Pacific Mutual Life Insurance v. First RepublicBank Corp.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 92-3375
_____________________
TGX CORP.,
Plaintiff,
versus
GLORIA ANNETTE TURNER SIMMONS, ET AL.,
Defendants-Appellants
Cross-Appellees,
versus
GREENWICH INSURANCE COMPANY, ET AL.,
Defendants-Appellees
Cross-Appellants.
* * * * * *
GAYLON D. SIMMONS, ET AL.,
Plaintiffs-Appellants
Cross-Appellees,
versus
J.C. TEMPLETON, ET AL.,
Defendants-Appellees
Cross-Appellants.
_______________________________________________________
Appeal from the United States District Court for
the Eastern District of Louisiana
_______________________________________________________
* * * * * *
_____________________
No. 92-1662
_____________________
PACIFIC MUTUAL LIFE INSURANCE CO.,
Plaintiff-Appellant,
versus
FIRST REPUBLICBANK CORP., ET AL.,
Defendants-Appellees.
_______________________________________________________
Appeal from the United States District Court for
the Northern District of Texas
_______________________________________________________
(July 20, 1993)
Before POLITZ, Chief Judge, REAVLEY and BARKSDALE, Circuit
Judges.
REAVLEY, Circuit Judge:
Plaintiffs who suffered dismissals in two separate
securities-fraud cases asked the district courts to reinstate
their claims under § 27A(b) of the Securities Exchange Act, 15
U.S.C. § 78aa-1(b), which Congress enacted in November 1991. The
district courts denied these motions after holding that § 27A(b)
violates the Constitution by disturbing final judgments and
invading judicial authority. We conclude that the legislation is
constitutional and we reinstate the plaintiffs' suits.
I. BACKGROUND
A. PACIFIC MUTUAL LIFE INS. CO. V. FIRST REPUBLICBANK CORP., ET AL.
In March 1991, Pacific Mutual Life Insurance Company (PMLI)
sued investment bankers and accountants (collectively PMLI
Defendants)1 for securities fraud under § 10(b) of the 1934
Securities Exchange Act (1934 Act), 15 U.S.C. § 78j(b). PMLI's
claims arise from the June 1987 merger of InterFirst Corporation
and RepublicBank Corporation, PMLI's purchase of InterFirst
securities in July and September 1987 for approximately $8
million, and the PMLI Defendants' facilitation of those
transactions.
From long before PMLI purchased the securities to the time
after PMLI filed its suit, this court determined the statute of
limitations for implied private actions under § 10(b) according
to analogous state law. When PMLI filed its suit in the United
States District Court for the Northern District of Texas, our
precedent recognized that the four-year limitations period
applicable to fraud actions in Texas also governs § 10(b) actions
filed there. In re Sioux, Ltd., Sec. Litig. v. Coopers &
Lybrand, 914 F.2d 61, 64 (5th Cir. 1990). For that reason,
although the PMLI Defendants filed dispositive motions under FED.
R. CIV. P. 9(b) and 12(b)(6), they did not contest the timeliness
of PMLI's suit.
While these motions awaited the district court's
consideration, the Supreme Court issued Lampf, Pleva, Lipkind,
Prupis & Petigrow v. Gilbertson, 111 S. Ct. 2773 (1991). Lampf
implicitly overrules Sioux, Ltd. and many similar cases in other
circuits with its holding that the Securities Exchange Act as
1
The PMLI Defendants are Morgan Stanley & Co., Goldman
Sachs & Co., Ernst & Young & Co., and Salomon Brothers Inc.
3
written in 1934, not state law, establishes the limitations
period for § 10(b) suits. Id. at 2780. The Court read the
Securities Exchange Act of 1934 to establish a uniform rule that
"[l]itigation instituted pursuant to § 10(b) ... must be
commenced within one year after the discovery of the facts
constituting the violation and within three years after such
violation." Id. at 2782 (1-and-3 rule).
On the same day that the Court rendered Lampf, it decided
James B. Beam Distilling Co. v. Georgia, 111 S. Ct. 2439 (1991).
A plurality of the Beam Court held that Georgia's Supreme Court
erred by "refus[ing] to apply a rule of federal law retroactively
after the case announcing the rule has already done so." Id. at
2446. Beam teaches that "when th[is] Court has applied a rule of
law to the litigants in one case it must do so with respect to
all others not barred by procedural requirements or res
judicata." Id. at 2448.
Because the Lampf Court applied the 1-and-3 rule to
eliminate Gilbertson's § 10(b) claim, Beam required courts to
apply the limitation rule announced in Lampf to pending claims
under § 10(b). The PMLI Defendants promptly brought Lampf and
Beam to the district court's attention, and the court dismissed
PMLI's § 10(b) claims with prejudice in August 1991. The
district court based its dismissal on the fact that "the face of
[PMLI's complaint establishes] that this action was filed more
than three years after the alleged misrepresentations or
4
omissions upon which [PMLI's] claim rests." Recognizing no way
around Lampf and Beam, PMLI did not appeal.
Three months later, however, Congress provided a way around
Lampf and Beam by passing § 27A, which provides:
(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
[December 19, 1991].
1934 Act, § 27A (amended by P.L. 102-242 (December 19, 1991)),
codified at 15 U.S.C. § 78aa-1. On January 31, 1992, PMLI filed
a motion to reinstate pursuant to § 27A(b). The PMLI Defendants
challenged the constitutionality of § 27A(b), and the district
court admitted the United States as an intervenor to explain why
§ 27A is constitutional. After considering the parties' written
submissions, the district court held: 1) § 27A(b) contravenes due
process by divesting the PMLI Defendants of their final judgment;
and 2) § 27A contravenes the constitutionally-mandated
retroactivity of new legal rules recognized in Beam. PMLI
5
appeals from the district court's denial of its motion to
reinstate.
B. SIMMONS, ET AL. V. TGX CORP., ET AL.
In 1987, TGX Corporation sued Gaylon Simmons2 over a $21
million stock purchase contract which the parties executed in
November 1986, and Simmons filed a counterclaim against TGX under
§ 10(b). TGX filed for bankruptcy protection in 1990, staying
the counterclaim. Simmons then filed a separate § 10(b) suit in
March 1990 against attorneys, accountants, and directors
(collectively TGX Defendants)3 who facilitated the stock
purchase.
Simmons sued the TGX Defendants in the United States
District Court for the Eastern District of Louisiana.4 The
parties disputed whether Simmons met Louisiana's two-year
prescriptive period for securities fraud, which this court has
held applicable to § 10(b) claims. Jensen v. Stellings, 841 F.2d
600, 606 (5th Cir. 1988). The Supreme Court rendered Lampf and
Beam before the district court ruled on the parties' limitation
dispute.
2
Gloria Simmons joins Gaylon Simmons as a party to this
dispute.
3
The TGX Defendants are J.C. Templeton, Joe H. Foy, Harry
V. Carlson, Robert Ted Enloe, III, W.A. Griffin, Thomas L.
Kister, Leonard Leon, Edward T. Cotham, Bracewell & Patterson,
BDO Seidman, Greenwich Insurance Co., and William M. Templeton.
Simmons amended his complaint to add Greenwich and W.M. Templeton
as defendants in May 1991.
4
The court consolidated this suit with the suit between TGX
Corporation and Simmons.
6
The TGX Defendants informed the district court that Simmons
sued them in March 1990, and his complaint alleges November 1986
misdeeds. They argued that these facts entitled them to
dismissal under Lampf's 1-and-3 rule. Simmons did not dispute
the effect of Lampf, and the district court directed the TGX
Defendants to draft a judgment and order. That document recited:
all of the federal claims asserted are time-
barred, and the Defendants are entitled to
judgment on those claims as a matter of law;
and [the court finds that] final judgment
should be entered....
[P]laintiffs' claims ... under ... the
Securities Exchange Act of 1934 are hereby
dismissed with prejudice.
Simmons asked the district court to delete "with prejudice" from
the judgment to avoid any preclusive effect, and the court
obliged before signing it in August 1991. Simmons did not appeal
this judgment.
Simmons sought the deletion from the August 1991 judgment
because he thought that he could avoid Lampf by adding the TGX
Defendants as parties to the 1987 counterclaim against TGX, and
he did not want the dismissal in the March 1990 suit to preclude
him from doing so. Simmons's idea ultimately proved
unsuccessful,5 and the district court entered another judgment
5
A magistrate permitted Simmons to amend his 1987
counterclaim for purposes of procedure only, but the district
court held that the additional claims did not relate back to the
1987 claims, so those claims were still untimely. In its
September 1991 minute entry explaining why Simmons's § 10(b)
claims were still untimely, the district court stated that the
August 1991 judgment did not preclude the amendment to the 1987
counterclaim because the court entered the August 1991 judgment
without prejudice.
7
dismissing Simmons's § 10(b) claims against the TGX Defendants in
October 1991. Simmons did not appeal this October 1991 judgment.
With renewed hope from § 27A(b), Simmons filed a Motion to
Reinstate the March 1990 suit in January 1992. The parties
disputed both the applicability and constitutionality of §
27A(b). In March 1992, the district court held: 1) the court
dismissed Simmons's March 1990 § 10(b) suit "as time barred"
within the meaning of § 27A(b) despite the fact that the court
dismissed the suit without prejudice in August 1991; and 2)
Simmons timely filed his § 10(b) claims under Louisiana's two-
year prescription period and Jensen; but 3) § 27A contravenes the
constitutionally-mandated retroactivity of new legal rules
recognized in Beam. TGX Corp. v. Simmons, 786 F. Supp. 587 (E.D.
La. 1992).
In April 1992, Simmons asked for a new trial on his
reinstatement motion. In May 1992, the district court denied
Simmons's motion for a new trial after holding that, in addition
to Beam's implications, § 27A(b) violates due process principles
by upsetting final judgments. Simmons appeals from the district
court's denials of his motion to reinstate and his new-trial
motion. The TGX Defendants cross-appeal the district court's
ruling that Simmons's March 1990 suit falls within the scope of §
27A(b) even though the district court dismissed that suit without
prejudice in August 1991. The United States intervenes to defend
the constitutionality of § 27A(b).
8
II. ANALYSIS
Simmons and PMLI ultimately raise the same novel
constitutional questions, so we decide both appeals in this
opinion. We review the district courts' decisions concerning the
meaning and constitutionality of § 27A(b) de novo. Moulton v.
City of Beaumont, 991 F.2d 227, 230 (5th Cir. 1993); Gray v.
First Winthrop Corp., 989 F.2d 1564, 1567 (9th Cir. 1993). We
proceed without the benefit of prior appellate attention to §
27A(b).
A. WHETHER A CONSTITUTIONAL SECTION 27A(b) HELPS SIMMONS
The TGX Defendants argue that § 27A(b) does not afford
Simmons any relief even if it is constitutional, because Simmons
asked the district court to dismiss his March 1990 claims under §
10(b) without prejudice. But all of their arguments require an
inaccurate reading of § 27A(b).
Congress wrote § 27A(b) to prevent courts from applying
Lampf to cases that plaintiffs filed before the Court rendered
Lampf. Section 27A(b) states a specific procedure (motion for
reinstatement within 60 days of enactment) to restart "[a]ny" §
10(b) claim "commenced on or before June 19, 1991 ... which was
dismissed as time barred" after Lampf, but "would have been
timely filed" before Lampf.
What little legislative history exists for § 27A confirms
that Congress intended to obliterate Lampf and Beam for all cases
9
filed before the Court rendered Lampf.6 See, e.g., 137 CONG. REC.
S17382 (daily ed. Nov. 21, 1992) (Sen. Riegle, § 27A sponsor)
("The language of the bill is designed to return plaintiffs and
defendants to exactly the position that they had on June 19,
1991," the day before the Court rendered Lampf.); id. at H11813
(daily ed. Nov. 26, 1991) (Rep. Markey) ("The language ...
unambiguously reverses the Lampf ruling's application of the 1-
year and 3-year statute of limitations...."). The Supreme Court
itself has recognized as much. See Musick, Peeler & Garrett v.
Employers Ins. of Wausau, 1993 WL 179262 at *5 ("Congress ...
limit[ed] the retroactive effect of [Lampf by directing] the
applicable 'limitation period for any private civil action
implied under [§ 10(b)] that was commenced on or before June 19,
1991....'"); id. at *11 (Thomas, J., dissenting) (Congress
"alter[ed] the retroactive effect of the 10b-5 limitations period
that we adopted in Lampf."). We know of no evidence or reason
that supports a narrower reading of § 27A. Compare Herman &
MacLean v. Huddleston, 103 S. Ct. 683, 689 (1983) (interpreting
securities laws to "further[] their broad remedial purposes").
1. Time-Bar Dismissal
The TGX Defendants seize on the district court's statement
that Simmons did not voluntarily dismiss his § 10(b) claims under
FED. R. CIV. P. 41 by asking the court to dismiss those claims
6
For a comprehensive treatment of the legislative history
of § 27A, see Anthony Michael Sabino, A Statutory Beacon or a
Relighted Lampf? The Constitutional Crisis of the New Limitary
Period for Federal Securities Law Actions, 28 TULSA L.J. 23, 27-30
(1992).
10
without prejudice in August 1991. Simmons, 786 F. Supp. at 590.
They argue that the court's statement is erroneous, and once we
recognize that Simmons voluntarily dismissed his claims, we must
hold that the claims were not "dismissed as time barred" under §
27A(b)(1).
But even if Simmons chose to dismiss his § 10(b) claims, the
record conclusively establishes that he did so because Lampf
rendered those claims time barred. The district court's August
1991 judgment states this very fact. We interpret "dismissed as
time barred" in § 27A(b) to include all cases that were dismissed
because of Lampf's time bar. Simmons satisfies this but-for
scrutiny.
2. Nullification
The TGX Defendants have found language in our cases in which
this court states that the effect of a voluntary dismissal is to
"put the plaintiff in the same legal position in which he would
have been had he never brought the first suit." Taylor v. Bunge
Corp., 775 F.2d 617, 619 (5th Cir. 1985). They would have us
apply this language, irrespective of the reasons for and context
in which we used it, to hold that Simmons's suit vanished upon
voluntary dismissal, leaving nothing to reinstate by operation of
§ 27A(b).
But there is no rule that makes all voluntarily dismissed
cases absolutely null for all purposes. This court has permitted
a district court to resurrect a voluntarily dismissed case under
FED. R. CIV. P. 60. Boehm v. Office of Alien Property, 344 F.2d
11
194 (5th Cir. 1965). And even if there were an absolute-nullity
rule, we could not apply it in the face of contrary congressional
intent unless we could articulate a constitutional basis for
doing so. As we have explained, Congress intended broad relief
from Lampf for any § 10(b) claim "that was commenced on or before
June 19, 1991." Simmons commenced his § 10(b) claims against the
TGX Defendants on March 8, 1990, which places those claims within
the ambit of § 27A(b).
3. Avoidance
The TGX Defendants cite cases holding that courts should
refrain from deciding constitutional questions if possible. See,
e.g., Daylo v. Administrator of Veterans' Affairs, 501 F.2d 811,
819 (D.C. Cir. 1974) ("[W]hen one interpretation of a statute
would create a substantial doubt as to the statute's
constitutional validity, the courts will avoid that
interpretation absent a 'clear statement' of a contrary
legislative intent."). They accompany these cites with creative
readings of § 27A(b) that would avoid constitutional questions,
while conveniently killing Simmons's claims.7 None of their
7
For example, the TGX Defendants suggest that Congress
really accomplished nothing whatsoever in § 27A because the "laws
applicable ... as such laws existed on June 19, 1991," which §
27A directs courts to apply, are defined by the Securities
Exchange Act of 1934, just as Lampf holds. They also suggest
that § 27A only replaces the one-year limitations period
discussed in Lampf, and does not affect Lampf's direction that §
10(b) actions be further limited by a three-year statute of
repose.
The PMLI Defendants suggest that Congress only meant §
27A(b) to reinstate actions that were dismissed from a district
court, but still pending on appeal at the time a party files a
12
readings respects Congress' unmistakable intent to keep Lampf
from operating retroactively in cases that were dismissed as time
barred.8 We will not ignore the obvious meaning of § 27A simply
to avoid the constitutional questions that Congress has created.
4. Claim Preclusion
Finally, the TGX Defendants point to the district court's
October 1991 dismissal of Simmons's amended counterclaim in the
TGX suit. They argue that the court dismissed this amended
counterclaim with prejudice, and the amended counterclaim raised
the same claims that Simmons pursues through his January 1992
reinstatement motion under § 27A(b), so claim preclusion bars any
reinstatement of Simmons's March 1990 claims regardless of §
27A(b).
But the TGX Defendants have waived any claim-preclusion
argument by failing to raise it in the district court. Our
thorough search of the record reveals no mention of claim
preclusion by the court's October 1991 judgment, and we refuse to
consider it for the first time on appeal. See Russell v.
SunAmerica Sec., Inc., 962 F.2d 1169, 1172 (5th Cir. 1992)
(failure to present res judicata argument to district court
usually prevents appellate court from addressing the issue); see
also Aluminum Prod. Distrib., Inc. v. Aaacon Auto Transp., Inc.,
motion for reinstatement.
8
Cf. Georgia Ass'n of Retarded Citizens v. McDaniel, 855
F.2d 805, 809 (11th Cir. 1988) (Though Congress intended a
statute to control cases "pending" before enactment of the
statute, the court found no clear intent that the statute would
apply to pending cases that a court had also finally dismissed.).
13
549 F.2d 1381, 1384 (10th Cir. 1977) (where a party asserted res
judicata for the first time in a new-trial motion, "the district
court was not bound by any [prior] judgment," and the appellate
court refused to consider any preclusive effect on appeal).
We come to the central question of both cases: the
constitutionality of § 27A(b).
B. WHETHER THE CONSTITUTION PROTECTS INDIVIDUALS OR THE JUDICIARY FROM
§ 27A(B)
Congress' authority to establish limitations periods for
securities-fraud claims cannot be disputed. See Musick, 1993 WL
179262 at *4-*5. Section 27A(b) is controversial exclusively for
its retroactivity.9 While the Constitution proscribes
retroactive criminal legislation, it contains no analogous civil
provision. U.S. CONST. art. I, § 9; Mahler v. Eby, 44 S. Ct.
283, 286 (1924).
The PMLI Defendants and TGX Defendants (collectively
Defendants) argue that the Supreme Court's precedent and the
structure of the Constitution establish that § 27A(b)
unconstitutionally affects individuals and the federal judiciary.
The district courts agreed with them. We do not.
9
A retroactive statute "gives to preenactment conduct a
different legal effect from that which it would have had without
the passage of the statute." Charles B. Hochman, The Supreme
Court and the Constitutionality of Retroactive Legislation, 73
HARV. L. REV. 692, 692 (1960) (hereinafter Constitutionality of
Retroactive Legislation).
14
1. Individual Rights
The Constitution's Fifth Amendment prohibits Congress from
depriving any person of property without due process of law. The
Defendants claim that § 27A(b) contravenes the Fifth Amendment by
compromising two of their property rights as recognized by the
Supreme Court.
a. The Right to a Final, Nonappealable Judgment
Each of the defendants in these cases (collectively
Defendants) possessed final, nonappealable judgments dismissing
the plaintiffs' § 10(b) claims. Unlike § 27A(a), § 27A(b)
effectively nullifies these judgments, so the cases addressing
the constitutionality of § 27A(a) have nothing to say about
whether § 27A(b) unconstitutionally abrogates any right to a
final judgment.10 For guidance on this question, we turn to the
Supreme Court.
The Defendants rely upon McCullough v. Virginia, 19 S. Ct.
134 (1898) and its progeny to argue that § 27A(b) cannot
constitutionally take away their judgments. McCullough obtained
a judgment against Virginia in 1892, but a Virginia appellate
court reversed that judgment. Id. at 135. Between the time of
10
The only appellate courts to rule on the
constitutionality of § 27A to date have upheld it as a means of
changing the limitations period in pending § 10(b) cases. Cooke
v. Manufactured Homes, Inc., 1993 WL 248257, at *8 (4th Cir. July
9, 1993); Cooperativa de Ahorro y Credito Aguada v. Kidder,
Peabody & Co., 1993 WL 156464, at *3 & n.11 (1st Cir. May 19,
1993); Berning v. A.G. Edwards & Sons, 990 F.2d 272, 279 (7th
Cir. 1993); Gray, 989 F.2d at 1574; Anixter v. Home-State Prod.
Co., 977 F.2d 1533, 1547 (10th Cir. 1992); Henderson v.
Scientific-Atlanta, Inc., 971 F.2d 1567, 1570 (11th Cir. 1992).
15
judgment and its reversal, Virginia's legislature repealed the
statute that authorized McCullough's suit. When the Supreme
Court agreed to hear McCullough's appeal, Virginia asked the
Court to apply the new law repealing authorization for the suit
and dismiss McCullough's appeal. Id. at 142. The Court
emphatically refused Virginia's request:
It is not within the power of a legislature
to take away rights which have been once
vested by a judgment. Legislation may act on
subsequent proceedings, may abate actions
pending, but when those actions have passed
into judgment the power of the legislature to
disturb the rights created thereby ceases.
Id.11
Our research indicates that the Court has never applied this
holding in McCullough to decide another case. Moreover, both
before and after McCullough, the Court has decided cases with
identical relevant facts according to a different rule.12
11
Before McCullough, the Court did not adhere to such an
absolute rule. See Freeland v. Williams, 9 S. Ct. 763, 767-68
(1889) (sustaining a state law which invalidated a final judgment
for damages in a trespass action); Pennsylvania v. Wheeling &
Belmont Bridge Co., 59 U.S. 421, 431 (1855) (accepting "as a
general proposition ... especially as it respects adjudication
upon the private rights of parties," that legislation "cannot
have the effect and operation to annul the judgment of the court
already rendered, or the rights determined thereby in favor of
the plaintiff") (emphasis added).
12
In United States v. The Schooner Peggy, 5 U.S. (1 Cranch)
103 (1801), Chief Justice Marshall explained:
[I]f, subsequent to the judgment, and before
the decision of the appellate court, a law
intervenes and positively changes the rule
which governs, the law must be obeyed, or its
obligation denied.... [T]he court must decide
according to existing laws, and if it be
necessary to set aside a judgment, rightful
16
Accordingly, we must carefully scrutinize McCullough's rationale
in assessing the precedential value of its broad statement
concerning rights vested by judgment.
The McCullough Court did not explicitly ground its holding
in the Constitution. In subsequent decisions, however, the Court
explained that the Fifth Amendment's Due Process Clause is the
source of constitutional protection for judgments, including the
one that belonged to McCullough. E.g., Hodges v. Snyder, 43 S.
Ct. 435, 436 (1923). Thus, we decide this case according to the
jurisprudence that the Court has developed to describe how due
process protects individuals from retroactive legislation. The
Defendants stress a "vested rights" theory exemplified by
when rendered, but which cannot be affirmed
but in violation of law, the judgment must be
set aside.
Id. at 110. Almost two hundred years later, Schooner Peggy
remains good law. See Kaiser Aluminum & Chem. Corp. v. Bonjorno,
110 S. Ct. 1570, 1581-82 (1990) (Scalia, J., concurring)
(reciting history of the Court's adherence to Schooner Peggy
while advocating a rule requiring a clear manifestation of
legislative intent before courts will recognize retroactive
legislation); see also Griffith v. Kentucky, 107 S. Ct. 708, 712
n.6 (judgment is final for purposes of the constitutional
prohibition on retroactive criminal legislation only when "a
judgment of conviction has been rendered, the availability of
appeal exhausted, and the time for a petition for certiorari
elapsed or a petition for certiorari finally denied"). But in
McCullough, the Court ignored Schooner Peggy and the fact that
McCullough's case was pending on appeal when Virginia's
legislature changed the law, deciding instead that the law
applicable to a case "freezes" at the time the trial court
renders its judgment. 19 S. Ct. at 142 ("The writ of error to
the court of appeals of [Virginia] brought the validity of [the
trial court's] judgment into review, and the question presented
to that court was whether, at the time it was rendered, it was
rightful or not.") (emphasis added). The McCullough Court may
have understood Schooner Peggy to apply only to Article III
courts, and ignored it for this reason.
17
McCullough, but we find talk of vested rights to merely state due
process conclusions, and thus unnecessarily confusing. The Court
explains:
the words "vested right" are nowhere used in
the constitution, neither in the original
instrument nor in any of the amendments to
it. We understand very well what is meant by
a vested right to real estate, to personal
property, or to incorporeal hereditaments.
But when we get beyond this, although vested
rights may exist, they are better described
by some more exact term, as the phrase itself
is not one found in the language of the
constitution.
Campbell v. Holt, 6 S. Ct. 209, 213 (1885). A seminal treatise
recognizes what has happened when courts have departed from the
Constitution in search of an amorphous "vested rights" theory:
Judicial opinions are full of standards which
purport to govern decision[s] concerning the
legality of retroactive application of new
law. On close examination most of them turn
out to be little more than ways to restate
the problem. Probably the most hackneyed
example of such a rule is to the effect that
a law cannot be retroactively applied to
impair vested rights. But the statement of
that proposition does nothing more than focus
attention on the question concerning what
circumstances qualify a right to be
characterized as "vested."
NORMAN J. SINGER, 2 SUTHERLAND STATUTORY CONSTRUCTION § 41.05, at 364-65
(C. Sands 4th ed. 1986); accord Constitutionality of Retroactive
Legislation, 73 Harv. L. Rev. at 696. We waste no further time
with the "vested rights" language, and turn to due process.
When the Court rendered McCullough, it may have held the
absolutist view, indicated by the statement quoted above, that
the Due Process Clause protects all final judgments from
18
retroactive legislation. But the Court has retreated from this
view. The Court permits retroactive legislation to annul private
judgments that affect public rights, Hodges, 43 S. Ct. at 436, or
private injunctions upon changed circumstances. System
Federation No. 91, Ry. Employees' Dept., AFL-CIO v. Wright, 81 S.
Ct. 368, 371 (1961) (modifying a permanent injunction to conform
with subsequently-enacted amendments to the Railway Labor Act).
The dispositive retreats from any absolute McCullough rule,
however, come in Fleming v. Rhodes, 67 S. Ct. 1140 (1947) and
Usery v. Turner Elkhorn Mining Co., 96 S. Ct. 2882 (1976).
In Fleming, landlords obtained valid final judgments from a
Texas court entitling them to evict certain tenants upon the
lapse of wartime price regulations. Congress cured the lapse
within two months, and included a law which prohibited the
eviction of the tenants with its extension of price regulations.
67 S. Ct. at 1141 n.3. A price-control administrator asked a
federal district court to apply this law to enjoin the landlords
and state officials from executing their judgments, but the
district court held that the federal statute violated the Fifth
Amendment's Due Process Clause. Id. at 1141-42. The Supreme
Court reversed, explaining that
Federal regulation of future action based
upon rights previously acquired by the person
regulated is not prohibited by the
Constitution. So long as the Constitution
authorizes the subsequently enacted
legislation, the fact that its provisions
limit or interfere with previously acquired
rights does not condemn it. Immunity from
federal regulation is not gained through
forehanded contracts. Were it otherwise the
19
paramount powers of Congress could be
nullified by "prophetic discernment." The
rights acquired by judgments have no
different standing. The protection of
housing accommodations in defense-areas
through the price control acts may be
accomplished by the [administrator]
notwithstanding these prior judgments. The
preliminary injunctions should have been
granted.
Id. at 1144 (footnotes omitted and emphasis added), cited with
approval in Federal Housing Admin. v. Darlington, Inc., 79 S. Ct.
141, 146 & n.6 ("[A]ny 'vested' rights by reason of the state
judgment were acquired subject to the possibility of their
dilution through Congress' exercise of its paramount regulatory
power.").
Usery arose from Congress' efforts to provide compensation
to coal miners and their survivors. The disputed legislation
establishes an administrative procedure under which victims of
the disease known as "black lung" and their survivors may collect
benefits from coal companies, mandates certain presumptions
against the coal companies, and operates retroactively. 96 S.
Ct. at 2889-90. The companies argued that the statute
unconstitutionally deprived them of their property because it
imposed upon them "an unexpected liability for past, completed
acts that were legally proper and, at least in part, unknown to
be dangerous at the time." Id. at 2892. The Court responded:
It is by now well established that
legislative Acts adjusting the burdens and
benefits of economic life come to the Court
with a presumption of constitutionality, and
that the burden is on one complaining of a
due process violation to establish that the
20
legislature has acted in an arbitrary and
irrational way....
To be sure, insofar as the Act requires
compensation for disabilities bred during
employment terminated before the date of
enactment, the Act has some retrospective
effect.... And it may be that the liability
imposed by the Act for disabilities suffered
by former employees was not anticipated at
the time of actual employment. But our cases
are clear that legislation readjusting rights
and burdens is not unlawful solely because it
upsets otherwise settled expectations. See
Fleming v. Rhodes....
Id. at 2892-93 (citations and footnotes omitted). The Court then
assessed the practical consequences of the Act's retrospective
imposition of liability and concluded that this imposition "is
justified as a rational measure to spread the costs of the
employees' disabilities to those who have profited from the
fruits of their labor...." Id. at 2893.
The Defendants would have us distinguish Fleming and Usery
on the ground that the Court in neither case permitted a
retroactive statute to upset a final, nonappealable judgment;
they maintain that the rights created by judgments are sacrosanct
above other due process rights, and that the McCullough rule
endures for judgment-based rights. This argument fails to
distinguish Fleming or Usery.
While the Fleming Court noted that the retroactive
legislation which it upheld only compromised the landlords'
ability to enforce their judgment rights as opposed to any
compromise of the rights themselves, 67 S. Ct. at 1144, the Court
has also recognized (as do we) that the removal of a remedy has
21
the same effect as the removal of a right. See Chase Sec. Corp.
v. Donaldson, 65 S. Ct. 1137, 1142 (1945) ("[I]t is troublesome
to sustain as a 'right' a claim that can find no remedy for its
invasion."); Lynch v. United States, 54 S. Ct. 840, 844 (1934)
("Contracts between individuals or corporations are impaired ...
whenever the right to enforce them is taken away or materially
lessened.").
Usury teaches that Congress can, under some circumstances,
create private civil liability for past acts. We recognize
nothing in the Usery Court's analysis that would limit Congress
from retroactively creating liability for securities fraud if it
justified this retroactive effect with reasons comparable to
those recited in Usery. See 96 S. Ct. at 2893-94. Because Usery
allows Congress to avert questions of judgment rights altogether,
there is no due process reason why Congress cannot reach the same
result by upsetting a judgment.
Moreover, FED. R. CIV. P. 60(b) itself destroys the
Defendants' position that final, nonappealable judgments confer
sacrosanct due-process rights on individuals. Rule 60(b) permits
courts to "relieve a party ... from a final judgment ... for ...
any ... reason justifying relief from the operation of the
judgment." The Court has repeatedly acknowledged that Rule 60
"provides courts with authority 'adequate to enable them to
vacate judgments whenever such action is appropriate to
accomplish justice.'" Liljeberg v. Health Servs. Acquisition
Corp., 108 S. Ct. 2194, 2204 (1988) (citation omitted). The
22
Tenth Circuit is especially likely to disturb final judgments
under Rule 60(b) upon subsequent changes in the law: "a change in
relevant case law by the United States Supreme Court warrants
relief under Fed. R. Civ. P. 60(b)(6)." Adams v. Merrill Lynch
Pierce Fenner & Smith, 888 F.2d 696, 702 (10th Cir. 1989).
Rule 60(b) has spawned an extensive jurisprudence; no doubt
remains as to its constitutionality. And we know of nothing to
indicate that an individual holds any greater constitutional
right against one branch of government than she holds against
another. This reasoning establishes that, despite McCullough,
judgments that are final and nonappealable do not create rights
that are absolutely immune from congressional manipulation.
It is not our place to state general rules as to when the
Due Process Clause permits Congress to disturb judgments. We
limit our inquiry to the facts before us. Fortunately, the Court
provides ample guidance in Donaldson. See 65 S. Ct. at 1141-43.
Donaldson sued a securities broker under Minnesota statutory
and common-law fraud theories. A state judge ruled that the
broker violated the Minnesota securities statute and that
Donaldson timely filed his claim because his absence from the
state tolled Minnesota's limitations period. Minnesota's Supreme
Court held the latter ruling erroneous, and remanded for further
proceedings. Id. at 1138. Meanwhile, Minnesota's legislature
enacted a limitations statute which permitted any securities
fraud claim to be brought within one year of the statute if the
securities were delivered more than five years before the
23
statute's enactment date. Donaldson met the five year delivery
requirement and availed himself of the new statute in Minnesota's
courts. Id. at 1139. The broker appealed to the Supreme Court,
arguing that Minnesota deprived him of due process by applying
the new limitations period to him. We quote extensively from the
Court's unanimous refutation of this argument because we find it
applicable here:
Statutes of limitation find their
justification in necessity and convenience
rather than in logic. They represent
expedients, rather than principles. They are
practical and pragmatic devices to spare the
courts from litigation of stale claims, and
the citizen from being put to his defense
after memories have faded, witnesses have
died or disappeared, and evidence has been
lost. ... They represent a public policy
about the privilege to litigate. Their
shelter has never been regarded as what now
is called a "fundamental" right or what used
to be called a "natural" right of the
individual. He may, of course, have the
protection of the policy while it exists, but
the history of pleas of limitation shows them
to be good only by legislative grace and to
be subject to a relatively large degree of
legislative control.
....
.... The Fourteenth Amendment [Due Process
Clause] does not make an act of state
legislation void merely because it has some
retrospective operation. ... Some rules of
law probably could not be changed
retroactively without hardship and oppression
.... Assuming that statutes of limitation
like other types of legislation could be so
manipulated that their retroactive effects
would offend the Constitution, certainly it
cannot be said that lifting the bar of a
statute of limitation so as to restore a
remedy lost through mere lapse of time is per
se an offense against the Fourteenth
Amendment. Nor has the appellant pointed out
24
special hardships or oppressive effects which
result from lifting the bar in this class of
cases with retrospective force. This is not
a case where appellant's conduct would have
been different if the present rule had been
known and the change foreseen. It does not
say, and could hardly say, that it sold
unregistered stock depending on a statute of
limitation for shelter from liability. The
nature of the defenses shows that no course
of action was undertaken by appellant on the
assumption that the old rule would be
continued. When the action was commenced, it
no doubt expected to be able to defend by
invoking Minnesota public policy that lapse
of time had closed the courts to the case,
and its legitimate hopes have been
disappointed. But the existence of the
policy at the time the action was commenced
did not, under the circumstances, give the
appellant a constitutional right against
change of policy before final adjudication.
Id. at 1142-43 (citations and footnotes omitted).
The Defendants understandably stress the last phrase of the
quoted passage, and observe that while Donaldson permits a
legislature to retroactively change limitations periods, it says
nothing about whether a legislature can divest a party of a final
judgment. The problem with this argument is that Donaldson
predates both Fleming and Usery, which we understand to establish
that Congress may upset final judgments under some circumstances.
To decide whether § 27A(b) can constitutionally upset final
judgments, we observe that the Court in Donaldson, Fleming, and
Usery invariably considered whether the legislature acted
rationally toward the party asserting a due process violation to
25
determine whether retroactive legislation deprived those parties
of rights without due process.13
In Fleming, the Court understood the landlords asserting due
process rights to have taken advantage of an inadvertent two-
month lapse in price-control regulation of defense-area housing
during wartime, and held that Congress could rationally exercise
its commerce authority to deny them this advantage. 67 S. Ct. at
1143-44. In Usery, the Court analyzed the effect of the
retroactive legislation on the coal companies to determine
whether the legislation "me[t] the test of due process" and
concluded that the legislation was "justified as a rational
13
Even before Usery, one commentator comprehensively
surveyed the Court's decisions concerning the constitutionality
of retroactive legislation, and concluded that three inquiries,
none of them dispositive, inform the Court's rationality
decisions: 1) the nature of the public interest served by the
retroactive enactment; 2) the extent of the abrogation of the
preenactment right; and 3) the nature of the right affected by a
retroactive statute. Constitutionality of Retroactive
Legislation, 73 HARV. L. REV. at 697, 711, 717. He considers a
statute that retroactively upsets final judgments primarily under
the third criteria, and explains:
the Court has indicated that it would be
reluctant to permit the legislature to
interfere with a right which has been
"adjudicated ... in final and unreviewable
determination." However, it must be
remembered that this is only one of many
considerations in determining the
constitutionality of retroactive legislation,
and in any given case, the Court may deem the
interests in the retroactive application of
the statute to a right which has been reduced
to judgment prior to its enactment sufficient
to outweigh the disadvantages of such
application. Such a case was Fleming v.
Rhodes ....
Id. at 718-19.
26
measure to spread the costs of the employees' disabilities." 96
S. Ct. at 2893. Likewise, as we quote above, the Donaldson Court
carefully considered the effect of the retroactive limitations
statute on the broker before holding that Minnesota's legislature
worked no injustice. 65 S. Ct. at 1143. And recently, the Court
upheld a statute that retroactively assessed a fee for use of the
Iran-United States Claims Tribunal against a due process
challenge by applying this standard: "the test of due process"
for "[t]he retroactive aspects of legislation" is met if "the
retroactive application of the legislation is itself justified by
a rational legislative purpose." United States v. Sperry Corp.,
110 S. Ct. 387, 396 (1989) (quoting Pension Benefit Guar. Corp.
v. R.A. Gray & Co., 104 S. Ct. 2709, 2718 (1984)).
Donaldson frees us from speculating as to the bounds of due-
process rationality when a legislature promulgates retroactive
laws. Like the statute at issue in Donaldson, § 27A(b) restores
a remedy that PMLI and Simmons lost through lapse of time. Like
the fraud-based cause of action at issue in Donaldson, the
Defendants' conduct would not have been different if they would
have foreseen § 27A(b). Like the effect of the retroactive
legislation at issue in Donaldson, § 27A(b) subjects the
Defendants to a lawsuit.
As a matter of practical effect on the parties, § 27A(b)
differs from the Donaldson legislation in one important respect.
The Donaldson Court characterized the broker's expectation that
the limitation law would remain as it was when suit was filed as
27
a "legitimate hope[]," yet held this expectation insufficient to
render Minnesota's retroactive limitations statute violative of
due process. Id. Section 27A(b) represents Congress'
complementary view that courts should honor the expectations of
plaintiffs and defendants as they ascertained § 10(b) limitations
law upon the filing of these suits before Lampf. Section 27A(b)
fulfills the hopes that the Donaldson Court found legitimate, and
is thus a stronger candidate for retroactivity than the statute
upheld by the Court; strong enough, we hold, to upset the
Defendants' final, nonappealable judgments.14
b. The Right to a Statute of Repose
The Defendants argue that even if Congress can legitimately
upset their judgments with § 27A(b), the statute still
contravenes due process because it creates civil liability for
past acts. Their argument rests on William Danzer & Co. v. Gulf
14
By this statement, we recognize that § 27A(b) should
survive any heightened scrutiny required for retroactive
legislation that upsets a judgment. We do not imply that
retroactive legislation necessarily receives heightened scrutiny
if it upsets a final judgment. A judgment for money is a species
of property right, and we see no reason why the Constitution
accords any more protection to an individual's right to her money
when this right is represented by a judgment than when this right
is represented by a savings passbook. See Tonya K. by Diane K.
v. Board of Educ. of Chicago, 847 F.2d 1243, 1247 (7th Cir. 1988)
("Once the court has fixed property rights by judgment, the
legislature has no greater power over this form of property than
over any other."). The Supreme Court, this court, and others
have consistently permitted legislatures to retroactively affect
individuals' rights to money by applying a rationality standard.
See Sperry, 110 S. Ct. at 396-97; Pension Benefit Guar. Corp.,
104 S. Ct. at 2718; Usery, 96 S. Ct. at 2893; Wright v. Union
Central Life Ins. Co., 58 S. Ct. 1025, 1031-34 (1938); Hoffman v.
City of Warwick, 909 F.2d 608, 618-19 (1st Cir. 1990); Fust v.
Arnar-Stone Lab., Inc., 736 F.2d 1098, 1100 (5th Cir. 1984);
DiPippa v. United States, 687 F.2d 14, 19 (3d Cir. 1982).
28
& S.I.R. R., 45 S. Ct. 612 (1925), where the Court distinguishes
between time-bar statutes that bar the remedy of suit in court,
and those that extinguish the liability altogether. Id. at 613;
see also Donaldson, 65 S. Ct. 1141 n.8 (distinguishing Danzer
according to its remedy/liability dichotomy). If a time-bar
statute extinguishes liability, the Danzer Court held that a
legislature cannot constitutionally amend such a statute to
revive liability once extinguished. 45 S. Ct. at 613. To do so
would "retroactively ... create liability" and thus "deprive the
defendant of its property without due process of law in
contravention of the Fifth Amendment." Id.
The Defendants point to the Lampf Court's distinction
between a one-year statute of limitation and a three-year statute
of repose, and its holding that Congress effectively created this
time-bar structure in 1934. See 111 S. Ct. at 2780. They
observe that, like the statute at issue in Danzer, the three-year
repose period recognized by the Lampf Court is an absolute bar
not subject to equitable tolling. Compare id. at 2782 with
Danzer, 45 S. Ct. at 613. From this, they reason that Congress
in 1934 enacted an absolute three-year limit on liability for §
10(b) violations. Because § 27A(b) operates in these cases to
lift this three-year outside limit, the Defendants argue that the
statute "retroactively ... creates liability" in contravention of
due process according to Danzer.
As a preliminary matter, we note that the Usery Court
squarely held that Congress may retroactively create liability
29
for past acts, and thus compromises Danzer's holding that such
legislation per se contravenes due process. See Usery, 96 S. Ct.
at 2893 (legislation is not unlawful solely because "the effect
of the legislation is to impose a new duty or liability based on
past acts") (citations omitted). The Court has also questioned
the continued validity of a dichotomy between remedy and right,
at least where extinction of the remedy has the same effect as
extinction of the right. See Donaldson, 65 S. Ct. at 1142; see
also Lynch, 54 S. Ct. at 844. And the last time a party asked
the Court to apply Danzer, the Court did not even make a
determination as to whether the time-bar statute at issue
affected remedy or liability. International Union of Elec.,
Radio & Mach. Workers v. Robbins & Myers, Inc., 97 S. Ct. 441,
450-51 (1976).
But even if Danzer remains good law, it does not help the
Defendants. Danzer and its progeny are inapposite to statutes
that bar remedies, while leaving liability intact. We need look
no further than Lampf to determine whether the three-year statute
of repose asserted by the Defendants bars liability.
The Lampf Court strove for crystal clarity in stating its
holding: "[T]he governing standard for an action under § 10(b)
[is] the language of § 9(e) of the 1934 Act, 15 U.S.C. § 78i(e)."
111 S. Ct. at 2782 n.9. Section 9(e), as passed by Congress in
1934, provides:
No action shall be maintained to enforce any
liability created under this section, unless
brought within one year after the discovery
30
of the facts constituting the violation and
within three years after such violation.
This language unequivocally bars an action to enforce a
liability, and says nothing about the continued existence of that
liability. Nowhere does the Lampf Court even imply that the
absolute three-year statute of repose extinguishes liability
under § 10(b). We hold that it does not.
This holding conflicts with the Tenth Circuit's holding in
Anixter v. Home-Stake Production Co., 939 F.2d 1420, 1434 (10th
Cir. 1991) that § 13 of the 1934 Act limits liability and not
remedy. The Lampf Court relied upon § 13 to hold that § 9(e)
governs § 10(b) limitations periods, yet mentioned nothing about
limitation of liability. 111 S. Ct. 2780 & n.7. And like §
9(e), the language of § 13 unequivocally indicates a limitation
of remedy, not of liability.15 We disagree with the Anixter
court's opposite conclusion.
The Defendants wrongly assume that a statute of repose must
go to liability rather than remedy. See City of El Paso v.
Simmons, 85 S. Ct. 577, 582 n.9 ("[T]he statute of repose
challenged here is an alteration of remedy rather than
obligation."). They are also mistaken that a time-bar statute
15
Section 13 provides:
In no event shall any such action be brought
to enforce a liability created under § 77k or
77l(1) of this title more than three years
after the security was bona fide offered to
the public, or under § 77l(2) of this title
more than three years after the sale.
15 U.S.C. § 77m.
31
limits liability merely because a legislature structures it as an
absolute bar that is not subject to equitable tolling. In Short
v. Belleville Shoe Manufacturing Co., 908 F.2d 1385 (7th Cir.
1990), the court discussed § 13 as follows:
Courts say that equitable tolling does not
apply under § 13, but this is not strictly
accurate. It is better to say that equitable
tolling and related doctrines do not extend
the period of limitations by more than the
two-year grace period § 13 allows. Congress
did not obliterate these valuable doctrines
so much as it set bounds on the length of
delay.
Id. at 1391 (citations omitted). Rather than assess whether a
statute is characterized as one of repose or limitation, or
whether it is subject to equitable tolling, the relevant inquiry
under Danzer is whether the legislature intended liability or
remedy to be extinguished by a time bar. Donaldson, 65 S. Ct.
1141 n.8. The primary evidence of this intent is, of course, the
language of the statute.16 In this case, we understand Congress
to have decided in § 9(e) that the three-year time bar goes to
remedy only.
Accordingly, the Defendants have failed to establish that §
27A(b) unconstitutionally deprives them of any right.
2. Judicial Authority
The Defendants next invite us to strike § 27A(b) as an
affront to our Article III authority even if it does not
16
The Ninth Circuit has distinguished Danzer by applying a
presumption that time bar statutes "go to matters of remedy
only." Starks v. S.E. Rykoff & Co., 673 F.2d 1106, 1109 (9th
Cir. 1982).
32
contravene their constitutional rights. Other courts have
considered some of the exact arguments made by the Defendants,
and we draw on their wisdom before reaching the Defendants' novel
contentions.
a. Beam and Klein
The Defendants present the same Beam argument that the
district court describes in Simmons, 786 F. Supp. at 592-94, and
the Ninth Circuit describes in Gray, 989 F.2d at 1571-72. We
adopt the Ninth Circuit's analysis rejecting this argument
insofar as it explains why any constitutional rule articulated in
Beam does not limit Congress' powers under Article I. Id. at
1572; accord Cooke, 1993 WL 248257 at *8; Berning, 990 F.2d at
277-78. The Defendants also argue that § 27A(b) affects the
outcome of cases without changing the law in violation of the
rule announced in United States v. Klein, 80 U.S. 128 (1871). We
adopt the analysis of the Eleventh Circuit in Scientific-Atlanta,
971 F.2d at 1572, which explains that § 27A respects Klein by
changing the law. Accord Cooke, 1993 WL 248257 at *8; Berning,
990 F.2d at 278-79; Gray, 989 F.2d at 1568-70; Anixter, 977 F.2d
at 1544-46.
b. Pure Retroactivity
The Defendants also contend that Article I does not confer
authority upon Congress to enact purely retroactive legislation.
We view such a blanket prohibition as tantamount to a civil Ex
Post Facto Clause, something that the Court has explicitly
refused to recognize. See Galvan v. Press, 74 S. Ct. 737, 743
33
n.4 ("The Court ... has undeviatingly enforced the ... position,
first expressed in Calder v. Bull," that "the ex post facto
Clause applies only to prosecution for crime.... It would be an
unjustifiable reversal to overturn a view of the Constitution so
deeply rooted and so consistently adhered to.") (citation
omitted); cf. Cummings v. Bostwick, 481 F. Supp. 1251, 1254 & n.6
(D. N.H. 1980) (the constitutions of Colorado, Georgia, Idaho,
Missouri, New Hampshire, Ohio, Tennessee and Texas explicitly
prohibit all retroactive legislation).
To the contrary, the Court has held that a statute is not
unconstitutional merely for its retroactivity. See Usery, 96 S.
Ct. at 2893; see also Scientific-Atlanta, 971 F.2d at 1573
(rejecting argument that § 27A transgresses separation of powers
doctrine because it is purely retroactive). The Defendants do
not adequately distinguish Usery by explaining that the statute
at issue in that case had some prospective effect. The Usery
Court nowhere predicates its blessing of retroactive legislation
on an associated prospective component. Indeed, the Court has
before upheld purely retroactive legislation against a
separation-of-powers challenge. See United States v. Sioux
Nation of Indians, 100 S. Ct. 2716, 2745 (1980). The
Constitution imposes no bar on purely retroactive legislation per
se.
c. Final Judgments
Lastly, the Defendants assert that § 27A(b)
unconstitutionally usurps judicial authority by upsetting final
34
judgments.17 They say that § 27A(b) places Congress in the
position of a super-appellate court, exercising review authority
over the Supreme Court and its decisions in Lampf and Beam.
To define the constitutional separation of legislative and
judicial authority, the Court focuses upon "the practical effect
that the congressional action will have on the constitutionally
assigned role of the federal judiciary." Commodity Futures
Trading Comm'n v. Schor, 106 S. Ct. 3245, 3257 (1986). Under
this standard, we find § 27A(b) harmless.
With § 27A(b), Congress did not overrule decisions of the
Supreme Court. As we have held through Scientific-Atlanta,
Congress changed the law after final judgment in Lampf and Beam,
giving plaintiffs a new right to assert in court through a
reinstatement motion. The Defendants understandably claim a
violation of their constitutional rights by this action, but §
27A(b) takes no authority from the judiciary. Most
significantly, § 27A(b) leaves the final resolution of
securities-fraud disputes to the courts )) we will decide, indeed
are here deciding, which controversies will end in dismissal
despite § 27A(b). If we understood a statute's purpose to be the
reversal of results in particular controversies between private
individuals, we would strike the statute as violative of our
authority to decide cases. See, e.g., United States v. O'Grady,
89 U.S. 641, 648 (1875) (finding that the Treasury Secretary
17
The Ninth Circuit pretermitted this question in Gray.
See 989 F.2d at 1571.
35
invaded judicial authority by offsetting a court's judgment with
claimed, but unlitigated tax liability). But § 27A(b) is
innocent on this score.
By upsetting final judgments, § 27A(b) at most denies us
some authority to say when a controversy is over. There is no
constitutional impediment to this denial if we share authority
with Congress to say when a controversy is done. In Sioux
Nation, the Court held that the Constitution does not forbid
Congress from mandating that a controversy continues when the
Court says that it is done.
The Sioux Nation brought a Fifth Amendment takings claim
against the United States because our government breached a
treaty obligation to reserve the Black Hills of South Dakota to
the Sioux. The United States Court of Claims dismissed the Sioux
Nation's claim for interest on the value of the seized property
as barred by res judicata. United States v. Sioux Nation of
Indians, 518 F.2d 1298, 1306 (Ct. Cl. 1975). The Supreme Court
denied certiorari. 96 S. Ct. 449 (1975). Three years later,
Congress directed the Court of Claims to review the claim's
merits without consideration of res judicata. See 25 U.S.C. §
70s(b); 100 S. Ct. at 2727. After the Court of Claims ruled in
favor of the Sioux Nation, the government appealed, asserting
that § 70s(b) violates the constitutional separation of
legislative and judicial authority. The Court upheld § 70s(b),
permitting Congress to say that a controversy continues after the
Court has said that it does not. 100 S. Ct. at 2735-36; see also
36
Tonya K., 847 F.2d at 1247 (citing Sioux Nation for the
proposition that "Congress may invite a court to reconsider even
when it may not dictate the outcome").
Schooner Peggy and its extensive progeny also represent
compelling evidence that the Constitution permits Congress and
the judiciary to share authority in deciding when a court is
finished deciding a particular controversy between individuals.
See 5 U.S. (1 Cranch) at 110. With the exception of
McCullough,18 the Court has repeatedly observed Chief Justice
Marshall's admonition that appellate courts must decide cases
according to the law that exists when they decide, not the law
that existed when the lower court rendered its decision.
In an extreme and stringent application of this rule, the
Court rendered 149 Madison Avenue Corp. v. Asselta, 67 S. Ct.
1726, modifying, 67 S. Ct. 1178 (1947). The 149 Madison Avenue
Court had affirmed a judgment for overtime pay due plaintiffs.
67 S. Ct. at 1184. But before the time for rehearing had run,
Congress retroactively created a defense for the defendants, who
asked the Court to reconsider its affirmance in light of the
change in law. The Court changed its judgment from an affirmance
to a remand so that the district court could consider the case in
light of the new law. 67 S. Ct. at 1726. The district court
eventually entered judgment for the defendants. Asselta v. 149
Madison Ave. Corp., 90 F. Supp. 442 (S.D.N.Y. 1950).
18
See note 12, supra.
37
Of course, the rule announced in Schooner Peggy does not
depend on whether the intervening law helps a particular party.
Courts must apply the new law regardless of whether it ends a
case that the court otherwise would have remanded for further
proceedings. Thus, we interpret Schooner Peggy to support the
constitutional proposition that Congress and the judiciary share
authority to decide when the judiciary's word on a controversy is
its last.
The Defendants have articulated no constitutional reason why
these controversies should not continue.
III. CONCLUSION
We REVERSE the orders of the district courts and reinstate
the cases. We REMAND for further proceedings consistent with
this opinion.
38