Lieberman v. Cambridge Partners, L.L.C.

Opinions of the United

2005 Decisions States Court of Appeals

for the Third Circuit

12-27-2005

Lieberman v. Cambridge Partners

Precedential or Non-Precedential: Precedential

Docket No. 04-3079

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

__________

Nos. 04-3079 & 04-3869

__________

IRVIN S. LIEBERMAN,

and all others similarly situated,

Appellant at No. 04-3079

vs.

CAMBRIDGE PARTNERS, L.L.C.;

J.B. HANAUER & CO.

_________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(No. 03-cv-02317)

District Judge: Honorable Cynthia M. Rufe

__________

L-3 COMMUNICATIONS CORP.

Appellant at No. 04-3869

vs.

WAYNE CLEVENGER, LARRY COLANGELO, JOHN

FLEURY, EDWARD GORMAN, MIDMARK CAPITAL,

L.P., MIDMARK ASSOCIATES, INC., MILAN

RESANOVICH, JOSEPH ROBINSON and PAUL

TISCHLER

_________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(No. 03-cv-03932)

District Judge: Honorable Anita B. Brody

__________

Argued: September 26, 2005

___________

Before: RENDELL, FUENTES, and GARTH, Circuit Judges

(Opinion Filed: December 27, 2005)

__________

OPINION OF THE COURT

__________

John F. Innelli, Esquire (Argued)

INNELLI ROBERTSON

1818 Market Street, Suite 3620

Philadelphia, PA 19103

Attorney for Appellant Irvin S. Lieberman,

and all others similarly situated

Matthew J. Siembieda, Esquire (Argued)

Carl M. Buchholz, Esquire

Timothy D. Katsiff, Esquire

Evan H. Lechtman, Esquire

BLANK ROME LLP

One Logan Square

130 North 18th Street

Philadelphia, PA 19103

Mark D. Simon, Esquire

L-3 COMMUNICATIONS CORP.

1 Federal Street

Camden, NJ 08103

Attorneys for Appellant L-3 Communications Corp.

Lawrence M. Rolnick, Esquire

Thomas E. Redburn, Jr., Esquire (Argued)

LOWENSTEIN SANDLER, PC

65 Livingston Avenue

Roseland, NJ 07068

Robert N. Feltoon, Esquire

Jacquelyn J. Ager, Esquire

CONRAD O’BRIEN GELLMAN & ROHN

1515 Market Street, 16th Floor

Philadelphia, PA 19102

Attorneys for Appellee J.B. Hanauer & Co.

Alexander Kerr, Esquire (Argued)

Gregory J. Hindy, Esquire

McCARTER & ENGLISH, LLP

Mellon Bank Center

1735 Market Street, Suite 700

Philadelphia, PA 19103-7501

Attorneys for Appellees Wayne Clevenger, Larry Colangelo,

Joseph Robinson, Midmark Capital, LP, and Midmark

Associates, Inc.

John F. Smith, III, Esquire

Charles L. Becker, Esquire

REED SMITH LLP

1650 Market Street

2500 One Liberty Place

Philadelphia, PA 19103

Mark D. Powers, Esquire

Matthew H. Charity, Esquire

BAKER & HOSTETLER LLP

666 Fifth Avenue

New York, NY 10103

Attorneys for Appellees John Fleury, Edward Gorman and

Paul Tischler

Lewis D. Prutzman, Esquire

Ralph A. Siciliano, Esquire

TANNEBAUM HELPERN SYRACUSE & HIRSCHTRITT

LLP

900 Third Avenue

New York, NY 10022

Attorneys for Appellee Milan Resanovich

Garth, Circuit Judge.

In these two cases, which have been consolidated on

appeal, plaintiff-appellants Irvin S. Lieberman (“Lieberman”)1

and L-3 Communications Corp. (“L-3”) instituted federal

securities fraud actions after the enactment of Section 804 of the

Public Company Reform and Investor Protection Act of 2002

(“Sarbanes-Oxley”).2 That provision extended the applicable

limitations period for private securities fraud claims from the

earlier of one year after discovery of the wrongdoing or three

years after the unlawful transaction3 to the earlier of two years

after discovery or five years after the unlawful transaction. See

§ 804(a).

Section 804 of Sarbanes-Oxley applies to all proceedings

“commenced on or after” its enactment date, or July 30, 2002.

§ 804(b). Were Section 804 applicable here, as Lieberman and

L-3 contend, the two actions would be timely, as they were filed

within the 2-and-5-year limitations structure. Both actions,

however, had earlier been time-barred under the then-applicable

1-and-3-year limitations scheme, inasmuch as the alleged

1

As noted below, Lieberman filed a class action

complaint on behalf of all others similarly situated.

2

Pub.L. No. 107-204, § 804, 116 Stat. 745, 801 (2002)

codified in part at 28 U.S.C. § 1658(b). For ease of reference,

throughout this opinion we will refer to the amended statute of

limitations provision as § 804 rather than 28 U.S.C. § 1658(b).

3

The pre-Sarbanes-Oxley 1-and-3-year limitations

period for private securities fraud actions was established by the

United States Supreme Court in Lampf, Pleva, Lipkind, Prupis

& Petigrow v. Gilbertson, 501 U.S. 350 (1991).

-5-

wrongdoing in each case occurred approximately four years

before the enactment of Section 804. Put simply, while the

actions were filed after the enactment of Section 804, they were

already extinguished by then.

At issue in these cases is whether the amended limitations

period of Sarbanes-Oxley revives previously expired securities

fraud claims. We hold that it does not, and in doing so, join the

other courts of appeals that have addressed this same question.

See In re Enterprise Mortg. Acceptance Co., LLC Sec. Litig.,

391 F.3d 401, 406 (2d. Cir. 2005) (holding that Sarbanes-Oxley

does not revive stale claims); Foss v. Bear, Stearns & Co., Inc.,

394 F.3d 540, 542 (7th Cir. 2005) (same); In re ADC

Telecomm., Inc. Sec. Litig., 409 F.3d 974, 978 (8th Cir. 2005)

(same). Accordingly, we will affirm the District Courts’

respective orders dismissing the actions.

I.

The facts relevant to the disposition of these appeals –

i.e., those pertaining to the timing of events – are not contested.

We recount them below.

A. Irvin S. Lieberman

On or about April 14, 2003, Irvin S. Lieberman filed a

putative securities fraud class action against J.B. Hanauer &

Company (“Hanauer”) in the United States District Court for the

Eastern District of Pennsylvania.4 In effect, Lieberman alleged

4

Lieberman also named Cambridge Partners, L.L.C. as

a defendant. Lieberman, however, never served process upon

Cambridge, apparently because Cambridge has ceased to exist

as a corporate entity. The District Court dismissed Lieberman’s

claims against Cambridge without prejudice for failure to effect

-6-

that Hanauer, as underwriter of certain debt securities issued in

a public offering on April 21, 1998, induced investors to

purchase the securities by misrepresentation, deceit and fraud,

in contravention of the federal securities law. Lieberman

claimed that the investors became aware of the alleged

misrepresentations only in March 2003.

The complaint was subsequently amended, and

thereafter, Hanauer moved to dismiss the amended complaint for

failure to state a claim under Fed. R. Civ. P. 12(b)(6). Hanauer

argued, inter alia, that all of Lieberman’s claims were time-

barred as of April 21, 2001, three years after the date of

purchase (April 21, 1998). Lieberman argued that his claims,

filed within five years of the date of purchase, were timely under

the extended limitations period of Sarbanes-Oxley. He argued

that the amended limitations scheme was applicable because he

instituted the action on April 13, 2003, and hence after

Sarbanes-Oxley’s effective date of July 30, 2002.

The District Court granted Hanauer’s motion and

dismissed the amended class action complaint in its entirety,

declining to apply Sarbanes-Oxley to revive Lieberman’s

expired claims.5 Lieberman appealed.

service of process. Cambridge is not a party to the present

appeal.

5

In the amended class action complaint, Lieberman

asserted claims under sections 12(a)(2) and 15 of the Securities

Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77l, 77o, in

addition to claims under Securities and Exchange Commission

Rule 10b-5 (“Rule 10b-5”) and sections 10(b) and 20(a) of the

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C.

§§ 78j; 78t. We forebear from a detailed description of

Lieberman’s claims, inasmuch as the threshold issue of

-7-

B. L-3 Communications Corp.

On July 1, 2003, L-3 Communications Corp., a leading

merchant supplier of secure communications technology and

other similar products, filed a securities fraud action in the

United States District Court for the Eastern District of

Pennsylvania, naming as defendants various officers and

shareholders of SPD Technologies, Inc. (“SPD Technologies”)

and a wholly-owned subsidiary, SPD Electrical Systems, Inc.

(“SPD Electrical”). SPD Electrical is a manufacturer of circuit

breakers and switchgear for the United States Navy’s nuclear

submarines and surface ships.

As relevant here, the complaint, advancing claims under

both federal and state law, alleged that on August 13, 1998, L-3

entered into a merger agreement with SPD Technologies and

Midmark Capital, L.P., a majority shareholder of SPD

Technologies, whereby L-3 purchased all outstanding shares of

SPD Technologies. The complaint further alleged that the

defendants engaged in a deceptive scheme designed to (1)

induce L-3 to pay an artificially high purchase price for the

company through material misrepresentations and (2) conceal

the fraudulent scheme. L-3 claims not to have discovered this

scheme until January 2002. The defendants moved to dismiss

the complaint, arguing, inter alia, that the federal securities

limitations/repose cuts across all the claims. Concluding, as we

do, that Sarbanes-Oxley does not revive expired securities fraud

claims, we find it unnecessary to consider other issues presented

by Lieberman specific to the nature of the individual claims, and

dealt with by the District Court.

-8-

fraud claims were time-barred after August 13, 2001, three years

from the date of the merger (August 13, 1998).

In a thorough and closely-reasoned opinion, Judge Brody

granted the defendants’ motion and held that Sarbanes-Oxley,

contrary to L-3’s contentions, did not overcome the strong

presumption against revival of time-barred claims, especially

where those claims had been extinguished by a statute of repose.

Under the then-applicable 1-and-3-year limitations scheme,

Judge Brody concluded, L-3’s claims had expired on August 13,

2001, three years after the date of the merger and nearly one

year before the enactment of Sarbanes-Oxley. Judge Brody

declined to exercise supplemental jurisdiction over the

remaining state claims.6 This appeal followed.

II.

Lieberman and L-3 now ask us to reverse the decisions

below, which held that the extended limitations period of

Sarbanes-Oxley did not apply to revive their expired federal

securities fraud claims. Because both cases involve the identical

legal issue, the parties submitted a Joint Motion for

Consolidation for Purposes of Disposition. The Court granted

that motion on November 5, 2004.7

We have jurisdiction over the District Courts’ final orders

dismissing the respective actions pursuant to 28 U.S.C. § 1291.

6

L-3 does not appeal the District Court’s decision to

decline the exercise of supplemental jurisdiction over its state

law claims.

7

While Lieberman and L-3 sometimes raise different

arguments, we hereinafter assign their respective arguments to

“Lieberman and L-3” collectively.

-9-

Our review is plenary. See Ballay v. Legg Mason Wood Walker,

Inc., 925 F.2d 682, 684 (3d Cir. 1991) (“This question is purely

one of statutory construction which implicates our plenary

standard of review.”).

III.

A.

Prior to the enactment of Sarbanes-Oxley, 28 U.S.C. §

1658(b), there was no congressionally created limitations period

for federal securities fraud claims arising under section 10(b) of

the Exchange Act. As a result, in Lampf, Pleva, Lipkind, Prupis

& Petigrow v. Gilbertson, 501 U.S. 350 (1991), the Supreme

Court held that litigation instituted pursuant to section 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, as statutorily prescribed for express

causes of actions contained in the Exchange Act and the

Securities Act. Id. at 362. The Lampf Court viewed the 3-year

limit as a “period of repose,” intended to impose an “outside

limit” not subject to tolling principles. Id. at 363 (citation

omitted). As the Supreme Court stated:

The 1-year period, by its terms, begins after discovery of

the facts constituting the violation, making tolling

unnecessary. The 3-year limit is a period of repose

inconsistent with tolling . . . Because the purpose of the

3-year limitation is clearly to serve as a cutoff, we hold

that tolling principles do not apply to that period.

Id.

As part of Sarbanes-Oxley, enacted on July 30, 2002,

Congress amended the 1-and-3-year limitations scheme for

private securities fraud actions, previously established by the

-10-

Supreme Court in Lampf. Section 804 of Sarbanes-Oxley

provides:

(a) . . . [A] private right of action that involves a claim of

fraud, deceit, manipulation, or contrivance in

contravention of a regulatory requirement concerning the

securities laws, as defined in section 3(a)(47) of the

Securities Exchange Act of 1934 (15 U.S.C. [§]

78c(a)(47)), may be brought not later than the earlier of-

(1) 2 years after the discovery of the facts constituting the

violation; or

(2) 5 years after such violation.

(b) EFFECTIVE DATE.-The limitations period provided

by section 1658(b) of title 28, United States Code, as

added by this section, shall apply to all proceedings

addressed by this section that are commenced on or after

the [July 30, 2002,] date of enactment of this Act.

(c) NO CREATION OF ACTIONS.-Nothing in this

section shall create a new, private right of action.

Public Company Accounting Reform and Investor Protection

Act of 2002, Pub.L. No. 107-204 § 804, 116 Stat. 745, 801,

codified in part at 28 U.S.C. § 1658(b) (emphasis added).

Both Lieberman and L-3 maintain that Section 804 of

Sarbanes-Oxley applies retroactively to their claims, thus

extending the relevant repose period to five years after the

alleged fraudulent transactions.8 They rely on the effective date

8

The discovery dates are immaterial to these appeals, as

the relevant period of repose ended earlier in both instances.

See Lampf, 501 U.S. at 364 (holding that litigation instituted

-11-

provision of the statute, which provides that “this section, shall

apply to all proceedings . . . that are commenced on or after

[July 30, 2002].” § 804(b). Both submit that they filed their

actions after July 30, 2002, which, they claim, brings their

actions within the purview of the new statute. Section 804

would extend the respective filing deadlines to April 21, 2003

for Lieberman and August 13, 2003 for L-3. The actions are

timely if, and only if, Section 804 is applicable.9

The Appellees, on the other hand, contend that Lampf

provided the governing limitations structure for private

securities fraud claims at the time of the alleged fraudulent

conduct in each case. They further contend that Lieberman’s

and L-3’s claims had been extinguished by the then-applicable

3-year period of repose prior to the enactment of Sarbanes-

Oxley. The Appellees submit that Congress never intended for

Sarbanes-Oxley to apply retroactively to revive claims already

extinguished by a statute of repose.

The question we must decide, then, is whether Section

804 effectuates this resurrection of moribund securities fraud

pursuant to section 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”) and § 804

(b) (providing that actions may be “brought not later than the

earlier of” 2 years after discovery or five years after the

violation) (emphasis added).

9

For Lieberman, the relevant dates are: (1) the fraud

occurred on April 21, 1998, the date of the public offering, and

(2) he filed the original complaint on April 14, 2003.

For L-3, the relevant dates are: (1) the fraud occurred on

August 13, 1998 when the merger occurred, and (2) L-3 filed its

complaint on July 1, 2003.

-12-

claims. We now turn to its resolution.

B.

We begin our analysis with a clarification of the question

presented. Retroactive application of a new statute, such as

Section 804, occurs whenever the statute is applied to causes of

action already accrued prior to its enactment date. See Landgraf

v. USI Film Products, 511 U.S. 244, 265 (1994) (“The ‘principle

that the legal effect of conduct should ordinarily be assessed

under the law that existed when the conduct took place has

timeless and universal appeal.’”) (quoting Kaiser Aluminum &

Chem. Corp. v. Bonjorno, 494 U.S. 827, 855 (1990) (Scalia, J.,

concurring)). But that description, while accurate, is

nonetheless imprecise, at least for present purposes.

Section 804 of Sarbanes-Oxley may be applied

retroactively to two separate categories of cases. First, it is

possible to give Section 804 retroactive effect by applying it to

all claims that have accrued but have not yet expired as of the

enactment date (July 30, 2002). Second, it is equally possible to

apply Section 804 retroactively to revive already expired claims,

an entirely separate category of cases. The Eighth Circuit Court

of Appeals has explained the distinction as follows:

Providing that a statute of limitations should be “applied

retroactively” is a broad brush approach to what is

actually a more specific inquiry. Retroactive application

can reach two categories of cases: first, a group on which

the statute has not run at the time the statute is amended;

and second, cases on which the existing statute has run at

the time of amendment. The second group is affected not

only by questions of the retroactive application of the

statute, but also by the need to consider the question of

revival of barred claims.

-13-

Kansas Pub. Employees Ret. Sys. v. Reimer & Koger Assocs.,

Inc., 61 F.3d 608, 615 (8th Cir. 1995) (holding that amendment

to state limitations statute applied retroactively but did not

revive time-barred actions). The present appeals fall into the

second group of cases.

Here, we decide only whether Congress intended for

Section 804 to revive already expired securities fraud claims.

We do not decide the broader question, not presented by these

appeals, whether Congress intended Section 804 to have a

general retroactive effect. Though related, the two questions are

analytically distinct, requiring separate inquiries into

congressional intent. We are mindful of that distinction in

applying the well-established principles that govern our

retroactivity determination. See Martin v. Hadix, 527 U.S. 343,

362 (1999) (Scalia, J., concurring) (noting that the key question

is “retroactive in reference to what?”).

C.

The Supreme Court has frequently noted that there is a

“presumption against retroactive legislation [that] is deeply

rooted in our jurisprudence.” Landgraf, 511 U.S. at 265. The

presumption arises because “[e]lementary considerations of

fairness dictate that individuals should have an opportunity to

know what the law is and to conform their conduct

accordingly.” Id. Consequently, “congressional enactments . .

. will not be construed to have retroactive effect unless their

language requires this result.” Bowen v. Georgetown Univ.

Hosp., 488 U.S. 204, 208 (1988).

In Landgraf v. USI Film Products, the Supreme Court set

forth a two-part test for determining whether a particular statute

applies retroactively. 511 U.S. at 280. At the first stage, a court

must determine if Congress has expressly prescribed the

-14-

statute’s intended reach. Id. If Congress has done so, the

inquiry ends, and the court enforces the statute as it is written.

Id. If the statute is ambiguous or contains no express command,

a court must examine whether the statute would have an adverse

effect if it were held to be retroactive; that is to say, “whether it

would impair rights a party possessed when he acted, increase

a party’s liability for past conduct, or impose new duties with

respect to transactions already completed.” Id. If the statute

would do any of these things, it will not be applied retroactively,

“absent clear congressional intent” to the contrary. Id.10

10

As later distilled by this Court, Landgraf and its

progeny establish the following principles that courts must

employ in retroactivity determinations:

1. There is a strong presumption against applying

a statute in a manner that would attach new legal

consequences to events completed before the statute’s

enactment, i.e., a manner that would impair rights a party

possessed when he acted, increase a party’s liability for

past conduct, or impose new duties.

2. If Congress has focused on the issue, has

determined that the benefits of retroactivity outweigh the

potential for disruption or unfairness, and has provided

unambiguous evidence of its conclusion by directing that

retroactive effect be given, then, and only then, will the

presumption be overridden.

3. Consistent with these principles, normal rules

of statutory construction may apply to remove . . . the

possibility of retroactivity. Nothing short of an

unambiguous directive, however, will justify giving a

statute a retroactive effect. Thus, when normal rules of

statutory construction indicate that a statute is intended

to be applied in a manner involving no retroactive effect,

a Court need inquire no further. On the other hand, if

-15-

1. Congressional Intent

In accordance with Landgraf, we first look to the plain

language of Section 804 of Sarbanes-Oxley. Section 804(b)

states that the revised statute of limitations “shall apply to all

proceedings addressed by this section that are commenced on or

after the [July 30, 2002] date of enactment.” Lieberman and L-3

contend that this provision clearly expresses the temporal scope

of the statute, and that the statute applies to all claims, even

previously expired ones, filed after the date of enactment. That

contention is a plausible one, but it is just as plausible to read

the provision as applying to all claims that are still viable and

not previously extinguished, filed after the date of enactment.

Even assuming, without deciding, that Section 804(b) clearly

provides for retroactive application, it does not necessarily

follow that Section 804(b) thereby clearly provides for the

resurrection of moribund claims.

In addition, Lieberman and L-3 read Section 804(b) in

isolation. In our view, however, Section 804(b) must be

considered together with Section 804(c), which provides that

“[n]othing in this section shall create a new, private right of

action.” See U.S. v. Morton, 467 U.S. 822, 828 (1984) (“We do

not . . . construe statutory phrases in isolation; we read statutes

such construction suggests that a retroactive effect may

have been intended, the traditional presumption

nevertheless bars retroactive application unless an

unambiguous congressional directive is found.

In re Minarik, 166 F.3d 591, 597-98 (3d Cir. 1999) (considering

retroactive application of AEDPA’s gatekeeping provisions)

(citations and internal quotation marks omitted). Our decision

today is in accord with these principles.

-16-

as a whole.”). Section 804(c) creates, at a minimum, ambiguity

as to the temporal reach of the statute.

Application of Sarbanes-Oxley to Lieberman’s and L-3’s

claims, previously extinguished by the 3-year statute of repose,

would create new causes of actions. As the Supreme Court has

noted, “extending a statute of limitations after the pre-existing

period of limitations has expired impermissibly revives a

moribund cause of action.” Hughes Aircraft Co. v. United

States ex rel. Schumer, 520 U.S. 939, 950 (1997) (citing

Chenault v. United States Postal Serv., 37 F.3d 535, 539 (9th

Cir. 1994) (relying on Landgraf in holding “that a newly enacted

statute that lengthens the applicable statute of limitations may

not be applied retroactively to revive a plaintiff’s claim that was

otherwise barred under the old statutory scheme because to do

so would alter the substantive rights of a party and increase a

party’s liability”)); see also Enterprise Mortg., 391 F.3d at 407

(“Where a plaintiff is empowered by a new statute to bring a

cause of action that previously had no basis in law, a new cause

of action has, in some sense of the word, been created.”).

The salience of Section 804(c) is further magnified by the

fact that Lieberman’s and L-3’s claims had been extinguished by

a statute of repose, not merely by a statute of limitations. See P.

Stolz Family Partnership L.P. v. Daum, 355 F.3d 92, 102 (2d

Cir. 2004) (noting that “statutes of repose affect the availability

of the underlying right: That right is no longer available on the

expiration of the specified period of time”). The P. Stolz

decision distinguished a statute of repose from a statute of

limitations in the following manner:

In general, a statute of repose acts to define temporally

the right to initiate suit against a defendant after a

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legislatively determined time period. Unlike a statute of

limitations, a statute of repose is not a limitation of a

plaintiff’s remedy, but rather defines the right involved

in terms of the time allowed to bring suit. “[S]tatutes of

limitations bear on the availability of remedies and, as

such, are subject to equitable defenses . . ., the various

forms of tolling, and the potential application of the

discovery rule. In contrast, statutes of repose affect the

availability of the underlying right: That right is no

longer available on the expiration of the specified period

of time. In theory, at least, the legislative bar to

subsequent action is absolute, subject to legislatively

created exceptions . . . set forth in the statute of repose.

Id. at 102 (quoting Calvin W. Corman, Limitation of Actions, §

1.1, at 4-5 (1991)).

If, as the Supreme Court has suggested, extending a

statute of limitations after the pre-existing period of limitations

has expired would essentially create a new cause of action, see

Hughes Aircraft, 520 U.S. at 950, then a fortiori applying

Sarbanes-Oxley to claims extinguished by a period of repose

would unequivocally create a new cause of action. Compare

Chenault, 37 F.3d at 538-39 (declining to apply new statute

retroactively to revive a claim that would otherwise be stale

under old statute of limitations). Congress undoubtedly

possesses the powers to resurrect claims extinguished by a

statute of repose, no less than claims barred by a statute of

limitations, but it must manifest those powers in the clearest

possible terms. Section 804(b), particularly when considered

with Section 804(c), does not possess the requisite degree of

-18-

clarity and unambiguity to accomplish this purpose.11

Therefore, reading the statute as a whole, it is clear to us that the

language of Section 804 does not unambiguously revive

previously expired securities fraud claims.

It also bears mention that the legislative history of

Section 804 does not clearly evince the congressional intent that

Section 804 apply retroactively to revive expired securities fraud

claims. We find the Second Circuit’s analysis persuasive on this

score:

Section 804’s precursor, Section 4 of the proposed

Corporate and Criminal Fraud Accountability Act of

2002, S. No.2010, was introduced by Senator Patrick

Leahy in March 2002. Nothing in the Senate Committee

Report for the proposed Act indicates that the extension

of the statute of limitations was intended to revive

expired claims or that Congress was even considering

such a thing. See S.Rep. No. 107-146 (2002). Nor do the

statements Senator Leahy made during the Conference

Committee meeting on Sarbanes-Oxley, reflect any

11

Lieberman and L-3 argue, however, that “[s]ection

804(c) merely serves as Congress’ response to a concern that the

extended statute of limitations may have been perceived as

creating additional private substantive rights of action, that did

not previously exist under the federal securities laws.” App. (L-

3) Br. at 33. But those “cases where [the] Court has found truly

‘retroactive’ effect adequately authorized by a statute have

involved statutory language that was so clear it could sustain

only one interpretation.” Lindh v. Murphy, 521 U.S. 320, 328 n.

4 (1997). That does not describe the situation presented here,

particularly in light of Hughes Aircraft Co., supra, and

Chenault, supra.

-19-

intention to revive expired claims. See Conference

Report on Corporate Responsibility Legislation, 107th

Cong., July 24, 2002, reprinted in Federal News Service

(2002).

Enterp. Mortg., 391 F.3d at 408. In arguing to the contrary,

Lieberman and L-3 ignore the fact that congressional intent to

apply the statute retroactively is different from congressional

intent to revive expired claims.

We therefore conclude that there is no clear evidence that

Congress intended Section 804 to revive previously expired

claims.12

12

We pause to note that application of the distinction

between mere retroactivity and the revival of expired claims

limits the relevance of the retroactivity cases relied upon by

Lieberman and L-3. In Martin v. Hadix, 527 U.S. 343 (1999),

for example, the Supreme Court considered the temporal reach

of a provision of the Prison Litigation Reform Act of 1995. In

concluding that Congress had not expressly mandated the

temporal reach of the applicable statute, the Court noted that the

statute did not contain the following language that it suggested

in Landgraf might qualify as a clear statement of congressional

intent to apply a statute retroactively: “[T]he new provisions

shall apply to all proceedings pending on or commenced after

the date of enactment.’” Id. at 354 (quoting Landgraf, supra, at

260).

Lieberman and L-3 compare the language of Section 804

to the language quoted by the Martin court as unambiguously

prescribing the temporal reach of the statute. However, Martin

(or Landgraf) never addressed the question, presented here, of

whether a statute should be given retroactive effect to revive

expired claims.

The same holds true with respect to United States v. One

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“Piper” Aztec “F” De Luxe Model 250 PA 23 Aircraft Bearing

Serial No. XX-XXXXXXX (Piper Aztec), 321 F.3d 355 (3d Cir.

2003), where this Court interpreted the Civil Asset Forfeiture

Reform Act (“CAFRA”). Under CAFRA, in “any forfeiture

proceeding commenced on or after [August 23, 2000],” the

government must provide forfeiture under a different burden of

proof – preponderance of the evidence. Id. at 357. The Court

found that the language in the statute was clear and

unambiguous, rejecting the argument for retroactive application

to cases filed before but pending on the effective date. Id. at

357-58.

Focusing on this Court’s conclusion that CAFRA’s

language clearly prescribed the temporal reach of the statute,

Lieberman and L-3 argue that, in Section 804, which contains

substantially identical language, Congress has also clearly

prescribed the relevant temporal scope. Piper Aztec, however,

did not consider the revival of stale claims.

Lieberman and L-3 also rely on two cases which arguably

have interpreted similar statutory language to include previously

expired claims. See International Union of Elec., Radio and

Mach. Workers, AFL-CIO, Local 970 v. Robbins & Myers, Inc.,

429 U.S. 229, 242-43 (1976) (holding amendment to limitations

period for filing EEOC complaints applied to previously expired

but currently pending claim) and Alabama Dry Dock and

Shipbuilding Corp. v. Sowell, 933 F.2d 1561, 1563-65 (11th Cir.

1991) (interpreting statute’s instruction that it “shall apply both

with respect to claims filed after such date and to claims pending

on such date” to include previously expired claims); overruled

on other grounds, Bath Iron Works Corp. v. Director, Office of

Workers’ Compensation Programs, U.S. Dept. of Labor, 506

U.S. 153 (1993). As the Appellees point out, these cases did

not deal with claims extinguished by statutes of repose, as

opposed to statutes of limitations. Nor did either of these cases

deal with a provision similar to Section 804(c). In any event,

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2. Retroactive Effect

Having concluded that there is no clear evidence that

Congress intended for Section 804 to apply retroactively to

revive stale claims, it is necessary to ask whether retroactive

application of Section 804 to such claims would have

“retroactive effect,” i.e., “whether it would impair rights a party

possessed when he acted, increase a party’s liability for past

conduct, or impose new duties with respect to transactions

already completed.” Landgraf, 511 U.S. at 280. Our conclusion

that Section 804 may not be read to authorize the revival of

moribund claims inexorably leads to a further conclusion that

such a reading would have an impermissible retroactive effect.

Nevertheless, because the parties have briefed and argued

“retroactive effect,” we address this issue.

Lieberman and L-3 essentially argue that application of

Section 804 to their claims does not implicate the concerns

specified by the Supreme Court in Landgraf, as Section 804

affects only the procedural posture of their action, not

substantive rules. However, it is evident that the resurrection of

previously time-barred claims “increase[s] a party’s liability” by

abolishing a complete defense to suit. See Enterprise Mortg.,

391 F.3d at 409-10 (holding that “the resurrection of previously

time-barred claims has an impermissible retroactive effect”

under Landgraf ); see also Chenault, 37 F.3d at 539 (“In this

case the rights of the defendant would be altered and its liability

increased because it would be forced to defend an action that

was previously time-barred.”).

they both predate Hughes Aircraft. We thus find them

inapposite.

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Moreover, as previously stated, we are dealing with

claims extinguished by a statute of repose. Lieberman’s and L-

3’s claims would therefore affect substantive rights by creating

new causes of action. We can envision no greater retroactive

effect than this.13

We conclude that extending the amended statute of

limitations to revive expired securities fraud claims would have

an impermissible retroactive effect. In accordance with

Landgraf then, we decline to apply Section 804 to revive

Lieberman’s and L-3’s expired claims.

IV.

As noted, we are not the first circuit court to consider

whether Sarbanes-Oxley revives previously expired securities

fraud claims. Three of our sister courts of appeals have already

done so, and in each case, they have declined to apply Section

804 to such claims – as we do here. See Enterprise Mortg., 391

F.3d at 409-10; Foss, 394 F.3d at 542; In re: ADC Telecomm.,

Inc. Sec. Litig., 409 F.3d at 978.14

13

In a somewhat similar vein, Lieberman and L-3

contend that Section 804 does not impose new duties with

respect to past conduct, as the conduct in question was unlawful

both before and after the enactment of Sarbanes-Oxley. The

same argument was rejected by the Supreme Court in Hughes

Aircraft. See 520 U.S. at 947.

14

We are aware of the recent decision from the Eleventh

Circuit in Tello v. Dean Witter Reynolds, Inc., 410 F.3d 1275

(11th Cir. 2005). In that case, the district court determined that

Section 804 of Sarbanes-Oxley revived time-barred claims. The

Eleventh Circuit, however, remanded for further fact-finding,

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Accordingly, we will affirm the District Courts’

respective decisions dismissing the actions.

thus declining to reach the question whether Section 804 can be

applied retroactively to revive securities fraud claims. See id. at

1294 n.19.

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