Obscure Cases and Important Principles: Free Enterprise Fund v. PCAOB

October 27, 2009 by

I am currently participating in on online debate under the auspices of the Federalist Society regarding a case hardly anyone has heard of that is now before the U.S. Supreme Court. The case is called Free Enterprise Fund v. Public Company Accounting Oversight Board (PCAOB). It poses the question whether Congress acted permissibly in structuring the PCAOB. Its members are (a) appointed by the Securities and Exchange Commission, not by the President, and (b) removable only by the Securities and Exchange Commission – not by the President – and only for good cause. The Federalist Society has asked its debaters to discuss whether these appointment and removal provisions are unconstitutional.

As my colleague Hal Bruff writes in a forthcoming essay, this is the kind of case only separation of powers cognoscenti typically follow, even though it has the potential – albeit, just slight potential – to revolutionize our separation of powers law. That is because, if the Court overturns the removal provisions, it may well cast into doubt the great many statutes that create administrative agencies throughout the federal government, such as the Federal Trade Commission and the Federal Communications Commission. It could instead vindicate so-called Unitary Executive Theory, which I try to refute in Madison’s Nightmare.

I have reprinted below my opening entry in the debate. Anyone intrigued can follow the unfolding conversation here. The other invited participants are Martin Flaherty, Andrew G. McBride, Gillian E. Metzger, Donna M. Nagy, Tuan Samahon, Christian G. Vergonis, and Christian J. Ward. * * *

Appointments: There’s no real doubt that members of the PCAOB are “officers of the United States.” That is, they have duties regarding the implementation of public law that go beyond the tasks Congress could assign to one of its own committees. Hence, its members must be appointed pursuant to the Appointments Clause. And, under the Appointments Clause, they must be appointed by the President with the advice and consent of the Senate, unless they are “inferior officers,” in which case they may be appointed by the president alone, by the head of a department, or by a court of law.

This is the PCAOB’s greatest vulnerability. The members of the PCAOB may well not be “inferior” in the constitutional sense. Although members are removable for good cause by the SEC, their jurisdiction is far more wide-ranging than that of the independent counsel upheld in Morrison v. Olson. The Court could leave Morrison and its antecedents intact, and enjoin the enforcement operations of the PCAOB on noninferiority grounds.

This is doctrinally the most modest way to overturn the PCAOB, and I predict this will be the result, with hardly any greater implications for separation of powers law. If PCAOB members are deemed “inferior,” then I do not see any other vulnerability on the appointments side. As the Court observed in Morrison, Congress’s discretion in choosing among the designated modes of appointing inferior officers is not limited by the text. There would not be anything constitutionally anomalous in giving the SEC power to appoint people with expertise in corporate accounting.

Removal: The more controversial question involves the limitation on direct removals by the President. It is not controversial under Morrison v. Olson. Morrison said that limitations on presidential removal powers are permissible unless they interfere with the President’s capacity to discharge his constitutionally assigned functions. The President, of course, is constitutionally obligated to take care that the laws be faithfully executed. If a PCAOB member is derelict in this regard, the President must be able to instigate that member’s discharge. Under Sarbanes-Oxley, he cannot do so directly – which was also true in Morrison v. Olson – but the failure of the SEC to correct any such dereliction would presumably be good cause for the dismissal of any recalcitrant SEC Commissioner. Under Morrison, this holds up.

The rub, of course, is that there may well be five members of the Court who would now like to overrule Morrison – Roberts, Alito, Scalia, and Thomas, almost certainly, and quite possibly, Kennedy, who recused himself in Morrison. Reaching out to limit or reverse Morrison, however, would be a conspicuous piece of judicial immodesty, especially since the PCAOB can be invalidated on the less controversial ground of noninferiority. I thus predict the Court will not attack Morrison – but this may be wishful thinking on my part because (a) I agree with Morrison and (b) modesty on the Roberts Court is, at best, an occasional virtue.

Executive Action Report: 10/14/2009 – 10/20/2009

October 21, 2009 by

Wednesday, October 14

Thursday, October 15

  • The President signed a bill to provide financial aid to the government of Pakistan. The bill provides $1.5 billion per year for the next five years to be spent on social programs. No conditions are attached to the funds. Congress passed the bill unanimously.
  • On a visit to New Orleans, President Obama promised not to repeat the mistakes made by the Bush Administration after Hurricane Katrina devastated the city in 2005.

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Weekly Web Watch 10/12/09 – 10/18/09

October 19, 2009 by

Shepard Fairey has admitted that he lied about which photo he used to make his “Hope” poster of then-candidate Barack Obama.  Both photographs in question were taken by the same photographer and both were covered by AP copyright.  However, Fairey’s  work was more transformative of the first photograph than of the one that, well, looks exactly like his poster.  That added transformation would aid him in his fair use claim.  Fairey’s lawyers have filed notice that they intend to withdraw from his suit as a result of his misleading them.

The Obama administration may scrap the pre-emptive war part of the “Bush Doctrine.”  Hat tip to Julian Ku.  Meanwhile, Russia and the U.S. both continue to claim the right to use nuclear weapons in a first-strike capability.

Peter J. Wallison penned an op-ed for the Wall Street Journal in which he points a finger at the federal government for the mortgage crisis.  Wallison points out that the predatory lending theory only tells half the story: Someone had to buy all these toxic assets; often as not, the buyers were government-backed agencies.  Ilya Somin concurs and extends: Not only did government back the purchase of these bad mortgages, they also encouraged excessive risk-taking by the private sector.  Kevin Drum is angered not because of this, but rather because the banks are recovering faster than the rest of the economy because of further government intervention.  And Matthew Yglesias says that we are repeating the pattern.

The Justice Department issued guidelines (.pdf) to prosecutors instructing them to deprioritize the investigation and prosecution of medical marijuana dispensaries.  Jonathan Adler explains that this is a valid exercise of power and thus, like, totally legit, man.

The military is currently meeting all of its recruiting goals.  The Pentagon credits the recession, along with marketing, for the success.  Fred Kaplan, however, says that the Pentagon is fudging.

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Weekly Web Watch 10/5/09 – 10/11/09

October 12, 2009 by

Alfred Nobel

Alfred Nobel

This happened.  Michael Russnow, a general Obama supporter, is irritated by the “cheapening” of the award.  Jonathan Adler argues that this event is not terribly extraordinary; the Prize has often been awarded to people prospectively.  John Miller explains the differences between Obama and other American presidents who have received a Nobel.  Jacob Heilbrunn runs through the list of reasons that Obama deserved the award.  Eugene Volokh questions whether Obama can accept the $1.4 million prize personally or whether the Emoluments Clause requires that he donate it to the country.  As it turns out, he will donate it to charity.  Jonah Goldberg explains why Obama should not decline the award.  And Anne Applebaum finds it bemusing that we care so much about what five Norwegians think (see also John Podhoretz).  On a more abstract level, I agree with Julian Sanchez that the initial reaction was agreement between right and left that this was an odd choice.  However, it quickly turned into a partisan litmus test, aided by the DNC’s claim that questioning the award means that you support the terrorists.

President Obama ruled out any reduction in the number of troops in Afghanistan.  Fellow Nobel laureate Henry Kissinger approves, but says that the U.S. still needs to pursue more engagement with Afghanistan’s neighbors.

James Joyner takes a break from his vacation to give a nice roundup of the tensions developing between President Obama and his top generals.  Obama was reportedly furious at Afghanistan commander Gen. Stanley’ McChrystal’s comments last week in which he called for more troops; now Gen. David Petraeus is becoming more involved in the White House decision-making process.  David Greenberg, however, cautions that we should not read too much into the situation.

The Federal Trade Commission issued a set of guidelines for bloggers and users of social media.  The guidelines are ostensibly directed at viral marketers who try to ensure that blogs and social media sites give positive press; the rules, however, are written so broadly that any blog could run afoul of the regulations if they do not include an “adequate” notice that they are being compensated.  An Arnold & Porter blog gives a summary of the regulations.  Walter Olson notes the overbreadthSlate’s Jack Shafer calls it a “mad power grab.”  And Ken at Popehat warns that trying to pump up your page views could land you in the FTC’s crosshairs.

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Obama’s Peace Prize: The World Bets on American Leadership

October 9, 2009 by

It’s a safe bet that President Obama’s first words this morning were something akin to, “I won what??”  This is, after all, the man who conceded that Arizona State had a point in thinking an honorary degree might be premature.  President Obama – whom I admire deeply – has been in office under 10 months, and the menu of world conflicts seems pretty much as long as last January.

In short, it also seems a safe bet that, in choosing President Obama for the Nobel Peace Prize, the Committee wanted to send a larger message.

As I read it, that message is, “America, we need you.”

The Birthers and Teabaggers will likely say that the Nobel Prize is testament to Obama’s overarching allegiance to European, rather than American values.  Nothing could be farther from the truth.

President Obama has so captured the world’s imagination because he so strikingly embodies an America that the world yearns for – an energetic, diverse, inclusive America that is determined to lead the world, but with the world’s interests in mind.

As the Nobel Committee said, President Obama’s “diplomacy is founded in the concept that those who are to lead the world must do so on the basis of values and attitudes that are shared by the majority of the world’s population.”

This statement takes as a given the fact that the President of the United States is “to lead the world.”  It just says how the world hopes he or she will do so.

This international yearning for enlightened American leadership should come as no surprise.

There will not be a meaningful international anti-nuclear proliferation regime without American leadership.

There will not be a rapprochement between the West and Islam without American leadership.

There will not be lasting peace in the Middle East without American leadership.

There will not be measurable progress against global warming without American leadership,

There will not be worldwide progress in the protection and expansion of human rights – and perhaps, most especially, women’s rights – without American leadership.

These are things for which people around the world yearn.  They do not want America to shed its position of leadership; they want America to abandon unilateralism – the idea that America can lead with indifference to the “values and attitudes that are shared by the majority of the world’s population.”

As an American, I have to say I am grateful and slightly amazed that the eight Bush-Cheney years did not utterly kill the American brand abroad.  An agonizing “what if?” question will always be, “What if, on September 12, 2001, America had embraced a less unilateral vision of world leadership?”  How much closer would we be to the imperative international objectives we now seek?

Because time only moves in one direction, however, Americans should be delighted by the award today bestowed upon our President.  The award is a bet not just on Obama’s future, but on ours.  It is a bet that we can be the America that the world sees in Barack Obama.

Executive Action Report: 09/30/2009-10/06/2009

October 7, 2009 by

Wednesday, September 30

Thursday, October 1

Friday, October 2

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Weekly Web Watch 09/28/09 – 10/4/09

October 5, 2009 by

Analysis of President Obama’s speech to the United Nations continues.  Kenneth Anderson has one of the most well-developed critiques, arguing that the administration is more concerned with multilateralism than with peace.  Meanwhile, Sen. Richard Lugar offered his thoughts on the future of NATO, the senator called for more troops to be deployed to Eastern Europe.

The Senate Judiciary Committee met to mark up proposed amendments to the PATRIOT Act.  The original matchup was between a moderate bill sponsored by Patrick Leahy and one with significantly heightened privacy protections sponsored by Russell Feingold.  However, the first act in the hearing was the replacement of Leahy’s bill with one sponsored by Diane Feinstein that might increase the ability of the FBI to gather intelligence without warrants.  The Electronic Frontier Foundation’s Kevin Bankston liveblogged the hearing here.  Meanwhile, the Justice Department released guidelines that confirm that the FBI is still allowed to conduct “assessments” of groups or individuals without any individualized belief that the target has committed a crime.

Iran’s nuclear facility at Qum continues to perplex some analysts.  Gary Milhollin wrote in the New York Times that the facility must be evidence of an as-yet undiscovered network of nuclear sites.  The Economist says that this ignores how irrationally governments sometimes act.  IOZ is even unkinder as he points out that Milhollin may have already decided Iran is guilty of making nuclear weapons and is taking all evidence to point that way.  The Economist also points out that this marks the third time that Iran has been caught playing fast and loose with the rules of the Non-Proliferation Treaty.  Nathan Hodge says that we may never know the exact capabilities of the Qum reactor.  Christopher Beam has more information on how nuclear inspections work.  The Express (UK) reports that Saudi Arabia has greenlighted an Israeli strike on Iranian nuclear facilities; I have not been able to find a confirming source for that story, however.

Last week, we reported that Vice President Joe Biden had suggested that we move from a counter-insurgency strategy to a counter-terrorism strategy in Afghanistan.  This Thursday, Gen. Stanley McChrystal told the Institute for Strategic Studies that such a strategy would lead to chaos (video and .pdf at the link).  Bruce Ackerman wonders whether the general’s intervention in a policy matter violates the principle of civilian control of the military.  Jonathan Adler thinks that Ackerman (and Michael Cohen) worry too much; this is not disagreement with announced policy, but rather an attempt to influence the formation of a policy that McChrystal, presumably, has valuable experience with.  James Joyner concurs.  Peter Baker points out that President Obama speaks with his theater commanders less than Bush did.  Mark Grimsley says that, historically, Obama’s policy is the more common.  And an attempt by GOP senators to force McChrystal to testify before congress failed on a party-line vote.

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Weekly Web Watch 09/21/09 – 09/27/09

September 29, 2009 by
Gen. Stanley McChrystal

Gen. Stanley McChrystal

The White House is considering a drastic change in Afghanistan strategy, according to the New York Times.  President Obama is, apparently, exploring the feasibility of drawing down the U.S. military presence in Afghanistan and getting out of Afghani politics, leaving the Taliban alone in order to focus exclusively on al-Qaeda.  Gen. Stanley McChrystal, commander of NATO forces in Afghanistan, sent a memo to the President warning that, if he does not receive more troops, the mission in Afghanistan is doomed to failure.  The memo is available here (.pdf).  Dave Schuler points out that, under conventional counter-insurgency doctrine, more than 400,000 troops are necessary to secure Afghanistan.  Spencer Ackerman finds that figure in the memo and reminds us that Afghanistan is supposed to supply at least that many troops and police to the effort.  And Andrew Exum points out that counter-insurgency tactics will increase the number of U.S. casualties.  If you visit that link, however, be aware that Exum has several other posts up with arguments and links supporting a counter-insurgency strategy.

The Justice Department concluded that Congress does not need to pass additional legislation regarding the detention of alleged terrorists.  The DoJ claims that the 2001 Authorization for the Use of Military Force provides the administration all the detention power that it requires.  Adam Serwer points out that this is considered a victory for civil libertarians.  Meanwhile, the administration is preparing to miss the self-imposed deadline for the closure of the detention facility at Guantanamo Bay.

President Obama delivered a speech to the U.N. on Wednesday.  Reaction to the speech has been fairly quiet.  The New York Times was pleased by the greater multilateralism on display, but concerned about the absence of any discussion of Afghanistan.

William Schambra penned an essay claiming that many of President Obama’s political problems can be traced to his affinity for large-scale policy proposals.  David Broder read the essay and pushed it to a wider audience, claiming that Schambra’s analysis pinpoints why Obama’s is unlikely to be a successful presidency.  Joe Klein takes issue with this and accuses Broder of being overly selective with his historical examples.  Stephen Griffin offers additional thoughts, including ways to amend the Constitutional structure in order to make this type of large-scale policymaking easier.

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Executive Action Report: 09/16/2009-09/22/2009

September 23, 2009 by

Wednesday, September 16

  • The White House responded to criticism of its policy of appointing “czars” to oversee specific policy areas. A blog post on the White House website points out that many of the “czars” also existed in the Bush Administration, and that several critics of the practice had voiced support for “czars” in the past.
  • President Obama said that he will not make a “quick decision” about whether to send additional troops to Afghanistan. Military leaders in Afghanistan and at the Pentagon have called for increasing the number of troops in order to conduct a broader counterinsurgency campaign.

Thursday, September 17

  • President Obama announced a shift in United States missile defense policy. The new policy will rely on ship-based missile systems to combat the threat posed by intermediate range missiles launched from Iran. This replaces the Bush Administration’s policy of land-based missiles located in Eastern European countries, a policy that Russia had sharply criticized.

Friday, September 18

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Weekly Web Watch 09/14/09 – 09/20/09

September 21, 2009 by

The Obama administration decided to scrap the Bush administration’s plans for missile defense systems in Poland and the Czech Republic.  Defense Secretary Robert Gates gave more information about the season in a press conference, implicitly rebuking those who claimed this was more about politics than defense.  The New York Times put together a selection of responses to the news.  John Noonan reinforces the point that the old system was about future capabilities, not about present threats.  Nathan Hodge is one of several who points out that announcing this decision on the 70th anniversary of the Soviet invasion of Poland was not the most politically astute move.  And Thomas Joscelyn follows up on the “updated intelligence” reports that led to the decision.

Last week, we noted that the Obama administration was putting in new procedures at Bagram AFB allowing detainees to challenge their detention.  As more details have emerged, however, reaction to this development seems to have shifted.  Spencer Ackerman, Glenn Greenwald, and Alex Knapp all weigh in with some variation of “this replicates Guantanamo at Bagram.”  Ackerman has the best quote: David Remes from Appeal for Justice says that the administration is replicating the Combatant Status Review Tribunals with the new order.  Greenwald points out that these new guidelines were issued one day before the DoJ appealed a ruling (.pdf) that interpreted Boumediene to extend habeas corpus rights to Bagram detainees.

The Obama administration delivered to Congress a document that, it says, lays out metrics to determine victory in Afghanistan.  Foreign Policy managed to acquire and post the entire document.  Spencer Ackerman offers the Cliffs Notes version.  Early reaction seems almost entirely negative, because the “metrics” read more like mission statements than measurable goals.  The Economist has the most disgusted reaction, saying that the document is disappointing and confusing.  Dave Schuler is also unimpressed, calling it a “wishlist” instead of a strategy.  Fred Kagan defends, if not the metrics themselves, at least the thinking behind them.

The Obama administration proposed the creation of a Consumer Financial Protection Agency (CFPA), engendering pushback from several interest groups.  The CFPA would regulate businesses that extend credit to consumers in a wide range of products, including credit cards and mortgages.  Joshua Wright and Todd Zywicki have an essay up that argues that the CFPA is a knee-jerk response to the financial crisis that fundamentally misunderstands what led to the breakdown in financial markets.  Their key argument is that the problem was not the consumers but rather the lenders.  Ilya Somin piles on, arguing that the agency will lead to less (or less effective) consumer protection.  Obama advisor Larry Summers has fired back, accusing business groups of using “scare tactics” like the infamous “death panels” used against health-care reform.  Meanwhile, Judge Jed Rakoff angrily disapproved of a settlement between the Securities and Exchange Commission and Bank of America that, he said, would allow both of those organizations to profit by BofA’s wrongdoing at shareholders’ expense.

Several provisions of the PATRIOT Act are up for renewal, and several Democratic senators are promising to fight for expanded protection of civil liberties.  Julian Sanchez, who wants reform of the PATRIOT Act, has the full text of proposed changes here (.pdf).

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