Powers Separation Case May Yield a Blockbuster High Court Ruling

Article excerpt

A dispute one appellate judge called the most important separation-of-powers case involving presidential appointment and removal authority in 20 years could reach the U.S. Supreme Court toward the end of the justices' current term.

Whether this term or next, says an Oklahoma law professor, it could supply one of those eyebrow-raising rulings the court became known for over the past couple of terms.

"It really could be a blockbuster, or indeed a very big case," said Oklahoma City University School of Law professor Michael O'Shea.

Free Enterprise Fund v. Public Company Accounting Oversight Board involves a challenge to an independent board created in the wake of Enron and similar scandals to ride herd on firms that audit public companies.

Free Enterprise Fund, a free-market advocacy group, challenged the PCAOB as a violation of separation of powers.

At issue is the fact that members of the board are appointed, not by the president as are members of most high-level executive-branch entities, but by the U.S. Securities and Exchange Commission.

"It has a very unusual structure," said O'Shea.

He also said that PCAOB members can only be removed by the SEC, and then only for cause.

"They don't serve at the will of the SEC," O'Shea said.

The SEC retains oversight authority over sanctions handed down by the board.

The plaintiffs in the case argued that this "twice removed" procedure violates both the separation of powers and the Appointments Clause in Article II of the U.S. Constitution.

A panel of the U.S. Court of Appeals for the District of Columbia Circuit disagreed, and ruled in favor of the board.

The appeals court said that members of the PCAOB are inferior officers and do not have to be appointed by the president. The majority also said the for-cause limitations on board members' removal by the SEC do not strip the president of sufficient power to influence the board and therefore do not contravene the separation of powers.

Regardless of what the D.C. Circuit does, O'Shea expects the Supreme Court to take the case, because of the fundamental importance of clarifying the separation-of-powers issue.

If and when the case reaches the Supreme Court, O'Shea's prediction is that a majority would hold the PCAOB unconstitutional, as it is currently structured, although it could be restructured in a manner to cure the problem. …