Securities and Exchange Commission, Henry C. Yuen Elsie M. Leung, Intervenors-Appellants v. Gemstar-Tv Guide International, Inc.

367 F.3d 1087 SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, Henry C. Yuen; Elsie M. Leung, Intervenors-Appellants, v. GEMSTAR-TV GUIDE INTERNATIONAL, INC., Defendant. No. 03-56129. United States Court of Appeals, Ninth Circuit. Argued and Submitted January 7, 2004. Filed May 12, 2004. Michelle A. Rice, Stanley S. Arkin, Arkin Kaplan LLP, New York, NY, for the intervenors-appellants. Richard M. Humes, Thomas J. Karr, Securities and Exchange Commission, Washington, DC, for the applicant-appellee. Sean T. Prosser, Kimberly S. Greer, Fish & Richardson P.C., San Diego, CA, for the defendant. Appeal from the United States District Court for the Central District of California; Wm. Matthew Byrne, Jr., District Judge, Presiding. D.C. No. CV-03-03124-MRP. Before: TROTT, RAWLINSON, and BEA, Circuit Judges. BEA, Circuit Judge: 1 * We decide a question of first impression: whether under the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), 15 U.S.C. § 78u-3 ("Section 1103"), certain termination payments to high-level corporate officials are "extraordinary payments," subject to involuntary retention in an escrow account compelled by court order. Because there was no evidence as…

I

We decide a question of first impression: whether under the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), 15 U.S.C. § 78u-3 (“Section 1103”), certain termination payments to high-level corporate officials are “extraordinary payments,” subject to involuntary retention in an escrow account compelled by court order. Because there was no evidence as to what would be an ordinary payment under comparable circumstances, we conclude that the district court erroneously determined certain payments proposed to be made by Defendant Gemstar-TV Guide International Inc. (“Gemstar”) to Intervenors-Appellants Yuen and Leung (hereafter Appellants) were “extraordinary payments” within the meaning of section 1103 of Sarbanes-Ox-ley. We vacate the district court’s order and remand for further proceedings consistent with this opinion.

In view of our ruling, we do not decide whether section 1103 of Sarbanes-Oxley is unconstitutionally vague, or operates in an unconstitutionally retroactive manner.

II

FACTS

On August 14, 2002, Gemstar, a Delaware corporation, announced that it was *1089 auditing the operations of its Technology and Licensing Sector and Interactive Platform Sector after finding…

dissenting:

The principal issue we decide in this case arises in a distinctive statutory context that cannot be ignored or slighted. Judge Wallace cogently explained this important context in SEC v. Rind, 991 F.2d 1486 (9th Cir.1993):

Id. at 1491. In reversing the district court’s decision in this case, I respectfully believe my colleagues have unintentionally overlooked this context, a context which makes the securities business one of the most highly regulated in our nation. In so doing, their opinion deals an unwarranted blow to the public interest and to the Commission’s ability adequately to protect that broad interest against the flood of corporate scandals of which Congress and the public has become all too painfully aware in the past few years. Thus, I dissent.

I

The civil statute under our microscope, Section 1103, 15 U.S.C. § 78u-3(c)(3) is extraordinarily narrow, well defined, and utterly clear. It comes into play only

See 15 U.S.C. § 78u-3(c)(3). In other words, this law covers only insiders making shadowy payments to insiders.

Should this combination of events occur, then Congress has empowered the Commission to petition a federal district court for nothing more…