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Business Cases Dominate Docket

Tuesday, October 6, 2009

The Supreme Court term that began Monday will be heavy on business cases, as companies aim to rebound after a year of high court setbacks.

The court will consider the constitutionality of the accounting oversight board set up by the Sarbanes-Oxley law as well as limits on investor lawsuits, among other issues.

The U.S. Chamber of Commerce is seeking to avoid a repeat of the 2008-2009 term. The court then allowed more lawsuits against drugmakers, tobacco companies and banks and backed out of a case that might have meant stricter limits on punitive damages.

In a clash over deadlines for fraud suits involving drugmaker Merck., investors say the company deceived them about the risks posed by its Vioxx painkiller. It was pulled from the market in 2004 because of links to heart attacks and strokes.

Merck argues that shareholders waited too long to file their suit.

The Sarbanes-Oxley case might produce a far-reaching constitutional ruling. The case centers on the Public Company Accounting Oversight Board, a private entity whose members are appointed by the Securities and Exchange Commission to be the accounting industry's watchdog.

The court will decide whether the measure violates the constitutional provision that lets the president appoint and supervise executive branch officials. The law is being challenged by Beckstead and Watts, a Las Vegas area accounting firm, and the Free Enterprise Fund in Washington, which advocates smaller government.

A decision that the PCAOB is unconstitutional might prod Congress to revisit the 2002 Sarbanes-Oxley law and to restructure the board. More broadly, such a ruling could raise questions about the independent agencies, including the SEC, that the Supreme Court first upheld in 1935.

-- Bloomberg News

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