McDonald v. City of Chicago (08-1521) and Free Enterprise Fund v. Public Company Accounting Oversight Board (08-861)

July 7, 2010 Supreme Court Update

Greetings, Court fans!

Hope you enjoyed a lovely holiday weekend. I'm back to bring you summaries of two more decisions: McDonald v. City of Chicago (08-1521), holding that the Second Amendment's protection of an individual citizen's right to bear arms is enforceable against the states and not just the federal government; and Free Enterprise Fund v. Public Company Accounting Oversight Board (08-861), striking down limitations on the Securities and Exchange Commission's ability to remove members of the Public Company Accounting Oversight Board, but otherwise upholding the constitutionality of the Sarbanes-Oxley Act, which created the Board.

In McDonald v. City of Chicago, the Court tied up a loose end left two years ago by its landmark Second Amendment decision in District of Columbia v. Heller. You'll recall that Heller settled the age-old debate of whether the Second Amendment's prohibition of laws infringing the right to keep and bear arms was a right held by individual citizens or was limited to those serving collectively in a state militia. Heller found an individual right to possess handguns in one's home, based on the need for self-defense of one's own person, family and property. But Heller only limited the power of the federal government or, in the context of Washington, D.C. home rule, what local government in the federal enclave could do to restrict possession of handguns. McDonald took the next step and, by a 5-4 vote, applied the Second Amendment to limit legislation in the states and their subdivisions. It did so in the context of a challenge to Chicago's ban on virtually all possession of handguns and a similar ban in the suburb of Oak Park, Illinois.

The opinion by Justice Alito, joined by the Chief, Scalia, and Kennedy, formed a plurality for using the traditional method of applying substantive rights to the states through the Fourteenth Amendment's Due Process Clause. (As discussed below, Justice Thomas provided the final vote to form the Court's majority, although he would have used the Fourteenth Amendment's Privileges or Immunities Clause to bind the states.) The Court described its history of incorporating selective provisions of the Bill of Rights into the Fourteenth Amendment's guarantee of due process of law, making those rights enforceable against the states and not just the federal government. Not every provision of the Bill of Rights is incorporated, but only those rights that are fundamental and necessary to the nation's system of "ordered liberty," in other words, those rights "deeply rooted in the country's history and tradition." The Court took the reader through a historical discussion of Americans' relationship with firearms for self-defense, from the colonial period (leading to the enactment of the Bill of Rights) to the era following the Civil War when Congress, in legislation passed in 1866, sought to stop southern states from disarming newly freed slaves and to protect the rights of all citizens to keep and bear arms. From this history, and the fact that a majority of states also enshrined the right to bear arms in their state constitutions, the Court concluded that the concept of due process in the post-Civil War Fourteenth Amendment includes the right to keep and bear arms – that the right is fundamental to what our forefathers viewed as our nation's system of ordered liberty.

The Court rejected arguments that the prevalence of handgun restrictions in numerous countries shows that an individual right to bear arms is not fundamental, as several provisions in the Bill of Rights previously applied to the states have no counterpart in many European countries. It was also unimpressed with public safety arguments, noting that other rights deemed fundamental also can compromise safety and impose costs on society. The Court did, however, repeat its general admonition from Heller that not all laws regulating firearms are invalid. In fact, it did not expressly invalidate the Chicago and Oak Park laws, instead sending the case back to the lower courts to (presumably) do that honor.

Justice Scalia joined the Court's opinion but wrote separately to explain why, despite his "misgivings," he has acquiesced in a jurisprudence of substantive due process as the basis for selectively applying federal constitutional rights against the states – "because it is both long established and narrowly limited." Scalia went on to engage in an unusually detailed point-by-point refutation of Justice Stevens' dissent, concluding that "[i]t is Justice Stevens' approach, not the Court's, that puts democracy in peril."

Justice Thomas added the fifth vote to apply the Second Amendment to the states, but he used this opportunity "to reexamine, and begin the process of restoring, the meaning of the Fourteenth Amendment agreed upon by those who ratified it." He rejected the longstanding use of "due process" in the Fourteenth Amendment for applying substantive rights to the states. His historical exegesis sought to undo the perceived damage done by a series of Court decisions, starting with the 1873 decision in the Slaughter-House Cases, that declined to make use of the Fourteenth Amendment's Privileges or Immunities Clause ("No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States."). In Thomas' view, this clause protects constitutional liberties against state interference. He went on to emphasize the importance of the right to bear arms, with emphasis on the history of violence against blacks that required black citizens to provide for their own self-defense following their emancipation. Thomas referred to how "[o]ne man recalled the night during his childhood when his father stood armed . . . until morning to ward off lynchers." Because the right to bear arms is a fundamental privilege of American citizenship, Thomas would protect it from state encroachment via the Privileges or Immunities Clause.

In dissent, Justice Stevens defended the notion of substantive due process for protecting rights through the Fourteenth Amendment, but he criticized the majority's sole reliance on a historical understanding of "liberty" and argued for a more modern, contextual approach. He also rejected the majority's constitutional view that a right enforceable against the federal government, if also applied to the states, must be applied in full, writing instead that the touchstone of "liberty" that decides what binds the states through the Due Process Clause can vary from the full scope of a provision in the Bill of Rights. To Stevens, a handgun is a weapon of both destruction and self-defense, so its relationship to liberty is quite ambiguous, and the long history of local firearms laws shows how the democratic process can tailor gun laws to local conditions without undermining liberty. He would therefore not extend Heller to apply to local handgun bans.

Justice Breyer also dissented, joined by Ginsburg and Sotomayor. Breyer saw no evidence that the right to keep and bear arms for private self-defense is so fundamental that it must be applied to the states through the Fourteenth Amendment. He drew on scholarship penned after Heller disputing the majority's historical record, so he would not rely on history alone in deciding the present constitutional question. He found the contemporary debate over handgun regulation to be so divided and inconclusive that it ultimately is a subject best left to legislative judgments. That is especially so where applying Heller to the states would infringe on a long tradition of the exercise of local authority to regulate firearms for the protection of public safety and welfare. To Breyer, the fact that the majority had to concede that some regulation is permissible, leaving it to judges to decide those boundaries on a case-by-case basis, undermines the rationale that federal constitutional law binds the states to uphold a right to possess handguns for private self-defense. The large variety of circumstances addressed by local gun laws is reason for allowing the local legislative process to calculate the best balance for saving lives. "For example, in 2008, the murder rate was 40 times higher in New Orleans than it was in Lincoln, Nebraska." There has never been a consensus of a fundamental private right of armed self-defense, and so Breyer would not apply Heller to all 50 states.

Next, we turn to the constitutionality of a new regulatory body in Free Enterprise Fund v. Public Company Accounting Oversight Board. Congress passed the Sarbanes-Oxley Act (SOX) in the wake of Enron and other accounting scandals. Among other things, SOX created the Public Company Accounting Oversight Board to regulate the accounting industry. SOX specified that the Securities and Exchange Commission (SEC) had authority to oversee the Board's activities, but the SEC could remove Board members only "for good cause shown." SEC Commissioners themselves can be removed by the President only for good cause as well. Petitioners, a small Nevada accounting firm and an anti-SOX non-profit organization of which the accounting firm was a member, sought a declaratory judgment and injunction against the Board on the ground that SOX violated the separation of powers and the Appointments Clause.

In a 5-4 decision led by the Chief, the conservative wing of the Court agreed that provisions in SOX creating a second layer of "for cause" limitation on the removal of Board members violated separation of powers. The power of removal is an integral part of the executive power vested in the President. Congress may impose certain "good cause" limits on the President's removal power without violating the separation of powers. This case was unique, however, in that it involved two layers of "good cause" protection, one between the President and the SEC, and another between the SEC and the Board. The second layer meant that the President could not hold the SEC fully accountable for the Board's conduct; the SEC could retain a Board member contrary to the President's wishes by claiming that it lacked good cause for removal. The Court rejected the dissent's argument that the need for expertise in the modern administrative state justified additional layers of "for cause" protection: "One can have a government that functions without being ruled by functionaries, and a government that benefits from expertise without being ruled by experts. Our Constitution was adopted to enable the people to govern themselves, through their elected leaders. The growth of the Executive branch, which now yields vast power and touched almost every aspect of daily life, heightens the concerns that it may slip from the Executive's control and thus from the people." At the same time, the Court took care to limit the reach of its decision. Rather than striking down the Board in its entirety, the Court found that the offending tenure provisions could be severed from the rest of SOX. The Court also stressed that its decision would have little effect on other agencies because so few other independent agencies offered a second-level of "good cause" protection to its officers. In a final section the dissent did not challenge, the Court rejected the petitioners' arguments that SOX violated the Appointments Clause by permitting Board members to be chosen by the SEC, instead of by the President, with Senate confirmation. Congress may vest the appointment of inferior officers to a "Head of Department." The Court held that the SEC is a "Department" for purposes of the Appointments Clause, that the multi-member Commission could be considered the Department's "Head," and that, particularly in light of the Court's ruling that the SEC is properly viewed as possessing the power to remove Board members at will, Board members are inferior officers under the SEC's control.

Justice Breyer led the dissent on the separation of powers question. The dissent believed that text, history, and precedent offered no immediate guidance on what limits Congress could place on the President's authority to remove officers. It was therefore necessary to examine how the provision in question was likely to function in real life. The dissent had difficulty seeing how, as a practical matter, two layers of "for cause" protection between the President and Board members imposed a more serious limitation on the President's removal power than just one layer, which the Court had found to be constitutional in the past. Moreover, since the SEC enjoyed virtually absolute control over the Board (including the power to review, modify, or cancel Board actions, and the power to initiate any investigation or promulgate any rule within the Board's purview), and everyone agreed that the President's control over the SEC was sufficient, the President's control over the Board should be sufficient as well. Meanwhile, Congress had good reasons for enacting the "for cause" provision, namely to protect the independence of members who sometimes engaged in adjudicatory functions, to recruit members with the necessary technical expertise, and to demonstrate to the public that the Board's work would be insulated from politics. Above all, the dissent was troubled by the potential ramifications of the Court's holding on other administrative positions, and possibly entire agencies, if the tenure provisions could not be severed from an agency's enabling statute. Justice Breyer attached appendices to the dissent identifying 48 agencies whose heads were removable only "for cause," which employed a total of 573 high-ranking officials who were protected by a second layer of "for cause" protection. The decision could affect even greater numbers of administrative law judges working in independent agencies, and military officers who could be removed only for cause by other military officers who also enjoyed tenure protections. To Justice Breyer, the Court's holding presented a worrying legal dilemma: "To interpret the Court's decision as applicable only in a few circumstances will make the rule less harmful but arbitrary. To interpret the rule more broadly will make the rule more rational, but destructive."

I'll be back soon with the final Update of the Term.


From the Appellate and Complex Legal Issues Practice Group at Wiggin and Dana
For more information, contact Kim Rinehart or any other member of the Practice Group at 203-498-4400