FREE ENTERPRISE FUND v. PUBLIC COMPANY OVERSIGHT BOARD

Transcript: 

ORAL ARGUMENT OF MICHAEL A. CARVIN ON BEHALF OF THE PETITIONERS

Chief Justice John G. Roberts: We will hear argument first this morning in Case 08-861, Free Enterprise Fund and Beckstead and Watts v. The Public Company Accounting Oversight Board.

Mr. Carvin.

Mr. Carvin: Mr. Chief Justice, and may it please the Court: The board is unique among Federal regulatory agencies in that the President can neither appoint nor remove its members, nor does he have any ability to designate the chairman or review the work product, so he is stripped of the traditional means of control that he has over the traditional independent agencies.

On the other side of the balancing test, Congress provided no reason for stripping him of these traditional means of control.

Justice Ruth Bader Ginsburg: Why do you call it an independent regulatory agency?

I mean, Congress wanted it to be independent of the profession.

That much is clear.

It didn't want it to be independent of the SEC, so why are you characterizing it as an independent regulatory agency?

Mr. Carvin: Justice Ginsburg, by making it public, it made it free of the accounting profession.

So then the next question is: Why didn't they have the same relationship between this agency and the President that the FCC and SEC have?

And, in those instances, the President can appoint and remove the members.

Now, why didn't they do that here?

Justice Ruth Bader Ginsburg: But the--

Mr. Carvin: There was--

Justice Ruth Bader Ginsburg: --The SEC doesn't have another overseer.

I mean, the SEC is set up like the FCC, the other independent regulatory commissions, but this is a board that has a relationship with the SEC, where it can't do anything that doesn't have the SEC's approval.

Mr. Carvin: --There is a buffer between the President and the board, and that's called the SEC, and the board can do many things without the approval of the SEC.

Most notably, it can conduct inspections and investigations.

There is no statutory--

Justice Ruth Bader Ginsburg: It can't even issue a subpoena without the SEC's approval.

Mr. Carvin: --It actually can collect information from anyone associated with the people they regulate, the auditing committees.

If it seeks to get a subpoena from someone outside -- if it seeks information from someone outside--

Justice Ruth Bader Ginsburg: So the SEC really could stop anything?

Mr. Carvin: --It cannot, for example, stop what happened to the Petitioners here.

There is no mechanism in the statute, in any way, shape, or form, for the SEC to stop an inspection or investigation as it is ongoing.

Justice Ruth Bader Ginsburg: What happened to the Petitioners here?

I think, if you were challenging what happened to the Petitioners here, certainly it would be a question of how you would have to do that.

You ordinarily go through the internal proceedings.

But here you are bringing a facial challenge and you say, never mind any particular proceedings; the whole thing is no good.

Mr. Carvin: No, no, and I'm dealing with the inspections issue at large, not for -- for Petitioner or for anyone else, there is no mechanism -- no existing mechanism for the SEC, in any way, to say stop the investigation.

Equally important--

Justice Antonin Scalia: When you say SEC adopt a rule that would give the SEC authority to -- to stop it?

Mr. Carvin: --No, it couldn't, and -- but I think the main point is, Your Honor, it hasn't, and since it hasn't, it doesn't have that authority now.

Justice Antonin Scalia: Well, I'm--

Mr. Carvin: But I can tell you--

Justice Antonin Scalia: --I'm not sure that's the main point.

I think the main -- the main point is whether the FCC could stop it -- the SEC could stop it if it wanted to.

Mr. Carvin: --Yes, and right now it cannot, and that's because--

Justice Antonin Scalia: Never mind "Right now, it cannot".

If it issued a rule that said you need our approval--

Mr. Carvin: --Yes, it cannot issue such a rule.

Justice Antonin Scalia: --It cannot issue such a rule?

Mr. Carvin: Absolutely not.

Justice Antonin Scalia: Why not?

Mr. Carvin: Well, the provision they point to, 7217(d)(1), says it can relieve the board of responsibility, but there is nothing in the statute that gives the SEC to conduct the board's statutory duties.

For example, it couldn't say, we will now collect the fees that are going to the board, we will now conduct the registration that's going to the board.

Justice Antonin Scalia: Well, why -- why isn't this simply relieving the board of responsibility, saying, you no longer have responsibility for -- for investigation and inspection in these areas?

Mr. Carvin: But that--

Justice Antonin Scalia: They could do that, couldn't they?

Mr. Carvin: --No, it can't.

But even if it could, my major point is it can't--

Justice Antonin Scalia: Well, let's talk about whether it can't or not.

Why can't it?

Mr. Carvin: --All right.

If you turn to 39 and 40a of the board's appendix, at the back of the red brief, the board's brief, it walks you through the statutes we have been talking about.

And at the bottom of 39a, that's 7217(d)(1), and that's where it says it can relieve the board of responsibilities.

And I have two points on that.

One is there's nothing in here that gives the SEC the power to assume the responsibility.

It simply says the board need not comply with that obligation.

My second point is: This doesn't stop the board from doing something.

If I relieve my associate of the responsibility to give me a brief tomorrow, I haven't told him he can't do it.

If I want to impose a limitation on him, if I want to say stop, I have to enclose a limitation.

And if you will turn to the very next page--

Justice Antonin Scalia: Don't -- don't you think that's what it means, though, realistically?

Mr. Carvin: --You know, Your Honor, I think that would be--

Justice Antonin Scalia: When you no longer have responsibility to perform a government -- governmental act, you no longer have authority to perform it.

Mr. Carvin: --If you viewed it in isolation, that would be an arguable principle.

But if you turn to the next page, 40a, you see a very specific provision in the statute that talks about how they can impose limitations on the board.

And this is when they want to censure -- impose limitations upon the activities, functions, and operations of the board.

And what do they need to do?

They have to have a hearing that the board has violated or is unable to comply with any provision of this Act or without reasonable justification or excuse.

So Congress has established very serious barriers to the SEC even limiting the board's responsibilities.

Justice Stephen G. Breyer: Well, they don't have to -- they can't issue a subpoena without the board's approval, I take it -- the commission's approval.

Mr. Carvin: They have very serious information-gathering powers totally distinct from the board.

Justice Stephen G. Breyer: What?

Mr. Carvin: Any -- any person who is a registered association or anyone who is associated with them has to provide documents, witness testimony, wholly apart from a subpoena, so anyone who is within the regulatory--

Justice Stephen G. Breyer: Or what?

Mr. Carvin: --Or they will suffer the sanctions that are listed in the statute.

Justice Stephen G. Breyer: And the commission can't change the sanctions?

Mr. Carvin: Well, not -- obviously the commission can review the sanctions.

But the--

Justice Stephen G. Breyer: And it can't -- it can't pass a rule saying, we don't want you to do that?

Mr. Carvin: --Well, sanctions of course are done with order.

They get to review the sanctions after the board has done it.

I'm talk about the prosecutorial, investigative techniques--

Justice Stephen G. Breyer: So as far as -- if the company was ever certain it was right and that the Accounting Board was out of control, completely wrong, the company would just say: I'm not complying--

Mr. Carvin: --Well -- but--

Justice Stephen G. Breyer: --fine, do what you want.

Mr. Carvin: --But--

Justice Stephen G. Breyer: And then at that moment, the group that would decide whether they were right or the board was right would be the commission; is that right?

Mr. Carvin: --Well, I don't think there ever would be a dispute about whether or not they would have access to their documents and their testimony, because it's written right in the statute--

Justice Stephen G. Breyer: It says you don't -- you can get it even without a subpoena?

Mr. Carvin: --Yes, absolutely.

Justice Stephen G. Breyer: Where does it say that?

Or I'll take your word for it.

I'll look it up.

Justice Anthony Kennedy: What happens--

Justice Stephen G. Breyer: I don't want to delay you, so forget it.

I'll look it up later.

Justice Anthony Kennedy: --What happens to the information that the board obtains?

Can the board go public with that--

Mr. Carvin: I think--

Justice Anthony Kennedy: --or is it all confidential?

Mr. Carvin: --I think there are certain confidentiality restrictions as part of their investigative and inspection thing.

It's -- it's the normal kind of inspection, where you go through the investigation and they would review the various documents.

And my -- but my basic point is that that is a very serious burden on American citizens.

That is something that is totally outside the SEC's control.

Justice Anthony Kennedy: The -- the burden of time of compliance?

Mr. Carvin: I'm sorry.

Justice Anthony Kennedy: The burden is because it's difficult and expensive to comply?

Mr. Carvin: That would be one.

Number two -- and I think probably more important -- since the SEC doesn't review it, this board was created to make sure that there was no more Enrons.

So let's look at it from the other perspective.

Let's say the board was negligent or sloppy in ferreting out the kind of auditing standards and abuses that the statute was enacted to do.

The SEC would have no way of knowing that, no way of--

Justice Anthony Kennedy: No -- but I'm -- I'm talking about the harm to your client and to the -- those similarly situated.

Mr. Carvin: --Yes.

Justice Anthony Kennedy: There's the cost of compliance.

What other harms or dangers or risks are inherent in the power of the board unmonitored, unchecked by the SEC, to investigate?

Mr. Carvin: You're right, Your Honor.

The burden here is the burden that Mr. Olson suffered in Morrison v. Olson.

He was never indicted.

There was never any sanctions subject to review.

But he was subject to a burdensome investigation and that is the burden that affects American citizens that is beyond the review of the SEC.

Justice Stephen G. Breyer: But I've got one thing on my list.

I'm looking to what they control, can't control -- the commission.

And so far I've written that in your view the commission can investigate people without subpoenas, and the commission can do nothing about it, okay?

That's one.

Mr. Carvin: Yes.

Justice Stephen G. Breyer: Now, what's two?

Mr. Carvin: Well, I think that that is the main point.

Justice Stephen G. Breyer: Okay.

So we only have one on our list.

Mr. Carvin: Well--

Justice Stephen G. Breyer: Okay.

Mr. Carvin: --But I do want to emphasize that--

Justice Stephen G. Breyer: I'm not saying it's good or bad.

I just want to be sure I have a complete list.

Mr. Carvin: --If I might elaborate slightly, Justice Breyer, I think it's important to understand that they have the ability to inspect foreign auditing firms, and the Cato Institute filed a brief that described the adverse reaction of the 27 countries where they are currently exercising this inspection power abroad.

That is totally beyond the control of the President, obviously, as well as the SEC, to say how these -- how these inspections and investigations are going.

The--

Justice Sonia Sotomayor: They can't pass rules?

Mr. Carvin: --Again, they can pass rules, but the Attorney General--

Justice Sonia Sotomayor: What -- what is the difference between what you are talking about and an employer who says: Look, I can't stick my nose in every bit of business that goes on in my office because that's impossible; otherwise I'd be doing all the work and I just humanly can't.

I'm delegating to you the responsibility to do X, Y, and Z according to these rules of conduct.

Mr. Carvin: --There are three fundamental differences, Justice--

Justice Sonia Sotomayor: What's the difference between that and this scheme?

Mr. Carvin: --In your hypothetical, the principal has exactly the same powers as the subordinate.

Here the subordinate has statutory duties and responsibilities totally distinct from what the SEC can do.

In addition to inspections, they can--

Justice Sonia Sotomayor: Well -- let's break down each part of your argument, please.

You are suggesting that Congress doesn't have the power to determine that a particular principal or agent of the government doesn't have certain responsibilities?

Mr. Carvin: --No, obviously they do.

And what I'm -- you were asking for -- I'm now trying to describe the relationship between the SEC and the board, and the one difference between the normal employer -- employee relationship is that the board has statutory authority wholly distinct from the principal.

Number two, if that subordinate didn't do things the way the principal wanted in the employment situation, the principal could fire the subordinate.

When can the SEC fire the board in these circumstances?

Only when they have committed gross abuses and after notice and opportunity for a hearing.

Justice Stephen G. Breyer: And if you have a statute that says each Department -- Commerce, Justice -- the Attorney General of the United States or the secretary shall appoint an inspector general who will in fact inspect and find ethics violations and that office -- he cannot be removed from that office without cause.

In your view, that's all -- and it would be unconstitutional.

Mr. Carvin: No, no.

In the Interior Department, those are of course the President's alter egos--

Justice Stephen G. Breyer: Yes.

Well, why?

What's the difference?

Mr. Carvin: --Well, two differences.

One is the -- the Secretary of the Interior is the President's alter ego, and so, therefore, the President--

Justice Stephen G. Breyer: So you are saying that the -- the chairman of the SEC does not under the Constitution have the authority or the SEC does not have the authority to appoint individuals who cannot be removed without cause?

Mr. Carvin: --Well, I think there is two points.

Justice Stephen G. Breyer: Or -- or you might be saying they do not have the authority to appoint inferior officers of the United States.

I don't know why they wouldn't have that authority if the Secretary of the Interior has that authority.

Mr. Carvin: Well, because Freytag made it clear that there's a difference between an independent agency, like the Tax Court.

Justice Stephen G. Breyer: What's an independent agency?

Mr. Carvin: Well, in that case was an independent agency in the Executive Branch--

Justice Stephen G. Breyer: Well, what is an independent agency?

Mr. Carvin: --One that is not subject to the President's plenary control.

Justice Stephen G. Breyer: But why isn't -- so why aren't they subject to the President's plenary control?

Mr. Carvin: Because of Humphrey's Executor and because of the removal provisions, which pose very serious removal restrictions on the President's ability to control the SEC.

Justice Sonia Sotomayor: But you just--

Justice Stephen G. Breyer: The SEC.

What -- what restrictions?

Because, interestingly enough, my law clerks have been unable to find any statutory provision that says that the President of the United States can remove an SEC commissioner only for cause.

Mr. Carvin: It is silent, and -- but it still--

Justice Stephen G. Breyer: It's silent.

Mr. Carvin: --Well--

Justice Stephen G. Breyer: Then, in other words--

Justice Antonin Scalia: I don't think the government will think it has achieved a great victory if it comes out of this with the proposition that the SEC is not an independent regulatory agency.

And I don't think the government is arguing that position.

Mr. Carvin: --They have not taken that position.

Justice Stephen G. Breyer: --But that was not what I have asked.

Mr. Carvin: I know.

They haven't taken--

Justice Stephen G. Breyer: I know.

I'm not interested in that.

I'm interested in an answer to my question.

Mr. Carvin: --Yes.

Justice Stephen G. Breyer: And the answer to my -- my question was--

Mr. Carvin: There is--

Justice Stephen G. Breyer: --is there anything in the law, as far as you know, any statute, that says that the President cannot remove a commissioner or the chairman of the SEC but for cause?

Mr. Carvin: --Yes.

Justice Stephen G. Breyer: The answer is there is something?

Mr. Carvin: Yes.

Justice Stephen G. Breyer: Where -- where is that?

Would you refer me to that citation?

Because we couldn't find it.

Mr. Carvin: It's -- they're given 5-year terms, so obviously if you have a term of 5 years, there is no removal provision.

Under this Court's precedent in Wiener, if there is a term, you need to look at the function of the agency.

There was no removal restriction in Wiener.

Justice Ruth Bader Ginsburg: I thought that both sides--

Mr. Carvin: The Court--

Justice Ruth Bader Ginsburg: --I thought that both sides agreed that there is no statute, everybody agrees to that.

But I thought that the government, just as your side, agreed that the President could dismiss an SEC commissioner for cause.

Mr. Carvin: --Yes, with -- pursuant -- yes, for cause, but--

Justice Ruth Bader Ginsburg: Even though there's no statute that says anything either way.

Mr. Carvin: --And the reason we--

Justice Ruth Bader Ginsburg: For cause would be short of the 5-year term.

Mr. Carvin: --The reason we infer FTC, and under Wiener, you need to look at function of the agency to determine the President's removal authority, and--

Justice Antonin Scalia: "For cause" doesn't mean for failure to obey the President's instructions, does it?

Mr. Carvin: --Not under Humphrey's Executor, which made it quite clear that the President had no--

Justice Antonin Scalia: That's why it's called an independent regulatory agency, because it's not subject to presidential control.

Mr. Carvin: --Right.

Justice Stephen G. Breyer: I don't agree with that, but I mean, you do agree.

I thought an independent agency is a function of a number of different things: where it is on the chart, what people's customs have grown up to, expectations about it--

Mr. Carvin: And I will--

Justice Stephen G. Breyer: --what the President might expect he can do or not.

But all those things are not what I'd call hard law.

Mr. Carvin: --It may not be hard law, but--

Justice Stephen G. Breyer: Well but if it's not hard law, then I wonder.

Mr. Carvin: --Well--

Justice Stephen G. Breyer: I mean, that's why I asked the question.

It's not what I have the answer to.

Mr. Carvin: --Well, if Your Honor wants to infer at-will removal of the SEC, that would be effectively overruling Humphrey's Executor.

And if you want to make a--

Justice Stephen G. Breyer: Why?

In Humphrey's Executor there was no provision that said--

Mr. Carvin: --Well--

Justice Stephen G. Breyer: --There was a provision, which we know, that said the President cannot remove an FTC commissioner but for cause.

Have I been wrong on that all those years?

Mr. Carvin: --No, you've been entirely right, but Humphrey's Executor didn't focus on the removal provision.

It said that that removal provision was constitutional, and the reason it was constitutional was because you could make executive actors separate from the chief executive.

The SEC, like the FCC, has always been lumped in with the FTC in terms of that.

If this Court wants to say that -- that those people are subject to the President's plenary--

Justice Antonin Scalia: I'd love to say that.

That would be wonderful.

Mr. Carvin: --I'm not going to stand in your way, because that would obviously--

[Laughter]

That would obviously render the board unconstitutional.

I think the key point here--

Justice Stephen G. Breyer: It would render the board unconstitutional?

Mr. Carvin: --Yes, because--

Justice Stephen G. Breyer: If an executive appointee who is a superior officer of the United States appoints an inferior officer, which inferior officer can be removed only for cause -- I mean, my goodness -- I can -- there are lots of shapes and sizes.

I can't imagine what would be unconstitutional about that.

What?

Mr. Carvin: --Well, Your Honor, if the President called up the head of the SEC and said, I want you to seek sanctions against the chairman of Exxon, under the traditional understanding of Humphrey's Executor the SEC commissioner would not be beholden to follow the President's direction.

The same would be true if he called him up and said, fire the chairman of the PCAOB.

And if that is so, then the President has no ability to remove somebody exercising a very important executive function, and unless we are going to rewrite what has been generally understood as the independence of -- of independent agencies, then there is a fundamental difference between the President's ability to fire an inferior officer at the Justice Department and fire an inferior officer at the independent agency.

Justice Antonin Scalia: This is not an argument you have made anyway.

Can we go on to the arguments that you've made?

Mr. Carvin: Yes.

Justice Antonin Scalia: Thank you.

Mr. Carvin: And in terms of that basic argument, he cannot control, for example, the appointment of the board members, which he could with respect to officers over whom he exercises.

He can't tell the SEC whom to appoint to the board.

And in terms of the question that Justice Scalia asked earlier, I don't think it's a statutory principle that you pretend--

Justice Sonia Sotomayor: --Is it unconstitutional for the President not to be able to appoint an inferior officer?

Mr. Carvin: --Not an inferior officer.

But, of course, these are principal officers for three reasons--

Justice Sonia Sotomayor: Assuming we don't accept your characterization of them?

Mr. Carvin: --Then I have two other arguments, Your Honor.

One is: The SEC cannot be a department under Freytag, because it is an independent agency indistinguishable from the Tax Court.

And -- and what the Freytag majority opinion said was, if you are unlike a cabinet department because you are not subject to political oversight, then--

Justice Antonin Scalia: I hope your case doesn't rest on Freytag.

[Laughter]

Mr. Carvin: --So do I.

I want to take an opportunity to focus on the real point of Freytag, which was made very eloquently in the Freytag dissenting opinion, which was--

[Laughter]

Chief Justice John G. Roberts: And the brief.

[Laughter]

Mr. Carvin: The Appointments Clause is designed to achieve accountability, and even when you are not talking about presidential advice and consent positions, the way we achieve that accountability is by vesting it, in the words of the dissenting opinion, in "the President's direct lieutenant".

And that's very important because it makes the President accountable for those positions, and it also makes them able to resist congressional encroachments.

And this scheme, besides, embodies precisely the evil that was condemned by every member of the Court in Freytag and in Edmond, which is it creates an unaccountable system where a multi-member commission beyond the President's political oversight and control is making appointments.

Not one elected representative, in the President or the Senate, has any influence who -- over the people appointed to this board--

Justice Ruth Bader Ginsburg: Does that mean, Mr. Carvin, that the SEC cannot appoint heads of -- heads of its divisions?

I assume that they would fit within the characterization "inferior officers".

Mr. Carvin: --That would be true, and--

Justice Ruth Bader Ginsburg: So -- but if the SEC can't appoint--

Mr. Carvin: --No, they can't appoint inferior officers.

Now, the board with the--

Justice Ruth Bader Ginsburg: --Yes, so what are -- so what are the heads of the various divisions of the SEC?

Mr. Carvin: --The board and the SEC say they are not inferior officers, because they do not under Freytag have any specific statutory authorization.

They are not, in the words of the Appointments Clause, "established by law".

So if they are--

Justice Ruth Bader Ginsburg: Aren't there -- aren't there people within the independent regulatory commissions that have jobs comparable to people who are in the departments--

Mr. Carvin: --Yes.

Justice Ruth Bader Ginsburg: --that the head of the department can appoint?

So who can appoint such people in the FEC, the FTC, the FCC, and so on?

Mr. Carvin: There are two differences.

One is, for those lower-level people within the executive departments, they have specific statutory creation of those offices, the Solicitor General on down.

There is no statute saying that anybody below the commission level at the SEC has any job.

That's totally up to the discretion of the commission.

They can vest them with whatever authority they want or not.

Justice Anthony Kennedy: But -- but the question is -- I assume it's the follow-up question that Justice Ginsburg is interested in -- under your view of the case, why is that lawful?

Mr. Carvin: No, it would only be unlawful if they were inferior officers.

And if the board is correct that they are not inferior officers, there would be no constitutional problem at all with the SEC, for example, appointing a general counsel.

I should--

Justice Antonin Scalia: I don't understand that.

It's okay for them to appoint principal officers, but not inferior officers?

Mr. Carvin: --No, no.

Employees, Your Honor.

Justice Antonin Scalia: Oh.

Oh, I see.

Mr. Carvin: And the argument for them being employees that the board has advanced is that they're -- that they're--

Justice Antonin Scalia: I wish you had said that.

You really had me scared there.

[Laughter]

Mr. Carvin: --If I am scaring you, I'm not doing my job--

Justice Antonin Scalia: You're saying they are not inferior officers and also not principal officers, but merely employees?

Mr. Carvin: --Merely employees.

Justice Antonin Scalia: And who appoints -- who appoints the inferior officers at the -- at the SEC?

Mr. Carvin: Well, that's my other point.

The chairman does, and so if you accept their view of who the head of the department is, which is the commission--

Justice Antonin Scalia: All those appointments are presumably invalid.

Mr. Carvin: --all those appointments are unconstitutional, so under their theory--

Justice Antonin Scalia: That would be a shame.

Mr. Carvin: --since the chairman didn't appoint any -- the general counsel, the heads of any of the departments, all of them are unconstitutional.

Justice Stephen G. Breyer: Does the chairman serve as a chairman for a fixed term?

Mr. Carvin: Not as chairman.

Justice Stephen G. Breyer: No?

Okay.

Mr. Carvin: He just has--

Justice Stephen G. Breyer: So, therefore, what you had said before would not apply to the chairman, that is to say: The President can remove him at will--

Mr. Carvin: --Not--

Justice Stephen G. Breyer: --There is no statute to the contrary; he does not serve for a fixed term, and so you cannot imply that.

Since the chairman cannot--

Mr. Carvin: --But this statute doesn't--

Justice Stephen G. Breyer: --can remove him at will -- you do not have what you would call the gearing into play, this somewhat mechanical jurisprudence, of what's an independent agency.

Mr. Carvin: --No, he can remove the chairman at his pleasure, which -- but not a commissioner.

And that's our whole point.

That's a very key point.

Justice Stephen G. Breyer: So you are saying that the chairman, not the commissioner, is the person who does the appointing?

Mr. Carvin: We argue that.

They argue the opposite.

Under the statute--

Justice Stephen G. Breyer: Okay.

Mr. Carvin: --the commissioner does the appointing.

And that's our key point.

Because the President exercises such extraordinary control over the chairman and therefore is able to control the SEC staff, Congress, in the statute, took away that traditional enforcement mechanism.

All of the SEC staff you were referring to earlier, Justice -- Justice Ginsburg, are the chairman's alter egos.

And since they are the chairman's alter egos, they are completely constitutional.

And Congress, again, took away the chairman's powers, which was a way of limiting the President's ability to control the board.

And I think they -- but our basic observation--

Justice Ruth Bader Ginsburg: So this whole thing would be constitutional if, instead of giving the appointing power to the commission, they had given it to the chairman?

Mr. Carvin: --No, because we believe they are principal officers for three reasons under Edmond: They run their own shop; the commission has no control over the officers on the board, since it can only remove them in these extraordinarily narrow situations; and as we have discussed at length before, it can only review part of its work product, whereas the appeals court judges in Edmond, all of their work product was subject to review.

And I think the removal provision is particularly important here.

The board can pursue policies that the SEC absolutely abhors and thinks are completely counterproductive, but under this extraordinarily narrow removal provision--

Justice Ruth Bader Ginsburg: Isn't that a highly unlikely scenario?

I mean, this thing won't work unless these two are working in harmony.

Mr. Carvin: --Well, it would work perfectly if the board was an independent, autonomous entity that was not subject to the plenary control of the SEC, and that's exactly how the Senate report described it.

No, the New York Stock Exchange works perfectly fine even though the SEC has oversight responsibility over the New York Stock Exchange directly analogous to the oversight responsibility it has over the board.

And so, no, it would work perfectly fine if you followed the congressional scheme, which was an agency with its own autonomy and power.

And since it is an agency that has its own revenue sources, its own statutory authority, it has to be an agency composed of principal officers.

Elsewise very powerful agencies, including the CIA, for example, would be considered inferior officers simply because in an organizational chain they report to some others.

And I would argue, to get back to my original point, Justice Scalia, that that would absolutely confound the accountability that the Framers insisted upon, that either the President and the Senate or a direct lieutenant of the President make the kinds of appointments of inferior officers and that the important officers go through the advice and consent process.

If there are no further questions, I'd like to reserve the remainder of my time.

Chief Justice John G. Roberts: Thank you, Mr. Carvin.

Mr. Carvin: Thank you.

Chief Justice John G. Roberts: General Kagan.

ORAL ARGUMENT OF GEN. ELENA KAGAN ON BEHALF OF THE RESPONDENT UNITED STATES

Ms Kagan: Mr. Chief Justice, and may it please the Court: Resolution of this case follows from a simple syllogism, and it is this: The President has constitutionally sufficient control over the SEC; the SEC has comprehensive control over the Accounting Board; therefore, the President has constitutionally sufficient control over the Accounting Board.

Now, Mr. Carvin has suggested that there--

Justice Antonin Scalia: Excuse me.

The President has adequate control over the SEC only because he can dismiss the chairman of the SEC.

But the activity here is not governed by the chairman of the SEC.

There's no role whatever for the chairmanship.

The -- the governance of this board is by the members of the SEC.

So that's quite different from saying -- you know, I -- I think your syllogism breaks down at that point.

Ms Kagan: --Well, I -- I think not, Justice Scalia.

Humphrey's Executor said 70 years ago the President does have constitutionally sufficient control over the SEC generally, including the chair.

Now, the SEC has constitutionally -- has comprehensive control over the Accounting Board.

There is nothing that the Accounting--

Justice Antonin Scalia: The chairman, which is -- which is -- which is the -- what should I say -- the knife that the President has into the SEC, has no role in the control of this board.

Ms Kagan: --The -- the chair has the same role that he has with respect to pretty much everything else that the SEC does.

The SEC--

Chief Justice John G. Roberts: No.

I thought the employees were appointed by the chairman, not by the commission.

Ms Kagan: --Subject to the control -- subject to the approval of the commission.

So--

Chief Justice John G. Roberts: So you think -- you think a -- a veto power is the same as an original -- original power?

Ms Kagan: --Well, in fact, the commission could do the exact same thing in this case.

The commission could delegate its control over the Accounting Board to the chair, subject to the control of the commission again.

So I think that there is no difference with respect to the SEC's supervision of the board than there is with respect to the SEC's supervision of any of its other functions or any--

Chief Justice John G. Roberts: Well, let's say--

Ms Kagan: --of its staff.

Chief Justice John G. Roberts: --Let's say that the -- let's say that the board issues -- demands documents from a particular company.

Can the SEC direct them not to do that?

Ms Kagan: The SEC has full control over the investigative and inspection function of the board.

This was what Mr. Carvin -- was the one thing that Mr. Carvin said the SEC lacked, but in fact it does not, because the board's investigations and the board's inspections are all done according to rule.

And the SEC in a number of ways can change those rules.

The SEC can reach out and abrogate any board rules, including rules relating to inspections and investigations.

The SEC also has power to promulgate its own rules, if--

Justice Antonin Scalia: Excuse me, but, you know, Congress -- Congress can change the statutory authority of any agency just like that.

Does that mean that Congress is controlling the agency?

Ms Kagan: --Well, it's certainly part of Congress's control mechanisms.

And this, too, is part of the SEC's control mechanisms with relation to the Accounting Board.

The Accounting Board can take no--

Justice Antonin Scalia: I'm not sure that -- that the ability to take away responsibility for an agency -- from an agency is the same as controlling what authority that agency does exercise.

It seems to me they are two different things.

Ms Kagan: --And I think that the SEC has both.

It certainly has the authority to take away responsibility from the Accounting Board.

The rescission provision in 7217 makes that completely clear.

But it also has authority to set the ground rules by which the Accounting Board does anything and everything.

It can say tomorrow -- it can promulgate a rule and say all inspections have to be approved by us, all investigations--

Chief Justice John G. Roberts: Will that be consistent -- do you think that will be consistent with the intent of Congress in establishing the PCAOB?

Ms Kagan: --I -- I do think it would be consistent with the intent of Congress, Mr. Chief Justice, because the intent of Congress was to place the Accounting Board under the extremely close and comprehensive supervision of the SEC.

The references to independence that one finds throughout the legislative record here are almost all references to independence from the accounting industry, not from the SEC.

Quite to the contrary, Congress made it clear--

Chief Justice John G. Roberts: Why did -- just out of -- I guess maybe it's not important, but why did the -- why did Congress set up a separate board if it's going to be entirely controlled by the SEC?

Ms Kagan: --I think it is important, Mr. Chief Justice, and I think that there were a few reasons.

First, Congress wanted to make sure that this board did not compete with the SEC's own resources.

Members of Congress thought that the SEC had been resource-strapped and wanted to create something with its own separate funding stream, which it was able to do by declaring this a kind of quasi-governmental -- agency.

Second, it wanted to get the board outside of the normal civil service laws, because it wanted to attract people that it thought it could not attract on normal civil service salaries.

And third, I think history and tradition have a great role in -- in the question that you are answering, because what -- the history and tradition of SEC regulation of the financial industry in general is -- is -- in -- in some part through the SROs, the self-regulatory organizations.

So--

Chief Justice John G. Roberts: Before we get -- before you get too far into that, of those first two things, is there any reason Congress couldn't have achieved those same objectives by establishing the PCAOB as a division within the SEC?

Ms Kagan: --Well, I -- I think so.

I think it would have been harder to establish a separate funding stream to take the Accounting Board out of the civil service when the rest of the SEC is subject to normal congressional appropriations and is subject to basic civil service laws regarding salary and so forth.

So, this was a way to -- to have both.

And it was also, I think--

Justice Anthony Kennedy: But that's -- that's the history and tradition of this board, which isn't very long.

But the history and tradition of boards like this is that their investigative powers are independent.

Now, you say that there could be a rule, but that just isn't the way it works.

And if you refer us to history and tradition for other purposes, we ought to look at the operational principles, operational assumptions of this board.

Ms Kagan: --Well, I -- I -- I do think, Justice Kennedy, that -- that the way this board is set up, the statutory scheme and structure, makes it clear that the SEC has comprehensive authority not just over the rulemaking, but over the investigative and inspection activities of the board; that no -- no sanction arising from an investigation can be issued except if the board agrees; that no inspection report can be issued except if the -- excuse me -- except if the SEC agrees.

And further, as I said before, that the SEC can reach further back into the process and say, not only do we have this kind of veto authority over any sanction that comes out of an investigation or over any report that comes out of an inspection, but we can also change the way those inspections and investigations are conducted in the first place.

Chief Justice John G. Roberts: Does it have consequences for public companies subject to the board if it refuses to turn over documents requested by this -- this board?

Ms Kagan: Well, for -- for -- for public companies for -- not for the accounting firms in general, but for their public company clients, any subpoena would have to come, as Justice Ginsburg rightly said--

Chief Justice John G. Roberts: Oh, I know, but presumably you only get a subpoena when people don't cooperate.

Ms Kagan: --That -- that's correct.

And -- and certainly public companies could cooperate, and certainly public companies have cooperated with the board--

Chief Justice John G. Roberts: And what happens if they don't?

Ms Kagan: --I -- I think that the board would go to the -- to the SEC for a subpoena, ask the SEC for a subpoena, and the SEC would choose whether to grant that subpoena and whether to allow the kind of investigation that the board wants.

Chief Justice John G. Roberts: Are there any other -- are there any consequences from the company's refusal short of -- that would not require the board to get a subpoena?

Ms Kagan: Are there any other consequences for the public company?

Chief Justice John G. Roberts: In the absence of the subpoena, if nothing happens?

Ms Kagan: --I -- I -- I believe that that's the case.

I believe that it's the choice of the public company whether to comply or not.

If the public company chooses not to comply, the board has to go to the SEC and to get a subpoena.

Chief Justice John G. Roberts: Is it -- does it have a consequence as a practical matter for the company if it doesn't comply with a request from this board?

Ms Kagan: Well, the board does not regulate the public companies themselves.

The board only regulates the accounting firms.

Now, the accounting firms do, as a condition of their registration, have to present any documents that the -- the -- the board wants.

And so the accounting companies have a real reason to comply with the board's requests.

Chief Justice John G. Roberts: So there are in fact collateral consequences that take place without any involvement by the SEC?

Ms Kagan: Well, I -- I -- I think again the SEC could change any of the rules that govern inspections, any of the rules that govern investigations.

Chief Justice John G. Roberts: So if you had a statute here that said, look, if you don't comply with the board's request for documents, your authorities will be suspended, and if that were the statute, you would say, well, that's okay, because the SEC can always change that rule.

Ms Kagan: I think that -- that the relationship between the SEC and the board has to be looked at as a whole.

And it's clear that the SEC has control over everything that the board does or could have control over everything the board does.

Justice Ruth Bader Ginsburg: General Kagan, I thought that -- the Chief asked a question, he posed a sanction, and I thought that any sanction the board wants to impose has to be approved by the SEC?

Ms Kagan: Well, that's exactly right.

Any sanction, any final inspection--

Chief Justice John G. Roberts: I'm sorry, I asked you whether there were any consequences from the failure of the company to turn over documents; and is your answer that there are no consequences whatever?

Ms Kagan: --There are no consequences with respect to the failure of public companies -- not the accounting firms, but public companies -- to turn over documents absent a subpoena, which the SEC needs to issue.

Justice Samuel Alito: As a practical matter, does the President have any ability to control what the board does?

Ms Kagan: I think, Justice Alito, the President has the exact same ability that the President has with respect to every other aspect of the SEC's operations.

So, the--

Justice Antonin Scalia: No, that's--

Justice Samuel Alito: Well, why is that--

Justice Antonin Scalia: --But that's not true.

He can remove -- he can remove the chairman of the SEC.

Ms Kagan: --And--

Justice Antonin Scalia: And he cannot -- he cannot remove the commissioners.

And it's the commissioners that govern the board, not the chairman.

Ms Kagan: --Well, it's the commissioners that govern all aspects of the SEC's operations.

The chair only does what is delegated to him by the commission or -- either -- or through the reorganization plans.

Justice Samuel Alito: --Well, let me give you an example.

Suppose the President objects to the -- the very large salaries that the members of the board receive.

What are their salaries?

Ms Kagan: Excuse me.

They are over $500,000.

Justice Samuel Alito: And they -- did they decide that themselves?

Ms Kagan: Subject to the review of the commission.

And the commission has been active in this area.

Justice Samuel Alito: Suppose the President reads about this and he says: This is outrageous; I want to change it.

How can he do that?

Remove--

Ms Kagan: Well, I think he does--

Justice Samuel Alito: --remove that -- remove the SEC commissioners unless they take action against the board?

Ms Kagan: --I think he does everything that he would do with respect to any other SEC function, is that he or some member of his staff would call the chair or would call other commissioners and say: I have a problem with this.

Justice Antonin Scalia: Would you please change it?

Right?

Ms Kagan: Would you please change it -- and -- and--

[Laughter]

--and with respect to that, that's exactly what--

Justice Antonin Scalia: I could do that.

[Laughter]

Ms Kagan: --Justice Scalia, that's Humphrey's Executor.

Humphrey's Executor does indeed say that the President can't order the SEC commissioners in the same way that he might be able to--

Chief Justice John G. Roberts: Yes, yes.

Ms Kagan: --That's a 70-year-old precedent.

Chief Justice John G. Roberts: Right.

That's Humphrey's Executor.

But you have to add to Humphrey's Executor Perkins and Morrison.

Humphrey's Executor says you can limit the President's removal power.

That doesn't get you down to the board.

You have to also say the principal officers -- there can be limits on their removal authority of the board members.

Ms Kagan: I -- I understand the temptation to say something like, well, we don't really much like Humphrey's Executor, but we are stuck with it, but not an inch further.

Chief Justice John G. Roberts: I didn't say anything bad about Humphrey's Executor.

[Laughter]

Ms Kagan: But -- but--

Justice Antonin Scalia: I did, I did.

[Laughter]

Ms Kagan: --But this in--

Justice Antonin Scalia: We did overrule it, by the way, in -- in Morrison, didn't we?

Ms Kagan: --But two points.

This in fact does not go an inch further, and it doesn't go an inch further because of the SEC's comprehensive control over the board, which makes the board function--

Chief Justice John G. Roberts: What is -- I'm sorry.

What is the removal authority of the SEC with respect to board officers?

Ms Kagan: --The removal authority of the SEC with respect to -- with respect to board officers is a for-cause removal limitation.

Chief Justice John G. Roberts: All right.

So there is a limitation there.

For cause does not include failure to follow the policies of the President.

Ms Kagan: Let's assume that that's correct.

Chief Justice John G. Roberts: So you need to rely on Morrison to make the limitations on what the SEC can do with respect to the board constitutional.

Ms Kagan: I think--

Chief Justice John G. Roberts: And you need to rely on Humphrey's Executor to make the limitations on what the President can tell the SEC constitutional.

Ms Kagan: --Mr. Chief Justice, removal is just a tool.

Removal is not the ultimate constitutional question.

The ultimate constitutional question is the level of presidential control, and the presidential control here is exactly the same with respect to the board's activities as it is with respect to the SEC staff's activities--

Chief Justice John G. Roberts: Oh, no, no, because you have got an extra layer there.

Let's say, I mean, that you have to have two violations of the for-cause provision.

You have got to have -- you have to meet the requirement in two places.

When the SEC wants to remove the board member, they can only do that for cause.

And if they decide, well, there isn't cause, I'm not going to do it, then the President under your theory has to remove the SEC commissioners, all of them, not just -- not just the chairman, and he can only do that for cause.

So you have got "for cause" squared, and that's -- that's a significant limitation that Humphrey's Executor didn't recognize and Morrison didn't recognize.

Ms Kagan: --But that for-cause provision is surrounded by a panoply of other control mechanisms--

Chief Justice John G. Roberts: Which one are we talking about, the first one or the second one?

Ms Kagan: --The -- the for-cause provision on the board members is surrounded by a panoply of other control mechanisms which function as a complete substitute, which give the SEC--

Chief Justice John G. Roberts: Well, let's just talk -- a practical example.

The board says I want to get the documents of company X.

The SEC thinks they shouldn't do that.

Okay?

Can they remove them for that situation -- in that situation?

Ms Kagan: --Well, they can pass a rule that says no, you can't get the -- the documents of company X, and then when the board members go ahead and try to get the documents of company X--

Chief Justice John G. Roberts: Can they say--

Ms Kagan: --they can remove them.

Chief Justice John G. Roberts: --you are fired?

Can they say, you are fired because we have control over what you do and we don't think you should do that?

Ms Kagan: I think that they effectively can.

They would have to do it by -- I think that the easiest, quickest, most legally secure way would be to -- to do it by -- by promulgating a rule that says you can't do this.

And then--

Chief Justice John G. Roberts: The easiest way to do it is to pick up the phone, not by promulgating a rule.

Ms Kagan: --I said the most legally secure way to do it would be to do it that way.

I think that the fact that they have that formal mechanism means that they could pick up the phone and accomplish the exact same thing, because--

Chief Justice John G. Roberts: Can the President pick up the phone and fire the SEC commissioners?

Ms Kagan: --The President can pick up the phone and fire the SEC commissioners for cause, however "cause" has been defined.

Chief Justice John G. Roberts: He thinks -- he thinks they -- the board should be getting the documents from the other company, and the SEC thinks they can't.

So the SEC tells the board, don't go after that company, and because they do that the President fires the SEC.

Does that work under your theory?

Ms Kagan: So now the SEC has given the board one order and the President doesn't like the order that the SEC has given to the board?

Chief Justice John G. Roberts: Right.

Ms Kagan: Again, the President has the same level of control over the SEC as he has with respect to anything else.

That's just Humphrey's Executor.

Chief Justice John G. Roberts: I'm not worried if it's the same.

I'm worried if it's enough.

Ms Kagan: Well, but that's Humphrey's Executor.

Humphrey's Executor said it was enough.

Chief Justice John G. Roberts: Right.

And then--

Ms Kagan: And the question is whether this goes any further.

Chief Justice John G. Roberts: --It goes further because you've got to rely on the SEC to get to the board.

So there you've got to rely on Perkins and Morrison.

Ms Kagan: You always have to rely on the SEC to do anything, to supervise anybody in its field of operations, whether it's the SEC's own staff or whether it's the board members, who stand in essentially the same relationship to the SEC commissioners as the own SEC staff does.

Justice Samuel Alito: Well, do you dispute the proposition that the more layers of for-cause removal you add, the -- the less control the President has?

Suppose there were five layers.

Ms Kagan: Justice Alito, I think it all depends.

I mean, we are not saying that a double for-cause provision is always constitutional, just as we are not saying that a single for-cause provision is always constitutional.

The question is, in what context does that for-cause provision operate?

And where it operates in a context like this one, where it is surrounded by a panoply of alternative and -- and equally effective control mechanisms, it simply should not matter that there's another for-cause provision.

Justice Stephen G. Breyer: Well, what do -- what do you say in response to their formal argument that heads of departments are those people whom the President has at-will control over, like the Secretary of Defense, and Freytag is support for that.

And these aren't those people, so the SEC's members must be inferior officers, and the Constitution says nothing about and implicitly forbids inferior officers from appointing other inferior officers beneath them.

All right, that's a formal argument, but I got that out of their briefs, and I want to know what you respond to it.

Ms Kagan: Well, Justice Scalia, who doesn't much like Humphrey's Executor, nevertheless wrote a brilliant opinion in Freytag saying that in fact independent agencies were departments, and -- and -- and so that commissioners of the SEC would be principal officers, their appointees would be inferior officers, if -- if those appointees were subject to the direction and supervision of the principals in exactly the way Justice Scalia said was necessary in the Edmond case.

He is--

Justice Stephen G. Breyer: Yes.

So I -- so we have to take the dissent there as opposed to taking the majority?

Ms Kagan: --No, no, no.

Freytag -- Freytag reserves the question--

Justice Stephen G. Breyer: I see.

Ms Kagan: --whether the independent agencies were departments for purposes of the Appointments Clause and, indeed, in reserving that question, suggested that they thought that the independent agencies, so-called, were a very different kind of creature than the small, specialized units such as the Tax Court.

So I think that the--

Justice Anthony Kennedy: I want to ask -- I want to ask one thing: You want us to imply or find -- or you want us to infer from the statute that there's a power in the President to remove SEC commissioners for cause?

You want us to find that that is implied in the statute?

Ms Kagan: --Justice Kennedy, the conventional understanding, really, ever -- ever since Humphrey's Executor, is that SEC commissioners are subject to a for-cause removal provision.

And the government--

Justice Anthony Kennedy: All right.

What is -- what is the authority for us to find that there is an implication in the statute to remove just for cause?

There's -- wouldn't that be unique in our precedents?

Ms Kagan: --I think that -- if I understand the question correctly, I think that the -- the implication about--

Justice Anthony Kennedy: I mean, if there is a removal power implied, why isn't it removal for all purposes?

How -- why can it be limited to just for cause?

What authority do we have to do that?

Ms Kagan: --Well, I think that the understanding about the SEC commissioners is that the SEC commissioners were, essentially, the same as the FTC commissioners, which, under -- which, under Humphrey's, were removable only for cause, and as I believe--

Justice Sonia Sotomayor: But that's because the statute required it.

Ms Kagan: --Yes, but -- you're exactly right, and it's a -- it's a perplexity of this law, but for many, many decades, everybody has assumed that the SEC commissioners are subject to the same for-cause removal provision, and the government has not contested that in this case, nor has Mr. Carvin.

Justice Antonin Scalia: General Kagan, the government argues here that the head of department is all of the commissioners.

Elsewhere, it is the chairman of the SEC who -- who appoints inferior officers.

Now, which is it?

Are all those appointments by the chairman invalid?

Ms Kagan: No, they're not, because all those appointments are made subject to the approval of the commission.

Justice Antonin Scalia: Well, that's something quite different.

He makes the appointments.

They can overturn it, but the appointment must be made by the head of the department, and the appointments are not made by the commissioners.

They are made by the chairman.

Ms Kagan: Well, I think practice in this regard has changed in different administrations, but if you look at the amicus brief that was filed by the former chairmen of the SEC, they make clear that in fact the commission has ultimate authority over each and every appointment.

Chief Justice John G. Roberts: What do they have to say about the theory that the SEC commissioners can be removed by the President?

Ms Kagan: I believe, Mr. Chief Justice, that nobody has contested that question.

Chief Justice John G. Roberts: And you are not contesting it?

Ms Kagan: And we are not contesting the question that the SEC commissioners, themselves, are removed by the President for cause under, I would say, a very broad for-cause provision, in the way that Bowsher suggested, not something that's niggling and technical.

Chief Justice John G. Roberts: Thank you, General.

Ms Kagan: Thank you, Mr. Chief Justice.

Chief Justice John G. Roberts: Mr. Lamken.

ORAL ARGUMENT OF JEFFREY A. LAMKEN ON BEHALF OF THE RESPONDENTS PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD, ET AL.

Mr. Lamken: Thank you, Mr. Chief Justice, and may it please the Court: The SEC has pervasive authority over every aspect of the board's operations.

Board rules and sanctions have no effect, except as the SEC allows, and can be changed by the SEC at any time.

Board inspections and investigations are subject to plenary SEC control.

Not only are they conducted under rules that the SEC must approve, but the SEC can threaten or actually rescind the board's enforcement authority any time it thinks that's appropriate in the public interest.

It controls the board's budget and salaries, and it can reassign matters to--

Chief Justice John G. Roberts: I thought -- so you disagree with General Kagan?

I thought she said one of the reasons for taking the board outside the SEC is that they'd have an independent funding stream.

Mr. Lamken: --Independent of the congressional appropriations process, not independent of the SEC.

Section 7219 is clear as water that the SEC controls the board budget, and the SEC in fact has used that control to regulate down to the level of the board members' salaries.

In addition, the SEC can impose rules requiring getting -- requiring the board, for example, to get SEC pre-approval for particular steps or particular actions.

Justice Antonin Scalia: Do you know any other agency composed of inferior officers that has the power to acquire its own budget, as this board does, by simply assessing a tax upon the people that it regulates?

Mr. Lamken: In fact, this board doesn't have that power, because it can only do so as the SEC allows.

Here, as in all other contexts, it is the will of the SEC that controls--

Justice Antonin Scalia: The SEC can overturn it, but it's up to the board -- the board can do it.

Do you know of any parallel situation where there is a, supposedly, agency composed of inferior officers who have the power to tax the public unless it's overturned by somebody else?

Mr. Lamken: --Well, there's a bunch of other similar entities, such as the SIPC and the like, that assess fees, and many of their officers are appointed by department heads, rather than the -- than the President.

And so, yes, I think that's actually not an uncommon feature, but the most -- but the most critical aspect of this is, here, as in every other context, it is the judgment and the decision of the SEC that controls.

The board can propose, but it's the SEC that decides.

Chief Justice John G. Roberts: Well, the board can act, and the SEC can, I suppose, retroactively veto their actions, but the SEC doesn't propose what actions the board takes, actions that can have significant, devastating consequences for the regulated bodies.

Mr. Lamken: Well, precisely the opposite.

With respect to rules, the board's rules are ineffective--

Chief Justice John G. Roberts: I'm not talking about rules.

Agencies in the government do not act only in implementing a particular rule.

They have authority to regulate.

And the board here, for example, can tell a particular entity: You have to turn over these documents.

They don't have to have a rule that says, this company must turn over the documents.

Mr. Lamken: --And the SEC staff can do precisely the same thing.

In fact, right now they can issue subpoenas without asking the commission for consent.

And the -- and the answer is, if you don't like it, you go to the principal officer, and you say, rescind the board's authority -- threaten to rescind the board's authority; this is out of line.

And the SEC has broad authority in the public interest to rescind the -- the board's authority to enforce the action, enforce the law in any respect--

Justice Antonin Scalia: But you can say the same -- you can say the same thing about Congress.

I mean, this is not the kind of control that an executive officer normally is supposed to have over inferior officers; when they do something, you can take away their authority.

--Congress can do that.

Mr. Lamken: Well, Congress would have to do that by legislation, subject to veto by the President, and in fact this is precisely the type of control that powerful executives regularly exercise.

If they don't like the way an inferior is doing something, they can take away that authority, and they can take away their salary as well, which is so close to being fired that I can't see any light between them, frankly, Your Honor.

So the board -- the SEC controls whether -- what the scope of the board's authority is and its salaries--

Chief Justice John G. Roberts: Is there any other--

Mr. Lamken: --and it can issue rules requiring start, stop, or obey my commands.

And--

Chief Justice John G. Roberts: --Is there any other situation in the vast federal bureaucracy, where you have this two-level situation that we have here?

Mr. Lamken: --Oh--

Chief Justice John G. Roberts: In other words, the President can't remove the SEC commissioners at will.

They can't remove the PCAOB commissioners at will.

Or even if you look at it from the for-cause perspective, there has to be two layers of "for cause".

Mr. Lamken: --Mr. Chief Justice, of course, we view rescinding an officer's authority and paycheck as being exactly like rescinding the officer's position, but if you are going to look at formal removal authority, that exists throughout the United States government.

There are 1,100 administrative--

Chief Justice John G. Roberts: What -- well, give me an example.

Mr. Lamken: --1,100 administrative law judges, right now, which are for-cause removed operating in independent agencies with for-cause removal by the President.

There's the Postal Service's IG's office, with 1,100 employees and 90 offices nationwide, removable for cause by an entity that is removable for cause.

We list--

Justice Anthony Kennedy: But we are talking -- we are talking about independent or quasi-independent agencies, and I understood Solicitor General Kagan to say that it's quite all right with an independent agency for the President to phone them on an ongoing basis and say, do this, and do that.

Do you agree that that's what a President ought to do with an independent agency?

Mr. Lamken: --Well, Your Honor, I would think that--

Justice Anthony Kennedy: Call them on a routine basis, to supervise what they are doing?

Mr. Lamken: --If the -- if the response from the agency falled out -- falled out -- fell outside the range of reasonable policy responses the agency could adopt, then that might amount to inefficiency, neglect, or malfeasance.

And the SEC works--

Justice Anthony Kennedy: Well, they -- they -- this board has authority to -- to tax those people it regulates, to issue subpoenas, and so forth.

Mr. Lamken: --Right.

Justice Anthony Kennedy: But this isn't subject to the operations of the President, if he has to go through an independent agency.

Are you encouraging the President, on an ongoing, daily basis, to instruct an independent agency what he wants done?

Mr. Lamken: Your Honor, the President has the same control over the SEC's supervision over the board that he has over everything else that falls within the SEC's jurisdiction.

Justice Antonin Scalia: Which is nothing, which is nothing.

Mr. Lamken: With--

Justice Antonin Scalia: I -- when I was OLC, I would -- I advised the President, you can't interfere with -- I think, if the President called up the FCC and said, I want you to rule this way, I want this kind of a rule from the FCC, I think there would be an impeachment motion in Congress.

Mr. Lamken: --But that -- that--

Justice Antonin Scalia: Congress set up that agency to be independent from the President.

That was the whole purpose of it, wasn't it?

Mr. Lamken: --Which is what Humphrey's -- Humphrey's Executor held up -- held up -- upheld that.

That is what Humphrey's Executor upheld, but this adds nothing to Humphrey's Executor because the SEC--

Justice Anthony Kennedy: No, no, Humphrey's -- Humphrey's Executor was not a specific issue.

It was just the general qualifications.

Mr. Lamken: --I'm sorry.

I believe Humphrey's Executor was that he couldn't remove the -- the officers--

Justice Anthony Kennedy: I -- I--

Mr. Lamken: --except for cause, and "for cause"--

Justice Anthony Kennedy: --I -- I understand that.

Mr. Lamken: --is traditionally understood to be inefficiency, neglect, or malfeasance in office.

But this does not depart at all from that standard, because the President has the same control over the SEC that he has over any other independent agency, and the SEC has pervasive control over the board, and it simply makes no sense to say that Congress can give the SEC or an independent agency--

Chief Justice John G. Roberts: The formulation--

Mr. Lamken: --regulatory authority, but not the ability to choose its--

Chief Justice John G. Roberts: --The formulation -- excuse me.

Mr. Lamken: --I'm sorry.

Chief Justice John G. Roberts: The formulation that you use and your friend the Solicitor General have used -- has used is that they have the same authority that they have over every other independent agency, but I'm -- it's very hard to find out exactly what that authority is.

So what is your position about the authority of the President?

Is it more than for cause or only for cause?

Mr. Lamken: Our position is the same as the Solicitor General's, because I represent inferior officers whose positions are controlled by the SEC who are principal officers, and their lawyer is the Solicitor General.

So--

Chief Justice John G. Roberts: What do you understand that position to be?

Mr. Lamken: --The position I understand the Solicitor General to have is that the traditional understanding of the SEC is that it is an independent agency.

But--

Chief Justice John G. Roberts: So the President -- I guess I'm following up on Justice Kennedy's question -- the President cannot call them and say, take this particular action in this particular case.

Mr. Lamken: --I don't think he would be able to enforce that in -- by removal, except--

Justice Antonin Scalia: But it's okay for him to ask them?

It's okay for him to suggest to an independent regulatory agency that this is how he wants something done?

Mr. Lamken: --Justice Scalia, the Treasury Department--

Justice Antonin Scalia: Do you know of any instance where that has happened?

Mr. Lamken: --works closely with the SEC and tells the SEC precisely what it thinks the SEC should do on a regular basis, but the difference is the SEC turns around and can tell the board exactly what it wants the board to do and back it up by taking away their salaries, threatening to rescind the enforcement authority, announcing rules that say you may start, stop, alter investigations upon our direction or the direction of the chief accountant.

The control of the SEC over the board is plenary.

This Court vindicated--

Justice Antonin Scalia: But what does the Treasury Department tell the SEC to do?

Mr. Lamken: --Well, it issues recommendations, for example, on how it wants the SEC to handle, for example, international aspects.

One of the issues brought up here was the SEC's handling of international things, and that's something that the SEC -- its international bureau coordinates over--

Justice Antonin Scalia: It takes the initiative?

The SEC doesn't request that information?

Mr. Lamken: --Pardon.

Justice Antonin Scalia: The SEC does not request that information; the Treasury Department just butts in?

Is that it?

Mr. Lamken: It's one -- this is one Executive Branch, Your Honor--

Justice Antonin Scalia: I understand, but--

Mr. Lamken: --and they work closely together--

Justice Antonin Scalia: --I understand, but--

Mr. Lamken: --and I can't tell you exactly how they work, but--

Justice Antonin Scalia: --It's one thing for the SEC to ask the Treasury Department's view.

It's another for the Treasury Department to butt in.

Does it butt in?

Mr. Lamken: --I -- I do believe that -- that other agencies do butt in all the time, and the question is--

Justice Stephen G. Breyer: What's the reason--

Mr. Lamken: --what's the control?

Justice Stephen G. Breyer: --What is the reason for this?

Having read this enlightening opinion of Justice Scalia in Freytag, which is enlightening to me if I've read it correctly, I would say that the question -- there are two separate questions.

One question is: What is a department?

And this might well fit within that.

And the second question, which is separate but mixed up in the cases, but not his, is: When is it constitutional for Congress to limit the President in his ability to dismiss a -- an officer of the United States or -- inferior or superior -- for cause?

And -- and what's -- if you can answer it, what are the justifications here for imposing that requirement?

Mr. Lamken: I think the first half is, What's a department?

And the answer--

Justice Stephen G. Breyer: I'm not interested in that.

Mr. Lamken: --Okay.

Justice Stephen G. Breyer: I'm interested in -- I'm developing--

Mr. Lamken: The justifications for the limitations on the removal of the officers of the board?

Justice Stephen G. Breyer: --That's right.

Mr. Lamken: Right.

And the answer to that is that these are the standard limitations -- the standard removal provisions that exist throughout the financial area where the SEC has a subordinate entity under its control, and Congress presumed that because the SEC's -- the SEC's control was so pervasive, it didn't need to go back and revisit those standard removal provisions, because -- precisely because -- the SEC has power to rescind the board's enforcement authority, establish rules requiring it to obey commands, disobedience of which would be grounds for removal, to withdraw the salaries.

The control is so pervasive that these removal provisions did not have to be reconsidered.

And from the board's perspective, they're just another means of control, one that actually taints them, as Shurtleff points out, with having committed misconduct.

Thank you, Your Honor.

Chief Justice John G. Roberts: Thank you, Mr. Lamken.

Mr. Carvin, to keep the time even here, you have 8 minutes.

REBUTTAL ARGUMENT OF MICHAEL A. CARVIN ON BEHALF OF THE PETITIONERS

Mr. Carvin: The first thing I'd like to address is the Solicitor General's syllogism that because the President can control the SEC, somehow he can control those whom the SEC regulates.

Well, the New York Stock Exchange has exactly the same relationship as the -- with the SEC as does the board, and no one would argue, I don't think, that he has any power -- the President, that is -- to direct and supervise the New York Stock Exchange.

In response to your question, Justice Alito, he couldn't complain about the excessive salary of Mr. Grasso at the New York Stock Exchange.

I'd also like to knock down this myth--

Justice Ruth Bader Ginsburg: But there is -- there is -- it was working okay with the Stock Exchange.

It wasn't working okay with the accountants.

And there's a problem.

There's a problem that Congress had to solve.

It wanted to tighten the oversight of the auditing function.

And they wanted to have people who were not beholden to the profession, but who were knowledgeable and could command high salaries to be doing this job.

Mr. Carvin: --No, that's entirely true, Justice Ginsburg, and the point is they could have accomplished all that and made the board members appointed and removable by the President, if -- if--

Justice Ruth Bader Ginsburg: How about if they -- would it work if the board members were proposed by the SEC, by SEC commissioners, subject to the approval of the President?

Would that be--

Mr. Carvin: --Well, I -- no, because the word "approval", as earlier colloquy has suggested, is--

Justice Ruth Bader Ginsburg: --But the nominee would be -- by a nomination.

The names would be presented.

Mr. Carvin: --The President needs the unfettered ability to appoint principal officers, not to have some subordinate agency tell him who he can appoint.

That would be a severe restriction, far greater, for example, than was at issue in Public Citizen.

And that's essentially my point.

Justice Ruth Bader Ginsburg: So, you--

Mr. Carvin: They can't give you -- I'm sorry.

Justice Ruth Bader Ginsburg: --You were -- I'm sorry, then.

I interrupted you, but I wanted you to give me your full picture of how this could be done, how Congress could accomplish its goal of having a strong, effective oversight body?

Mr. Carvin: In the same way they have strong, effective oversight of the communications industry and what the FTC does and the SEC.

Just follow the model for independent agencies that has been used for over a hundred years.

You make them appointed by the President, removable by the President, and the President gets to designate the chairman.

The--

Justice Ruth Bader Ginsburg: So it would be totally separate.

Then you would -- you'd say it would have to be a totally separate independent regulatory agency.

It could not be put under the wing of the SEC.

Mr. Carvin: --You could have exactly the same relationship between the SEC and this agency, which I think is not under the wing of the SEC now.

The only difference is, instead of having the commissioners appoint them and remove them, you'd have the President appoint them and remove them.

Chief Justice John G. Roberts: Well, I would have -- Judge Kavanaugh has suggested there are two ways to cure this problem: One, have the President appoint and remove; and the other thing, make it truly subordinate to the SEC.

Now, I've heard the argument on the other side, both from the government -- well, it's an issue with the government -- the Solicitor General and the board, that the agency, the board, is completely subordinate to the SEC.

Well, if Congress -- Congress could fix this problem by saying: The board is subordinate to the SEC.

Mr. Carvin: So why have they created any independence if they really wanted them to be subordinate?

And I really want to deal with that.

This notion that they could pass rules to govern the investigative activities of the board is a myth.

The attorney general in Morrison had the ability to promulgate rules for prosecution, but he couldn't tell Alexia Morrison how to proceed in that individual case.

He couldn't say: Anything she does with respect to Mr. Olsen, I need to pre-approve.

Why?

Because the independent counsel, under that statute, had the prosecutorial authority.

Under this statute, the board has the prosecutorial authority, and everyone knows you can't govern the kind of manifold decisions that prosecutors need to make through some kind of bulky notice-and-comment rulemaking.

And that is why it is utterly mythical to pretend that they have this power.

Justice Scalia, we assume that people exercise the powers they have, removal and the like.

We don't assume that they exercise powers that they don't have simply because they can theoretically get it.

What if the statute said the SEC--

Justice Antonin Scalia: Say it again--

Mr. Carvin: --Okay.

Let's--

Justice Antonin Scalia: --We don't assume that they--

Mr. Carvin: --That they have powers they don't have simply because they can reach out and get it.

So let's assume the statute here said the SEC could transfer the board's powers to the Treasury instead of the SEC.

Would we assume -- would we analyze this case as if the Treasury was conducting the board's powers simply because the SEC had the theoretical ability to transfer it?

This Court has emphasized countless times that you analyze separation of powers cases with respect to the practical consequences, as Mistretta said it; as Plaut said it, with respect to bright lines and high walls; and as Airport Authority said it, with great skepticism of Congress's subtle encroachments.

You don't create fictional realities which allow severe usurpations of executive authority on the basis of fictional--

Justice Ruth Bader Ginsburg: We don't know -- we don't know what's fictional and what is not here, because you came in, and you don't have a particular case.

Mr. Carvin: --I do have--

Justice Ruth Bader Ginsburg: Do you have another instance where Congress set up a scheme, and without having a particular case of an individual who has been hurt, you come in and say: We might sometime be hurt by this, so we want the whole thing knocked down in the absence of any concrete case.

Mr. Carvin: --Justice Ginsburg, we know exactly what the SEC and the Solicitor General think about the interrelationship of the Constitution and the statute, because they have expressed it in briefs from the district court on up.

I am saying that even if you bend over backwards to give them this power under the statute, what you can't do is pretend that they have exercised this power under the statute.

The first might be a doctrine of statutory construction.

The second is deciding separation of powers cases on the basis of a fictional world that doesn't really exist.

And I would suggest that that would give Congress an extraordinary blueprint for using the board as a model for each and every executive department.

What would stop them from tomorrow; from transferring the Transportation and Labor and Energy Departments to a private corporation like the board, and creating some bipartisan commission that's going to oversee this board with these fictional hypothetical realities?

If this Court endorses this scheme, they have literally offered no limiting principle why that couldn't be applied to each and every executive function.

To the contrary, they have emphasized that there is no constitutional distinction between alter egos and these independent commissions, and they have sought to justify this scheme on the basis of cases involving core executive functions, Perkins and Morrison.

So, again--

Justice Ruth Bader Ginsburg: If we took away -- I mean, one big point was the double for-cause.

So let's say we have said that the SEC could fire board members, period.

Then that would remove the double for-cause.

Would this statute then be constitutional?

Mr. Carvin: --Well, I don't think you can sever that provision from the statute, because I don't -- I think you'd be rewriting the statute and re-striking the balance that Congress did.

Moreover, of course, it wouldn't solve the Appointments Clause problem because, again, these are principal officers not appointed by the President, and even if they are inferior officers, the SEC is not a department.

So--

Justice Ruth Bader Ginsburg: So, it's not the double for -- the double for-cause isn't, in your judgment, what sinks this statute?

Mr. Carvin: --Well, no.

It is a very serious -- yes, it is on my view absolutely dispositive of why the statute is no good.

I'm saying merely fixing that will not fix the entire statute, because in addition to removal problems, we have very serious appointment problems under the appointments clause--

Justice John Paul Stevens: May I ask one -- one narrow question?

If we assume that the members of the board are inferior officers, and if we -- do -- would you agree that if the board had unrestricted power to discharge them at will, the statute would be constitutional?

Mr. Carvin: --Your -- I'm -- I'm to assume that the Appointments Clause problem -- if they are inferior officers, again, I have an Appointments Clause problem, because they are appointed by somebody who is not department head, i.e., the SEC commissioner.

Do you want me to take that out and assume that that's okay as well?

Justice John Paul Stevens: Yes.

Mr. Carvin: Okay.

So, if we are looking at it strictly from a separation of powers perspective, it is true that eliminating the for-cause removal provision goes a long way towards fixing the problem, but it doesn't go all the way and for one reason, which is we think the SEC imposes -- is at the outermost limits of constitutional acceptability.

And so, unless the President has the same control over the officers that he has over the SEC, it would not be good.

Justice John Paul Stevens: But your answer to my question is that even if they are inferior officers and the other conditions have been met, if the Commission had unrestricted power of removal, the statute would still be unconstitutional.

Mr. Carvin: Principally because they are not subject--

Justice John Paul Stevens: The answer is yes is what I just--

Mr. Carvin: --I'm sorry.

Yes, Your Honor.

May I just--

Justice John Paul Stevens: --Yes.

Sure.

Mr. Carvin: --They are not subject to the chairman's control, unlike the SEC general counsel, and they have statutory duties entirely distinct from the commission.

unlike the SEC general counsel.

Chief Justice John G. Roberts: Thank you, counsel.

The case is submitted.

Transcript: 

Chief Justice John G. Roberts Jr.: Finally this term I have the opinion of the Court in case 08-861, Free Enterprise Fund Versus Public Company Accounting Oversight Board.

This is a case about Presidential power and accountability.

We learned early on that our constitution seeks to protect liberty by separating the government’s powers in to three branches, legislate, executive and judicial.

The constitutional vests executive power in the President and makes it his duty to take care that the laws be faithfully executed.

The President of course, cannot executive the laws by himself, rather he insures the faithfully execution of the laws through his oversight of executive officers.

The issue before us concerns the President’s authority to remove those officers when he determines that such action is necessary to his own faithful execution of the laws.

The case arises out of a challenge to an unusual government agency, the public company accounting oversight board.

The Congress created the board in 2002 to regulate the accounting business.

Accounting firms that audit public companies must register with the board, pay it fees and comply with its rules and oversight.

The board inspects firms, conducts formal investigations and can issue severe sections.

Members of the board are not appointed by the President instead they are appointed by the Securities and Exchange Commission, an independent government agency over which the President has little direct control.

The President appoints commissioners but the parties agree that the President can not remove them at will but only for good cause.

A legal concept that in this context does not include disagreements about policy.

While the SEC appoints board members it in turn can not remove them at will, instead the SEC can remove board members only for good cause strictly defined in this instance to include only the willful violation of board rules or the securities laws, willful abuse of office or unreasonable failure to enforce compliance with the law and with accounting rules.

Board members execute the laws of the United States but they are shielded from the chief executive by two layers of insulation.

The President must show good cause to fire the commissioners and the commission must show good cause to fire the board.

Now this suit was brought by an accounting firm, Beckstead and Watts and a nonprofit group, the free enterprise fund, they argued that the Act creating the board violates the separation of powers by effectively shielding the board from the President's control.

The District Court ruled against petitioners and a divided Court of Appeals affirmed.

We granted certiorari and now reverse in part, we hold that the dual for cause limitations on the removal of Board members contravene the Constitution's separation of powers.

The President's executive power includes the authority to keep executive officers accountable by removing them from office if necessary.

As James Madison stated on the floor of the first Congress “if any power whatsoever is in its nature executive, it is the power of appointing overseeing and controlling those who execute the laws".

Our landmark decision in Myers versus United States almost 90 years ago, we affirm that Article Two confers on the President, the general administrative control of those executing the laws. It is his responsibility to take care that the laws be faithfully executed.

As we explained in Myers he must therefore have the power to remove those officers for whom he cannot continue to be responsible.

Now since Myers, we have upheld limited restrictions on the President's removal power, most prominently in a case called Humphrey's Executor versus United States, there we held that Congress may under certain circumstances create independent principal officers whom the President cannot remove at will but only for good cause.

But in that case and others applying similar reasoning 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 decide it whether the protected officers conduct merited removal under the good cause standard.

In this case, we are asked to consider a new situation, not yet encountered by the court.

The act before us insulates executive officers, officers who exercise significant power in the name of the United States behind two levels of good cause tenure, it not only protects board members from removal except for good cause but withdraws from the President, any decision on which on whether that could cause exists.

That decision invested in other tenured officers, to commissioners were not subject to the President's direct control and who cannot be fired simply because the President disagrees with their decision.

This added layer of protection makes a fundamental difference with only one layer of insulation, the commissioners could remove board members at will and would have no excuse for retaining an officer who is not faithfully executing the law, they would be responsible for everything the board does and the President could hold them accountable to the same extent that he can hold them accountable for all the commission's other functions but with two layers of insulation in place the President's review is limited.

The President cannot hold the commissioners accountable for the board's conduct because the commissioners cannot remove the board at will, they are not responsible for everything the board does.

They are only responsible for their determination of whether the act’s rigorous would cause standard is met and even if the President disagrees with their determination, he cannot intervene on that basis alone.

This arrangement is contrary to Article Two’s vesting of the executive power in the President.

Without the ability to oversee the board or to attribute the board's failings to those whom he can oversee, the President is no longer the judge of the board's conduct.

He does not decide whether board members are abusing their officers or neglecting their duties.

He cannot ensure that the laws are being faithfully executed and he cannot be responsible for board member’s breach of faith.

That consequence undermines the principle of accountability that is at the heart of our democratic republic.

After all none of us get to vote for SEC commissioners or for members of the public company accounting oversight board, instead as Alexander Hamilton explained in the Federalist papers the people look to the President to guide the assistance and deputies subject to his superintendence, without a clear and effective chain of command the people do not know, again as Hamilton put it on whom the blame for “a pernicious measure or a series of pernicious measures ought really to fall" that is why Madison insisted that the chain of dependents be preserved, that the lowest officers, the middle grade, and the highest will depend as they ought on the President and the President on the community.

This much is basic for the people to govern they must be able to hold an elected official responsible for the conduct of the executive branch, that official is under the Constitution the President.

For the President to be accountable, he must have the power to control the executive officers who assist him in carrying out his duties.

This fundamental principle is captured in one of the most famous political axioms in our nation's history.

The one that was on the sign on Harry Truman's desk in the Oval Office, “The Buck Stops Here”.

The Act before us today grants the board, executive power without effective Presidential oversight, under this law the buck stops with the public company accounting oversight board.

The law is therefore incompatible with the Constitution's separation of powers.

The government, the board and the dissent in this case all resist this conclusion.

We have considered their arguments carefully but we disagree.

Respondents for example, argue that the second layer of insulation from oversight does not matter.

They say that the commission has general oversight over the board's functions if not its members that this power is enough but broad power over board functions is not equivalent to a power to remove board members.

The SEC cannot wield a free hand to supervise individual members if it must destroy the board in order to fix it.

Moreover the commission's power over the board is not plenary.

The board has significant independence from anyone's control in determining its priorities and enforcing the laws in the name and with the power of the United States.

The dissent too dismisses the importance of removal as a tool of accountability.

It concludes that the President's practical influence depends on many things such as budgeting authority, relationships between agencies, the influence of Congress and whether unelected official support or resist the President's policies.

But the framers of our Constitution did not rest our liberties on such bureaucratic minutiae.

We think it plain that when the President cannot fire the commission when he wants and the commission cannot fire the board when it wants, the boards independent -- independence from the President is greatly expanded.

The President can always choose to restrain himself in dealing with his subordinates.

This is a case about whether power exists, not about how it should be exercised.

With sincere respect we think that the dissent does not place sufficient weight on the on the constitutional need for accountability.

The dissent points to the vast and varied functions of the federal government, stresses the need for regulation by technical professional experts and portrays the board’s dual levels of insulation as necessary to a workable government.

But you can have a government that functions without being ruled by functionaries, 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 who must be held accountable for what the government does.

The dissent suggests that the board structure is not all that unusual and predicts dire consequences from our holding.

It argues that many other government positions are analogous to the board and complains that we do not resolve the status of those positions even though the issues concerning those other positions have not been briefed, argued or presented for our review.

We decline to do so.

In any event the dissent fails in our view to support its premonitions of doing, none of the petitioner positions it identifies are similarly situated to the board.

We note in our opinion a variety of respects in which the other physicians remarkably different from the one before us today.

We also note that the government does not share the dissent's view that these other positions are like the board and declined to cite them as ground for not reaching the ruling we do.

If the government thought these positions could be affected, we think it would have let us know instead in a precisely the opposite representation in the court below.

There is no reason for us to address whether these positions or any others not at issue here are so structure as to infringe the President's constitutional authority.

The only issue in this case is whether Congress may deprive the President of adequate control over the board which is the regulator of first resort and the primary law enforcement authority for a vital sector of our economy.

We hold that it cannot.

We turn now to the practical consequences of that holding.

Petitioners argue that the board must be struck down as unconstitutional in its entirety.

The government on the other hand argues that we should just answer the question before us by severing the aspect of the statute that is unconstitutional.

The second layer of insulation from Presidential control and otherwise not disturb the Act.

We agree with the government and adopt that more modest approach, with the unconstitutional restrictions excised, the act remains fully operative as a law, the board may continue to function as before but its members are subject to removal at will by the commission.

This gives as much effect to the expressed will of Congress as we can consistent with the constitution.

It seems clear to us that Congress would have preferred a board with a single level of insulation from the President rather than no board at all.

The judgment of the Court of Appeals for the District of Columbia circuit is affirmed in part, reversed in part and remanded.

Unknown Speaker: The Court today announces a new principle of constitutional law governing the structure of our Federal Government.

It says that the Constitution forbids statutes that provide a inferior officer of the United States with two layers of removal for cause protection.

Where does this constitutional principle come from?

It doesn’t come from that Constitution's text, the text assignment with respect to the power of removal from office.

It doesn't come from the Constitution’s history, for that shows that the framers disagreed about protecting officers from removal and remove, read what Madison says about it.

At one point he wants to keep the controller totally insulated, at another point, he doesn't.

You can find lots of that history, you can't find agreement.

Nor does it come from this Court’s earlier precedent.

For that precedent makes absolutely clear that the Constitution does permit one level of ‘for cause’ protection and it nowhere hints or suggests the two levels would be somehow worse, nor can I find any constitutional policy, say a policy related to the separation of powers could somehow offer significant support for the majority's brand new principal.

Now you have to keep in mind because it's a little complicated, that level one of ‘for cause’ protects the SCC commissions and they appoint the board members and level 2 of for cause protects the board members, okay?

I understand that arithmetically speaking, arithmetic two levels are more than one level, I've got that one but I do not understand why, constitutionally speaking.

That fact about arithmetic should make some significant difference.

Let’s consider the pure logic.

How does two levels more than one level make a significant practical difference to the President of the United States?

Either, the commission and the President agree about removing board members or they do not?

If they agree that they should be removed or they shouldn’t, level 1 makes no difference, how could it make a difference?

The President and the commissioners agree.

Now if they disagree and if the commission doesn't want to remove the board member, level 2 makes no difference because the commission wouldn’t remove the board member since it doesn't want to level 2 or not level 2?

But if the disagreement is different and it's the President who does not want to remove the board members but the commission does, level two helps suppress it, because level two stop the commission from doing something that the President doesn't want.

Now the majority underneath those general statements does try to find some instances where the two levels make a difference.

Now I would read them with great care and try to figure out just what they are and if you do figure them out, I think you may agree with me that there are best court cases that are not likely to arise and there is no evidence that any of it never has arisen in the history of United States, nor in the second level for cause removal limit the President's policy choices beyond what level 1 does because the statute grants the commission virtually complete control over every action the board takes.

The sole function, I think that second level of fore-clause provision serves is to assure the board members and the public that whether the commission does or does not change the board's policies, the board members themselves are protected from removal, say for political reasons and there are strong justifications for granting them this kind of protection.

The board carries out important adjudicatory functions, its members act like judges, when they hear individual cases, for example, deciding whether and how to discipline and an accounting firm what the Chief Justice properly mentioned is imposing sanctions on affirm, that’s called an adjudication.

In this rationale for protection here is reinforced by other factors, the nature of the accounting board, the need for board expertise, they need to assure the financial markets and the public that board members will themselves act independently, and not politically.

Now these are classical reasons particularly adjudication, for saying that the Constitution permits for -cause protection.

So I can conclude from that the presence of two levels of constitutional protection, at least from a constitutional protection is justified.

In any event, for the reasons I said I don't think it really hurts the President's authority to do what he wants in any practical respect having a second level rather than one.

And I don't even see to be honest while the court reached this question, do we really have two levels of for-cause protection?

The SCC statute says nothing about removal for-cause and if you look, when it was enacted, it enacted at a time when Congress because of the Myers case and before Humphrey's executor thought they didn’t have the power to impose for-cause protection.

So I would say reading it, there is only level of for-cause protection.

So the court has to read an otherwise silent statute is if it contained a provision that then causes the court to strike the statute down, the other part of it.

This seems to me the opposite of what we normally do which is to read statutes to whenever possible in a manner that allows us to uphold what Congress has done, not strike it down.

Well, with the matter end right here you might wonder, although it’s sort of interesting.

Why would I dissent orally from what sounds like a technical constitutional issue?

But the reason I'm doing so is because I think quite a lot more is at stake, however technical, the court's decision sounds, I think it could have seriously adverse impact upon the functioning of the federal government.

In announcing its new principle, the Court as you heard, says well there may be all reasons out there that limit this, maybe it just for the accounting board normally, judicial opinions are not tickets for one ride in one day on one train, they have principle in all this.

Maybe it can be limited, the courts says we are not quite saying how, but unless it is somehow limited, its impact will reach way beyond the accounting board, potentially bringing within its scope many other inferior officers protected from removal by a double layer of for-cause requirements.

Now I have tried to count them and the government didn't, so they may be right and maybe I'm wrong.

But we made a serious effort over months to count them, how many are there in this situation?

And what we found in our office was thousands of positions arguably occupied by a person who seems to be an inferior officer of the United States, and who is protected by two levels of double clause including for example high level administrators of the Nuclear Regulatory Commission, The Federal Energy Regulatory Commission, The Federal Trade Commission, The Federal Communications Commission, The Chemical Safety Board, The Federal Mine Safety And Health Review Commission, The Social Security Administration and including as well 1500 administrative law judges and including might be surprised, -- I was surprised to hear this, most of the military's officer core, they all have two levels of protection and they are all officers of the United States.

So what's supposed to happen, when a private company that opposes an agency decision, attacks the constitutionality of that decision on grounds similar to the ground advanced by the private company in this case?

The majority just says, well this may be really different but maybe it is, I just don’t see it at the moment and I wish they had, well, the majority does not explain whether or how these positions differ from most of the county board members before us, but unless today's principle of constitutional law is limited in some way or other, it can become virulent, running like a computer virus throughout the holes of government.

I cannot know for certain for the reasons that the Chief Justice said, just what the adverse consequences of today's new principles will be, but I fear and I have grounds for fear, that they may be substantial, that concern helps explain why, joined by Justice Stevens, Justice Ginsburg and Justice Sotomayor, I dissent.