Legal Commentary

Free Enterprise Fund: The Lopez of Separation of Powers Doctrine

By John Elwood

I have long thought that if the Court invalidated any provision of Sarbanes-Oxley in Free Enterprise Fund v. PCAOB, 08?861, it would base its decision on the Act?s dual good-cause removal restrictions for Board members. First, because that was the strongest claim as a matter of doctrine. But also because doing so wouldn?t break much china. As the Court noted today in doing just that, ?[t]he parties have identified only a handful of isolated positions in which inferior officers might be protected by two levels of good-cause tenure.?

Free Enterprise Fund thus reminds me a bit of United States v. Lopez, 514 U.S. 549 (1995), in which the Court invalidated the Gun Free School Zones Act of 1990 on the ground it exceeded Congress?s Commerce Clause authority. The offense at question in Lopez was charged fairly infrequently, and thus the Court could warn Congress of the limitations on its power in a case yielding a minimum of immediate disruption.  The same is true here. Aside from some administrative law judges identified by counsel for PCAOB, who might be subject to two layers of for-cause removal restrictions, today?s opinion won?t have much immediate effect outside of the PCAOB. It would have been far more disruptive if the Court would have held for F.E.F. on one of the other grounds it advocated (e.g., that the Board members were principal officers; that a multi-member body cannot be the ?head? of a department for Appointment Clause purposes). 

The comparison to Lopez is also apt because it?s the first time the Court has invalidated a law on this basis in a while.

UPDATE:  Over at Balkinization, Prof. Rick Pildes has an excellent post that is in a similar vein:

I view Chief Justice Roberts?s opinion * * * as a symbolic victory for the ?unitary executive branch? view of the Presidency, but as little more than symbolic. The decision has no practical effect at all on the Sarbanes-Oxley Act; the SEC and the Board that administers the Act will go on as before. Indeed, lost in the headlines will be the fact that the Court actually rejected all the most expansive constitutional challenges to the SEC and to SOX. It accepted only the most narrow challenge * * * .
* * * * *
Moreover, despite the headline of ?Court holds SOX unconstitutional,? the decision is also a loss on many fronts to the ?unitary executive branch? view.

Full post as published by The Volokh Conspiracy on June 28, 2010 (boomark / email).