Fisher said the Court held there wererntwo constitutional infirmities in Obama’s appointments:  “The Recess” applies only to intersession recesses, and the vacancy itselfrnmust happen during that recess.  Keyserrnpoints out that there is an additional argument not available to the NLRB case:rn CFPB is a brand new agency so no “vacancy”rncould exist within the meaning of the Clause.</p

The first option available to therngovernment – a petition for rehearing – would not have much likelihood ofrnsuccess as the decision was unanimous.  Arnpetition for a rehearing En Banc,rni.e. to all judges sitting in the circuit, would only involve a few more judgesrnmost of whom, like the three who handed down the decision, are Republicanrnappointees, and unlikely to reverse.  </p

He said it is possible to see four votesrnto grant the Petition for Certiorari to the Supreme Court – the jurists couldrnsee the need to hear a case overturning Executive expectations dating back tornFDR and involving the definition of key terms “Recess,” “Happen,” and “Vacancy”rn- but hard to find the fifth vote for reversal. </p

There are five other cases involvingrnthese appointments two of which involve Cordray.  In one of these his appointment appears aboutrnto be upheld. Of the other suits, one was dismissed and the remaining threernare in process.   </p

Fisher said Dodd-Frank, in §1066 (a) talksrnabout the operations of CFPB before a director is confirmed.  “The Secretary (i.e. Treasury) isrnauthorized to perform the functions of the Bureau under this subtitle (i.e.rnSubtitle F of Title X) until the Director of the Bureau is confirmed by thernSenate in accordance with section 1011.” rnThe invalidation of Cordray’s appointment would set the Bureau back torn2011 when it operated for six months without a director.  Its powers would be limited in two ways -rnthey must be covered under this subtitle and must be performed by thernSecretary of the Treasury.  </p

Most of the Bureau’s powers are setrnforth in Title X outside of Subtitle F which only relates to those consumerrnprotection powers transferred from the federal banking agencies as they existedrnon the day before the designated transfer date. rnIf OCC, the Fed, or other federal agencies did not have an authority priorrnto the CFPB, CFPB would not have that power without a director.  CFPB could continue to supervise large banksrn(over $10 billion in assets) through the Secretary of the Treasury but wouldrnlose non-bank supervision authority.  Itrncould not supervise mortgage, student, or payday lending, “larger participants”rnsuch as credit reporting agencies, nor could it supervise service providers tornlarge banks.</p

Enforcement powers would be similarlyrnlimited.  It inherited authority to issuernorders which does extend to banks and in part to service providers but cannotrnengage in enforcement against non-banks without a director.  </p

All of the transferred functions canrnonly be exercised by the Secretary.  Theyrncan be delegated but not to an unconfirmed director or anyone other thanrnanother Treasury official. </p

The practical implications of Noel Canning are unclear at thernmoment.  CFPB is continuing to operate asrnthough nothing has happened and supervised entities will have to cooperate withrnexaminations and enforcement unless they wish to litigate against the authorityrneven before the courts extend Canning to the Cordray appointment and onernnon-bank in California has already done so. rnIf the recess appointment issue is resolved fairly quickly fighting overrnit now may not be worthwhile, but if it lingers non-banks are going to increasinglyrnraise and litigate it. 

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