Court Defers Ruling on Cordray’s Legal Authority

A court challenge to the constitutionality of President Obama’s controversial 2012 recess appointment of Richard Cordray to run the Consumer Financial Protection Bureau (CFPB) has been put on hold by a U.S. District Judge.

According to a Bloomberg report, U.S. District Judge Ellen Segal Huvelle announced she would not make a decision on whether Cordray’s 2012 appointment was legal because that question is currently being considered by the U.S. Court of Appeals for the District of Columbia. The appeals court is currently considering that aspect of the Cordray directorship as part of a case brought by PHH Corp. against the CFPB.

Cordray’s appointment came while the Republican-controlled Congress was in a pro forma session designed to prevent recess appointments. The Obama Administration used the recess appointment to elevate Cordray to the bureau’s leadership role after the Senate refused to consider his confirmation. Cordray would be formally confirmed in 2013 after the president resubmitted his candidacy.

The challenge before the district court was brought by State National Bank of Big Spring, Texas, which filed suit in 2012. The bank stated that Cordray lacked the constitutional authority to make regulatory decisions. Greg Jacob, a partner in the Washington office of O’Melveny & Myers LLP representing the bank, vowed to appeal the decision.

“Judge Huvelle’s holding that Director Cordray could ratify literally thousands of invalid actions, including invalid rulemakings, by publishing three perfunctory sentences with no accompanying process at all cannot be right, and we are confident we will prevail on appeal,” Jacob said.