New Process Steel v. National Labor Relations Board

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Argued March 23, 2010. Decided June 17, 2010.

Authorship: Dina Guzovsky of Harvard Law School and Kimberly Harding of Akin Gump, with Kevin Russell of Howe & Russell

Docket: 08-1457

Issue: Whether Section 3(b) of the National Labor Relations Act, 29 U.S.C. § 153(b), authorizes the NLRB to act when only two of its five positions are filled, if the Board has previously delegated its full powers to a three-member group of the Board that includes the two remaining members; does the NLRB have authority to decide cases with only two sitting members, where 29 U.S.C. § 153(b) provides that “three members of the Board shall, at all times, constitute a quorum of the Board”?

1 Briefs and Documents
2 Opinion Coverage
- 2.1 Recap
- 2.2 Commentary
3 Commentary on Order Requesting New Briefs
4 Oral Argument Recap
5 Pre-Argument Articles
- 5.1 Argument Preview
6 Links and Further Information
- 6.1 Media Links
- 6.2 From the Blogosphere

Briefs and Documents

Decision

REVERSED AND REMANDED in a 5-4 decision with an opinion written by Justice Stevens. Justice Kennedy dissented, joined by Justices Ginsburg, Breyer, and Sotomayor.

Order Requesting New Briefs

Order (April 16, 2010)

Oral Argument

Transcript (March 23, 2010)

Merits Briefs

Amicus Briefs

Certiorari-Stage Documents

Opinion Coverage

Recap

Kimberly Harding originally wrote the following for SCOTUSblog:

On June 17, in New Process Steel v. National Labor Relations Board (No. 08-1457), the Court held that, under Section 3(b) of the National Labor Relations Act, a delegee group must have three members to exercise the delegated authority of the National Labor Relations Board (“Board”).

The Taft-Hartley Act, enacted in 1947, expanded the Board from three to five members and permitted the Board to delegate any or all of its powers to “any group of three or more members.” It also provided that a “vacancy in the Board shall not impair the right of the remaining members to exercise all of the powers of the Board, and three members of the Board shall, at all times, constitute a quorum of the Board, except that two members shall constitute a quorum of any group designated pursuant to the first sentence hereof.”

At the end of 2007, the four members of the Board delegated all of its authority to a three-member group. Three days later, the recess appointment of one of those three members expired, leaving the remaining two members as the only members of the Board. For more than two years, those two members acted as a quorum, deciding nearly six hundred cases. The petitioner in this case, New Process Steel, challenged two such decisions, arguing that the two-member Board lacked the authority to issue the orders.

The court of appeals rejected New Process Steel’s contentions. In its view, the plain meaning of the statute supported the Board’s delegation procedure: the two members of the Board constituted a quorum of the three-member group to which the Board had delegated its authority. Moreover, the court noted, its reading comported with the legislative history of the statute, which was enacted to make the Board more efficient and to better manage the delays that had plagued the Board in the past.

In an opinion by Justice Stevens, joined by the Chief Justice and Justices Scalia, Thomas, and Alito, the Court reversed and remanded. First, the Court reasoned that requiring the delegee group to have at least three members was the only way to harmonize and give meaningful effect to all of the provisions in Section 3(b). By contrast, reading the statute to allow two members to act as the Board would allow the permanent circumvention of the quorum requirement and would give no meaningful effect to the command that the Board’s full power be vested in no fewer than three members.

Second, the Court emphasized that if Congress had intended to authorize just two members to act for the Board on an ongoing basis, it could have said so in straightforward language. Instead, Congress required the Board to delegate authority to no fewer than three members, and to have three participating members to constitute a quorum.

Third, the Court recognized that its decision was consistent with the Board’s longstanding practice of reconstituting a delegee group when one member’s term expired. The quorum provisions, as the Court understood them, merely define the number of members who must participate in a decision, while the vacancy clause determines whether vacancies in excess of that number have any effect on an entity’s authority to act.

Justice Kennedy filed a dissenting opinion, which was joined by Justices Ginsburg, Breyer, and Sotomayor. In his view, the Board’s interpretation of the statute is supported by the plain text: “Because the [three-member] group was properly designated . . . and a two-member quorum of the group was authorized to act under the statute’s plain terms, its actions were lawful.” The Court’s contrary conclusion, Justice Kennedy posited, rested on the idea that “Congress did not intend to allow two members” to act as the Board for extended periods of time; even so, he contended, Congress certainly “did not intend that the Board would cease operating altogether for an extended period of time.” And Justice Kennedy downplayed the significance of the Board’s prior practice of reconstituting panels that drop below three members by virtue of a vacancy; in his view, the fact that “the Board respects the superiority of three-member groups” does not mean that “a two-member group lacks the authority to act when recomposition is not an option.

Commentary

Kevin Russell originally wrote the following for SCOTUSblog:

UPDATE: The NLRB has issued a press release on the decision which gives a hint at what the Board thinks will happen to non-final cases, and its estimate of the number of such cases: “The same question has been raised in five more cases pending before the Supreme Court, and 69 that are pending before the Courts of Appeals. It is expected that those cases will be remanded to the Board, and the now-four member Board will decide the appropriate means for further considering and resolving them.”

The Supreme Court's decision in New Process Steel v. National Labor Relations Board, No. 08-1457, took many observers by surprise. The Court held that for a two-year period that ended only recently, the Board had been acting without statutory authority in adjudicating nearly six hundred cases because vacancies had left the Board without a quorum. We will provide further coverage of the decision later, but for the moment, the immediate question that arises is what effect the decision has on those hundreds of decisions.

The question has two parts. First, how does the decision affect the parties to the prior adjudications? In the case before it, the Supreme Court simply reversed the decision of the court of appeals (which had upheld the Board’s authority) and remanded for further consideration consistent with its opinion. In all likelihood, it seems to me, the decision of the Board will be vacated and the Board will have to hold a new adjudication (now that it has a proper quorum). The same result is likely in other cases that are not yet final (for example, other cases still being challenged in the courts of appeals).

The more difficult question is what happens to the cases that are final. Res judicata principles would ordinarily preclude reopening a final judgment. But there may be arguments that the principles do not apply with respect to a final judgment issued by a body lacking jurisdiction to enter the judgment. Likewise, a party’s prior failure to challenge the Board’s lack of a quorum might ordinarily forfeit the right to raise that objection later (particularly after final judgment), but again one ordinarily cannot waive subject-matter jurisdictional defects (assuming that the defect here is considered equivalent to a court lacking subject-matter jurisdiction, as opposed to some other kind of defect that might be loosely labeled “jurisdictional”). And it might be possible that parties to prior final cases could petition the Board itself for reconsideration.

As a practical matter, it may not be worth the time and expense for parties to challenge prior final judgments. After all, the two-member boards were composed of one Democrat and one Republican who agreed on the result (the two-member board did not issue decisions in cases in which the members could not reach an agreement). And if the decision was challenged in court, the court will have already found that the decision by the two-member panel was substantively lawful. Parties will have to gauge the chances of getting a different result from a properly authorized panel or in a subsequent appeal.

The second part of the fallout has to do with the precedential effect of the decisions issued in that two-year period. Since they were issued unlawfully, one might presume that they will now be deprived of precedential effect. The Board might avoid this by issuing a blanket order adopting the decisions on behalf of the now properly constituted Board (presuming it has authority to do that). Or it may be that the questions will simply have to be re-examined as they come up again in future cases (the old decisions perhaps being treated as persuasive, but not binding, authority akin to unpublished decisions or decisions from other jurisdictions).

I must admit that I have not had the time – and do not have the expertise – to reach any firm conclusions about the implications. I am sure that others will be giving the question a great deal of thought in the coming days. But it does seem clear that the Court’s decision will require a great deal of sorting out and is likely to prompt a fair bit of litigation in the coming months.

Commentary on Order Requesting New Briefs

Lyle Denniston [1] originally wrote the following for SCOTUSblog:

The Supreme Court on Friday afternoon ordered lawyers in a case argued March 23, testing the powers of the National Labor Relations Board, to file new briefs on the effect of new appointments to the Board. The order, requiring briefs to be filed simultaneously on April 26, is above. The question at issue is spelled out here. On March 29, Solicitor General Elena Kagan notified the Court that President Obama had made two appointments to the Board, but did not comment on the effect that might have on the case. The case involves the Board’s authority to make decisions with only two members taking part; the Board’s full membership is set at five.

Oral Argument Recap

Dina Guzovsky originally wrote the following for SCOTUSblog:

During argument in New Process Steel v. NLRB, the Court honed in on both the precise language of the statute and its policy implications as it attempted to discern whether the NLRB has fallen afoul of the NLRA’s quorum requirements.

Early in the argument, Sheldon Richie, arguing on behalf of petitioner New Process Steel, raised what the NLRB contended was a new argument not encompassed by the question presented. He argued that the NLRB had violated not only Section 3(b)’s quorum requirement, but also its membership requirement, which allows vacancies on the Board but has no similar allowance for delegated groups. Because the delegated group was missing a member, it violated Section 3(b)’s membership requirement and could not function, regardless of the quorum provisions.

Members of the Court, particularly Justices Scalia, Stevens, and Breyer, reacted favorably to this argument, raising it several times to Deputy Solicitor General Neal Katyal, who argued on behalf of the NLRB. Questioning Katyal on the mechanics and language of the statute, Stevens wondered whether the group to which authority had been delegated even existed, because with two members it was no longer the same group.

Focusing on the statute itself, Justice Scalia, perhaps surprisingly, immediately embraced New Process Steel’s broad purposive arguments, asking Katyal whether the two-member group was not clearly “an evasion of the whole purpose of the…quorum requirement?” Meanwhile, Justices Ginsburg and Breyer focused on the language of the statute, questioning New Process Steel about how quorum provisions could have been violated when the statute clearly makes an exception to the three-member quorum requirement for delegated groups. Richie fell back on agency arguments and also the idea that once the group acts with all the powers of the Board, it becomes the Board and is subject to the full quorum requirement.

Later in the argument, Justices Scalia, Alito, and Chief Justice Roberts expressed serious policy concerns about two-member panels. They first ascertained that any member of the Board could typically review draft opinions before they became final or sit in on any panel he or she chose, effectively allowing parties the chance to have their case considered by the entire Board. The current situation, they implied, thus precludes what was once significantly more expansive review. Katyal, while acknowledging that a two-member Board was not ideal, nevertheless argued that was better than nothing during a “vacancy crisis.”

Justices Kennedy and Scalia also attempted to understand the scope of New Process Steel’s agency argument, wondering whether all action of the Board, including the operation of regional offices and the payment of salaries, would become inoperative once membership of the Board fell below three. Justice Kennedy later questioned Katyal about the special rule excepting government agencies from traditional principles of agency law.

Pre-Argument Articles

Argument Preview

Dina Guzovsky originally wrote the following for SCOTUSblog:

Recent decisions of the courts of appeals have called into question over two years of rulings by the National Labor Relations Board (NLRB). On March 23, the Supreme Court will consider the status of both these rulings and future NLRB decisions in New Process Steel v. NLRB, which poses the question whether, when the five-member Board has properly delegated its authority to a three-member subset group, the two remaining members of that group constitute a quorum for the purposes of decision-making by the Board.

The NLRB, created by the National Labor Relations Act, rules on labor policy disputes. Typically five members, appointed by the President and approved by Congress, sit on the Board. Currently, however, the Board is comprised of only two members. Section 3(b) of the Act, as relevant here, authorizes the Board “to delegate to any group of three or more members any or all of the powers which it may itself exercise.” “A vacancy in the Board,” the provision continues, “shall not impair the right of the remaining members to exercise all of the powers of the Board, and three members of the Board shall, at all times, constitute a quorum of the Board, except that two members shall constitute a quorum of any group designated pursuant to the first sentence hereof.”

The events leading to this case have their origins in late December 2007, when the Board had four members. With the terms of two of those four members about to expire, the Board delegated its authority to a “group of three or more members.” One of those three members left a few days later, leaving two Board members – who have made all NLRB decisions since then.

Petitioner New Process Steel was involved in a labor dispute with the AFL-CIO, the union negotiating a collective bargaining agreement on behalf of the company’s workers. The AFL-CIO filed an unfair labor-practice charge relating to the dispute in September 2007, and an administrative law judge ruled in the union’s favor. New Process Steel then appealed to the NLRB, which (with two sitting members) approved the ALJ’s judgment.

New Process Steel then sought review in the Seventh Circuit. In addition to challenging the merits of the Board’s findings, it argued that the Board lacked authority to issue the decision because two members did not constitute a quorum under Section 3(b) of the Act. The NLRB countered that, because the Board had properly delegated authority to a three-member panel, the two remaining members did constitute a quorum.

The Seventh Circuit ruled in the Board’s favor, holding that that plain language of Section 3(b) indicated that two members could constitute a quorum when the Board had delegated authority to a three-member board. On the same day, the D.C. Circuit entered a decision in Laurel Baye Healthcare of Lake Lanier, Inc. v. NLRB reaching the exact opposite conclusion. Three other courts of appeals (the First, Second, and Fourth Circuits) had also ruled on this issue, with all three joining the Seventh Circuit in holding that the current two members of the Board constituted a quorum under Section 3(b) of the NLRA.

New Process Steel filed a petition for certiorari that emphasized the need to resolve the circuit split: the Board had been operating with only two members since the beginning of 2008 and the legitimacy of its issued opinions, as well as any future opinions, was now in doubt. The Board agreed that the Court should grant certiorari to resolve the question of the validity of past and future NLRB decisions. The Court granted certiorari on November 2, 2009.

In its brief on the merits, New Process Steel argues that because Section 3(b) requires three members of the Board “at all times” to constitute a quorum, two members can never constitute a quorum of the Board. Although two members can constitute a quorum of a three-member group created by the Board, that group cannot operate with a vacancy. Moreover, Congress likely had principles of agency and corporation law in mind when drafting the statute. Consistent with those principles, Congress would presume that once the NLRB itself lacked a quorum, any group delegated by the Board would also be dissolved. To hold otherwise would effectively make the three-member quorum requirement meaningless, because the Board could essentially function in perpetuity with only two members as long as, at some point in the past, its members had delegated authority to a three-member group.

Turning to broader issues of congressional purpose and policy, New Process Steel argues that allowing the NLRB to make decisions with only two members would undermine Congress’s general intent in creating a five-member board and three-member quorum: to allow for variety in the individuals making decisions for the NLRB. Odd-numbered panels are more common and more useful, because they allow real majority votes and vigorous dissents. And practically speaking, the NLRB effectively never made decisions with two-member panels in the past.

Finally, to the extent that NLRB decision-making may be inhibited by a holding that a two-member Board lacks authority to issue decisions, that is a problem for the President and Congress to address; it should not be solved through a holding in contravention of the statute.

The NLRB makes several arguments in response, the first of which is based on the plain language of the NLRA: Section 3(b) allows the Board to function with two members as long as it has delegated all of its authority to a three-member group, of which two members can constitute a quorum. New Process’s interpretation of the statute would render the word “except” superfluous in the phrase “three members . . . constitute a quorum . . . , except that two members shall constitute a quorum of any group.”(emphasis added). Moreover, under New Process’s reading, the word “quorum” is not given its ordinary meaning. A quorum is meant to establish a floor for participation, rather than a “membership” floor – which exists regardless whether members participate in any given decision.

Next, the NLRB addresses the legislative history, pointing out that the expansion of the NLRB from three to five members in 1947 was simply part of an effort to have the NLRB efficiently decide more cases. Responding to New Process Steel’s invocation of agency and corporation law, the NLRB argues that these common law principles do not generally apply to governmental actions; in fact, an agency’s decisions remain binding even if it dissolves. Furthermore, “background” rules should not be prioritized over the text of the statute.

The NLRB further argues that the Board’s interpretation of the statute is entitled to some judicial deference – an argument that New Process urges the Court not to consider on the ground that it was not raised below. Finally, the NLRB addresses New Process’s policy arguments, pointing out both that the wisdom of Congress’s policy choice is not up for discussion and that, in any case, Congress had good reason to allow for a two-member NLRB rather than paralyze the Board.

Links and Further Information

Media Links

From the Blogosphere

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