Free Enterprise Fund v. PCAOB
Citation: 561 U.S. 477 (U.S. Supreme Court, 2010)
Facts
The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board (PCAOB) to regulate the auditing industry. PCAOB members were appointed by the SEC, not the President, and could be removed by the SEC only for cause. SEC commissioners themselves were removable by the President only for cause. Free Enterprise Fund challenged the constitutionality of this dual-layer for-cause removal protection.
Issue
Does a statutory scheme that insulates agency officers from removal by the President through two successive layers of for-cause protection — removable only by commissioners who are themselves removable only for cause — violate Article II’s vesting of executive power in the President?
Holding
The Supreme Court, 5-4, held that the dual-layer for-cause removal structure was unconstitutional. The President must retain sufficient control over officers who exercise executive power; two layers of for-cause protection eliminated that control. The Court severed the PCAOB’s removal provision to make board members removable by the SEC at will, but left the rest of the statute intact.
Rule
While Congress may provide a single layer of for-cause removal protection for certain officers (per Morrison v. Olson), it may not create a second layer of insulation — protecting an officer from removal by a superior who is herself already protected from presidential removal — because such double-layered protection eliminates presidential control over executive functions.
Significance
Free Enterprise Fund significantly constrains the Morrison v. Olson principle by holding that layered for-cause removal protections are unconstitutional. The case signals the Roberts Court’s greater solicitude for the unitary executive. It is also important for Appointments Clause doctrine — the Court held that PCAOB members are “Officers of the United States” subject to constitutional appointment requirements, not mere employees. The decision raises ongoing questions about the constitutionality of similarly structured independent agencies.