561 U.S. 477, 489, 130 S. Ct. 3138, 3150, 177 L. Ed. 2d 706 (2010)
In 2002 Congress enacted the Sarbanes-Oxley Act, which created the Public Company Accounting Oversight Board as a five-member entity appointed by the Securities and Exchange Commission.1 The Board oversees audits of public companies and possesses authority to inspect registered accounting firms, initiate investigations, and issue sanctions.2 Beckstead and Watts, LLP, a Nevada accounting firm, registered with the Board.3 The Board inspected the firm, released a report critical of its auditing procedures, and began a formal investigation.4
Free Enterprise Fund, a nonprofit organization of which the firm is a member, and Beckstead and Watts sued the Board and its members, the Commission, and the United States in federal district court.5 They sought declaratory and injunctive relief alleging that the Board's structure violated the Constitution.6 The district court determined it had jurisdiction and granted summary judgment to the defendants.7
The Court of Appeals for the District of Columbia Circuit affirmed the district court's judgment in full.8 The Supreme Court granted certiorari.9
Whether the district court had jurisdiction over petitioners' constitutional claims?10
Provisions for agency review do not restrict judicial review unless the statutory scheme displays a fairly discernible intent to limit jurisdiction.11 Courts presume Congress does not intend to limit jurisdiction if a finding of preclusion could foreclose all meaningful judicial review, if the suit is wholly collateral to a statute's review provisions, and if the claims are outside the agency's expertise.12
Yes. The petitioners' constitutional claims are collateral to any Commission orders or rules from which review might be sought under 15 U.S.C. §78y, as they challenge the Board's existence rather than any specific rule or sanction.13 The claims are outside the Commission's competence and expertise, involving standard questions of administrative law rather than technical considerations of agency policy.14 Requiring the petitioners to incur a sanction to test the law's validity would not provide a meaningful avenue of relief.15
The district court therefore properly exercised jurisdiction over the claims brought by Free Enterprise Fund and Beckstead and Watts.16
The district court had jurisdiction over the constitutional claims.17
Whether the dual for-cause limitations on the removal of Board members contravene the Constitution's separation of powers?18
The Constitution vests the executive power in the President.19 The President must be able to oversee the conduct of those who exercise executive power on his behalf by removing them from office if necessary.20 Multilevel for-cause protections that insulate an officer from presidential control violate this constitutional structure.21
Yes. The Sarbanes-Oxley Act protects Board members from removal except for good cause shown after notice and hearing.22 The Commissioners may be removed by the President only for inefficiency, neglect of duty, or malfeasance in office under Humphrey's Executor.23 This dual layer of for-cause protection withdraws from the President any decision on whether good cause exists for removing Board members.24
That decision is vested in the Commissioners who are themselves insulated from direct presidential control.25 The arrangement contradicts Article II's vesting of the executive power in the President.26 It impairs his ability to ensure that the laws are faithfully executed, as applied to the Board created by the Act and challenged by Free Enterprise Fund and Beckstead and Watts.27
The dual for-cause limitations contravene the Constitution's separation of powers.28
Related opinions on this issue
Joined by Stevens, Ginsburg, And Sotomayor, Jj.
Justice Breyer dissented.29 He argued that the dual for-cause provision does not significantly interfere with the President's exercise of executive authority.30 The Commission possesses virtually comprehensive control over the Board's functions.31
This control includes the power to approve or abrogate rules, review sanctions, and relieve the Board of responsibilities.32 The Accounting Board members supervise, and are themselves, technical professional experts. The Court's decision threatens to disrupt the fair and efficient administration of the laws by creating an overly rigid separation-of-powers rule.33
Whether the unconstitutional tenure provisions are severable from the remainder of the statute?34
When confronting a constitutional flaw in a statute, courts limit the solution to the problem by severing any problematic portions while leaving the remainder intact.35 This rule applies if the remainder is fully operative as a law and it is not evident that Congress would have preferred no statute at all.36
Yes. The Board may continue to function as before.37 Its members may be removed at will by the Commission once the tenure restrictions are excised.38 The Act remains fully operative as a law with the removal restrictions severed.39
Nothing in the statute's text or historical context makes it evident that Congress would have preferred no Board at all to a Board whose members are removable at will.40 The judgment of the Court of Appeals is therefore reversed as to the removal issue and the case remanded for further proceedings.41
The unconstitutional tenure provisions are severable from the remainder of the statute.42
Whether the Board's appointment by the Commission is consistent with the Appointments Clause?43
Inferior officers are those whose work is directed and supervised at some level by superiors appointed by the President with the Senate's consent.44 Congress may vest the appointment of inferior officers in the heads of departments.45 The Commission constitutes a department as a freestanding component of the Executive Branch.46
Yes. With the tenure restrictions excised, the Commission possesses the power to remove Board members at will in addition to its other oversight authority.47 This renders the Board members inferior officers whose appointment Congress may permissibly vest in a head of department.48 The Commission is a department under the Appointments Clause because it is a freestanding component of the Executive Branch not subordinate to or contained within any other such component.49
The several Commissioners, and not the Chairman, are the Commission's head.50 The appointment of Board members by the Commission is therefore consistent with the Appointments Clause.51
The Board's appointment by the Commission is consistent with the Appointments Clause.52