By Elena Eyber, J.D.
A registered public accounting firm filed a complaint in federal district court in Texas, seeking declaratory and injunctive relief to stop the Public Company Accounting Oversight Board (PCAOB) from enforcing an investigative Accounting Board Demand (ABD) authorized by the Sarbanes-Oxley Act. The firm argues that the ABD, the latest in a series of demands, is part of an unlawful and secretive investigative process that violates constitutional principles and deprives them of due process. According to the complaint, without the relief sought, the firm faces severe penalties and lacks the opportunity for pre-enforcement judicial review, leaving them with the dilemma of complying with an unconstitutional demand or risking their business's future (John Doe Corporation v. Public Company Accounting Oversight Board, March 27, 2024).
Claims for relief. The first claim asserts that the delegation of legislative power to the PCAOB, particularly under Sarbanes-Oxley, lacks an intelligible principle as required by the Constitution. As alleged in the complaint, the PCAOB's rules for investigation and discipline lack clear direction, rendering them constitutionally illegitimate and unenforceable.
The second claim argues that the PCAOB, despite being a private entity, exercises core executive power without proper supervision or oversight. This constitutes a violation of Article II of the Constitution, as governmental power should only be wielded by the federal government or its subordinate agencies.
The third claim alleges a denial of due process under the Fifth Amendment. According to the complaint, the PCAOB imposes fines and punishments without allowing recipients of staff-issued demands the opportunity for judicial review, violating their right to due process of law.
The fourth claim contends that the PCAOB's actions violate Sarbanes-Oxley's requirement for fair procedures. According to the complaint, the PCAOB's lack of guidelines or limits on the issuance of demands, coupled with the absence of a meaningful process for review, denies affected parties’ fair procedures as mandated by the law.
The relief requested includes declaratory judgment, injunction against enforcing the demands, and award of attorneys' fees and costs.
The case is No. 4:24-cv-01103.