Below, Dina Guzovsky of Harvard Law School previews New Process Steel v. NLRB (08-1457), in which the Court will hear oral arguments on Tuesday, March 23.  Check the New Process Steel SCOTUSwiki page for additional updates.

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  union negotiating a collective bargaining agreement on behalf of the company's workers. The UNION 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.

Posted in New Process Steel v. NLRB, Merits Cases, Uncategorized