FEF v. PCAOB: MSJ Oral Arguments...cutting to the chase

Starting things off was Michael Carvin of Jones Day arguing for the plaintiffs. His arguments could roughly be divided into two points; separation of powers issues, and Appointments Clause issues. During his separation of powers argument, Mr. Carvin spent a great deal of time discussing hypothetical scenarios; however, Judge Robertson was clearly more interested in a pragmatic discussion. Twice he interjected to ask how the arguments would apply in a practical sense. The Appointments Clause argument was much the same as had been put forth in the briefs, with the added theory by Mr. Carvin that according to the Board’s position, all inferior officers at the SEC were appointed unconstitutionally.

Jeffrey Lamkin of Baker Botts was up next, representing the Board. Early on in the argument, Judge Robertson decided to “sort of cut to the chase here.” He asked what Beckstead and Watts could do while they were “being beaten up on, vilified, smeared.” Mr. Lamkin was quick to point out that the accounting firm could have sought SEC review of the Board’s unfavorable inspection report and they chose not to do so. Apparently picking up on the judge’s preference for the practical, Mr. Lamkin focused on what he characterized as “the way this works,” punctuating his argument with multiple references to sections of SOX and relevant case law. It seems he may have overdone it however, as Judge Robertson pointed out that he had recited the same passage from US v. Perkins three times.

Arguing on behalf of the United States was DOJ attorney Robert Katerberg. In addition to adding to the points made by Mr. Lamkin, he noted that as a representative of the executive branch it did not see its power being infringed upon by the relevant sections of SOX. Mr. Katerberg went to frame the plaintiffs’ argument as being based wholly upon a narrow and hypothetical reading of the statute, which was insufficient for a constitutional challenge.

Mr. Carvin’s rebuttal seems to also have been inspired by Judge Robertson’s focus on practical consequences of the issues. He spent nearly all of his rebuttal time bringing his earlier argument into a realistic context in response to the judge’s challenge to provide examples of executive direction regarding regulatory investigations.

Judge Robertson wrapped up the proceedings by reminding the audience how fortunate they were that “you still don’t have to pay anything for a ticket price to get in here to hear good arguments like these.”

The transcript can be found on DU’s corporate governance website.