FEF v. PCAOB: The Board's Cross-Motion for Summary Judgment

In September 2006, PCAOB filed a memorandum in opposition to Plaintiffs’ summary judgment motion, and concurrently filed a cross-motion for summary judgment. In a brief filed both in support of the motion and in opposition to Plaintiffs’ motion, the Board argued four points:

The members of the Board are appointed in a manner consistent with the Appointments Clause. Defendant first argues that the SEC Chairman and Commissioners are principal officers under the meaning of Article II because they are appointed by the President with the advice and consent of the Senate. Further, Board members are inferior officers because they fall under SEC supervision. The SEC has oversight regarding the PCAOB’s budget, fees, rule promulgation, and enforcement actions. Since the Board members are inferior officers they are properly appointed by the SEC, pursuant to the Excepting Clause.

SOX does not violate separation of powers. The PCAOB contends that the power to remove Board members need not be vested in the President. The power to remove inferior officers has historically not been granted to the President. Alternatively, through his power to remove the heads of the SEC, the President has the indirect authority to remove PCAOB members.

There is no merit to FEF’s delegation claim. PCAOB argues that Congress may delegate rulemaking authority so long as it provides the agency with “intelligible principles” to guide the agency’s decisions. Additionally, while plaintiffs assert that PCAOB is a private agency, and subject to a more strict delegation standard, for purposes of this claim, they simultaneously claim that the PCAOB is a governmental agency for purposes of their other claims. Perhaps most importantly, it was Congress, and not the Board, that decided that violation of PCAOB rules would carry criminal liability. For this reason, the Board’s delegation of authority was no different than the delegation made to the SEC.

Plaintiffs have a lack of standing. The Board notes that on a motion for summary judgment, a plaintiff must set forth specific facts to support its standing. FEF still has yet to disclose who its members are and how they have been injured, which is required for it to sue on their behalf.

PCAOB cross motion for SJ