UK: Supreme Court Rules Five-Year Statute Of Limitations Applies To SEC Disgorgement Payments

Co-authored by Timothy Piscatelli

This week's corporate law news roundup includes discussions of the U.S. Supreme Court's recent decision on SEC disgorgement payments for ill-gotten gains, the Eleventh Circuit's adoption of the "registration" approach (instead of the "application" approach) to copyright registration, and the adoption by many U.S. state governors of legislation or initiatives toward direct state compliance with the Paris Agreement in the wake of the Trump administration withdrawal decision.

SUPREME COURT RULES FIVE-YEAR STATUTE OF LIMITATIONS APPLIES TO SEC DISGORGEMENT PAYMENTS

On June 5, 2017, the U.S. Supreme Court unanimously ruled that disgorgement constitutes a penalty under applicable federal law, so that disgorgement will now be subject to the five-year statute of limitations set forth in the federal statute (28 U.S.C. Section 2462). The U.S. Justice Department had argued that disgorgement constituted equitable relief instead of a penalty, reasoning that it restores the defendant to the same position in which it had been prior to its ill-gotten gain. The Court found that the purpose of disgorgement orders is to deter violators by depriving them of gains that resulted from misconduct, and that sanctions imposed for deterrence purposes are inherently punitive. This decision comes in the wake of the SEC's having collected approximately $3 billion in disgorgement payments in 2015. For more information on the Kokesh v. SEC case, see https://www.supremecourt.gov/opinions/16pdf/16-529_i426.pdf.

UNITED STATES CLIMATE ALLIANCE EMERGES IN WAKE OF TRUMP DECISION FOR THE U.S. TO EXIT THE PARIS AGREEMENT

On June 1, 2017, President Trump announced that the U.S. would be exiting the Paris Agreement on climate change. While the U.S.'s withdrawal could not become effective until 2020 at the earliest, many cities and states have taken up the charge of pledging to comply with the Paris Agreement on their own. This includes the States of California, New York and Washington, whose governors agreed to continue to advance the Paris Agreement's objectives within their own borders by forming the "United States Climate Alliance". Other states and territories that have joined the United States Climate Alliance include Connecticut, Delaware, Hawaii, Massachusetts, Minnesota, Oregon, Puerto Rico, Rhode Island, Vermont and Virginia. Almost 300 cities' mayors have made similar pledges include those in Atlanta, Boston, Chicago, Los Angeles, New York, Philadelphia, Pittsburgh and San Francisco. On June 6, 2017, Hawaii became the first U.S. state to pass a law that adopts goals of the Paris climate agreement (including reducing greenhouse gas emissions). For more information, see http://governor.wa.gov/news-media/united-states-climate-alliance-adds-10-new-members-coalition-committed-upholding-paris (Climate Alliance), https://medium.com/@ClimateMayors/climate-mayors-commit-to-adopt-honor-and-uphold-paris-climate-agreement-goals-ba566e260097 (Climate Mayors) and http://www.npr.org/sections/thetwo-way/2017/06/07/531882630/hawaii-signs-legislation-to-implement-goals-of-paris-climate-accord-anyway (Hawaii).

U.S. FEDERAL CIRCUIT COURTS SPLIT AS TO "APPLICATION" VERSUS "REGISTRATION" APPROACHES IN COPYRIGHT REGISTRATION CASES

U.S. federal circuit courts currently have a split as to whether copyright registration is completed when a certificate of registration has been issued versus when a completed application has been submitted. In May 2017, the Eleventh Circuit joined the Tenth Circuit in adopting the "registration" approach to copyright registration, in its Fourth Estate Public Benefit Corporation v. Wall-Street.com, LLC case. These circuits have noted that the statutes (17 U.S.C. §§ 408(a) and 410(a)) use the term "application" in the same section as "registration" in a manner representative of something separate and apart from registration, and that the Register's affirmative acts to "examine," "register," and then "issue" the certificate of registration must be accomplished in order to complete registration. Conversely, the Fifth and Ninth Circuits favor the "application" approach because a lawsuit may still be brought after an application is rejected. These circuits reason that justice and judicial economy warrant bringing a suit as soon as an application is submitted in order to impede an infringer from diluting a copyright until an official action has been taken. For more information on the Fourth Estate v. Wall-Street.com case, see http://www.jurisnote.com/Case/four372.pdf.

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