One of the difficult administrative law questions facing most legal systems today is the tradeoff between independence and accountability. Last Monday, June 28, the US Supreme Court handed down a 5-4 decision in the case of Free Enterprise Fund v. Public Company Accounting Oversight Board that highlights this tension.
We first posted about the oral argument in this case a few months ago here. The Public Company Accounting Oversight Board (hereafter "Board") was created as part of a series of accounting reforms in the Sarbanes-Oxley Act of 2002. The Board is composed of five members appointed by the Securities and Exchange Commission (SEC). While the SEC has oversight of the Board, it cannot remove Board members at will, but only "for good cause shown," "in accordance with" specified procedures. According to the majority opinion written by Chief Justice Roberts, the parties also agree that the Commissioners, in turn, cannot themselves be removed by the President except for "inefficiency, neglect of duty, or malfeasance in office" (although the dissenting opinion written by Justice Breyer argues that the Court, by assumption, reads into the statute books a "for cause removal" phrase that does not appear in the relevant statute and which Congress probably did not intend to write). For the purposes of this post, the most interesting argument of the petitioners was that the Sarbanes-Oxley Act contravened the separation of powers by conferring executive power on Board members without subjecting them to Presidential control. One of the bases for the constitutional challenge was that Board members were insulated from Presidential control by two layers of tenure protection: Board members could only be removed by the SEC for good cause, and the Commissioners could in turn only be removed by the President for good cause.
The Court held that the dual for-cause limitations on the removal of Board members contravene the Constitution's separation of powers. It noted that where the Supreme Court had upheld limited restrictions on the President's removal power, only one level of protected tenure separated the President from an officer exercising executive power. The President -or a subordinate he could remove at will- decided whether the officer's conduct merited removal under the good-cause standard. Here, the Act not only protects Board members from removal except for good cause, but withdraws from the President any decision on whether that good cause exists. That decision is vested in other tenured officers -the Commissioners- who are not subject to the President's direct control. Because the SEC cannot remove a Board member at will, the President cannot hold the Commission fully accountable for the Board's conduct. He can only review the Commissioners' determination of whether the Act's rigorous good-cause standard is met. And if the President disagrees with that determination, he is powerless to intervene -unless the determination is so unreasonable as to constitute "inefficiency, neglect of duty, or malfeasance in office." This arrangement, according to the majority opinion, contradicts Article II's vesting of the executive power in the President. As the Chief Justice wrote, "the diffusion of power carries with it a diffusion of accountability. . . . Without a clear and effective chain of command, the public cannot determine on whom the blame or the punishment of a pernicious measure, or series of pernicious measures ought really to fall" (internal citations omitted). At another point, the majority continues: "if allowed to stand, this dispersion of responsibility could be multiplied. If Congress can shelter the bureaucracy behind two layers of good-cause tenure, why not a third? At oral argument, the Government was unwilling to concede that even five layers between the President and the Board would be too many. The officers of such an agency -safely encased within a Matryoshka doll of tenure protections- would be immune from Presidential oversight, even as they exercised power in the people's name." However, the Court found that the unconstitutional tenure provisions are severable from the remainder of the statute.
This decision is interesting not just because of its holding but also because it points to Chief Justice Roberts' and Justice Breyer's different views of the administrative state reflecting the tension between independence (as a safeguard for agency expert decisionmaking) and political accountability that we identified in the title of the post. As the Chief Justice writes, "[o]ne can have a government that functions without being ruled by functionaries, and a government that benefits from expertise without being ruled by experts. Our Constitution was adopted to enable the people to govern themselves, through their elected leaders. The growth of the Executive Branch, which now wields vast power and touches almost every aspect of daily life, heightens the concern that it may slip from the Executive's control, and thus from that of the people. This concern is largely absent from the dissent's paean to the administrative state."
On the contrary, Justice Breyer notes that the legal question before the Court arises at the intersection of two general constitutional principles: on the one hand, Congress has broad authority to create governmental offices and to structure those offices as it chooses; on the other hand, under the Constitution the President "shall take Care that the Laws be faithfully executed." The same opinion explains that no text, no history, perhaps no precedent provides any clear answer. Therefore, it is important to examine how a particular provision, taken in context, is likely to function. According to Justice Breyer, the functional approach recognizes today's administrative complexity and, more importantly, recognizes the various ways presidential power operates within this context -and the various ways in which a removal provision might affect that power. It also indicates that judges should hesitate before second-guessing a "for cause" decision made by the other branches because, compared to Congress and the President, the judiciary possesses an inferior understanding of the realities of administration, and the manner in which power, including and most especially political power, operates in context. In the case at hand, as the dissenting opinion argues, "Congress and the President had good reason for enacting the challenged ‘for cause' provision. First and foremost, the Board adjudicates cases. This Court has long recognized the appropriateness of using ‘for cause' provisions to protect the personal independence of those who even only sometimes engage in adjudicatory functions. . . . Moreover, in addition to their adjudicative functions, the Accounting Board members supervise, and are themselves, technical professional experts. . . . Here, the justification for insulating the ‘technical experts' on the Board from fear of losing their jobs due to political influence is particularly strong."
As to the future implications of this case, Breyer's dissent identifies 48 federal agencies whose heads are by statute removable only "for cause." In those agencies there are 573 senior officials (just below the top) who themselves are removable only "for cause" and are therefore under this Court's decision subject to constitutional challenges. The bigger question is whether in the future the Court's conservative wing would be willing to go beyond today's prohibition of the two layers of tenure protection and challenge more broadly any limitations on the President's authority to remove agency officials at will. Such limitations were sustained in cases, such as Humphrey's Executor (1935). At this point the five-member majority does not seem to explicitly contemplate overturning these precedents ("[t]he parties do not ask us to reexamine any of these precedents, and we do not do so"). However, the institutional manifestations of this tension between independence and accountability are worth keeping an eye on in the future.