On Monday, the Supreme Court granted cert in Free Enterprise Fund and Beckstead and Watts, LLP, Petitioners v. Public Company Accounting Oversight Board, et al. This is news that will almost certainly have ramifications for the pending Appointments Clause challenge of the Copyright Royalty Board.

The two cases

The facts in Free Enterprise Fund share many similarities with those in the Copyright Royalty Board litigation. The Securities and Exchange commission is comprised of five officers who are appointed by the President with the advice and consent of the Senate. The Chairman of the SEC serves at the pleasure of the President, while the four other officers can only be removed for cause. The Commission, in turn, appoints a Public Company Accounting Oversight Board,  after consultation with the Chairman of the Board of Governors of the Federal Reserve and the Secretary of the Treasury. The SEC is empowered to set Board rules and procedures, to overturn any sanction proposed by the Board, to limit or relieve the Board of its powers, and remove members of the board for cause.

To quickly review, in the Copyright Royalty Board litigation, the Librarian of Congress is appointed by the President with the advice and consent of the Senate. There are no limitations on the President’s power to remove the Librarian of Congress. The three Copyright Royalty Judges are appointed by the Librarian of Congress after consultation with the Register of Copyrights, an officer who is also appointed by the Librarian of Congress. (I somehow made a mistake on this not inconsequential fact in an earlier post on this case.) The Librarian of Congress may remove a Copyright Royalty Judge for cause. Determinations by the Copyright Royalty Judges are appealed to the United States Court of Appeals for the D.C. Circuit.

The Appointments Clause

According to the Appointments Clause, Congress may only vest the power to appoint inferior officers in the President, the Courts of Law, or the Heads of Departments. In Freytag v. Commissioner of Internal Revenue, a majority of the Supreme Court held that a Head of a Department must be the head of a “Cabinet-level department[]” that is “limited in number and easily identified.” Four concurring justices adopted a less strenuous test for a Head of a Department stating that one need be only a head of any agency “immediately below the President in the organizational structure of the Executive Branch,” including “all independent executive establishments.” The D.C. Circuit in Free Enterprise Fund rejected the test set forth by the majority in Freytag — standing precedent — and instead adopted the less potent test used in the concurrence:

In Freytag, the Supreme Court described Departments as being “like the Cabinet-level departments,” 501 U.S. at 886 (emphasis added), which are “limited in number and easily identified,” id. Although the Court did not identify the precise characteristics of “Cabinetlike” departments and reserved the issue of whether independent agencies are departments, id. at 887 n.4, four Justices urged that “Departments” should be understood to encompass “all agencies immediately below the President in the organizational structure of the Executive Branch,” including “all independent executive establishments,” id. at 918-19 (Scalia, J., joined by O’Connor, Kennedy, and Souter, JJ, concurring in part and in the judgment) (hereinafter “Concurring Op.”). They reasoned that the Framers “chose the word ‘Departmen[t]’ . . . not to connote size or function (much less Cabinet status), but separate organization – a connotation that still endures even in colloquial usage today.” Id. at 920. Noting that the Constitution makes no reference to the term “Cabinet,” id. at 916-17, and that the Court has not held that “‘the Heads of Departments’ are Cabinet members,” id. at 917, the concurring justices observed that even the sparse history of the Appointments Clause included the 1792 Act creating a Post-Master General, who, while not a cabinet member, had power to appoint an assistant and deputies, id. As Congress has continued to empower non-Cabinet officers to appoint inferior officers, id. at 918, the concurring justices cautioned that to conclude such action violated the Appointments Clause would “cast[] into doubt the validity of many appointments and a number of explicit statutory authorizations to appoint,” id.

Thus, on appeal, the Supreme Court will address an issue in Free Enterprise Fund that is almost directly on point to the Appointments Clause challenge of the Copyright Royalty Board. If  the SEC is found to be a Department, under whatever test the Supreme Court applies, the appointment of the Copyright Royalty Judges will likely stand. Likewise, if the Supreme Court gives the Appointments Clause teeth and finds that the SEC isn’t a Department, the appointment of the Copyright Royalty Board will likely be held to transgress the Constitution.

There are two potentially substantive differences between Free Enterprise Fund and the Copyright Royalty Board litigation, one of which looks to me like a red herring, the other may be a game changer. The red herring is that the Library of Congress is sometimes thought of as a legislative branch establishment and not part of the executive. I think the importance of this fact can be overstated since the Librarian of Congress is appointed by the President.

The potential game changer is that the Copyright Royalty Judges are appointed by one person who answers directly to the President. The board in Free Enterprise Fund, in contrast, is appointed by the five Securities and Exchange commissioners. Part of the theory underlying the Appointments Clause is that it’s integral to have a consolidated chain of command so that you know whose head must roll if an inferior officer is underqualified or makes a bad decision. Having five people select an appointment makes for an attenuated chain of command.

So what now?

To be completely honest, as I am not an appellate litigator, or any type of litigator, I’d be interested to hear any of your more informed opinions on whether the Copyright Royalty Board litigation will be stayed pending the upcoming Supreme Court decision.

Update: Word comes via the legal blog grapevine (thanks again!) that there is no set course of action that an appellate court will follow in this circumstance. A court may refrain from deciding a case because they either don’t want to be wrong or decide an issue that they are not forced to address. Some courts, alternatively, will jump the Supreme Court to give the tribunal the benefit of its analysis, or find that it is able to distinguish the facts and proceed accordingly.

Thanks to the wonderful SCOTUS blog for the collection of documents:

• Opinion Below (D.C. Circuit)
• Petition for certiorari
• Brief in opposition for respondents Public Company Accounting Oversight Board
• Brief in opposition for the United States
• Reply brief for Petitioners
• Amicus curiae brief for Washington Legal Foundation (in support of petitioners)
• Amicus curiae brief for Mountain States Legal Foundation (in support of petitioners)
• Amicus curiae brief for American Civil Rights Union (in support of petitioners)