The PCAOB will not be found unconstitutional. 

The transcript, briefs, and other primary materials can be found at the DU Corporate Governance web site.

The restrictions on the President's ability to remove SEC commissioners is a core component to Petitioner's argument.  If the President had broad authority to remove SEC commissioners, he/she could effectively control the actions of the PCAOB through this authority.  Moreover, its not enough to contend that the SEC commissioners can only be removed for cause.  The definition of "for cause" must be narrow enough to deprive the President of the ability to remove commissioners when he/she thinks they have not acted with sufficient alacrity with respect to PCABO behavior.

In other words, the argument for unconstitutionality is fundamentally premised on the President's inability to remove except for cause and a narrow reading of the circumstances when cause can be found.  The issue came up often in oral argument.  Perhaps the clearest example occurred in connection with a colloquy between Justice Kennedy and Solicitor General Kagan:

• JUSTICE KENNEDY: I want to ask -- I want to ask one thing: You want us to imply or find -- or you want us to infer from the statute that there's a power in the President to remove SEC commissioners for cause? You want us to find that that is implied in the statute?

• GENERAL KAGAN: Justice Kennedy, the conventional understanding, really, ever -- ever since Humphrey's Executor, is that SEC commissioners are subject to a for-cause removal provision. And the --

• JUSTICE KENNEDY: All right. What is --what is the authority for us to find that there is an implication in the statute to remove just for cause? There is -- wouldn't that be unique in our precedents?

• GENERAL KAGAN: I think that, if I understand the question correctly, I think that the --the implication about --

• JUSTICE KENNEDY: I mean, if there is a removal power implied, why isn't it removal for all purposes -- why can it be limited to just for cause? What authority do we have to do that?

• GENERAL KAGAN: Well, I think that the understanding about the SEC commissioners is that the SEC commissioners were, essentially, the same as the FTC commissioners, which, under -- which, under Humphrey's, were removable only for cause, and as I believe --

• JUSTICE SOTOMAYOR: But that's because the

• GENERAL KAGAN: Yes, but -- you are exactly right, and it's a -- it's a perplexity of this law, but for many, many decades, everybody has assumed that the SEC commissioners are subject to the same for-cause removal provision, and the government has not contested that in this case, nor has Mr. Carvin.

Those favoring the PCAOB need not resolve the issue.  They can assume a for cause removal restriction and a narrow interpretation of the phrase yet conclude that the PCAOB is constitutional. 

Those wanting to strike down the PCAOB, however, have no such luxury.  Assuming predicate interpretations of a statute (that for cause was the appropriate standard and that it was a narrow interpretation) that may or may not ultimately be accurate is not a sound basis for striking down the PCAOB. 

It seems, therefore, that the opponents will have to resolve these issues.  Yet they were not briefed.  They will require an exegesis into statutory authority at the time of the adoption of the Exchange Act.  It seems unlikely that a majority on the Court will resolve these issues, suggesting that there will not be a majority on the Court to strike down the PCAOB. 

The transcript, briefs, and other primary materials can be found at the DU Corporate Governance web site.

A review of the transcript, however, suggests that in fact the Court may not be so divided.  Or, perhaps a better way to say it, is that the Court factions are not so unified.  The conservatives on the Court had a hard time finding a theory that would allow, in a facial challenge, for a determination that the PCAOB was unconstitutional.

Petitioners primarily argued that the PCAOB had unreviewable discretion through its ability to initiate investigations. Justice Scalia seemed unconvinced that the SEC could not prevent improper investigations through its rulemaking authority.  Although counsel for Petitioner denied that the SEC had the authority, the Solicitor General argued otherwise.  As she noted: "But [the SEC] also has authority to set the ground rules by which the Accounting Board does anything and everything. It can say tomorrow -- it can promulgate a rule and say all inspections have to be approved by us, all investigations."  In other words, the one area of concern about unreviewable discretion by the PCAOB was in dispute.  Unless the Court is prepared to resolve the issue, it will likely have to accept the Solicitor General's characterization. 

Justice Kennedy asked only a few questions, at least some of which suggested that he was not impressed with the concern over the PCAOB's investigatory authority.  In the early moments of the argument, he essentially made clear that he considered the "harm" to accounting firms as a result of any investigatory discretion by the PCAOB as a "cost of compliance."  The characterization seemed to suggest that he viewed Petitioners' argument about harm as nothing more than a routine business expense, hardly a basis for ruling a statute unconstitutional. 

Justices Alito and Roberts worked hard to find places where the PCAOB had discretion that was effectively unreviewable.  They suggested that the PCAOB was unique. They questioned counsel about the budget and about salaries paid to board membes.  Jefferey Lamken provided strong responses, repeating over and over that even salaries and budget were subject to SEC oversight.  In the end, neither Justice was able to get a clear example of an aspect of the PCAOB's function that wasn't under the control of the SEC. 

In the end, the PCAOB will hold the votes of the four liberals.  For the conservatives to find the PCAOB unconstitutional, they will have to conclude that the president exercised insufficient control over the PCAOB.  That in turn will require a finding that the double layer of removal authority is per se unconstitutional and that the SEC lacked plenary control over the PCAOB.  While there will be some support for the former, the latter, particularly given the high level of SEC control and the uncertainty of the SEC's rulemaking authority (which arguably could be used to remove even the authority to initiate certain investigations), will be difficult to conclude.

The transcript, briefs, and other primary materials can be found at the DU Corporate Governance web site.

The approach is little more than hyperbole.  Whatever happens in the case, SOX, particularly Section 404 and the heightened governance requirements, will remain unaltered.  At most, Congress will have to merge the PCAOB into the Securities and Exchange Commission, something that all of the parties concede is constitutional. 

A critical issue in the case turns on the constitutionality of the limits on the president's right to remove members of the PCAOB board.  The president has no direct removal authority.  Only the Securities and Exchange Commission can remove them and only for cause.  At the same time, Commissioners on the SEC can only be removed by the president for cause.  (Although as we have noted, and Justice Breyer pointed out at oral argument, there is no explicit provision that limits the president's ability to remove SEC commissioners only for cause).  The president does have plenary authority to designate the chairman. 

The Government took the position that the PCAOB was subject to plenary control by the SEC.  It was, therefore, functionally no different than a branch of the Commission.  The Commission had the right to review all rules, penalties in enforcement proceedings, and even subpoenas.  As such, the PCAOB was no more independent from the president than the SEC itself.  As Solicitor General Kagan noted:

• Mr. Chief Justice, removal is just a tool. Removal is not the ultimate constitutional question. The ultimate constitutional question is the level of presidential control, and the presidential control here is exactly the same with respect to the board's activities as it is with respect to the SEC staff's activities.

The only real exception to the plenary control argument was the right to begin an investigation.  As this exchange between Justice Breyer and counsel for Plaintiff noted:

• JUSTICE BREYER: But I've got one thing on my list. I'm looking to what they control, can't control, the commission. And so far I've written that in your view the commission can investigate people without subpoenas and the commission can do nothing about it, okay? That's one.

• MR. CARVIN: Yes.

• JUSTICE BREYER: Now, what's two?

• MR. CARVIN: Well, I think that that is the main point.

For the Supreme Court to strike down the PCAOB, a majority of the Court will have to find that this degree of discretion violates the Constitution.  They will have to find that the imposition of something described in oral argument as a "cost of doing business" results in a violation of the Constitution. 

The transcript, briefs, and other primary materials can be found at the DU Corporate Governance web site.

• The Inspector General of the Postal Service is an inferior officer. See 5 U.S.C. App. 3 § 8G(f );About the USPS OIG, at http://www.uspsoig.gov/about.htm. But he is removable only for cause by the Governors of the Postal Service, who in turn are removable only for cause. 39 U.S.C. § 202(a)(1), (e)(3). Likewise, the Chief Actuary of the Social Security Administration is an inferior officer. See 42 U.S.C. § 902(c)(1); Office of the Chief Actuary, at http://www.ssa.gov/ OACT/actuaries/organization.html. He too is removable only for cause, and the Commissioner to whom he reports is removable only for cause. 42 U.S.C. § 902(a)(3), (c)(1). Finally, many independent agencies have administrative law judges (ALJs) who are subject to for-cause removal protections. Although some are mere employees, others are clearly inferior officers. ALJs in the Federal Mine Safety and Health Review Commission, for example, are inferior officers because their decisions are final rather than recommendatory and are subject only to limited review. See 30 U.S.C. § 823(d)(1), (2)(A)(ii)(I); Landry, 204 F.3d at 1133-34. All of those ALJs, however, are removable only for cause by officers who in turn are removable only for cause. 30 U.S.C. § 823(b)(1), (2) (incorporating 5 U.S.C. § 7521); 5 U.S.C. § 1202(d). (ALJs cannot be distinguished on the grounds that agencies can choose whether to use them, and that their decisions are subject to agency review. See 537 F.3d at 699 n.8 (Kavanaugh, J., dissenting). 

Plaintiffs' brief is once again written in an unfortunately non-gender neutral manner.  Mary Schapiro, the incoming chair of the SEC, would no doubt be surprised to learn on page 17 that "he serves as Chairman 'at the pleasure of the President.'"  She would likewise be surprised to hear that, in creating the PCAOB,  Congress denied the Chairman "his traditional statutory authority to 'appoint and supervise'" members of the body.  And this is not the only example.  On this basis alone the petition deserves to be denied.

We will wait for the government's response before venturing a prediction on the merits.

The petition is posted on the DU Corporate Governance web site.

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
____________
No. 07-5127 September Term 2008
06cv00217
Filed On: November 17, 2008

Free Enterprise Fund and Beckstead and
Watts, LLP,
Appellants

v.

Public Company Accounting Oversight Board,
et al.,
Appellees

BEFORE: Sentelle*, Chief Judge, and Ginsburg*, Henderson, Rogers, Tatel,
Garland, Brown, Griffith*, and Kavanaugh*, Circuit Judges

O R D E R

Appellants’ petition for rehearing en banc and the responses thereto were
circulated to the full court, and a vote was requested. Thereafter, a majority of the
judges eligible to participate did not vote in favor of the petition. Upon consideration of
the foregoing, it is

ORDERED that the petition be denied.

FOR THE COURT:
Mark J. Langer, Clerk
BY: /s/
Michael C. McGrail
Deputy Clerk

* Chief Judge Sentelle, and Circuit Judges Ginsburg, Griffith, and Kavanaugh would
grant the petition for rehearing en banc.

With that in mind, we were a bit surprised to see the motion for reconsideration written without regard to gender neutrality.  This was particularly (but not always) true with respect to references to the president.  Thus, according to the brief:

• Here, the President has been "completely stripped" of his removal power.  Brief, at 4.
• the President has no power to direct the SEC to exercise its discretion to remove a Board member, any more than he could direct the SEC to follow his wishes . . . Brief, at 5. 
• The President's ability to "appoint" does not confer influence over how independent agencies exercise their discretionary power . . . because it is not coupled with the power to remove for failure to follow his policy wishes.  Brief, at 6 n. 3 
• Congress specifically denied the President this power by stripping the Chairman of his heretofore exclusive power to appoint and remove subordinates . . .    Brief, at 6 n. 3 
• "Equally important, even if the President could totally control the SEC through his indirect influence, that still would not enable him to exert any policy influence over Board members who were executing the law in a way he viewed as destructive . . . Brief, at p. 7
• Even assuming arguendo that enhanced SEC control over the board could somehow ameliorate stripping the President of his Article II power, Brief, at 10
• and the President is powerless to switch that power to an agency over which he exercises sufficient control.
• An executive official is an inferior officer only if his work is . . . Brief, at 12.
• Where, as here, an officer cannot be removed for purising policies at odds with the agency's desired policies, then he is not subject to . . . 

• First, the SEC is permitted to remove a PCAOB member only if it finds, after a hearing on the record, that the member willfully violated the Act or Board rules, willfully abused his or her authority, or unreasonably failed to enforce compliance with the Act

The critical issue is the double layer of removal restrictions.  Members of the PCAOB are appointed by the SEC and can only be removed by the SEC for cause.  It is this attenuated influence that is at the heart of the constitutional challenge. Plaintiffs pose the proper question.  They argue that "the President has been 'completely stripped' of his removal power."  Thus, the president can only remove rogue board members by somehow forcing the SEC to do it.  

For the plaintiffs to win, the en banc court will have to accept that the double layer of restrictions is per se unconstitutional, irrespective of the duties assigned to the PCAOB.  After all, Morrison, the key case in this area, defined the test as whether the restriction on removal interfered with the president's ability to carry out his or her constitutionally assigned duties.  Overseeing accounting firms is not a very big or important part of the president's duties.  

The petition is filed on the DU Corporate Governance web site.

The Supreme Court upheld the removal restriction emphasizing that the independent counsel was a position with limited jurisdiction (the panel of judges assigned the relevant matter for investigation) and limited duration (it went away once the investigation was completed).  Although these were the factors emphasized by the Court, it wasn't really about limited jurisdiction or tenure.  It was about whether the task performed by independent counsel somehow involved a critical executive  function.  As the Supreme Court concluded:  "we simply do not see how the President's need to control the exercise of that discretion [the discretion exercised by the independent counsel] is so central to the function of the Executive Branch . . . "  In other words, restrictions on removal of employees in the executive branch are permissible if they are imposed on personnel who are not that important to the function of the presidency.

That accurately describes the PCAOB.  Even though the jurisdiction is arguably broader and the tenure longer (at least more definite), the task of regulating independent auditors isn't central to the function of the president. 

But even if the office can be subject to removal restrictions, that does not mean any restrictions will pass constitutional muster.  If for example Congress were to provide that removal could only occur with the advise and consent of the Senate, this would be unconstitutional, even if it applied to non-central personnel.  In Morrison, the Supreme Court concluded that Congress could limit removal of non-central personnel to good cause where the cause was exercised by the Attorney General.  Presumably, had Congress instead prohibited removal by the president (or anyone appointed by the president), this would have been unconstitutional.  The president must have at least some residual right to police the actions of the members of his or her branch, particularly where they engage in misconduct.

The issue in the PCAOB case, therefore, is whether the double removal restriction was so severe as to deprive the president of any ability to supervise employees in his/her own branch.  One could imagine, for example, that a quadruple removal restriction (four layers of for cause removal restrictions) would make the president's authority to remove so attenuated as to deny it completely.  That was the question in this case:  Whether the president's ability to remove was so attenuated, it effectively did not exist.  Moreover, the analysis might change somewhat depending upon the importance of the non-central official at issue.

In this case, though, the answer is no.  The SEC has extensive supervisory authority over the PCAOB.  The authority constrains the actions of the PCAOB, limiting its discretion.  This oversight is a form of presidential supervision since the commissioners on the SEC are appointed by the president.  Moreover, if real misconduct occurred and the SEC did nothing, the president likely could remove SEC commissioners (for cause) and appoint those who would take the necessary steps against the PCAOB.  Its a blunt authority to say the least.  The president won't be likely to remove members of the Commisson for failing to act against the PCAOB except in the most extreme circumstances.  But that's the point.  In the most extreme circumstances, the president could intervene.  Short of that, the structure requires that auditing standards  be kept above the political fray.

The DC Circuit held that the PCAOB, as a matter of administrative structure, was constitutional.  There were a plethora of issues but the main one was the double layer of for cause removal restrictions.  Congress set up the PCAOB so that the members were appointed by the Securities and Exchange Commission, not the President.  Moreover, members of the board could only be removed for cause by the Commission.  More specifically, the Commission had the right to remove board members for failing to enforce their own rules.

The PCAOB is something like a self regulatory organization, an approach to regulation that has long been present in the securities markets, with the stock exchanges an example.  But the model has problems, in particular the problem of enforcement.  Self regulators have an incentive to go light on their own.  This is not a new problem.  The legislative history to the Exchange Act is replete with discussions of this problem in connection with the NYSE.  Indeed, in adopting the Act, Congress refused to allow the NYSE to regulate the periodic reporting process because of the problem of enforcement and instead gave the authority to the SEC.  Recall that in 1934, Section 13(a) only applied to exchange traded companies.

Because the SEC appoints the members of the PCAOB, rather than the president, this effectively limits the authority of the president over the regulation of auditors.  While this might not sound like any great loss, one could imagine what auditing standards would look like if the system became imbued with excessive political interference (imagine what would have happened with the dispute over the standards for conforming with the attestation requirements of SOX Section 404(b) had the process been more political). 

At the same time, by only allowing the Commission to remove board members for cause, Congress unquestionably was trying to create a regulatory body that was to some degree independent of the regulators.  In other words, Congress didn't want auditor standards set by the president but also didn't want auditor standards set by the SEC.  Instead, Congress wanted an organization that was largely free of bureaucratic impediments and closer to industry.  At the same time, however, the right of the Commission to remove board members for non-enforcement of the rules of the PCAOB meant that the PCAOB couldn't get too close to industry.  It is an interesing experiment in government.  The approach, as the litigation illustrates, raises a number of constitutional questions.

With that in mind, we will do a second post today on the constitutionality issue.

We offer a final note.

There is no doubt at this Blog that the litigation has not yet ended. We fully expect the plaintiffs to file a petition for ceriorari and see if they can attract the attention of the high court. Certainly, the dissent has written one of those opinions designed to attract the attention of those on the Supreme Court most concerned with limits on executive authority. But having said that, we'll be surprised if Justice Scalia is able to convince three others (cert requires four justices to assent) to join him. Why?

First, Judge Kavanaugh is caught in a conundrum. On the one hand, he wants to make the case one of critical importance, a direct threat to the Republic. On the other hand, he knows that he must delicately walk around the independent agency issue. He cannot issue a decision that provides ammunition to those wanting the challenge the constitutionality of independent agencies. That ship has sailed and there is no going back. Consequently, he starts by opining on the importance of the decision but ends with an explanation of the unimportance of the decision. He points out that the decision does not impact the independent agencies and, in fact, only impact the PCAOB. He's not quite right on that, as we have noted, but it sure reduces the power of any argument that the case, if left standing, will disrupt our system of government.

Second, although wanting to defend executive authority, the Supreme Court won't have the executive on its side. It has been the DOJ that has vigorously defended the constitutionality of the PCAOB. Judge Kavanaugh was clearly troubled by this. First, he tries to minimize the government's involvement.

• the Department of Justice representing the United States as intervenor has defended the constitutionality of this statute. To be sure, the defense has been rather tentative; at oral argument, the superb counsel from DOJ refused to say that the structure of the PCAOB would be permissible in any analogous situation, strongly implying that the Executive Branch’s position is a ticket good for this train and this day only. In any event, the Executive Branch has defended the statute as consistent with Article II. This is reason for respectful consideration.

The written transcript suggests a vigorous defense of the Act by the attorney for the DOJ, Mark Stern. 

Judge Kavanaugh then tries to make the case that the DOJ really didn't really believe its own position, that it was a matter of political expediency.

• History tells us that Executive Branch prerogatives have, in some instances, taken a backseat to the President’s other more immediate policy, legislative, or political priorities. The United States as intervenor has argued that the PCAOB is better from a Presidential control perspective than the private self-regulatory accounting organizations that previously existed to regulate the accounting industry. This is an odd argument as a matter of constitutional law. The fact that the President would have less control over a private organization than over an Executive Branch entity is both obvious and irrelevant. It certainly does not excuse compliance with Article II’s principles regarding Presidential appointment and removal of executive officers.

In the end, he is left with the only real response. He disagrees with the DOJ and, as a result, doesn't intend to follow the reasoning.    But added to this is the notion that it falls on Judge Kavanaugh to defend the Constitution, at least where the President won't. 

• But as the Supreme Court has stated when this situation has arisen before, the Judiciary cannot defer to the Executive Branch in justiciable cases affecting individual rights simply because the Executive Branch does not assert its Article II prerogatives. The primary reason, as the Court has explained time after time, is that the separation of powers protects not simply the office and the officeholders, but also individual rights. The point was captured well by Justice Blackmun in his opinion for the Court in Freytag: “In reaching this conclusion, we note that we are not persuaded by the Commissioner’s request that this Court defer to the Executive Branch’s decision that there has been no legislative encroachment on Presidential prerogatives . . . . The structural principles embodied in the Appointments Clause do not speak only, or even primarily, of Executive prerogatives simply because they are located in Article II. . . . The structural interests protected by the Appointments Clause are not those of any one branch of Government but of the entire Republic.” So too here.

The Justice Department is not always right but in this case, a potentially delicate issue dealing with separation of powers, the Supreme Court will get no help from the supposedly aggrieved branch of government.

Finally, even if the Supreme Court wanted to examine whether a somewhat more severe restriction on the president's removal authority was constitutional, this is not the right case, at least for those wanting to strengthen executive authority.  The case, after all, involves the regulation of independent auditors.  In other words, unless the Court was willing to issue a per se rule that these types of restrictions were always unconstitutional (like the way it struck down legislative veto in Chadha), this case simply doesn't intersect in any meaningful way with the president's constitutionally assigned duties.  

We have a limited track record in predicting decisions by the Supreme Court but so far are one for one, having anticiapted the outcome in Stoneridge.  We will therefore offer a prediction in this matter.  A petition for certiorari will be filed and it will be denied.

The dissent goes out of its way to minimize the impact of its reasoning.  Striking down the PCAOB (primarily because of the limitations on the president's removal authority) would, according to the dissent, have little effect and be easily corrected.  

• Third , to reiterate, the PCAOB is uniquely structured, and a judicial holding invalidating it would be uniquely limited to the PCAOB. And Congress could easily fix the constitutional flaws by, for example, making PCAOB members subject to Presidential appointment with the advice and consent of the Senate and therefore 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 fix the problem by making the PCAOB a truly subordinate part of the SEC – for example, by giving the SEC express authority to direct and supervise all Board actions and to fire Board members at will. In such a structure, the Board would not differ from any other inferior officers in the SEC. In the meantime, in my judgment, the Board’s structure violates the Constitution of the United States. 

The opinion (and the supporting documents) are here. 

Second, assuming Congress stays out of it, limitations on removal are permissible if they do not prevent the president from performing his or her "constitutionally assigned duties." Morrison, 487 U.S. at 696. This is a highly underdeveloped area. But in Morrison, the Supreme Court essentially reaffirmed the holding in Humprhey's Executor. That was the case that upheld the restrictions imposed by Congress on the president's abilty to remove commissioners from the Federal Trade Commission. Congress allowed the president to remove them only "for cause." In other words, the Supreme Court held that Congress could limit removal authority by the president for officials that have wide ranging authority without it interfering with the president's "constitutionally assigned duties." Given this blessing of Humphrey's Executor, it is hard to make an argument that limitations on removal of commissioners of the PCAOB somehow interfere with the president's constitutionally assigned duties.

Nonetheless, the double layer of removal restrictions presents at least a unique set of circumstances. The majority addressed the issue in succinct fashion:

• The Fund does not assert that Congress or the judiciary have directly encroached on the Executive Branch’s appointment, removal, or decision making 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.

The PCAOB is subject to extensive supervision by the SEC, with all rules and sanctions subject to review by the agency. As such, the PCAOB was subject to the oversight of a superior. Plaintiff argued that there were places where the PCAOB could intitiate actions without supversion. Thus, for example, the PCAOB could intitiate an investigation without SEC approval although any sanctions ultimately were subject to SEC oversight. The majority rejected the argument.

• Consequently, the Board’s work is necessarily “directed and supervised at some level” by the Commission. 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 were 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.” 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.” 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.

The main argument, however, that took up most of the space in the majority and dissenting opinion, came back to one issue: The restriction on the president's ability to remove commissioners of the PCAOB. (It is the Commission that has this authority and may only remove for cause). Thus, the dissent essentially conflated appointments and removal authority. Limits on removal meant unconstitutional appointment. The majority rightfully noted the central weaknesses in the argument:

• 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 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.

The critical issue was removal (as even the discussion of the appointments issue illustrates). We will discuss that issue next.

The opinion (and the supporting documents) are here.