A complaint for declaratory and injunctive relief has been filed on behalf of former NCUA Board Members Tanya Otsuka and Todd Harper. Harper and Otsuka, the two democrats on the board, were dismissed on April 15th by President Donald Trump years before their terms were set to expire and without a reason provided for the firings.

The lawsuit, filed by Vincent Levy, a partner at Holwell Shuster & Goldberg LLP, names Harper and Otsuka as the plaintiffs and includes Scott Bessent, Secretary of the Treasury, Trent Morse, Deputy Assistant to the President and Deputy Director of the White House Presidential Personnel Office, President Donald Trump, as well as Larry Fazio, Executive Director of the NCUA, and Kyle Hauptman, Chairman of the NCUA Board, as defendants.

In justification for the filing, Levy stated, “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.”

The complaint alleges that these dismissals—the first time in the board’s history members were removed before their terms expired—were made without cause and violate the integrity of the Federal Credit Union Act, which demands a bipartisan board. It maintains that Otsuka and Harper fulfilled their duties as NCUA Board Members without fail.

“The identical, one-sentence emails sent to both Mr. Harper and Ms. Otsuka at the same time on the same day say nothing about the reasons for the termination, and do not attempt to assert a basis for cause. Nor could they,” read the lawsuit. “None of [Harper or Otsuka’s] efforts reflected anything other than the faithful execution of the mission Congress entrusted to the NCUA: ensuring the safety and soundness of credit unions, protecting consumers, and promoting public confidence in the credit union system.”

The lawsuit also disagrees with the NCUA’s assertion that the lone remaining board member, Chairman Kyle Hauptman, constitutes a quorum, arguing that the Federal Credit Union Act places powers of the agency within a multi-member board, not one individual. Therefore, the lawsuit asks that the Court order the defendants to provide Otsuka and Harper with “all the rights and privileges attendant to their appointment,” but also prevent the defendants from acting on behalf of the NCUA board, stating it “disregards [Harper and Otsuka’s] continuing status as members.”

Furthermore, the complaint asks that the Court declare that the President may only remove NCUA Board Members “for cause.” However, the request is not quite so simple. These firings and the subsequent lawsuit are part of a larger legal battle on the extent of the President’s power and his ability to remove board members of independent agencies, of which he has been doing often as of late, including firing Democratic commissioners at the Federal Trade Commission, the Merit Systems Protection Board, and the National Labor Relations Board.

While a Supreme Court decision from 1935, called Humphreys’ Executor, unanimously agreed that the President cannot dismiss board members of independent agencies without cause, it’s possible the current Supreme Court may choose to reverse course and declare that removal of board members does fall under the President’s executive power.

Statements from Harper and Otsuka

Upon filing, both plaintiffs gave the following statements:

Statement from Todd Harper

“Having grown up in a neighborhood next to Chicago’s industrial East Side, I learned early on that when someone begins a fight, you stand up and push back for what’s right. What’s right is protecting consumers and their deposits by maintaining an independent, three-member NCUA Board guided by expert judgment in line with the Federal Credit Union Act’s mandates and other statutory requirements.

That’s why I joined my fellow NCUA Board Member, Tanya Otsuka, in filing this important legal proceeding against the Trump Administration. The President’s unprecedented and unlawful decision to terminate two-thirds of the NCUA Board legally serving within their Senate-confirmed terms and without providing any cause should concern everyone who uses a federally insured financial institution like a credit union or a bank.

In creating the NCUA, the FDIC, and the Federal Reserve, Congress adopted organizational protections to insulate financial institution regulation and supervision from partisan politics and preserve the integrity of our financial markets. And in 1978, Congress clearly determined that a credit union watchdog operating with three members—instead of a single administrator—was the better way to insure deposits, protect consumers, charter new credit unions, and maintain the system’s safety and soundness.

In those amendments, Congress also sought to ensure stability in policymaking by staggering NCUA Board terms. This structure promotes continuity, expertise and independence. Dismantling the existing system of checks and balances established by Congress to protect credit union consumers and their deposits, as well as taxpayers from losses to the Share Insurance Fund, is risky, ill-advised and imprudent.

Credit union members need a strong, independent watchdog. That’s why we’re seeking relief to restore the Board’s lawful composition and preserve the independence Congress mandated. Our failure to take these actions could pave the way to the consolidated regulation of credit unions and banks and lead to the demise of our nation’s vibrant credit union movement focused on its mission of meeting the credit and savings needs of members, especially those of modest means.”

Statement from Tanya Otsuka

“Our banking system is built on trust—people need to be confident that their hard-earned money will be there when they need it. When people lose that sense of trust, it can reverberate across the financial system and lead to financial crises that end up costing people their homes, jobs, and financial security.

The National Credit Union Administration (NCUA) plays a key role in maintaining trust in the financial system. The NCUA protects Americans’ deposits in credit unions, just like the FDIC protects deposits in banks. We watch out for the 142 million people and businesses that use a credit union for a checking or savings account, a credit card, or a car loan. Credit unions are nonprofit financial institutions created to help all communities access the financial system.

Congress created the NCUA Board to be independent, because whether your money is safe in a credit union shouldn’t have anything to do with politics. Weakening financial watchdogs like the NCUA puts people’s money at risk and makes it harder and more expensive to pay your bills, start a new business, or buy a home.

That is why my fellow Board Member Todd Harper and I are challenging the Trump Administration’s attempt to illegally remove us before our Senate-confirmed terms expire. This administration’s actions fundamentally undermine the NCUA’s independence and its ability to protect our financial system. It also has implications for other independent financial regulators like the FDIC and the Federal Reserve.

Working people, families, and businesses, large and small, need to have confidence in the banking system so that we have a strong and stable economy. Everyone who puts their money in a credit union or a bank has a stake in this lawsuit.”

A waiting game

The lawsuit leaves the NCUA in a purgatory of sorts. Should Hauptman make any moves while acting as the sole board member of the NCUA, and the Court rules in favor of Otsuka and Harper, those actions may be null and void. However, should the NCUA wait for the outcome, it will be rendered unable to take action.

Ultimately, the outcome of this case will most likely hinge on the Supreme Court’s ruling, which is set to be decided as soon as early summer, with arguments potentially commencing in May. Until then, any decisions made by the lower courts may be overruled by the Supreme Court’s view on where the limits on executive powers lie.

The lawsuit can be read in full on Bloomberg Law.