Monday, June 28, 2010
The Supreme Court handed down its much-anticipated decision in Free Enterprise Fund v. Public Company Accounting Oversight Board (Download PCAOB Opinion) today and held (5-4) that the dual for-cause limitations on the removal of the Board members contravene the Constitution's separation of powers. However, it also held that the unconstitutional tenure provisions are severable from the remainder of the statute. The Board's existence does not violate the separation of powers; the fix to the unconstitutional removal restrictions is to make the Board members removable by the SEC at will. In addition, the Court found that the Board's appointment is consistent with the Appointments Clause.
Chief Justice Roberts wrote the majority opinion, joined by Justices Scalia, Kennedy, Thomas and Alito. Justice Breyer dissented, joined by Stevens, Ginsberg, and Sotomayor.
Some had forecast that because of the lack of a severability clause in Sarbanes Oxley, the Court might strike down the entire statute. However, the court found nothing in the text or historical context that makes it evident that Congress would have preferred no Board at all to a Board whose members are removable at will.