SARBANES-OXLEY CASE TO BE APPEALED TO SUPREME COURT
SARBANES-OXLEY CASE TO BE
TO SUPREME COURT
D.C. Circuit Denies Rehearing, But 5-to-4 Split Signals Importance
Washington, D.C., November 19,
2008—On a 5 to 4 split, the U.S. Court of Appeals for the D.C. Circuit this
week declined to review a constitutional challenge to the Public Company
Accounting Oversight Board. The Competitive Enterprise Institute,
together with the law firm of Jones Day, plans to appeal the case to the U.S.
“While the court’s decision is,
of course, disappointing, the 5-4 split among the judges demonstrates that this
is an extremely important issue. We are hopeful that the Supreme Court
will accept this case for review,” said Sam
Kazman, CEI General Counsel.
The plaintiffs are challenging
the constitutionality of the PCAOB on the grounds that the Board violates the
Appointments Clause of the Constitution, which requires that major officers be
appointed by the President with the advice and consent of the Senate. The
Board’s members were selected by the Securities and Exchange Commissioners
acting as a body, rather than by the President or by the SEC’s chairman.
This avoided the individual accountability that the Framers viewed as crucial
to reining in government.
Plaintiffs had requested a
rehearing by the full court after three-judge panel in August rejected this
argument, in a 2-1 decision, saying that the SEC had adequate power to
supervise the Board. In a lengthy dissent, Judge Brett M. Kavanaugh
argued that the Board’s structure violated both the President’s appointment and
removal powers, and was contrary to previous Supreme Court rulings on the
issue. He characterized it as “the most important case” on the issue “in
the last 20 years.”
The vote in this week’s decision
to deny the petition for rehearing en banc was extremely close. Of the 9
participating judges, 4 voted for rehearing.
The plaintiffs in the case are the
Free Enterprise Fund and Beckstead & Watts, a small Nevada accounting firm that was being
investigated by the Board They are represented
by Jones Day and CEI.
Read more about the lawsuit, Free Enterprise Fund v. The Public Company
Accounting Oversight Board.