Johnston v. Cigna Corp.

• Decision Date: 07 December 1993
• Docket Number: No. 92-1186,92-1186
• Citation: 14 F.3d 486
• Parties: , 27 Fed.R.Serv.3d 1290 Larry D. JOHNSTON; Lawrence G. Lyon; H. Rodgers Company, Plaintiffs-Appellants, v. CIGNA CORPORATION; Inc. Cigna Securities; Cigna Holdings, Inc.; M. Doak Jacoway; Cigna Individual Financial Services Company; Cigna Financial Partners, Inc., a Delaware Corporation, Defendants-Appellees, United States of America, Intervenor, Securities and Exchange Commission, Amicus Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 486

14 F.3d 486

62 USLW 2386, 27 Fed.R.Serv.3d 1290

Larry D. JOHNSTON; Lawrence G. Lyon; H. Rodgers Company, Plaintiffs-Appellants, v. CIGNA CORPORATION; Inc. Cigna Securities; Cigna Holdings,

Inc.; M. Doak Jacoway; Cigna Individual Financial Services

Company; Cigna Financial Partners, Inc., a Delaware

Corporation, Defendants-Appellees,

United States of America, Intervenor,

Securities and Exchange Commission, Amicus Curiae.

No. 92-1186.

United States Court of Appeals,

Tenth Circuit.

Dec. 7, 1993.

Rehearing Denied Feb. 1, 1994.

Alan C. Friedberg, Martha C. Reps of Pendleton & Sabian, P.C., Denver, CO, for plaintiffs-appellants.

Theodore J. Boutrous, Jr. of Gibson, Dunn & Crutcher, Washington, DC (Theodore B. Olson, Stephen R. McAllister, John K. Bush of Gibson, Dunn & Crutcher, Washington, DC, David G. Palmer, Thomas M. Piccone of Gibson, Dunn & Crutcher, Denver, CO, with him on the brief), for defendants-appellees.

Mark B. Stern, Atty., Civ. Div., Dept. of Justice, Washington, DC (Michael J. Norton, U.S. Atty., Denver, CO, Stuart E. Schiffer, Acting Asst. Atty. Gen., Stuart M. Gerson, Asst. Atty. Gen., Barbara C. Biddle, Atty., Civ. Div., Dept. of Justice, Washington, DC, with him on the brief), for intervenor.

Paul Gonson, Sol., Jacob H. Stillman, Associate Gen. Counsel, Leslie E. Smith, Senior Sp. Counsel, S.E.C., Washington, DC, for amicus curiae.

Before BALDOCK, HOLLOWAY, and KELLY, Circuit Judges.

BALDOCK, Circuit Judge.

Plaintiffs appeal the district court's denial of their motion for reconsideration of their motion for reinstatement of claims under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78j(b), and their alternative motion for relief from judgment, Fed.R.Civ.P. 60(b)(6). The district court denied Plaintiffs' motion for reconsideration, reaffirming its earlier determination that Defendants were entitled to summary judgment because Section 27A of the Securities Exchange Act of 1934, Sec. 476 of the Federal Deposit Insurance Corporation Improvement Act of 1991, 15 U.S.C. Sec. 78aa-1, is unconstitutional. ¹ We have jurisdiction under 28 U.S.C. Sec. 1291.

Plaintiffs filed suit on January 30, 1990 alleging that Defendants violated Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5, 17 C.F.R. Sec. 240.10b-5, and various Colorado securities laws in connection with Plaintiffs' purchases of certain interests in real estate limited partnerships in 1983 and 1987. Plaintiffs also asserted state law claims for breach of fiduciary duty and negligence. On January 9, 1991, the district court granted Defendants' motion to dismiss Plaintiffs' state law claims. Borrowing the applicable limitations period from Colorado law, however, the court denied Defendants' motion to dismiss Plaintiffs' section 10(b) claims as time barred.

On June 20, 1991, 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). In Lampf, the Court rejected the practice of borrowing state statutes of limitation for private causes of action under section 10(b). --- U.S. at ----, 111 S.Ct. at 2781-82. The Court held that such actions must be commenced within one year after discovery of the facts constituting the violation and within three years after the violation occurred. Id. The Lampf Court applied this new rule retroactively to the parties before it and dismissed the plaintiffs' action as time barred. Id. On the same day, the Court decided Beam, in which the majority held that when it applies a new rule to the litigants in a particular case, that rule must also be applied to all other pending civil suits. --- U.S. at ----, 111 S.Ct. at 2441.

Relying on Lampf and Beam, Defendants moved for summary judgment on September 6, 1991, on the ground that Plaintiffs' section 10(b) claims were time barred. The district court agreed that Plaintiffs' action was not timely under the rule of Lampf and granted Defendants' motion on October 10, 1991. Plaintiffs did not appeal this determination.

Approximately two months after judgment was entered against Plaintiffs, and after Plaintiffs' time in which to file a notice of appeal had expired, Congress enacted the Federal Deposit Insurance Corporation Improvement Act of 1991, Pub.L. No. 102-242, 105 Stat. 2387 (codified at 15 U.S.C. Sec. 78aa-1), amending the Securities Exchange Act of 1934 by adding the following new section 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.

(b) Effect on dismissed causes of action

Any private civil action implied under section [10(b) ] of this [Act] that was commenced on or before June 19, 1991--

(1) which was dismissed as time barred subsequent to June 19, 1991, and

(2) which would have been timely filed under 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 Dec. 19, 1991.

15 U.S.C. Sec. 78aa-1. Section 27A effectively overturned the Lampf/ Beam basis upon which the district court had granted Defendants' summary judgment motion.

On January 10, 1992, Plaintiffs filed a timely motion to reinstate their section 10(b) claims pursuant to section 27A(b). Defendants opposed the motion, contending that section 27A was unconstitutional. On March 10, 1992, while the motion for reinstatement was still pending, Plaintiffs filed a Rule 60(b) motion requesting relief from the October 10, 1991 judgment. In that motion, Plaintiffs requested that if the district court determined that section 27A could not revive their final, unappealed judgment, the court should nevertheless grant Rule 60(b) relief "to allow justice to be done and the clear intent of Congress to be vindicated."

In a Memorandum Opinion and Order dated March 20, 1992, the court denied both motions. The court denied Plaintiffs' motion to reinstate, concluding that section 27A violates the principle of separation of powers and impermissibly upsets a final judgment. The court also rejected Plaintiffs' Rule 60(b) argument as dependent on the validity of section 27A.

On April 3, 1992, Plaintiffs filed a Rule 59(e) motion for reconsideration of the denial of their motion to reinstate and their Rule 60(b) motion in light of the Supreme Court's decision in Robertson v. Seattle Audubon Soc'y, --- U.S. ----, 112 S.Ct. 1407, 118 L.Ed.2d 73 (1992). ² On May 20, 1992, the court denied the motion. Plaintiffs thereafter filed a timely notice of appeal.

On appeal, Plaintiffs claim (1) the district court erred in denying their motion to reinstate because section 27A represents a constitutional exercise of congressional power, and (2) the district court abused its discretion in denying their Rule 60(b) motion for relief from judgment. Defendants maintain that despite our intervening decision in Anixter v. Home-Stake Production Co., 977 F.2d 1533 (10th Cir.1992), section 27A(b) is unconstitutional as applied to the final, unappealed judgment in this case in that section 27A(b) violates the doctrine of vested rights and the principle of separation of powers. We review the district court's decision regarding the constitutionality of section 27A(b) de novo. ³ See United States v. Wynne, 993 F.2d 760, 764 (10th Cir.1993).

I.

In Anixter v. Home-Stake Production Co., 977 F.2d 1533, 1542 (10th Cir.1992), we held that section 27A did not violate the principle of separation of powers because "Congress properly exercised its legislative function to compel a change in the law." Applying United States v. Klein, 80 U.S. 128, 20 L.Ed. 519 (1871), and Robertson v. Seattle Audubon Soc'y, --- U.S. ----, 112 S.Ct. 1407, 118 L.Ed.2d 73 (1992), we concluded that section 27A was a constitutional exercise of congressional power because:

Section 27A does not direct courts to make specific factual findings or mandate a result in a particular case. (citation omitted). It does not remove or alter the courts' constitutional adjudicatory function. Instead, in section 27A Congress prescribed a new statute of limitations for the judiciary to apply to all section 10(b) litigation pending on June 19, 1991.

Anixter, 977 F.2d at 1545 (emphasis added). All but one of our sister circuits that have addressed the issue have concluded that section 27A, as it applies to cases still before the courts, establishes a valid change in the law. See Axel Johnson v. Arthur Andersen & Co., 6 F.3d 78 (2d Cir.1993); Cooke v. Manufactured Homes, Inc., 998 F.2d 1256 (4th Cir.1993); Pacific Mut. Life Ins. Co. v. First Republicbank Corp., 997 F.2d 39 (5th Cir.1993); Cooperativa de Ahorro y Credito Aguada v. Kidder, Peabody & Co., 993 F.2d 269 (1st Cir.1993); Berning v. A.G. Edwards & Sons, Inc., 990 F.2d 272 (7th Cir.1993); Gray v. First Winthrop Corp., 989 F.2d 1564 (9th Cir.1993); Henderson v. Scientific-Atlanta, Inc., 971 F.2d 1567 (11th Cir.1992), cert. denied, --- U.S. ----, 114 S.Ct. 95, 126 L.Ed.2d 62 (1993); but see Plaut v. Spendthrift Farm, Inc., 1 F.3d 1487 (6th Cir.1993) ("we strongly disagree with the rationale behind these decisions [upholding the constitutionality of section 27A as a valid change in the law]").

In Anixter, as distinct from the instant case, the plaintiffs' petition for certiorari was before the Supreme Court at the time section 27A was enacted. ⁴ Id. at 1542. As a result, we had no occasion in Anixter to address the constitutionality of section 27A(b) to the extent it directs courts to reinstate claims that were no longer before...