Henley v. Slone

• Decision Date: 23 March 1992
• Citation: 961 F.2d 23
• Parties: Fed. Sec. L. Rep. P 96,597 Julian HENLEY, Plaintiff-Appellant, v. William SLONE and Advest, Inc., Defendants-Appellees. Docket 91-9320.
• Court: U.S. Court of Appeals — Second Circuit

Page 23

961 F.2d 23

Fed. Sec. L. Rep. P 96,597

Julian HENLEY, Plaintiff-Appellant, v. William SLONE and Advest, Inc., Defendants-Appellees.

Docket 91-9320.

United States Court of Appeals Second Circuit.

Submitted Feb. 25, 1992.

Decided March 23, 1992.

Eliot B. Gersten, Andrea A. Hewitt, Hartford, Conn., submitted papers for plaintiff-appellant.

Michael Dodson, Greene, Terk & Lahm, Wethersfield, Conn., submitted papers for defendant-appellee Slone.

Dean M. Cordiano, Day, Berry & Howard, Hartford, Conn., submitted papers for defendant-appellee Advest, Inc.

Before: TIMBERS, NEWMAN, and WINTER, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

This motion to remand a pending appeal requires renewed consideration of the issue whether the new uniform federal limitations period for securities fraud claims applies retroactively. The issue arises on a motion by Julian Henley to remand to the District Court his appeal from the September 30, 1991, judgment of the District Court for the District of Connecticut (T.F. Gilroy Daly) dismissing as time-barred his suit under section 10(b) of the Securities Exchange Act of 1934 ("the '34 Act"), 15 U.S.C. § 78j(b) (1988). See Henley v. Slone, 774 F.Supp. 98 (D.Conn.1991). We grant the motion to remand.

We first encountered the retroactivity issue in Ceres Partners v. GEL Associates, 918 F.2d 349 (2d Cir.1990), in which we announced a uniform limitations period of the earlier of one year from the date the fraud was or reasonably should have been discovered or three years from the date of the transaction. In adopting the new one-year/three-year period, we explicitly left open the retroactivity issue, which did not affect the outcome of that appeal. Id. at 364. We faced the issue again in Welch v. Cadre Capital, 923 F.2d 989 (2d Cir.1991) ("Welch I "), vacated and remanded sub nom. Northwest Savings Bank v. Welch, --- U.S. ----, 111 S.Ct. 2882, 115 L.Ed.2d 1048 (1991), ruling that the new limitations period did not apply retroactively to bar the Welch complaint. See also Levine v. NL Industries, Inc., 926 F.2d 199, 201-02 & n. 1 (2d Cir.1991).

Thereafter, the Supreme Court adopted the one-year/three-year limitations period in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, --- U.S. ----, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991) ("Lampf "), and applied the new period retroactively to the Lampf complaint. The Court remanded Welch I for reconsideration in light of Lampf and James B. Beam Distilling Co. v. Georgia, --- U.S. ----, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991) ("Beam "). Northwest Savings Bank v. Welch, --- U.S. ----, 111 S.Ct. 2882, 115 L.Ed.2d 1048 (1991). On remand, we bowed to the force of Lampf and Beam and applied the new limitations period retroactively to bar the Welch complaint. Welch v. Cadre Capital, 946 F.2d 185 (2d Cir.1991) ("Welch II ").

The next move was made by Congress. On December 19, 1991, Congress amended the '34 Act by enacting section 27A to modify the retroactive effect of the Lampf ruling. See Federal Deposit Insurance Corporation Improvement Act of 1991, § 476, Pub.L. 102-242, 1991 U.S.C.C.A.N. (105 Stat.) 2236. This provision provides for reinstatement of certain actions dismissed under Lampf, provided the action was commenced prior to June 19, 1991, the date of the Lampf decision, and had been timely filed according to the statute of limitations applicable on June 19, 1991.

In the pending case, the appellees resist the motion to remand for application of the benefit of section 27A, contending that section 27A does not help Henley because his suit was not timely filed under the law in effect on June 19, 1991. Appellees point out that prior to June 19, this Court had anticipated Lampf by adopting the one-year/three-year limitations period in Ceres Partners. However, on June 19, it was also the law of this Circuit that Ceres Partners was not to be applied retroactively as a routine matter. See "Welch I " (decided Jan. 22, 1991).

Recognizing that Welch I stated the law of this Circuit as of June 19, 1991, appellees further contend that Henley's suit is untimely even under that decision because the considerations that militated against retroactive application of Ceres Partners in Welch I do not apply to Henley's circumstances. Henley responds that by enacting section 27A Congress intended to restore to claimants suing under the '34 Act the benefit of any pertinent state limitations period that existed prior to Lampf. Before this Circuit in Ceres Partners and the Supreme Court in Lampf announced the one-year/three-year limitations period, the applicable limitations period for securities fraud claims in Connecticut was two years after the contract of sale, see Clute v. Davenport, 584 F.Supp. 1562, 1577 (D.Conn.1984), and Henley alleges that his suit is timely under that standard. These conflicting contentions require us to confront a subtle issue lurking beneath the surface clarity of section 27A. The issue is whether Congress intended to afford pre-Lampf litigants the benefit of more generous state or federal common law limitations periods or to afford them only whatever benefit they can derive from the law existing in the pertinent jurisdiction on June 19, 1991, including the law concerning both a new limitations period and the retroactivity of such a new limitations period.

Section 27A(a) provides:

The limitation period for any private civil action implied under section 10(b) of this Act [the '34 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.

Pub.L. 102-242, 1991 U.S.C.C.A.N. (105 Stat.) 2236, 2387 (1991) (emphasis added). On its face, this language appears to support appellees' contention that Henley's suit is to be governed, not by automatic application of the state limitations period that preceded Ceres Partners, but by a case-specific determination of whether the retroactivity principles applied in Welch I make it inappropriate to apply the new limitations period.

We acknowledge that some...