Free Enterprise Fund v. PCAOB Opinion Analysis: PCAOB Removal Process Unconstitutional

In another 5-4 and lengthy decision today,  the Court declared unconstitutional the formation of the Public Company Accounting Oversight Board (PCAOB)  created as part of the Sarbanes-Oxley Act of 2002.

As we previously noted in discussing the oral arguments here, the central question in the case is whether the PCAOB violates separation of powers and the Appointments Clause--whether its members are subject to sufficient presidential control, and, in any event, whether they were properly appointed as principal or inferior officers.  Indeed, the PCAOB case pushes the outer edge of what Congress can authorize without intruding on the executive.

The Court held that this "outer limit" had been exceeded.  Roberts, writing for the Court, concluded that combining protections for from removing members of the PCAOB is

contrary to Article II’s vesting of the executive power in the President. The President cannot “take Care that the Laws be faithfully executed” if he cannot oversee the faithfulness of the officers who execute them.  Here the President cannot remove an officer who enjoys more than one level of good-cause protection, even if the President determines that the officer is neglecting his duties or discharging them improperly. That judgment is instead
committed to another officer, who may or may not agree with the President’s determination, and whom the Presi­dent cannot remove simply because that officer disagrees with him. This contravenes the President’s “constitutional obligation to ensure the faithful execution of the laws.”

(Opinion at 2).  This certainly reflected his concerns in oral argument, as we said, "Chief Justice Roberts at one point seemed to endorse the petitioners' theory of "double for cause" removal, calling it "'for cause' squared," while still navigating bedrock cases that uphold independent institutions."

Of great interest should be the Appendices to Breyer's 37 page dissent, which are almost as long as the dissenting opinion itself which Breyer read from the bench.  These appendices constitute a cartography of the present federal administrative state, specifically focusing on "double" for cause removals of inferior officers.  These support the conclusion of Breyer - - - joined by Stevens, Ginsburg, and Sotomayor - - - that "vast numbers of statutes governing vast numbers of subjects, concerned with vast numbers of different problems, provide for, or foresee, their execution or administration through the work of administrators organized within many different kinds of administrative structures, exercising different kinds of administrative authority, to achieve their legislatively mandated objectives."  Breyer therefore advocated for a "functional approach" as "required" by precedent, recognizing

the various ways presidential power operates within this context—and the various ways in which a removal provision might affect that power.  As human beings have known ever since Ulysses tied himself to the mast so as safely to hear the Sirens’ song, sometimes it is necessary to disable oneself in order to achieve a broader objective.

(Dissenting Opinion at 9).

Justice Roberts for the Court has an answer:

No one doubts Congress’s power to create a vast and varied federal bureaucracy. But where, in all this, is the role for oversight by an elected President?  The Constitu­tion requires that a President chosen by the entire Nation oversee the execution of the laws.  And the “‘fact that a given law or procedure is efficient, convenient, and useful in facilitating functions of government, standing alone, will not save it if it is contrary to the Constitution,’” for “‘[c]onvenience and efficiency are not the primary objec­tives—or the hallmarks—of democratic government.’” 

(Opinion at 18 [citing Bowsher v. Synar]).  The Court briefly discusses and rejects the other challenges to PCAOB.  Roberts concludes with a citation to The Federalist Papers:

The Constitution that makes the President accountable to the people for executing the laws also gives him the power to do so.  That power includes, as a general matter, the authority to remove those who assist him in carrying out his duties.  Without such power, the President could not be held fully accountable for discharging his own responsibilities; the buck would stop somewhere else.  Such diffusion of authority “would greatly diminish the intended and necessary responsibility of the chief magis­trate himself.” The Federalist No. 70, at 478.

While we have sustained in certain cases limits on the President’s removal power, the Act before us imposes a new type of restriction—two levels of protection from removal for those who nonetheless exercise significant executive power. Congress cannot limit the President’s authority in this way.

(Opinion at 33). 

RR