A modest proposal: Abolishing agency independence in free enterprise fund v. PCAOB

Fordham Law Review

Volumn 79, Issue 6, 2011, Pages 2541-2575

  Rao, Neomi ^a  

^a GEORGE MASON UNIVERSITY   (United States)

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[No Author keywords available]

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EID: 79959947074     PISSN: 0015704X     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (223)

1. 130 S. Ct. 3138 (2010).
2. Pub. L. No. 107-204, 116 Stat. 745.
3. 15 U. S. C. §§ 7211-7215 (2006) (outlining the responsibilities of the Board).
4. Id. § 7211 (e) (6);
5. see also id. § 7217 (d) (3).
6. Free Enter. Fund, 130 S. Ct. at 3147
7. (quoting U. S. CONST, art. II).
8. Id. at 3147.
9. Id. at 3157.
10. Id. at 3151-57.
11. See infra Part II. A.
12. Free Enter. Fund, 130 S. Ct. at 3158-59.
13. See infra Part II. B.
14. Free Enter. Fund, 130 S. Ct. at 3154 n. 4.
15. See infra Part II. C.
16. Free Enter. Fund, 130 S. Ct. at 3161-62.
17. Id. at 3147 ("The parties do not ask us to reexamine any of these precedents, and we do not do so.").
18. See, e.g., Rick Pildes, The Unitary Executive, Administrative Agencies, and the Supreme Court, BALKINIZATION, (May 18, 2009, 10:36 AM), http://alkin. blogspot.com/2009/05/unitary-executive-administrative.html;
19. see infra notes 51-53 and accompanying text.
20. Free Enter. Fund, 130 S. Ct. at 3146 (emphasis added)
21. (citing Humphrey's Executor, 295 U. S. 602, 620(1935);
22. Myers v. United States, 272 U. S. 52 (1926)).
23. 295 U. S. at 628-30 (upholding the constitutionality of statutory limitations on the President's removal power with regard to the Commissioners of the Federal Trade Commission).
24. Id. at 3161.
25. 5 U. S. (1 Cranch) 137 (1803).
26. This Article does not take up the broader questions about the appropriate scope of the removal power, which are discussed in greater detail by other scholars. See generally, Steven G. Calabresi & Saikrishna B. Prakash, The President's Power to Execute the Laws, 104 YALE L. J. 541, 642-45 (1994);
27. Lawrence Lessig & Cass R. Sunstein, The President and the Administration, 94 COLUM. L. REV. 1, 2(1994);
28. Geoffrey P. Miller, Independent Agencies, 1986 SUP. CT. REV. 41, 42-43;
29. Saikrishna Prakash, New Light on the Decision of 1789, 91 CORNELL L. REV. 1021, 1022-23 (2006).
30. See infra Part I.
31. See infra Part II.
32. See infra Part III.
33. 15 U. S. C. § 7212 (a) (2006).
34. Id. § 7213 (a) (1).
35. Id. §§ 7214-7215.
36. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 130 S. Ct. 3138, 3147(2010).
37. 15 U. S. C. §§ 7211 (e) (1), 7217 (b) - (c).
38. Id. § 7211 (e) (6).
39. Free Enter. Fund, 130 S. Ct. at 3158.
40. 15 U. S. C. § 7217 (d) (3).
41. Free Enter. Fund, 130 S. Ct. at 3148-49.
42. For an interesting discussion of this aspect of the case see Gary Lawson, Stipulating the Law, 109 MICH. L. REV. (forthcoming), available at http://ssrn. com/abstract=1677014 (arguing contrary to standard American practice that parties should be able to stipulate legal conclusions).
43. Free Enter. Fund, 130 S. Ct. at 3149.
44. Id. at 3147 ("The parties do not ask us to reexamine any of these precedents, and we do not do so.").
45. *7-8, Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 130 S. Ct. 3138 (2010) (No. 08-861)
46. * 7-8.
47. Id.
48. *8.
49. Id.
50. *6 (D. D. C. Mar. 21, 2007).
51. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 537 F.3d 667, 715 (D. C. Cir. 2008).
52. Id. at 685 (Kavanaugh, J., dissenting).
53. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 130 S. Ct. 3138, 3151(2010).
54. Id. at 3153.
55. Id.
56. Id. at 3161-62.
57. Id. at 3164 (Breyer, J., dissenting).
58. Id. at 3167.
59. Id. at 3184.
60. Id. at 3171.
61. Id. at 3178-80.
62. 487 U. S. 654 (1988).
63. Rick Pildes, The Free Enterprise Decision: A Symbolic Victory for the "Unitary Executive Branch" Vision of the Presidency, but of Limited Practical Consequence, BALKINIZATION (June 28, 2010, 11:47 AM), http://balkin. blogspot.com/2010/06/freeenterprise-decision-symbolic.html.
64. Id.
65. David Zaring, Goodbye, Old PCAOB, and Hello, New PCAOB, THE CONGLOMERATE, http://www.theconglomerate.org/2010/06/goodbye-old-pcaob-and-hellonew-pcaob. html (June 28, 2010).
66. John Elwood, Free Enterprise Fund: The Lopez of Separation of Powers Doctrine, VOLOKH CONSPIRACY (June 28, 2010, 12:31 PM), http://volokh.com/2010/ 06/28/freeenterprise-fund-the-lopez-of-separation-of-powers-doctrine.
67. Stephen M. Bainbridge, The PCAOB Anti-climax, PROFESSORBAINBRIDGE. COM (June 28, 2010, 9:38 AM) http://www.professorbainbridge.com/ professorbainbridgecom/2010/06/the-pcaob-anticlimax.html.
68. Richard H. Pildes, Free Enterprise Fund, Boundary-Enforcing Decisions, and the Unitary Executive Branch Theory of Government Administration, 6 DUKE J. CONST. L. & PUB. POL'Y (forthcoming), available at http://ssrn. com/abstract=1678031.
69. Peter L. Strauss, On the Difficulties of Generalization-PCAOB in the Footsteps of Myers, Humphrey's Executor, Morrison, and Freytag 17, 19 (Colum L. Sch. Pub. L. & Legal Theory Working Paper Grp., Working Paper No. 10-253, 2010), available at http://ssrn. com/abstract=1693143.
70. Id. at 19.
71. Jack Michael Beermann, An Inductive Understanding of Separation of Powers or Why the PCAOB Opinion Doesn't Change Anything Yet 3-4 (Boston Univ. Sch. of L., Working Paper No. 10-24, 2010), available at http://ssm.com/abstract= 1656452.
72. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 130 S. Ct. 3138, 3157(2010) ("The point is not to take issue with for-cause limitations in general; we do not do that. The question here is far more modest.").
73. See infra Part IV. A.
74. Free Enter. Fund, 130 S. Ct. at 3146 (internal quotation marks omitted).
75. U. S. Const, art II, § 1, § 3;
76. Free Enter. Fund, 130 S. Ct. at 3146.
77. Free Enter. Fund, 130 S. Ct. at 3146.
78. Id. at 3151
79. (1 ANNALS OF CONG. 463 (1789) (statement of James Madison)) (internal quotation marks omitted).
80. 272 U. S. 52 (1926).
81. Free Enter. Fund, 130 S. Ct. at 3152
82. (quoting Myers v. United States, 272 U. S. at 164) (internal quotation marks omitted).
83. Id. at 3154.
84. U. S. CONST, art. II, § 3;
85. see also Free Enter. Fund, 130 S. Ct. at 3147 ("The President cannot 'take Care that the Laws be faithfully executed' if he cannot oversee the faithfulness of the officers who execute them.").
86. Free Enter. Fund, 130 S. Ct. at 3154.
87. As the next part of the proof explains, oversight of subordinates requires being able to remove them at will. See infra Part II. B.
88. As the third step of the proof explains, this argument leads the Court to the principle that the removal power cannot be limited by statute. See infra Part II. C.
89. Free Enter. Fund, 130 S. Ct. at 3157
90. (quoting 1 ANNALS OF CONG. 463 (1789)) (internal quotation marks omitted).
91. Id. at 3157
92. (quoting THE FEDERALIST NO. 51 (James Madison)).
93. Id. at 3156.
94. Similarly, in Myers the Court explained that the constitutional structure could not have given Congress or the Senate in case of political or other differences, the means of thwarting the Executive in the exercise of his great powers and in the bearing of his great responsibility, by fastening upon him, as subordinate executive officers, men who by their inefficient service... [or] by their lack of loyalty to the service, or by their different views of policy, might make his taking care that the laws be faithfully executed most difficult or impossible. Myers v. United States, 272 U. S. 52, 131(1926). Myers noted that the President's exercise of his great powers requires subordinates who are efficient, loyal, and share the President's view of policy.
95. Id. The President's responsibilities require that he oversee whether his subordinates meet these and other criteria that he might set out for their service in his Administration.
96. Id.
97. Free Enter. Fund, 130 S. Ct. at 3152.
98. Id. at 3154 (emphasis added)
99. (quoting Clinton v. Jones, 520 U. S. 681, 712-13 (1997) (Breyer, J., concurring)).
100. Free Enter. Fund, 130 S. Ct. at 3156.
101. Id. at 3155.
102. Id.
103. (citing THE FEDERALIST NO. 72 (Alexander Hamilton) (J. Cooke ed., 1961)).
104. Id. at 3155-56.
105. See, e.g., Strauss, supra note 56, at 20 ("[T]he question is not whether [the President] is entitled to command or decide, but what constitutes the constitutionally indispensable elements of his necessary oversight relationship. ").
106. Free Enter. Fund, 130 S. Ct. at 3151-52 (emphasis added)
107. (quoting letter from James Madison to Thomas Jefferson (June 30, 1789), in 16 DOCUMENTARY HISTORY OF THE FIRST FEDERAL CONGRESS 893 (2004)).
108. Id. at 3170 (Breyer, J., dissenting) (evaluating the extent to which the removal provision "as a practical matter" limits the "President's exercise of executive authority").
109. See generally Myers v. United States, 272 U. S. 52, 122(1926) (explaining in great historical detail why the removal power necessarily follows from the President's control of the executive branch).
110. Free Enter. Fund, 130 S. Ct. at 3157.
111. Id. at 3164.
112. Myers drew this connection between faithful execution of the laws and the power to appoint and remove executive officers. As Chief Justice William Howard Taft explained, The power of removal is incident to the power of appointment, not to the power of advising and consenting to appointment, and when the grant of the executive power is enforced by the express mandate to take care that the laws be faithfully executed, it emphasizes the necessity for including within the executive power as conferred the exclusive power of removal. Myers, 272 U. S. at 122.
113. Free Enter. Fund, 130 S. Ct. at 3174 (Breyer, J. dissenting).
114. Id. at 3172.
115. Id. at 3173 (citing statutory provisions).
116. Id.
117. Id. at 3172.
118. Id. at 3158 (majority opinion).
119. Id. at 3158-59.
120. Id. at 3159 ("[T]he Act nowhere gives the Commission effective power to start, stop, or alter individual Board investigations, executive activities typically carried out by officials within the Executive Branch.").
121. Id. at 3161.
122. Id.
123. See id. at 3167 (Breyer, J., dissenting) ("[T]he question presented lies at the intersection of two sets of conflicting, broadly framed constitutional principles. And no text, no history, perhaps no precedent provides any clear answer.");
124. Morrison v. Olson, 487 U. S. 654, 697(1988) (Scalia, J., dissenting).
125. See Humphrey's Executor v. United States, 295 U. S. 602, 631-32 (1935).
126. See Morrison, 487 U. S. at 672;
127. United States v. Perkins, 116 U. S. 483, 485(1886).
128. The parties stipulated that SEC members could be removed only for cause, and they did not challenge the validity of Humphrey's Executor. Free Enter. Fund, 130 S. Ct. at 3148.
129. Id. at 3156
130. (quoting 1 ANNALS OF CONG, at 463 (1789) (statement of James Madison)).
131. Id. at 3157.
132. Id. at 3154 n. 4.
133. Cf. United States v. Carolene Prods. Co., 304 U. S. 144, 152 n. 4 (1938);
134. J. M. Balkin, The Footnote, 83 NW. U. L. REV. 275, 281(1989) ("When constitutional scholars talk about the 'problem of the footnote', they are referring to a specific footnote, the Footnote, footnote four of United States v. Carolene Products.... Here indeed is a footnote that has become more important than the text; that is often read separated from its text; that can stand alone.").
135. Free Enter. Fund, 130 S. Ct. at 3154 n. 4.
136. Id.
137. Id. at 3162.
138. Id. at 3164.
139. Id. at 3157 (citation omitted).
140. Id. at 3164.
141. Id. at 3155.
142. Id. at 3154.
143. Justice Breyer identifies this central aspect of the majority's opinion. Id. at 3171 (Breyer, J., dissenting).
144. Id. at 3148 (majority opinion)
145. (quoting Humphrey's Executor v. United States, 295 U. S. 602, 620(1935)) (internal quotation marks omitted).
146. Id. at 3147.
147. Cf. United States v. Lopez, 514 U. S. 549 (1995) (holding that the Gun Free School Zone Act of 1990 exceeds Congress's Commerce Clause authority, but reaffirming farreaching Commerce Clause precedents such as Wickard v. Filburn).
148. Free Enter. Fund, 130 S. Ct. at 3146 ("Since 1789, the Constitution has been understood to empower the President to keep [executive] officers accountable-by removing them from office, if necessary. This Court has determined, however, that this authority is not without limit.") (emphasis added)
149. (citing Myers v. United States, 272 U. S. 52 (1926)).
150. See infra Part IV. A.
151. Free Enter. Fund, 130 S. Ct. at 3154 (emphasis added).
152. Id.
153. See supra notes 56-58 and accompanying text.
154. Free Enter. Fund, 130 S. Ct. at 3153 ("[The] decision [regarding the Board's removal] is vested instead in other tenured officers-the Commissioners-none of whom is subject to the President's direct control.").
155. Id. at 3154.
156. Id.
157. Id. at 3164.
158. 487 U. S. 654, 692(1988) (upholding for-cause restrictions on the Attorney General's ability to remove the independent counsel because "the Executive, through the Attorney General, retains ample authority to assure that the counsel is competently performing his or her statutory responsibilities in a manner that comports with the provisions of the Act").
159. Free Enter. Fund, 130 S. Ct. at 3154-55.
160. Id. at 3154.
161. Id. at 3173 (Breyer, J., dissenting).
162. Id. at 3154 (majority opinion);
163. see also id. at 3158-59 (describing the statutory scheme and explaining the absence of meaningful control by the Commissioners).
164. Id. at 3154.
165. Justice Breyer again does not let the Court sidestep the central inquiry. The majority identifies as the central problem the fact that the decision to remove Board members is vested in Commissioners, "none of whom is subject to the President's direct control."
166. Id. at 3171 (Breyer, J., dissenting). Breyer explains that "nullifying the Commission's power to remove Board members only for cause will not resolve the problem the Court has identified: The President will still be 'powerless to intervene' by removing the Board members if the Commission reasonably decides not to do so."
167. Id.
168. Id. at 3154 n. 4 (majority opinion).
169. Id.
170. Id. at 3171 (Breyer, J., dissenting).
171. Id. at 3170-71 (explaining how the decision may increase or decrease the President's control depending on the circumstances).
172. This raises the question of what "good cause" might require. The Court states that neither its precedents nor the Government suggested that disagreement with policies or priorities would be good cause for removal.
173. See id. at 3157 (majority opinion).
174. For a helpful discussion of reading "good cause" in light of constitutional concerns, see John F. Manning, The Independent Counsel Statute: Reading "Good Cause" in Light of Article II, 83 MINN. L. REV. 1285 (1999).
175. Free Enter. Fund, 130 S. Ct. at 3171 (Breyer, J., dissenting).
176. Id. at 3154 (majority opinion).
177. Id. at 3161.
178. Id. ("Concluding that the removal restrictions are invalid leaves the Board removable by the Commission at will, and leaves the President separated from Board members by only a single level of good-cause tenure. The Commission is then fully responsible for the Board's actions, which are no less subject than the Commission's own functions to Presidential oversight.").
179. Id. (explaining that severance allows the Court to "limit the solution to the problem").
180. See Miller, supra note 18, at 44-45 (arguing that "Congress may not constitutionally restrict the President's power to remove officials who fail to obey... presidential instructions" but explaining that this principle could be implemented through interpretation and severance of offending provisions without "wholesale invalidation of federal statutes").
181. Free Enter. Fund, 130 S. Ct. at 3161.
182. Strauss, supra note 56, at 19.
183. Beermann, supra note 58, at 4.
184. Free Enter. Fund, 130 S. Ct. at 3147.
185. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 537 F.3d 667, 688 (D. C. Cir. 2008) (Kavanaugh, J., dissenting).
186. Id.
187. See generally Gary Lawson, The "Principal" Reason Why the PCAOB is Unconstitutional, 62 VAND. L. REV. EN BANC 73 (2009), http://www. vanderbiltlawreview.org/articles/2009/11/Lawson-62-Vand-L-Rev-En-Banc-73.pdf.
188. See, e.g., Edmond v. United States, 520 U. S. 651, 664(1997) (discussing the specific duties of the Coast Guard Court of Criminal Appeals judges and their supervision by and accountability to other executive officers before concluding that the judges are "inferior officers");
189. Morrison v. Olson, 487 U. S. 654, 671(1988) (citing a number of factors for determining whether an officer is an inferior one but noting that "[t]he line between 'inferior' and 'principal' officers is one that is far from clear, and the Framers provided little guidance into where it should be drawn").
190. *56.
191. Petitioners also argued that even if the SEC were considered a Department, the full Commission cannot appoint Board members because only the Chairman is the "Head."
192. *60. They explained that '"Heads of Departments' does not connote a committee of equals" because a "Head" was understood at the time of the founding to be a principal or leader and the "Head" of the SEC is its Chairman.
193. Id. Accordingly, the statutory provision that vests appointment of the Board with the Commission is unconstitutional.
194. See id. Such a holding would be of limited long-term consequence largely for the same reasons as discussed with regard to petitioners' other claims.
195. See supra notes 52-55.
196. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 130 S. Ct. 3138, 3146(2010) (emphasis added)
197. (citing Myers v. United States, 272 U. S. 52 (1926)).
198. Id.
199. Id. at 3147.
200. Id. at 3161.
201. As Justice Breyer notes, The Court then, by assumption, reads into the statute books a 'for cause removal' phrase that does not appear in the relevant statute and which Congress probably did not intend to write. And it does so in order to strike down, not to uphold, another statute. This is not a statutory construction that seeks to avoid a constitutional question, but its opposite.
202. Id. at 3184 (Breyer, J., dissenting).
203. Id. at 3161.
204. *52 n. 20
205. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 130 S. Ct. 3138 (2010) (No. 08-861)
206. WL 3290435.
207. Free Enter. Fund, 130 S. Ct. at 3161.
208. Id. at 3161-62 (citation omitted) (internal quotation marks omitted).
209. Id. at 3161 (citation omitted). With regard to other separation-of-powers decisions, however, the Court sometimes has refused to sever an unconstitutional provision. For example, in Bowsher v. Synar, the Court determined that the Comptroller General, an officer removable by Congress, could not exercise executive powers, but that "striking the removal provisions would lead to a statute that Congress would probably have refused to adopt."
210. U. S. 714, 734-35 (1986).
211. See INS v. Chadha, 462 U. S. 919, 933-35 (1983) (discussing the severability of the one-house legislative veto held to be unconstitutional and relying on the statutory severability provisions as well as the legislative history to conclude that the presumption in favor of severability was not rebutted).
212. Free Enter. Fund, 130 S. Ct. at 3182 (Breyer, J., dissenting).
213. See id. at 3182-84 (arguing that the majority simply assumes that SEC Commissioners are removable "for cause" even though the statute is silent on this point and the SEC statute was enacted between Myers and Humphrey's Executor when such for-cause removal provisions were thought to be unconstitutional).
214. See Miller, supra note 18, at 86 (arguing that statutes creating the independent agencies may be saved through interpretation).
215. Humphrey's Executor v. United States, 295 U. S. 602, 610-11 (1935).
216. Id. at 611.
217. *51 n. 19.
218. Free Enter. Fund, 130 S. Ct. at 3158 n. 7.
219. See, e.g., 12 U. S. C. § 242 (2006) (providing that members of the Federal Reserve Board "shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President").
220. Compare 15 U. S. C. § 41 (2006) (providing for the Federal Trade Commission that "[a]ny Commissioner may be removed by the President for inefficiency, neglect of duty, or malfeasance in office")
221. with 42 U. S. C. § 7171 (b) (1) (2006) (providing for the Federal Energy Regulatory Commission that members "may be removed by the President only for inefficiency, neglect of duty, or malfeasance in office") (emphasis added).
222. See Miller, supra note 18, at 86-87.
223. One can, however, imagine some possibilities. Threatened by the expansion of presidential authority over these agencies, Congress might seek to restructure the duties or obligations of the independent agencies-it could reduce their authority and power, but rolling back the administrative state may prove politically and practically difficult. More plausibly, Congress might try to redirect control over these agencies through appropriations and the exercise of its oversight authority.