Julian Helisek · June 2009
77 GEO. WASH. L. REV. 1063 (2009)
Free Enterprise Fund v. Public Co. Accounting Oversight Board, easily one of “the most important separation-of-powers case[s] regarding the President’s appointment and removal powers . . . in the last 20 years,” is off to the Supreme Court.
The case involves a facial challenge to the constitutionality of the Public Company Accounting Oversight Board (“PCAOB” or “Board”), an entity created by the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). In their lawsuit, plaintiffs, Free Enterprise Fund and Beckstead & Watts, LLP (collectively, “the Fund”), allege that the structure of the PCAOB violates the Appointments Clause of the Constitution, separation-of-powers principles, and the nondelegation doctrine. In the district court, the PCAOB successfully moved for summary judgment on all three claims, and a divided panel of the D.C. Circuit affirmed. For now, then, the PCAOB is constitutional. On the Appointments Clause question, PCAOB members are “inferior officers” who need not be appointed by the President, the Securities and Exchange Commission (“SEC”) is within the meaning of “Department” in Article II, and its commissioners constitute a Department “Head.” On the separation-of-powers question, because the President appoints the SEC commissioners, who in turn retain broad oversight authority over the PCAOB, the structure of the Board does not impermissibly restrict the President’s removal power. But given Judge Kavanaugh’s piercing dissent and the 5-4 decision denying rehearing en banc, the Supreme Court’s grant of certiorari likely took few by surprise.
Still, how the Court will react to the majority’s conclusions and Judge Kavanaugh’s arguments is difficult to predict. The majority rejected both the Fund’s separation-of-powers argument and its Appointments Clause argument, as it had to, in order to find the Board constitutional. Judge Kavanaugh, by contrast, concluded that both the separation-of-powers argument and the Appointments Clause arguments had merit. This Essay takes the middle ground by contending that although Judge Kavanaugh probably is correct to find the PCAOB unconstitutional, the fault lies only in the statutory mechanism providing for removal of PCAOB members. That is, the majority got the better of the Appointments Clause argument, but Judge Kavanaugh got the better of the presidential removal power argument. Ultimately, because violating either spells doom for the PCAOB, Judge Kavanaugh’s position likely will prevail when the Supreme Court decides the case.
In Part I this Essay describes briefly the origin of the PCAOB and the statutory scheme that authorizes its creation and sets forth its various functions. Part I then reviews (1) the SEC’s broad authority over the PCAOB and (2) the statutory provisions specifying appointment and removal of PCAOB members. This coverage is needed to analyze the Fund’s Appointments Clause and separation-of-powers arguments.
Part II offers a high-level overview of the relevant Supreme Court precedent addressing (1) the Appointments Clause and (2) the President’s removal power.
Part III takes a close look at the D.C. Circuit’s analysis in Free Enterprise Fund. This Essay agrees with the majority’s decision that the PCAOB does not violate the Appointments Clause. But this Essay agrees with the dissent that the PCAOB impermissibly constrains the President’s removal power and is thus unconstitutional.
Concluding in Part IV, this Essay identifies the potential “fallout” from a finding that the PCAOB is unconstitutional and then muses about how such a finding might facilitate fresh dialogue on the unitary executive theory and the place of independent agencies in our scheme of government.
