Supreme Court Ruling Temporarily Permits Removal of Independent Board Members

As most of you probably know, President Trump has removed the two Democrat members on the National Credit Union Administration (NCUA) Board, Todd Harper and Tonya Otsuka. Both Mr. Harper and Ms. Otsuka have filed a lawsuit claiming that their removal was illegal. NCUA and the Department of Justice (DOJ) recently responded, arguing that Congress cannot restrict the president's authority to remove NCUA Board members. While a judge has yet to rule on the Harper/Otsuka case, the Supreme Court (SCOTUS) may have just given us a glimpse of where the case is going.

On Thursday, May 22nd, SCOTUS issued a preliminary ruling in the case of Donald J. Trump, President of the United States, et. al v. Gwynne A. Wilcox, et. al (Wilcox case). Like the Harper/Otsuka case, the Wilcox case centers around President Trump's removal of two board members of two different independent agencies. Specifically, Gwynne Wilcox, a Democratic member of the National Labor Relations Board (NLRB) and Cathy Harris, a Democratic member of the Merit Systems Protection Board (MSPB). Thursday's preliminary ruling temporarily permits the President's removal of Ms. Wilcox and Ms. Harris to stand. It should be noted that this preliminary ruling was issued through SCOTUS' emergency docket. The merits of the case are still being decided, though this will likely work its way up to SCOTUS for an ultimate and final decision.

What makes these removals and ruling notable is that federal law explicitly prohibits a president from removing members of the NLRB and the MSPB without cause. Further, in 1935, SCOTUS ruled in Humphrey's Executor v. United States (Humphrey's Executor) that the president was prohibited from removing an FTC Commissioner. In Humphrey's Executor, SCOTUS held that Congress could create independent, bipartisan, multi-member commissions that exercise quasi-legislative, quasi-judicial regulatory powers and that Congress could prevent the President from removing members of those commission but only for cause. Fun fact, another ongoing case involves the removal of two Democratic Commissioners on the FTC. That case presents a direct challenge to Humphrey's Executor.

It seems that SCOTUS is leaning towards ruling that such "for cause" requirements are unconstitutional. This would give the president much greater authority to remove agency officers. Further, considering that the Federal Credit Union Act (FCUA) does not contain an explicit prohibition on removing NCUA board members, this ruling paints a grim picture for Mr. Harper and Ms. Otsuka in that, unlike with the FTC, NLRB, and MSPB cases, there is no "direct protection" within a statute, such as requiring "for cause" removal.

So Why Is This Important?

Under the FCUA, for the NCUA Board to conduct official business, the Act requires a quorum of the Board. The FCUA defines a quorum as, "[a] majority of the Board..." NCUA has recently announced that a single board member constitutes a quorum when there are no other board members. Historically, there is precedent for a single board member running the NCUA. During the Bush Administration, former Chairman Dennis Dollar acted as a sole Board Member. Notably, former Chairman Dollar did not approve or rescind any rulemaking during his tenure as sole NCUA Board member. Further, current NCUA regulation requires at least two board members to act and approve new rulemakings.

For a more robust discussion on the NCUA removals and how they might affect the NCUA, America's Credit Unions' readers can review this FAQ.

As always, for any compliance questions, members can email the Compliance Team at compliance@americascreditunins.org