Supporters of the Sarbanes-Oxley Act claimed victory on June 28, when the Supreme Court turned back a broad challenge to the law. Passed in 2002, in the wake of financial scandals at Enron, WorldCom and other companies, the act introduced numerous measures to combat corporate fraud, including the establishment of the Public Company Accounting Oversight Board (PCAOB). Acting on behalf of seven former chairman of the Securities and Exchange Commission, Sudler Family Professor of Constitutional Law Richard Pildes filed an amicus brief with the Court defending the statute, in particular the way it structured presidential authority over the PCAOB. In a 5-4 ruling in Free Enterprise Fund v. Public Company Accounting Oversight Board, the Court ruled that this aspect of the statute was unconstitutional, but left in place all other provisions of the law.
In a dissenting opinion, Associate Justice Stephen Breyer wrote that the majority should not have ruled the section on presidential authority invalid. In support of his argument, Breyer cited both the amicus brief authored by Pildes and an article he published last year in the Vanderbilt Law Review. Following the Court's ruling, Pildes said he was delighted the law as a whole remained in force, despite the broad-gauge attack on its legality. "The case raised more major constitutional challenges than any case in years to the design of administrative agencies," Pildes said. "The decision is a complete victory for the Sarbanes-Oxley Act, the SEC, and the Board that enforces accounting standards throughout the United States."
Published June 30, 2010