Alivio Medical Center v. Abruzzo

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ALIVIO MEDICAL CENTER, )

)

Plaintiff, )

)

v. )

) No. 24-cv-7217

JENNIFER ABRUZZO, in her official )

capacity as the General Counsel of the ) Judge Jeffrey I. Cummings

National Labor Relations Board, )

NATIONAL LABOR RELATIONS )

BOARD, a federal administrative )

agency, LAUREN M. McFERRAN, )

in her official capacity as the Chairman )

of the National Labor Relations Board, )

MARVIN E. KAPLAN, GWYNNE )

A. WILCOX, and DAVID M. )

PROUTY, in their official capacities )

as Board Members of the National )

Labor Relations Board, and PAUL A. )

BOGAS in his official capacity as an )

Administrative Law Judge of the )

National Labor Relations Board, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

Plaintiff Alivio Medical Center (“Alivio”) is a respondent in an unfair labor practice

proceeding pending before the National Labor Relations Board (“NLRB”) that is scheduled to

proceed to an administrative hearing before an administrative law judge (“ALJ”) on September

25, 2024. On August 14, 2024, Alivio filed its three-count complaint, (Dckt. #1), in this lawsuit

against the NLRB, its General Counsel Jennifer Abruzzo, Chairman Lauren M. McFerran, Board

Members Marvin E. Kaplan, Gwynne A. Wilcox, and David M. Prouty, and ALJ Paul A. Bogas,

(collectively, “defendants”). Alivio alleges in Counts I and II that the structure of the NLRB is

unconstitutional because the removal procedures for the NLRB ALJs and NLRB Members

violate Article II of the Constitution of the United States. Alivio further alleges in Count III that

“the ALJ’s order revoking subpoenas violates due process and relies upon an overly broad

interpretation of a rule not based upon any reasonable reading of the NLRA [National Labor

Relations Act].” (Id., at 14).

On August 22, 2024, Alivio filed an opposed motion for a temporary restraining order

and expedited preliminary injunction, (Dckt. #25), seeking to enjoin the NLRB from proceeding

with a September 25 administrative hearing based on its claim that the hearing would constitute

an unconstitutional proceeding because the NLRB’s Members and ALJs are unconstitutionally

insulated from removal.1 Pursuant to the schedule set by the Court, (Dckt. #32), defendants filed

a response to the motion on September 3, 2024. (Dckt. #29). Shortly thereafter, the American

Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”) and the Service

Employees International Union (“SEIU”) sought and were granted leave to file amici curiae

brief regarding Alivio’s motion for injunctive relief. (Dckt. #33). The Court held a hearing on

September 8, 2024, at which counsel for the parties appeared and offered argument, and the

motion is now ripe for resolution.

For the reasons set forth below, plaintiff’s motion for a temporary restraining order and

expedited preliminary injunction, (Dckt. #25), is denied.

1Alivio initially sought a temporary restraining order and expedited preliminary injunction in connection

with the due process claim it asserts in Count III. After questions were raised at the hearing regarding

whether this Court had jurisdiction over its due process claim, Alivio’s counsel withdrew its request for

injunctive relief as to that claim and indicated that it would seek leave to file an amended complaint to

clarify its allegations. See 9/6/24 Transcript (Dckt. #38), at 77. Alivio has since filed a motion for leave

to amend its complaint, (Dckt. #37), and the due process claim it seeks to assert therein will have no

bearing on the Court’s decision regarding Alivio’s quest for injunctive relief.

I. BACKGROUND

A. The Purpose of the NLRB

The NLRB is an independent federal agency created by Congress in 1935 to protect

employees’ rights under the National Labor Relations Act (the “NLRA” or, simply, the “Act”),

29 U.S.C. §151 et seq. Among other things, the Act protects the rights of employees to “self-

organization, to form, join, or assist labor organizations, to bargain collectively through

representatives of their own choosing, and to engage in other concerted activities for the purpose

of collective bargaining or other mutual aid or protection.” 29 U.S.C. §157. The NLRB has “the

sole statutory authority to adjudicate allegations that an employer or union has committed an

unfair labor practice (“ULP”).” (Dckt. #29 at 9-10); Costello v. Grundon, 651 F.3d 614, 624 (7th

Cir. 2011) (recognizing that only the NLRB can “provide affirmative remedies for unfair labor

practices.”). Allegations of ULPs “arise from charges filed by members of the public; formal

proceedings do not commence unless and until the NLRB’s General Counsel . . . finds merit to

the charge” and issues a complaint, usually accompanied by a notice of hearing before an ALJ.

(Dckt. #29 at 10) (citing 29 U.S.C. §160(b)). The NLRB is comprised of its General Counsel,

Board Members, and ALJs.

B. Duties and Powers of the Board Members and the General Counsel

Pursuant to the NLRA, the multi-member Board consists of five members “appointed by

the President by and with the advice and consent of the Senate” to serve five-year, staggered

terms. 29 U.S.C. §153(a). Significantly, “[a]lthough political balancing of the Board members

is not mandated by the NLRA, ‘there has been a tradition since the Eisenhower years that

Presidents have filled no more than three of the NLRB’s five seats with members of their own

party.’” Yapp USA Auto. Sys., Inc. v. NLRB, Case No. 24-12173, 2024 WL 4119058, at *2 (E.D.

Mich. Sept. 9, 2024), quoting Brian D. Feinstein & Daniel J. Hemel, Partisan Balance with Bite,

118 Colum. L. Rev. 9, 54 (2018) (internal quotation and citation omitted); Cortes v. NLRB, No.

23-2954 (JEB), 2024 WL 1555877, at *1 (D.D.C. Apr. 10, 2024) (same). Furthermore, “[a]ny

member of the Board may be removed by the President, upon notice and hearing, for neglect of

duty or malfeasance in office, but for no other cause.” 29 U.S.C. §153(a).

“The NLRA, as originally enacted, granted the Board plenary authority over all aspects

of unfair labor practice disputes: the Board controlled not only the filing of complaints but their

prosecution and adjudication.” N.L.R.B. v. United Food & Co. Workers Union, Loc. 32, AFL-

CIO, 484 U.S. 112, 117 (1987). However, the Labor Management Act of 1947 (“LMRA”), 29

U.S.C. §141 et seq., altered the Board’s authority by “divid[ing] the old Board’s prosecutorial

and adjudicatory functions” between the NLRB’s General Counsel and the Board (id., at 117-

18), to “differentiate between the General Counsel’s and the Board’s ‘final authority’ along a

prosecutorial versus adjudicatory line.” Exela Enter. Sols., Inc. v. Nat’l Lab. Rels. Bd., 32 F.4th

436, 444 (5th Cir. 2022), quoting NLRB v. United Food & Com. Workers Union, Loc. 23, 484

U.S. 112, 124 (1987); Rieth-Riley Constr. Co. v. Nat’l Lab. Rels. Bd., No. 23-1899, --- F.4th ---,

2024 WL 3811837, at *5 (6th Cir. Aug. 14, 2024) (noting the Board serves an “adjudicatory

function”). Consequently, courts have since characterized the Board as “an administrative body

exercising quasi-judicial powers.” See, e.g., Haleston Drug Stores v. N.L.R.B., 187 F.2d 418,

421 (9th Cir. 1951).

At present, “[t]he primary duty of the NLRB is to enforce the [NLRA], a task that it

carries out (almost) exclusively by adjudicating labor disputes.” Cortes v. NLRB, 2024 WL

1555877, at *1. The Board Members’ duties and powers include, inter alia, adjudicating and

issuing agency decisions in ULP cases, 29 U.S.C. §160(c), and petitioning courts for the

enforcement of such orders, 29 U.S.C. §160(e); conducting and certifying the outcome of union

elections, 29 U.S.C. §159; promulgating rules and regulations, 29 U.S.C. §156; and, at the close

of each fiscal year, submitting a written report to Congress and to the President “summarizing

significant case activities and operations for that fiscal year.” 29 U.S.C. §153(c).

By contrast, the General Counsel – who is “appointed by the President, by and with the

advice and consent of the Senate, for a term of four years” – has a “purely executive function”

that “is detached from the Board’s adjudicatory function.” Rieth-Riley, 2024 WL 3811837, at

*5; 29 U.S.C. §153(d). Among other things, the General Counsel has the “final authority” in

respect to the supervision of all NLRB attorneys (other than ALJs and legal assistants to Board

Members), the investigation of charges, the issuance and withdrawal of complaints, and the

prosecution of such complaints before the Board. 29 U.S.C. §153(d); Rieth-Riley, 2024 WL

3811837, at *4-5. The NLRA does not specify removal authority for the General Counsel and,

as such, she serves “at the President’s pleasure” and is removable at will. Collins v. Yellen, 594

U.S. 220, 248 (2021) (“When a statute does not limit the President’s power to remove an agency

head, we generally presume that the officer serves at the President’s pleasure.”).2

C. Duties and Powers of the ALJs

The NLRB ALJs are appointed by the five-member Board in accordance with the Civil

Service Reform Act, 5 U.S.C. §3105, and the NLRA, 29 U.S.C. §154(a), to “inquire fully into

the facts as to whether [a defendant] has engaged in or is engaging in an unfair labor practice

affecting commerce as set forth in the complaint.” 29 C.F.R. §102.35(a). In doing so, the

2 Although Alivio brings this action against General Counsel Jennifer Abruzzo, it has not alleged that she

is unconstitutionally insulated from removal or otherwise sought any specific relief as to her authority.

NLRBs ALJs are afforded the power to, inter alia, (1) “[a]dminister oaths and affirmations;” (2)

grant applications for subpoenas and rule upon petitions to revoke subpoenas; (3) “[r]ule upon

offers of proof and receive relevant evidence;” (4) “[t]ake or cause depositions to be taken;” (5)

“regulate the course of the hearing,” including to “exclude persons or counsel from the hearing

for contemptuous conduct;” (6) hold settlement conferences; and (7) resolve motions, including

motions for default judgment, summary judgment, or to amend pleadings. Id. at §102.35(a)(1)-

(13). After a hearing, the assigned ALJ issues a decision that contains “findings of fact,

conclusions of law, and the reasons or grounds for the findings and conclusions, and

recommendations for the proper disposition of the case.” 29 C.F.R. §102.45(a).

After the ALJ issues a decision, parties may file “exceptions to the [ALJ’s] decision or to

any other part of the record or proceedings (including rulings upon all motions or objections).”

29 C.F.R. §102.46(a). If no exceptions are filed, “the findings, conclusions, and

recommendations contained in the Administrative Law Judge’s decision will . . . automatically

become the decision and order of the Board and become its findings, conclusions, and order. 29

CFR §102.48; 29 U.S.C. §160(c). Nonetheless, even if no party has filed a relevant exception,

the Board may reverse a finding made by the ALJ. Hedstrom Co. v. NLRB, 629 F.2d 305, 315-

16 (3d Cir. 1980). Moreover, the Board is not required to use an ALJ and it may elect to preside

over an enforcement action itself. 29 CFR §102.50. Furthermore, even when an ALJ has been

assigned to preside, the Board is “free to adopt findings of fact and conclusions of law different

from the ALJ’s conclusions.” Local 65-G, Graphic Commc’ns Conf. of Int’l Bhd. of Teamsters

v. N.L.R.B., 572 F.3d 342, 348 (7th Cir. 2009).

Removal of NLRB ALJs involves a two-step process prescribed by statute: (1) the Board

must bring an action to remove an ALJ; and (2) the Merit Systems Protection Board (“MSPB”),

an independent federal agency, must then determine that good cause for removal has been

established. 5 U.S.C. §7521(a). As for the members of the MSPB, they may only be removed

for “inefficiency, neglect of duty, or malfeasance in office.” 5 U.S.C. §1202(d).

D. The Underlying NLRB Proceedings Against Alivio

Alivio is a bilingual, bicultural non-profit Federally Qualified Health Center that offers

“access to quality cost effective health care and services to the Hispanic community, the

uninsured and the underinsured, regardless of their immigration status.” (Dckt. #25-1 ¶2). In

June 2022, Alivio notified several union and non-union employees that it received notice from

the Internal Revenue Service (“IRS”) that the social security numbers each employee had

provided upon hire did not match the names in the IRS’ records. (Dckt. #25-3 ¶2). Alivio

required the employees to resolve the social security “no match” discrepancy by July 25, 2022.

(Dckt. #25-5 at 4). Ultimately, Alivio determined that four employees provided false

information at the time of hire and terminated their employment. (Dckt. #25-3 ¶¶3-4).

In late July 2022, the SEIU Healthcare IL/IN MO/KS (the “Union”) filed its initial charge

with the NLRB regarding the “no match” terminations, which it subsequently amended on three

occasions. On March 14, 2023, the NLRB issued a ULP complaint and notice of hearing (in

NLRB Case No. 13-CA-300158), alleging, inter alia, that Alivio violated Section 8(a)(5) and (1)

of the NLRA by refusing to bargain over changes, and the effects of changes, to its policy for

handling the receipt of IRS “no match” letters for current employees, specifically requiring that

employees resolve such discrepancies within a specific time period. (Dckt. #25-5).

Pursuant to the notice of hearing accompanying the complaint, the administrative hearing

was initially set to proceed on July 26, 2023, before ALJ Paul Bogas. (Id. at 6). Since that time,

however, the administrative hearing has been rescheduled three times – with no opposition from

either party – due to events outside of their control, including unavailability of various witnesses,

counsel, and a hearing space. (Dckt. #29 at 12 n.3). Shortly after filing the complaint in this

matter, Alivio filed a request to postpone the administrative hearing pending resolution of this

case (and its appeal of the ALJ’s order revoking subpoenas). (Dckt. #25-4 at 5). On August 22,

2024, the NLRB denied that request and the hearing is set to proceed on September 25, 2024.

(Dckt. #25-10).

II. STANDARD FOR INJUNCTIVE RELIEF

“The standards for granting a temporary restraining order and [a] preliminary injunction

are the same.” USA-Halal Chamber of Commerce, Inc. v. Best Choice Meats, Inc., 402

F.Supp.3d 427, 433 (N.D.Ill. 2019) (citation omitted). In either instance, “injunctive relief [is]

an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is

entitled to such relief.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22 (2008); see also

Barbecue Marx, Inc. v. 551 Ogden, Inc., 235 F.3d 1041, 1044 (7th Cir. 2000), quoting Schwinn

Bicycle Co. v. Ross Bicycles, Inc., 870 F.2d 1176, 1184 (7th Cir. 1989) (“A preliminary

injunction is a very serious remedy, ‘never to be indulged in except in a case clearly demanding

it.’”).

To decide whether injunctive relief is warranted, courts in the Seventh Circuit engage in a

multi-step inquiry involving a threshold phase and a balancing phase. See Int’l Ass’n of Fire

Fighters, Local 365 v. City of E. Chi., 56 F.4th 437, 446 (7th Cir. 2022). First, the moving party

– here, Alivio – has the burden of making a threshold showing that (1) it is likely to succeed on

the merits; (2) traditional legal remedies would be inadequate; and (3) it will suffer irreparable

harm absent a preliminary injunction. Life Spine, Inc. v. Aegis Spine, Inc., 8 F.4th 531, 539 (7th

Cir. 2021). If the moving party does, however, make a showing of each of the threshold

requirements, the court moves to the balancing phase where the court “weighs the harm of

denying an injunction to the [movant] against the harm to the [opposing party] of granting one.”

Life Spine, Inc., 8 F.4th at 549 (citing Speech First, Inc. v. Killeen, 968 F.3d 628, 637 (7th Cir.

2020)). In balancing the harms, the court also considers the public interest in granting or

denying the injunction. Life Spine, Inc., 8 F.4th at 539.

With respect to the likelihood of success on the merits, the Seventh Circuit has made

clear that the moving party “need not show by a preponderance of the evidence that [it] will win

[its] suit.” Protect Our Parks, Inc. v. Buttigieg, 10 F.4th 758, 763 (7th Cir. 2021) (citing Ill.

Republican Party v. Pritzker, 973 F.3d 760, 762-63 (7th Cir. 2020), cert. denied, 141 S. Ct. 1754

(2021)). Nonetheless, “the mere possibility of success is not enough” and the movant must

instead “make a ‘strong’ showing on the merits.” Id.; see also Life Spine, Inc., 8 F.4th at 539

(“We recently clarified that a plaintiff must demonstrate that its claim has some likelihood of

success on the merits, not merely a better than negligible chance.”) (internal quotation marks

omitted). “The precise showing necessary ‘depends on the facts of the case at hand . . .’” Life

Spine, Inc., 8 F.4th at 540, quoting Mays v. Dart, 974 F.3d 810, 822 (7th Cir. 2020).

If the moving party “fails to meet any of the threshold requirements for a preliminary

injunction including likelihood of success on the merits, the court ‘must deny the injunction.’”

Martinez v. City of Chicago, 534 F.Supp.3d 936, 955 (N.D.Ill. 2021), quoting GEFT Outdoors,

LLC v. City of Westfield, 922 F.3d 357, 364 (7th Cir. 2019) (emphasis added). Thus, if a plaintiff

seeking injunctive relief cannot meet its burden of showing a likelihood of success, “a court must

deny the injunction regardless of how heavily any other equities may weigh in the plaintiff’s

favor.” D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455, 458 n.1 (7th Cir. 1993) (cleaned up);

Curtis v. Thompson, 840 F.2d 1291, 1297 (7th Cir. 1988) (“The denial of an injunction based

solely upon a plaintiff’s failure to establish a negligible chance of success on the merits has been

expressly sanctioned by this and other circuits”) (citing cases). Indeed, if a plaintiff fails to show

a likelihood of success, the court need not even address the other factors relevant to obtaining

injunctive relief. See, e.g., Doe v. University of Southern Indiana, 43 F.4th 784, 791 & n.4 (7th

Cir. 2022) (where plaintiff fails to demonstrate “some likelihood of success on the merits,” the

court “need not address the remaining elements” even if “the balance of harms weighed

overwhelmingly in [plaintiff’s] favor”); Lukaszczyk v. Cook County, 47 F.4th 587, 598 (7th Cir.

2022) (same, and noting that whether or not plaintiff can show a likelihood of success “is often

decisive.”); Curtis, 840 F.2d at 1296.

III. ANALYSIS

The parties dispute whether the removal procedures for the NLRB’s Members and ALJs

impermissibly impinge on the President’s executive power in violation of Article II of the

Constitution. For the reasons stated below, the Court finds that Alivio has failed to carry its

burden of showing that it has a likelihood of success on its claims that the NLRB’s Members and

ALJs are unconstitutionally insulated from removal.

A. The Take Care Clause Within Article II of the Constitution

In 2020, the Supreme Court explained that:

Under our Constitution, the ‘executive Power’ – all of it – is ‘vested in a President,’

who must ‘take Care that the Laws be faithfully executed.’ Art. II, § 1, cl. 1; id., §

3. Because no single person could fulfill that responsibility alone, the Framers

expected that the President would rely on subordinate officers for assistance. Ten

years ago, in Free Enterprise Fund v. Public Company Accounting Oversight Bd.,

561 U.S. 477 . . . (2010), we reiterated that, ‘as a general matter,’ the Constitution

gives the President ‘the authority to remove those who assist him in carrying out

his duties,’ id., at 514 . . . .

The President’s power to remove – and thus supervise – those who wield executive

power on his behalf follows from the text of Article II, was settled by the First

Congress, and was confirmed in the landmark decision Myers v. United States, 272

U.S. 52 . . . (1926). Our precedents have recognized only two exceptions to the

President’s unrestricted removal power. In Humphrey’s Executor v. United States,

295 U.S. 602 . . . (1935), we held that Congress could create expert agencies led by

a group of principal officers removable by the President only for good cause. And

in United States v. Perkins, 116 U.S. 483 . . . (1886), and Morrison v. Olson, 487

U.S. 654 . . . (1988), we held that Congress could provide tenure protections to

certain inferior officers with narrowly defined duties.

Seila L. LLC v. Consumer Fin. Prot. Bureau, 591 U.S. 197, 203-04 (2020) (emphasis in

original). In analyzing the constitutionality of the restrictions on the president’s ability to

remove the NLRB’s Members and ALJs, the first step is to determine whether their tenure

protection falls within one of the two established exceptions to the president’s general removal

authority. Id., at 215-18; Yapp USA Auto, 2024 WL 4119058, at *4.

B. Alivio Has Failed to Show a Likelihood of Success on its Claim That the

Removal Protections for the NLRB Members Violate Article II of the

Constitution.

In Humphrey’s Executor, the Supreme Court considered a constitutional challenge to the

removal protections given to the Federal Trade Commission’s (“FTC”) Commissioners in 1935

and held that Congress was permitted “to give for-cause removal protections to a multimember

body of experts, balanced along partisan lines, that performed legislative and judicial functions”

and “that do not wield substantial executive power.” Seila L., 591 U.S. at 216, 218 (citing

Humphrey’s Executor, 295 U.S. at 619-20, 624, 628, 631-32)); Consumers’ Rsch. v. Consumer

Prod. Safety Comm’n, 91 F.4th 342, 353 (5th Cir. 2024) (citing Seila L., 591 U.S. at 218). The

parties dispute whether the Humphrey’s Executor removal exception – which Alivio concedes

has not been overruled by the Supreme Court (Dckt. #25 at 20) – applies to shield the removal

protections for the NLRB’s Members from a finding that they are unconstitutional.

The Supreme Court has not yet had occasion to consider whether the Humphrey’s

Executor removal exception applies to the removal protections for the NLRB’s Members and the

Seventh Circuit has yet to consider the application of the exception in any context. However, a

number of courts have considered whether the removal protections for members of multimember

commissions fall within the parameters of the Humphrey’s Executor removal exception.

Specifically, both the Tenth Circuit and the Fifth Circuit have held that the removal

protections for officers serving on the multimember Consumer Product Safety Commission

(“CPSC”) are constitutional under the Humphrey’s Executor removal exception. See Leachco,

Inc. v. Consumer Prod. Safety Comm’n, 103 F.4th 748, 760-63 (10th Cir. 2024) (holding that the

removal protections for the CPSC are constitutional); Consumers’ Rsch., 91 F.4th at 345-46

(same) & at 352 (recognizing that the Humphrey’s Executor removal “exception still protects

any ‘traditional independent agency headed by a multimember board’”); see also United States v.

SunSetter Prod. L.P., No. 23-CV-10744-ADB, 2024 WL 1116062, at *4 (D.Mass. Mar. 14,

2024) (citing to Consumers’ Rsch. and finding that “the CPSA’s for cause removal provisions

are constitutional.”).

The Fifth Circuit likewise held that the removal protections for the modern – and more

robust – FTC pass constitutional muster under the Humphrey’s Executor removal exception:

Illumina claims that the FTC unconstitutionally exercised executive powers while

insulated from presidential removal in violation of Article II. But Humphrey’s

Executor v. United States held that the FTC’s enabling act did not run afoul of

Article II because, essentially, the FTC was vested with quasi-legislative/quasi-

judicial authority rather than purely executive authority. . . . While the Supreme

Court has cabined the reach of Humphrey’s Executor in recent years,3 it has

expressly declined to overrule it. . . . . Thus, although the FTC’s powers may have

3 Most notably, in Seila L., the Supreme Court declined to extend the Humphrey’s Executor removal

exception to the removal protections for the sole director of the Consumer Financial Protection Bureau, an

independent agency that “wields significant executive power,” “lacks a foundation in historical practice[,]

and clashes with constitutional structure by concentrating power in unilateral actor insulated from

Presidential control.” Selia L., 591 U.S. at 204; Collins v. Yellen, 594 U.S. 220, 251-56 (2021) (citing

Seila L. and holding that the single director structure and removal protections in the Federal Home

Mortgage Corporation unconstitutionally limited the President’s removal power). The Seila L. Court

expressly stated that it “d[id] not revisit Humphrey’s Executor or any other precedent” when ruling on the

constitutionality of the removal procedures at issue in that case. Seila L., 591 U.S. at 228.

changed since Humphrey’s Executor was decided, the question of whether the

FTC’s authority has changed so fundamentally as to render Humphrey’s Executor

no longer binding is for the Supreme Court, not us, to answer.

Illumina, Inc. v. Fed. Trade Comm’n, 88 F.4th 1036, 1046-47 (5th Cir. 2023) (cleaned up and

footnote added). Furthermore, two district courts have considered whether the Humphrey’s

Executor removal exception applies to the removal protections for the NLRB’s Members and

reached opposite conclusions. Compare Yapp USA Auto, 2024 WL 4119058, at *5 (finding that

“the NLRB appears to fall comfortably within the Humphrey’s Executor exception”) with Space

Exploration Technologies Corp. v. National Labor Relations Board (“SpaceX”), Civil No. W24-

CV-00203-ADA, 2024 WL 3512082, at *4 (W.D.Tex. July 23, 2024) (“Finding that NLRB

Member’s removal protection [is] constitutional would require this court to expand Humphrey’s

Executor where the Supreme Court has repeatedly declined to do so.”).

When considering whether the removal procedure for an agency’s board members or

commissioners fits within the Humphrey’s Executor removal exception, courts consider the

organizational features of the agency:

(1) does it have multiple members who are non-partisan or balanced along partisan

lines?

(2) are the members’ duties neither political nor executive but instead call for the

trained judgment of a body of experts informed by experience?

(3) are the terms of the members staggered to enable the agency to accumulate

technical expertise and avoid a complete change in leadership at any one time?

(4) does the agency function as a legislative or judicial aid in a quasi-legislative and

quasi-judicial manner that does not exercise any enforcement power, or does it

“promulgate binding rules” fleshing out federal statutes, “unilaterally issue final

decisions awarding legal and equitable relief in administrative adjudications,” and

have the power to “seek daunting monetary penalties against private parties on

behalf of the United States in federal court”? and

(5) is the agency well-grounded in historical precedent or does it reflect a novel

concept that lacks a historical pedigree?

Seila L., 591 U.S. at 215-16, 218-19; Humphrey’s Executor, 295 U.S. at 619-20, 624, 628;

Consumers’ Rsch., 91 F.4th at 352-55; Calcutt v. Fed. Deposit Ins. Corp., 37 F.4th 293, 313-14

(6th Cir. 2022), rev’d on other grounds, 598 U.S. 623 (2023); Yapp USA Auto, 2024 WL

4119058, at *5-6.

The organizational features of the NLRB match the profile of an agency that fits within

the parameters of the Humphrey’s Executor removal exception. To begin, “the NLRB was itself

modeled after the FTC, and the NLRA was modeled after the FTC Act.” Yapp USA Auto, 2024

WL 4119058, at *5 (citing Dish Network Corp. v. Nat’l Lab. Rels. Bd., 953 F.3d 370, 375 n.2

(5th Cir. 2020)); NLRB v. P*I*E Nationwide, Inc., 894 F.2d 887, 892 (7th Cir. 1990). To this

end, as the court noted in Yapp USA Auto:

Like the FTC, the NLRB is a multi-member independent, expert agency. The

Board members, similar to the Commissioners, are balanced along partisan lines,

serve staggered multi-year terms, and exercise quasi-legislative and quasi-judicial

power. What is more, the NLRB’s structure is not novel or new like the agencies

at issue in the Supreme Court’s recent removal power cases.

Yapp USA Auto, 2024 WL 4119058, at *5. The NLRB also performs a quasi-legislative function

by making annual reports to Congress. Leachco, 103 F.4th at 761 (citing Seila L., 591 U.S. at

215); 29 U.S.C. §153(c). Furthermore, in at least one sense, the NLRB has less authority than

the FTC because “[t]he Board is given no power of enforcement. Compliance is not obligatory

until the court, on petition of the Board or any party aggrieved, shall have entered a decree

enforcing the [Board’s] order as made, or as modified by the court.” In re NLRB, 304 U.S. 486,

49 (1938); Dish Network Corp., 953 F.3d at 375 n.2 (the NLRB “may be the only agency that

needs a court’s imprimatur to render its orders enforceable.”); NLRB v. Thill, Inc., 980 F.2d

1137, 1142 (7th Cir. 1992) (same).

On the other hand, the district court’s decision in SpaceX – which found that the NLRB’s

Members’ removal protection is outside the scope of Humphrey’s Executor – is unpersuasive. In

SpaceX, the court found that the Humphrey’s Executor removal exception did not apply to the

NLRB for three reasons.

First, the court opined that “the NLRB members clearly wield substantial executive

power.” SpaceX, 2024 WL 3512082, at *3. It is unclear, however, whether the NLRB

Members, in fact, “wield substantial executive power.” As explained above in Section I(B), the

LMRA divided the authority and responsibility of the original Board and vested the General

Counsel with the “extensive executive” and “prosecutorial functions” of the agency. Rieth-Riley,

2024 WL 3811837, at *4 & at *5 (“The General Counsel’s purely executive function . . . is

detached from the Board’s adjudicatory function”). In any event, even if the NLRB’s Members

do “wield substantial executive power,” the Fifth Circuit has recently held the exercise of such

power does not in itself defeat the application of the Humphrey’s Executor removal exception.

See Consumers’ Rsch., 91 F.4th at 346 (“Although the Commission wields what we would today

regard as substantial executive power, in every other respect it is structurally identical to the

agency that the Supreme Court deemed constitutional in Humphrey’s. Yet the district court

concluded that the Commission’s structure is unconstitutional under Seila Law. We disagree.”).

Second, the SpaceX court distinguished the Fifth Circuit’s decision in Consumers’

Research and found that the NLRB was outside the scope of the Humphrey’s Executor removal

exception in reliance on SpaceX’s argument that the NLRB has a “distinctive structure” that

“divides prosecutorial authority between its Members (in the Section 10(j) context)4 and its

politically accountable General Counsel (in unfair labor practice proceedings).” SpaceX, 2024

WL 3512082, at *4. However, the NLRA “permits the Board to delegate to the General Counsel

its power to seek §10(j) relief,” Muffley ex rel. N.L.R.B. v. Spartan Mining Co., 570 F.3d 534,

540 (4th Cir. 2009), including the final authority in deciding whether to petition for such

injunctive relief. Frankl v. HTH Corp., 650 F.3d 1334, 1353-54 (9th Cir. 2011) (citing cases).

Furthermore, the Board has invariably made such delegations to the General Counsel, and §10(j)

petitions are filed in federal district court by the General Counsel’s Regional Directors as a

matter of course. See Gottfried v. Frankel, 818 F.2d 485, 492 (6th Cir. 1987) (“we find it

persuasive that Sixth Circuit cases analyzing section 10(j) petitions have been filed by a Regional

Director. . . . In fact, we have not discovered a section 10(j) case in any circuit which was not

filed by a Regional Director.”) (cleaned up). Thus, the NLRB Board Members do not prosecute

the §10(j) petitions, as SpaceX suggests.

Finally, the SpaceX court found that applying the Humphrey’s Executor removal

exception to the NLRB would be “an unjustified expansion of Humphrey’s Executor” because

the “[t]he removal protections for NLRB Members are even stricter than those that have

insulated the FTC Commissioners.” SpaceX, 2024 WL 3512082, at *4. In particular, the

NLRB’s Members are removable only “for neglect of duty or malfeasance in office” whereas the

FTC Commissioners can be removed for “inefficiency, neglect of duty, or malfeasance in

4 Section 10(j) of the NLRA (29 U.S.C. §160(j)) provides, in pertinent part, that:

The Board shall have power, upon issuance of a complaint as provided in subsection (b)

charging that any person has engaged in or is engaging in an unfair labor practice, to

petition any United States district court, within any district wherein the unfair labor practice

in question is alleged to have occurred or wherein such person resides or transacts business,

for appropriate temporary relief or restraining order.

office.” Id. However, both the Fifth Circuit (in Consumers’ Research) and the Tenth Circuit (in

Leachco) have held that removal protections identical to those applicable to the NLRB’s

Members still fall within the Humphrey’s Executor removal exception. See Consumers’ Rsch.,

91 F.4th at 346, 355-56; Leachco, 103 F.4th at 761-64; Yapp USA Auto, 2024 WL 4119058, at

*6 n.4. Furthermore, the Supreme Court has declined to broadly construe the “inefficiency,

neglect of duty, or malfeasance of office” removal standard in the manner suggested by SpaceX.

See Seila L., 591 U.S. at 229.5

In sum: given the unpersuasive nature of the sole decision cited in support of its position,6

the Court finds that Alivio has failed to meet its burden of establishing a likelihood of success on

its claim that the removal protections for the NLRB Members violate the Take Care Clause of

Article II of the Constitution.

5 Legal commentators have likewise cast doubt on the proposition that the removal of “inefficiency” from

the grounds upon which board members or commissioners can be removed from office renders

unconstitutional the removal protections of independent agencies. As noted in one article:

Congress, in erecting the commission system, made room for the President’s constitutional

obligations by permitting the President to remove unfaithful administrators. Congress

keyed the President’s removal authority to long-established grounds for official liability –

neglect of duty and malfeasance in office. And it is no coincidence that in the case of the

NLRB, SSA, Consumer Product Safety Commission, Commission on Civil Rights, U.S.

Sentencing Commission, Foreign Service Grievance Board, and Independent Medicare

Advisory Board, Congress limited the President’s removal authority to those two causes

alone. Article II, under Myers, could be said to require this minimum delegation – but

nothing more.

Jane Manners & Lev Menard, The Three Permissions: Presidential Removal and the Statutory Limits of

Agency Independence, 121 Colum. L. Rev. 1, 69 (2021); see also Cass R. Sunstein & Adrian Vermeule,

Presidential Review: The President’s Statutory Authority over Independent Agencies, 109 Geo. L.J. 637,

649 n.68 (2021).

6 SpaceX is the only decision cited by Alivio or uncovered by the Court’s own research in which a court

has struck down removal protections for officers serving on a multimember commission.

C. Alivio Has Failed to Show a Likelihood of Success on its Claim that the Two-

Level Tenure Protection Enjoyed by the NLRB ALJs Violates Article II of the

Constitution.

As explained above in Section I(C), NLRB ALJs have a two-level tenure protection: the

Board must first bring an action to remove an ALJ and the MSPB, an independent federal

agency, must then determine that good cause for the ALJ’s removal has been established. The

parties dispute whether the removal procedure applicable to the NLRB ALJs violates the Take

Care Clause of Article II. To evaluate who has the better part of this dispute, the Court must

consider the relevant Supreme Court precedent and the lower courts decisions applying it.

In Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477

(2010), the Supreme Court addressed the two-level tenure protection enjoyed by members of the

Public Company Accounting Oversight Board (“PCAOB”). Congress created the PCAOB as a

private nonprofit corporation and vested it with expansive powers: (1) to enforce the Sarbanes-

Oxley Act, the securities laws, the rules of the U.S. Securities and Exchange Commission

(“SEC”) , its own rules, and professional accounting standards; (2) to regulate every accounting

firm – both foreign and domestic – that participates in auditing public companies under the

securities laws; and (3) to inspect accounting firms, initiate formal investigations and

disciplinary proceedings, and issue sanctions. Id., at 484-85. The PCAOB members could be

removed by the SEC under certain limited circumstances and the SEC Commissioners

themselves could not be removed by the President except for inefficiency, neglect of duty, or

malfeasance in office. Id., at 487. In performing their duties, the PCAOB members were

inferior officers who “exercise[d] significant executive power” and enjoyed a two-level tenure

protection. Id., at 514.

The Supreme Court held that the two-level tenure protection for the PCAOB members

was “contrary to Article II’s vesting of the executive power in the President” because “[n]either

the president, nor anyone directly responsible to him, nor even an officer whose conduct he may

review only for good cause, has full control over the [PCAOB].” Id., at 496. The Court,

however, did not categorically deem unconstitutional all two-level tenure protection for inferior

officers, and it expressly stated that its holding “does not address that subset of independent

agency employees who serve as administrative law judges.” Id., at 507 n.10. The Court further

noted that “unlike members of the [PCAOB], many administrative law judges of course perform

adjudicative rather than enforcement or policymaking functions, . . . , or possess purely

recommendatory powers.” Id. The constitutionality of two-level tenure protection for agency

ALJs has not been addressed by the Seventh Circuit and it remains an open question in the

Supreme Court. Leachco, 103 F.4th at 764 (citing Lucia v. Securities and Exchange

Commission, 585 U.S. 237, 244 n.1 (2018)).

The circuits have split on the question of whether the Free Enterprise holding striking

down the two-level tenure protection for the PCAOB members applies to the two-level tenure

protection schemes afforded to agency ALJs like those employed by the NLRB. The Tenth,

Ninth, and Sixth Circuits have held that such removal protections are constitutional, or likely so,

where the ALJs perform a “purely adjudicatory function.” See Leachco, 103 F.4th at 763-65

(holding that the removal protections for the CPSC ALJs are constitutional); Decker Coal Co. v.

Pehringer, 8 F.4th 1123, 1129-36 (9th Cir. 2021) (holding that the two-level tenure protection

scheme for the Department of Labor ALJs is constitutional); Calcutt, 37 F.4th at 319-20 (holding

that the two-level tenure protection scheme for FDIC ALJs is likely constitutional); H&R Block

Inc. v. Himes, No. 24-00198-CV-W-BP, 2024 WL 3742310, at *1-6 (W.D.Mo. Aug. 1, 2024)

(denying a motion for preliminary injunction on the ground that plaintiffs failed to show a

likelihood of success on their constitutional challenge to the FTC’s ALJs’ removal protections).

Moreover, in Yapp USA Auto, the court found that the NLRB ALJ’s perform “purely

adjudicatory functions” and – in reliance upon the above circuit court authority – held that that

the ALJs’ two-level removal protection appears valid under existing precedent. Yapp USA Auto,

2024 WL 4119058, at *8.

It is unclear whether Alivio disputes the proposition that ALJs who perform “purely

adjudicatory functions” fall outside the scope of the Free Enterprise holding that struck down the

removal protections for the PCAOB members. Instead, Alivio asserts that the two-level removal

protection for the NLRB ALJs is within the scope of Free Enterprise and violates the Take Care

Clause of Article II because the ALJs perform “substantial executive functions.” (Dckt. #25 at

13-14). In support of its argument, Alivio relies on the Fifth Circuit’s decision in Jarkesy v. Sec.

& Exch. Comm’n, 34 F.4th 446, 463-65 (5th Cir. 2022), aff’d on other grounds, 144 S.Ct. 2117

(2024),7 and two district court decisions from the Western and Southern Districts of Texas that

treated Jarkesy as circuit precedent and followed it. See SpaceX, 2024 WL 3512082, at *3;

Energy Transfer, LP v. National Labor Relations Board, No. 3:24-cv-198, 2024 WL 3571494, at

*2 (S.D.Tex. July 29, 2024).8

7 In its decision, the Supreme Court made clear that it affirmed the Fifth Circuit’s decision on the Seventh

Amendment ground alone and that it was not reaching the constitutional question at issue in this case.

Sec. & Exch. Comm’n v. Jarkesy, 144 S.Ct. 2117, 2139 (2024).

8 Alivio asserts that the NLRB has “conceded” that Jarkesy decides this issue. (Dckt. #25 at 14-15 n.2).

However, the statement that Alivio claims is a concession was made during the argument in the Energy

Transfer case where the district court was bound by Jarkesy, its circuit precedent. Moreover, the NLRB

made it clear that it disagreed with Jarkesy and that it was preserving its counterargument for future

stages of the case. Energy Transfer, 2024 WL 3571494, at *2 n.3.

In Jarkesy, the Fifth Circuit held that the removal restrictions for the SEC’s ALJs were

unconstitutional under the holding in Free Enterprise because the ALJs “perform substantial

executive functions” and the two-level tenure protection impeded the President’s ability to have

sufficient control over the performance of their functions. Jarkesy, 34 F.4th at 463. Alivio

claims that “there is no relevant difference between SEC ALJs and NLRB ALJs” and asserts that

“the Fifth Circuit’s reasoning in Jarkesy is persuasive as a synthesis of current Supreme Court

precedent.” (Dckt. #25 at 13). This Court respectfully disagrees with the latter proposition.

In particular, the Fifth Circuit’s finding that the SEC ALJs perform substantial executive

functions analogous to the PCOAB members in Free Enterprise is unpersuasive. The Supreme

Court described the adjudicatory nature of the SEC ALJs’ duties in Lucia, where the Court

stated:

An ALJ assigned to hear an SEC enforcement action has extensive powers – the

authority to do all things necessary and appropriate to discharge his or her duties

and ensure a fair and orderly adversarial proceeding. . . . Those powers include,

but are not limited to, supervising discovery; issuing, revoking, or modifying

subpoenas; deciding motions; ruling on the admissibility of evidence;

administering oaths; hearing and examining witnesses; generally [r]egulating the

course of the proceeding and the conduct of the parties and their counsel; and

imposing sanctions for [c]ontemptuous conduct or violations of procedural

requirements.

As that list suggests, an SEC ALJ exercises authority comparable to that of a federal

district judge conducting a bench trial.

Lucia, 585 U.S. at 241-42 (cleaned up). Moreover, there is no indication in either Lucia or

Jarkesy that the SEC ALJs exercised the sort of “significant executive power” wielded by the

PCOAB members who, among other things, initiated formal investigations, disciplinary

proceedings, and enforcement actions, and regulated accounting firms.

For these reasons, this Court finds persuasive the opinion of the dissenting judge on the

Jarkesy panel, who aligned himself with the Ninth Circuit’s decision in Decker and found that

the SEC ALJs “solely perform an adjudicative function” that brings their two-level tenure

protection outside the scope of the Free Enterprise holding. Jarkesy, 34 F.4th at 475-79 (W.

Eugene Davis, J., dissenting). The Court is also persuaded by the Yapp USA Auto court’s finding

that the NLRB ALJs perform purely adjudicatory functions. Yapp USA Auto, 2024 WL 4119058,

at *8; supra, at Section I(B). Alivio’s counsel acknowledged at the hearing that Alivio has no

evidence that the NLRB’s ALJs exercise executive functions by initiating investigations or

enforcement actions, filing complaints, or engaging in rulemaking or the development of policy

for the agency. (Dckt. #38 at 26-29).

In sum: given the circuit split on the question of whether the two-level tenure protection

scheme for ALJs who perform adjudicatory duties analogous to those performed by the NLRB

ALJs is constitutional under the Take Care Clause of Article II, and the fact that this Court finds

the decisions that are contrary to Alivio’s position to be more persuasive, the Court finds that

Alivio has failed to meet its burden of showing “it is likely to succeed on the merits of its

constitutional challenge to the NLRB ALJs’ removal protections.” (Dckt. #25 at 12) (emphasis

in original); see, e.g., Care One, LLC V. Nat’l Lab. Rels. Bd., No. 3:23-CV-00831 (RNC), 2023

WL 645761, at *1, 3-4 (D.Conn. Oct. 4, 2023) (denying injunctive relief on plaintiff’s claim that

the two-level, for cause protection against removal enjoyed by NLRB ALJs violates the Take

Care Clause of the Constitution on the ground that a circuit split on the question defeats

plaintiff’s ability to show a likelihood of success on the issue); Manis v. U.S. Dep’t of Agric., No.

1:24-CV-175, 2024 WL 1770775, at *6 (M.D.N.C. Apr. 24, 2024) (“Because of inconsistencies

in the caselaw and the lack of available precedent, Plaintiff does not demonstrate that he is likely

to succeed on the merits of his claim that the ALJs’ removal mechanism is unconstitutional.”);

Ladenburg Thalmann & Co., Inc. v. Oragenics, Inc., No. 1:24-CV-21431, 2024 WL 2938821, at

(S.D.Fla. June 11, 2024) (likelihood of success not shown where there was no binding

Supreme Court or circuit authority and there was an even split in the other circuits on the issue).

CONCLUSION

As the Seventh Circuit has repeatedly made clear, injunctive relief 1s an extraordinary

remedy and that proposition certainly holds true in this case. Alivio’s position — if accepted —

would neuter the National Labor Relations Act by blocking all proceedings before the National

Labor Relations Board, the independent agency that has steadfastly and exclusively enforced the

statute for the past eighty-nine years against entities accused of unfair labor practices. Quite

extraordinary, indeed. However, as explained herein, the injunctive relief sought by Alivio is not

mandated by the governing Supreme Court precedent. To the contrary, Alivio has fallen far

short in its effort to meet its burden of establishing a likelihood of success on the merits of its

constitutional claims. Without this required showing, Alivio’s quest for injunctive relief fails,

and its motion for a temporary restraining order and expedited preliminary injunction, (Dckt.

#25), is denied.

DATE: September 13, 2024

Jeffrey Cummings

United States District Court Judge

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