Looking Back at the Success of ‘Free Enterprise Fund’

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In the last decade there has been a kind of separation of powers renaissance in the courts. Previously, separation-of-powers cases were rare and usually occurred when Congress did something very unusual (like give itself veto powers). But in the last eight years, almost every term of the U.S. Supreme Court has had at least one, and sometimes several, separation of powers cases.

Looking back through these cases, one precedent has been cited repeatedly, and appears to be indicative of the Supreme Court’s renewed focus on these critical issues—that is Free Enterprise Fund v. PCAOB, 561 U.S. 477 (2010). The Competitive Enterprise Institute was instrumental in bringing this case to the Supreme Court, and two CEI attorneys were co-counsel in the lawsuit.

In Humphrey’s Executor the Court had allowed Congress to limit the president’s ability to remove officers without giving a reason. Congress took Humphrey’s Executor and went wild, creating officers that could not be removed without cause and that could only be removed for cause by other officers who couldn’t be removed without cause. As Judge Kavanaugh wrote in his dissent from the D.C. Circuit panel’s ruling, Free Enterprise Fund “is Humphrey’s Executor squared.” 537 F.3d at 686 (D.C. Cir. 2008).

The Court in Free Enterprise Fund took seriously the power of the president to control executive branch officers. It did this by limiting the protection provided to unelected bureaucrats to presidential oversight. After Free Enterprise Fund, the president had to have the power (directly or indirectly) to fire officers for cause

But it also emphasized another important point that would be quoted by the Court in Luis v. United States (2016): “[T]he lack of historical precedent” was “[p]erhaps the most telling indication of a severe constitutional problem.” Never before had these kinds of limitations been imposed on presidential power. The unprecedented nature of the government’s action was also cited by the court in the Obamacare case, NFIB v. Sebelius (2012), when the court rejected the government’s Commerce Clause arguments. And there are a variety of other “never done before” actions by Congress that are now receiving greater scrutiny.

In NLRB v. Noel Canning (2014), the court considered President Obama’s decision to recess-appoint people to the NLRB when the Senate said it wasn’t in recess. Free Enterprise Fund was cited by both the majority and the dissent concerning the importance of presidential control of officers. Ultimately the court rejected these appointments by 9-0; unfortunately, however, by 5-4 it failed to further limit recess appointments. But still, the principles of Free Enterprise Fund were on the mind of all the justices in considering these important separation-of-powers questions.

Future cases are also likely to cite Free Enterprise Fund concerning the administrative state. Chief Justice Roberts, in City of Arlington v. FCC (2013), quoted Free Enterprise Fund in describing the “vast and varied federal bureaucracy” that “wields vast power and touches almost every aspect of daily life.” As the court considers re-examining deference to the administrative state in future cases, this characterization of the massive power wielded by unelected bureaucrats will be front and center.

These are just a few of the approximately one hundred cases that cite Free Enterprise Fund at the circuit and Supreme Court levels. This decision may have seemed to be minor at the time, but the fundamental principles that it supports continue to animate questions concerning the basic structure of our government. Helping bring this case before the Supreme Court may be one of the most important things that CEI has done—not only for the substantial changes this case brought alone, but for the precedent it set for challenging future government abuse.