Free Enterprise Fund and severability

Last month, the Supreme Court ruled in Free Enterprise Fund v. PCAOB that a provision in Sarbanes-Oxley that insulated the Public Company Accounting Oversight Board from influence was unconstitutional. The provision said that PCAOB members could only be dismissed for cause by the board of the SEC, who themselves could also only be dismissed for cause. The Court found that two levels of for-cause dismissal leave the president unable to oversee the board, which violates the Constitution’s separation of powers.

Since Sarbanes-Oxley did not include a severability clause, Free Enterprise Fund sought to have the entire law struck down. The Court did not do so. In the constitutional equivalent of awarding $1 in damages, the Court struck down the for-cause dismissal provision, but left the rest of the law intact.

How did the Court rule that the provision was severable in the absence of a severability clause? The Court said (p. 28):

“Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem,” severing any “problematic portions while leaving the remainder intact.”

So, despite popular understanding to the contrary, a severability clause is not required for the remainder of the law to remain intact. Instead, they look at the law and see whether it makes sense without the unconstitutional provision (p. 29):

The remaining provisions are not “incapable of functioning independently,” . . . and nothing in the statute’s text or historical context makes it “evident” that Congress, faced with the limitations imposed by the Constitution, would have preferred no Board at all to a Board whose members are removable at will.

I’ll concede that this reasoning seems defensible. Nevertheless, I think it assigns to the Supreme Court more editorial control than it ought. Faced with an unconstitutional law and no explicit indication (such as a severability clause) of how to correct it, the Court is taking on the job of determining what constitutional law the Congress would have written. In so doing, I think the Court is usurping the Congress’s legislative role. It would be better to send the bill back and let the Congress decide explicitly what it should say, rather than the Court guess what the Congress would decide.

The Court seems to recognize the danger (p. 29):

In theory, perhaps, the Court might blue-pencil a sufficient number of the Board’s responsibilities so that its members would no longer be “Officers of the United States.” Or we could restrict the Board’s enforcement powers, so that it would be a purely recommendatory panel. Or the Board members could in future be made removable by the President, for good cause or at will. But such editorial freedom—far more extensive than our holding today—belongs to the Legislature, not the Judiciary. Congress of course remains free to pursue any of these options going forward.

but the Court believes that it is okay for it to exercise editorial freedom as long as it is not “extensive”.

Naturally it is the judiciary’s job to make judgement calls, but every judgement call makes the outcome less predictable, and predictability is the very essence of the rule of law. Where possible, the judiciary ought to make predictable, bright-line distinctions, and limit judgement calls to the bare minimum. Here the Supreme Court indulged in a judgement call it did not need to make.

But it seems that precedent going back at least to 1932 already establishes that the Court should make such a judgement call. Not one of the nine justices held out for my position.

Now let’s consider another piece of dreadful legislation without a severability clause: health care nationalization. The individual mandate appears to be unconstitutional. If the Court agrees (a big if, granted), the next question is whether the individual mandate will be held to be severable from the rest of the law.

As noted above, the question is whether it is “evident” that Congress would not have passed the law without the mandate. I think it is. The law is a delicately assembled Rube Goldberg machine. Without the mandate, the preexisting-condition provision will quickly bankrupt health insurers. Thus, the preexisting-condition provision must surely go as well. Furthermore, the mandate is the mechanism by which the law coerces changes in required health coverage (such as preventative care).

Would Congress have passed Obamacare without preexisting conditions, and without changes in required health coverage? Certainly not. It only barely passed as it was. Moreover, even if we imagine that it might have passed, the process of excising the unconstitutional provisions and all the other provisions that depend on them is exactly the sort of “blue-pencil” exercise that the Court is saying here is outside its power. I’m not a lawyer, but experts seem to agree: if the mandate falls, the whole bill will fall.

(Previous post.)

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s