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Lawsuit Challenging SOX Fails Again

Melissa Klein Aguilar | September 4, 2008

A long-shot lawsuit filed by conservative activists to have the Sarbanes-Oxley Act ruled unconstitutional has failed yet again in federal appeals court.

A three-judge panel on the U.S. Appeals Court for the District of Columbia ruled Aug. 22 that the Public Company Accounting Oversight Board does not violate the Appointments Clause of the Constitution, even though its members are appointed by the Securities and Exchange Commission rather than the White House.

The plaintiffs, the Washington D.C.-based Free Enterprise Fund and Las Vegas accounting firm Beckstead & Watts, had argued that the president must appoint PCAOB members. Their suit was dismissed in federal district court last year. Whether they will now appeal to the U.S. Supreme Court is unclear at the moment.

The appeals court ruling prevents what could have been a major chaotic twist in the Sarbanes-Oxley Act. Because the law has no severability clause, the entire statute would be invalidated if any...

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