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

concurring in the result, with whom GRABER, Circuit Judge, joins:

I agree that the severance packages in question are “extraordinary payments.” I do not believe, however, that Congress intended courts to apply a vague and mul-ti-faceted test that requires consideration of the purpose, circumstances, and size of the benefits, as well as other more complex factors, when determining whether to grant a temporary order escrowing such one-time payments for a short period of time while the SEC makes its decision regarding the filing of formal charges. Rather, employing a well-established meaning of the word “extraordinary,” I would hold that all severance packages due top corporate officers and officials, and any other substantial non-routine payments to which they may be entitled, constitute “extraordinary payments” that the district court may order placed in escrow temporarily.

Section 1103 is a prophylactic provision intended to maintain the financial status quo of companies under investigation. As *1049 Senator Lott, sponsor of the provision, explained, its purpose is to “freeze[] payments of potential wrongdoers ... [by] imposing a 45-day freeze on extraordinary payments to…

401 F.3d 1031 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 December 15, 2004. Filed March 22, 2005. COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Michelle Rice, Arkin Kaplan LLP, for Yuen & Leung, New York, NY, for the intervenors-appellants. Richard M. Humes, Securities and Exchange Commission, Washington, D.C., for the plaintiff-appellee. Thomas J. Karr, Securities and Exchange Commission, Washington, D.C., for the plaintiff-appellee. Richard L. Stone, for Gemstar-TV Guide, for the defendant-respondent-appellee. Sean T. Prosser and Kimberly S. Greer, Morrison & Foerster LLP, San Diego, CA, for the defendant-respondent-appellee. 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-WMB/MRP. Before: SCHROEDER, Chief Judge, REINHARDT, TROTT, THOMAS, GRABER, McKEOWN, WARDLAW, FISHER, CLIFTON, CALLAHAN, and BEA, Circuit Judges. Opinion by Judge TROTT; Concurrence by…

Opinion by Judge TROTT; Concurrence by Judge REINHARDT; Dissent by Judge BEA.

In response to a formal application by the Securities and Exchange Commission (“SEC” and “Commission”), the district court entered an order pursuant to Section 1103 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. § 78u — 3(c)(3), placing in escrow in excess of $37 million representing contemplated one-time payments by Gemstar-TV Guide International, Inc. (“Gemstar”), a public corporation, to its resigning Chief Executive Officer (“CEO”), Dr. Henry Yuen, and its Chief Financial Officer (“CFO”), Elsie Leung. This escrow order — directed to Gemstar — was predicated upon the district court’s conclusion under the statute that these payments, which were to be made during the course of a lawful investigation by the SEC of Gemstar involving possible violations of federal securities laws, were “extraordinary.” Gemstar did not oppose the entry of this order and has not filed a substantive brief in connection with this appeal. However, Intervenors-Appellants Yuen and Leung do appeal, claiming (1) that this statute is unconstitutionally vague on its face and as applied to them; (2) that the district court erred as a…

dissenting:

We are called upon to interpret the phrase “extraordinary payments” found in Section 1103 of the Sarbanes-Oxley Act. 15 U.S.C. § 78u-3(c)(3)(A)(i). In my view, the majority errs in two regards.

First, the majority interprets “extraordinary payments” to mean “payments under extraordinary circumstances.” See Maj. Op. at 1044-46. This first step enables the majority to take account of a variety of circumstances (such as the fact that the payments at issue were made “in the shadow” of conduct ultimately giving rise to the SEC’s investigation) that are only indirectly related (or, in some cases, not related at all) to the payments at issue. See id. at 1046. Of course, it is perfectly proper for the SEC to consider such circumstances in deciding whether to initiate an investigation regarding possible violations of the federal securities laws. But by also conscripting these and similar circumstances to render payments “extraordinary,” the majority violates basic canons of statutory construction, rewriting the statute and, in so doing, rendering the very term at issue surplusage.

Second,' by establishing as the principally relevant standard whether the circumstances…