Henderson v. Scientific-Atlanta, Inc., SCIENTIFIC-ATLANT
| Decision Date | 11 September 1992 |
| Docket Number | INC,No. 91-8938,SCIENTIFIC-ATLANT,91-8938 |
| Citation | 971 F.2d 1567 |
| Parties | , Fed. Sec. L. Rep. P 96,994 Russell HENDERSON, Mildred E. Chambers and Charles E. Moore, Individually and as Class Representatives, Plaintiffs-Appellants, v., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
C. Neal Pope, Max R. McGlamry, Paul Kilpatrick, Jr., Columbus, Ga., Michael L. McGlamry, Steven W. Saccoccia, Wade H. Tomlinson, III, Atlanta, Ga., Richard H. Gill, Copeland, Franco, Screws & Gill, Montgomery, Ala., William J. Cornwell, Pope, McGlamry, Kilpatrick & Morrison, Charles A. Presto, Atlanta, Ga., for plaintiffs-appellants.
Susan A. Cahoon, Mary Lillian Walker, Stephen E. Hudson, Kilpatrick & Cody, Atlanta, Ga., for defendant-appellee.
Barbara C. Biddle, Scott R. McIntosh, Civ. Div., U.S. Dept. of Justice, Washington, D.C., for U.S. Dept. of Justice.
Appeal from the United States District Court for the Northern District of Georgia.
Before COX, Circuit Judge, CLARK, * and WELLFORD, ** Senior Circuit Judges.
The Plaintiffs filed a securities fraud class action against Scientific-Atlanta, Inc. (Scientific) in the Northern District of Georgia. Shortly before trial, the Supreme Court announced its decisions in Lampf Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, --- U.S. ----, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991), and James B. Beam Distilling Co. v. Georgia, --- U.S. ----, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991), which changed the applicable statute of limitations for Plaintiffs' suit. In light of these decisions, the district court granted Scientific's motion for summary judgment on the ground that the action was time-barred. On appeal, Plaintiffs argue that section 27A of the Securities Exchange Act of 1934, which was recently added to the Act, requires the district court to reinstate their action. Scientific, on the other hand, contends that section 27A is unconstitutional. We conclude that section 27A is constitutional and controlling. Accordingly, we vacate the judgment and remand with instructions to reinstate the action.
In September 1988, Russell Henderson filed this action against Scientific on behalf of himself and some 40,000 other investors who purchased Scientific's common stock during the time period beginning on January 1, 1981, and ending on August 31, 1983. The complaint asserts federal claims under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and rule 10b-5, 17 C.F.R. § 240.10b-5, as well as pendent state-law claims for fraud and misrepresentation. Two other individuals joined the suit as named plaintiffs and class representatives. The class was certified in August 1989. The Plaintiffs allege that they lost over $370 million due to Scientific's fraudulent omissions, misstatements, and misrepresentations that artificially inflated the price of its stock. Scientific denies all allegations of wrongdoing.
Scientific moved for summary judgment on the ground that the Plaintiffs' action was time-barred. Neither section 10(b) nor rule 10b-5 contains a statute of limitations. At that time, for implied private causes of action arising under section 10(b), the law of this circuit directed courts to "borrow" a statute of limitations from state law. See Smith v. Duff and Phelps, Inc., 891 F.2d 1567, 1569-70 (11th Cir.1990). In this case, the district court borrowed from Georgia law and applied a two-year statute of limitations running from the date of discovery. The court concluded that the Plaintiffs' action was timely and rejected Scientific's motion for summary judgment.
The district court then set the case for trial. The parties were still awaiting trial on June 20, 1991, when the Supreme Court announced its decisions in Lampf and Beam. In Lampf, the Supreme Court rejected the practice of borrowing state statutes of limitations for private causes of action under section 10(b). Lampf, --- U.S. at ----, 111 S.Ct. at 2781-82. Instead, the Court held that such actions are subject to a federal one-year/three-year statute of limitations; a private action under section 10(b) must be brought within one year of discovery but no more than three years after the date of the alleged violation. In announcing this new rule, the Supreme Court held that the rule should be retroactively applied to the parties before it and dismissed the plaintiffs' suit as time-barred. Id.
In Beam, which was announced on the same day as Lampf, the Supreme Court held that when the Court applies a new rule to the litigants in a particular case, that rule must be retroactively applied to all other similarly situated litigants. Beam, --- U.S. at ----, 111 S.Ct. at 2441. This circuit has recognized that Beam requires retroactive application of the new statute of limitations rule announced in Lampf. Lufkin v. McCallum, 956 F.2d 1104, 1108 (11th Cir.1992).
In light of Lampf and Beam, Scientific again moved for summary judgment on the ground that the Plaintiffs' action was time-barred. The district court agreed that the action was not timely under the new statute of limitations rule announced in Lampf. Accordingly, the district court granted summary judgment in favor of Scientific on the federal securities law claims. The court also dismissed the pendent state-law fraud and misrepresentation claims without prejudice. The Plaintiffs then filed notice of appeal to this court.
While this appeal was pending, Congress enacted the Federal Deposit Insurance Corporation Improvement Act of 1991. Section 476 of that Act amended the Securities Exchange Act of 1934 by adding the following provision:
Sec. 27A. (a) Effect on Pending Causes of Action.--The limitation period for any private civil action implied under section 10(b) of this Act that was commenced on or before June 19, 1991, shall be the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991.
shall be reinstated on motion by the plaintiff not later than 60 days after the date of enactment of this section.
Pub.L. No. 102-242, § 476, 105 Stat. 2236, 2387 (1991). We decline to remand this case to the district court to consider the effect of section 27A because the issue is solely a question of law and does not require any additional fact-finding. Moreover, both the Plaintiffs and Scientific have had the opportunity in their briefs and at oral argument to discuss the effect of section 27A on the applicable statute of limitations in this case. See Howard v. Haddad, 962 F.2d 328, 330 (4th Cir.1992) (). 1
1. Whether section 27A of the Securities Exchange Act of 1934 affects the applicable statute of limitations and requires the district court to reinstate the action.
2. Whether section 27A violates the doctrine of separation of powers.
3. Whether section 27A violates the Due Process Clause of the Fifth Amendment.
Scientific contends that the district court's grant of summary judgment should be affirmed. It argues that we should interpret the statute of limitations in section 27A of the Securities Exchange Act of 1934 in a manner consistent with the Supreme Court's decision in Lampf. Such an interpretation would avoid the necessity of deciding whether section 27A is constitutional. In the alternative, Scientific claims that section 27A is unconstitutional because it violates both the doctrine of separation of powers embodied in Article III of the Constitution and the Due Process Clause of the Fifth Amendment.
The Plaintiffs argue that section 27A makes their action timely because it reinstates the statute of limitations in existence on June 19, 1991. Contrary to Scientific's suggestion, this court cannot interpret the statute of limitations in section 27A in a manner consistent with the Supreme Court's decision in Lampf. In addition, the Plaintiffs and the United States contend that section 27A is constitutional because it neither contravenes separation of powers principles nor violates the Due Process Clause of the Fifth Amendment. 2
We review the district court's grant of summary judgment de novo. Twin Construction v. Boca Raton, Inc., 925 F.2d 378, 381 (11th Cir.1991). The constitutionality of section 27A was not addressed by the district court. The constitutional issue is subject to plenary consideration by this court.
We begin by addressing Scientific's suggestion that we interpret section 27A of the Securities Exchange Act of 1934 in a manner consistent with the Supreme Court's decision in Lampf. See Communications Workers v. Beck, 487 U.S. 735, 762, 108 S.Ct. 2641, 2657, 101 L.Ed.2d 634 (1988) (). "Nothing in Section [27A] precludes this Court from determining what the appropriate limitations period was for Section 10(b) in light of all the law that existed on June 19 and applying that law to plaintiffs." Appellee's Brief at 16. Scientific points out that other circuits had adopted a federal one-year/three-year statute of limitations as of June 19, 1991. It asks this court to now adopt such a statute as the law of the circuit as...
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