D.C. Circuit Panel Splits 2-1 on Constitutionality of Public Company Accounting Oversight Board:

A very interesting Appointments Clause question, discussed in Free Enterprise Fund v. Public Company Accounting Oversight Board. The split is 2-1, with liberal Judith Rogers and conservative Janice Rogers Brown (no known relation) in the majority, and conservative Brett Kavanaugh dissenting.

UPDATE: Here's Hans Bader's criticism of the majority's reasoning. Hans was one of the lawyers for the plaintiffs.

Hans Bader (mail):
This case was a constitutional challenge to the PCAOB, the regulatory board set up by Sarbanes-Oxley.

The PCAOB's function is enormously important: The red tape generated by the board has cost the stock market over $1.4 trillion, and annually imposes compliance costs of over $35 billion, while providing only illusory benefits for investors.

But rather than being picked by the President with Senate approval, the way important government officials are supposed to be, PCAOB members are picked by SEC Commissioners as a group (which led to a disorganized selection process for the first PCAOB members).

The lawsuit says that violates the Appointments Clause of the Constitution, which requires that government officials be picked by the President or (for minor officials) by the "Head of a Department." The lawsuit also argued that the PCAOB members are so unaccountable to the president, who can't remove them (the SEC Commissioners collectively can, but only for "willful" misconduct), that it violates separation of powers.

In order to reject the constitutional challenges, the court's majority had to rely on inconsistent reasoning. First, it claimed that the SEC's Chairman is NOT the SEC's head, but rather "simply one" of "several commissioners," making the SEC Commissioners collectively the head of the SEC. See Opinion, at pg. 20 ("The [SEC's] Chairman . . . is simply one Commissioner"); Opinion, pg. 21 ("The commission" is a body "whose 'Head' consists of the several commissioners"). Only by doing that could it rule that the SEC Commissioners collectively are the "Head" of a department and thus are permitted by the Appointments Clause to make appointments. (Never mind that the Chairman has been described by the SEC itself as its "chief executive" and "head").

Then, just a few pages later, it suddenly suggested just the opposite: that the SEC's chairman was, after all, the SEC's head. Confronted with the argument that PCAOB members are unaccountable to the President and his appointees, such as the SEC's chairman (who, unlike other SEC commissioners, serves at the president's pleasure), the court stated that the President has indirect influence over the PCAOB through the SEC, because the president picks the SEC Chairman, who "dominates commission policymaking." See Opinion, Pg. 24. The majority said that "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.'" See Opinion, pg. 24. If he "dominates policymaking," is called "the Chairman," and is described by SEC itself as its "head," how is the SEC's Chairman not its "head"?

Is it too much to ask that courts at least use consistent reasoning? Especially in a case like this, which Judge Kavanaugh noted 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."
8.22.2008 3:31pm
Turbo-ip (mail) (www):
Greetings to all. Here [url=] here [/url]
the theme of your discussion is in more detail stated
8.22.2008 3:32pm
Sasha Volokh (mail) (www):
The 3 is silent.
8.22.2008 3:44pm
EH (mail):
The 3 is silent.

Where I come from we pronounce it "Throat-Warbler Mangrove."
8.22.2008 4:02pm
Eugene Volokh (www):
The 3 has been removed. But, yes, it was silent.
8.22.2008 7:35pm
Hans Bader (mail):
Many lawyers and legal scholars, like corporate-law expert Stephen Bainbridge and securities-regulation expert Donna Nagy, have questioned the constitutionality of the board (PCAOB) set up by Sarbanes-Oxley.

The divided court ruling rejecting the constitutional challenge to the PCAOB is not only internally inconsistent (as I have explained above), but also rests on factual premises conceded to be false by a Senator who voted to create the PCAOB.

The 2-to-1 decision by the D.C. Circuit claimed, over a strong dissent by Judge Kavanaugh, that PCAOB members really weren't powerful enough, or independent enough, to be "principal officers" who needed to be appointed by the President with the advice and consent of the Senate, as the text of the Constitution's Appointments Clause explicitly mandates.

But the very legislators who voted to create the PCAOB recognized differently. For example, a Senator who voted to pass Sarbanes-Oxley said that the law gave the PCAOB "massive power," "unchecked power by design."
8.24.2008 12:44pm