With the recent resignation of Caroline Crenshaw, there are now two vacancies at the top of the Securities and Exchange Commission.  The sticking point in filling these vacancies has been President Trump’s unwillingness to appoint Democrats to run our federal agencies. 

However, assuming the constitutionally required advice and consent of the Senate is provided, what is stopping President Trump from appointing two more Republicans to the SEC? 

In our opinion, the Supreme Court would support the President’s decision to ignore the statutorily required “partisan balance requirement” found in the Securities Exchange Act of 1934.  This statutory provision requires that not more than “three of such commissioners shall be members of the same political party.” Such a provision is found in many of the statutes that authorize the existence of “independent” agencies. 

The “Unitary Executive“

We base our opinion on the sea change in constitutional-law thinking that the Supreme Court has gone through since the appointments of Justices Barrett, Gorsuch, and Kavanaugh.    This sea change means that it is highly likely that the partisan balance requirement will run afoul of the Court’s current thinking on the Constitution’s “vesting clause”—“[t]he executive Power shall be vested in a President of the United States of America.” This is referred to as the “unitary executive,” and the Court currently takes a “strong form” approach to this concept.  As explained by Professors Adrian Vermeule and Cass Sunstein:

Article II, section 1 of the U.S. Constitution vests the executive power in “a president of the United States.” Those words do not seem ambiguous. Under the Constitution, the President, and no one else, has executive power. The executive is therefore “unitary.” It follows, as the night follows the day, that Congress lacks the power to carve up the executive—to say, for example, that the Secretary of Transportation is a free agent, immune from presidential control, or that the Secretary of Commerce can maintain their job unless the President is able to establish some kind of “cause” for removing them.

This understanding forms the basis of the Administration’s legal argument in Trump v. Slaughter.  In this litigation the constitutionality of “for cause” language in the Federal Trade Commission Act is the focus.  This language prohibits the President from firing commissioners of the FTC except in cases of “inefficiency, neglect of duty, or malfeasance in office.”

This limitation arguably interferes with the President’s authority as the unitary executive.  As the Supreme Court explained in its recent Trump v. Wilcox ruling, which allowed the President to remove members of two independent agencies prior to litigating the merits in the D.C. Circuit: “Because the Constitution vests the executive power in the President … he may remove without cause executive officers who exercise that power on his behalf, subject to narrow exceptions recognized by our precedents.”

Therefore, it is very likely that the Supreme Court will rule in favor of President Trump in Trump v. Slaughter.  If so, the holding will stand for the general proposition that congressionally mandated limitations on the President’s removal power are unconstitutional.

The Analogy

If Congress cannot limit the President’s power to remove executive officers, it follows that Congress cannot narrow the pool of eligible candidates for appointment based on political affiliation.  Such a statutory requirement would serve as a limitation on his ability to act as the unitary executive in connection with his authority under Article II, Section 2, which gives the President the power to “nominate, and by and with the Advice and Consent of the Senate … appoint … all other Officers of the United States.”  Limiting the pool of applicants from whom the President may select appointments is, in effect, another example of Congress unconstitutionally carving up the executive. 

Who Can Challenge the President?   

The most direct means by which a President can be dissuaded from ignoring a partisan balance requirement is through the Senate’s advice and consent.  The Senate can simply fail to affirm a nomination.  However, if the Senate consents then this issue must be litigated.  For that to happen, the petitioner seeking annulment must establish “standing.”  

The question of standing, “the capacity of a party to bring a lawsuit in court,” would be a formidable hurdle for those seeking to enforce a partisan balance requirement.  Unlike Trump v. Slaughter, where a specific individual is fired and suffers a direct, personal injury, a challenge to a “non-appointment” is far more abstract.  For example, if the President appoints two Republicans to the SEC and the Senate approves, who could claim injury? A Democratic candidate who was expecting to be appointed cannot easily show a “concrete and particularized” injury, as no specific individual has a legal right to a presidential nomination.

Furthermore, private litigants—such as companies under SEC investigation—would have to prove that the lack of partisan balance caused them a specific harm. Proving that a 5-0 Republican SEC treated you differently than a 3-2 Republican SEC is an almost impossible evidentiary burden.  Given the Supreme Court’s recent trend toward limiting standing, it is difficult to see how a court would allow a challenge to proceed without a plaintiff who can demonstrate a direct link between the agency’s partisan makeup and a specific regulatory injury.

Summary

Our federal agencies cannot be independent of the President’s executive power just because Congress authorizes it.  This would be a violation of the unitary executive language found in the Constitution.  If President Trump wishes, he can legally challenge the partisan balance requirement found in any regulatory statute, including the Exchange Act, by nominating candidates that violate the requirement.  The Senate, in turn, can blunt the President’s efforts by refusing to confirm such nominations.   For those who believe they have standing, it is critical they pursue litigation, helping the courts establish with greater certainty what role partisan balance is to play in the administration of our federal agencies.    

Bernard S. Sharfman is a research fellow with the Law & Economics Center at George Mason University’s Antonin Scalia Law School. Nick Morgan is President and Founder of Investors Choice Advocates Network. ICAN is a nonprofit public interest litigation organization dedicated to serving as a legal advocate and voice for small investors and entrepreneurs.  The opinions expressed here do not represent the official positions of the Law & Economics Center or ICAN.