State National Bank of Big Spring v. GeithnerState National Bank of Big Spring v. Geithner
any basis for discovery, plaintiffs request for it must be denied.
CONCLUSION
For the foregoing reasons, the Court GRANTS defendant‘s Motion for Summary Judgment. An Order consistent with this decision accompanies this Memorandum Opinion.
Justin Michael Sandberg, Bradley Heath Cohen, Matthew Joseph Berns, U.S. Department of Justice, Ethan Price Davis, King & Spalding LLP, Jonathan Gordon Cooper, Quinn Emanuel Urquhart & Sullivan LLP, Washington, DC, for Defendants.
ELLEN SEGAL HUVELLE, United States District Judge
Plaintiffs filed this suit in 2012 to challenge the constitutionality of the Consumer Financial Protection Bureau (“CFPB“), which was created as part of the Dodd-Frank Act. See
At this time, the Court will defer ruling on plaintiffs’ attack on the CFPB on separation-of-powers grounds. This same constitutional challenge was made to the D.C. Circuit in a recently argued case. See Pet‘rs’ Statement of Issues, PHH Corp. v. Consumer Fin. Prot. Bureau, Case No. 15-1177 (D.C. Cir. July 24, 2015) (raising the question of “[w]hether the unprecedented structural features of the CFPB, which combine legislative, executive, and judicial power in the hands of a single individual, violate the separation of powers“). Plaintiffs in this case filed an amicus brief in support of petitioners, making largely the same arguments that they make here. See generally Br. of State National Bank of Big Spring, The 60 Plus Association, Inc.; and Competitive Enterprise Institute, PHH Corp. v. Consumer Fin. Prot. Bureau, Case No. 15-1177 (D.C. Cir. Oct. 5, 2015). Given the likelihood that this issue will soon be decided by the Circuit, this Court will hold this matter in abeyance until the Court of Appeals rules in PHH Corp. See, e.g., Al Qosi v. Bush, 2004 WL 4797470, at *1 (D.D.C. Dec. 17, 2004) (holding further proceedings in abeyance pending resolution of the same issues in a case already before the D.C. Circuit).
It will, however, address the merits of plaintiffs’ challenge to the recess appointment of Director Cordray. To do this, it will limit its background discussion to information that is relevant only to that issue.
BACKGROUND
On July 18, 2011, President Obama first nominated Richard Cordray to serve as CFPB Director. (See Defs.’ Resp. to Pls.’ Statement of Material Facts Not in Dispute (“Defs.’ Resp.“) [ECF No. 59-2] ¶ 18.) When the Senate took no action on that nomination, the President then appointed him to the position on January 4, 2012, invoking his authority under the Recess Appointments Clause. (See id. ¶ 19.) That same day, the President also invoked his Recess Appointment authority to appoint three members to the National Labor Relations Board (“NLRB“). (See id. ¶ 21.) The Supreme Court subsequently found in National Labor Relations Board v. Noel Canning, — U.S. —, 134 S.Ct. 2550, 2578, 189 L.Ed.2d 538 (2014), that these NLRB appointments were made in violation of the Recess Appointments Clause.
As a recess appointee, Cordray exercised final decision-making authority concerning several CFPB rulemakings. (See Defs.’ Resp. ¶ 27;
On January 24, 2013, President Obama re-nominated Cordray to serve as CFPB Director, and the Senate confirmed his nomination on July 16, 2013. (Defs.’ Resp. ¶ 26.) The following month, Director Cordray published a Notice of Ratification in the Federal Register, which read as follows:
The President appointed me as Director of the Bureau of Consumer Financial Protection on January 4, 2012, pursuant to his authority under the Recess Appointments Clause,
U.S. Const. art. II, § 2, cl. 3 . The President subsequently appointed me as Director on July 17, 2013, following confirmation by the Senate, pursuant to the Appointments Clause,U.S. Const. art. II, § 2, cl. 2 . I believe that the actions I took during the period I was serving as a recess appointee were legally authorized and entirely proper. To avoid any possible uncertainty, however, I hereby affirm and ratify any and all actions I took during that period.
The primary point of contention between the parties is what legal effect, if any, this purported ratification has.
ANALYSIS
I. RECESS APPOINTMENT
After finding that plaintiffs had standing to challenge Director Cordray‘s recess appointment as unconstitutional, the Court of Appeals left it to this Court “to consider the significance of Director Cordray‘s later Senate confirmation and his subsequent ratification of the actions he had taken while serving under a recess appointment.” State Nat. Bank of Big Spring, 795 F.3d at 54. Defendants now argue that the confirmation and subsequent ratification is fatal to plaintiffs’ recess appointment challenge for three reasons.
A. Mootness
At the time the Second Amended Complaint was filed, Director Cordray had not yet been confirmed by the Senate, and thus, plaintiffs challenged his authority to take any action as head of the Bureau. (See Second Am. Compl. [ECF No. 24] ¶ 257 (filed Feb. 19, 2013).) They now acknowledge that his subsequent confirmation moots much of their claim for injunctive relief: “To be sure, plaintiffs do not dispute that subsequent to his confirmation, Cordray could (subject to plaintiffs’ separation of powers challenge) properly exercise those authorities that are lawfully vested in him as Director of the CFPB.” (See Pls.’ Reply Br. [ECF No. 62] at 33.) However, they argue that even if they are not entitled to all of the relief they initially requested, the dispute remains live because the Court can still enjoin the enforcement of regulations that were promulgated prior
Even if certain remedies have been foreclosed during the course of litigation, the availability of partial relief prevents the case from becoming moot. See Church of Scientology of Cal. v. United States, 506 U.S. 9, 13, 113 S.Ct. 447, 121 L.Ed.2d 313 (1992). Therefore, defendants’ mootness argument can only succeed if none of the relief sought remains available in the wake of Director Cordray‘s confirmation. See id. As discussed, plaintiffs initially sought to enjoin Cordray from “carrying out any of the powers” of his office (Second Am. Compl. ¶ 257), and they continue to seek an injunction against the enforcement of rules promulgated prior to his confirmation. The Court agrees with plaintiffs that the broad request for relief in their complaint encompasses the more limited relief that could still be granted, i.e., enjoining Director Cordray from carrying out some of the powers of his office. (See Pls.’ Reply Br. at 32.) Defendants’ argument that “[t]here is no overlap between the injunction originally requested and SNB‘s present characterization of it” (Defs.’ Reply Br. [ECF No. 64] at 20) is not persuasive. For the same reason, there is no support for defendants’ argument that the reframed request for relief is not properly before the Court. (See id. at 20-21.) As discussed, the limited relief still potentially available to plaintiffs was sought in their Second Amended Complaint.
B. Standing
Defendants next argue that plaintiffs have not demonstrated standing to challenge most of the regulations they seek to invalidate. (See Defs.’ Cross-Mot. for Summ. J. at 35-40.) This both misapprehends the thrust of plaintiffs’ claim and flies in the face of the Court of Appeals’ decision. First, plaintiffs are not seeking to directly “invalidate” any regulations, as if this were a run-of-the-mill APA challenge. (See Pls.’ Reply Br. at 34-35.) Instead, they are seeking a declaration that Director Cordray‘s recess appointment was unconstitutional, and consequently, an injunction preventing the enforcement of any rules that were issued while he was a recess appointee. (See id.; see also Second Am. Compl. ¶ 257.) Defendants essentially admit that plaintiffs’ compliance costs under the Remittance Rule create standing to challenge the recess appointment (see Defs.’ Cross-Mot. for Summ. J. at 35), as they must following the decision of the Court of Appeals. See State Nat. Bank of Big Spring, 795 F.3d at 53-54 (SNB‘s Remittance Rule compliance costs create standing to challenge both the Bureau‘s constitutionality and Director Cordray‘s recess appointment). Thus, the Court must reach the merits of the recess appointment claim, regardless of whether SNB would have also been able to establish standing under other rules. Second, and more fundamentally, the Court of Appeals has already unequivocally held as much: “[T]he Bank has standing to challenge Director Cordray‘s recess appointment.” See id. at 54. It thus remanded to this Court “for consideration of the merits of this issue,” including the significance of Cordray‘s ratification of the acts taken during the allegedly unlawful recess appointment. See id. (emphasis added).
Accordingly, the Court will now turn to the merits of this issue.2
On August 30, 2013, just over a month after his Senate confirmation, Director Cordray published a notice in the Federal Register “affirm[ing] and ratify[ing] any and all actions” that he took between his recess appointment and subsequent confirmation. See
In Legi-Tech, the Federal Election Commission brought an enforcement action against appellee, but while that litigation was pending, the D.C. Circuit ruled in a separate case that the FEC‘s makeup was unconstitutional. See 75 F.3d at 706. The FEC then properly reconstituted itself and voted to continue with the enforcement action against Legi-Tech. See id. Nonetheless, the district court dismissed the case, holding that the ratification was ineffective and that to move forward, the FEC would have to initiate an entirely new proceeding. See id. The D.C. Circuit reversed, holding that (1) the FEC‘s improper makeup did not, in and of itself, render its actions void;4 (2) even if it
The D.C. Circuit reaffirmed Legi-Tech‘s holding and rationale just two years later in Doolin. See 139 F.3d at 214. There, an agency‘s Acting Director issued a Notice of Charges against a bank, after which the Acting Director‘s successor found the charges warranted and entered a final cease and desist order. See 139 F.3d at 204. On appeal, the bank challenged the validity of the Acting Director‘s appointment, arguing that he lacked authority to issue the Notice of Charges, and therefore the subsequent cease and desist order issued by his successor was also invalid. See id. at 211-12. Relying on Legi-Tech, the Court of Appeals held otherwise—because the Acting Director‘s successor was properly appointed, and because his cease and desist order implicitly ratified the earlier Notice of Charges, the agency‘s order was upheld. See id. at 213-14. (“[R]edoing the administrative proceedings would bring about the same outcome—a cease and desist order against the Bank. To require another Director sign a new notice ... would do nothing but give the Bank the benefit of delay ....“). The Court thus had no need to determine whether the Acting Director‘s appointment was invalid, because even if it were, his successor‘s ratification cured any potential defect. See id. at 214.
The more recent D.C. Circuit decisions cited by plaintiffs do nothing to negate this analysis. It is true that Landry v. FDIC stated that Appointments Clause violations create a structural error that, even absent a showing of prejudice, make the invalid appointee‘s actions “subject to automatic reversal.” See 204 F.3d 1125, 1131 (D.C.Cir.2000). However, Landry did not involve ratification, and it distinguished Doolin on that basis, expressly recognizing that ratification can “cure[] the [Appointments Clause] error.” See id. at 1132. SW General similarly did not involve any attempt at ratification. See SW Gen., Inc. v. Nat. Labor Relations Bd., 796 F.3d 67, 79 (D.C.Cir.2015). And, Intercollegiate Broadcasting System, which plaintiffs cite for the same “automatic reversal” point, is even more detrimental to their position. See Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 796 F.3d 111, 124 (D.C.Cir.2015). There, the Court rejected an Appointments Clause challenge because a properly constituted panel of administrative judges later ratified the challenged decision. See id. (“[A] court‘s holding that there has been an Appointments Clause violation does not mean that the violation cannot be remedied by a new, proper appointment.“).
Moreover, the recent Third and Ninth Circuit decisions upholding agency ratification further support defendants’ position. In Advanced Disposal Services East, petitioner challenged the actions of an NLRB Regional Director who was appointed by an improperly constituted NLRB. See 820 F.3d at 596. Because the properly reconstituted NLRB had ratified the Regional Director‘s appointment, and because the Regional Director had then
Plaintiffs raise three arguments to dispute the effectiveness of Director Cordray‘s ratification, none of which is persuasive. First, they argue that ratification can only be effective if the ratifier was authorized to take the action both initially and at the time of ratification, and Cordray lacked that authority when the rules were initially promulgated. (See Pls.’ Mot. for Summ. J. at 33-35.) This argument confuses the principal (the CFPB) and its agent (Cordray). If it were the agent who needed that authority at all times, then ratification could never cure an Appointments Clause violation—the very reason ratification is needed is that the appointee lacked authority to take the original action. See, e.g., Legi-Tech, 75 F.3d at 709 (ratification was an “adequate remedy” where FEC initially acted without authority). Instead, it is the principal, the CFPB, who must at all times have the authority to take the challenged action. See Gordon, 819 F.3d at 1191 (“Under the Second Restatement, if the principal (here, CFPB) had authority to bring the action in question, then the subsequent August 2013 ratification of the decision to bring the case against Gordon is sufficient.“). Plaintiffs implicitly acknowledge that the CFPB, at all relevant times, has had the authority to promulgate the challenged regulations. (See Pls.’ Mot. for Summ. J. at 34 (discussing “the CFPB‘s rulemaking authority” during Cordray‘s recess appointment); see also
Second, plaintiffs assert that the ratification is ineffective because it did not involve “repromulgation of the regulations pursuant to the APA‘s notice and comment rulemaking procedures.” (See Pls.’ Reply Br. at 41-42.) In other words, they make the same argument that the Court of Appeals rejected in Legi-Tech, Doolin, and Intercollegiate Broadcasting System—that ratification can only be effective if it involves a repetition of the procedures initially followed. See Legi-Tech, 75 F.3d at 708 (rejecting argument that “the FEC must repeat the entire administrative process” in order for ratification to be effective); Doolin, 139 F.3d at 214 (agency not required to “redo[] the administrative proceedings” in order for ratification to be effective); Intercollegiate Broad. Sys., 796 F.3d at 120 (ratification effective even though reconstituted Board did not conduct a new evidentiary hearing). Plaintiffs suggest that these cases are distinguishable because they do not involve a rulemaking (see Pls.’ Reply Br. at 39), but nothing in them implies that the particular form of administrative action at issue is dispositive. See Intercollegiate Broad. Sys., 796 F.3d at 119 (rejecting attempt to distinguish Legi-Tech and Doolin “on the ground that they involved administrative enforcement actions ... rather than the exercise of judicial authority in an adversarial proceeding“). Instead, regardless of the type of administrative action, these decisions have consistently declined to impose formalistic procedural requirements before a ratification is deemed to be effective.
Nonetheless, plaintiffs insist that they remain prejudiced even after ratification,
Finally, plaintiffs make the related argument that ratification was ineffective because Director Cordray failed to meaningfully reconsider the merits of the challenged rules through a de novo deliberative process. (See Pls.’ Reply Br. at 40.) There is some support for this argument, particularly in Doolin and Advanced Disposal Services East, but the Court concludes that such a “de novo reconsideration” requirement is both unworkable and unwarranted, at least where, as here, the agency decision-maker is ratifying his own actions. Instead, D.C. Circuit‘s earlier opinion in Legi-Tech makes clear that “the better course is to take the [ratification] at face value and treat it as an adequate remedy,” even though it may well be nothing more than a rubberstamp. See 75 F.3d at 709.
The reason for this is well-established: “it generally is not the function of the court to probe the mental processes of an agency decisionmaker.” See Hercules, Inc. v. Envtl. Prot. Agency, 598 F.2d 91, 123 (D.C.Cir.1978) (quoting United States v. Morgan, 313 U.S. 409, 422, 61 S.Ct. 999, 85 L.Ed. 1429 (1941)) (internal quotations omitted); see also Legi-Tech, 75 F.3d at 709 (“[W]e cannot, as Legi-Tech argues, examine the internal deliberations of the Commission, at least absent a contention that one or more of the Commissioners were actually biased.“).
This is especially true where Director Cordray is ratifying his own actions—the Court would effectively be forcing him to repeat his own analysis in a deliberation that is only nominally “de novo.” See Legi-Tech, 75 F.3d at 709 (a new proceeding by a similar FEC panel, “given human nature, promises no more detached and ‘pure’ consideration of the merits of the case than the Commission‘s ratification decision reflected“). As discussed supra, an Appointments Clause violation creates prejudice where it likely affected a challenged decision, because a different, properly appointed decision-maker might have taken a different approach. See id. at 708-09 (assuming that the presence of non-voting FEC members “impacted the [challenged enforcement] action” against Legi-Tech). Therefore, where the very same decisionmaker ratifies his own challenged decision, any chance of prejudice is effectively wiped out. Cf. Andrade v. Regnery, 824 F.2d 1253, 1257 (D.C.Cir.1987) (no Appointments Clause injury where a properly appointed administrator implemented a policy developed by his improperly appointed predecessor). In each of the ratification cases decided by the Court of Appeals, the ratifier was not the same as the original decision-maker. See Legi-Tech, 75 F.3d at 706 (ratifying FEC panel excluded two non-voting ex officio members from the original panel); Doolin, 139 F.3d at 204 (new director ratified Notice of Charges issued by prior acting director); Intercollegiate Broad. Sys., 796 F.3d at 118-19 (Copyright Royalty Board determination ratified by a Board made up of entirely new members). Thus, even if those opinions could be stretched to impose a “de novo deliberation” requirement, this case is distinguishable for that reason alone. As discussed, however, Legi-Tech precludes such a reading, and a re-deliberation requirement would be inconsistent with the prohibition on courts probing agency decision-making processes.
CONCLUSION
For the reasons stated above, the Court will grant in part defendants’ cross-motion for summary judgment and deny in part plaintiffs’ motion for summary judgment. It will hold in abeyance any ruling on plaintiffs’ separation-of-powers challenge pending the Court of Appeals’ ruling in PHH Corp. v. Consumer Financial Protection Bureau, Case No. 15-1177 (argued Apr. 12, 2016). A separate Order accompanies this Memorandum Opinion.
Louis Ronald DEPOLO, Plaintiff, v. Caroline CIRAOLO-KLEPPER, Personally, et al., Defendants.
Civil Action No. 1:15-cv-2039 (RMC)
United States District Court, District of Columbia.
Signed July 14, 2016