Free Enterprise Fund v. Public Co. Accounting Oversight Board
The Supreme Court struck down a provision of the Sarbanes-Oxley Act that let accounting board members be fired only for cause by Securities and Exchange Commissioners who themselves could only be fired for cause, ruling that this double layer of job protection unconstitutionally cut the President off from control over the officials enforcing the law.
The Court left the accounting board itself intact, but said the President must be able to trace responsibility for its actions through officials he can actually hold accountable, so it struck the removal restriction while leaving the rest of the agency's structure in place.
“The President cannot “take Care that the Laws be faithfully executed” if he cannot oversee the faithfulness of the officers who execute them.”
The majority's core reasoning for why double layers of removal protection are unconstitutional.
How it got here: A federal district court and a divided D.C. Circuit panel both upheld the board's structure as constitutional before the Supreme Court agreed to review the case.
The Case in Depth
What happened
After major accounting scandals, Congress created the Public Company Accounting Oversight Board to police the accounting industry, giving it broad power to investigate and discipline auditing firms. A Nevada accounting firm and a nonprofit advocacy group sued after the Board investigated the firm, arguing the Board's structure — insulated from the President by two layers of job protection — violated the separation of powers.
The question before the Court
Can Congress shield a corporate accounting watchdog's board members from being fired by giving them two separate layers of job protection, so that not even the President's appointees can remove them at will?
The Court's answer
No — the Court ruled that Congress cannot combine two layers of for-cause job protection between the President and an official who enforces federal law. The accounting board's members could be fired only for cause by the SEC's Commissioners, who themselves could be fired only for cause by the President. That double insulation left the President unable to hold anyone accountable for the board's conduct, because the Commissioners were the ones who decided whether "cause" existed, and the President could not override their judgment.
The Court did not strike down the board itself or its broad regulatory powers. It simply removed the extra layer of job protection, so that the SEC can now fire board members at will, while the President's control over the SEC Commissioners remains unchanged from before.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Accounting firms and public companies still answer to the same regulatory board, but its members can now be fired at will by the SEC, which the President can hold accountable. The ruling also puts a ceiling on how many layers of job protection Congress can stack between the President and officials who enforce federal law, affecting how future agencies can be designed.
What changes now
The removal restriction on accounting board members is void, meaning the SEC can now remove board members at will, while the board's other powers and existence remain intact. The case was sent back to the lower courts for further proceedings consistent with the ruling. The decision does not resolve how the new limit on layered removal protections applies to other federal officials, leaving those questions for future cases.
What this does not decide
The Court expressly declined to decide whether its ruling affects civil-service employees, administrative law judges, military officers, or other government positions with similar layered removal protections, leaving those questions for future cases rather than resolving them here.
Concurrences and dissents
Dissent — Justice Breyer
“In my view the Court’s decision is wrong — very wrong.”Breyer's blunt statement of disagreement with the majority's ruling.
Justice Breyer argued the double for-cause protection barely affects Presidential power in practice, since the SEC already has near-total control over the board's functions, and the President's control over the SEC is undisputed. He warned the majority's rule is vague about who counts as an 'inferior officer,' potentially threatening the job protections of thousands of civil servants, administrative law judges, and military officers, and would have upheld the provision as constitutional.
How the Court got there
The legal reasoning, step by step
- The Court began from the settled principle that Article II gives the President the power to oversee officers who execute the law, including through removal, a power Congress may limit only in certain circumstances recognized in past cases involving a single layer of for-cause protection.
- The Court identified a question it said it had never before addressed: whether Congress can add a second layer of for-cause protection, so that an officer who exercises executive power is shielded not just from the President but also from a superior who is himself shielded from the President.
- Applying that framework, the Court found that once a second layer of protection is added, the President can no longer hold the intermediate officer (here, the SEC Commissioners) fully responsible for the subordinate's (the board's) conduct, because the Commissioners — not the President — decide whether good cause for removal exists and the President cannot easily overturn that judgment.
- The Court concluded that this diffusion of removal authority broke the chain of accountability the Constitution requires, since neither the President nor anyone he could remove at will had genuine control over the board, impairing his ability to make sure the laws are faithfully carried out.
- Having found the two-layer removal scheme unconstitutional, the Court applied ordinary severability rules, asking whether Congress would have wanted the rest of the statute to survive without the offending removal restriction, and concluded that it would, since the agency remains fully able to function with its members removable at will by the Commission.
- Turning to a separate challenge, the Court applied its existing test for identifying 'inferior officers' and concluded that once the removal restriction was excised, the board's members were properly classified as inferior officers whose appointment by the multi-member Commission satisfied the Constitution's Appointments Clause.
Doctrinal impact
Cases affected by this decision
Reaffirms Humphrey's Executor v. United States (295 U. S. 602)
The Court left intact the rule allowing a single layer of good-cause removal protection for independent agency heads.
Reaffirms Morrison v. Olson (487 U. S. 654)
The Court preserved the holding allowing good-cause limits on removing an inferior officer by a single superior.
Reaffirms Myers v. United States (272 U. S. 52)
The Court relied on Myers' recognition of the President's general power to remove executive officers.