No one any longer contests that President Obama acted in excess of his constitutional powers when, on January 4, 2012—a day on which the Senate was not in recess—he purported to grant a recess appointment to Richard Cordray to head the Consumer Financial Protection Bureau (CFPB). Yet, in a troubling decision issued last week, the U.S. District Court for the District of Columbia indicated that it was of no moment that for a period of 18 months Cordray, although no more than a private citizen, issued dozens of significant decisions in the name of CFPB. Judge Ellen Huvelle ruled in State National Bank of Big Springs v. Lew that Cordray, after finally receiving Senate confirmation, could simply wave a magic wand and retroactively approve all of his unauthorized acts. That decision eviscerates the Constitution’s explicit limitations on the President’s appointment powers and encourages future Presidents to disregard those limitations.
The Appointments Clause Violation
President Obama attempted to make several recess appointments on January 4, 2012, including Cordray’s as well as several appointments to fill vacant slots on the National Labor Relations Board (NLRB). The Supreme Court disapproved President Obama’s efforts in NLRB v. Noel Canning, ruling unanimously that the recess appointments were unauthorized because the Senate remained in session on that date.
So what to do about official actions taken by the improperly appointed officials? NLRB and CFPB adopted diametrically opposed approaches. NLRB carefully reconsidered each of its actions taken while the recess-appointed members were purporting to serve on its five-member board, and ultimately issued new decisions. In sharp contrast, CFPB’s Cordray simply rubber-stamped every action he took during the 18 months (from January 2012 to July 2013) that he improperly exercised authority. His four-sentence Federal Register notice (published on August 30, 2013) purported to ratify all actions he took during the 18-month period, without citing specific actions or suggesting that he had taken a new look at any of them. Indeed, he continued to insist that “the actions I took during the [18-month] period … were legally authorized and entirely proper,” despite the D.C. Circuit’s January 2013 Noel Canning decision that had held otherwise. Among the many actions that Cordray claimed to ratify were numerous formal regulations issued by CFPB to carry out its delegated responsibilities, as well as enforcement actions that had resulted in federal court judgments being entered against private citizens.
The State Bank Lawsuit
State National Bank of Big Spring is a Texas bank that objects to five formal CFPB regulations that the Bureau—during the unauthorized recess-appointment period—proposed and/or adopted for the purpose of carrying out the regulatory functions assigned to it by Congress. Its lawsuit challenges Cordray’s purported retroactive ratification of the regulations, asserting that no ratification of the admittedly unauthorized-when-undertaken acts can be effected until after a properly constituted Bureau complies with the Administrative Procedure Act’s notice-and-comment requirements. In a 2015 decision, the D.C. Circuit ruled that State National had standing to challenge the constitutionality of Cordray’s recess-appointment actions and directed the district court to address whether Cordray had properly ratified the regulations in question.
In her decision last week, Judge Huvelle rejected State National’s challenge. She held that a rubber-stamp ratification sufficed to breathe life into federal regulations that—because they were approved by improperly appointed officials—were invalid when initially issued. She concluded that there was no point in requiring Cordray to undertake a more detailed review of the regulations because, given that he was the individual who initially approved the regulations, there was virtually no possibility that a more detailed review would result in a different set of regulations.
Conflict with D.C. Circuit Precedent
Judge Huvelle’s endorsement of rubber-stamp ratifications conflicts sharply with recent decisions from both the Third and D.C. Circuits, which hold that ratification of previously unauthorized agency action requires, at a minimum, that “the ratifier must make a detached and considered affirmation of the earlier decision.” Advanced Disposal Services East, Inc. v. NLRB, 820 F.3d 592, 602 (3d Cir. 2016). Judge Huvelle noted that in her case the ratifier (Cordray) was ratifying his own prior decisions, while in prior D.C. Circuit decisions the ratifier was a federal administrative body that had been reconstituted following a determination that agency action was unauthorized because the administrative body as previously constituted violated constitutional norms. See, e.g., Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd, 796 F.3d 111 (D.C. Cir. 2015). She asserted that when the ratifier is examining his own prior decisions, there is less reason for courts to question a rubber-stamp ratification because it is significantly less likely that a “detached and considered” re-examination would cause the ratifier to arrive at a different conclusion.
But that distinction actually cuts against Judge Huvelle. When it is a new administrator with a fresh set of eyes that must decide whether to affirm prior, unauthorized agency action, reviewing courts have some basis for surmising that those adversely affected by the prior action have obtained at least a modicum of relief—even when the ratification process appears to be somewhat cursory. But courts should be especially wary of rubber-stamp ratifications when the ratifier is the very person whose unauthorized activity initially inflicted injury on those challenging the ratification.
Indeed, Judge Huvelle’s decision cuts against the basic premise underlying the APA, which is that agency decision-making is enhanced when agencies are required to explain their actions. It is well recognized that when a federal agency proposes to adopt a substantive regulation, it usually ends up adopting a final regulation that is substantially similar to its initial proposal. But the APA nonetheless requires the agency to follow elaborate procedures before adopting the regulation in final form. It must give advance notice of its proposed action, provide interested stakeholders with a meaningful opportunity to comment on the proposal, and then write a reasoned response to all substantive comments before the regulation can be made final. The district court’s decision does not explain why those same procedural safeguards should not apply when an agency seeks to ratify a regulation that was promulgated without authorization, no matter how unlikely it is that adherence to the safeguards would cause the agency to modify the regulation.
Maintaining Constitutional Limits on the Appointment Power
Judge Huvelle’s wholesale endorsement of retroactive ratification of unauthorized government action is particularly troubling because it suggests an unwillingness to enforce meaningful limits on the President’s appointment powers. Article II of the Constitution provides that the President may appoint principal Executive Branch officers (such as the Director of CFPB) only after obtaining “the advice and consent” of the Senate. President Obama sought to install Cordray as Director by means of a recess appointment only after the Senate initially declined to consent to the appointment. However, his attempted recess appointment was ruled invalid because the Senate was not in recess. By upholding Cordray’s rubber-stamp ratification of every action he took during the 18 months he claimed to head CFPB (a period during which he was, in fact, an unauthorized interloper), the district court is eviscerating the Article II limits on Presidential appointment powers and encouraging similar lawless activity in the future. After all, why bother with the niceties of a valid recess appointment when an invalid appointment still permits subsequent ratification of the appointee’s acts?
Indeed, Cordray’s purported ratification extends far beyond improperly adopted regulations and other internal CFPB matters. He also claims to have retroactively ratified enforcement actions that CFPB, per his authorization, filed and prosecuted (to final judgment) in federal court. Disappointingly, the Ninth Circuit, in a decision issued this past April, upheld Cordray’s ratification of a district-court judgment that CFPB obtained against a California lawyer, even though Cordray lacked authority to pursue the action throughout the period that the action was pending in district court. (Full disclosure: I and other Washington Legal Foundation attorneys represent the California lawyer and will be filing a petition seeking Supreme Court review of the Ninth Circuit decision.) In effect, Cordray is asserting authority not only to ratify unauthorized agency actions but also to ratify court decisions issued in response to those unauthorized actions. If courts construe rubber-stamp ratification authority so broadly, future Presidents who wish to bypass the “advice and consent” requirement will have every incentive to make improper use of their recess appointment powers—on the assumption that even if the appointment is successfully challenged in court, any actions taken by the unauthorized recess appointee will eventually be ratified.
The FVRA Points in the Right Direction
Congress adopted the Federal Vacancy Reform Act (FVRA) in 1998 to impose reasonable limits on the President’s authority to tap government officials to temporarily fill vacancies in senior Executive Branch offices. The FVRA attempts to balance two competing interests: (1) the federal bureaucracy must be permitted to perform essential government functions during the interregnum between the occurrence of an unexpected vacancy and the Senate’s confirmation of the President’s choice to fill the vacancy; but (2) if no limits are imposed on the President’s power to fill vacancies with “temporary” officials, the President could retain acting officials indefinitely and would never need to seek the Senate’s consent to his appointees.
In adopting the FVRA, Congress recognized that statutory limitations on the President’s power to appoint acting officers temporarily would be ineffective unless it enacted measures that created adverse consequences for Presidents who violated those limitations. One of those measures is codified at 5 U.S.C.§ 3348(d), which provides that any action taken by an official named as a temporary federal officer in violation of the terms of the FVRA “shall have no force or effect” and “may not be ratified.” Congress’s obvious rationale: a President is far more likely to adhere to the terms of the FVRA when he knows that if an official appointed as an acting agency head is later determined to have been ineligible for a temporary appointment, actions taken by that official can never be retroactively ratified by his successor.
Effective judicial policing of Article II’s constitutional limitations on the President’s appointment powers requires federal courts to adopt a similar approach. If instead they continue to permit retroactive, rubber-stamp ratification of unauthorized actions taken by officials acting on the basis of invalid recess appointments, we can expect Presidents to continue making similar improper appointments.
Also published by Forbes.com on WLF’s contributor page.