“This case is about the rule of law and the independence of federal regulators,” Harper said in a previous interview. “The NCUA is designed to be shielded from political interference, and this action undermines that foundation.”

The Department of Justice, representing the defendants, has countered that the president has broad authority to remove appointed officials, citing Supreme Court precedent and challenging the plaintiffs’ interpretation of tenure protections.

Adding to the legal complexity of Thursday’s hearing, an amicus brief filed this week by Jeffrey Moats, an NCUA enforcement target currently suing the agency, argued that Harper himself previously acknowledged in court filings that board members are removable at will. Moats, represented by the Pacific Legal Foundation, highlighted what he calls a “direct contradiction” between Harper’s position in his own lawsuit and his current legal argument in this case. Moats’ brief further contended that any statutory protections from removal would be unconstitutional under Supreme Court precedent.

The NCUA fired Moats from the $93.9 million Edinburg Teachers Credit Union in Edinburg, Texas after it was conserved in 2021. Two years later, the federal agency issued a four-count notice of charges with the U.S. Office of Financial Institution Adjudication (OFIA), accusing the former CEO of legal violations and fiduciary breaches that allegedly caused more $4 million in losses to credit union. The OFIA is an interagency group of administrative law judges based in Arlington, Va.

Moats is challenging the constitutionality of the NCUA’s enforcement framework under Section 1786 of the Federal Credit Union Act.
After a Texas district court dismissed his suit last year, ruling it lacked jurisdiction, Moats appealed. He argued that Section 1786 does not bar federal district courts from hearing constitutional claims, especially under 28 U.S. Code § 1331, which provides jurisdiction over civil rights issues.

Moats cited the U.S. Supreme Court’s 2023 decision in Axon v. FTC, which allowed similar constitutional challenges to bypass agency review.

The NCUA countered that Section 1786 contains an explicit jurisdictional bar that “no court shall have jurisdiction” and that constitutional challenges can only be reviewed after agency proceedings conclude. The agency also pointed to prior precedent, including MCorp v. Federal Reserve, to defend the statute’s limits on judicial intervention.

The outcome in the case involving Harper and Otsuka could carry major implications for the credit union industry and for federal agency leadership norms. If the court sides with Harper and Otsuka, it could create uncertainty around the legality of actions taken by the current NCUA Board. If the court upholds the dismissals, it may set a precedent reinforcing executive power to reshape independent agencies at will.

Judge Amir H. Ali will preside over the hearing, and a ruling could be announced soon.