Plaut v. Spendthrift Farm Inc.

Decision Date18 April 1995
Docket Number931121
PartiesEd PLAUT, et ux., et al., Petitioners, v. SPENDTHRIFT FARM, INC., et al
CourtU.S. Supreme Court
Syllabus *

In a 1987 civil action, petitioners alleged that in 1983 and 1984 respondents committed fraud and deceit in the sale of stock in violation of § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission. The District Court dismissed the action with prejudice following this Court's decision in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 364, 111 S.Ct. 2773, 2782, 115 L.Ed.2d 321, which required that suits such as petitioners' be commenced within one year after the discovery of the facts constituting the violation and within three years after such violation. After the judgment became final, Congress enacted § 27A(b) of the 1934 Act, which provides for reinstatement on motion of any action commenced pre-Lampf but dismissed thereafter as time barred, if the action would have been timely filed under applicable pre-Lampf state law. Although finding that the statute's terms required that petitioners' ensuing § 27A(b) motion be granted, the District Court denied the motion on the ground that § 27A(b) is unconstitutional. The Court of Appeals affirmed.

Held: Section 27A(b) contravenes the Constitution's separation of powers to the extent that it requires federal courts to reopen final judgments entered before its enactment. Pp. __.

(a) Despite respondents' arguments to the contrary, there is no reasonable construction on which § 27A(b) does not require federal courts to reopen final judgments in suits dismissed with prejudice by virtue of Lampf. Pp. __.

(b) Article III establishes a "judicial department" with the "province and duty . . . to say what the law is" in particular cases and controversies. Marbury v. Madison, 1 Cranch 137, 177, 2 L.Ed. 60. The Framers crafted this charter with an expressed understanding that it gives the Federal Judiciary the power, not merely to rule on cases, but to decide them conclusively, subject to review only by superior courts in the Article III hierarchy. Thus, the Constitution forbids the Legislature to interfere with courts' final judgments. Pp. __.

(c) Section 27A(b) effects a clear violation of the foregoing principle by retroactively commanding the federal courts to reopen final judgments. This Court's decisions have uniformly provided fair warning that retroactive legislation such as § 27A(b) exceeds congressional powers. See, e.g., Chicago & Southern Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 113, 68 S.Ct. 431, 437, 92 L.Ed. 568. Petitioners are correct that when a new law makes clear that it is retroactive, an appellate court must apply it in reviewing judgments still on appeal, and must alter the outcome accordingly. However, once a judgment has achieved finality in the highest court in the hierarchy, the decision becomes the last word of the judicial department with regard to the particular case or controversy, and Congress may not declare by retroactive legislation that the law applicable to that case was in fact something other than it was. It is irrelevant that § 27A(b) reopens (or directs the reopening of) final judgments in a whole class of cases rather than in a particular suit, and that the final judgments so reopened rested on the bar of a statute of limitations rather than on some other ground. Pp. __.

(d) Apart from § 27A(b), the Court knows of no instance in which Congress has attempted to set aside the final judgment of an Article III court by retroactive legislation. Fed.Rule Civ.Proc. 60(b), 20 U.S.C. § 1415(e)(4), 28 U.S.C. § 2255, 50 U.S.C.App. § 520(4), and, e.g., the statutes at issue in United States v. Sioux Nation, 448 U.S. 371, 391-392, 100 S.Ct. 2716, 2728-2729, 65 L.Ed.2d 844, Sampeyreac v. United States, 7 Pet. 222, 238, 8 L.Ed. 665, Paramino Lumber Co. v. Marshall, 309 U.S. 370, 60 S.Ct. 600, 84 L.Ed. 814, and Pennsylvania v. Wheeling & Belmont Bridge Co., 18 How. 421, 15 L.Ed. 435, distinguished. Congress's prolonged reticence would be amazing if such interference were not understood to be constitutionally proscribed by the Constitution's separation of powers. The Court rejects the suggestion that § 27A(b) might be constitutional if it exhibited prospectivity or a greater degree of general applicability. Pp. 19-30.

1 F.3d 1487 (CA6 1993), affirmed.

SCALIA, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and O'CONNOR, KENNEDY, SOUTER, and THOMAS, JJ., joined. BREYER, J., filed an opinion concurring in the judgment. STEVENS, J., filed a dissenting opinion, in which GINSBURG, J., joined. djQ Justice SCALIA delivered the opinion of the Court.

The question presented in this case is whether § 27A(b) of the Securities Exchange Act of 1934, to the extent that it requires federal courts to reopen final judgments in private civil actions under § 10(b) of the Act, contravenes the Constitution's separation of powers or the Due Process Clause of the Fifth Amendment.

I

In 1987, petitioners brought a civil action against respondents in the United States District Court for the Eastern District of Kentucky. The complaint alleged that in 1983 and 1984 respondents had committed fraud and deceit in the sale of stock in violation of § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission. The case was mired in pretrial proceedings in the District Court until June 20, 1991, when we decided Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991). Lampf held that "[l]itigation instituted pursuant to § 10(b) and Rule 10b-5 . . . must be commenced within one year after the discovery of the facts constituting the violation and within three years after such violation." Id., at 364, 111 S.Ct., at 2782. We applied that holding to the plaintiff- respondents in Lampf itself, found their suit untimely, and reinstated a summary judgment previously entered in favor of the defendant-petitioners. Ibid. On the same day we decided James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991), in which a majority of the Court held, albeit in different opinions, that a new rule of federal law that is applied to the parties in the case announcing the rule must be applied as well to all cases pending on direct review. See Harper v. Virginia Dept. of Taxation, 509 U.S. ----, ----, ---- - ----, 113 S.Ct. 2510, ---- - ----, 125 L.Ed.2d 74 (1993). The joint effect of Lampf and Beam was to mandate application of the 1-year/3-year limitations period to petitioners' suit. The District Court, finding that petitioners' claims were untimely under the Lampf rule, dismissed their action with prejudice on August 13, 1991. Petitioners filed no appeal; the judgment accordingly became final 30 days later. See 28 U.S.C. § 2107(a) (1988 ed., Supp. V); Griffith v. Kentucky, 479 U.S. 314, 321, n. 6, 107 S.Ct. 708, 712, n. 6, 93 L.Ed.2d 649 (1987).

On December 19, 1991, the President signed the Federal Deposit Insurance Corporation Improvement Act of 1991, 105 Stat. 2236. Section 476 of the Act—a section that had nothing to do with FDIC improvements—became § 27A of the Securities Exchange Act of 1934, and was later codified as 15 U.S.C. § 78aa-1 (1988 ed., Supp. V). It provides:

"(a) Effect on pending causes of action

"The limitation period for any private civil action implied under section 78j(b) of this title [§ 10(b) of the Securities Exchange Act of 1934] 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 78j(b) of this title 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 December 19, 1991."

On February 11, 1992, petitioners returned to the District Court and filed a motion to reinstate the action previously dismissed with prejudice. The District Court found that the conditions set out in §§ 27A(b)(1) and (2) were met, so that petitioners' motion was required to be granted by the terms of the statute. It nonetheless denied the motion, agreeing with respondents that § 27A(b) is unconstitutional. Memorandum Opinion and Order, Civ. Action No. 87-438 (ED Ky., Apr. 13, 1992). The United States Court of Appeals for the Sixth Circuit affirmed. 1 F.3d 1487 (1993). We granted certiorari. 511 U.S. ----, 114 S.Ct. 2161, 128 L.Ed.2d 885 (1994).1

II

Respondents bravely contend that § 27A(b) does not require federal courts to reopen final judgments, arguing first that the reference to "the laws applicable in the jurisdiction . . . as such laws existed on June 19, 1991" (the day before Lampf was decided) may reasonably be construed to refer precisely to the limitations period provided in Lampf itself, in which case petitioners' action was time barred even under § 27A.2 It is true that "[a] judicial construction of a statute is an authoritative statement of what the statute meant before as well as after the decision of the case giving rise to that construction." Rivers v. Roadway Express, Inc., 511 U.S. ----, ----, 114 S.Ct. 1510, 1519, 128 L.Ed.2d 274 (1994); see also...

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