Supreme Court Breakfast Table
I am feeling deeply ambivalent about the Court's 5-to-4 decision in Free Enterprise Fund v. Public Company Accounting Oversight Board decision. I cannot quite decide whether it is an important separation-of-powers decision that portends a major doctrinal shift in the court's approach to separation-of-powers issues or a nothing-burger that does not provide any meaningful relief even to the parties that challenged the law. Others seem to share much of my ambivalence. The truth is that both propositions may be true.
Based on today's press coverage of the decision, the latter view seems prevalent. The Washington Post, for example, gave the Free Enterprise decision the fewest column inches of the four decisions handed down yesterday and ran the story under the headline: "Sarbanes-Oxley Act upheld by justices." At one level, that is an odd headline to describe an opinion that found a provision in the Sarbanes-Oxley Act unconstitutional. Yet the headline does reflect the reality that the decision had the potential to strike down the whole act, and the result of the court's decision is far more modest, at least as far as the Sarbanes-Oxley Act is concerned.
There were at least three issues the court had to decide about the board and the act that created it: whether the provisions for removing board members were constitutional, whether the appointment process was valid, and whether any unconstitutional provisions could be severed from the rest of the statute or whether the whole act had to go. You may not know much about the board created to provide greater oversight of the accounting industry, but you may want to investigate. As the court noted, with perhaps a twinge of jealousy given the current state of judicial salaries, board members pull down a tidy $547,000 a year, while the chairman makes $673,000—or just a shade over three times what the chief justice makes. And, importantly, there are vacancies.
In all events, the court found the so-called "double-for-cause" removal provision unconstitutional. The court reasoned that because the president may remove SEC commissioners only for cause (even though the relevant statute is silent about this), and the SEC in turn may only remove board members for cause, the board members are too insulated from presidential control, and the removal provision is unconstitutional. The court then went on to reject the challenge to the appointment process. Finally, the court found that the invalid removal provisions were severable from the remainder of the statute, so the whole act did not fall because of the improper removal provision.
So what is the consequence of an invalid removal provision? Good question. The court made it crystal-clear that it would have no impact going forward, and the court would read the removal provision out of the statute, so henceforth board members would be removable by the SEC for any reason. What about past decisions taken by the board at a time when board members operated with an undue and unconstitutional view of their own independence? On that question, the opinion is less explicit, because the plaintiffs did not challenge any past action of the board. So what did the plaintiffs get for going to the trouble of bringing a case all the way to the Supreme Court? A declaration that the act's removal provision is unconstitutional. It is unclear whether that declaration comes with free steak knives or has any other consequence. It must have some consequence; otherwise, it is not obvious why plaintiffs had standing.
All that would seem to suggest that the decision is much ado about nothing. So where does the ambivalence come in? Well, first off, there is Justice Stephen Breyer's 37-page dissent (joined by Justices John Paul Stevens, Ruth Bader Ginsburg, and Sonia Sotomayor), accompanied by four appendices covering another 35 pages. Clearly, Justice Breyer thought that something more was going on than an inconsequential excising of a removal provision. Second, there is the language of the majority opinion, which embraces a formalistic vision of the separation of powers, where an arrangement that makes sense to both the Congress and the executive does not receive any special deference. Indeed, much of the language in the majority opinion would suggest that even a single for-cause removal provision is an improper intrusion on the president's authority, although the majority was quick to note that any question of the validity of such provisions, which are common throughout the government—and the continued vitality of the decision that upheld them—was not before the court.
The reason this seemingly innocuous decision may yet prove consequential is that if there are five solid votes on the court for a formalist approach to the separation of powers, then the Roberts court will be an aggressive defender of executive power, more aggressive than the executive branch in this particular case. But are there five solid votes for this view of the separation of powers, or just five votes for the narrow result in this case? It is too soon to tell, but there are some clues. It is interesting that Justice Anthony Kennedy did not feel the need to write separately, as he did in the Hastings law school case. When the court announced the gun-free-schools case, Lopez, 15 years ago, it was treated as if it would usher in a new federalism counterrevolution. By the time of the medical-marijuana decision a decade later, most concluded that the counterrevolution had never materialized. But there were hints in the gun-free-school case itself, in the form of concurring opinions emphasizing the narrowness of the holding. When the Apprendi decision came out, it was greeted primarily with a collective yawn, yet there were no concurring opinions, and Apprendi's logic would eventually completely rework criminal sentencing. Is Free Enterprise a Lopez or an Apprendi? Stay tuned.