A lawsuit filed Monday by the two Democrats fired recently from their board posts at the National Credit Union Administration (NCUA) seeks their reinstatement and asserts that with its two vacancies, the NCUA Board now lacks the quorum required to carry out key functions.
“During the Board’s nearly fifty years of existence, the President has never removed a Member whose term had not yet expired,” states the suit, filed in the U.S. District Court for the District of Columbia. “President Trump’s unprecedented removal of Mr. [Todd] Harper and Ms. [Tanya] Otsuka violates Congress’s mandate and has left the Board without a quorum.”
The filing states that the Federal Credit Union Act, the law that created the system of member-owned, not-for-profit credit unions, under amendments in 1978 vests the NCUA’s management in a three-member board, not in any one individual, “with a quorum requiring a majority of the Board.” It also quotes the agency’s rules for board procedure, stating that the “agreement of at least two of the three Board members is required for any action by the Board.”
According to a release last week, NCUA staff were told that it is “the NCUA’s long-held view that a single Board Member constitutes a quorum when there are no other Board Members.” Harper and Otsuka’s lawsuit asserts, however, that “(w)ith only a single Member purporting to exercise authority, the NCUA cannot continue carrying out the supervisory, regulatory, and institutional functions that Congress intended to be exercised by a Board composed of at least a majority of its Members.”
As to the terminations, the filing states that in Swan V. Clinton (a suit in which a sitting board member was removed after his term had expired), the D.C. Circuit in 1996 ultimately assumed that NCUA Board members are removable only for cause, and it pointed to a 1978 restructuring of the NCUA that supported an inference of removal protection during each six-year term. “The D.C. Circuit traced the shift to Congress’s broader effort to align the NCUA with other independent financial regulators, such as the FDIC and the Federal Reserve, where removal protections – express or implied – were widely understood to apply in service of well-functioning markets,” it states.
Harper (also a former NCUA Board chairman) and Otsuka were still serving out their board terms – set to expire April 2, 2027, and Aug. 2, 2029, respectively – when they were sent identical emails April 15 stating they were terminated.
The emails, sent by Trent Morse, deputy assistant to the president and deputy director of the White House Presidential Personnel Office stated, “On behalf of President Donald J. Trump, I am writing to inform you that your position on the National Credit Union Administration is terminated, effective immediately. Thank you for your service.” The suit states that the emails “say nothing about the reasons for the termination, and do not attempt to assert a basis for cause.”
“Plaintiffs seek declaratory and injunctive relief to restore the Board’s lawful composition and preserve the independence Congress mandated,” it states.
Defendants named are Trump; Morse; Hauptman; Larry Fazio, NCUA’s executive director; and Treasury Secretary Scott Bessent. The suit was filed for Harper and Otsuka by the New York law firm Howell Shuster & Goldberg LLP.
Meanwhile, NCUA has announced an open board meeting slated for May 22 that will include a briefing on the agency’s “voluntary separation programs,” taken by most to refer to the agency’s expected plans to cut 20% of its staff after discussions with the Trump administration’s Department of Government Efficiency (DOGE) led by Elon Musk. DOGE is behind a series of massive layoffs and firings across federal agencies.
The agency, through a Federal Register notice, has also invited public comments on two rules adopted last December that are currently set to take effect in 2026. One creates a “trust account” category for federal share insurance, and the other requires federally insured credit union boards of directors to establish succession planning processes for key positions.
The NCUA, in its Register notice, pointed to the Jan. 20 White House memorandum, “Regulatory Freeze Pending Review.” Echoing language in that memorandum, the notice said the public comment period on the two rules “will allow interested parties to provide comments about issues of fact, law, and policy raised by the two final rules.” The memorandum provides scenarios under which federal agency rules should be reviewed by the Office of Management and Budget (OMB) prior to implementation.
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