Maritime Law--Can Fisherman's Case Recast Sarbanes-Oxley?

Can a law written to punish the "Enrons" of the world for shredding or doing away with records also be used to convict a Florida fisherman who tossed his undersized catch into the sea in an effort to avoid penalties?

That is the question before the U.S. Supreme Court in a case it has accepted to hear in its next term. The case involves the Sarbanes-Oxley Act, specifically 18 U.S.C. § 1519, which makes it a crime to destroy “any record, document or tangible object” with the intent to obstruct an investigation. In this case, fish were deemed by the government to be a “tangible object.”

The case arose when government agents boarded John Yates’ boat, F/V MISS KATIE, and found 72 undersized red grouper fish, some several inches shorter than the 20-inch keeper limit. Yates, a commercial fisherman, was ordered to turn over the undersized catch when he came to port. However, a crew member testified at trial that Yates told the crew to throw the undersized fish overboard and replace them with others. The U.S. Court of Appeals for the Eleventh Circuit upheld Yates’ conviction, finding in part that a fish fits within the definition of a “tangible object” as defined under the Sarbanes-Oxley Act.

In the SCOTUS briefing, the three key arguments against the government include the following:

1. The statute criminalizes ambiguous conduct without providing a workable definition of the phrase “tangible object.”

2. The statute extends criminal law into economic activity that would be better handled by civil enforcement.

3. Congress drafted the statute to apply to financial and white-collar crimes, not fishing.

The Yates case has the potential to affect Sarbanes-Oxley more broadly than mere fishing, depending on the court’s ruling. If the Court simply refuses to apply the statute to circumstances like those of the fisherman at issue here, that ruling would have little impact on Sarbanes-Oxley at large. However, if the Court strikes down the provision as void for vagueness or on similar broad grounds, companies regulated by Sarbanes-Oxley will be able to breathe a sigh of relief that this provision will not be available for prosecutors to wield in circumstances Congress never had in mind.

Thus, this case is important to all companies and their general counsel because if the Court were to uphold a broad requirement not to destroy a ‘tangible object’ unrelated to records or documents, it would raise all forms of compliance difficulties for companies.

If you are interested in receiving a copy of the Eleventh Circuit opinion, please feel free to contact me at mov@chaloslaw.com.

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