Today's Recess Appointment News

by Deepak Gupta

• The Arbitration Wars Meet the Recess Appointment Wars: Since its beginning, this blog has closely covered controversies over mandatory arbitration in consumer and employment contracts. More recently, we've been covering the constitutional controversy over the President's recess appointments to the CFPB and NLRB. On Tuesday, those two worlds officially collided when lawyers for the D.R. Horton company sent a letter to the Fifth Circuit invoking the D.C. Circuit's recent decision in Noel Canning. As observers of the arbitration wars know, D.R. Horton has been fighting the NLRB's year-old decision holding that federal labor law precludes employers from forcing their workers to waive collective-action rights through arbitration clauses. Now, D.R. Horton argues that the March 2010 recess appointment of NLRB member Craig Becker is invalid and therefore nullifies the board's decision. "Just like the situation in Noel Canning," the letter asserts, "the vacancy Mr. Becker filled did not arise during the Senate's recess, nor did the president appoint him during that recess. When the NLRB issued the D.R. Horton decision, it therefore had only two properly appointed members and no quorum to act."

• A New Court Challenge to the Cordray Appointment? Carter Dougherty of Bloomberg reports on the possibility that a CFPB enforcement action now pending before the U.S. District Court in Los Angeles could provide a new forum for a court challenge to Rich Cordray's status as the Bureau's director. The defendants in the action are a law firm and its principals that operated a network of mortgage loan modification businesses. On Tuesday, their lawyer sent the Bureau a letter "asking for a negotiated settlement of the six-month-old case in light of" the D.C. Circuit decision in Noel Canning. The lawyer appears to be trying to use the prospect of a recess appointment challenge to obtain leverage in settlement negotiations: “I want to give them an opportunity to resolve this without court intervention,” he says. (The case that's received the most attention -- C. Boyden Gray's Big Spring case filed in district court here in Washington -- is likely to be thrown out on standing grounds, so the big question is where and when a fresh court challenge will appear. My guess is that the Los Angeles case won't become the next vehicle.)

• Free Webinar on Monday: Our friends at Ballard Spahr, a law firm that represents banks in consumer finance matters, are convening a free webinar on Monday at noon entitled "The Impact of the D.C. Circuit Court NLRB Ruling on the CFPB." I won't be able to participate in Monday's webinar, but I recently co-hosted a webinar with Ballard Spahr and can attest to the quality of their programming. This is a good opportunity to hear some of the banking industry perspective on the recess appointment controversy. The banks -- despite what they may say -- are quite worried about the CFPB's fate. The webinar will discus the holding and reasoning of the court and the possibility of a further en banc review by the D.C. Circuit or review by the U.S. Supreme Court; the status of other cases dealing with the recess appointments; how the CFPB will react to the ruling; the impact on ongoing investigations and consent orders; the impact on supervision of non-banks; and the political impact of the ruling.