In a spirited argument at the Supreme Court on Monday, the justices considered whether Congress had violated separation-of-powers principles in 2002 when it created a board to regulate the accounting industry. The problem, critics of the law say, is that the board is too insulated from presidential oversight.
The board, the Public Company Accounting Oversight Board (sometimes called peekaboo by accountants), is overseen by the Securities and Exchange Commission, itself an independent agency.
Under the 2002 law, the Sarbanes-Oxley Act, board members are doubly insulated from presidential control. The S.E.C., but not the president, can remove them, and only for cause. One level up, the president can remove S.E.C. commissioners, but again only for cause.
“In other words,” Chief Justice John G. Roberts Jr. said at the argument, “the president can’t remove the S.E.C. commissioners at will. They can’t remove the P.C.A.O.B. commissioners at will.”
The net result, the chief justice said, was two layers of insulation — “for-cause squared,” he called it. He suggested that Congress had gone too far in telling the executive branch how to conduct its business.
Michael A. Carvin, representing an accounting firm challenging the law, told the justices that that “the board is unique among federal regulatory agencies in that the president can neither appoint nor remove its members” and so “is stripped of the traditional means of control that he has over the traditional independent agencies.”
The solicitor general, Elena Kagan, urged the court not to become fixated on the president’s removal authority.
“Removal is not the ultimate constitutional question,” Ms. Kagan said. “The ultimate constitutional question is the level of presidential control.” Here, she said, the president has no less control over the board than he has over the S.E.C. itself.
She presented this argument as a syllogism. The president, she said, has “constitutionally sufficient control over the S.E.C.” The commission, in turn, has “comprehensive control over the accounting board.”
“Therefore,” she said, “the president has constitutionally sufficient control over the accounting board.”
But she faced heavy fire from the court’s more conservative justices.
“Oh, no, no,” Chief Justice Roberts said, “because you have an extra layer there.”
Justice Samuel A. Alito Jr. asked whether five layers of for-cause removal would be constitutional. It depends, Ms. Kagan said.
Given the novel structure of the accounting board, the court may well decide the case, Free Enterprise Fund v. Public Company Accounting Oversight Board, No. 08-861, on narrow grounds.
But the case may also allow the court to address the general question of how much oversight the executive branch must have over independent agencies. That issue has divided constitutional scholars since the New Deal.
Proponents of the “unitary executive” theory have long maintained that Congress should not have the power to insulate agencies charged with executing the law from presidential control.
Ms. Kagan has addressed the issue in her academic writing. “As a practical matter,” she wrote in The Harvard Law Review in 2001, “successful insulation of administration from the president — even if accomplished in the name of ‘independence’ — will tend to enhance Congress’s own authority over the insulated activities.”
Some of the justices seemed interested in addressing these larger questions.