launched by Congress almost sixty years ago and monitored, and amended, by Congress thereafter. Congress' superintendence, and occasional modification, of the Exchange Act reflects the fact that the shaping of "what the law is" is an interactive process in which the legislative and judicial branches have complementary roles. When Congress thinks the law as said by the courts -- whether by interpretation of what an earlier Congress wrote or by implication where Congress never wrote -- is less than optimal, Congress, as a general matter, has authority to rearrange the law by revising an existing statute or writing a new one.
Among the multitude of things all legislatures, Congress included, can rearrange are statutes of limitations. And such rearrangements can, and indeed commonly do, have impact on pending cases. For example, when the Pennsylvania Legislature, in 1976, massively redesigned its statute-of-limitations apparatus in a statute that was to take effect in 1978, the Legislature also provided that:
(a) Any civil action or proceeding:
(1) the time heretofore limited by statute for the commencement of which is reduced by any provision of this act; and
(2) which is not fully barred by statute on the day prior to the effective date of this act; may be commenced within one year after the effective date of this act, or within the period heretofore limited by statute, whichever is less . . .
Act of July 9, 1976, P.L. 586, No. 142 § 25(a).
If a legislature can, with retrospective effect, alter limitation periods established by earlier statutes, and if, as in Lampf, an appellate court can, with retrospective effect, jettison limitation periods established by lower courts and long relied on, it is hard to see what principle of judicial suzerainty should insulate a judicially established limitation period from retrospective legislative alteration, as in subsection (a) of § 27A.
The separation of powers argument has somewhat more plausibility to the extent that it targets subsection (b) of § 27A -- the provision for reinstatement of pre-Lampf § 10(b) suits dismissed as time barred after Lampf. Legislative resuscitation of a dismissed claim is said by Touche Ross to contravene principles authoritatively laid down by Chief Justice Chase one-hundred-and-twenty-years ago, in United States v. Klein, 80 U.S. (13 Wall.) 128, 146 (1871), in invalidating a statute depriving the Supreme Court and the Court of Claims of jurisdiction over post-Civil War claims brought by pardoned Southerners to recover property seized by the Union Army: "The court is required to ascertain the existence of certain facts and thereupon to declare that its jurisdiction on appeal has ceased, by dismissing the bill. What is this but to prescribe a rule for the decision of a cause in a particular way?" Professor Tribe has shown that Klein, which "arose in the cockpit of Reconstruction politics," L. Tribe, American Constitutional Law (2d ed. 1988) 50, is a case whose rhetoric must be parsed in the light of its particular facts.
What Klein illustrates, in Professor Tribe's view, is the proposition that "the separation of powers does limit congressional regulation of the decision-making processes of Article III courts at least this much: if Congress does not purport to alter the government procedural and substantive law, Congress cannot force its interpretation of that law upon the federal courts in particular cases." L. Tribe, supra, at 50. In support of his analysis, Professor Tribe has pointed out that Chief Justice Chase was at pains to contrast the legislative intervention affecting Klein with the legislative intervention that affected Pennsylvania v. Wheeling & Belmont Bridge Co., 54 U.S.(13 How.) 518 (1851); 59 U.S. (18 How.) 421 (1855), protracted litigation that had heavily engaged the Court's attention in the early and middle 1850s. "In that case," said Chief Justice Chase:
after a decree in this court that the bridge, in the then state of the law, was a nuisance and must be abated as such, Congress passed an act legalizing the structure and making it a post-road; and the court, on a motion for process to enforce the decree, held that the bridge had ceased to be a nuisance by the exercise of the constitutional powers of Congress, and denied the motion. No arbitrary rule of decision was prescribed in that case, but the court was left to apply its ordinary rules to the new circumstances created by the act. In the case before us no new circumstances have been created by legislation. But the court is forbidden to give the effect to evidence which, in its own judgment, such evidence should have, and is directed to give it an effect precisely contrary.
We must think that Congress has inadvertently passed the limit which separates the legislative from the judicial power.
Klein, 80 U.S. (13 Wall.) at 146-47. But compare Ex parte
McCardle, 74 U.S. (7 Wall.) 506 (1869).
In enacting § 27A Congress has indeed, in Professor Tribe's words, "purported to alter the governing procedural . . . law" -- namely, the limitation period applicable to § 10(b) cases filed before a certain date that had not been dismissed as of that date. Congress has done that by, in subsection (a) of § 27A, restoring the "governing procedural . . . law" to the heterogeneity (different from circuit to circuit, and in some circuits from state to state) that characterized it before the Court, in Lampf, imposed what Congress evidently regards as an overly restrictive uniform rule. Further, in subsection (b), Congress, in the interest of equity, has sought to insure that the alteration embodied in subsection (a) will be applied even-handedly to all § 10(b) cases timely filed before Lampf and not dismissed as of that date by providing for the restoration to the docket of any such case dismissed as time barred post-Lampf and pre-§ 27A.
Moreover, subsection (b) of § 27A does not do what Chief Justice Chase condemned in Klein -- "prescribe a rule for the decision of a cause in a particular way." Subsection (b) of § 27A does not "prescribe a rule for the decision of a cause" at all. It opens courthouse doors that have been shut and thereby provides litigants with an opportunity to resolve their differences on the merits -- merits whose ingredients Congress has not altered. In short, as Chief Justice Chase said with respect to Pennsylvania v. Wheeling & Belmont Bridge Co., "the court was left free to apply its ordinary rules to the new circumstances created by the act." In sum, § 27A has not breached the separation of powers.
Touche Ross also contends that § 27A violates equal protection principles inherent in the Fifth Amendment. I agree that Fifth Amendment due process embraces principles of equal protection. Bolling v. Sharpe, 347 U.S. 497 (1954). But I am unable to detect any absence of equal protection in either of the scenarios Touche Ross finds troublesome:
(1) The first scenario Touche Ross envisages is this:
To the extent that Section 27A is read to demand that state statutes of limitation apply to plaintiffs' claims, the statute creates an irrational scheme under which liability depends on when a lawsuit was brought and where the parties reside. These factors bear no rational relation to the goals of the Exchange Act. Under this interpretation of Section 27A, cases commenced after June 19, 1991, will be decided under the one-year/three-year limitations period of Lampf, while cases brought on or before June 19, 1991, may be decided based on the limitations periods and principles of retroactivity in effect in the jurisdictions in which the cases are brought. In pre-Lampf cases, geography alone will determine the applicable statute of limitations.
Memorandum of Touche Ross, p. 26.
Geography-based disuniformity in federal statutes of limitations has been a feature of the juridical landscape in a variety of contexts for a very long time. In 1983, in DelCostello v. Teamsters, 462 U.S. 151, 171 (1983), the Court -- with Justices Stevens and O'Connor dissenting -- opted for a federal limitation period, rather than one borrowed from analogous state statutes of limitations, for federal claims asserted by employees charging unions and employers with practices allegedly constituting (a) as to the union, breach of the duty of fair representation, and (b) as to the employer, breach of the collective bargaining agreement. Writing for the Court, Justice Brennan observed:
We stress that our holding today should not be taken as a departure from prior practice in borrowing limitations periods for federal causes of action, in labor law or elsewhere. We do not mean to suggest that federal courts should eschew use of state limitations periods anytime state law fails to provide a perfect analogy. See, e.g., Mitchell, 451 U.S., at 61, n.3. On the contrary, as the courts have often discovered, there is not always an obvious state-law choice for application to a given federal cause of action; yet resort to state law remains the norm for borrowing of limitations periods.
462 U.S. at 171.
And Justice Stevens, in his dissent in Lampf, pointed out that, from the inception of the implied cause of action under § 10(b) of the Exchange Act in Kardon v. National Gypsum Co., 69 F. Supp. 512 (E.D. Pa. 1946) up to the Third Circuit's decision in Data Access in 1988, reference to state statutes of limitations had been the established rule for "four decades." 111 S. Ct. at 2784. It is hard to perceive § 27A's reversion to state limitation periods as a congressional denial of equal protection. Perhaps it may be more aptly perceived as an acceptance of federalism.
(2) Touche Ross's second scenario focuses on the disparate treatment of two hypothetical plaintiffs:
. . . Two Michigan residents could have identical claims under Section 10(b) for securities bought in June of 1986. Yet the one who brought her suit on June 19, 1991, has a six-year limitation period apply to her claim of securities fraud. The Michigan plaintiff, who brings an identical suit one day later, on June 20, 1991, will, however be barred by the one-year/three-year limitations period of Lampf. There is simply no principled reason for treating these similarly-situated plaintiffs differently, yet that is what Section 27A demands.
Memorandum of Touche Ross, p. 27.
Touche Ross's concern about the second, time barred, Michigan plaintiff is presented as a challenge to § 27A. But it is not § 27A that has deprived the hypothetical second Michigan plaintiff of an opportunity to have her case tried on the merits. The source of the second Michigan plaintiff's difficulties is Lampf -- a case which, as I understand its position, Touche Ross, approves of.
All that can be laid at the door of § 27A is that it has not undertaken to alleviate the plight of post-Lampf filers, the second Michigan plaintiff included. I suppose an argument could be fashioned that § 27A -- an act of legislative grace designed to mitigate the rigors of Lampf -- suffers from the infirmity of underinclusiveness, in that those to whom the statute's benefits do not run may be said to be just as worthy as those gathered to its bosom.
"Where a statute is defective because of underinclusion there exist two remedial alternatives; a court may either declare it a nullity and order that its benefits not extend to the class that the legislature intended to benefit, or it may extend the coverage of the statute to include those who are aggrieved by exclusion." Concurring opinion of Harlan, J., in Welsh v. United States, 398 U.S. 333, 361 (1970). One may reasonably assume that, if the argument that § 27A is unconstitutionally underinclusive were to strike a responsive judicial chord, the remedy selected would be to broaden the statute rather than to nullify it. But those with standing to make the argument would be the hypothetical second Michigan plaintiff and others similarly situated, not Touche Ross.
In part I of this opinion I have determined that (1) plaintiffs' motion is not moot, (2) plaintiffs' motion is not barred by res judicata, and (3) § 27A, as invoked by plaintiffs, is not unconstitutional. It remains to be considered whether, pursuant to § 27A, plaintiffs are entitled to reinstatement of their § 10(b) claims.
To gain the relief they seek, plaintiffs must demonstrate two things: The first is that their § 10(b) claims were "dismissed as time barred subsequent to June 19, 1991." The second is that their claims "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."
(1) Were plaintiffs' § 10(b) claims "dismissed as time barred subsequent to June 19, 1991" ?
Plaintiffs contend that the dismissal of their § 10(b) claims should be deemed, for the purposes of § 27A, to have taken place not on November 7, 1988, when I dismissed them, but on September 12, 1991, when the Court of Appeals affirmed by judgment order a series of dispositive orders I had entered commencing with the order of November 7, 1988. As plaintiffs see the matter, "realistically, the ultimate or final dismissal of plaintiffs' section 10(b) claims occurred after June 19, 1991. It is unreasonable to interpret section 27A as applying only to cases disposed of by district courts on the basis of Lampf." Reply Brief of Plaintiffs, p. 10 (emphasis in original).