Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 1 of 59 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

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1 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 1 of 59 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA FREE ENTERPRISE FUND, et al., Plaintiffs, Civil Action No. 1:06-cv JR -against- THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD, et al., Defendants. DEFENDANTS MOTION TO DISMISS THE COMPLAINT FOR LACK OF JURISDICTION AND FAILURE TO STATE A CLAIM Pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, and for the reasons stated more fully in the accompanying Memorandum of Points and Authorities, defendants respectfully move to dismiss this case. First, this Court lacks jurisdiction because this suit was brought outside the statutory review mechanism of the Sarbanes-Oxley Act of 2002, Pub. L. No , 116 Stat. 745 (codified at 15 U.S.C et seq.) ( Sarbanes-Oxley ). Sarbanes-Oxley and other federal securities laws establish detailed and precise mechanisms for administrative and judicial review. Those laws specify the timing, scope, and forums for such review. Plaintiffs have failed to avail themselves of that exclusive statutory review process and have failed to exhaust administrative remedies as well. Second, plaintiffs have failed to identify a cause of action that authorizes them to sue the Public Company Accounting Oversight Board (the Board ) in district court. Neither Sarbanes- Oxley nor any other statute authorizes this suit against the Board. To the contrary, Sarbanes-

2 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 2 of 59 Oxley provides for administrative review before the Securities and Exchange Commission (the Commission ) followed by judicial review in the court of appeals. This Court should not judicially imply a cause of action to bring suit in district court where Congress has provided an express statutory mechanism for review in the court of appeals. Third, the complaint must be dismissed in part for want of standing. Plaintiff Free Enterprise Fund fails to allege injury sufficient to establish associational standing. Both plaintiffs lack standing to challenge restrictions on the Commission s appointment authority (Compl. 92). And plaintiffs also lack standing to challenge Sarbanes-Oxley s grant of appointment authority to the five Commissioners rather than the Chairman alone (Compl. 91): The Chairman voted in favor of each appointment to the Board, so plaintiffs suffered no injury fairly traceable to this alleged defect in the appointment process. A proposed order is attached. Dated: May 15, 2006 Lewis H. Ferguson (D.C. Bar No ) J. Gordon Seymour (D.C. Bar No ) Heidi E. Murdy (D.C. Bar No ) PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD 1666 K Street, N.W. Washington, D.C (202) (telephone) (202) (facsimile) Respectfully submitted, /s/ Joe Caldwell Joe Robert Caldwell, Jr. (D.C. Bar No ) James R. Doty (D.C. Bar No ) Jeffrey A. Lamken (D.C. Bar No ) Joshua A. Klein (D.C. Bar No ) BAKER BOTTS, LLP 1299 Pennsylvania Avenue, N.W. Washington, D.C (202) (telephone) (202) (facsimile) Counsel for Defendants 2

3 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 3 of 59 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA FREE ENTERPRISE FUND, et al., Plaintiffs, Civil Action No. 1:06-cv JR -against- THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD, et al., Defendants. DEFENDANTS MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS THE COMPLAINT Lewis H. Ferguson (D.C. Bar No ) J. Gordon Seymour (D.C. Bar No ) Heidi E. Murdy (D.C. Bar No ) PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD 1666 K Street, N.W. Washington, D.C (202) (telephone) (202) (facsimile) Joe Robert Caldwell, Jr. (D.C. Bar No ) James R. Doty (D.C. Bar No ) Jeffrey A. Lamken (D.C. Bar No ) Joshua A. Klein (D.C. Bar No ) BAKER BOTTS, LLP 1299 Pennsylvania Avenue, N.W. Washington, D.C (202) (telephone) (202) (facsimile) Counsel for Defendants

4 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 4 of 59 TABLE OF CONTENTS STATEMENT... 1 I. Statutory Background...1 A. Review of SEC and SRO Decisions... 3 B. The Public Company Accounting Oversight Board... 5 II. Relevant Proceedings... 9 A. Board Rulemakings and Commission Review... 9 B. The Inspection and Investigation of Plaintiff Beckstead and Watts C. The Instant Lawsuit SUMMARY OF ARGUMENT ARGUMENT I. Plaintiffs Have Bypassed Congress s Exclusive Statutory Mechanism for Judicial Review A. Where Congress Provides a Comprehensive Remedial Scheme, That Scheme Is Presumed To Be Exclusive B. Congress Provided a Comprehensive Review Process for Challenges to Board Authority C. The Statutory and Legislative History of Sarbanes-Oxley s Review Provisions Confirm Congress s Intent That They Be Exclusive D. Congress s Statutory Review Mechanism Is Adequate To Address Plaintiffs Constitutional Claims E. Plaintiffs Suit Frustrates Congress s Purposes in Establishing an Exclusive Statutory Review Mechanism II. Plaintiffs Have Failed To Identify a Cause of Action Authorizing This Suit III. Plaintiffs Claims Must Be Dismissed for Lack of Standing A. Free Enterprise Fund s Allegations Are Insufficient To Support Standing B. Plaintiffs Lack Standing To Raise Certain Appointments Clause Challenges i

5 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 5 of Plaintiffs Lack Standing To Challenge Restrictions on the Commission s Appointment Authority Plaintiffs Lack Standing To Challenge Congress s Grant of Appointment Authority to the Commission Collectively Rather Than to the Chairman CONCLUSION ii

6 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 6 of 59 TABLE OF AUTHORITIES CASES 1 Action for Children s Television v. FCC, 59 F.3d 1249 (D.C. Cir. 1995)...18, 30 Aerosource, Inc. v. Slater, 142 F.3d 572 (3d Cir. 1998)...29 Alton v. NASD, No. C , 1994 WL (N.D. Cal. July 26, 1994)...23 Am. Benefits Group, Inc. v. NASD, No. 99 Civ. 4733, 1999 WL (S.D.N.Y. Aug. 10, 1999)...23, 29 Am. Coal. for Competitive Trade v. Clinton, 128 F.3d 761 (D.C. Cir. 1997)...27, 32 Am. Fed. of Gov t Employees, AFL-CIO v. Loy, 367 F.3d 932 (D.C. Cir. 2004)...18 Am. Power & Light Co. v. SEC, 329 U.S. 90 (1946)...26 Andrade v. Lauer, 729 F.2d 1475 (D.C. Cir. 1984)...43 Belfort v. NASD, No. 93 Civ. 7159, 1994 WL (S.D.N.Y. Mar. 24, 1994)...23 Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388 (1971)...38 Blessing v. Freestone, 520 U.S. 329 (1997)...16 Blinder, Robinson & Co. v. SEC, 837 F.2d 1099 (D.C. Cir. 1988)...26 Block v. Cmty. Nutrition Inst., 467 U.S. 340 (1984)...15 Bragdon v. Abbott, 524 U.S. 624 (1998)...24 Brown v. GSA, 425 U.S. 820 (1976)...38 Bush v. Lucas, 462 U.S. 367 (1983)...38 Bus. Roundtable v. SEC, 905 F.2d 406 (D.C. Cir. 1990)...4 Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984)...30 City of Rancho Palos Verdes v. Abrams, 544 U.S. 113 (2005)...16 City of Rochester v. Bond, 603 F.2d 927 (D.C. Cir. 1979)...17, 37 1 Authorities on which we chiefly rely are marked by an asterisk. iii

7 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 7 of 59 Coleman v. NASD, No. 99 Civ. 248, 1999 WL (S.D.N.Y. May 14, 1999)...23 Comm. for Monetary Reform v. Bd. of Governors of Fed. Reserve Sys., 766 F.2d 538 (D.C. Cir. 1985)...43 Corr. Servs. Corp. v. Malesko, 534 U.S. 61 (2001)...38 Datek Sec. Corp. v. NASD, 875 F. Supp. 230 (S.D.N.Y. 1995)...23 Davis v. Passman, 442 U.S. 228 (1979)...38 Desiderio v. NASD, 2 F. Supp. 2d 516 (S.D.N.Y. 1998)...23 Eastern Bridge, LLC v. Chao, 320 F.3d 84 (1st Cir. 2003)...17, 18 Eng rs Pub. Serv. Co. v. SEC, 138 F.2d 936 (D.C. Cir. 1943), vacated as moot, 332 U.S. 788 (1947)...33 Evans v. United States, 504 U.S. 255 (1992)...24 *FDIC v. Meyer, 510 U.S. 471 (1994)...37, 38 *FEC v. NRA Political Victory Fund, 6 F.3d 821 (D.C. Cir. 1993)...41 Fair Employment Council of Greater Wash., Inc. v. BMC Mktg. Corp., 28 F.3d 1268 (D.C. Cir. 1994)...39 *First Jersey Sec., Inc. v. Bergen, 605 F.2d 690 (3d Cir. 1979)...23, 28 Fund Democracy, LLC v. SEC, 278 F.3d 21 (D.C. Cir. 2002)...39 Gen. Fin. Corp. v. FTC, 700 F.2d 366 (7th Cir. 1983)...17 Great Plains Coop v. Commodity Futures Trading Comm n, 205 F.3d 353 (8th Cir. 2000)...17 Hayden v. N.Y. Stock Exch., 4 F. Supp. 2d 335 (S.D.N.Y. 1998)...23, 28 Hirschberg v. Commodity Futures Trading Comm n, No. 02 C 6483, 2003 WL (N.D. Ill. Aug. 27, 2003)...23, 28, 29 Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (1999)...16 Hunt v. Wash. State Apple Adver. Comm n, 432 U.S. 333 (1977)...39 iv

8 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 8 of 59 INS v. Phinpathya, 464 U.S. 183 (1984)...24 Intercontinental Indus. v. Am. Stock Exch., 452 F.2d 935 (5th Cir. 1971)...26 Inv. Co. Inst. v. Bd. of Governors of Fed. Reserve Sys., 551 F.2d 1270 (D.C. Cir. 1977)...17 Lebron v. Nat l R.R. Passenger Corp., 513 U.S. 374 (1995)...37 Lorillard v. Pons, 434 U.S. 575 (1978)...24 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992)...39 Marchiano v. NASD, 134 F. Supp. 2d 90 (D.D.C. 2001)...23, 27 Maschler v. NASD, 827 F. Supp. 131 (E.D.N.Y. 1993)...23 Massieu v. Reno, 91 F.3d 416 (3d Cir. 1996)...32 McLaughlin, Piven, Vogel, Inc. v. NASD, 733 F. Supp. 694 (S.D.N.Y. 1990)...23 Meredith Corp. v. FCC, 809 F.2d 863 (D.C. Cir. 1987)...33 Merrill Lynch, Pierce, Fenner & Smith, Inc. v. NASD, 616 F.2d 1363 (5th Cir. 1980)...23 Middlesex County Sewerage Auth. v. Nat l Sea Clammers Ass n, 453 U.S. 1 (1981)...16, 38 Montana-Dakota Utils. Co. v. Northwestern Pub. Serv. Co., 341 U.S. 246 (1951)...37 NASD v. SEC, 431 F.3d 803 (D.C. Cir. 2005)...3, 4, 5 Nassar & Co. v. SEC, 566 F.2d 790 (D.C. Cir. 1977)...23 *Nat l Taxpayers Union v. SSA, 376 F.3d 239 (4th Cir. 2004)... passim Northwest Envtl. Def. Ctr. v. Brennen, 958 F.2d 930 (9th Cir. 1992)...43 Norwegian Nitrogen Prods. Co. v. United States, 288 U.S. 294 (1933)...32 Prevatte v. NASD, 682 F. Supp. 913 (W.D. Mich. 1988)...23 Pub. Serv. Comm n v. Wycoff Co., 344 U.S. 237 (1952)...37 R.H. Johnson & Co. v. SEC, 198 F.2d 690 (2d Cir. 1952)...26 *Reuss v. Balles, 584 F.2d 461 (D.C. Cir. 1978)...42 v

9 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 9 of 59 Roach v. Woltmann, 879 F. Supp (C.D. Cal. 1994)...23, 28 SEC v. Andrews, 88 F.2d 441 (2d Cir. 1937)...23 Seminole Tribe of Fla. v. Florida, 517 U.S. 44 (1996)...38 Sheldon v. SEC, 45 F.3d 1515 (11th Cir. 1995)...26 Sorrell v. SEC, 679 F.2d 1323 (9th Cir. 1982)...26 *Sturm, Ruger & Co. v. Chao, 300 F.3d 867 (D.C. Cir. 2002)... passim *Swirsky v. NASD, 124 F.3d 59 (1st Cir. 1997)...23, 28 Syracuse Peace Council v. FCC, 867 F.2d 654 (D.C. Cir. 1989)...33 Telecomm. Research & Action Ctr. v. FCC, 750 F.2d 70 (D.C. Cir. 1984)...27 *Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994)... passim Time Warner Entm t Co., L.P. v. FCC, 93 F.3d 957 (D.C. Cir. 1996)...27 Todd & Co. v. SEC, 557 F.2d 1008 (3d Cir. 1977)...26 Trifax Corp. v. Dist. of Columbia, 314 F.3d 641 (D.C. Cir. 2003)...29 *United States v. AVX Corp., 962 F.2d 108 (1st Cir. 1992)...39, 40 United States v. Erika, Inc., 456 U.S. 201 (1982)...18 *United States v. Fausto, 484 U.S. 439 (1988)...18, 30, 36 United Transp. Union v. Norfolk & W. Ry. Co., 822 F.2d 1114 (D.C. Cir. 1987)...36 Verizon Md., Inc. v. Pub. Serv. Comm n, 535 U.S. 635 (2002)...38 *Weinberger v. Salfi, 422 U.S. 749 (1975)...18, 27, 32, 34 *Whitney Nat l Bank v. Bank of New Orleans & Trust Co., 379 U.S. 411 (1965)... passim Wright v. McPhie, No. Civ. A , 2005 WL (D.D.C. Sept. 27, 2005)...39, 40 Younger v. Harris, 401 U.S. 37 (1971)...34 vi

10 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 10 of 59 CONSTITUTIONAL PROVISIONS, STATUTES, AND RULES U.S. Const. art. II, Sarbanes-Oxley Act of 2002, Pub. L. No , 116 Stat. 745 (codified at 15 U.S.C et seq.)... passim 3, 15 U.S.C , 15 U.S.C passim 102, 15 U.S.C , , 15 U.S.C passim 105, 15 U.S.C , 20, 21, , 15 U.S.C , 15 U.S.C passim 109, 15 U.S.C , 6, , 15 U.S.C , 15 U.S.C. 78j-1(g)-(l) , 15 U.S.C , 15 U.S.C , 15 U.S.C. 78kk (amending 18 U.S.C. 1341, 1343, 1349, 1350, and 29 U.S.C. 1131) U.S.C. 437c...41 Administrative Procedure Act, 5 U.S.C U.S.C U.S.C U.S.C. 77t...3, 22 vii

11 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 11 of 59 Securities Exchange Act of 1934, 15 U.S.C. 78a et seq.... passim 15 U.S.C. 78d U.S.C. 78e...3, 6 15 U.S.C. 78f...3, 4 15 U.S.C. 78o...3, 6 15 U.S.C. 78o-3...3, 4 15 U.S.C. 78q...4, 5 15 U.S.C. 78s... passim 15 U.S.C. 78u...3, U.S.C. 78y... passim 15 U.S.C. 78aa...3, U.S.C Fed. R. Civ. P LEGISLATIVE HISTORY H.R. Rep. No (1988)...32 H.R. Rep. No (2002)...2 S. Rep. No (1975)...4, 25, 36 S. Rep. No (1978)...30, 36 S. Rep. No (2002)...2, 3, 25 ADMINISTRATIVE DECISIONS In re Alderman, Exchange Act Release No , 59 SEC Docket 2075, 1995 WL (July 20, 1995)...33 Commission Announces Acting Chairman of Public Company Accounting Oversight Board, SEC News Release (Jan. 8, 2003), available at viii

12 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 12 of 59 Dissemination and Display of Transaction Reports, Last Sale Data and Quotation Information, Exchange Act Release No , 19 SEC Docket 659, 1980 WL (Feb. 19, 1980)...33 Establishment of Accounting Support Fee, PCAOB Release No (Apr. 18, 2003), available at 18_Release_ pdf...9 Inspection of Beckstead & Watts, LLP, PCAOB Release No (Sept. 28, 2005), available at Beckstead_and_Watts.pdf...11 In re Marrie, Exchange Act Release No , 80 SEC Docket 2163, 2003 WL (July 29, 2003), rev d on other grounds, 374 F.3d 1196 (D.C. Cir. 2004)...33 In re Middle West Corp., Public Utility Holding Company Act Release No , 1942 WL (July 6, 1942)...26 In re North Am. Co., Public Utility Holding Company Act Release No , 1942 WL (Apr. 14, 1942)...26 Notice of Filing of Proposed Ethics and Independence Rules Concerning Independence, Tax Services, and Contingent Fees, Exchange Act Release No (Mar. 7, 2006), available at Notice of Filing of Proposed Rule Change Relating to Solicitation of Municipal Securities Business Under MSRB Rule G-38, Exchange Act Release No , 85 SEC Docket 649, 2005 WL (Apr. 15, 2005)...33 Notice of Filing of Proposed Rule on Auditing Standard No. 4, Exchange Act Release No (Dec. 21, 2005), available at Notice of Filing of Proposed Rule on Funding, Exchange Act Release No , 68 Fed. Reg (June 27, 2003)...10 Order Approving Proposed Auditing Standard No. 1, Exchange Act Release No , 82 SEC Docket 3079 (May 14, 2004)...10 Order Approving Proposed Auditing Standard No. 2, Exchange Act Release No , 83 SEC Docket 212 (June 17, 2004)...10 Order Approving Proposed Auditing Standard No. 3, Exchange Act Release No , 83 SEC Docket 1905 (Aug. 25, 2004)...10 ix

13 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 13 of 59 Order Approving Proposed Auditing Standard No. 4, Exchange Act Release No (Feb. 6, 2006), available at pdf...10, 13, 31 Order Approving Proposed Ethics and Independence Rules Concerning Independence, Tax Services, and Contingent Fees, Exchange Act Release No (Apr. 19, 2006), available at 13 Order Approving Proposed Rule Change by the Municipal Securities Rulemaking Board Relating to Political Contributions and Prohibitions on Municipal Securities Business, Exchange Act Release No , 56 SEC Docket 1045, 1994 WL (Apr. 7, 1994)...33 Order Approving Proposed Rules on Funding, Exchange Act Release No , 80 SEC Docket 2319 (Aug. 1, 2003)...10 Order Approving Proposed Rules Relating to Bylaws, Exchange Act Release No , 80 SEC Docket 1978 (July 23, 2003)...10 Order Approving Proposed Rules Relating to Compliance with Auditing and Related Professional Practice Standards and Advisory Groups, Exchange Act Release No , 81 SEC Docket 1509 (Oct. 31, 2003)...10 Order Approving Proposed Rules Relating to Inspections of Registered Public Accounting Firms, Exchange Act Release No , 82 SEC Docket 3341 (June 1, 2004)...10 Order Approving Proposed Rules Relating to Investigations and Adjudications, Exchange Act Release No , 82 SEC Docket 3076 (May 14, 2004)...10 Order Approving Proposed Rules Relating to Registration System, Exchange Act Release No , 80 SEC Docket 1890 (July 16, 2003)...10 Order Regarding Section 101(d) of the Sarbanes-Oxley Act of 2002, Exchange Act Release No , 80 SEC Docket 144 (Apr. 25, 2003)...5 Order Regarding Section 103(a)(3)(B) of the Sarbanes-Oxley Act of 2002, Exchange Act Release No , 80 SEC Docket 142 (Apr. 25, 2003)...9 Proceedings of the Commission (Oct. 25, 2002), available at openmeetings.shtml...42 Proposal for Establishment of Accounting Support Fee, PCAOB Release No (Mar. 14, 2003), available at 07_Release pdf...9 x

14 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 14 of 59 SEC Names Bill Gradison Acting Chairperson; Approves PCAOB Appointment Procedures, SEC News Release (Dec. 2, 2005), available at SEC Unanimously Approves William J. McDonough as Chairman of Public Company Accounting Oversight Board, SEC News Release (May 21, 2003), available at Statement Concerning the Issuance of Inspection Reports, PCAOB Release No (Aug. 26, 2004), available at statement_concerning_inspection_reports.pdf...29 Statement Regarding the Establishment of Auditing and Other Professional Standards, PCAOB Release No , at 3 (April 18, 2003), available at In re Wright, Exchange Act Release No , 1938 WL (Feb. 28, 1938)...26 MISCELLANEOUS John C. Coffee, Jr., Understanding Enron: It s About the Gatekeepers, Stupid, 57 Bus. Law (2002)...2 Corporate Fraud Responsibility: A Legislative History of the Sarbanes-Oxley Act of 2002 (William H. Manz ed., 2003)...2 F. Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum. L. Rev. 527 (1947)...24 Thomas Lee Hazen, Treatise on the Law of Securities Regulation (5th ed. 2005)...23 L. Loss & J. Seligman, Securities Regulation (3d ed. 1998)...1, 23 PCAOB Rulemaking Docket, at Richard J. Pierce, Jr., Administrative Law Treatise (4th ed. 2002)...32 U.S. Gen. Accounting Office, The Accounting Profession: Major Issues: Progress and Concerns (1996)...1 U.S. Gen. Accounting Office, Actions Needed To Improve Public Company Accounting Oversight Board Selection Process (2002), available at new.items/d03339.pdf...42 xi

15 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 15 of 59 In the wake of defective audits that left massive frauds undetected and caused enormous shareholder losses, Congress enacted the Sarbanes-Oxley Act of Pub. L. No , 116 Stat. 745 (codified at 15 U.S.C et seq.) ( Sarbanes-Oxley or the Act ). 1 That Act, among other things, established the Public Company Accounting Oversight Board (the Board ) to oversee the audits of public companies. According to the complaint in this case, plaintiff Beckstead and Watts, a small Nevada accounting firm, was inspected by the Board in 2004 and remains the subject of an ongoing Board disciplinary investigation. Together with co-plaintiff Free Enterprise Fund, Beckstead and Watts filed this action to enjoin the Board s investigation of Beckstead and Watts and to have the Board and its rules declared unconstitutional. Because plaintiffs have bypassed Sarbanes-Oxley s exclusive review mechanism, have not exhausted administrative remedies, have failed to identify any cause of action that authorizes suit in this Court, and lack standing to bring their claims, this suit must be dismissed. STATEMENT I. STATUTORY BACKGROUND Congress enacted the federal securities laws in the 1930s and 1940s to restore integrity to the Nation s financial markets in the wake of the stock market crash of 1929 and the Great Depression. For many years, the Securities and Exchange Commission ( SEC or the Commission ) relied primarily on the accounting profession to establish its own accounting and auditing standards for the financial reports required by those laws. See 2 L. Loss & J. Seligman, Securities Regulation (3d ed. 1998); U.S. Gen. Accounting Office, The Accounting Profession: Major Issues: Progress and Concerns 2-4 (1996). By 2002, however, the collapse of Enron and other corporate scandals had revealed a systematic governance failure 1 Otherwise undesignated citations to statutory sections in this memorandum are references to Sarbanes-Oxley. Relevant provisions are set out in a statutory appendix to this motion. 1

16 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 16 of 59 implicating accountants and auditors. See John C. Coffee, Jr., Understanding Enron: It s About the Gatekeepers, Stupid, 57 Bus. Law. 1403, 1404 (2002). Multiple House and Senate committees held hearings to address the repeated failures of audit effectiveness. S. Rep. No , at 2 (2002); see also H.R. Rep. No , at 18 (2002). Witnesses concurred that prior attempts at reform had failed. See, e.g., S. Rep. No , at 6 (2002) ( [I]n 1978 [we] also said: the public accounting profession has failed to react.... And unfortunately, a quarter of a century later, I have to repeat that. It s identical. ). After considering at least 26 different bills and conducting 33 hearings, Congress enacted the Sarbanes-Oxley Act of 2002 by a vote of 423 to 3 in the House and 99 to 0 in the Senate. 2 The Act imposed auditor independence standards, , 15 U.S.C , 15 U.S.C. 78j-1(g)-(l), and certification duties for corporate officers, 302(a), 15 U.S.C. 7241(a). It increased criminal penalties for certain frauds (amending 18 U.S.C. 1341, 1343, 1349, 1350, and 29 U.S.C. 1131). And it preserved and reinforced the SEC s authority to regulate the securities markets and public-company audits. 3(c), 15 U.S.C. 7202(c); 601, 15 U.S.C. 78kk. Most important here, Title I of the Act established the Public Company Accounting Oversight Board to oversee the audit of public companies that are subject to the securities laws, and related matters, in order to protect the interests of investors and further the public interest. 101(a), 15 U.S.C. 7211(a). In establishing the Board, regulating its operations, and providing for administrative oversight and judicial review, Congress borrowed extensively from prior enactments. In particular, Congress drew heavily on, and in many cases expressly incorporated, provisions governing review of the Commission s own decisions and those of self-regulatory organizations 2 For a list of bills and hearings, see 1 Corporate Fraud Responsibility: A Legislative History of the Sarbanes-Oxley Act of 2002, at xv-xxi (William H. Manz ed., 2003). 2

17 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 17 of 59 ( SROs ) private organizations like the New York Stock Exchange and the National Association of Securities Dealers ( NASD ) that help the Commission oversee the industry by promulgating rules and disciplining their members. See generally 15 U.S.C. 78f(b)(5)-(6); id. 78o-3(b)(6)-(7); NASD v. SEC, 431 F.3d 803, 804 (D.C. Cir. 2005). 3 As the Senate Report explained, the rules for SEC oversight of the Board are generally the same as those that apply to SEC oversight of the National Association of Securities Dealers. S. Rep. No , at 12 (2002). A. Review of SEC and SRO Decisions Ever since Congress granted the Commission broad regulatory powers in the Securities Exchange Act of 1934 (the Exchange Act ), it has provided an elaborate regime that specifies procedures for review within the agency itself and in the courts. For example, the Commission may impose disciplinary sanctions only after notice and a hearing. E.g., 15 U.S.C. 78o(b)(4). When it delegates that function to an administrative law judge, the Commission may review the decision on its own initiative or on petition of a party. 15 U.S.C. 78d-1(a)-(b). Final Commission disciplinary decisions are reviewable in the court of appeals under 25(a) of the Exchange Act, 15 U.S.C. 78y(a), but the court normally may not consider grounds not presented to the Commission, 15 U.S.C. 78y(c)(1). The securities laws address district-court jurisdiction, but do so in connection with Commission-initiated enforcement actions rather than review of Commission decisions. See 15 U.S.C. 77t(b)-(e); id. 78u(d)(1)-(3), (e); id. 78aa. The Exchange Act also establishes a system of administrative and judicial review for SRO rulemaking and discipline. [S]elf-regulatory organizations exercise authority subject to 3 Together, the exchanges and the NASD oversee virtually the entire securities market it is illegal for a broker-dealer to trade in covered securities on an unregistered exchange or without membership in a registered national securities association. 15 U.S.C. 78e; id. 78o(b)(8). 3

18 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 18 of 59 SEC oversight and have no authority to regulate independently of the SEC s control. S. Rep. No , at 23 (1975). For example, SROs must promulgate rules to prevent fraudulent and manipulative acts and practices [and] to promote just and equitable principles of trade, 15 U.S.C. 78f(b)(5); id. 78o-3(b)(6), but they must file notice of any proposed rule with the Commission, 15 U.S.C. 78s(b)(1). The Commission in turn must publish the rule for public comment and then approve or reject it. 15 U.S.C. 78s(b)(1)-(3); see Bus. Roundtable v. SEC, 905 F.2d 406, (D.C. Cir. 1990). The Commission may also on its own initiative abrogate, add to, and delete from any SRO rule. 15 U.S.C. 78s(c). Persons aggrieved by a final Commission decision approving, rejecting, or amending an SRO rule may petition for review in the court of appeals within 60 days under 25 of the Exchange Act, 15 U.S.C. 78y(a), (b), asserting any ground raised before the Commission, 15 U.S.C. 78y(c)(1). The Commission may also impose recordkeeping requirements on SROs and may inspect those records at any time. 15 U.S.C. 78q(a)(1), (b)(1). Likewise, although SROs must discipline their members for violations of SRO rules, SEC rules, or the securities laws, 15 U.S.C. 78f(b)(6); id. 78o-3(b)(7), SRO disciplinary actions are subject to similar plenary review. NASD v. SEC, 431 F.3d at 804. Congress has specified the procedures SROs must follow when proceeding against their members. 15 U.S.C. 78o- 3(h). Once an SRO imposes a final disciplinary sanction, it must file notice with the SEC (or other appropriate federal regulator). 15 U.S.C. 78s(d)(1). The SRO s decision is subject to review by the Commission, on the Commission s own motion or by party application. 15 U.S.C. 78s(d)(2). The Commission makes an independent determination as to whether a violation occurred, and may cancel or remit any sanction that is excessive or oppressive. 15 U.S.C. 78s(e)(1)-(2). Aggrieved persons may petition for review of the Commission s decision in the 4

19 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 19 of 59 court of appeals within 60 days, on any ground preserved before the Commission. 15 U.S.C. 78y(a), (c)(1). As the D.C. Circuit recently explained: The congressional scheme, in short, establishes a system in which the Commission not only closely supervises and approves the processes by which NASD brings disciplinary action, but in which the Commission fully revisits the issue of liability, and can completely reject or modify NASD s decision as it deems appropriate.... The authority [NASD] exercises ultimately belongs to the SEC, and the legal views of the self-regulatory organization must yield to the Commission s view of the law. NASD v. SEC, 431 F.3d at 806. B. The Public Company Accounting Oversight Board Title I of Sarbanes-Oxley established the Public Company Accounting Oversight Board. The Board s five members are appointed by the SEC after consultation with the Chairman of the Federal Reserve and the Secretary of the Treasury. 101(e)(4)(A), 15 U.S.C. 7211(e)(4)(A). Exactly two Board members must be or have been certified public accountants. 101(e)(2), 15 U.S.C. 7211(e)(2). By statute, the Board is not an agency or establishment of the United States Government, but rather a private nonprofit corporation. 101(b), 15 U.S.C. 7211(b). The Board is funded primarily by an accounting support fee assessed on public companies. 109(c)(1), 15 U.S.C. 7219(c)(1). It has responsibility in four principal areas registration, rulemaking, inspections, and disciplinary proceedings. 101(c), 15 U.S.C. 7211(c). Congress granted the SEC extensive authority over the Board with respect to each. General Oversight. Even after its members were appointed by the Commission, the Board assumed its responsibilities only upon the Commission s determination that the Board had the capacity to carry out the requirements of the Act. 101(d), 15 U.S.C. 7211(d); see Order Regarding Section 101(d) of the Sarbanes-Oxley Act of 2002, Exchange Act Release No , 80 SEC Docket 144 (Apr. 25, 2003). The Commission may impose recordkeeping 5

20 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 20 of 59 requirements on the Board and may inspect those records, just as if the Board were an SRO. 107(a), 15 U.S.C. 7217(a) (incorporating 15 U.S.C. 78q(a)(1), (b)(1)). The Board must submit annual reports, including audited financial statements, to the Commission. 101(h), 15 U.S.C. 7211(h). The Commission can censure or remove Board members for cause. 107(d)(3), 15 U.S.C. 7217(d)(3). And the Commission, by rule, may relieve the Board at any time of any of its responsibilities, consistent with the public interest, the protection of investors, and the other purposes of this Act and the securities laws. 107(d)(1), 15 U.S.C. 7217(d)(1). Funding. The Board s rules for allocation, assessment, and collection of accounting support fees must be approved by the Commission after notice and comment. 109(d), 15 U.S.C. 7219(d); 107(b), 15 U.S.C. 7217(b). The Commission s decision is subject to judicial review under 25(a) of the Exchange Act. 15 U.S.C. 78y(a). The fees cannot exceed the Board s budgeted expenses, 109(f), 15 U.S.C. 7219(f), and the Board s budget must be approved by the Commission annually, 109(b), 15 U.S.C. 7219(b). Registration. Under Sarbanes-Oxley, no accounting firm may participate in the preparation or issuance of an audit report for any issuer of publicly traded stock unless the firm is registered with the Board. 102(a), 15 U.S.C. 7212(a); cf. 15 U.S.C. 78e, 78o(b)(8) (prohibiting trading on an unregistered exchange or without membership in a registered national securities association). Applicants for registration must submit a prescribed application and pay prescribed fees. 102(b), (f), 15 U.S.C. 7212(b), (f). Denial of registration is treated as a disciplinary sanction and is subject to review by the Commission and then by the courts. 102(c)(2), 15 U.S.C. 7212(c)(2); pp. 8-9, infra. Rulemaking. Just as SROs prescribe rules for their members, the Board prescribes auditing, quality control, ethics, independence, and other standards relating to the preparation of 6

21 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 21 of 59 audit reports by public accounting firms. 101(c)(2), 15 U.S.C. 7211(c)(2). When the Board proposes rules, it conducts notice-and-comment proceedings that allow for public participation. See Statement Regarding the Establishment of Auditing and Other Professional Standards, PCAOB Release No , at 3 (April 18, 2003), available at Rules/Docket_004/ _Release_ pdf ( The Board also intends to solicit public comment, and, where appropriate, to convene hearings or roundtable meetings, in order to obtain the views of issuers, accountants, investors, and other interested persons with respect to proposed Professional Auditing Standards. ); PCAOB Rulemaking Docket, at Rulemaking_Docket.aspx. No rule of the Board, however, becomes effective unless approved by the Commission. 107(b)(2), 15 U.S.C. 7217(b)(2). Except for certain transitional rules, the Commission must conduct its own notice-and-comment proceedings. The procedures governing those proceedings are the same ones that govern Commission review of SRO rules Sarbanes-Oxley expressly incorporates those SRO provisions from the Exchange Act. 107(b)(4), 15 U.S.C. 7217(b)(4) (incorporating 15 U.S.C. 78s(b)(1)-(3)). To approve a rule, the Commission must find that it is consistent with the requirements of [Sarbanes-Oxley] and the securities laws, or is necessary or appropriate in the public interest or for the protection of investors. 107(b)(3), 15 U.S.C. 7217(b)(3). Board decisions to exempt firms from certain rules similarly require Commission approval. 106(c), 15 U.S.C. 7216(c); 201(b), 15 U.S.C Sarbanes-Oxley also gives the Commission authority to abrogate, add to, and delete from Board rules, again incorporating the provisions of the Exchange Act that govern SRO rules. 107(b)(5), 15 U.S.C. 7217(b)(5) (incorporating 15 U.S.C. 78s(c)). Any person aggrieved by a final Commission decision may petition for review within 60 days in the court of appeals. 15 U.S.C. 78y(a), (b). 7

22 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 22 of 59 Inspections. The Board is required to inspect each registered public accounting firm with public-company audit clients every one to three years. 101(c)(3), 15 U.S.C. 7211(c)(3); 104(b)(1), 15 U.S.C. 7214(b)(1). The rules under which the Board conducts inspections are subject to Commission approval, 104(c), 15 U.S.C. 7214(c); 107(b), 15 U.S.C. 7217(b), and judicial review, 15 U.S.C. 78y(a). Where the inspection reveals an apparent violation of the securities laws, professional standards, or Board or SEC rules, the Board may, if appropriate, report it to the Commission and to state regulators, and can begin a disciplinary investigation. 104(c), 15 U.S.C. 7214(c). Before issuing a final report on any inspection, however, the Board must provide the inspected firm an opportunity to review and respond to the Board s draft inspection report. 104(f), 15 U.S.C. 7214(f). If the accounting firm disagrees with the Board s response to its comments on the draft report, it may seek Commission review. 104(h)(1)(A), 15 U.S.C. 7214(h)(1)(A). The firm may also seek Commission review of the Board s decision to make certain parts of the report public. 104(h)(1)(B), 15 U.S.C. 7214(h)(1)(B). The Commission s decision on review of a report, however, is not final agency action for purposes of the Administrative Procedure Act and is not reviewable under the Exchange Act. 104(h)(2), 15 U.S.C. 7214(h)(2). Rather, judicial review of any apparent deficiencies identified in the inspection report is available if and when, following an investigation, the Board finds that the violations occurred and imposes disciplinary sanctions. 104(c)(3), 15 U.S.C. 7214(c)(3); pp. 8-9, infra. Disciplinary Proceedings. Also like SROs, the Board is authorized to conduct disciplinary investigations and impose sanctions. When conducting an investigation involving a potential violation of the securities laws, the Board must notify and coordinate its activities with the Commission. 105(b)(4)(A), 15 U.S.C. 7215(b)(4)(A). The Board may institute 8

23 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 23 of 59 disciplinary proceedings and impose sanctions. 105(c)(4)-(6), 15 U.S.C. 7215(c)(4)-(6). Any party aggrieved may seek Commission review of the Board s determination, 107(c), 15 U.S.C. 7217(c), and any sanction is stayed automatically pending Commission review, unless the Commission orders otherwise, 105(e), 15 U.S.C. 7215(e). The procedures for review are the same as those governing Commission review of SRO disciplinary sanctions; Sarbanes-Oxley expressly incorporates those provisions of the Exchange Act. 107(c)(2), 15 U.S.C. 7217(c)(2) (incorporating 15 U.S.C. 78s(d)(2), (e)(1)). The Commission may enhance, modify, cancel, reduce, or require the remission of a sanction imposed by the Board if, having due regard for the public interest and the protection of investors, the Commission finds that the sanction is not necessary or appropriate in furtherance of this Act or the securities laws or is excessive, oppressive, inadequate, or otherwise not appropriate. 107(c)(3), 15 U.S.C. 7217(c)(3). Any party aggrieved by the Commission s final order may, within 60 days, petition for review in the court of appeals. 15 U.S.C. 78y(a). II. RELEVANT PROCEEDINGS A. Board Rulemakings and Commission Review The Commission approved the Board s interim auditing standards, which were based on the existing standards of the American Institute of Certified Public Accountants, on April 25, Order Regarding Section 103(a)(3)(B) of the Sarbanes-Oxley Act of 2002, Exchange Act Release No , 80 SEC Docket 142 (Apr. 25, 2003). Since then, the Board has begun to replace its transitional standards with permanent ones and has adopted other rules governing its operations. For instance, on March 14, 2003, the Board published for public comment proposed rules for the assessment of its annual accounting support fee. 4 The Board considered the 4 Proposal for Establishment of Accounting Support Fee, PCAOB Release No (Mar. 14, 2003), available at

24 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 24 of 59 comments received and then submitted its final proposed rules to the Commission for approval. 5 The Commission in turn published notice of the proposed rules in the Federal Register for further public comment, reviewed the rules, and ultimately approved them. 6 The Commission has similarly approved, after notice and comment, the Board s bylaws; its rules for registration, inspections, and investigations; and several Board auditing standards. 7 B. The Inspection and Investigation of Plaintiff Beckstead and Watts According to the complaint in this case, Beckstead and Watts is a Board-registered public accounting firm located in Nevada that specializes in audits of small publicly traded corporations. Compl. 12, 69. In May 2004, the Board inspected Beckstead and Watts pursuant to 104 of the Act, 15 U.S.C Compl. 74. Inspectors identified numerous auditing deficiencies with respect to Beckstead and Watts s audits of its clients. Compl pdf. 5 Establishment of Accounting Support Fee, PCAOB Release No (Apr. 18, 2003), available at 6 Notice of Filing of Proposed Rule on Funding, Exchange Act Release No , 68 Fed. Reg (June 27, 2003); Order Approving Proposed Rules on Funding, Exchange Act Release No , 80 SEC Docket 2319 (Aug. 1, 2003). 7 Order Approving Proposed Rules Relating to Bylaws, Exchange Act Release No , 80 SEC Docket 1978 (July 23, 2003); Order Approving Proposed Rules Relating to Registration System, Exchange Act Release No , 80 SEC Docket 1890 (July 16, 2003); Order Approving Proposed Rules Relating to Inspections of Registered Public Accounting Firms, Exchange Act Release No , 82 SEC Docket 3341 (June 1, 2004); Order Approving Proposed Rules Relating to Investigations and Adjudications, Exchange Act Release No , 82 SEC Docket 3076 (May 14, 2004); Order Approving Proposed Auditing Standard No. 1, Exchange Act Release No , 82 SEC Docket 3079 (May 14, 2004); Order Approving Proposed Auditing Standard No. 2, Exchange Act Release No , 83 SEC Docket 212 (June 17, 2004); Order Approving Proposed Auditing Standard No. 3, Exchange Act Release No , 83 SEC Docket 1905 (Aug. 25, 2004); Order Approving Proposed Auditing Standard No. 4, Exchange Act Release No (Feb. 6, 2006), available at see also Order Approving Proposed Rules Relating to Compliance with Auditing and Related Professional Practice Standards and Advisory Groups, Exchange Act Release No , 81 SEC Docket 1509 (Oct. 31, 2003); Order Approving Proposed Ethics and Independence Rules Concerning Independence, Tax Services, and Contingent Fees, Exchange Act Release No (Apr. 19, 2006), available at 10

25 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 25 of 59 After permitting Beckstead and Watts to comment, the Board issued its inspection report on September 28, Compl. 76, 78; see Inspection of Beckstead & Watts, LLP, PCAOB Release No (Sept. 28, 2005), available at Public_Reports/2005/Beckstead_and_Watts.pdf. With respect to eight of the sixteen audit engagements reviewed, the report identified deficiencies of such significance that it appeared to the inspection team that the Firm did not obtain sufficient competent evidential matter to support its opinion on the issuers financial statements. PCAOB Release No , at 3. Following the inspection, two of Beckstead and Watts s clients restated their financial statements. Id. at 4. Beckstead and Watts did not seek SEC review of the Board s inspection report as permitted by 104(h)(1), 15 U.S.C. 7214(h)(1). The complaint alleges that, at the same time the Board issued its inspection report, the Board initiated a disciplinary investigation. Compl. 79. That investigation remains currently ongoing. Id. No sanctions have been imposed and, accordingly, Beckstead and Watts has had no occasion to seek Commission review of any sanction under 107(c), 15 U.S.C. 7217(c). C. The Instant Lawsuit On February 7, 2006, Beckstead and Watts, joined by co-plaintiff Free Enterprise Fund, filed suit in this Court against the Board and four of its members in their official capacities. The complaint seeks, among other relief, an order enjoining the Board from taking any further action against Beckstead and Watts and a declaratory judgment that the provisions of Sarbanes-Oxley establishing the Board are unconstitutional. Compl. at 23 (prayer for relief). Count I of the complaint alleges that Congress violated separation-of-powers principles by vesting wide-ranging executive authority in the Board without sufficient presidential oversight. Compl Count II claims that the selection process for Board members 11

26 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 26 of 59 violates the Appointments Clause. U.S. Const. art. II, 2. That Clause requires principal officers of the United States to be nominated by the President and confirmed by the Senate, but allows inferior officers to be appointed by the Heads of Departments. Id. The complaint alleges that Board members are principal officers and therefore must be nominated by the President and confirmed by the Senate, rather than appointed by the Commission. Compl. 90. In the alternative, the complaint asserts that, if the Board members are inferior officers, the Commission still cannot appoint them because (1) the SEC is not a Department, and (2) even if the SEC were a Department, the Chairman rather than the five Commissioners would be the Department s Head. Compl. 91. Plaintiffs further urge that the requirement that two and only two Board members be accountants, and that the Commission consult with the Federal Reserve and Treasury Department when appointing Board members, are improper limitations on the power to appoint. Compl. 92. Finally, Count III alleges that Sarbanes-Oxley is an unconstitutional delegation of legislative authority to the Board. Compl Beckstead and Watts alleges that the Board s auditing standards have injured it by substantially increasing the time and expense of its public-company audits. Compl It asserts that, in response to the defects identified by the Board, it reduced the number of clients it audits, leading to further reduction in profits. Compl. 77. Beckstead and Watts also claims that its professional reputation has been damaged by the Board s inspection report. Compl. 80. Finally, Beckstead and Watts alleges that the Board s ongoing investigation is subjecting it to burdensome discovery and legal fees. Compl The Free Enterprise Fund, for its part, alleges that it is a non-profit organization that supports economic growth, lower taxes, and limited government. Compl. 11. Its sole allegation of injury is that its members are subject to the Board s authority and have been injured by 12

27 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 27 of 59 the regulations imposed by the Board. Id. The Free Enterprise Fund does not identify who its members are, how they have been injured, or which regulations caused those injuries. Neither plaintiff has raised its claims before the Board, the Commission, or the court of appeals. Neither plaintiff submitted comments or otherwise participated in the Board s rulemaking proceedings. Neither plaintiff submitted comments or otherwise participated in the SEC s review of the Board s rules, even though comment periods were open for proposed rules shortly before and after plaintiffs complaint was filed. 8 Neither plaintiff sought judicial review of the Commission s approval of any Board rules, even though the 60-day period for review was open for one rule when the complaint was filed, 9 and is still open for another rule now. 10 Finally, neither plaintiff filed a petition for rulemaking with the SEC under 107(d)(1) of Sarbanes- Oxley to modify or withdraw the Board s authority in any respect. 15 U.S.C. 7217(d)(1). SUMMARY OF ARGUMENT Plaintiffs suit should be dismissed for lack of jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) and for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). First and foremost, this Court lacks jurisdiction because this suit was brought outside Congress s exclusive statutory review mechanism. Sarbanes-Oxley, together with the Exchange Act, establishes a detailed mechanism for administrative and judicial review. Because that review mechanism is not only 8 See Notice of Filing of Proposed Rule on Auditing Standard No. 4, Exchange Act Release No (Dec. 21, 2005), available at Notice of Filing of Proposed Ethics and Independence Rules Concerning Independence, Tax Services, and Contingent Fees, Exchange Act Release No (Mar. 7, 2006), available at 9 See Order Approving Proposed Auditing Standard No. 4, Exchange Act Release No (Feb. 6, 2006), available at 10 See Order Approving Proposed Ethics and Independence Rules Concerning Independence, Tax Services, and Contingent Fees, Exchange Act Release No (Apr. 19, 2006), available at 13

28 Case 1:06-cv JR Document 17 Filed 05/15/2006 Page 28 of 59 comprehensive but also adequate to address plaintiffs constitutional claims, it is exclusive. It cannot be circumvented by filing suit in district court instead. That conclusion is reinforced by the history of the pre-existing review mechanisms Congress explicitly incorporated in Sarbanes-Oxley mechanisms repeatedly held exclusive in the decades leading up to Sarbanes-Oxley s enactment. Every one of plaintiffs complaints about the Board could have been and still could be meaningfully addressed through the processes Congress provided. By failing to avail themselves of those processes (and thereby also failing to exhaust administrative remedies), plaintiffs have undermined the purposes of the exclusive statutory review mechanism. Second, plaintiffs suit should be dismissed for failure to state a claim. Plaintiffs identify no statutory cause of action that authorizes this district-court suit against the Board. Nor should this Court judicially imply a cause of action where Congress has specified other fully adequate means of review to address plaintiffs claims. Finally, even if plaintiffs suit were not barred for the reasons above, several claims would still have to be dismissed for lack of standing. First, Free Enterprise Fund s vague and generalized allegations of harm are insufficient, even under lenient notice-pleading standards. Second, neither plaintiff has standing to challenge the Act s restrictions on the Commission s appointment authority the limitation on the number of Board members who may be accountants and the requirement that the Commission consult with the Federal Reserve and Treasury Department before making appointments. Finally, neither plaintiff has standing to challenge the fact that the Act grants appointment authority to the Commission collectively rather than to the Commission s Chairman alone. The Chairman was one of the five Commissioners who voted on appointments, and he concurred in each vote. Plaintiffs therefore 14