The Free Enterprise Decision: A Symbolic Victory for the "Unitary Executive Branch" Vision of the Presidency, but of Limited Practical Consequence

Rick Pildes

In a much anticipated separation-of-powers decision, the Court today held unconstitutional a provision of the Sarbanes-Oxley Act (SOX). I view Chief Justice Roberts's opinion, for a 5-4 Court, as a symbolic victory for the "unitary executive branch" view of the Presidency, but as little more than symbolic. The decision has no practical effect at all on the Sarbanes-Oxley Act; the SEC and the Board that administers the Act will go on as before. Indeed, lost in the headlines will be the fact that the Court actually rejected all the most expansive constitutional challenges to the SEC and to SOX. It accepted only the most narrow challenge; the Court held that the SEC had to have the power to remove Board members at will, rather than being able to remove them only for "good cause" (as SOX essentially provided). And even on that score, the Court simply severed the offending provision from the law and told the SEC and the Board to get on with continuing to administer SOX. In the view of the seven former SEC Chairman I represent in this case, the decision will change nothing in the on-the-ground relationship between the SEC and the Board. The SEC already has effective power to control the Board fully; the decision will not change that reality. Congress does not have to do anything legislatively in response to the Court's decision. To those in the business community who are hostile to SOX and were hoping the decision would undercut SOX in a major way and throw the statute back into Congress's lap to reconsider -- such as, presumably, the Free Enterprise Fund itself -- the decision is a total loss.

Moreover, despite the headline of "Court holds SOX unconstitutional," the decision is also a loss on many fronts to the "unitary executive branch" view. Proponents of this view believe independent agencies are themselves unconstitutional. The challengers argued that independent agencies, such as the SEC, unlike executive departments of the government, such as the Treasury, were not "departments" within the meaning of the Constitution and hence Congress could not give independent agencies the power to appoint inferior officers. The Court unanimously rejected that view. Similarly, many of the leading proponents of the "unitary executive branch" view, including academics like Steven Calabresi and Gary Lawson, had argued that the Board was constitutional only if the President, with Senate consent, appointed the Board members -- as opposed to the current law, in which the SEC appoints the Board members. The Court unanimously rejected that position too.

The big battle over the "unitary executive branch" view has always been whether independent agencies are constitutional. To see how removed from that battle today's decision, notice the irony of where the Court ends up: to protect the President's power to control administration of the laws, an independent agency, the SEC, must have greater power to fire the people who work under it, such as Board members. The opinion has some of the most robust language in 90 years in support of the unitary executive branch view, but for now at least, the fight is really at the margins of this issue, as today's decision confirms. One way to view the decision is that unitary executive branch proponents have lost the war, over independent agencies, but the unique structure of the SEC-Board relationship provided them an opportunity to at least draw a line somewhere. But anything is possible, and if the Court majority wants to revive the larger battle at some point, the language of today's opinion could be put in service of that mission.

UPDATE: I noticed that at the Volokh blog, John Elwood has a response to the case that is very similar to mine. I agree with John's comments there.
Posted 11:47 AM by Rick Pildes [link]