Eleventh Circuit Court Of Appeals Examines Sarbanes-Oxley Provision

by Glen Shapiro, LawAndTax-News.com, New York

26 November 2003

The 11th US Circuit Court of Appeals is currently examining whether the Sarbanes-Oxley Act allows aggrieved investors to revive claims against companies following corporate governance lapses after the statute of limitations on their claims has expired.

According to reports in the US media, arguing on behalf of former Dean Witter investors, Washington lawyer, Conor R. Crowley attempted to convince the appeals court that Florida federal judge, Richard A. Lazarra was correct in his ruling, which stated that section 804 (b) of the law was worded in such a way as to allow the investors to sue the firm for making unauthorised trades in 1998.

Quoting from the section of the Act which states that it "shall apply to all proceedings addressed by this Section that are commenced on or after the enactment of this Act," Judge Lazarra argued that:

"This language, standing alone, seems to presume that the Act affords redress for violations that had already occurred before July 30, 2002."

However, arguing on behalf of Dean Witter's parent company, Morgan Stanley Dean Witter, Kirkland & Ellis attorney, William H. Pratt revealed that judges in the Eastern District of Virginia, the Southern District of New York, and the Central District of California had all issued rulings which stated that the old claims could not be revived under the auspices of the Sarbanes-Oxley Act.

The appeals court panel reportedly appeared unconvinced that the corporate governance act does allow for the revival of claims on Friday, with Chief Judge J.L. Edmondson suggesting to the Dean Witter investors' legal team that:

"You're going to have to show me something with neon light and underlined by Congress."

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