Free Enterprise Fund v. Public Company Accounting Oversight Board

130 S.Ct. 3138 (2010)


D was created by Congress but the individual members of the Board-like the officers and directors of the self-regulatory organizations-are substantially insulated from the SEC's control. The SEC cannot remove Board members at will, but only “for good cause shown,” “in accordance with” certain procedures. Removal of a Board member requires a formal Commission order and is subject to judicial review. The parties agree that the Commissioners cannot themselves be removed by the President except under the Humphrey’s Executor standard of “inefficiency, neglect of duty, or malfeasance in office.” Beckstead (P1), is a Nevada accounting firm registered with D. D inspected the firm, released a report critical of its auditing procedures and began a formal investigation. Ps then sued the Board and its members, seeking (among other things) a declaratory judgment that the Board is unconstitutional and an injunction preventing the Board from exercising its powers. The District Court granted summary judgment to D. A divided Court of Appeals affirmed. On the merits, the Court of Appeals recognized that the removal issue was “a question of first impression,” as neither that court nor this one “had considered a situation where a restriction on removal passes through two levels of control.” It ruled that the dual restraints on Board members’ removal are permissible because they do not “render the President unable to perform his constitutional duties.” The dissent argued that “the double for-cause removal provisions in the [Act] … combine to eliminate any meaningful Presidential control over the [Board].”