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D.C. Circuit Finds NLRB Appointments Invalid And Leaves Board Without Quorum for Action

Monday, January 28, 2013

The U.S. Court of Appeals for the District of Columbia Circuit held Jan. 25 that President Obama's recess appointments of three members to the National Labor Relations Board were invalid and the board lacked a valid quorum to support an unfair labor practice order against a Washington bottling firm (Noel Canning Div. of Noel Corp. v. NLRB, D.C. Cir., No. 12-1115, 1/25/13).

Writing for the court, Judge David B. Sentelle said the recess appointment power of the president described in the U.S. Constitution applied only during an “intersession” recess of the Senate, not during intrasession adjournments of the congressional body. Obama made his recess appointments of board members Sharon Block (D), Terence F. Flynn (R), and Richard F. Griffin (D) on Jan. 4, 2012, and the court said the president exceeded his constitutional authority. Judges Karen LeCraft Henderson and Thomas B. Griffith joined in the ruling.

The court also observed that the Constitution's recess appointments provision only permits the president to fill a vacancy “that may happen during the Recess,” and found that the NLRB vacancies did not meet the test, which the court said referred to the onset or beginning of a vacancy, not merely its continuation. Griffith found it unnecessary to reach that issue since the court was unanimous in holding that Obama's lack of authority to make intrasession appointments was enough to make the board appointments “invalid from their inception.” 

Administration Disagrees With Ruling

During a press conference Jan. 25, White House Press Secretary Jay Carney called the ruling “novel and unprecedented” and said the administration “respectfully but strongly” disagrees with the court's decision. Carney did not answer a question about further appeals in the case.

NLRB Chairman Mark Gaston Pearce (D) issued a statement that NLRB “believes that the President's position in the matter will ultimately be upheld.”

“It should be noted that this order applies to only one specific case, Noel Canning, and that similar questions have been raised in more than a dozen cases pending in other courts of appeals,” Pearce said.

“In the meantime,” the chairman said, “the Board has important work to do. The parties who come to us seek and expect careful consideration and resolution of their cases, and for that reason, we will continue to perform our statutory duties and issue decisions.” 

January 2012 Appointments at Issue

Flynn resigned from NLRB last year, and a ruling that Block and Griffin lack valid appointments leaves Pearce alone on the board without a quorum.

Obama announced the recess appointments of the board members in January 2012 at the same time he recess appointed Richard Cordray as director of the Consumer Financial Protection Bureau. Avoiding a loss of an NLRB quorum that would have resulted from the expiration of a recess appointment of former Member Craig Becker (D), the president said: “The American people deserve to have qualified public servants fighting for them every day--whether it is to enforce new consumer protections or uphold the rights of working Americans.”

White House Press Secretary Jay Carney called the ruling “novel and unprecedented” and said the administration “respectfully but strongly” disagrees with the court's decision. NLRB Chairman Mark Gaston Pearce (D) said NLRB “believes that the President's position in the matter will ultimately be upheld.”

The first appellate court ruling on the validity of the NLRB appointments arose in what Sentelle said would otherwise have been a “routine review” of an unfair labor practice decision that Noel Canning violated Section 8(a)(5) of the National Labor Relations Act when it refused to reduce to writing a collective bargaining agreement it had negotiated with International Brotherhood of Teamsters Local 760 (358 N.L.R.B. No. 4, 192 LRRM 1503 (2012)).

Noel Canning petitioned for review in the D.C. Circuit, attacking both the unfair labor practice findings and the authority of the board to rule in its case. The board panel that decided the case included only one Senate-confirmed member, Brian E. Hayes (R), along with recess appointees Block and Flynn. 

NLRB Order Otherwise Enforceable

Sentelle said the court first looked at the merits of the unfair labor practice case, believing the case should be resolved on statutory rather than constitutional grounds if possible.

The court's conclusion, he wrote, was that the board properly relied on credibility determinations made by an administrative law judge. The court also agreed with NLRB that because the company failed to raise at the board an argument about the ALJ's failure to apply Washington law, the contention was not properly before the court.

The board decision was supported by substantial evidence, the appeals court found. It then turned to the constitutional challenges to the recess appointments and a board decision that depended on Block and Flynn to form a quorum. 

Extraordinary Circumstance Allowed Review

Sentelle said a preliminary issue confronting the court was whether the court had jurisdiction to hear a company challenge based on the recess appointments that was not presented to the board during its consideration of the unfair labor practice case.

Section 10(e) of the National Labor Relations Act generally precludes court consideration of such issues, but the statute provides that a court may consider an objection where “the failure or neglect to urge such objection shall be excused because of extraordinary circumstances.”

Citing New Process Steel LP v. NLRB, 130 S. Ct. 2635, 188 LRRM 2833 (2010) (116 DLR AA-1, 6/18/10), which held that the authority of the five-seat board could not be delegated to a panel with fewer than three members, the D.C. Circuit said issuance of the NLRB order against Noel Canning fell within the “extraordinary circumstances” exception.

Sentelle said the company could raise the recess appointments issue in its challenge to the board's order because there was no order to enforce in a case decided by a board without a quorum. “This, we hold, constitutes an extraordinary circumstance within the meaning of the NLRA,” the appeal court wrote. 

Debate Over the Meaning of 'Recess'

The first constitutional argument Noel Canning made, the court said, was that Block, Flynn, and Griffin were never validly appointed because their recess appointments came at a time when the Senate was not in recess.

Sentelle said when Obama made the three NLRB appointments, the Senate was operating pursuant to a unanimous consent agreement that had the Senate meeting in brief pro forma sessions every three business days from Dec. 20, 2011, through Jan. 23, 2012.

During a Jan. 3 session, the court said, the Senate convened as required by the Constitution to commence the second session of the 112th Congress. The recess appointments were made on Jan. 4 and the decision against Noel Canning was dated Feb. 8.

NLRB contended that the appointments were valid under Article II, Section 2, Clause 2 of the Constitution, often referred to as the “Recess Appointments Clause,” which provides “[t]he President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.”

The employer argued that “the Recess” referred to in the constitutional provision refers to the intersession recess, which Sentelle defined as “the period between sessions of the Senate when the Senate is by definition not in session and therefore unavailable to receive and act upon nominations from the President.”

NLRB argued that the recess appointment power could be exercised within a session, during “recesses” or breaks in Senate business, but Sentelle said the board failed to specify how short a break would be too short to allow such an exercise of presidential power. “This,” the D.C. Circuit said, “merely reflects the Board's larger problem: it fails to differentiate between 'recesses' and the actual constitutional language, 'the Recess.' ” 

Court Emphasizes Constitutional Text

Stressing the constitutional provision's reference to “the Recess” rather than recesses generally, Sentelle said: “This is not an insignificant distinction. In the end it makes all the difference.”

Reviewing the text of constitutional references to “the Recess” and sessions of Congress, the court said the Constitution's “appointments structure … makes clear that the Framers used 'the Recess' to refer only to the recess between sessions.”

Sentelle said a second possible interpretation of the Constitution was that “the Recess” is “a practical term that refers to some substantial passage of time, such as a ten- or twenty-day break.” The interpretation was used in a 1921 opinion by Attorney General Harry M. Daugherty, but Sentelle said the court rejected Daugherty's “vague alternative” in favor of a distinction that would allow otherwise proper intersession recess appointments but prohibit intrasession appointments.

“Given that the appointments structure forms a major part of the separation of powers in the Constitution, the Framers would not likely have introduced such a flimsy standard,” Sentelle wrote. 

Court Settles on 'Intersession Interpretation'

The appeals court also rejected arguments that “the Recess” could be any adjournment of more than three days and that the President has discretion to determine whether the Senate is in recess.

The first argument, Sentelle said, “lacks any constitutional basis,” while accepting the second contention “would eviscerate the Constitution's separation of powers and would give a president “free rein to appoint his desired nominees at any time he pleases, whether that time be a weekend, lunch, or even when the Senate is in session and he is merely displeased with its inaction.”

“The intersession interpretation of 'the Recess' is the only one faithful to the Constitution's text, structure, and history,” the appeals court said, ruling that the NLRB decision against Noel Canning had to be vacated. 

Recess Appointment Must Arise During Recess

Writing for himself and Henderson, Sentelle said the court also agreed with the employer that when the recess appointments clause refers to vacancies “that may happen” during “the Recess,” the provision is describing vacancies that arise or begin or come into being during an intersession recess.

“The term 'happen' connotes an event taking place--an action--and it would be plainly incorrect to say that an event happened during some period of time when in fact it happened before that time,” Sentelle wrote.

The court also said if it accepted NLRB's argument that recess appointments could be made in vacancies that existed before a recess, “[a] President at odds with the Senate over nominations would never have to submit his nominees for confirmation. He could simply wait for a 'recess' (however defined) and then fill up all vacancies.”

Sentelle said NLRB and some other circuit courts take the position that limiting recess appointments to the time when vacancies arise leaves open the possibility that an agency will lose a quorum and its power to act.

The court responded that “if Congress wished to alleviate such problems, it could certainly create Board members whose service extended until the qualification of a successor, or provide for action by less than the current quorum, or deal with any inefficiencies in some other fashion.”

Several federal statutes allow filling executive vacancies with “acting” officers, the court said. “[I]f some administrative inefficiency results from our construction of the original meaning of the Constitution, that does not empower us to change what the Constitution commands,” Sentelle said.

Flynn took a seat that became vacant in August 2010, and Griffin filled one that became vacant in 2011, so their appointments did not fill vacancies that arose during a recess, the court said.

Block filled a seat that Becker vacated on Jan. 3, 2012, but the court said the Senate did not take an intersession recess between the first and second sessions of the 112th Congress. Becker's appointment--itself a recess appointment--ended at the conclusion of the first session, Sentelle said, but it did not lead to a valid intersession appointment of Block. 

AFL-CIO, Democrats Blast the Decision

Initial comment on the D.C. Circuit decision was quick and divided.

AFL-CIO President Richard Trumka issued a statement calling the ruling “nothing less than shocking.” Asserting President George W. Bush made 179 appointments and President Clinton made 139 appointments “to keep agencies functioning and make the government work,” Trumka said he expects the decision to be overruled.

“In the meantime,” Trumka said, “the appointees to the National Labor Relations Board remain in their jobs and the NLRB remains open for business.”

Sen. Tom Harkin (D-Iowa), chairman of the Senate Health, Education, Labor and Pensions Committee, was also insistent NLRB should continue to function.

“Republicans have made clear that they are willing to disrupt the basic functions of government to stop the NLRB from carrying out its congressionally-mandated function to defend the rights of workers,” Harkin said. “I urge the NLRB to continue to do its business until and unless the Supreme Court rules on this important question.”

Reps. George Miller (D-Calif.), the senior Democratic member of the House Education and the Workforce Committee, and Rob Andrews (D-N.J.), the ranking member of the Health, Employment, Labor, and Pensions Subcommittee, issued a joint statement arguing that the court decision “radically undermines the ability of any president--Democratic or Republican--to staff critical government positions when another party engages in political obstructionism.”

Calling the appeals court's view of the Constitution “distorted,” the two House Democrats said: “It is time the legal gamesmanship and political obstruction in the Senate end so that Presidential nominations for this agency and others can be considered and voted.”

Republicans Call for NLRB Resignations

House Speaker John Boehner (R-Ohio) issued a statement shortly after the decision issued, and took a contrary view.

“We welcome today's ruling as a victory for accountability in government and hope it will ultimately help employers and workers overcome excessive regulations,” the speaker said.

“The Obama administration has consistently used the NLRB to impose regulations that hurt our economy by fostering uncertainty in the workplace and telling businesses where they can and cannot create jobs,” Boehner said.

House Education and the Workforce Committee Chairman John Kline (R-Minn.) said in a Jan. 25 statement: “The Obama labor board must cease all activity until qualified nominees have been constitutionally appointed to the board.”

“Any attempt to continue this battle in federal court will only prolong the uncertainty the president's unilateral action has created for America's workers and job creators,” Kline argued.

House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) said in a statement that his committee considered the recess appointments in 2012 and they “looked like an obvious election-year pander to big labor bosses.”

“To avoid further damage to the economy, the NLRB must take the responsible course and cease issuing any further opinions until a constitutionally-sound quorum can be established. The unconstitutionally appointed members of the NLRB should do the right thing and step down,” Issa said.

Sen. Lamar Alexander (R-Tenn.), now the ranking Republican on the Senate Health, Education, Labor and Pensions Committee said in a statement: “The court has found that the president violated the Constitution when he made these appointments. These individuals should resign from the board immediately, because no decision in which they participate can be valid.” 

Lawyers' First Comments Underline Significance

Ronald Meisburg, a partner representing employers at Proskauer in Washington, D.C., and a former NLRB general counsel and board member, told BNA Jan. 25 that the dispute over the president's power to make recess appointments “will undoubtedly have to be finally resolved by the Supreme Court, because it recognizes a serious constitutional limitation on the power of the President to make recess appointments to any federal position.”

But for NLRB, Meisburg said, the consequences of the court decision are immediate and significant. The “validity of any decision issued by the NLRB in the last year is now called into question, as well as the Board's power to issue decisions going forward,” he said.

“The other activities of the NLRB, such as the prosecution of unfair labor practice cases and the processing of representation petitions by the Regional Offices, will continue, but the ability to obtain Board review is effectively eviscerated, at least for the time being.”

Management attorney Evan J. Spelfogel of Epstein Becker & Green in New York told BNA the decision was ''the one everyone has been waiting to see.'' The lawyer called the 46-page opinion an ''extremely scholarly and studious analysis,'' and suggested that its authorship by Sentelle, chief judge of the D.C. Circuit, made the three-judge panel decision less likely to be reversed if it is considered by the appeals court in an en banc review.

Spelfogel acknowledged that the validity of the NLRB appointments is still at issue in other circuits, but he said the D.C. Circuit has particularly significant weight, since any party aggrieved by a final NLRB decision can petition for review there.

Nelson Cary, a management lawyer and partner at Vorys, Sater, Seymour and Pease in Columbus, Ohio, noted the ruling came shortly after the end of a year in which the board issued significant decisions covering NLRA protection for Facebook activity, the enforceability of dues checkoff agreements, and other questions.

“The D.C. Circuit's decision throws into doubt the validity of many significant NLRB decisions in the last year,” Cary said. “If the Supreme Court takes the case, and affirms the decision, it would invalidate the NLRB's rulings issued after the recess appointments at issue were made.”

By Lawrence E. Dub  

John Herzfeld contributed to this report.


Text of the opinion is available at http://about.bloomberglaw.com/files/2013/01/Canning-DCC.pdf.

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