A Year Wasted, But A Mission Accomplished

The National Labor Relations Board decided approximately 300 cases during the past year, and there is a good chance that not a single one of those decisions is worth the digital paper they are printed on.

A federal appeals court struck a staggering – but unsurprising – blow to the NLRB this month, ruling in Noel Canning v. National Labor Relations Board that the board lacked the necessary quorum with which to act.

The case hinged on the legality of three controversial recess appointments to the board made by President Obama. Noel Canning, a bottler and distributor for Pepsi-Cola, argued that the NLRB’s decision against it in a labor dispute was invalid because the appointments were illegal. The United States Court of Appeals for the D.C. Circuit agreed.

When he restocked the NLRB, Obama relied on the president’s constitutional power to make temporary appointments without the normally required “advice and consent” of the Senate when the Senate is in recess. This recess appointment power was originally designed to prevent administrative power vacuums, back in the days of slow communications and slower travel. In our modern era of instant communications (and faster, though still often slow, travel), the recess appointment has become a presidential tool for bypassing Senate resistance to nominees.

In addition to the three NLRB members, Obama used the supposed recess to appoint Richard Cordray as the head of the Consumer Financial Protection Bureau. That agency’s actions during the past year, its first since its establishment under the Dodd-Frank financial reform legislation, have now likewise been cast into doubt.

The biggest problem with Obama’s recess appointments is that the Senate, which we should recall is controlled by the president’s own party, did not consider itself to be in recess at all. In the waning days of 2012, it remained open for business by holding so-called pro-forma sessions every few days. In pro-forma sessions, the floor is opened and then immediately gaveled closed. This technique was first used by Senate Democrats to stop recess appointments during George W. Bush’s presidency, and Bush did not challenge the maneuver. Obama, however, declared the pro-forma sessions a sham and decided that he had the power to disregard them.

The constitutional scholar who currently occupies the White House may not think much of the separation of powers, but the D.C. Circuit appeals panel that heard Noel Canning’s case evidently does.

As I wrote at the time, the appointments were a practical nightmare from the start. Since everyone knew a case such as Noel Canning might arise, every action of the NLRB and of Cordray has long been shadowed in doubt. Now, if the ruling stands, the work of a year is worth nothing.

The NLRB has issued a statement reminding the public that the appellate ruling only immediately affects the Noel Canning case. This is mostly bluster. The same D.C. circuit court has jurisdiction over most federal actions, and the precedent set by the panel in Noel Canning will stand unless it is reversed by the full D.C. circuit in a rare en banc decision, or by the Supreme Court, if it agrees to hear the matter. The Noel Canning court’s determination that Obama’s recess appointments were invalid could just as easily be applied to overturn any other action of the NLRB or of Cordray’s agency.

Moreover, it’s hard to see why any court would support Obama’s power grab. The Senate, part of a co-equal branch of government, said it was in session. Obama’s assertion that it really was not was either a breathtaking gamble or a move of pure political expediency. Obama has never been known as much of a gambler, but he is politically expedient in spades. I know where I’d place my money if I had to bet on his motives.

Obama almost certainly knew there was a good chance, if not an outright likelihood, that these appointments would be struck down. But the appointments served the political purpose of helping Obama paint Congress as obstructionist, and thus responsible for the nation’s economic and administrative underperformance, as he headed into his re-election year.

Interestingly, the appeals court did not simply uphold pro-forma sessions as a means of keeping the Senate nominally open. Instead it broadly redefined the type of recess during which recess appointments can occur. Congressional recesses take two forms: intersession recesses and intrasession recesses. Intersession recesses are the breaks between the formal sessions of Congress, each of which generally lasts a year. Intrasession recesses, on the other hand, include all other breaks, such as those taken for holidays. The appeals court ruled that the framers of the Constitution intended the president’s power to make recess appointments to apply only during intersession recesses.

Two of the judges on the court’s three-member panel also argued that the president can only fill positions that actually become vacant during recesses. The Constitution states that the president may “fill up all vacancies that may happen during the recess of the Senate.” In the past, all vacancies that have continued through recesses have been considered to “happen” during those recesses. Under the appeals court’s interpretation, however, a vacancy would only “happen” during a recess if the position was actually vacated during that time.

Together, these two determinations would render unconstitutional hundreds of recess appointments, going back to the 1800s. If Obama was willing to gamble a year’s work of a couple of federal agencies, he may find that he got a lot more than he bargained for if administrative decisions from much earlier appointments are later struck down. I’m not certain that will happen, but I am quite certain that the NLRB has lacked a valid quorum for the past year and still lacks one today.

It will be some time before we hear the last word in this dispute. The Justice Department may appeal to the full D.C. Circuit for an en banc review, or it can try to go directly to the Supreme Court. Other federal appeals courts in Philadelphia and Richmond, Va., are scheduled to hear similar cases in March. Unless the Supreme Court steps in to resolve any discrepancies that emerge, each court’s decision will be precedent only in its own jurisdiction.

For the president, none of that is especially important. His goal was not to resolve the question of what the framers meant by the words “recess” or “happen.” His goal was not to ensure the credibility or authority of the NLRB. His goal was to get re-elected. Mission accomplished.

About Larry M. Elkin 524 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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