Free Enterprise Fund v. Public Co. Accounting Oversight Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 15, 2008 Decided August 22, 2008

No. 07-5127

FREE ENTERPRISE FUND AND BECKSTEAD AND WATTS, LLP,

APPELLANTS

v.

PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 06cv00217)

Michael A. Carvin argued the cause for appellants. With

him on the briefs were Viet D. Dinh, Sam Kazman, Hans F.

Bader, Christian G. Vergonis, and Kenneth W. Starr.

Elizabeth Gallaway and William P. Pendley were on the

brief for amicus curiae Mountain States Legal Foundation.

Daniel J. Popeo, Paul D. Kamenar, Helgi C. Walker, and

Thomas R. McCarthy were on the brief for amicus curiae

Washington Legal Foundation in support of appellants.

Jeffrey A. Lamken argued the cause for appellees Public

Company Accounting Oversight Board, et al. With him on the

2

brief were Joe Robert Caldwell Jr. and James R. Doty.

Mark B. Stern, Attorney, U.S. Department of Justice, argued

the cause for appellee United States of America. With him on

the brief were Jeffrey S. Bucholtz, Acting Assistant Attorney

General, Jeffrey A. Taylor, U.S. Attorney, Mark R. Freeman,

Attorney, Brian G. Cartwright, General Counsel, Securities &

Exchange Commission, Andrew N. Vollmer, Deputy General

Counsel, Jacob H. Stillman, Solicitor, and John W. Avery,

Special Counsel. Robert J. Katerberg, Attorney, U.S.

Department of Justice, and R. Craig Lawrence, Assistant U.S.

Attorney, entered appearances.

Richard H. Pildes was on the brief for amici curiae G.

Bradford Cook, et al.

Ira M. Millstein, Gregory S. Coleman, and Christian J.

Ward were on the brief for amicus curiae Council of

Institutional Investors in support of appellees.

Before: ROGERS, BROWN and KAVANAUGH, Circuit Judges.

Opinion for the court by Circuit Judge ROGERS.

Dissenting opinion by Circuit Judge KAVANAUGH.

ROGERS, Circuit Judge: In this facial challenge, appellants

contend that Title I of the Sarbanes-Oxley Act of 2002 (“the

Act”), 15 U.S.C. §§ 7211-19, violates the Appointments Clause

of the Constitution and separation of powers because it does not

permit adequate Presidential control of the Public Company

Accounting Oversight Board (“the Board”). Congress,

however, made the Board’s exercise of its duties subject to the

comprehensive control of the Securities and Exchange

Commission (“the Commission”). Under the Act, the

3

Commission is empowered to set Board rules and procedures,

to overturn any sanction proposed by the Board, and to limit or

relieve the Board of its powers, id. §§ 7217(b)(2), (b)(5), (c)(3),

(d)(1), (2); the Commission also may remove members of the

Board for cause, id. § 7211(e)(6). Members of the Commission,

in turn, are appointed by the President with the advice and

consent of the Senate and subject to removal by the President

for cause; its chairman is selected by and serves at the pleasure

of the President. In appellants’ view this statutory scheme vests

Board members “with far reaching executive power while

completely stripping the President of the authority to appoint or

remove those members or otherwise supervise or control their

exercise of that power.” Appellants’ Br. at 1. But their facial

challenge ignores the entirety of the statutory scheme and runs

afoul of the Supreme Court’s instruction regarding the nature of

the President’s constitutional relationship with independent

administrative agencies. Supreme Court precedent as we have

it does not support appellants’ singular focus on removal

powers as the be-all and end-all of Executive authority, but

rather compels a more nuanced approach that examines the

myriad means of Executive control.

We hold, first, that the Act does not encroach upon the

Appointment power because, in view of the Commission’s

comprehensive control of the Board, Board members are subject

to direction and supervision of the Commission and thus are

inferior officers not required to be appointed by the President.

Second, we hold that the for-cause limitations on the

Commission’s power to remove Board members and the

President’s power to remove Commissioners do not strip the

President of sufficient power to influence the Board and thus do

not contravene separation of powers, as that principle embraces

independent agencies like the Commission and their exercise of

broad authority over their subordinates. Accordingly, we affirm

the grant of summary judgment to the Board and the United

4

States.

I.

Following the Enron and Worldcom accounting scandals

that exposed serious weaknesses in industry self-regulatory

reporting requirements for certain publicly held companies,

Congress enacted the Sarbanes-Oxley Act of 2002, 15 U.S.C. §§

7201 et seq.1 Title I of the Act established the Board “to

oversee the audit of public companies that are subject to the

securities laws . . . in order to protect the interests of investors

and further the public interest in the preparation of informative,

accurate, and independent audit reports.” 15 U.S.C. § 7211(a).

The five members of the Board are appointed by the

Commission after consultation with the Chairman of the Board

of Governors of the Federal Reserve and the Secretary of the

Treasury. Id. § 7211(e)(4)(A). The Act empowers the Board ,

subject to the oversight of the Commission, to, among other

things, register public accounting firms, establish auditing and

ethics standards, conduct inspections and investigations of

registered firms, impose sanctions, and set its own budget,

which is funded by annual fees. Id. §§ 7211(c), 7219(c), (d).

The Commission’s authority over the Board is explicit and

comprehensive. Id. §§ 7217, 7218. Indeed, it is extraordinary.

The Board could commence operations only upon the

Commission’s determination that it was properly organized and

had appropriate rules and procedures in place, id. § 7211(d), and

“[n]o rule of the Board shall become effective without prior

approval of the Commission,” id. § 7217(b)(2). The

Commission is empowered to “abrogate, add to, and delete

from” the Board’s rules “to assure the fair administration of the

1

See S. REP. No. 107-205, at 2 (2002); H. R. REP. No. 107-

414, at 18-19 (2002).

5

[Board], conform the rules promulgated by that Board to the

requirements of title I of the [Act], or otherwise further

purposes of that Act, the securities laws, and the rules and

regulations thereunder applicable to that Board.” Id. §§

7217(b)(5), 78s(c). In addition to these ex ante controls, all

Board adjudications are subject to the Commission’s de novo

review, id. § 7217(c)(2); Nat’l Ass’n of Sec. Dealers, Inc. v.

SEC, 431 F.3d 803, 804 (D.C. Cir. 2005) (“NASD”), upon an

immediate stay when an application for review is filed or sua

sponte by the Commission, 15 U.S.C. §§

7215(e)(1), 7217(c)(2)(A). The Commission is empowered to

“enhance, modify, cancel, reduce, or require the remission of a

sanction imposed by the Board.” Id. § 7217(c)(3). The

Commission alone determines whether the Board may “sue and

be sued” in any court. Id. § 7211(f)(1). A member of the Board

may be censured or removed from office “for good cause

shown,” id. § 7211(e)(6), upon a finding by the Commission,

after notice and opportunity for a hearing, that the member

willfully violated the Act or abused authority, or failed to

enforce compliance with a rule or standard without reasonable

justification, id. § 7217(d)(3). The Commission is further

empowered, by rule, to relieve the Board, consistent with the

public interest, of any enforcement authority whatsoever, id. §

7217(d)(1), as well as, by order, to censure the Board and, after

notice and opportunity for a hearing, to “impose limitations

upon the activities, functions, and operations of the Board”

upon finding that the Board has failed to abide by its statutory

duties, id. § 7217(d)(2).

This facial challenge to the Act is brought by the Free

Enterprise Fund, a non-profit public interest organization that

“promotes economic growth, lower taxes, and limited

government.” Compl. ¶ 11. It is joined by one of its members,

Beckstead and Watts, LLP (“B&W”), a Nevada accounting firm

that is registered with the Board and is subject to an ongoing

6

formal investigation that was commenced in 2005. Id. ¶ 79. On

February 7, 2006, the Free Enterprise Fund and B&W

(collectively “the Fund”) filed a complaint alleging that the

creation of the Board violated the Appointments Clause,

separation of powers, and non-delegation principles. The Fund

sought declaratory and injunctive relief prohibiting the Board

from carrying out its duties, including taking “any further

action” against B&W. The United States intervened to defend

the constitutionality of the Act. The district court denied the

Board’s motion to dismiss the complaint for lack of jurisdiction

and granted the motions for summary judgment of the Board

and the United States.

The Fund appeals, and our review is de novo. See Simpson

v. Socialist People’s Libyan Arab Jamahiriya, 470 F.3d 356,

359 (D.C. Cir. 2006); Wilson v. Pena, 79 F.3d 154, 160 n.1

(D.C. Cir. 1996). To succeed in its facial challenge to Title I of

the Act under the Appointments Clause and separation of

powers,2 the Fund bears a heavy burden to show that the

provisions of which it complains are unduly severe in all

circumstances and cannot be constitutionally applied. See

Wash. State Grange v. Wash. State Republican Party, 128 S. Ct.

1184, 1190 (2008) (citing United States v. Salerno, 481 U.S.

739, 745 (1987)).

II.

The Board and the United States contend, as a threshold

matter, that the district court lacked jurisdiction because the

Fund failed to exhaust the Act’s statutory review procedures.

The Act permits a person “aggrieved by a final order of the

Commission” or a person “adversely affected by a rule of the

2

The Fund does not pursue its non-delegation claim on

appeal.

7

Commission” to obtain review in the court of appeals. 15

U.S.C. § 78y(a)(1), (b)(1) (emphasis added). The Act further

provides that “[n]o objection to an order or rule of the

Commission, for which review is sought under this section, may

be considered by the court unless it was urged before the

Commission or there was reasonable ground for failure to do

so.” Id. § 78y(c)(1) (emphasis added). The Fund did not pursue

administrative remedies before filing its complaint.

As a matter of statutory text, the administrative procedures

available under the Act are confined to challenges to an “order”

or a “rule” of the Board. See, e.g., Nat’l Mining Ass’n v. Dep’t

of Labor, 292 F.3d 849, 856 (D.C. Cir. 2002); Gen. Elec. Co. v.

EPA, 360 F.3d 188, 191 (D.C. Cir. 2004). The Fund’s facial

challenge, by contrast, advances a “broad-scale attack,” Nat’l

Mining, 292 F.3d at 856, to the Act itself that is not “of the type

Congress intended to be reviewed within this statutory

structure,” Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 212

(1994). In Thunder Basin, the Supreme Court acknowledged

that the district court retains jurisdiction over claims

“considered ‘wholly collateral’ to a statute’s review provisions

and outside the agency’s expertise.” 510 U.S. at 212 (quoting

Heckler v. Ringer, 466 U.S. 602, 618 (1984)).

Jurisdiction over the Fund’s complaint is consistent with

the distinction drawn by this court in Time Warner

Entertainment Co. v. FCC, 93 F.3d 957 (D.C. Cir. 1996), which

held that the district court has “general federal question

jurisdiction to consider a facial challenge to a statute’s

constitutionality so long as that challenge is not raised in a suit

challenging the validity of agency action taken pursuant to the

challenged statute or in a suit that is collateral to one

challenging the validity of such agency action,” id. at 965.

Because the complaint presents a “facial, or systemic”

challenge, and not an “as-applied, or particularized challenge[],”

8

Gen. Elec., 360 F.3d at 192 (internal quotation marks omitted),

and does not attempt to bootstrap other claims regarding a

Board order or rule, see First Jersey Sec., Inc. v. Bergen, 605

F.2d 690, 695 (3d Cir. 1979), the Fund’s lawsuit is not properly

viewed as a circumvention of the Act’s review procedures. In

contrast with American Coalition for Competitive Trade v.

Clinton, 128 F.3d 761 (D.C. Cir. 1997), where the statute

granted the court of appeals exclusive jurisdiction over all

constitutional attacks on the statute upon compliance with

exhaustion requirements, see id. at 765, the Act contains no

similar provision as would indicate that Congress intended the

review scheme to be exclusive.

Therefore, because the Fund’s constitutional challenges to

the Act are collateral to the Act’s administrative review scheme,

the exhaustion doctrine does not apply, and we hold that the

district court had subject matter jurisdiction over the complaint

and properly denied the motion to dismiss.

III.

The Appointments Clause provides:

[The President] shall . . . nominate, and by and with

the Advice and Consent of the Senate, shall appoint

Ambassadors, other public Ministers and Consuls,

Judges of the supreme Court, and all other Officers of

the United States, whose Appointments are not herein

otherwise provided for, and which shall be established

by Law: but the Congress may by Law vest the

Appointment of such inferior Officers, as they think

proper, in the President alone, in the Courts of Law, or

in the Heads of Departments.

U.S. CONST. art. II, § 2, cl. 2.

9

The plain text of the Appointments Clause thus

contemplates that Congress may lodge the appointment power

of inferior officers in entities other than the President. The

Fund contends, however, that the absence of day-to-day

supervision of the Board by the Commission and the for-cause

limitation on the Commission’s power to remove Board

members means that Board members are not inferior officers

and therefore must be appointed by the President.

Alternatively, the Fund contends that even if Board members

are inferior officers, they cannot be appointed by the

Commission because the Commission is not a “Department[]”

and the Commissioners are not its “Head[].”

A.

“Generally speaking, the term ‘inferior officer’ connotes a

relationship with some higher ranking officer or officers below

the President: Whether one is an ‘inferior’ officer depends on

whether he has a superior.” Edmond v. United States, 520 U.S.

651, 662 (1997). Under this standard, the Board is composed of

officers inferior to the Commission. The Commissioners, who

serve staggered five-year terms, are “appointed by Presidential

nomination with the advice and consent of the Senate,” id. at

663, and they exercise comprehensive control over Board

procedures and decisions and Board members. For instance, the

Commission approves all Board rules, 15 U.S.C. §§ 7211(g),

7217(b)(2), and may abrogate, delete, or add to them, id. §

7217(b)(5). All Board sanctions are subject to plenary review

by the Commission, id. § 7217(c)(2); NASD, 431 F.3d at 804,

and the Commission “may enhance, modify, cancel, reduce, or

require the remission of a sanction imposed by the Board,” id.

§ 7217(c)(3). As such, the Board’s disciplinary authority

“ultimately belongs to the [Commission], and the legal views of

the [Board] must yield to the Commission’s view of the law,”

NASD, 431 F.3d at 806; see also Gold v. SEC, 48 F.3d 987, 990

(7th Cir. 1995); Shultz v. SEC, 614 F.2d 561, 568 (7th Cir.

10

1980). The Commission both appoints and removes Board

members, id. §§ 7211(e)(4)(A), (e)(6). It also may impose

limitations upon Board activities, id. § 7217(d)(2), and relieve

the Board of its enforcement authority altogether, id. §

7217(d)(1).

Consequently, the Board’s work is necessarily “directed

and supervised at some level” by the Commission, Edmond, 520

U.S. at 663. Notably for purposes of this facial challenge, the

Act subjects Board members to greater supervision than the

Coast Guard judges in Edmond, whom the Supreme Court held

to be inferior officers even though supervision of the judges was

fractured between two different bodies, id. at 664, and their

decisions were not subject to de novo review, id. at 665.

Contrary to the Fund’s suggestion, the fact that the Board is

charged with exercising extensive authority on behalf of the

United States does not mean that Board members must be

appointed by the President, for principal as well as inferior

officers, by definition, “‘exercis[e] significant authority

pursuant to the laws of the United States,’” Freytag v. CIR, 501

U.S. 868, 881 (1991) (quoting Buckley v. Valeo, 424 U.S. 1, 126

(1976)); see also Edmond, 520 U.S. at 662. Instead, what is key

under the Edmond analysis is the fact that Board members

“have no power to render a final decision on behalf of the

United States unless permitted to do so by other Executive

officers,” Edmond, 520 U.S. at 665. The Act vests a broad

range of duties in the Board, 15 U.S.C. § 7211(c), but its

exercise of those duties is subject to check by the Commission

at every significant step.

Board members are also subject to greater oversight than

the Independent Counsel in Morrison v. Olson, 487 U.S. 654,

662 (1988). Whereas the Act specifies that every decision of

the Board is “subject to action by the Commission,” 15 U.S.C.

§ 7211(c), the Ethics in Government Act vested the Independent

11

Counsel with “full power and independent authority to exercise

all investigative and prosecutorial functions and powers of the

Department of Justice,” 28 U.S.C. § 594(a). Still the Supreme

Court adjudged that the Independent Counsel was an inferior

officer. Morrison, 487 U.S. at 671. The Board’s ability to act

independently is dwarfed by the “independent discretion [of the

Independent Counsel] to exercise the powers delegated to her

under the [Ethics in Government] Act,” Morrison, 487 U.S. at

671.3

The Fund is incorrect in suggesting that the Commission’s

review authority of Board rules and regulations is “severely

circumscribed,” Appellants’ Br. at 34. The Act provides that

the Commission “shall approve a proposed rule, if it finds that

the rule is consistent with the requirements of this Act and the

securities laws, or is necessary or appropriate in the public

interest or for the protection of investors.” 15 U.S.C. §

7217(b)(3). This provision does not, as the Fund offers,

establish a deferential, Chevron-like review but reflects an

intent to require the Commission itself to determine whether

Board rules are consistent with the statutes and the public

interest. Given the Commission’s several statutory

3

Morrison presents a significant obstacle to our dissenting

colleague’s proposed test for inferior officer status, Dis. Op. at 45-46,

because the Independent Counsel had broad final decision-making

authority unchecked by any other Executive officer. The dissent’s

attempt to limit Morrison to situations in which the office is

temporary, id. at 45 n.17, ignores the fact that the Supreme Court has

rejected the interpretation of Morrison as a bright-line test, see

Edmond, 520 U.S. at 661. But even assuming that the temporariness

of the position was the linchpin in view of the Independent Counsel’s

extraordinarily broad powers, the Supreme Court has never suggested

that Morrison has no relevance to the inferior officer analysis for

offices that, while not temporary, possess powers that are significantly

more constrained. Inconvenient precedent is not so easily disposed of.

12

responsibilities, the Fund’s approach would sanction flouting

one statutory goal in service of another, an untenable

interpretation of congressional intent where the goals can be

reconciled. Cf. Richards v. United States, 369 U.S. 1, 11

(1962). Moreover, in Edmond the Supreme Court held that the

“limitation upon review does not . . . render the judges of the

Court of Criminal Appeals principal officers.” 520 U.S. at 665.

The Fund ignores that the Commission’s regulatory control does

not end with its review of Board rules. The Act empowers the

Commission to abrogate or amend Board rules “to assure the

fair administration of the [Board], conform the rules

promulgated by that Board to the requirements of title I of the

[Act], or otherwise further the purposes of that Act, the

securities laws, and the rules and regulations thereunder

applicable to that Board.” 15 U.S.C. § 7217(b)(5). The

Commission itself is also empowered to promulgate rules in

furtherance of the Act. Id. § 7202(a). These powers are

inimical to Chevron-like deference.

To the extent the Fund suggests that the for-cause

limitation on the Commission’s removal power requires Board

members to be deemed principal officers, it overinflates the

importance of removal authority. Recognizing that “[t]he

power to remove officers . . . is a powerful tool for control,”

Edmond 520 U.S. at 664, the Supreme Court has indicated that

courts should consider removal authority as one factor in

determining whether an official is an inferior officer, id. at 666.4

4

Our dissenting colleague’s reading of Edmond to mean that

at-will removal authority is “the key initial question,” Dis. Op. at 42,

is curious in light of the Supreme Court’s cursory consideration of this

factor in determining that the Coast Guard judges were inferior

officers, see Edmond, 520 U.S. at 664, 666. As the dissent

acknowledges, at-will removal authority is not the linchpin of the

analysis; rather, an officer is inferior as long as he is “statutorily

13

The Court has held that both the Coast Guard Judges in

Edmond, who were subject to the Judge Advocate General’s at-

will removal authority, 520 U.S. at 664, and the Independent

Counsel in Morrison, who was subject to removal only for

cause, 487 U.S. at 663, were inferior officers. Here, the Act

vests removal authority in the Commission, providing that “[a]

member of the Board may be removed by the Commission from

office, in accordance with section [107(d)(3)], for good cause

shown.” 15 U.S.C. § 7211(e)(6).5 Just as in Morrison, “the fact

that [Board members] can be removed by the [Commission]

indicates that [they are] to some degree ‘inferior’ in rank and

authority,” 487 U.S. at 671.

The Supreme Court has expressly permitted legislatively-

imposed limitations on executive officers’ removal authority:

We have no doubt that when congress, by law, vests

the appointment of inferior officers in the heads of

subject to direction and supervision in all significant activities.” Dis.

Op. at 48. Here every significant Board function is subject to

significant Commission oversight. See supra pp. 9-10.

5

Section 107(d)(3) provides that the Commission may

remove a Board member upon finding that the member

(A) has willfully violated any provision of this Act,

the rules of the Board, or the securities laws; (B) has

willfully abused the authority of that member; or (C)

without reasonable justification or excuse, has failed

to enforce compliance with any such provision or

rule, or any professional standard by any registered

public accounting firm or any associated person

thereof.

15 U.S.C. § 7217(d)(3).

14

departments, it may limit and restrict the power of

removal as it deems best for the public interest. The

constitutional authority in congress to thus vest the

appointment implies authority to limit, restrict, and

regulate the removal by such laws as congress may

enact in relation to the officers so appointed. The head

of a department has no constitutional prerogative of

appointment to offices independently of the legislation

of congress, and by such legislation he must be

governed, not only in making appointments, but in all

that is incident thereto.

United States v. Perkins, 116 U.S. 483, 485 (1886). In Myers v.

United States, 272 U.S. 52 (1926), the Court reaffirmed that

“Congress, in committing the appointment of such inferior

officers to the heads of departments, may prescribe incidental

regulations controlling and restricting the latter in the exercise

of the power of removal,” id. at 161, although not to the point

of requiring Senate approval of removals, id. at 164; see also

Bowsher v. Synar, 478 U.S. 714, 726 (1986).

Moreover, the Fund can point to no case prescribing the

ways in which Congress can restrict a principal officer’s

removal of his inferiors. The opinion of the Justice

Department’s Office of Legal Counsel (“OLC”), 17 U.S. Op.

Off. Legal Counsel 150, 156-57 (1993), relied on by the Fund,

concluded only that “jointly” vesting removal authority in a

cabinet secretary and the council whose members were

themselves subject to removal could pose constitutional

problems. Like the Attorney General in Morrison and the Judge

Advocate General in Edmond, the Commission has sole

removal authority under the Act. For purposes of this facial

challenge, the arguably more restrictive for-cause removal

cannot be dispositive because, as the district court concluded,

the Commission could broadly interpret its removal authority in

15

order to ensure that the Board conforms to its policies.

Finally, our dissenting colleague’s two-part test for

determining inferior officer status, Dis. Op. at 45-46, sets up a

new paradigm in order to reach a desired result. Nothing in

Edmond suggests that “direct[ion] and supervis[ion] at some

level,” 520 U.S. at 663 (emphasis added), necessitates

“manag[ing] the ongoing conduct,” Dis. Op. at 46, of every day-

to-day function. Surely both the Coast Guard judges in Edmond

and the Independent Counsel in Morrison would have failed

such a narrow test. But even under the terms of this novel test,

the Act survives scrutiny. Indeed, the Act commands that all of

the Board’s duties are “subject to action by the Commission.”

15 U.S.C. § 7211(c). As in Edmond, any sanctions imposed by

the Board are “subject to review by the [Commission] before

the decisions t[ake] effect on the accused,” Dis. Op. at 41; see

15 U.S.C. §§ 7215(e)(1), 7217(c)(2). Additionally, the

Commission’s broad authority under the Act contradicts the

dissent’s position that the Board’s decisions regarding

“inspections, investigations, and enforcement actions” cannot

be “prevent[ed][,] affirmatively command[ed], and manage[d]”

by the Commission, Dis. Op. at 46. First, the Act requires the

Board to inspect all registered public accounting firms in

accordance with a predetermined schedule, 15 U.S.C. §

7214(b); the Board lacks discretion not to inspect a particular

firm. Each inspection yields an inspection report, 15 U.S.C. §

7214(g), and each firm may seek Commission review of its

inspection report, id. § 7214(h). Therefore, to the extent the

inspection report forms the basis for a subsequent investigation

by the Board, the Board’s determination is subject to

Commission approval. Second, although it has the power to do

so, see id. § 7202(a), the Commission need not “affirmatively

command” an investigation, Dis. Op. at 46, given that the Act

preserves the Commission’s own authority to take

administrative or disciplinary action against a firm, 15 U.S.C.

16

§ 7202(c)(3). The fact that the Commission’s investigative

authority remains intact is consistent with the role of the Board

as a specialized component of the Commission that exercises

authority for purposes of efficiency and convenience but cannot

usurp it. Third, and most important, because the Board must

establish by rule “fair procedures for the investigation and

disciplining” of accounting firms and individuals, id. § 7215(a),

and “[n]o rule of the Board shall become effective without prior

approval of the Commission,” id. § 7217(b)(2), the Commission

is empowered to modify the Board’s investigative authority as

it sees fit and may mandate that all decisions regarding

investigation or enforcement actions against a firm be approved

by the Commission. See also id. § 7271(d)(2). While the Board

may adjust the inspection schedule, it may do so only by rule,

id. § 7214(b)(2), and all Board rules are subject to Commission

approval. So too for the Board’s investigative authority, see id.

§ 7215(b)(1). Certainly the Commission’s authority to

“promulgate such rules and regulations[] as may be necessary

or appropriate in the public interest or for the protection of

investors, and in furtherance of th[e] Act,” id. § 7202(a),

provides ample room for the Commission to tighten its reins on

the Board’s investigative authority.6 For purposes of this facial

challenge, that the Commission has not chosen to take these

steps does not mean that it lacks the authority to do so. If

anything, it suggests that the Board has so far acted in

6

In suggesting that the Commission is somehow limited by

its statutory obligation to promulgate rules “in furtherance of this

Act,” Dis. Op. at 50, our dissenting colleague ignores that the Act’s

purpose in establishing the Board was “to protect the interests of

investors and further the public interest,” 15 U.S.C. § 7211(a), and

therefore Congress contemplated that the goals of the Act and the

public interest would go hand in hand. If the public interest demands

increased micromanaging of Board operations, the Act empowers the

Commission to respond accordingly.

17

accordance with Commission policy.

Because the Board’s exercise of its powers under the Act

is subject to comprehensive control by the Commission and

Board members are accountable to and removable by the

Commission, we hold that Board members are inferior officers.

B.

The Fund’s alternative contention, assuming Board

members are inferior officers, that the Commission is not a

department and the Commissioners are not the head of the

Commission, is also unpersuasive.

1. As used in the Appointments Clause, the phrase “‘Heads

of Departments’ . . . suggests that the Departments referred to

are themselves in the Executive Branch or at least have some

connection with that branch.” Buckley, 424 U.S. at 127. The

Supreme Court has explained that “Departments” refers to “the

subdivision of the power of the Executive into departments, for

the more convenient exercise of that power.” United States v.

Germaine, 99 U.S. 508, 510 (1878). In Freytag, the Supreme

Court described Departments as being “like the Cabinet-level

departments,” 501 U.S. at 886 (emphasis added), which are

“limited in number and easily identified,” id. Although the

Court did not identify the precise characteristics of “Cabinet-

like” departments and reserved the issue of whether independent

agencies are departments, id. at 887 n.4, four Justices urged that

“Departments” should be understood to encompass “all

agencies immediately below the President in the organizational

structure of the Executive Branch,” including “all independent

executive establishments,” id. at 918-19 (Scalia, J., joined by

O’Connor, Kennedy, and Souter, JJ, concurring in part and in

the judgment) (hereinafter “Concurring Op.”). They reasoned

that the Framers “chose the word ‘Departmen[t]’ . . . not to

connote size or function (much less Cabinet status), but separate

18

organization – a connotation that still endures even in colloquial

usage today.” Id. at 920. Noting that the Constitution makes no

reference to the term “Cabinet,” id. at 916-17, and that the Court

has not held that “‘the Heads of Departments’ are Cabinet

members,” id. at 917, the concurring justices observed that even

the sparse history of the Appointments Clause included the

1792 Act creating a Post-Master General, who, while not a

cabinet member, had power to appoint an assistant and deputies,

id. As Congress has continued to empower non-Cabinet

officers to appoint inferior officers, id. at 918, the concurring

justices cautioned that to conclude such action violated the

Appointments Clause would “cast[] into doubt the validity of

many appointments and a number of explicit statutory

authorizations to appoint,” id.

The Commission is “Cabinet-like” because it exercises

executive authority over a major aspect of government policy,

and its principal officers are appointed by the President with the

advice and consent of the Senate, 15 U.S.C. § 78d(a), and

subject to removal by the President, SEC v. Blinder, Robinson

& Co., 855 F.2d 677, 681 (10th Cir. 1988). Given the

constitutionality of independent agencies, see Humphrey’s Ex’r

v. United States, 295 U.S. 602 (1935), such entities must be able

to constitutionally exercise appointment authority to permit

their proper functioning. As the Attorney General opined in

concluding that the Civil Service Commission was a

“Department[]” under the Appointments Clause, the

Commission here is “not a subordinate Commission attached to

one of the so-called executive departments but is in itself an

independent division of the Executive Branch of the

Government with certain independent duties and functions.” 37

U.S. Op. Att’y Gen. 227, 231 (1933). In 1996, the OLC further

stated that Congress may “vest the power to appoint inferior

officers in the heads of the so-called independent agencies.” 20

Op. Off. Legal Counsel 124, 152 (1996). Congress has

19

authorized the Commission to appoint officers and employees,

5 U.S.C. § 4802(b), and it would be illogical to handicap its

ability to effectuate its statutory mandate because of the very

independence that Congress has deemed necessary and the

Supreme Court has deemed constitutional.

2. The Commissioners as a group exercise the same final

authority as is vested in a single head of an executive

department. Congress has vested “the Commission” with

rulemaking, investigative, and adjudicatory authority. See, e.g.,

15 U.S.C. § 7202. Just as independent agencies are

“Departments” capable of receiving appointment powers even

though they are structured to give the President less control over

their functioning, see Freytag, 501 U.S. at 919 (Concurring

Op.), the heads of independent agencies need not be wholly

controlled by the President as long as they are principal officers

appointed (with the advice and consent of the Senate) and

removable by the President. All three branches of government

are in agreement that the head of an agency can be a multi-

member body. The Attorney General’s opinion in 1933

acknowledged that the Civil Service Commission is “headed

by” its commissioners. 37 U.S. Op. Att’y Gen. at 228.

Congress enacted the Reorganization Act of 1949, 5 U.S.C.

§ 904, providing that a Presidential plan for Congressional

approval can “provide that the head of an agency be an

individual or a commission or board with more than one

member.” The Ninth Circuit held in Silver v. United States

Postal Service, 951 F.2d 1033 (9th Cir. 1991), that the nine

governors of the Postal Service constituted its “Head[],”

concluding that “[t]he fact that the Postal Service is not

structured like a traditional government agency need not imply

that its structure is not constitutionally permissible,” id. at 1037,

and that as to appointment, removal and decisionmaking,

“Congress carefully vested ultimate control and authority of the

Postal Service in the Governors,” id. at 1038. The same is true

20

here. Congress, in the Act as well as the Securities Exchange

Act of 1934, 15 U.S.C. § 78a et seq., vested authority in “the

Commission” to promulgate rules, initiate investigations, sue to

enjoin violations of securities laws, review disciplinary

sanctions, appoint Board members, approve Board rules and the

Board’s budget, and censure and remove Board members.

The historical sources relied on by the Fund regarding the

“benefits of lodging the appointment power in a single

individual,” Appellants’ Br. at 39 (citing THE FEDERALIST No.

76 and 3 JOSEPH STORY, COMMENTARIES ON THE

CONSTITUTION § 1522 (1833)), address a different question,

namely the decision to vest appointment of principal officers in

the President, and the Framers entrenched that preference in

Article II, § 2, cl. 2. The Fund has pointed to no authority

wherein the Framers foreclosed Congress from granting multi-

member commissions authority to appoint inferior officers. The

dictionary is of no assistance because a definition of a “head” as

“one who has the first rank or place,” Appellants’ Br. at 39-40

(quoting NOAH WEBSTER, AN AMERICAN DICTIONARY OF THE

ENGLISH LANGUAGE (1828)), does not resolve whether the

“one” must be one person rather than one committee.

Finally, in urging that the Chairman of the Commission is

its “Head[]” and therefore the Act’s grant of Commission

appointment power is invalid, the Fund’s authorities do not

support its conclusion. While the Postmaster General in Silver

was an inferior officer appointed and removable by the nine

governors, see 951 F.2d at 1040, the Chairman is not inferior to

the Commission but rather is simply one commissioner who has

additional administrative functions. Just as the Chairman has no

power to remove another commissioner, the Commission as a

whole may neither appoint nor remove one of its own.

Moreover, the Reorganization Act addressed in Silver mandated

that the head of an agency be either a civil service position or

21

subject to Presidential appointment with the advice and consent

of the Senate, 5 U.S.C. § 904; the Chairman is neither, as the

President alone selects a Chairman from among the

Commissioners. Reorganization Plan No. 10, § 3, 64 Stat.

1265, 1266 (1950). Additionally, although the Chairman has

authority to appoint and supervise personnel pursuant to

Reorganization Plan No. 10 of 1950, the Chairman does not

have sole appointment authority under the Plan; rather “[t]he

appointment by the Chairman of the heads of major

administrative units under the Commission shall be subject to

the approval of the Commission.” Reorganization Plan No. 10,

§ 1(b)(2), 64 Stat. at 1266 (1950); see United States v. Hartwell,

73 U.S. (6 Wall) 385, 393-34 (1867); Nat’l Treasury Employees

Union v. Reagan, 663 F.2d 239, 246 n.9 (D.C. Cir. 1981).

Because Board members are inferior officers of the

Commission, which is a “Department[]” whose “Head[]”

consists of the several Commissioners, we hold that Title I of

the Act creating the Board does not violate the Appointments

Clause.

IV.

Although not expressly included in the Constitution itself,

the principle of separation of powers is implicit in the first three

articles of the Constitution that define separate roles for the

legislative, executive, and judicial branches. See Nat’l Mut. Ins.

Co. of D.C. v. Tidewater Transfer Co., 337 U.S. 582, 591

(1949); Kilbourn v. Thompson, 103 U.S. 168, 190 (1880).7

7

This principle has been more recently reaffirmed by the

Supreme Court in a series of opinions interpreting the President’s

Article II powers. See Boumediene v. Bush, 128 S. Ct. 2229

(2008); Hamdan v. Rumsfeld, 548 U.S. 557 (2006); Hamdi v.

Rumsfeld, 542 U.S. 507 (2004).

22

Considered a bulwark of a just government, see THE

FEDERALIST No. 47 (James Madison), this principle, however,

“by no means contemplates total separation of each of these

three essential branches of Government,” Buckley, 424 U.S. at

121. The Fund does not assert that Congress or the judiciary

have directly encroached on the Executive Branch’s

appointment, removal, or decisionmaking authority by

aggrandizing their own powers. Instead, the Fund’s separation

of powers challenge is premised on the contention that the Act

constitutes an excessive attenuation of Presidential control over

the Board. The crux of the Fund’s challenge – that the double

for-cause limitation on removal makes it impossible for the

President to perform his duties – is a question of first

impression as neither the Supreme Court nor this court has

considered a situation where a restriction on removal passes

through two levels of control. But the Fund’s categorical,

bright-line approach conflicts with the Supreme Court’s case-

specific reasoning in Morrison, which emphasized that there are

“several means of supervising or controlling [Presidential]

powers,” 487 U.S. at 696. The removal power thus does not

operate in a vacuum; rather it is one of several criteria relevant

to assessing limits on the President’s ability to exercise

Executive power.

A.

The Supreme Court has long recognized that some types of

restrictions on Presidential authority within the Executive

Branch are permissible, especially in the case of independent

agencies. In Humphrey’s Executor, the Supreme Court rejected

a challenge to the constitutionality of independent agencies in

which principal officers were “subject to removal by the

President for inefficiency, neglect of duty, or malfeasance in

office,” rather than at the President’s will. 295 U.S. at 623. The

Court observed that “to hold that . . . the members of the

[Federal Trade Commission] continue in office at the mere will

23

of the President,” id. at 626, would thwart Congress’s intention

that the commission be “nonpartisan” and “independent of

executive authority,” id. at 624-25 (internal quotation marks

omitted).

Several decades later, the Supreme Court expanded upon its

analysis in Humphrey’s Executor, concluding that the statute

establishing the Independent Counsel did not violate the

principle of separation of powers. The Court considered the

“two related issues” of restrictions on the President’s power to

remove and the impact of the Ethics in Government Act as a

whole in order to address the “real question” of “whether . . . the

President’s ability to perform his constitutional duty,”

Morrison, 487 U.S. at 691, to “take Care that the Laws be

faithfully executed,” U.S. CONST., art. II, § 3, was impeded.

Noting the Attorney General’s powers to request appointment

of the Independent Counsel and to remove her for cause

alongside her limited jurisdiction and tenure and lack of

policymaking authority, id. at 691-92, the Court held that

restrictions on the “amount of control or supervision,” id. at

695, that the President ultimately exercised over the functions

of the Independent Counsel were constitutional given the

“several means of supervising or controlling the . . . powers that

may be wielded,” id. at 696.

B.

As an initial matter, independent agencies such as the

Commission by definition enjoy a degree of autonomy in

conducting their affairs, including staffing and operations. Yet

this independence is not without limits. In addition to the

ability to appoint Commissioners, 15 U.S.C. § 78d(a), and

remove them for cause, see Blinder, 855 F.2d at 681; see also

Wiener v. United States, 357 U.S. 349 (1958), which removal

24

power the Supreme Court has interpreted broadly,8 the President

possesses significant additional levers of influence. Most

obviously, by appointment of the Commission chairman, who

serves at the pleasure of the President and often “dominate[s]

commission policymaking,” the President can influence

Commission policy and control who directs “the administrative

side of commission business, select[s] most staff, set[s]

budgetary policy, and as a consequence command[s] staff

loyalties.” Peter L. Strauss, The Place of Agencies in

Government: Separation of Powers and the Fourth Branch, 84

COLUM. L. REV. 573, 591 (1984) (citing DAVID M. WELBORN,

GOVERNANCE OF FEDERAL REGULATORY AGENCIES (1977)).

“Here the White House connection is often less direct and

generally more subtle, but consultation and coordination on

general policy issues of national interest naturally occurs.” Id.

(footnotes omitted). Additionally, although statutory as well as

political constraints may prevent Presidential dominance in

specific decisions, the President is not stripped of overall

influence because independent agencies generally require

“presidential good will” to obtain budgetary and legislative

support, id. at 594-95. Various administrative tools provide

additional influence to the President; these include

centralization of contracting, personnel requirements, and

property allocations. Id. at 587. “[A]ny assumption that

executive agencies and independent regulatory commissions

differ significantly or systematically in function, internal or

external procedures, or relationships with the rest of

government is misplaced.” Id. at 596.

8

The Supreme Court has held that the restrictions on the

President’s removal of Commissioners for “inefficiency, neglect of

duty, or malfeasance in office” are “very broad and . . . could sustain

removal . . . for any number of actual or perceived transgressions.”

Bowsher, 478 U.S. at 729.

25

In turn, the Commission enjoys both appointment and

removal powers over Board members and, most significantly,

“Congress has provided sweeping mechanisms to guarantee

substantive control by the [Commission] of the Board’s use of

its powers under the Act.” Intervenor’s Br. for the United States

at 49-50. The Board’s status, as a heavily controlled component

of an independent agency, is fully congruent with the paradigm

laid out in Humphrey’s Executor.9 No Board rule is

promulgated and no Board sanction is imposed without the

Commission’s stamp of approval. Indeed, any policy decision

made by the Board is subject to being overruled by the

Commission. The Act also provides authority for the

Commission to limit and to remove Board authority altogether.

15 U.S.C. §§ 7217(d)(1), (2). Additionally, the Act fully

preserves the Commission’s authority to regulate the accounting

profession, set standards, and take any action against a company

or individual. Id. § 7202(c). “Because the Commission can

withdraw or preempt any aspect of the Board’s substantive

regulatory authority at any time to effectuate the Commission’s

own understanding of ‘purposes of th[e] Act and the securities

laws,’ no functional concern or constitutional dimension should

be raised by the ‘good cause’ restrictions on its ability to

remove particular officers.” Intervenor’s Br. for the United

States at 50 (quoting 15 U.S.C. § 7217(d)(1)). Thus the Act

ensures that all Board functions are subject to pervasive

9

Our dissenting colleague wholly misreads both the court’s

opinion and the Board’s brief to suggest that the Board is itself an

independent agency. Dis. Op. at 1,3, 30 n.9. Indeed, with that premise

the dissent’s conclusion that the Board’s structure is unconstitutional

conveniently follows. But repeatedly referring to the Board as an

independent agency, see, e.g., id. at 23 & n.7, 24, 26, 30 n.9, 36, 43 &

n.16, does not make it so. As explained in Part III above, by statutory

design the Board is composed of inferior officers who are entirely

subordinate to the Commission and whose powers are governed by the

Commission.

26

Commission control, including approval of its annual budget

and supporting fees, 15 U.S.C. § 7219(b), (d).

When assessed in the context of the restrictions on

Presidential power upheld in Morrison, the President’s powers

under the Act extend comfortably beyond the minimum

required to “perform his constitutionally assigned duties,”

Morrison, 487 U.S. at 696. Although the President does not

directly select or supervise the Board’s members, the President

possesses significant influence over the Commission, which in

turn possesses comprehensive control over the Board. By

contrast, neither the President nor the Attorney General had the

power to appoint the Independent Counsel or the power to

control her investigatory or prosecutorial authority. Instead, a

three-judge court appointed the Independent Counsel, Morrison,

487 U.S. at 661 (citing 28 U.S.C. § 49 (1982 ed., Supp. V)), and

defined her jurisdiction, id. Whereas the Board cannot appear

in court without the Commission’s permission, 15 U.S.C. §

7211(f)(1), the Independent Counsel’s powers included

“‘initiating and conducting prosecutions in any court of

competent jurisdiction, framing and signing indictments, filing

informations, and handling all aspects of any case, in the name

of the United States,’” Morrison, 487 U.S. at 662 (quoting 28

U.S.C. 594(a)(9)) (emphasis added), and hiring staff to do so,

id. (citing 28 U.S.C. 594(c)). Most importantly, while the

Commission retains its full authority under the Act, 15 U.S.C.

§ 7202(c), the Ethics in Government Act divested the Attorney

General of his pre-existing authority and invested it entirely in

the Independent Counsel: “[W]henever a matter has been

referred to an independent counsel under the [Ethics in

Government] Act, the Attorney General and the Justice

Department are required to suspend all investigations and

proceedings regarding the matter,” Morrison, 487 U.S. at 662-

27

63.10 As designed by Congress, the Independent Counsel

possessed significant independence from the President, but the

Supreme Court found no separation of powers violation. The

statutorily more constrained authority of the Board, when set

beside the Independent Counsel’s broad powers and

independence, falls well within constitutional bounds.11

The Fund points to the limited tenure and jurisdiction of the

Independent Counsel in Morrison as justification for the

unchecked powers of the position, but neither the duration of

the office nor its prescribed scope operated as significant

constraints on the Independent Counsel’s exercise of her broad

powers. Although the Independent Counsel was a temporary

position, neither the President, the Attorney General, nor even

the statute itself limited the length of her tenure; rather, the

Independent Counsel determined when her statutory duties were

complete, id. at 664. The Independent Counsel’s time in office,

thus, was “rather indefinite and expected to last for multiple

years.” 31 Op. Off. Legal Counsel, at *34 (Apr. 16, 2007).

Moreover, the Independent Counsel’s powers were arguably

10

Thus, the Independent Counsel “possessed core and largely

unchecked federal prosecutorial powers, effectively displacing the

Attorney General and the Justice Department within the counsel’s

court-defined jurisdiction, which was not necessarily limited to the

specific matter that had prompted [her] appointment.” 31 Op. Off.

Legal Counsel, at *34 (Apr. 16, 2007).

11

Even viewing Morrison as authorizing a “significant

intrusion” on the Executive power, Dis. Op. at 21, because the Board

is subject to much greater Executive control than the Independent

Counsel, the Board would withstand constitutional scrutiny if the

Independent Counsel had not. The “sky is falling” approach to the

Board’s separation of powers implications is an exaggerated response

to a relatively insignificant innovation. Morrison was the proverbial

mountain; the present case, by comparison, is a molehill.

28

less delimited than the Board’s insofar as she could request

expansion of her prosecutorial jurisdiction. See Morrison, 487

U.S. at 667; 28 U.S.C. § 593(c). Not only is the Board subject

to statutorily-defined jurisdictional boundaries, but also the

Commission is empowered to further limit the Board’s

functions, 15 U.S.C. § 7217(d)(2). To the extent the Fund

maintains that the breadth of the Independent Counsel’s powers

was justified by exceptional circumstances, the circumstances

leading to the enactment of the Independent Counsel statute are

far from unique; as in the case of the Board, Congress identified

the need for an entity within the Executive Branch and

determined that some limitations on Presidential power were

advisable. See supra n.1.

More directly, the Act’s attenuation of the President’s

removal power of Board members does not mean, as the Fund

contends, that the President’s ability to carry out his Executive

responsibility is therefore unconstitutionally restricted.

Although the principal officer in Morrison – the Attorney

General – served at the pleasure of the President, nothing in

Morrison suggests that Congress cannot restrict removal of

inferior officers in independent agencies as well as executive

agencies.12 The Supreme Court instead underscored that the

animating concern of the Court’s removal-power cases is not

formal but functional:

The analysis . . . is designed not to define rigid

categories of those officials who may or may not be

12

Our dissenting colleague’s assertion that Morrison “all but

resolves the removal issue in this case” so as to “require[] invalidation

of the [Board],” Dis. Op. at 25-26, is remarkable in light of the fact

that in Morrison the Supreme Court did not purport to establish what

removal restrictions would “completely strip[]” the President of

removal authority, 487 U.S. at 692.

29

removed at will by the President, but to ensure that

Congress does not interfere with the President’s

exercise of “executive power” and his constitutionally

appointed duty to “take care that the laws be faithfully

executed” under Article II.

487 U.S. at 689-90. The Court stated that, as regards an inferior

officer, “we cannot say that the imposition of a ‘good cause’

standard for removal by itself unduly trammels on executive

authority.” Id. at 691. So too here, the President is not, as the

Fund contends, “completely stripped” of his ability to remove

Board members: Like-minded Commissioners can be appointed

by the President and they can be removed by the President for

cause, and Board members can be appointed and removed for

cause by the Commissioners. Although the level of Presidential

control over the Board reflects Congress’s intention to insulate

the Board from partisan forces, this statutory scheme preserves

sufficient Executive influence over the Board through the

Commission so as not to render the President unable to perform

his constitutional duties.13

13

The Fund’s suggestion that the Board’s creation represents

an effective diminution of Executive Branch power or an

unprecedented Congressional innovation is also unavailing. The

Commission’s wide-ranging oversight over the Board was modeled

after the rules regarding Commission authority over self-regulatory

organizations (“SROs”) in the securities industry, which have existed

for over seventy years, NASD, 431 F.3d at 804, such as the New York

Stock Exchange and the National Association of Securities Dealers,

15 U.S.C. § 7217(a); S. Rep. No. 107-205, at 12. A main difference

– Board members are appointed by the Commission, whereas the

government plays no formal role in the selection of SRO board

members – means that the Board’s grant of governmental authority is

duly accompanied by government accountability. Consequently, the

Fund’s characterization of the Commission’s review of Board action

as “highly deferential,” “severely restricted,” and “severely

30

Our dissenting colleague asks why the Board is removable

only for cause, Dis. Op. at 51, concluding that it is to preserve

the Board’s independence of the Commission. But for-cause

removal is not the end of the constitutional inquiry. We might

ask in return, why has Congress granted such pervasive

Commission authority over the Board if not to preserve the

means of Executive control? Indeed, why would Congress deny

the Commission at-will removal authority on the one hand and

then provide the Commission with the authority to abolish

Board powers on the other, essentially granting at-will removal

power over Board functions if not Board members? Certainly

the latter power blunts the constitutional impact of for-cause

removal. Even if these statutory provisions may reveal a

legislative compromise, the Act as a whole provides ample

Executive control over the Board. If, as the dissent posits, the

for-cause removal provision reflects Congress’s intention to

grant “some degree of substantive independence” to the Board,

id. at 34, that independence is undercut by the vast degree of

Commission control at every significant step. To the extent the

dissent offers that the Commission cannot have broad

rulemaking authority to circumscribe the Board’s investigative

actions because “such authority would all but destroy the

‘independence’” that the for-cause removal provision might

otherwise allow, id. at 49; see id. at 34-35 (citing legislative

history), such is the statute as written by Congress.

The Fund’s contention that the Act violates separation of

powers because the removal restrictions go beyond the “good

cause” standard approved in Morrison fares no better. The

Fund contends that under the Act “the [Commission] cannot

remove a Board member who incompetently pursues wrong-

circumscribed,” Appellants’ Br. 7, 33, 34, is difficult to reconcile with

the Act, much less with this court’s analysis of the same statutory

review provisions for SROs in NASD, 431 F.3d at 806.

31

headed policies, but permits, at most, removal only of those

members who egregiously and deliberately flout their duties or

engage in serious misconduct.” Appellants’ Br. at 21. The

Supreme Court has never specified that “good cause” is the

greatest restriction Congress may impose on removal of inferior

officers. In fact, the Court has broadly stated that Congress

“may limit and restrict the power of removal as it deems best

for the public interest.” Perkins, 116 U.S. at 483. Furthermore,

it is far from clear that the Commission would share the Fund’s

cramped interpretation of its removal authority. Cf. supra n.8.

While the Fund points to the fact that two of the three

provisions that authorize removal of Board members refer to

actions taken “willfully,” see supra n. 5, the meaning of that

word “is often being influenced by its context,” Spies v. United

States, 317 U.S. 492, 497 (1943), and the Fund points to no

basis for assuming that the Commission would view 15 U.S.C.

§ 7217(d)(3) as necessarily defining the exclusive

circumstances in which removal for “good cause” may be

established, see Bowsher, 478 U.S. at 729; cf. Wonsover v. SEC,

205 F.3d 408, 413-14 (D.C. Cir. 2000).

V.

“[F]acial challenges are disfavored” precisely because they

do not permit the Executive Branch to attempt to “implement[]

[statutes] in a manner consonant with the Constitution,” Wash.

State Grange, 128 S. Ct. at 1191, and the Fund’s challenge does

not present the occasion for the court to announce a bright-line

rule regarding removal restrictions.14 Consistent with the court’s

14

Contrary to our dissenting colleague, Dis. Op. at 35-36

n.12, the fact that this is a facial challenge significantly affects the

analysis, for the Fund bears a heavy burden to demonstrate that the

Act unduly constrains the President’s ability to see that the laws are

faithfully executed in all circumstances and cannot be constitutionally

32

duty to construe statutes to avoid constitutional infirmity,

Commodity Futures Trading Comm’n v. Schor, 478 U.S. 833,

841 (1986), there is no basis to conclude that the Commission’s

removal authority does not satisfy Article II requirements, cf.

Morrison, 487 U.S. at 682. The Fund’s focus on the removal

limitations ignores the statutory context, which empowers the

Commission not only to oversee all significant Board activities

through ex ante controls and ex post de novo review but also to

“withdraw or preempt any aspect of the Board’s substantive

regulatory authority,” Intervenor’s Br. for the United States at

50, thus mitigating concern regarding the scope of the removal

restrictions. The Act additionally preserves all of the

Commission’s authority in the field while enhancing Executive

control in an area previously left largely in private control. See

supra n.13.

Nor does our dissenting colleague’s philosophical approach

undermine either the court’s logic or view of the law. While the

fundamental purposes of the Appointments Clause and the

principle of separation of powers are undisputed, the

constitutional question for this court requires that we take

instruction from Supreme Court precedent as we find it and

understand that the absence of a precise precedent is neither the

end of the inquiry – the statutory scheme in Morrison, for

example, was also novel – nor grounds for failing to address

Congress’ statutory scheme as it is written. Our dissenting

colleague’s analysis, cloaked in textualist garb, construes

Supreme Court precedent to support his theory instead of

acknowledging its limits; for example, the intrusion by Congress

upon the President’s removal authority in Myers is far removed

applied, see supra p.6. In making that determination, the court must

look at the extent of the Commission’s authority under the Act, not to

whether and how it has exercised that authority, see Dis. Op. at 51

n.23.

33

from what is at issue here, and the Court’s multi-factor analysis

in Edmond does not fit the dissent’s novel two-step paradigm.

The absolutes that the dissent postulates – essentially, either the

President must have at-will removal power or Congress has acted

unconstitutionally – are inconsistent with the Supreme Court’s

more nuanced approach in addressing limitations on the

President’s appointment authority and separation of powers. In

the face of a comprehensive statutory scheme that provides

exhaustive means of Executive control and oversight, the dissent

misrepresents the Board as an independent agency with final

Executive authority, see supra n.9, interprets the Commission’s

powers of oversight narrowly, see Dis. Op. at 48-51, 51 n.23, and

the limitations attendant to for-cause removal broadly, see id. at

31-35, divorced from their statutory context in a manner to create

constitutional problems where there are none; and misreads

Supreme Court precedent to portend doom for the unitary

Executive. But those fears have no statutory basis, for our

dissenting colleague can cite to no instance in which the Board

can make policy that the Commission cannot override.15

Given the constitutionality of independent agencies and the

Commission’s comprehensive control over the Board, the Fund

cannot show that the statutory scheme so restricts the President’s

control over the Board as to violate separation of powers. The

bulk of the Fund’s challenge to the Act was fought – and lost –

over seventy years ago when the Supreme Court decided

15

To the extent our dissenting colleague asserts both that

overturning the Act would have no impact on other independent

agencies, Dis. Op. at 5-6, and that failing to overturn the Act would

produce a parade of horribles were Congress to adopt a double-for-

cause approach generally, id. at 28, again he ignores the statutory

scheme in a singular focus on the removal power. If that is to be the

Supreme Court’s approach, then it must say so for its precedent is

more nuanced and takes account of the statute as a whole.

34

Humphrey’s Executor. At that time, the Court concluded that the

concept of a unitary Executive embodied in the Constitution does

not require the President to have an alter ego (i.e., an official

serving at the pleasure of the President and removable at will)

within independent agencies. The Court reiterated the

conclusion that neither for-cause removal nor substantial

independent discretion eviscerates Executive control in

Morrison. The key question the Supreme Court requires this

court to answer is whether the Act so limits the President’s

ability to influence the Board as to render it unconstitutional.

Because of the reality of the President’s broad-ranging authority

under the Act, the Fund’s facial challenge fails.

Accordingly, we hold that the Fund’s facial challenge to

Title I of the Act fails to reveal violations of the Appointments

Clause or separation of powers, and we affirm the grant of

summary judgment to the Board and the United States.

KAVANAUGH, Circuit Judge, dissenting: This case raises

fundamental questions about the scope of the President’s

constitutional power to appoint and remove officers in the

Executive Branch. Article II begins: “The executive Power

shall be vested in a President of the United States of

America.” Under Article II, the President possesses the sole

power and responsibility to “take Care that the Laws be

faithfully executed.” To assist in his duties, the President has

authority, within certain textual limits, to appoint and remove

executive officers. Myers v. United States, 272 U.S. 52, 117

(1926). Disputes over the scope of the President’s

appointment and removal powers have arisen sporadically

throughout American history. This latest chapter involving

the Public Company Accounting Oversight Board is the most

important separation-of-powers case regarding the President’s

appointment and removal powers to reach the courts in the

last 20 years. Cf. Morrison v. Olson, 487 U.S. 654 (1988);

Bowsher v. Synar, 478 U.S. 714 (1986); Buckley v. Valeo, 424

U.S. 1 (1976); Humphrey’s Executor v. United States, 295

U.S. 602 (1935); Myers, 272 U.S. 52.

The Public Company Accounting Oversight Board is an

independent executive agency created by the Sarbanes-Oxley

Act of 2002. The PCAOB is considered an “independent”

agency because the five members of the PCAOB are

removable only for cause, not at will. The PCAOB portrays

itself as just another independent executive agency – like the

FCC, the FTC, and the NLRB – that is permissible under the

Supreme Court’s 1935 decision in Humphrey’s Executor.

Plaintiffs, including a Nevada accounting firm regulated by

the Board, strenuously disagree and challenge its

constitutionality. Plaintiffs object to the fact that members of

the PCAOB are appointed by and removable for cause by

another independent agency, the Securities and Exchange

Commission, rather than by the President. They argue that

this structure, an independent agency appointed by and

removable only for cause by another independent agency:

2

(i) interferes with the President’s Article II authority to

remove executive officers, and thereby exercise the executive

power and take care that the laws be faithfully executed; and

(ii) violates the specific terms of the Appointments Clause of

Article II regarding the President’s authority to appoint

“principal officers” in the Executive Branch. Plaintiffs

contend that “vesting government agencies with coercive

power over the citizenry, and simultaneously depriving the

citizenry of any ability to control or check those exercising

such potentially tyrannical authority, is precisely the

fundamental threat to the ‘liberty and security of the

governed’ that separation of powers principles were designed

to prevent.” Plaintiffs’ Br. at 10-11 (quoting Metro. Wash.

Airports Auth. v. Citizens for Abatement of Aircraft Noise,

Inc., 501 U.S. 252, 272 (1991)).

On the removal issue, the majority opinion views this

case as Humphrey’s Executor redux. But this case is

Humphrey’s Executor squared. There is a world of difference

between the legion of Humphrey’s Executor-style agencies

and the PCAOB: The heads of the Humphrey’s Executor

independent agencies are removable for cause by the

President, whereas members of the PCAOB are removable

for cause only by another independent agency, the Securities

and Exchange Commission. The President’s power to remove

is critical to the President’s power to control the Executive

Branch and perform his Article II responsibilities. Yet under

this statute, the President is two levels of for-cause removal

away from Board members, a previously unheard-of

restriction on and attenuation of the President’s authority over

executive officers. This structure effectively eliminates any

Presidential power to control the PCAOB, notwithstanding

that the Board performs numerous regulatory and law-

enforcement functions at the core of the executive power. So

far as the parties, including the United States as intervenor,

3

have been able to determine in the research reflected in their

exhaustive and excellent briefs, never before in American

history has there been an independent agency whose heads are

appointed by and removable only for cause by another

independent agency, rather than by the President or his alter

ego.1 But that is the case with PCAOB members, who are

removable for cause only by the SEC – and it is undisputed

that the SEC as an independent agency is not the President’s

alter ego. The PCAOB thus goes well beyond what historical

practice and Humphrey’s Executor authorize.

The PCAOB’s structure not only exceeds the boundaries

of Humphrey’s Executor; it also contravenes specific and

critical language in the Supreme Court’s 1988 decision in

Morrison v. Olson. The Supreme Court allowed for-cause

removal of the independent counsel in Morrison only because

the President through his alter ego (the Attorney General) still

retained the authority to remove the independent counsel.

Therefore, the Court emphasized, Morrison was “not a case in

which the power to remove an executive official has been

completely stripped from the President, thus providing no

means for the President to ensure the ‘faithful execution’ of

the laws.” 487 U.S. at 692. This is such a case. The

1

By the President’s “alter ego,” I mean the head of a

department who is removable at will by the President, such as the

Attorney General or the Secretary of the Treasury. The Supreme

Court has recognized that when the head of a department appoints

inferior officers in that department, the President technically

exercises his removal authority over those inferior officers through

his alter ego, the department head. See Myers, 272 U.S. at 133

(referring to “alter ego” of President); Morrison, 487 U.S. at 692

(describing Attorney General as President’s alter ego for removal of

inferior officer by Attorney General); Ex parte Hennen, 38 U.S.

230, 259-60 (1839).

4

President has no ability to remove the PCAOB members,

either directly or through an alter ego.

The statute’s violation of the Appointments Clause is also

plain. Under Article II as interpreted in Edmond v. United

States, 520 U.S. 651 (1997), the PCAOB members are

principal officers who must be appointed by the President

with the advice and consent of the Senate. They are not

inferior officers because they are not “directed and

supervised” by the SEC, id. at 663: The PCAOB members

are not removable at will by the SEC; the SEC does not have

statutory authority to remove them for failure to follow

substantive SEC direction or supervision; and the SEC does

not have statutory authority to prevent and affirmatively

command, and to manage the ongoing conduct of, Board

inspections, Board investigations, and Board enforcement

actions. Moreover, as the statutory text demonstrates, the

very purpose of this statute was precisely to create an

accounting board that would operate with some substantive

independence from the SEC, not one that would be “directed

and supervised” by the SEC. See, e.g., 15 U.S.C. §§ 7211(c),

7214, 7215, 7217; see also S. Rep. No. 107-205, at 6 (2002)

(“The successful operation of the Board depends upon its

independence . . . .”); 148 CONG. REC. S6327, S6331 (daily

ed. July 8, 2002) (statement of Sen. Sarbanes) (“[W]e need to

establish this oversight board . . . to provide an extra

guarantee of its independence . . . .”). Because PCAOB

members are principal officers under the Edmond test, they

must be appointed by the President with the advice and

consent of the Senate. The Board members are appointed by

the SEC alone; therefore, the statute violates the

Appointments Clause as well.

The two constitutional flaws in the PCAOB statute are

not matters of mere etiquette or protocol. By restricting the

5

President’s authority over the Board, the Act renders this

Executive Branch agency unaccountable and divorced from

Presidential control to a degree not previously countenanced

in our constitutional structure. This was not inadvertent;

Members of Congress designed the PCAOB to have “massive

power, unchecked power.” 148 CONG. REC. at S6334

(statement of Sen. Gramm). Our constitutional structure is

premised, however, on the notion that such unaccountable

power is inconsistent with individual liberty. “The purpose of

the separation and equilibration of powers in general, and of

the unitary Executive in particular, was not merely to assure

effective government but to preserve individual freedom.”

Morrison, 487 U.S. at 727 (Scalia, J., dissenting); see also

Clinton v. City of New York, 524 U.S. 417, 450 (1998)

(Kennedy, J., concurring) (“Liberty is always at stake when

one or more of the branches seek to transgress the separation

of powers.”). The Framers of our Constitution took great care

to ensure that power in our system was separated into three

Branches, not concentrated in the Legislative Branch; that

there were checks and balances among the three Branches;

and that one individual would be ultimately responsible and

accountable for the exercise of executive power. The PCAOB

contravenes those bedrock constitutional principles, as well as

long-standing Supreme Court precedents, and it is therefore

unconstitutional.

Although the constitutional violations here are serious,

two points are important to bear in mind. First, finding the

PCAOB unconstitutional would not itself call into question

the many other independent agencies that dot Washington,

D.C. The heads of those agencies are appointed by and

removable for cause by the President, the precise structure

that Humphrey’s Executor upheld and that is conspicuously

missing from the PCAOB statute. In other words, the

PCAOB is uniquely structured, and a judicial holding

6

invalidating it would be uniquely limited to the PCAOB.

Second, and relatedly, the constitutional flaws here could be

easily and quickly corrected. Congress could simply amend

the statute to require, for example, that the PCAOB members,

like the heads of other agencies, be appointed by the President

with the advice and consent of the Senate and therefore be

removable by the President. Cf. Housing and Economic

Recovery Act of 2008, Pub. L. No. 110-289, 122 Stat. 2654

(2008) (creating new “independent” federal regulator of

Fannie Mae and Freddie Mac appointed by President with

advice and consent of Senate and removable for cause by

President). Alternatively, Congress could make the Board

part of the SEC – directed, supervised, and removable at will

by the Commission just like inferior officers in the SEC. In

the meantime, however, the Board’s structure violates the

Constitution of the United States.

I

As the Supreme Court has indicated, it is always

important in a case of this sort to begin with the constitutional

text and the original understanding, which are essential to

proper interpretation of our enduring Constitution. See

Clinton v. City of New York, 524 U.S. 417, 438-40 (1998);

Edmond v. United States, 520 U.S. 651, 658-64 (1997); INS v.

Chadha, 462 U.S. 919, 945-59 (1983); Buckley v. Valeo, 424

U.S. 1, 118-37 (1976). The text and original understanding

are particularly significant in this case: They properly inform

our analysis of the Board’s arguments for extending the

Supreme Court’s 1935 opinion in Humphrey’s Executor to

cover this novel agency structure. I therefore will discuss the

text and original understanding at some length.

“If there is a principle in our Constitution . . . more sacred

than another, it is that which separates the Legislative,

7

Executive and Judicial powers.” Myers v. United States, 272

U.S. 52, 116 (1926) (quoting 1 ANNALS OF CONGRESS 581

(Madison) (1789)). “The principle of separation of powers

was not simply an abstract generalization in the minds of the

Framers: it was woven into the document that they drafted in

Philadelphia in the summer of 1787.” Buckley, 424 U.S. at

124. To protect individual liberty, the Framers did not adopt

a parliamentary system with a Prime Minister dependent on

the Legislature but instead created a President independent

from the Legislative Branch: The President is not selected by

the Congress (except in the rare cases when no Presidential

candidate wins a majority of the state electors’ votes); the

President’s salary is protected against any congressional

diminution; and the President’s term in office is fixed, except

in cases of impeachment by the House and conviction by two-

thirds of the Senate for high crimes and misdemeanors.

Article II of the Constitution addresses the Presidency.

Its first 15 words are definitive: “The executive Power shall

be vested in a President of the United States of America.”

U.S. CONST. art. II, § 1, cl. 1. Article II also grants the

President the sole authority and duty to “take Care that the

Laws be faithfully executed.” Id. art. II, § 3. Under the text

of our Constitution, a single President possesses the entirety

of the “executive power” (whatever the scope of that power

may be) and the entire authority to take care that the laws be

faithfully executed.2

2

It is important to distinguish the question of who is

responsible for exercising the executive power from the question of

the scope of executive power. The fact that a single President is

responsible and accountable for exercising the executive power

does not mean that the scope of executive power is broad or

narrow. Cf., e.g., Neal Kumar Katyal, Hamdan v. Rumsfeld: The

Legal Academy Goes to Practice, 120 HARV. L. REV. 65, 69 n.16

8

The Framers established a single President by design: A

single head of the Executive Branch enhances efficiency and

energy in the administration of the Government. And a single

head furthers accountability by making one person

responsible for all decisions made by and in the Executive

Branch. As the Supreme Court has noted, the “insistence of

the Framers upon unity in the Federal Executive – to ensure

both vigor and accountability – is well known.” Printz v.

United States, 521 U.S. 898, 922 (1997); see also THE

FEDERALIST NOS. 69, 70, 72, 76 (Hamilton); Sierra Club v.

Costle, 657 F.2d 298, 405 (D.C. Cir. 1981); Elena Kagan,

Presidential Administration, 114 HARV. L. REV. 2245,

2332 (2001) (“The Presidency’s unitary power structure, its

visibility, and its ‘personality’ all render the office peculiarly

apt to exercise power in ways that the public can identify and

evaluate.”).

Justice Breyer succinctly summarized the Constitution’s

provision for a single President: “Article II makes a single

President responsible for the actions of the Executive Branch

in much the same way that the entire Congress is responsible

for the actions of the Legislative Branch, or the entire

Judiciary for those of the Judicial Branch. . . . The Founders

created this equivalence by consciously deciding to vest

Executive authority in one person rather than several. They

did so in order to focus, rather than to spread, Executive

responsibility thereby facilitating accountability. . . . [T]hese

constitutional objectives explain why a President, though able

to delegate duties to others, cannot delegate ultimate

responsibility or the active obligation to supervise that goes

(2006) (“The unitary executive theory merely means that truly

executive power is concentrated in the President; the theory alone

does not specify what counts as executive power in the first

place.”).

9

with it.” Clinton v. Jones, 520 U.S. 681, 712-13 (1997)

(concurring in judgment).

Of course, “the President alone and unaided could not

execute the laws. He must execute them by the assistance of

subordinates.” Myers, 272 U.S. at 117. It has been

understood since the beginning of the Republic that “Article

II grants to the President the executive power of the

Government, i.e., the general administrative control of those

executing the laws, including the power of appointment and

removal of executive officers – a conclusion confirmed by his

obligation to take care that the laws be faithfully executed.”

Buckley, 424 U.S. at 136 (quoting Myers, 272 U.S. at 163-64)

(emphasis added).

Under Article II, the President thus necessarily possesses

the power to appoint executive officers who exercise

executive authority delegated by the President and who

otherwise advise and assist the President. See U.S. CONST.

art. II, § 2, cl. 2; id. art. II, § 2, cl. 1 (President “may require

the Opinion, in writing, of the principal Officer in each of the

executive Departments, upon any Subject relating to the

Duties of their respective Offices”); see also Akhil Reed

Amar, Some Opinions on the Opinion Clause, 82 VA. L. REV.

647, 660-68 (1996). Reflecting the Framers’ careful attention

to checks and balances, the text of the Constitution constrains

the President’s appointment power in certain important

respects. In particular, the Appointments Clause provides that

the President may appoint the “principal” executive officers –

a category that includes at least the heads of departments –

only with the advice and consent of the Senate. See U.S.

CONST. art. II, § 2, cl. 2. In other words, the President does

not possess the unilateral power to appoint the Secretary of

Defense or Attorney General, for example, but can do so only

with Senate concurrence. Senate approval helps prevent the

10

Presidential appointment of “unfit characters.” THE

FEDERALIST NO. 76 (Hamilton). Because Senate confirmation

of all executive officers could prove cumbersome, however,

the Appointments Clause also provides that Congress may by

law vest the appointment of “inferior” executive officers in

the President alone or the heads of departments, without the

need for Senate approval. U.S. CONST. art. II, § 2, cl. 2.

To help direct and supervise executive officers – and

thereby to exercise the “executive Power” and “take Care that

the Laws be faithfully executed” – the President possesses not

just the power to appoint, but also the power to remove

executive officers. “Made responsible under the Constitution

for the effective enforcement of the law, the President needs

as an indispensable aid to meet it the disciplinary influence

upon those who act under him of a reserve power of

removal.” Myers, 272 U.S. at 132. The moment that the

President “loses confidence in the intelligence, ability,

judgment or loyalty of any one of them, he must have the

power to remove him without delay.” Id. at 134; see also THE

FEDERALIST NO. 72 (Hamilton) (executive officers “ought to

be considered as the assistants or deputies of the Chief

Magistrate . . . and ought to be subject to his

superintendence”). “The power to remove officers, we have

recognized, is a powerful tool for control.” Edmond, 520 U.S.

at 664. The reason that the power to remove at will translates

into the power to control is evident: “Once an officer is

appointed, it is only the authority that can remove him, and

not the authority that appointed him, that he must fear and, in

the performance of his functions, obey.” Bowsher v. Synar,

478 U.S. 714, 726 (1986) (quoting Synar v. United States, 626

F. Supp. 1374, 1401 (D.D.C. 1986)). If the President were

stripped of plenary removal power over, say, the Secretary of

Defense or the Attorney General, then the President no longer

could fully control and be accountable for the exercise of

11

executive power, as the Constitution demands. In other

words, if Congress could unduly limit the President’s ability

to remove executive officers, the result would be a

fragmented, inefficient, and unaccountable Executive Branch

that the President would lack power to fully direct and

supervise.

Unlike the President’s power to appoint, the President’s

power to remove officers in the Executive Branch is not

limited by the text of the Constitution. And the subject of

removing officers in the Executive Branch “was not discussed

in the Constitutional Convention.” Myers, 272 U.S. at 109-

10.3 The issue of removal of executive officers instead was

first “presented early in the first session of the First

Congress,” during consideration of a bill establishing certain

Executive Branch offices and providing that the officers

would be subject to Senate confirmation and “removable by

the President.” Id. at 109, 111. “Then ensued what has been

many times described as one of the ablest constitutional

debates which has taken place in Congress since the adoption

of the Constitution.” Parsons v. United States, 167 U.S. 324,

329 (1897). Representative James Madison of Virginia and

others argued that Article II provided the President plenary

power to remove executive officers, making the reference in

the bill unnecessary and misleading surplusage. Madison and

his allies “dwelt at length upon the necessity there was for

construing Article II to give the President the sole power of

removal in his responsibility for the conduct of the executive

branch, and enforced this by emphasizing his duty expressly

3

The Constitution provides that all executive and judicial

officers of the Federal Government can be removed through the

impeachment process, U.S. CONST. art. II, § 4, but that has never

been understood to be the exclusive method for removing executive

officers other than the President and Vice President. See Shurtleff

v. United States, 189 U.S. 311, 317 (1903).

12

declared in the third section of the Article to ‘take care that

the laws be faithfully executed.’” Myers, 272 U.S. at 117

(quoting 1 ANNALS OF CONGRESS 496, 497 (Madison)). As

Madison explained, “If the President should possess alone the

power of removal from office, those who are employed in the

execution of the law will be in their proper situation, and the

chain of dependence be preserved; the lowest officers, the

middle grade, and the highest, will depend, as they ought, on

the President, and the President on the community.” Id. at

131 (quoting 1 ANNALS OF CONGRESS 499 (Madison)).

Madison added: “Is the power of displacing an Executive

power? I conceive that if any power whatsoever is in its

nature Executive, it is the power of appointing, overseeing,

and controlling those who execute the laws.” 1 ANNALS OF

CONGRESS 463 (Madison). This Presidential removal power

would preserve “that great principle of unity and

responsibility in the Executive department.” Myers, 272 U.S.

at 131 (quoting 1 ANNALS OF CONGRESS 499 (Madison)).

The House ultimately concurred with Madison’s

understanding and deleted the bill’s express reference to the

manner of removing the officers so as not to imply that the

President’s removal power “might appear to be exercised by

virtue of a legislative grant only.” Id. at 112 (quoting 1

ANNALS OF CONGRESS 579). Congress passed the bill, and

President Washington signed it into law. President

Washington proceeded to assert and use the removal power

throughout his Presidency in order to ensure his personal

control over and direction of the Executive Branch. See

Saikrishna Prakash, Removal and Tenure in Office, 92 VA. L.

REV. 1779, 1827-29 (2006).

Congress’s decision – referred to as the “Decision of

1789” – “provides contemporaneous and weighty evidence of

the Constitution’s meaning since many of the Members of the

13

First Congress had taken part in framing that instrument.”

Bowsher, 478 U.S. at 723-24 (internal quotation marks

omitted). As Chief Justice Marshall explained, the Decision

of 1789 “has ever been considered as a full expression of the

sense of the legislature on this important part of the American

constitution.” 5 JOHN MARSHALL, THE LIFE OF GEORGE

WASHINGTON 200 (1807).

In short, the plain text and original understanding of

Article II establish the broad scope of the President’s

appointment and removal powers. As a leading scholar of the

Constitution’s text has aptly observed, “What Article II did

make emphatically clear from start to finish was that the

president would be personally responsible for his branch.”

AKHIL REED AMAR, AMERICA’S CONSTITUTION: A

BIOGRAPHY 197 (2005).

II

With that grounding in the constitutional text and the

First Congress’s Decision of 1789, I turn to the Supreme

Court’s key precedents interpreting that text and to analysis of

the questions presented in this case. In this Part II, I will

address the removal power issue. In Part III, I will consider

the Appointments Clause question.

A

As explained above, the constitutional text and the

original understanding, including the Decision of 1789,

established that the President possesses the power under

Article II to remove officers of the Executive Branch at will.

That original understanding became widely accepted during

the first 60 years of the Nation. See, e.g., Myers v. United

States, 272 U.S. 52, 149 (1926) (“[T]he construction given to

the Constitution in 1789 . . . may now be considered as firmly

14

and definitely settled, and there is good sense and practical

utility in the construction.”) (citing 1 JAMES KENT,

COMMENTARIES ON AMERICAN LAW, Lecture 14, at 310). Yet

questions over the extent of the President’s removal power

did not end. The issue came to the fore in the wake of the

Civil War and prompted the House of Representatives’s

impeachment of President Andrew Johnson in 1868. As part

of a bitter struggle over Reconstruction, Congress enacted the

Tenure of Office Act in 1867, 14 Stat. 430, ch. 154. That law

prohibited the President from removing certain Executive

Branch officers without the Senate’s concurrence. President

Johnson contended that the Act was unconstitutional; in

defiance of the Act, he removed his Secretary of War without

Senate approval. The House of Representatives responded by

impeaching President Johnson, which was followed by a

narrow Senate acquittal. The contentious Johnson episode

ended in a way that discouraged congressional restrictions on

the President’s removal power and helped preserve

Presidential control over the Executive Branch. The Tenure

of Office Act was itself repealed in 1887. The Johnson

acquittal stands as one of the most important events in

American history in maintaining the separation of powers

ordained by the Constitution. See WILLIAM H. REHNQUIST,

GRAND INQUESTS: THE HISTORIC IMPEACHMENTS OF JUSTICE

SAMUEL CHASE AND PRESIDENT ANDREW JOHNSON 215-16,

230-31, 250 (1992); see also Raines v. Byrd, 521 U.S. 811,

826-28 (1997).

A few decades later in 1897, the Supreme Court

considered a case that arose when President Cleveland fired a

holdover U.S. Attorney from the Harrison Administration.

See Parsons v. United States, 167 U.S. 324 (1897). The

relevant statute established a four-year term for U.S.

Attorneys. A unanimous Court held that the law did not

preclude the President from removing the U.S. Attorney at

15

will, based largely on the constitutional backdrop that

necessarily informed interpretation of the statute. The Court

said the debates and opinions on the removal power from the

Decision of 1789 onward showed a “continued and

uninterrupted practice” of unlimited Presidential removal

power. Id. at 340. “Considering the construction of the

Constitution in this regard as given by the Congress of 1789,

and having in mind the constant and uniform practice of the

Government in harmony with such construction,” the Court

construed the act as “providing absolutely for the expiration

of the term of office at the end of four years, and not as giving

a term that shall last, at all events, for that time.” Id. at 339.

The Court accordingly held that recognition that the officials

“were removable from office at pleasure was but a

recognition of the construction thus almost universally

adhered to and acquiesced in as to the power of the President

to remove.” Id.; see also id. at 330 (“[T]he decision of

Congress in 1789, and the universal practice of the

Government under it, had settled the question beyond any

power of alteration.”).

In Myers v. United States, the Supreme Court thoroughly

addressed the scope of the President’s removal power. See

272 U.S. 52 (1926). In an extraordinarily detailed opinion by

Chief Justice Taft, who had previously served as President

and had a keen understanding of the realities of Executive

Branch governance, the Court reaffirmed the Decision of

1789 and agreed with President Johnson’s view in 1868 that

restrictions on the President’s removal power were

unconstitutional. Id. at 166-67. The dispute in Myers arose

after President Wilson had removed a postmaster without

Senate approval, in violation of an 1872 statute covering the

Post Office Department. The postmaster sued. In upholding

the President’s removal authority and rejecting the

postmaster’s claim, the Court examined the text and history of

16

Article II and outlined the broad reach of the President’s

appointment and removal powers:

The vesting of the executive power in the President

was essentially a grant of the power to execute the

laws. . . . As he is charged specifically to take care that

they be faithfully executed, the reasonable implication,

even in the absence of express words, was that as part of

his executive power he should select those who were to

act for him under his direction in the execution of the

laws. The further implication must be, in the absence of

any express limitation respecting removals, that as his

selection of administrative officers is essential to the

execution of the laws by him, so must be his power of

removing those for whom he can not continue to be

responsible.

Id. at 117. The Myers Court said that the President’s power of

removal over executive officers was “essential to the

execution of the laws by him.” Id. The Court added that the

President’s removal power extended to officers appointed by

the President throughout the Executive Branch, including to

officers who are charged with promulgating regulations or

exercising “quasi-judicial” duties, such as “members of

executive tribunals.” Id. at 135. And the Myers Court made

clear that Congress could play no role in the removal of

executive officers.

Consistent with the constitutional text and the Decision

of 1789, the holding of Myers continues to this day to prohibit

any congressional involvement in the removal of executive

officers. In its 1986 decision in Bowsher v. Synar, for

example, the Court reaffirmed this precise holding. See 478

U.S. 714. The Bowsher Court held that Congress had

impermissibly “intruded into the executive function” by

17

preventing the President’s removal of an executive officer

(the Comptroller General as his duties were then defined)

without congressional approval. Id. at 734. The Court stated

that “Congress cannot reserve for itself the power of removal

of an officer charged with the execution of the laws except by

impeachment.” Id. at 726.

B

If the removal issue in this case were decided based on

the constitutional text, the prevailing understanding of that

text at the time of drafting and ratification and during the First

Congress, the historical practice and common understanding

of that text during the first 146 years of our constitutional

Government, and the leading Supreme Court decisions in

Myers and Parsons, we would face an easy decision. The

PCAOB would be flatly unconstitutional because the statute

restricts the President’s power to remove PCAOB members at

will and thereby to direct and supervise the exercise of

executive power and take care that the laws are faithfully

executed.

It’s not quite that easy, however. Any decision this Court

makes in this area must recognize the central importance of

the Supreme Court’s 1935 decision in Humphrey’s Executor

v. United States, 295 U.S. 602 (1935). The Court there did

not overrule the precise holding of Myers by allowing

congressional involvement in removal of executive officers.

But in tension with Myers, the Court did uphold

congressionally imposed good-cause restrictions on the

President’s removal of certain executive officers. Id. at 631-

32.4 The case arose after a decision by President Franklin

4

Some have questioned the persuasiveness of the

constitutional distinction drawn in removal cases between (i) a

statute generally requiring the President to meet good-cause

18

Roosevelt, upon taking office in 1933, to ask for Humphrey’s

resignation from the Federal Trade Commission. President

Roosevelt wrote in a letter to Humphrey, who had been

standards to remove an officer as in Humphrey’s Executor and (ii) a

statute requiring congressional approval of particular removal

decisions as in Myers. In both cases, the President’s power to

remove is restricted by an Act of Congress; the for-cause approach

arguably just shows, as Madison warned, that Congress can “mask,

under complicated and indirect measures, the encroachments which

it makes on the co-ordinate departments.” THE FEDERALIST NO. 48

(Madison). The apparent theory behind the distinction is that (i)

Congressional diminishment of Presidential authority is different

from (ii) Congressional diminishment of Presidential authority and

concurrent enhancement of its own authority. As Justice Kennedy

has written for the Court, that theory is not an entirely accurate

summary of separation of powers principles: “Even when a branch

does not arrogate power to itself, moreover, the separation-of-

powers doctrine requires that a branch not impair another in the

performance of its constitutional duties.” Loving v. United States,

517 U.S. 748, 757 (1996); see also Clinton v. Jones, 520 U.S. 681,

701 (1997) (quoting this language from Loving with approval).

And as Judge Silberman, writing for himself and Judge Williams,

has recognized, the factual basis for the distinction is dubious: “If

the President’s authority is diminished . . . Congress’ political

power must necessarily increase vis-a-vis the President.” In re

Sealed Case, 838 F.2d 476, 508 (D.C. Cir. 1988), rev’d sub nom.

Morrison v. Olson, 487 U.S. 654 (1988); see also In re Sealed

Case, 829 F.2d 50, 65 n.3 (D.C. Cir. 1987) (Williams, J.,

concurring in part and dissenting in part) (“Power abhors a vacuum.

Unhitching the Independent Counsel from the executive may make

the office naturally prone to domination by the branch that

represents its primary competitor.”); Elena Kagan, Presidential

Administration, 114 HARV. L. REV. 2245, 2271 n.93 (2001) (“As a

practical matter, successful insulation of administration from the

President – even if accomplished in the name of ‘independence’ –

will tend to enhance Congress’s own authority over the insulated

activities.”).

19

appointed by President Hoover: “I do not feel that your mind

and my mind go along together on either the policies or the

administering of” the FTC. Id. at 619. When Humphrey

refused to resign, President Roosevelt fired him. Humphrey

challenged the removal as a violation of the Federal Trade

Commission Act, which provided that the President could

remove commissioners during their statutory term of office

only for “inefficiency, neglect of duty, or malfeasance in

office.” Id.

The Solicitor General defended President Roosevelt’s

decision on constitutional grounds by citing Myers. Yet the

Court ruled for Humphrey. In an opinion by Justice

Sutherland, the Court upheld the statutory limits on the

President’s removal power, allowing the FTC to be “a body

which shall be independent of executive authority, except in

its selection, and free to exercise its judgment without the

leave or hindrance of any other official or any department of

the government.” Id. at 625-26 (emphasis omitted). The

Court stated that the Constitution permitted Congress to

establish independent agencies that “cannot in any proper

sense be characterized as an arm or an eye of the executive.”

Id. at 628; see also Wiener v. United States, 357 U.S. 349,

355-56 (1958) (relying on Humphrey’s Executor and

upholding removal restrictions on members of War Claims

Commission).5

Humphrey’s Executor thereby blessed Congress’s

creation of the so-called “independent” agencies where “at

5

“The rationale of Wiener, which is essentially that Congress

must have implied a for-cause removal restriction when the Court

believes that the functions of the agency demand such tenure

protection, 357 U.S. at 353-56, seems questionable.” The

Constitutional Separation of Powers Between the President and

Congress, 20 Op. Off. Legal Counsel 124, 168 n.115 (1996).

20

least one individual is appointed by the President to a full-

time, fixed-term position with the advice and consent of the

Senate and has protection against summary removal by some

form of ‘for cause’ restriction on the President’s authority.”

Marshall J. Breger & Gary J. Edles, Established by Practice:

The Theory and Operation of Independent Federal Agencies,

52 ADMIN. L. REV. 1111, 1114 (2000). Today, this collection

of independent agencies is commonly understood to include,

among many others, the CFTC, the FCC, the Federal Reserve,

the FTC, FERC, the NLRB, and the SEC. As the cases and

statutes illustrate, what makes an agency “independent” is the

for-cause removal restriction that limits the President’s ability

to remove the heads of the agency – typically to cases of

inefficiency, neglect of duty, or malfeasance in office. See,

e.g., 44 U.S.C. § 3502(5) (listing as “independent” for

purposes of the Paperwork Reduction Act 16 particular

agencies); Breger & Edles, Established By Practice, 52

ADMIN. L. REV. at 1114 n.6, app. at 1236-94 (cataloging

“independent agencies”).

Along the same lines as Humphrey’s Executor, the

Supreme Court’s 1988 decision in Morrison v. Olson upheld a

good-cause restriction on removal of an inferior executive

officer by a head of department who was an alter ego of the

President (that is, by a head of department removable at will

by the President). See 487 U.S. 654. In particular, the Court

upheld the independent counsel provisions of the Ethics in

Government Act of 1978, including the restriction on the

Attorney General’s power to remove an inferior officer (the

independent counsel) only for “good cause.” Id. at 685. In

the Morrison Court’s view, because the President’s alter ego

(the Attorney General) retained the authority to remove the

independent counsel for cause, the President’s “power to

remove” was not “completely stripped.” Id. at 692. The for-

cause removal provision of the statute therefore was deemed

21

not to “unduly trammel[] on executive authority” any more

than in Humphrey’s Executor. Id. at 691. The Court thus

found no constitutionally significant difference for purposes

of Humphrey’s Executor between (i) the President removing

an executive officer for good cause and (ii) a Presidential alter

ego such as the Attorney General removing an executive

officer for good cause. See also In re Sealed Case, 838 F.2d

476, 528 n.30 (D.C. Cir. 1988) (R.B. Ginsburg, J., dissenting)

(Attorney General “is the hand of the President in taking care

that the laws of the United States . . . be faithfully executed.”)

(internal quotation marks omitted) (alteration in original),

rev’d sub nom. Morrison, 487 U.S. 654.6

By permitting a good-cause restriction on the removal of

an executive officer by the President or the President’s alter

ego, there is no doubt that Humphrey’s Executor and

Morrison authorize a significant intrusion on the President’s

Article II authority to exercise the executive power and take

care that the laws be faithfully executed. See Morrison, 487

U.S. at 695 (“It is undeniable that the Act reduces the amount

of control or supervision that the Attorney General and,

6

Like Morrison, the Court’s short and unexplained 19th

Century decision in United States v. Perkins also appeared to allow

restrictions on removal of inferior officers by the head of an

executive agency, at least where the agency was headed by a

principal officer removable at will by the President (there, the

Secretary of the Navy). See 116 U.S. 483 (1886). Assuming

Perkins remains good law on the removability of inferior officers,

see generally John F. Manning, The Independent Counsel Statute:

Reading “Good Cause” in Light of Article II, 83 MINN. L. REV.

1285, 1332-33 n.167 (1999), it goes no further than Morrison in

allowing restrictions on the President’s removal of inferior

executive officers. See Morrison, 487 U.S. at 689 n.27, 690 n.29.

22

through him, the President exercises over the investigation

and prosecution of a certain class of alleged criminal

activity.”); Humphrey’s Executor, 295 U.S. at 628

(independent agencies are not “an arm or an eye of the

executive”).

For that reason, those cases have long been criticized by

many as inconsistent with the text of the Constitution, with

the understanding of the text that largely prevailed from 1789

through 1935, and with prior precedents such as Myers and

Parsons. See, e.g., Geoffrey P. Miller, Independent Agencies,

1986 SUP. CT. REV. 41, 93 (“Humphrey’s Executor, as

commentators have noted, is one of the more egregious

opinions to be found on pages of the United States Supreme

Court Reports.”); Morrison, 487 U.S. at 733-34 (Scalia, J.,

dissenting) (“Today’s decision . . . fails to explain why it is

not true that – as the text of the Constitution seems to require,

as the Founders seemed to expect, and as our past cases have

uniformly assumed – all purely executive power must be

under the control of the President.”).

But we cannot, need not, and do not re-litigate those two

cases here. For this Court, those cases are binding precedents

on the removal question. The question is whether the

Sarbanes-Oxley Act’s restriction on the President’s removal

power over the PCAOB is unconstitutional under Humphrey’s

Executor and Morrison. As I explain below, the PCAOB

contravenes those precedents and violates the Constitution.

C

The removal issue in this case arises because, unlike in

Humphrey’s Executor and Morrison, neither the President nor

a Presidential alter ego can remove the members of the

PCAOB. Rather, the Board is removable only by the

23

Securities and Exchange Commission, and only for cause.

Put another way, the PCAOB is an independent agency

appointed by and removable for cause by another independent

agency.7 This means that the President of the United States is

two levels of for-cause removal away from the PCAOB,

notwithstanding that the PCAOB performs numerous

regulatory and law-enforcement functions at the heart of the

executive power.

In 1935 and 1988, the Supreme Court found that the

President retains at least some authority to remove for-cause

executive officers and thus some degree of control over them.

The Court further said that the President’s power to remove

either directly or through an alter ego was essential to the

constitutionality of the for-cause removal statutes. See

Morrison, 487 U.S. at 692. By contrast, the double for-cause

removal provisions in the Sarbanes-Oxley Act completely

strip the President’s ability to remove PCAOB members,

either directly or through an alter ego, and combine to

eliminate any meaningful Presidential control over the

PCAOB. As one commentator cogently stated, “defenders of

the PCAOB’s structure will have their work cut out for them

7

As an independent agency whose Commissioners are

considered removable by the President only for cause, the SEC

(unlike the Attorney General in Morrison) is not the President’s

alter ego, a point not contested by the Board or the United States as

intervenor. See SEC v. Blinder, Robinson & Co., 855 F.2d 677, 681

(10th Cir. 1988); 44 U.S.C. § 3502(5). Some agencies are

“specifically designed not to have the quality . . . of being subject to

the exercise of political oversight and sharing the President’s

accountability to the people – namely, independent regulatory

agencies such as the Federal Trade Commission and the Securities

and Exchange Commission.” Freytag v. Comm’r of Internal

Revenue, 501 U.S. 868, 916 (1991) (Scalia, J., concurring in part)

(internal quotation marks and alteration omitted).

24

in arguing that the Constitution allows the PCAOB’s five

members to be even more independent from the President

than the members of federal independent agencies.” Donna

M. Nagy, Playing Peekaboo with Constitutional Law: The

PCAOB and Its Public/Private Status, 80 NOTRE DAME L.

REV. 975, 1056 (2005); see also Peter L. Strauss, The Place of

Agencies in Government: Separation of Powers and the

Fourth Branch, 84 COLUM. L. REV. 573, 597 (1984)

(“Whatever arrangements are made, one must remain able to

characterize the President as the unitary, politically

accountable head of all law-administration . . . .”).

This case therefore presents what the majority opinion

rightly labels a constitutional issue of first impression. The

question is whether to extend Humphrey’s Executor and

Morrison to uphold the removal restrictions in this Act – in

other words, to interpret those precedents to permit not just

independent agencies whose heads are removable for cause by

the President or his alter ego, but also independent agencies

whose heads are removable for cause only by other

independent agencies. I would not so stretch Humphrey’s

Executor and Morrison. Four points inform my conclusion.

First, the lengthy recitation of text, original

understanding, history, and precedent above leads to the

following principle: Humphrey’s Executor and Morrison

represent what up to now have been the outermost

constitutional limits of permissible congressional restrictions

on the President’s removal power. Therefore, given a choice

between drawing the line at the holdings in Humphrey’s

Executor and Morrison or extending those cases to authorize

novel structures such as the PCAOB that further attenuate the

President’s control over executive officers, we should opt for

the former. We should resolve questions about the scope of

those precedents in light of and in the direction of the

25

constitutional text and constitutional history. See Bowsher,

478 U.S. at 724-26 & n.4; cf. Hein v. Freedom from Religion

Found., Inc., 127 S. Ct. 2553, 2571-72 (2007). In this case,

that sensible principle dictates that we hold the line and not

allow encroachments on the President’s removal power

beyond what Humphrey’s Executor and Morrison already

permit.

Second, the Supreme Court in Morrison has already

specifically required that the President or his alter ego possess

authority to remove an executive officer protected by a for-

cause removal provision:

Nor do we think that the “good cause” removal

provision at issue here impermissibly burdens the

President’s power to control or supervise the independent

counsel, as an executive official, in the execution of his

or her duties under the Act. This is not a case in which

the power to remove an executive official has been

completely stripped from the President, thus providing no

means for the President to ensure the “faithful

execution” of the laws. Rather, because the independent

counsel may be terminated for “good cause,” 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.

Morrison, 487 U.S. at 692 (emphases added).

That language from Morrison all but resolves the

removal issue in this case. No doubt recognizing that this

passage from Morrison dooms its submission, the Board tries

to dismiss it as “dicta.” PCAOB Br. at 43. I think not: This

discussion contains the Morrison Court’s essential

26

explanation for why the independent counsel statute’s

restriction on removal was permissible under Humphrey’s

Executor. If that language from Morrison has meaning – and

the Court clearly indicated that it would – it requires

invalidation of the PCAOB. Here, unlike in Morrison, the

“power to remove an executive official has been completely

stripped from the President.” 487 U.S. at 692.

Third¸ Justice Holmes reminded us that “a page of history

is worth a volume of logic.” New York Trust Co. v. Eisner,

256 U.S. 345, 349 (1921). Perhaps the most telling indication

of the severe constitutional problem with the PCAOB is the

lack of historical precedent for this entity. Neither the

majority opinion nor the PCAOB nor the United States as

intervenor has located any historical analogues for this novel

structure. They have not identified any independent agency

other than the PCAOB that is appointed by and removable

only for cause by another independent agency. Cf. Bowsher,

478 U.S. at 725 n.4 (“Appellants have referred us to no

independent agency whose members are removable by the

Congress for certain causes short of impeachable offenses, as

is the Comptroller General.”).8 The lack of precedent for the

8

In all the laws enacted since 1789, it is always possible that

Congress has created another structure like the PCAOB that

exercises traditional executive functions and yet is two levels of

for-cause removal away from the President – even though the

research of the parties and the Court has not found such a needle in

the haystack. Even if such an example were uncovered, this kind of

“independent agency appointed by and removable for cause only by

another independent agency” has been rare at best.

As the parties acknowledge, any civil service tenure-protected

employees in independent agencies constitute no precedent for the

PCAOB. First, consistent with the text of the Appointments

Clause, the Article II removal precedents have focused on the

President’s control over “officers” – not “employees,” who are

27

“lesser functionaries” typically exercising ministerial duties.

Buckley v. Valeo, 424 U.S. 1, 126 n.162 (1976). And any civil

servants in independent agencies are employees, not officers,

because they do not exercise “significant authority pursuant to the

laws of the United States.” Id. at 126; cf. In re Sealed Case, 838

F.2d at 497 (“[C]ivil servants are not thought to be the President’s

policymakers.”), rev’d sub nom. Morrison, 487 U.S. 654. Second,

in any event, civil service laws recognize the authority of the

President or agency head to exempt certain employees from tenure

protection as necessary and appropriate. See, e.g., 5 U.S.C. §§

2302(a)(2)(B), 3301-02, 7511(b)(2); cf. id. § 4802 (giving SEC

express authority to hire officers and employees without regard to

civil service laws); see also Steven G. Calabresi & Christopher S.

Yoo, The Unitary Executive in Historical Perspective, 31 ADMIN.

& REG. L. NEWS 5, 5-6 (2005).

Although the Board and the United States as intervenor did not

point to them as a precedent, administrative law judges in the

independent agencies are removable only for cause at the initiation

of the agency that employs them and with approval of the Merit

Systems Protection Board, see 5 U.S.C. § 7521, whose members in

turn are removable only for cause by the President, see id. §

1202(d). But there are good reasons the Board and the United

States did not cite ALJs as a precedent. First, an agency has the

choice whether to use ALJs for hearings, see 5 U.S.C. 556(b);

Congress has not imposed ALJs on the Executive Branch. Second,

many ALJs are employees, not officers. See Landry v. FDIC, 204

F.3d 1125, 1132-34 (D.C. Cir. 2000) (ALJs in FDIC are employees

because they possess only recommendatory powers that are subject

to de novo review by agency). Third, ALJs perform only

adjudicatory functions that are subject to review by agency

officials, see 5 U.S.C. § 557(b), and that arguably would not be

considered “central to the functioning of the Executive Branch” for

purposes of the Article II removal precedents. Morrison, 487 U.S.

at 691-92. Nothing in this dissenting opinion is intended to or

would affect the status of employees in independent agencies who

have congressionally mandated civil service tenure protection or the

status of administrative law judges.

28

PCAOB counsels great restraint by the Judiciary before

approving this additional incursion on the President’s Article

II powers.

Fourth, upholding the PCAOB here would green-light

Congress to create a host of similar entities. Congress could

thereby splinter executive power to a degree not previously

permitted, in serious tension with Article II’s conception of a

single President who can control his subordinates and the

exercise of executive power. Congress would have license to

create a series of independent bipartisan boards appointed by

independent agencies and removable only for cause by such

independent agencies. Imagine an Energy Price Enforcement

Board appointed by and removable only for cause by FERC,

an Indecency Enforcement Board appointed by and

removable only for cause by the FCC, a Mortgage Regulatory

Board appointed by and removable only for cause by the Fed.

All are permissible under the PCAOB’s theory of the case.

But in such a system, where is the President, in whom the

Constitution vests the “executive power”?

In the past, when faced with novel creations of this sort,

the Supreme Court has looked down the slippery slope – and

has ordinarily refused to take even a few steps down the hill.

As Justice Stevens stated for the Court in invalidating the

structure of the Metropolitan Washington Airports

Authority’s Board of Review: “[T]he statutory scheme

challenged today provides a blueprint for extensive expansion

of the legislative power beyond its constitutionally confined

role. . . . Congress could, if this Board of Review were valid,

use similar expedients . . . . As James Madison presciently

observed, the legislature ‘can with greater facility, mask under

complicated and indirect measures, the encroachments which

it makes on the co-ordinate departments.’ Heeding his

warning that legislative ‘power is of an encroaching nature,’

29

we conclude that the Board of Review is an impermissible

encroachment.” Metro. Wash. Airports Auth. v. Citizens for

Abatement of Aircraft Noise, Inc., 501 U.S. 252, 277 (1991)

(quoting THE FEDERALIST NO. 48).

As demonstrated in MWAA, when presented with

arguments for “the kind of practical accommodation between

the Legislature and the Executive that should be permitted in

a ‘workable government,’” id. at 276, the Court has strictly

adhered to the constitutional text and the limitations of Myers

and Humphrey’s Executor and flatly and forcefully said no to

novel policy inventions and corresponding structures that

contravene Article II. See id. at 276-77; Bowsher, 478 U.S. at

736; Buckley v. Valeo, 424 U.S. 1, 132, 138-39 (1976); see

also Clinton v. City of New York, 524 U.S. 417, 438 (1998);

INS v. Chadha, 462 U.S. 919, 945 (1983); cf. Printz v. United

States, 521 U.S. 898, 922 (1997) (striking down Brady Act in

part on separation of powers grounds because it effectively

transferred President’s law enforcement responsibility to state

officials “who are left to implement the program without

meaningful Presidential control (if indeed meaningful

Presidential control is possible without the power to appoint

and remove)”). We should do the same here, lest we give rise

to a new “Fifth Branch” of the Federal Government. Cf.

Strauss, The Place of Agencies in Government: Separation of

Powers and the Fourth Branch, 84 COLUM. L. REV. 573.

In sum, the Sarbanes-Oxley Act created an entity that is

inconsistent with the text and history of Article II, that the

Humphrey’s Executor Court did not confront much less

endorse, that Morrison expressly rejects, that is apparently

unprecedented in our history, and that could well lead to

30

serious additional encroachments on the President’s removal

authority. The PCAOB violates Article II.9

D

Underlying my conclusion that the PCAOB violates

removal precedents is the premise that this double for-cause

removal structure attenuates the President’s control over the

Board more than the typical single for-cause provision

restricts the President’s control over independent agencies

(whose heads are removable for cause directly by the

President). As explained above, text, history, precedent, and

logic demonstrate that this premise is correct.

To be sure, some might argue that the President’s Article

II removal power over independent agencies is already so

crippled by Humphrey’s Executor and Morrison that this

statute does no further discernible damage. The problem with

any such suggestion, however, is that the Supreme Court

upheld the for-cause restrictions at issue in Humphrey’s

Executor and Morrison on the precise factual assumption that

they still permit the President some limited degree of control

over executive officers. The Court concluded that a single

9

The majority opinion seems to argue that the PCAOB is

actually not an independent agency. See Maj. Op. at 23-24, 32-33.

But that is the term that traditionally has been applied by the

Supreme Court, the Congress, and the Executive Branch to

agencies like the PCAOB whose heads are not removable at will.

See, e.g., Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 398

(1995); Bowsher, 478 U.S. at 724 n.4. The majority opinion can try

to argue that this independent agency is constitutionally permissible

under the Supreme Court’s precedents. But its attempt to claim that

the PCAOB is not even an independent agency defies long-

accepted terminology and does not account for the meaning and

effect of for-cause removal restrictions.

31

for-cause restriction did not unduly “interfere with the

President’s exercise of the ‘executive power’ and his

constitutionally appointed duty to ‘take care that the laws be

faithfully executed’ under Article II.” Morrison, 487 U.S. at

690. Importantly, the Morrison Court distinguished the

situation there from a case (like this one) where the power to

remove had been “completely stripped” from the President.

Id. at 692. The double for-cause removal provision at issue

here completely strips the President’s removal power and, as

Morrison anticipated, poses a greater restriction on the

President’s constitutional authority than a single for-cause

provision.

From the other direction, rather than argue that the

President’s well of executive removal power is already

drained by the single for-cause restriction allowed by

Humphrey’s Executor and Morrison (so what’s the harm with

two?), some alternatively might contend that the President’s

control over an independent agency is actually not

significantly affected by a for-cause removal provision (so

again, what’s the harm with two?). The majority opinion

seems to latch onto this theory, see Maj. Op. at 23-24, which

posits that, notwithstanding two for-cause removal provisions,

the President can control the SEC and the PCAOB just as well

as the President can control, for example, the Secretary of

State and the U.S. Ambassador to Iraq. But that suggestion

does not fully account for the text of for-cause statutes, the

realities of Executive Branch decisionmaking, and the long-

standing interpretations and understandings of Congresses,

Presidents, and courts regarding independent agencies.

The for-cause removal restrictions attached to

independent agencies typically prohibit removal except in

cases of inefficiency, neglect of duty, or malfeasance. Those

restrictions have significant impact both in law and in

32

practice. See Freytag v. Comm’r of Internal Revenue, 501

U.S. 868, 916 (1991) (Scalia, J., concurring in part)

(“independent regulatory agencies such as the Federal Trade

Commission and the Securities and Exchange Commission”

are “specifically designed not to have the quality . . . of being

subject to the exercise of political oversight and sharing the

President’s accountability to the people”) (internal quotation

marks and alteration omitted); Mistretta v. United States, 488

U.S. 361, 411 (1989) (good-cause provisions “specifically

crafted to prevent the President from exercising ‘coercive

influence’ over independent agencies”). Humphrey’s

Executor and Wiener demonstrate, for example, that “for

cause” removal requirements forbid dismissal by the

President due to lack of trust in the administrator, see 295

U.S. at 625-26, differences in policy outlook, id., or the mere

desire to install administrators of the President’s choosing,

357 U.S. at 356. In Morrison, the Court therefore took it as a

given that “the degree of control exercised by the Executive

Branch over an independent counsel is clearly diminished in

relation to that exercised over other prosecutors, such as the

United States Attorneys, who are appointed by the President

and subject to termination at will.” 487 U.S. at 696 n.34; see

also Buckley, 424 U.S. at 133 (“The Court in [Humphrey’s

Executor] carefully emphasized that . . . the members of such

agencies were to be independent of the Executive in their day-

to-day operations . . . .”); Humphrey’s Executor, 295 U.S. at

628 (independent agencies “cannot in any proper sense be

characterized as an arm or an eye of the executive”).

Consistent with the plain language, precedents, and

common interpretation of those for-cause provisions,

Presidents, Congresses, and officials in independent agencies

work under the real-world understanding that the heads of the

“independent” agencies possess some degree of

congressionally conferred substantive autonomy from the

33

President (although exactly how much autonomy is not

always clear). That understanding is why Congress continues

to include for-cause removal restrictions when it wants to

create an independent officer with some substantive

autonomy – as it did yet again a few weeks ago. See Housing

and Economic Recovery Act of 2008, Pub. L. No. 110-289,

122 Stat. 2654 (2008) (creating new “independent” federal

regulator of Fannie Mae and Freddie Mac appointed by

President with advice and consent of Senate and removable

for cause by President). In short, the double for-cause

removal restriction cannot be justified by a theory that for-

cause removal restrictions have no real meaning and effect.10

10

There is some respected academic support for reading the

text of the typical for-cause removal restrictions to be all but

indistinguishable from removal at will. But that conclusion is not

obvious as a matter of ordinary statutory interpretation, and it is not

evident, therefore, that this approach would comfortably fall even

within the scope of the constitutional avoidance doctrine. See

Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg. & Constr.

Trades Council, 485 U.S. 568, 575 (1988) (“[W]here an otherwise

acceptable construction of a statute would raise serious

constitutional problems, the Court will construe the statute to avoid

such problems unless such construction is plainly contrary to the

intent of Congress.”); William K. Kelley, Avoiding Constitutional

Questions as a Three-Branch Problem, 86 CORNELL L. REV. 831

(2001). If there is a problem with the statutory for-cause removal

restrictions on the President’s removal of so-called independent

agency heads – and many think there may be, see, e.g., Steven G.

Calabresi & Saikrishna B. Prakash, The President’s Power to

Execute the Laws, 104 YALE L.J. 541, 598 (1994) – the problem is

likely because the for-cause statutes contravene constitutional

principles, not because the relevant political and judicial actors

have misinterpreted the statutes for seven decades to be more

restrictive than their plain language actually requires and

contemplates.

34

Notwithstanding that text, history, precedent, and logic

show that for-cause removal provisions generally have

significant effects, the Board persists in arguing that the

second for-cause restriction at issue here – the restriction on

the SEC’s removal of the Board – does not meaningfully

restrict the SEC’s power over Board members. The

suggestion is that Board members are no different from

inferior officers in the SEC – like the SEC General Counsel –

who are removable at will by the Commission. But the for-

cause removal provision here (as elsewhere) carries real

meaning. It ensures that the Board possesses some degree of

substantive independence from the SEC: In particular, the

SEC has no power to direct and supervise Board inspections,

investigations, and enforcement actions. And the SEC cannot

remove the Board for failing to follow any attempted

substantive direction by the SEC with respect to specific

Board inspections, investigations, and enforcement

decisions – a point the Board never disputes. As a result, the

for-cause removal restriction establishes, just as the

congressional sponsors intended, that the PCAOB has “an

extra guarantee of its independence and its plenary authority

to deal with this important situation.” 148 CONG. REC. S6327,

S6331 (daily ed. July 8, 2002) (statement of Sen. Sarbanes).

The for-cause removal restriction ensures, in other words, that

the PCAOB operates as a “strong independent board.” Cf. id.

at S6330 (statement of Sen. Sarbanes) (“Title I of the bill

creates a strong independent board to oversee the auditors of

public companies.”); S. REP. NO. 107-205, at 2 (2002) (Act

creates “a strong independent board”); id. at 6 (“The

successful operation of the Board depends upon its

independence . . . .”). The for-cause removal provision

supplies the basis for the trenchant observation of one of the

supporters of this legislation that the PCAOB has “massive

35

power, unchecked power.” 148 CONG. REC. at S6334

(statement of Sen. Gramm).11

The Board’s argument for dismissing the impact of this

second for-cause provision is particularly far-fetched in this

case because the statutory restriction on the SEC’s removal of

the Board is far more stringent than the typical for-cause

removal restriction. The Board is designed to be even more

independent from the SEC when performing certain critical

activities than, for example, the independent SEC is from the

President. The statute permits removal only when a Board

member has “willfully” broken the law, has “willfully

abused” his or her authority, or “without reasonable

justification or excuse” has “failed to enforce compliance.”

15 U.S.C. § 7217(d)(3)(A)-(C). This is more restrictive

removal language than the traditional for-cause language of

inefficiency, neglect of duty, or malfeasance. This provision

makes it even clearer that the SEC’s substantive

disagreements with the Board’s decisions regarding specific

inspections, investigations, or enforcement actions do not

justify removal for cause – a critical point that the Board

never contests and that badly undermines its argument for

upholding the double for-cause removal restriction.12

11

I cite these legislative materials not to alter interpretation of

the text, but to demonstrate that the text’s design of the PCAOB as

an independent agency whose heads are protected against removal

except for cause was exactly consistent with the legislative reports

and statements, contrary to the strained interpretation of the

majority opinion. Cf. Maj. Op. at 25-34.

12

The Board notes that this case involves a facial challenge.

But that does not affect the analysis; this is not the kind of case

where a statute might be applied constitutionally in some instances

but not in others. See United States v. Salerno, 481 U.S. 739, 745

(1987). Here, either the PCAOB is unconstitutionally structured, or

it is not. The Board also invokes the doctrine of constitutional

36

The statutory language and history show, in short, that

the effect and purpose of this statute was to wall off the

PCAOB from comprehensive SEC control, not to make the

PCAOB “an arm or an eye” of the SEC. Cf. Humphrey’s

Executor, 295 U.S. at 628. The Board’s counter-factual,

counter-textual argument ignores the double for-cause reality

of this statutory scheme.

***

In sum, neither the President of the United States nor a

Presidential alter ego possesses any power to remove PCAOB

members for cause or otherwise. The unique and apparently

unprecedented double for-cause removal statute – an

independent agency whose heads are removable for cause

only by another independent agency – overruns the

boundaries set by Supreme Court precedents in Humphrey’s

Executor and Morrison with respect to congressional

encroachment on Presidential removal authority. I would

hold it unconstitutional as a violation of Article II because it

impermissibly restricts the President’s power to remove

executive officers.13

avoidance and seems to suggest interpreting the statute so as to

minimize if not eliminate the provision restricting the SEC’s

removal of the Board. But the for-cause removal provision cannot

legitimately be read entirely out of the statute; as a result, the

doctrine of constitutional avoidance does not help the Board in

analyzing the removal issue. See DeBartolo Corp., 485 U.S. at

575.

13

The majority opinion claims that this dissent articulates a

theory that the President “must have at-will removal power.” Maj.

Op. at 33. Obviously that is an inaccurate reading of this dissenting

37

III

The Accounting Board also violates the Appointments

Clause of Article II of the Constitution.

A

To reiterate, the Appointments Clause provides that the

President:

shall nominate, and by and with the Advice and Consent

of the Senate, shall appoint Ambassadors, other public

Ministers and Consuls, Judges of the supreme Court, and

all other Officers of the United States, whose

Appointments are not herein otherwise provided for, and

which shall be established by Law: but the Congress may

by Law vest the Appointment of such inferior Officers, as

they think proper, in the President alone, in the Courts of

Law, or in the Heads of Departments.

U.S. CONST. art. II, § 2, cl. 2.

By its plain text, the Appointments Clause governs the

appointment of all “Officers of the United States.” The

PCAOB does not dispute that its members are “officers” of

the United States, rather than mere employees who are “lesser

functionaries.” Buckley v. Valeo, 424 U.S. 1, 126 n.162

(1976). This concession was sound: PCAOB members have

extraordinarily broad power under the Sarbanes-Oxley Act of

2002 to, among other things, promulgate rules, initiate and

conduct investigations and inspections, compel testimony, and

opinion. Humphrey’s Executor and Morrison permit certain for-

cause removal statutes. My argument on the removal issue is that

the statute at issue here contravenes those two cases.

38

impose sanctions. They plainly exercise “significant authority

pursuant to the laws of the United States,” and they therefore

are officers who must “be appointed in the manner prescribed

by” the Appointments Clause. Id. at 126; see also Freytag v.

Comm’r of Internal Revenue, 501 U.S. 868, 881 (1991).

As the plain text of Article II provides and as the

Supreme Court has long recognized, the Constitution “for

purposes of appointment very clearly divides all its officers

into two classes.” United States v. Germaine, 99 U.S. 508,

509 (1879). The most important executive officers – the

“principal officers,” a term that includes at least the “heads of

departments” – require nomination by the President and

confirmation by the Senate. The Framers foresaw, however,

that the advice-and-consent process “might be inconvenient”

when “offices became numerous, and sudden removals

necessary.” Id. at 510. The Appointments Clause therefore

says that Congress can provide for appointment of “inferior

officers” either by Presidential nomination and Senate

confirmation or “in the President alone, in the Courts of Law,

or in the Heads of Departments.” U.S. CONST. art. II, § 2, cl.

2.

B

The Appointments Clause issue in this case turns on

whether PCAOB members are “principal” or “inferior”

officers as those terms are understood and have been

explained in Supreme Court decisions. If the members of the

PCAOB are principal rather than inferior officers, then the

Board is an unconstitutional violation of the Appointments

Clause because Board members are not appointed by the

President with the advice and consent of the Senate, but

instead are appointed by the SEC.

39

Unlike with respect to the removal issue, there are

relatively few Supreme Court precedents on the “principal

versus inferior” officer issue for Appointments Clause

purposes. See In re Sealed Case, 838 F.2d 476, 481 (D.C.

Cir. 1988) (“Two hundred years after the adoption of the

United States Constitution the federal courts are, essentially

for the first time, required to construe closely the

appointments clause of Article II.”), rev’d sub nom. Morrison

v. Olson, 487 U.S. 654 (1988); see also Note, Congressional

Restrictions on the President’s Appointment Power and the

Role of Longstanding Practice in Constitutional

Interpretation, 120 HARV. L. REV. 1914, 1916 (2007). The

dearth of precedent is easily explained as a matter of text and

history. When Congress provides that appointment to a

specific office requires Presidential appointment with Senate

confirmation, the “principal versus inferior” question is

irrelevant because that appointment procedure is

constitutionally permissible for both principal and inferior

officers. For example, the heads of the independent agencies

are all appointed by the President with the advice and consent

of the Senate, so it does not matter whether the officers are

considered principal or inferior. Moreover, in most situations

where Congress historically has provided for appointment of

an executive officer by the Head of a Department, it was clear

that the officer was inferior to that principal officer – because

Congress did not prevent the principal officer from removing

that inferior officer at will. See generally Ex parte Hennen,

38 U.S. 230, 259-60 (1839).

The Supreme Court most recently and most thoroughly

analyzed the distinction between principal and inferior

officers in Edmond v. United States, 520 U.S. 651 (1997). In

that case, service members challenged the affirmance of their

court-martial convictions by the Coast Guard Court of

Criminal Appeals, an intermediate Executive Branch judicial

40

tribunal within the Department of Transportation. That Coast

Guard Court reviewed decisions of courts-martial, and its

decisions were reviewed by the U.S. Court of Appeals for the

Armed Forces. The service members argued among other

things that the judges of the Coast Guard Court of Criminal

Appeals were “principal officers.” This created a

constitutional problem, they contended, because the judges

had been appointed by the Secretary of Transportation, not by

the President with the advice and consent of the Senate. See

id. at 655-56.

In an opinion by Justice Scalia for eight Justices, the

Supreme Court rejected that argument. Acknowledging that

previous cases had not “set forth an exclusive criterion for

distinguishing between principal and inferior officers for

Appointments Clause purposes,” id. at 661, the Court stated

that “the term ‘inferior officer’ connotes a relationship with

some higher ranking officer or officers below the President:

Whether one is an ‘inferior’ officer depends on whether he

has a superior” other than the President who was nominated

by the President and confirmed by the Senate. Id. at 662. But

it is “not enough” to identify other officers “who formally

maintain a higher rank, or possess responsibilities of a greater

magnitude.” Id. at 662-63. The Court succinctly stated the

test for discerning the difference between the two: Inferior

officers “are officers whose work is directed and supervised

at some level by others who were appointed by Presidential

nomination with the advice and consent of the Senate.” Id. at

663 (emphasis added).

Applying the “directed and supervised” test to the Coast

Guard Court of Criminal Appeals judges, the Edmond Court

concluded that they were inferior officers. See id. at 666.

The Court described two different ways the Coast Guard

judges were “directed and supervised.” First, the Coast Guard

41

judges were “directed and supervised” by the Coast Guard

Judge Advocate General (who is ex officio the General

Counsel of the Department of Transportation) because they

were removable at will by the JAG, and “[t]he power to

remove officers . . . is a powerful tool for control.” Id. at 664

(citing Bowsher v. Synar, 478 U.S. 714, 727 (1986); Myers v.

United States, 272 U.S. 52 (1926)). As the Court also noted,

the JAG prescribed rules of procedure for the court. Second,

the Coast Guard judges were “directed and supervised” by the

Court of Appeals for the Armed Forces because, by statute,

their judicial decisions were subject to review by the Court of

Appeals before the decisions took effect on the accused. The

Coast Guard judges thus had “no power to render a final

decision on behalf of the United States unless permitted to do

so by other Executive officers.” Id. at 665.14

C

Edmond was a relatively easy case in which to apply the

“directed and supervised” test: The officers were removable

at will, and at-will removal has always been considered a

powerful tool for control. See id. at 664. And the case

involved intermediate adjudicatory officers in the Executive

Branch whose decisions were subject to review by a higher

adjudicatory body before taking effect, not executive officers

who performed more typical executive functions such as

14

As Edmond reveals, the analysis of whether an officer is

“directed and supervised” depends on the express language of the

statutes governing the officer in question. The Edmond test does

not contemplate discovery or factual inquiry into how things work

in different agencies with different superiors and subordinates. The

analysis thus does not turn on the vagaries of particular supervisory

relationships or personalities that might result in different degrees

of actual supervision and direction. Rather, the constitutional

analysis focuses on the structure set up by the statutory text.

42

conducting investigations, taking enforcement actions, and

otherwise executing laws passed by Congress.

The task in this case is to apply the Edmond “directed and

supervised” test to traditional executive officers who perform

quintessentially executive functions, such as conducting

investigations and inspections, and bringing enforcement

actions.

Edmond and the basic principles underlying Article II

teach that the key initial question in determining whether an

executive officer is inferior is whether the officer is

removable at will. Removability at will carries with it the

inherent power to direct and supervise: “Once an officer is

appointed, it is only the authority that can remove him, and

not the authority that appointed him, that he must fear and, in

the performance of his functions, obey.” Bowsher, 478 U.S.

at 726 (quoting Synar v. United States, 626 F. Supp. 1374,

1401 (D.D.C. 1986)). Therefore, if an executive officer is

removable at will and is not the head of a department, the

officer ordinarily may be considered inferior for purposes of

the Appointments Clause. And Congress in turn may provide

for appointment by the President alone or by the head of the

department, rather than through Presidential appointment with

Senate advice and consent.15

15

Whether removable-at-will executive officers are principal

or inferior depends on their place in the Executive Branch

organizational chart. The heads of departments have no superior

other than the President; therefore, they are principal officers. By

contrast, the remaining removable-at-will officers in the executive

departments and agencies ultimately report not only to the

President, but also to other superior officers in the Executive

Branch chain of command. Therefore, they may properly be

considered inferior officers.

43

By contrast, an executive officer removable only for

cause is ordinarily designed and understood to be free from

significant substantive direction and supervision by superiors.

Indeed, that’s the whole point of for-cause removal. See

Humphrey’s Executor v. United States, 295 U.S. 602, 625-26

(1935); cf. id. at 629 (“[I]t is quite evident that one who holds

his office only during the pleasure of another cannot be

depended upon to maintain an attitude of independence

against the latter’s will.”). Because the purpose and effect of

for-cause removal are to give the officer some measure of

substantive independence from direction and supervision, for-

cause officers ordinarily are not “directed and supervised” for

purposes of Edmond. Instead, they presumptively should be

considered principal officers who must be appointed by the

President with the advice and consent of the Senate (as are the

heads of independent agencies other than the PCAOB). The

key, therefore, to applying the Edmond test to a for-cause

executive officer, therefore, is to appreciate that for-cause

removal by its nature is generally inconsistent with the notion

of being “directed and supervised” by a superior officer.16

16

Presuming for-cause officers to be principal officers makes

great sense when one considers the purposes of the Appointments

Clause. Because for-cause officers are designed to be relatively

immune from direction and supervision, it is all the more important

at the front end to ensure full scrutiny of the officers’ character and

qualifications. The combination of Presidential nomination and

Senate confirmation is the constitutionally preferred way to achieve

that goal. See LAURENCE H. TRIBE, 1 AMERICAN

CONSTITUTIONAL LAW § 4-8, at 684 (3d ed. 2000); see also

Freytag, 501 U.S. at 884 (“The Framers understood, however, that

by limiting the appointment power, they could ensure that those

who wielded it were accountable to political force and the will of

the people.”). That, indeed, is how the system works for the

independent agencies (other than the PCAOB) now in existence;

44

To be sure, if a statute expressly provides that a for-cause

officer could be removed for disobeying any direction or

orders by a superior, that officer would be subject to direction

and supervision via the removal power, much like at-will

officers. But the vast majority of agency statutes do not

specify that for-cause officers can be removed for such

disagreement, no doubt because the point of allowing removal

only for cause would not be clear in that situation. Cf.

Elena Kagan, Presidential Administration, 114 HARV. L. REV.

2245, 2323 (2001) (“[A] for-cause removal provision would

buy little substantive independence if the President, though

unable to fire an official, could command or, if necessary,

supplant his every decision.”).

As noted above, in finding the Coast Guard judges to be

inferior officers, Edmond did not refer only to the fact that the

Coast Guard judges were removable at will by the JAG. The

Court also pointed out that the intermediate appellate

adjudicatory body at issue in Edmond could not issue a final

decision; instead, all of its decisions were subject to review

and pre-approval by a superior court if requested by the

accused or the JAG. The Court therefore stated that the

officers in question had “no power to render a final decision

on behalf of the United States unless permitted to do so by

other Executive officers.” 520 U.S. at 665. Although

Edmond involved at-will adjudicatory officers, it is logical to

assume that even for-cause executive officers who perform

traditional executive functions – investigations, enforcement

actions, and the like – still might be considered “directed and

supervised” if a superior other than the President has statutory

authority to prevent and affirmatively command, and to

their heads are appointed by the President with the advice and

consent of the Senate.

45

manage the ongoing conduct of, all significant exercises of

executive authority by the officer.17

Therefore, an officer removable only for cause is

ordinarily not “directed and supervised” for purposes of

Edmond, at least unless (1) the statute expressly provides that

17

The independent counsel in Morrison was considered an

inferior officer even though removable only for cause. But as the

Court in Edmond stated: “Morrison did not purport to set forth a

definitive test for whether an office is ‘inferior’ under the

Appointments Clause. To the contrary, it explicitly stated: ‘We

need not attempt here to decide exactly where the line falls between

the two types of officers . . . .’” 520 U.S. at 661-62 (quoting

Morrison, 487 U.S. at 671). The critical facts that explain

Morrison – and that also make it an unusual case on the inferior

officer issue – are that the office was temporary and the counsel’s

duties and jurisdiction were considered limited. The temporary

nature of the office is the same reason that acting heads of

departments are permitted to exercise authority without Senate

confirmation. See United States v. Eaton, 169 U.S. 331, 343 (1898)

(“Because the subordinate officer is charged with the performance

of the duty of the superior for a limited time and under special and

temporary conditions, he is not thereby transformed into the

superior and permanent official.”); see also Designation of Acting

Dir. of the Off. of Mgmt. & Budget, Op. Off. Legal Counsel at 3-4

(2003). Had the independent counsel been a permanent office for

investigation and prosecution of crimes by high-level executive

officers, and had the statute included the same for-cause removal

restriction, it seems evident that the counsel would have been

considered by the Morrison Court to be a principal officer requiring

appointment by the President with the advice and consent of the

Senate. In any event, for offices that are not temporary, the later

decision in Edmond, not Morrison, controls the inferior-officer

Appointments Clause analysis: Edmond, unlike Morrison, did

expressly purport to set forth a definitive test for inferior officer

status governing future cases such as this one.

46

the officer can be removed for failing to follow a supervisor’s

direction and supervision, or (2) the statute expressly provides

that a superior officer other than the President has authority to

prevent and affirmatively command, and to manage the

ongoing conduct of, all of the officer’s exercises of executive

authority against the public (such as conducting investigations

and taking enforcement actions).

D

Applying the Edmond analysis to this case, PCAOB

members are principal officers.

To begin with, unlike the judges at issue in Edmond,

PCAOB members are not removable at will. The SEC can

remove PCAOB members only for cause.

Nor does the statute satisfy the conditions under which a

for-cause officer can still qualify as inferior. The statute’s

for-cause removal provision does not allow the SEC to

remove PCAOB members for failure to follow SEC direction

and supervision. And the statute does not provide that the

SEC can prevent and affirmatively command, and manage the

ongoing conduct of, all PCAOB functions – most importantly,

inspections, investigations, and enforcement actions.

In that regard, it again bears mention that the whole point

of this statute – as evidenced in the statutory text and history –

was to create an Accounting Board that would not be part of

the SEC and not be subject to direction and supervision by the

SEC with respect to Board inspections, investigations, and

enforcement actions.18 Rather, the text of the Sarbanes-Oxley

18

The House overwhelmingly voted for a bill sponsored by

Representative Oxley that would have authorized an accounting

oversight entity within the SEC. See H.R. 3763, 107th Cong. § 2(b)

47

Act reflects the deliberate legislative choice to create an

independent entity protected by for-cause removal from SEC

interference. As the statutory text repeatedly shows, Congress

did not want the PCAOB to have “here-and-now

subservience” to the SEC. Bowsher, 478 U.S. at 727 n.5.

E

The Board nonetheless cites a scattershot of authorities

that, it suggests, show that the Board is “directed and

supervised” by the SEC and that Board members therefore are

inferior officers. But those arguments are all unavailing. The

key is this: None of the cited authorities gives the SEC power

to prevent and affirmatively command, and to manage the

ongoing conduct of, Board inspections, investigations, and

enforcement actions.

First, the Board contends that after-the-fact review of

Board sanctions by the SEC suffices to show that the SEC

directs and supervises the Board with respect to its

inspections, investigations, and enforcement actions. That

makes little sense. One would not say, for example, that a

U.S. Attorney is directed and supervised by a federal district

court in his or her investigative decisions just because a court

ultimately would have an opportunity to review any

indictment or subpoena challenge. So too here. After-the-

fact judicial or quasi-judicial review of enforcement decisions

following an investigation does not remotely equate to

direction and supervision for purposes of Edmond.

(2002). But the Senate passed Senator Sarbanes’s proposed bill,

which provided for the creation of a new oversight board protected

from SEC interference by means of for-cause removal provisions.

See S. 2673, 107th Cong. § 107 (2002). The Conference

Committee effectively preserved the relevant portions of the Senate

bill. See H.R. REP. NO. 107-610, at 24 (2002) (Conf. Rep.).

48

Second, the Board argues that the SEC has power to

review Board rules before they take effect. That is true – and

if the Board’s sole statutory power were rulemaking, then it

might be reasonable to conclude that the Board was “directed

and supervised” for purposes of Edmond. But the problem

with this argument is that the Board also has power to conduct

inspections, investigations, and enforcement actions without

SEC direction and supervision. Being directed and

supervised in only one slice of an officer’s portfolio does not

render the officer inferior if the officer is not directed and

supervised in other significant activities. To qualify as

inferior, an officer must be statutorily subject to direction and

supervision in all significant activities.

Third, the Board points out that the SEC, in certain

circumstances, can exercise, take over, or limit some

investigative and enforcement responsibilities assigned to the

Board if the SEC chooses to do so (after on-the-record

hearings). See 15 U.S.C. §§ 7217(d)(1)-(2). But the SEC’s

exercising, taking over, or limiting the Board’s

responsibilities does not amount to directing and supervising

the PCAOB. For example, Congress can alter the jurisdiction

of particular federal courts, but that does not make judges

inferior to Congress, or “directed and supervised” by

Congress. Congress may switch regulatory authority from

one agency to another, but that does not make the initial

agency “directed and supervised” by Congress. Again, the

critical point is this: The SEC’s theoretical power to alter the

Board’s jurisdiction does not equate to power to prevent and

affirmatively command, and to manage the ongoing conduct

49

of, Board inspections, Board investigations, and Board

enforcement actions.19

Fourth and finally, the Board seems to argue – albeit only

in one oblique single-sentence footnote – that the SEC

actually has statutory authority to issue rules by which the

SEC could give itself power to direct and supervise all Board

inspections, investigations, and enforcement actions. See

PCAOB Br. at 26 n.3. There is a reason this bootstrapping

argument appears in the Board’s brief only in a single-

sentence footnote. It is incorrect. The statute does not give

the SEC that kind of authority; indeed, such authority would

all but destroy the independence that the statutory text

mandates and that Congress sought to ensure the

This text is long and has been trimmed here. Open the source document for the complete record.