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WASHINGTON–Former NCUA board members Todd Harper and Tonya Otsuka have won their court case against the Trump Administration over their firings. It is expected the decision in the United States District Court for the District of Columbia will be appealed to the Supreme Court.
The judge ruled that both board members be returned to their positions.
Both Harper and Otsuka said in statements to the CU Daily that the ruling is a win for credit unions, members, the agency’s independence and the rule of law.
As the CU Daily reported, Harper and Otsuka, the two Democrats on the board, were notified by the White House in mid-April that they were being terminated, leaving Republican Kyle Hauptman as the lone board member.
As the CU Daily reported here, Harper and Otsuka filed suit in late April arguing they are entitled under the Federal Credit Union Act to serve their “remainders of their terms as Members of the National Credit Union Administration Board” as board members serve six-year terms and “may only be removed for cause.”’
The Ruling
In the 27-page ruling, Judge Amir Ali went back to the founding of NCUA in the 1970s when it originally had a single administrator who served at the “pleasure of the president.”
That administrator, Adm. (Ret.) Herman M. Nickerson, testified before the Senate as a restructuring of the agency was being considered that “Administrator testified that his “day to day” tenure meant “you don’t know whether you’re going to take a position that would be your last day in office or not.”
In 1978, Judge Ali stated, Congress removed the statutory text saying that agency leadership served “at the pleasure of the President” and provided that the new board’s three members would serve fixed, staggered six-year terms with no more than two members affiliated with the same political party.
“Nearly fifty years later, the President summarily fired two NCUA Board members, Todd M. Harper and Tanya F. Otsuka,” the opinion states. “Harper and Otsuka filed this action challenging their removals as unlawful and seeking reinstatement to their positions. For its part, the government concedes the President lacked any cause for the terminations. The government argues instead that the President maintains absolute authority to remove NCUA board members at will, and that reinstatement is not an available remedy. These arguments—which the government all but concedes would apply equally to the Chair of the Federal Reserve and FDIC Board members—are unavailing.
Congress’ Intent ‘Clear’
“The statutory text and context, and the structure and function of the NCUA, make clear Congress restricted the President’s authority to fire NCUA Board members,” the opinion continues. “And Congress did so consistent with the separation of powers because the NCUA Board fits comfortably within the traditional model of a multimember expert agency that does not wield substantial executive power. Under governing Circuit precedent, reinstatement is available when the President unlawfully removes an executive officer and proper here. The Court accordingly grants the plaintiffs’ motion for summary judgment and denies the government’s cross motion.”
As numerous legal analysts told the CU Daily when the lawsuit was filed that one issue will be how the court views the 1935 Supreme Court Ruling “Humphrey’s Executor,” in which the court ruled unanimously that the President’s power to remove officials from independent agencies, like the Federal Trade Commission (FTC), is limited.
And Judge Ali found the structure of the NCUA board closely tracks the traditionalmultimember board held to have removal protection in Humphrey’s Executor.
The court further cited precedent set in the same District Court in a case involving former NCUA Board Member Robert Swan, in which the court ruled, “Independence from presidential control is arguably important if agencies charged with regulating financial institutions, such as the NCUA, are to successfully fulfill their responsibilities; people will likely have greater confidence in financial institutions if they believe that the regulation of these institutions is immune from political influence.”
Reinstatement Ordered
In conclusion, wrote Ali, “The Court further orders that Defendants Scott Bessent, Larry Fazio, Kyle S. Hauptman, and Trent Morse, as well as their subordinates, agents, and employees, are enjoined, during Harper’s and Otsuka’s terms as members of the NCUA Board, from removing Harper and Otsuka from their offices without cause or in any way treating Harper and Otsuka as having been removed from office, from impeding in any way their ability to fulfill their duties as members of the NCUA Board, and from denying or obstructing their authority or access to any benefits or resources of their offices. Those defendants and their subordinates, agents, and employees shall provide Harper and Otsuka with access to the necessary government facilities and equipment so that they may carry out their duties during their terms as members of the NCUA Board.
‘No Reasons Provided’
Harper and Otsuka’s complaint, filed by Vincent Levy of Holwell Shuster & Goldberg LLP, New York, which is representing the two board members on a pro bono basis, further alleged that neither plaintiff was provided any reasons for the termination nor did the one-sentence emails informing them of the dismissal “attempt to assert a basis for cause. Nor could they.”
The suit which named as defendants Treasury Secretary Scott Bessent; NCUA Executive Director Larry Fazio; NCUA Chairman Hauptman; Deputy Assistant to the President Trent Morse, and President Trump, argued there is a “half century of binding Supreme Court precedent upholding materially identical protections for members of multimembers boards of independent federal agencies,” and that the termination was “unlawful.”
Attorney: ‘Violates Congress’ Intent’
At the time of the filing of the suit, Attorney Levy said in a statement, “The termination of Todd Harper and Tanya Otsuka from the NCUA Board violates Congress’s intent in creating an independent financial regulator. This lawsuit seeks to vindicate Congress’s intent and to preserve the integrity of the financial markets.”
Harper: ‘A Real Win for Americans’
“Today’s ruling in favor of immediately restoring the board to its full capacity is a real win for the 143 million Americans who rely on the National Credit Union Administration to protect their rights and insure their deposits,” said Harper in a statement. “It’s also a win for all credit unions by maintaining the agency’s future independence. I look forward to once again working with my fellow Board members and the outstanding team at the NCUA to ensure our credit union system and our economy remain safe, stable, sound, secure, and fair.”
Otsuka: ‘Victory for the Rule of Law’
“The court’s decision is a victory for the rule of law and the millions of people who use credit unions. I look forward to getting back to work to make sure we have a safe and resilient financial system,” said Otsuka in a statement.
Levy: Congress’ Judgement Vindicated
“The Court’s decision today vindicates Congress’s judgment that the independence of financial regulators like the NCUA Board is necessary to ensure the stability of our financial markets,” said Levy in a statement.
America’s Credit Unions: ‘We Will Know Soon’
“Judge Amir Ali deemed that Todd Harper and Tanya Otsuka’s removal as independent agency members was unlawful and ordered that they be reinstated, similar to other recent decisions in the U.S. District Court of the District of Columbia,” America’s Credit Unions CEO Jim Nussle said in a statement. “America’s Credit Unions has been consistent in our support of an independent, three-person board at the NCUA, and we will know soon whether this matter will be stayed and appealed or if the NCUA will return to business as usual.”
Earlier, Harper and Otsuka spoke with the CU Daily here about their case and more.
The NCUA board is currently scheduled to meet on Thursday.
Similar to Ruling in FTC Case
The ruling comes less than a week after another federal judge ordered that a fired FTC commissioner be given her job back.
In that ruling, also the U.S. District Court for the District of Columbia, U.S. District Judge Loren L. AliKhan has ordered that FTC Commissioner Rebecca Slaughter be restored to her position.
Judge AliKhan ruled the law is clear that the president may only fire members of the FTC for “inefficiency, neglect of duty, or malfeasance in office.”
