Kirkland Alert Kirkland & Ellis LLP

Section 304: All Bark and No Bite?

On September 27, 2005, in Neer v. Pelino, the United States District Court for the Eastern District of Pennsylvania dismissed a private shareholder suit seeking, among other things, to recover bonus compensation paid to company officers under Section 304 of the Sarbanes-Oxley Act of 2002.  The court dismissed the complaint after finding that Congress did not intend to create an implied cause of action in Section 304 of the Act and, as a result, the court lacked subject matter jurisdiction as the remaining claims alleged violations of state law.  This alert discusses the implications of this ruling.