be costly to American businesses, according to Sen. Mike Lee, R-Utah, who testified before the House committee.

“In addition to the expense and the delay related to the litigation, these companies [involved in the constitutional challenge] and other companies — even those who will not be litigating — will inevitably have had to avoid making the kind if investments that we need in order to create jobs,” Lee told lawmakers.

Andrew Pincus, a partner in the Washington office of Mayer Brown, said the uncertainty over the CFPB director’s authority is causing problems for businesses.

“There is real confusion and uncertainty,” he testified. “What businesses want are clear rules of the road. But they will have exactly the opposite.”

Mark A. Carter, a partner in the Charleston, W.V., office of Dinsmore, said the same cloud of uncertainty looms over the NLRB’s decisions and rulemaking.

“Every decision will be subject to appeal or attack,” Carter said.