by Deepak Gupta
First, because the decision openly creates a circuit split with an Eleventh Circuit decision upholding George W. Bush's recess appointment of Judge Pryor and because of its tremendous importance for the separation of powers, the Supreme Court is likely to review the decision if the Justice Department files a cert petition. The need for the Court to step in is heightened by the sweeping nature of the decision, which goes well beyond the controversy over "pro forma" sessions and invalidates nearly two centuries of settled practice. (Indeed, the decision's unnecessary reading of the word "happen" to preclude appointments for vacancies that pre-exist the recess conflicts with the Eleventh, as well as the Ninth and Second Circuits.) There's also the possibility that the Justice Department will first seek en banc review.
Second, because the banking industry — despite what it says — fears chaos and regulatory uncertainty more than anything else, there will be pressure on the Senate to reach a deal and confirm Rich Cordray.
Third, even assuming the decision on the NLRB appointments is ultimately upheld and that Rich Cordray's CFPB recess appointment is likewise unconstitutional, that doesn't necessarily mean that everything the Bureau has done under Cordray would be wiped out. A longstanding legal doctrine known as the "de facto officer doctrine" is designed to avoid the sort of needless chaos that would otherwise result from a ruling like today's. The de facto officer doctrine confers validity upon acts performed by a person acting under the color of official title even though it is later discovered that the legality of that person’s appointment or election to office is deficient. Although its roots are old and somewhat murky, the Supreme Court recognized the doctrine as recently as 1995. See Ryder v. United States, 515 U.S. 177 (1995).
As the Court explained in Ryder, the doctrine “springs from the fear of the chaos that would result from multiple and repetitious suits challenging every action taken by every official whose claim to office could be open to question, and seeks to protect the public by insuring the orderly functioning of the government despite technical defects in title to office.”
In my view, the de facto officer doctrine may be successfully invoked to protect many of the Bureau's actions, including regulatory and supervisory actions. Notably, this doctrine was applied to protect from legal challenge actions taken by an improperly-appointed Director of the Office of Thrift Supervision. See, e.g., Office of Thrift Supervision v. Paul, 985 F. Supp. 1465, 1475 (S.D. Fla. 1997); Franklin v. Sav. Ass’n v. Director of Office of Thrift Supervision, 740 F. Supp. 1535, 1542, 1542 (D. Kan. 1990). Ryder, however, provides an exception to the doctrine when “one makes a timely challenge to the appointment of an officer who adjudicates his case.” 515 U.S. at 181. Thus, the de facto officer doctrine might not be available if objections to Bureau authority are raised in the course of a pending adjudication, but could operate to insulate a finalized rulemaking, for example.