Opinion ID: 799861
Heading Depth: 3
Heading Rank: 3

Heading: sox 304

Text: In addition to paying a civil fine, Jasper was ordered to reimburse Maxim for $1.8 million in bonuses and profits from the sale of Maxim stock that Jasper received during the period that he certified Maxim's false financial statements. This reimbursement was ordered pursuant to a provision known as SOX 304. SOX 304 was passed in 2002 as part of the Sarbanes-Oxley Act, and it is codified at 15 U.S.C. § 7243. SOX 304 provides, in relevant part: If an issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer, as a result of misconduct, with any financial reporting requirement under the securities laws, the chief executive officer and chief financial officer of the issuer shall reimburse the issuer for (1) any bonus or other incentive-based or equity-based compensation received by that person from the issuer during the 12-month period following the first public issuance or filing with the Commission (whichever first occurs) of the financial document embodying such financial reporting requirement; and (2) any profits realized from the sale of securities of the issuer during that 12-month period. The district court found that Maxim was required to restate financial statements originally issued in September 2002, 2003, 2004, and 2005 because of its material noncompliance with securities reporting requirements, and ordered that Jasper reimburse Maxim the bonuses Jasper earned during the 1-year period following each of those misstated reports according to SOX 304. [15] Jasper contends that the jury's verdict was not specific enough to support this finding because the jury was never asked to consider whether Maxim was `required' to restate its financials `as a result of misconduct.' To prevail on this argument, Jasper must establish that the remedy of reimbursement is a legal rather than an equitable remedy, since Jasper himself recognizes that he has a right to a jury trial only on any claim for relief seeking traditionally legal, as opposed to equitable, remedies. SEC v. Rind, 991 F.2d 1486, 1493 (9th Cir.1993). Jasper notes that [f]orfeiture and penalties are legal remedies, as compared to equitable remedies like restitution, disgorgement, and injunctions. Ninth Circuit law is clear that the reimbursement provision of SOX 304 is considered an equitable disgorgement remedy and not a legal penalty. Thus, Jasper is not entitled to have a jury find all of the facts necessary to support the reimbursement. In In re Digimarc Corp. Derivative Litig., 549 F.3d 1223 (9th Cir.2008), we addressed the question whether SOX 304 creates a private right of action. Id. at 1231. The court undertook a detailed analysis of the nature of the provision by examining not only the legislative intent of SOX 304 but also how SOX 304 fits into the legislative scheme of Sarbanes-Oxley as a whole. Id. In holding that SOX 304 did not create a private right of action, the court examined the nature of the remedy available in SOX 304 and said that it require[s] non-compliant directors and officers to reimburse the issuer by disgorging the profits of their noncompliance. Id. at 1232 (emphasis added). The court then explicitly noted that disgorgement remedies are equitable. Id. at 1233. Finally, the court contrasted SOX 304 with other equitable provisions of Sarbanes-Oxley and stated that we cannot find in Congress' silence in section 304 an intent to create a private right of action where it was not silent in creating such a right to similar equitable remedies in other sections of the same Act. Id. (emphasis added). [16] Because Jasper had no right to have a jury find all predicate facts to the remedy of disgorgement, the finding that Maxim was indeed required to restate those four earnings reports because of misconduct is viable whether or not it is characterized as having been made by the judge or upon the advice of a jury.