Congressional Research Service Report on the D.C. Circuit's "Noel Canning" Decision and the Recess Appointment Power

We've posted many times about the D.C. Circuit's Noel Canning decision, which held that three putative recess appointments made by President Obama to the National Labor Relations Board were, in fact, not proper recess appointments and were thus invalid. Go, for instance, here, here, and here.

Last week, the Congressional Research Service issued a report entitled The Recess Appointment Power After Noel Canning v. NLRB: Constitutional Implications. The report reviews the recess appointment clause and how earlier analyses of the clause from the Second, Ninth, and Eleventh Circuits compare to the analysis in Noel Canning. Perhaps most interesting is the report's take on the practical implications of the D.C. Circuit's ruling if it were to become the law of the land. Here's an excerpt of that section:

Although the D.C. Circuit’s actual order in Noel Canning directly implicates only one specific action, against one specific party, within one specific circuit, the court’s interpretation of the President’s recess appointment authority could have a substantial impact on the future division of power between the President and Congress in the filling of vacancies. If affirmed by the Supreme Court, the likely effect of the reasoning adopted in Noel Canning would be a shift toward increased Senate control over the appointment of government officials and a decrease in the frequency of presidential recess appointments. Most prominently, the President would no longer be permitted to make intrasession recess appointments. Since 1981, 329 appointments—more than half of all recess appointments made during that period—have been made during intrasession recesses of the Senate. In addition, the President would no longer be permitted to exercise his recess appointment authority to fill vacancies that arose while the Senate was in session, or that arose during a different intersession recess. Although CRS has not been able to determine the precise number of appointments that would have fallen into this category, it would appear that few of the intersession recess appointments made since 1981 filled vacancies that arose during the intersession recess in which the appointment was made. Vacancies in positions requiring Senate confirmation that no longer qualify for a recess appointment under Noel Canning would need to be filled through the general process of presidential nomination and Senate confirmation. Thus, by limiting both the periods in which a President may make recess appointments, and the vacancies that may be filled by such appointments, the decision likely would strengthen the Senate’s “Advice and Consent” role, while restricting the President’s authority to make unilateral appointments.

And here is the report's summary:

Under the Appointments Clause, the President is empowered to nominate and appoint principal
officers of the United States, but only with the advice and consent of the Senate. In addition to
this general appointment authority, the Recess Appointments Clause permits the President to
make temporary appointments, without Senate approval, during periods in which the Senate is not
in session. On January 4, 2012, while the Senate was holding periodic “pro forma” sessions,
President Obama invoked his recess appointment power and unilaterally appointed Richard
Cordray as Director of the Consumer Financial Protection Bureau (CFPB) and Terrence F. Flynn,
Sharon Block, and Richard F. Griffin Jr. as Members of the National Labor Relations Board
(NLRB).

The President’s recess appointments were ultimately challenged by parties affected by actions
taken by the appointed officials, and on January 25, 2013, the U.S. Court of Appeals for the
District of Columbia Circuit (D.C. Circuit) became the first court to evaluate the merits of the
President’s appointments. In a broad decision entitled Noel Canning v. National Labor Relations
Board, the court invalidated the appointment of all three NLRB Board Members. In reaching its
decision, the D.C. Circuit concluded that under the Recess Appointments Clause, the President
may only make recess appointments during a formal intersession recess (a recess between the end
of one session of Congress and the start of another), and only to fill those vacancies that arose
during the intersession recess in which the appointment was made.

Although the D.C. Circuit’s actual order in Noel Canning directly applies only to the NLRB’s
authority to undertake the single action at issue in the case, the court’s interpretation of the
President’s recess appointment authority could have a substantial impact on the future division of
power between the President and Congress in the filling of vacancies. If affirmed by the Supreme
Court, the likely effect of the reasoning adopted in Noel Canning would be a shift toward
increased Senate control over the appointment of government officials and a decrease in the
frequency of presidential recess appointments.

This report begins with a general legal overview of the Recess Appointments Clause and a
discussion of applicable case law that existed prior to the D.C. Circuit’s decision in Noel
Canning. The report then analyzes the Noel Canning opinion and evaluates the impact the case
could have on the roles of the President and Congress in the appointments context. A companion
CRS report, Practical Implications of Noel Canning on the NLRB and CFPB, provides a detailed
discussion of the impact the Noel Canning decision may have on the functioning of the NLRB
and the CFPB.

Michigan Appeals Court Protects Anonymity of Online Critic, But Should Have Done More

by Paul Alan Levy

The decision posted this morning by the Michigan Court of Appeals in Thomas Cooley Law School v. Doe is a victory for the Doe defendant, who gets the reversal that he sought, but is a mixed blessing for anonymous Internet speakers in future cases.

A unanimous Court of Appeals decided that the trial judge, Clinton Canady, was wrong to deny a protective order barring Thomas M. Cooley Law School from disclosing the name of a former student whom it had sued, alleging that harsh criticisms of Cooley on his blog, the Thomas Cooley Law School Scam, were defamatory.  The majority opinion faults the trial judge for deciding that Michigan law does not require such a protective order, and for assuming that a public figure like Cooley is exempt from having to allege and prove actual malice simply because the Doe had called its conduct criminal.  Under the ruling, Doe will be able to seek to have the complaint dismissed either on its face or for lack of evidence to support the claim that his blog is defamatory. 

Equally important for future cases, the Court of Appeals made clear that an anonymous speaker’s First Amendment rights must be considered in addressing protective orders.  The Court indicated that the Dendrite and Cahill standards, which are applied in other states directly pursuant to the First Amendment, “largely overlap” with Michigan law, and that, although the protective order motion itself does not turn on whether an adequate complaint has been filed or the plaintiff has evidence to support its claims, a protective order can be granted barring disclosure of a defendant’s name while the anonymous defendant seeks to have the lawsuit dismissed.

For future cases, however, it is disappointing that the majority opinion, in its effort to avoid applying the Dendrite and Cahill standards directly, gave little guidance to trial courts about the standards under which anonymous speakers’ requests for protective orders should be decided by trial judges.  And most troublesome is the majority’s deliberate refusal to address the notice requirement on which every other state appellate court has insisted, because otherwise an anonymous defendant may not know that a subpoena has been issued seeking his identifying information.  Thus, while the Doe was well-protected in this case, that is only because Cooley Law School issued a press release announcing its defamation claims, enabling the Doe to file a motion to block the subpoena.

A powerful opinion by Judge Jane Beckering concurs in the decision to overturn the denial of anonymity protection and remand the case, but strongly disagrees with the reasoning, arguing that Michigan should embrace the approach taken by almost very other state that has addressed the issue and adopt clear standards to guide trial judges.  Judge Beckering explains that Michigan’s existing rules require notice before subpoenas can be issued, and hence that appropriate First Amendment standards can be incorporated without any need to change the current rules.

No decision has yet been made whether to seek further review in the Michigan Supreme Court, in light of hints in the majority opinion that the Supreme Court might be the right Court to decide whether to adopt a specific rule to govern anonymity disputes about subpoenas.

More on disability in the United States

On Monday, we posted about Chana Joffe-Walt's piece for "This American Life" called "Unfit for Work: The startling rise of disability in America."  Joffe-Walt chronicled the rising number of people on federal disability benefits and discussed poor U.S. counties (focusing in particular on one county in Alabama) where 25% of all working age people receive federal disability benefits. We updated that story with a critical response from Media Matters, which claimed that Joffe-Walt's reporting was chock full of errors. Other organizations agree that Joffe-Walt's story is misleading or misunderstands the federal disability programs. Go here, here, and here.

UPDATE:

Go here for a powerful response to the Joffe-Walt story from eight former commissioners of the Social Security Administration. Here's a key excerpt:

The statutory standard for approval [of federal disability benefits] is very strict, and was made even more so in 1996. To implement this strict standard, Social Security Administration (SSA) regulations, policies, and procedures require extensive documentation and medical evidence at all levels of the application process. Less than one third of initial DI and SSI applications are approved, and only about 40 percent of adult DI and SSI applicants receive benefits even after all levels of appeal. As with adults, most children who apply are denied SSI, and only the most severely impaired qualify for benefits. * * * It is true [as reported by Joffe-Walt] that DI has grown significantly in the past 30 years. The growth that we’ve seen was predicted by actuaries as early as 1994 and is mostly the result of two factors: baby boomers entering their high disability years, and women entering the workforce in large numbers in the 1970s and 1980s so that more are now "insured" for DI based on their own prior contributions. The increase in the number of children receiving SSI benefits in the past decade is similarly explained by larger economic factors, namely the increase in the number of poor and low‐income children. More than 1 in 5 U.S. children live in poverty today and some 44 percent live in low‐income households. Since SSI is a means‐tested program, more poor and low‐income children mean more children with disabilities are financially eligible for benefits. Importantly, the share of low‐income children who receive SSI benefits has remained constant at less than four percent.

CFPB acts against mortgage insurers giving kickbacks to lenders

The Consumer Financial Protection Bureau (CFPB) announced four enforcement actions against mortgage insurers that the CFPB believes are paying improper kickbacks to mortgage lenders in exchange for business. The CFPB filed complaints alleging violations of the Real Estate Settlement Procedures Act (sometimes referred to as RESPA) and proposed consent orders against the four insurance companies to stop the practices, which the CFPB says have been prevalent for more than 10 years. The proposed consent orders would require the mortgage insurers to pay more than $15 million in penalties. The proposed consent orders are posted at the bottom of this page.

American Banker: How CFPB Exams Will Change the Debt Collection Industry

by Jeff Sovern

Here (behind a paywall, unfortunately). The article implies that the Bureau will listen to collector phone calls (at least, that's how I interpret the statement that the Bureau will audit the "handling of phone calls").  That contrasts with what Fred Williams reported in his book Fight Back Against Unfair Debt Collection Practices (which I blogged about here), when he wrote that collectors were told when the firm's compliance department was listening to their calls, in response to which the collectors would tone down their behavior.

Consumer Law Events, Including Consumer Financial Services Institute Next Week and Panel on Fair Lending Tomorrow

There are some consumer-law events coming up that readers may find interesting:

• ABA Fair Lending Panel Tomorrow (April 5):  The recent exchange between Jeff Sovern and Chris Willis on disparate impact and fair lending (at this blog and the CFPB Monitor blog) reminds me to mention a panel on the same subject tomorrow at the spring meeting of the American Bar Association's Consumer Financial Services Committee in Washington. Chris Willis and I will be both speaking, along with Bryan Greene of HUD and Roddrick Lynch of TD Bank. The panel -- a discussion of hot topics in fair lending -- takes place tomorrow at 10:30am at the Washington Hilton. 

• Other interesting events at the ABA conference tomorrow include panels on online/tribal lending (including my former colleague Ellie Blume of the CFPB) and a discussion of the consumer finance market as a reflection of the growing income disparity in America. Saturday's program features a panel focused on the nuts-and-bolts implications of Noel Canning for CFPB enforcement litigation and a preemption discussion.

• PLI Consumer Law Institute Next Week (April 8 and 9): There's still time to register for the Annual Consumer Financial Services Institute at PLI, which takes place in New York on April 8th and 9th. I'm a co-chair of the Institute and will be moderating or participating on several panels. Co-blogger Jeff Sovern will be appearing on Tuesday. Other consumer advocates include Mike Donovan, Ira Rheingold, and John Barrett. The program includes a lineup of detailed panels on the CFPB regulations, enforcement, and supervision with key officials, including General Counsel Meredith Fuchs and former head of Regulations Leonard Chanin. There will also be panels on hot topics in arbitration, class actions, and unfair and deceptive acts and practices. Clicking this link will give you a 25% discount on the program.

• And in Chicago in May 2 and 3: For those who can't make it next week but are interested in attending, the PLI Consumer Financial Services Intitute will also take place in Chicago (at the University of Chicago's business school facility downtown) in early May. 

I look forward to seeing some of you at these events.

Another Reply to Chris Willis: This Time on Disparate Impact

by Jeff Sovern

Chris Willis of Ballard Spahr's CFPB Monitor recently blogged about whether disparate impact can properly be termed discrimination and therefore prohibited by ECOA.  For those who don't know, courts generally recognize three ways to prove discrimination in violation of ECOA: direct evidence, disparate treatment (except in the Seventh Circuit) and disparate impact, or as it is sometimes called, disparate effect. Direct evidence would exist, for example, if a lender said we don't lend to old people.  For obvious reasons, that doesn't happen that often.  Disparate treatment requires that the lender have discriminated intentionally.  That turns out to be very difficult to prove, so difficult in fact that it almost doesn't matter that the Seventh Circuit doesn't use the disparate treatment test. That leaves disparate impact. Disparate impact requires the plaintiff to show that using a particular criterion has a disproportionate effect on a particular group.  That can happen even if the lender did not intend to discriminate against anyone.  If the plaintiff carries that burden, the lender has the burden of showing that the criterion has a manifest relationship to creditworthiness.

To take a somewhat fanciful example, but one that I think makes the rule fairly clear, suppose the cattle organization that sued Oprah Winfrey some years back for disparaging beef decides to open a bank and that it will lend only to people who eat meat.  Some religions require their adherents to be vegetarians.  Accordingly, the lender's policy would discriminate against members of those religions, which I believe includes Budhism, at least in some forms.  The lender would not have intended to discriminate against Budhists, but its policy would have a disparate impact upon them. Consequently, the lender would have to show that its criterion enabled it to avoid lending to non-creditworthy borrowers. 

So the disparate impact test prevents unintentional discrimination against members of protected groups.  Why should we use such a test?  I confess I haven't studied the literature on this as much as I would have liked, but I can think of several reasons (I think Chris knows more about this than I do, but I wanted to respond anyway).  First, the legislative history of ECOA supports the use of the disparate impact test.  Some lawyers and judges oppose the use of legislative history, but I don't intend to repeat that debate here; it happens that I believe in using legislative history, at least under some circumstances. Second, the administrative agencies that have interpreted ECOA, such as the Federal Reserve and HUD, have also endorsed using the disparate impact test.  Courts usually defer to administrative agencies in interpreting statutes.

There also are policy justifications for using the disparate impact test.  if Budhists can't borrow from a particular lender because of their religion, does it really matter that the lender didn't intend to discriminate against Budhists but just insists on lending to meat-eaters?  Whether the lender intended to discriminate or not, the Budhists who refuse to eat meat can't borrow from that lender because of their religion.  They are being treated as second-class citizens by that lender.  And, again, if the lender can demonstrate that meat eaters are less likely to default, then the lender could continue insisting that its borrowers eat meat.

Another reason to recognize the disparate impact test is because the other tests have not been very effective. If courts don't block disparate impact, ECOA won't have very much impact at all.  In other words, lenders could continue to treat people differently based on criteria that don't relate to creditworthiness, but that produce different effects on protected and non-protected groups.  And just suppose the lender really did want to discriminate against Budhists, and is willing to accept as the price of doing so that it also discriminate against non-Budhist vegetarians, to avoid creating evidence of disparate treatment. If the lender managed to avoid providing direct evidence of animus towards Budhists, disparate impact would be the only avenue for stopping the lender.  Take that away, and the lender could discriminate with impunity. 

Chris provides an engaging example about two car loans he and his wife took out.  I think his example is beside the point because, unless I am misinformed, disparate impact cases are not based on one or two examples, but on enough examples to create statistical evidence that different groups are being treated differently.  If a car dealer systematically charges one group higher rates than another, it becomes much more difficult to say that the explanation is innocent (but maybe I'm not understanding Chris's example properly, because I don't see why the car price, as opposed to the loan terms, are relevant).  Similarly, Chris's point that the different treatment is not that different also misses the mark, in my view.  If the differences are not that great, then maybe there hasn't been a disparate impact.  But that doesn't mean that in other cases, in which the differences between the treatment of two groups are statistically significant, we should ignore those differences. 

I agree with Chris that unintentional discrimination doesn't carry the same moral objection as intentional discrimination.  But treating people differently because of race or religion, etc. is still deeply troubling. In any event, I agree with the courts and administrative agencies that have concluded the disparate impact test is an appropriate test of whether ECOA has been violated.

Online data brokers may be subject to the Federal Credit Reporting Act

The Federal Trade Commission has warned operators of six websites that share information about consumers’ rental histories with landlords that they may be subject to the requirements of the Fair Credit Reporting Act (FCRA).

The letters inform the six operators that, if they collect information on tenants and their rental history and provide that information to landlords to use in deciding whether to rent to those tenants, they are considered credit reporting agencies and are subject to certain legal requirements. The FTC has not determined whether the six have violated the FCRA, but the letters encourage them to review their business practices to ensure compliance.

The FTC 's press release identifies the companies as The BlueChip Group LLC (www.donotrentto.com), M & R Rental Properties (www.badtenantlistings.com), The Landlord Protection Agency (www.thelpa.com), National Tenant Network (ntnonline.com), 123 Rent Inc. (therentersblacklist.com), and Tenancy Bureau Inc. (www.tenancybureau.us).

FTC announces winners of robocall challenge

The Federal Trade Commission (FTC) yesterday announced two winners of its contest seeking ideas to block illegal robocalls. The two winners will receive $25,000 each. Both of their solutions "focus on intercepting and filtering out illegal prerecorded calls using technology to 'blacklist' robocaller phone numbers and 'whitelist" numbers associated with acceptable incoming calls. Both proposals also would filter out unapproved robocallers using a CAPTCHA-style test to prevent illegal calls from ringing through to a user," according to the FTC's press release. The FTC stated that "the challenge, designed to help solve this problem by spurring innovation in the marketplace, garnered nearly 800 eligible submissions."

Obama Administration wants to loosen home loan availability for people with weak credit

It is widely believed that a major cause of the financial crisis and economic collapse that began in 2008 was the extension of home loans to people who could not afford them. The Clinton and Bush Administrations have been criticized for promoting policies of loose home lending backed by federal guarantees. Today, it's harder for people with weak credit to get a home loan. But according to this article by Zachary Goldberg the Obama Administration wants to change course, at least to some degree. It wants home loan credit loosened to spur the economy and allow lower-income people and home buyers without a credit history to share in the (now weak) economic recovery. Here's an excerpt:

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place. ... [A]dministration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default. [Federal] Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.