On July 13, a federal judge tossed out a challenge to the recess appointment of Consumer Financial Protection Bureau Director Richard Cordray.

In State National Bank of Big Spring et al. v. Lew et al., the State National Bank of Big Spring, Texas, joined by conservative advocacy groups The Competitive Enterprise Institute and The 60 Plus Association Inc., challenged the constitutionality of the CFPB.  The plaintiffs also alleged that Cordray’s 2012 recess appointment was unconstitutional and that every action he has taken since his appointment should be nullified.  The government countered that Cordray ratified all those actions after he was confirmed by the Senate in 2013.

 D.C. District Court Judge Ellen Segal Huvelle sided with the CFPB and rejected the bank’s argument that Cordray did not have the authority to ratify his actions because he was not initially authorized to do so. 

As the Court held, “This argument confuses the principal (the CFPB) and its agent (Cordray),” Judge Huvelle wrote.  “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.” 

Judge Huvelle, however, declined to rule on the bank’s argument that the CFPB’s structure violated the Constitution’s separation of powers requirement because it is answerable neither to Congress nor to the President, as it has a single director and is funded through the Federal Reserve.  Judge Huvelle declined to rule on that issue because the D.C. Circuit recently heard oral arguments on that precise issue in PHH Corp. v. Consumer Fin. Prot. Bureau, Case No. 15-1177 (D.C. Cir. July 24, 2015).   

Judge Huvelle decided to hold that argument in abeyance until the D.C. Circuit rules on the PHH Corp. case.