Amicus Curiae Brief — Plaut v. Spendthrift Farm, Inc.

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P FILED |

9) JUL 21

No. 93-1121 1994

ENE HHE CLERK

Iu the Supreme Court of the United States

OCTOBER TERM, 1994

ED PLAUT, ET AL., PETITIONERS

Vv.

SPENDTHRIFT FARM, INC., ET AL.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

BRIEF FOR THE UNITED STATES

Drew S. Days, III

Solicitor General

FRANK W. HUNGER

Assistant Attorney General

SIMON M. LORNE EDWIN S. KNEEDLER

General Counsel Deputy Solicitor General

PAUL GONSON MICHAEL R. DREEBEN

Solicitor Assistant to the Solicitor

JACOB H. STILLMAN General

Associate General Counsel Barpara C. BIDDLE

LESLIE E. SMITH Scott R. MCINTOSH

Senior Litigation Counsel Attorneys

Securities and Exchange Department of Justice

Commission Washington, D.C. 20530

Washington, D.C. 20549 (202) 514-2217

QUESTION PRESENTED

The Court’s grant of certiorari is limited to the

following question:

Whether Section 27A(b) of the Securities Ex-

change Act of 1934, 15 U.S.C. 78aa-1, to the extent

that it requires reinstatement of Section 10(b) ac-

tions dismissed with prejudice pursuant to judg-

ments that became final prior to the enactment of

Section 27A(b), contravenes the separation-of-

powers doctrine or the Fifth Amendment Due Proc-

ess Clause of the United States Constitution.

(1)

TABLE OF CONTENTS

II ia. osciensictanedeicabibniessivadlbcbibnermniniadnnpiantdamentinataitian

Fa RE Ne I Lt cE RA 2s AOA So OSE EO

ECE A SE AI eC

Argument:

Section 27A(b) of the Securities Exchange Act of

ES ee ee

I. Section 27A(b) does not violate the separation

of powers under the Constitution .....................

A. Section 27A(b) is consistent with the prin-

ciples of Hayburn’s Case ....................0:cc-000-++

B. Section 27A(b) is consistent with broader

separation of powers principles —..................

C. Section 27A(b) does not conflict with the

historical understanding or later implemen-

I reins

II. Section 27A(b) does not violate the Due Process

Clause ........... SRE EASES IE ae eee nee

A. The Due Process Clause protects property

interests, not “vested rights” —......................

B. The “vested rights” doctrine, even if it has

continuing significance, does not invalidate

| REESE Ae open eee

a TR ae ET CR Rh RL ST ns

TABLE OF AUTHORITIES

Cases:

Adams Vv. Merrill Lynch Pierce Fenner & Smith,

888 F.2d 696 (10th Cir. 1989) 2.0.00 ee

Anixter Vv. Home-Stake Prod. Co., 977 F.2d 1533

(10th Cir. 1992), cert. denied, 113 S. Ct. 1841

ST De SE eee ae oe eee coe ae

Anwne

Cases—Continued: Page

Astoria Federal Savings & Loan Ass’n v. Soli-

mine, 601 US. 104 (1991) ..................................... 22

Axel Johnson Inc. Vv. Arthur Anderson & Co., 6

I 4

Bank of the United States v. Donnally, 33 U.S.

I allie 40

Berning V. A.G. Edwards & Sons, 990 F.2d 272

(7th Cir. 1998) ....... ee = — SE aaenenee 4-5

Block v. North Dakota, 461 U.S. 273 (1983) _........ 40

Board of Regents v. Roth, 408 U.S. 564 (1972)... 33

Braxton Vv. United States, 500 U.S. 344 (1991)...... 22

Calder Vv. Bull, 3 U.S. (3 Dall.) 386 (1798) —.......... 18, 44

Campbell v. Holt, 115 U.S. 620 (1885) 000000000. 32, 41

Carimi V. Royal Carribean Cruise Line, Inc., 959

kG LS ne 24

Carothers V. Rice, 633 F.2d 7 (6th Cir. 1980), cert.

denied, 450 U.S. 998 (1981) ................................. 2, 38

Chase Securities Corp. V. Donaldson, 325 U.S. 304

iT isceetcaretlinbdeaaeianariia die aan iactanienabeiaeemtenannes 41

Chicago & Southern Air Lines, Inc. v. Waterman

Steamship Corp., 333 U.S. 103 (1948) 00000000000... 30, 31

Commodity Futures Trading Commission V. Schor,

478 U.S. 888 (1966) ......................... 17-18, 21, 22, 23, 27

Concrete Pipe & Products of California, Inc. V.

Construction Laborers Pension Trust, 113 S. Ct.

EE Se 33

Connolly v. Pension Benefit Guaranty Corp., 475

a i lca 39

Cooke v. Manufactured Homes, Inc., 998 F.2d 1256

a ee 4

Cooperativa de Ahorro y Credito Aguada v. Kid-

der, Peabody & Co., 993 F.2d 269 (1st Cir.),

petition for cert. pending, No. 93-564 (filed

I a aie iain ttciaianracaiaernerces 4

District of Columbia v. Eslin, 183 U.S. 62 (1901).. 31

Dolan Vv. Tigard, No. 93-518 (June 24, 1994)........ 39

Duke Power Co. Vv. Carolina Environmental Study

Group, Inc., 488 U.S. 59 (1978) —......00..0 ee. 35

Durfee v. Duke, 375 U.S. 106 (19638) — 0. 21

Federal Housing Admin. Vv. Darlington, 358 U.S.

ETE oe ave en anne 36

ee ww ew —

Cases—Continued: Page

Federated Dep’t Stores, Inc. Vv. Moitie, 452 U.S. 394

ST asic iain ntihiailiaaainaaiaaatatatamabinintinneian 22

Fleming Vv. Rhodes, 331 U.S. 100 (1947) ............ 35, 36, 42

Freeborn Vv. Smith, 69 U.S. (2 Wall.) 160 (1864).. 15, 44

Freeland v. Williams, 131 U.S. 405 (1889) —......... 43, 44

General Motors Corp. Vv. Romein, 112 S. Ct. 1105

a ee ae Oe 34

Gondeck v. Pan American World Airways, Inc.,

Reever erere 36

Gordon Vv. United States, 69 U.S. (2 Wall.) 561

AR eee seer a ae ee 30, 31

Graham & Foster v. Goodcell, 282 U.S. 409 (1931) .. 40

Granfinanciera V. Nordberg, 492 U.S. 33 (1989)... 33

Gray V. First Winthrop Corp., 989 F.2d 1564 (9th

Gn: TEED -icicsiccadidatasiicacsitcteteennideinecibieimcnienaniinniniiiaabidiia 5

Hayburn’s Case, 2 U.S. (2 Dall.) 409 (1792) ......6, 9, 10,

11, 12, 13, 15, 16

Henderson Vv. Scientific-Atlanta, Inc., 971 F.2d

1567 (11th Cir. 1992), cert. denied, 114 S. Ct.

calcined ialiai a aiaietaliningimens 5

Hodges V. Snyder, 261 U.S. 600 (1923) —........0. 42

Hopkins v. Coen, 431 F.2d 1055 (6th Cir. 1970)... 24

INS v. Chadha, 462 U.S. 919 (1983) ...................... 29

International Union of Electrical Workers v. Rob-

bins & Myers, Inc., 429 U.S. 229 (1976) —.......... 41

James B. Beam Distilling Co. v. Georgia, 111 8. Ct.

I aati cache ticeattantbitainaeahl ” 3

Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gil-

berteon, 111 S. Ct. 2778 (1991) ........................... 2,3

Landgraf Vv. USI Film Products, 114 S. Ct. 1483

FES LS ae 18, 19, 33, 34, 42

Matarese V. LeFevre, 801 F.2d 98 (2d Cir. 1986),

cert. denied, 480 U.S. 908 (1987) ........................ 36

McCleskey v. Zant, 499 U.S. 467 (1991) ................ 22

McCullough Vv. Virginia, 172 U.S. 102 (1898) _...... 41, 42

Mistretta v. United States, 488 U.S. 361 (1989) .... 12, 18,

20, 23, 24

Morrison V. Olson, 487 U.S. 654 (1988) 0.000.000... 11

Musick, Peeler & Garrett v. Employers Ins. of

Wausau, 113 S. Ct. 2085 (1993) —..............-.......... 13

Cases—Continued:

Muskrat v. United States, 219 U.S. 346 (1911)......

National R.R. Passenger Corp. Vv. Atchison, T. &

SF. Ry., 470 U.S. 451 (1985) ...............................

Nixon V. Administrator of General Services, 433

ss A ae

Northern Pipeline Construction Co. Vv. Marathon

Pipe Line Co., 458 U.S. 50 (1982) _... eens

Paramino Lumber Co. v. Marshall, 309 U.S. 370

UN ia kat ee oe ee ae ae 42,

Pennsylvania V. Wheeling & Relmont Bridge Co.,

59 U.S. (18 How.) 421 (1855) .....0

Pension Benefit Guaranty Corp. Vv. R.A. Gray &

Co., 467 U.S. 717 (1984) _... pb SMe eas

Perez Vv. Fernandez, 220 U.S. 224 (1911)...

Pittston Co. Vv. Reeves, 263 F.2d 328 (7th Cir.

ARE SETS AS Role Sh: CLR Cg ea eRe

Pope V. United States, 323 U.S. 1 (1944)...

Printed Media Services, Inc. Vv. Solna Web, Inc., 11

F.3d 838 (8th Cir. 1993) ..... LL St

Renegotiation Board v. Bannercraft Clothing Co..,

415 U.S. 1 (1974) Senseisenichnabieiseaeliiamsaniemiaiaia st

Rivers v. Roadway Express, Inc., 114 S. Ct. 1510

RECN a ee Pe) © 13,

Robertson Vv. Seattle Audubon Society, 112 S. Ct.

I rs aepimaiadaae

Sampeyreac V. United States, 32 US. (7 Pet.)

I a ee ee Ss

Sanborn, In re, 148 U.S. 222 (1893)... a

Sanders Vv. United States, 373 U.S. 1 (1963)

Satterlee Vv. Matthewson, 27 U.S. (2 Pet.) 380

I dite a ee ids

Sibbach v. Wilson & Co., 312 U.S. 1 (1941)

Stephens Vv. Cherokee Nation, 174 U.S. 445 (1899) .

Stoll v. Gottlieb, 305 U.S. 165 (19388) 00000...

Thomas Vv. Union Carbide Agricultural Products

OG Ee

Thos. P. Gonzalez Corn. Vv. Conseio Nacional De

Production De Costa Rica, 614 F.2d 1247 (9th

SD vcticinteinces ETS AS SI OE a PINE

45, 46

17, 43

14, 34

19, 20

42-43,

VII

Cases—Continued: Page

United States v. Bodcaw Co., 440 U.S. 202 (1979)... 39

United States v. Brown, 381 U.S. 437 (1965) ....... 18-19

United States v. Carlton, No. 92-1941 (June 13,

TITIES <i ccccntesnsesennneninitinibatescestpianmsnenneiiasiastaiaiitasiiunteenaall 33, 34, 38

United States v. Ferreira, 54 U.S. (18 How.)

5 Fares SES Meco 12, 30, 31

United States v. Jefferson Elec. Mfg. Co., 291 U.S.

SIE : III ss: scnrsicicneenneeeremeesstsiisuminieemiieanes 31

United States v. Klein, 80 U.S. (18 Wall.) 128

EEE ees cane Oe nn EEL nO ne 19

United States v. Locke, 471 U.S. 84 (1985) ............ 35

United States v. O’Grady, 89 U.S. (22 Wall.) 641

ene oo ene ce ea ee 31

United States v. Sioux Nation of Indians, 448 U.S.

Fo en 26

United States v. Sperry Corp., 493 U.S. 52 (1989) .. 34

United States v. The Schooner Peggy, 5 U.S. (1

lS OS 17, 42

United States v. Waters, 133 U.S. 208 (1890) _...... 31

United States v. Wilson, 420 U.S. 332 (1975) ........ 21

United States v. Yale Todd (1794) ..............---....----. 12

Usery Vv. Turner Elkhorn Mining Co., 428 U.S. 1

RUTITITTIED .cciecuticgeasshemendaatatttuiadiainidiateiatidmssiinbibeniustiaimual 33-34, 35, 38

Watson V. Mercer, 33 U.S. (8 Pet.) 88 (1834) _...... 44

Wayman v. Southard, 23 U.S. (10 Wheat.) 1

ERE SEES A Ee Ree oneness are ee 24

Weaver Vv. Graham, 450 U.S. 24 (1981) —................ 18, 33

Williams v. Amroyd, 11 U.S. (7 Cranch) 423

STII int vehcienetesintleieteiinetieaeltataceh di hmieasnani hanes tlinad dibiabiatiatinn 22

Constitution, statutes, regulations, and rules:

U.S. Const.:

| ESS Ree ear oe eee eT ne oe 9

§8, Cl. 18 (Necessary and Proper

ESSERE eee ee eae cesce Omar 24

§ 9, Cl. 3 (Ex Posto Facto Clause) .......... 18

LL ee 42

8 EE eee passim

| 12

Art. IV, § 1 (Full Faith ond Credit Clause)... 21

Vul

Constitution, statutes, regulations,

and rules—Continued: Page

Ar sesteeiateeriatecchstatiestinshsttieniesenissniisbiribaionssasniadiitniie 39

Double Jeopardy Clause .......... aiid lasdeateaiiai 21

BUS PROCES CIMUBC ...........0000..cec-eccececceeceess passim

ES SNE ee 38, 39

I ae a Be ee 44

Act of Mar. 23, 1792, ch. 11, 1 Stat. 243 ......0..... 10

EE In See ye 10

FSA A: See eee ene CD 10

Act of Feb. 28, 1793, ch. 17, 1 Stat. 324 0000. 10

Federal Deposit Insurance Corporation Improve-

ment Act of 1991, Pub. L. No. 102-242, § 476,

Se iat aac eae cae 4

Securities Exchange Act of 1934, 15 U.S.C. 78a

et seq.:

| 8 | ! ' | See hapididaebeiibaliiiadaddheielins 27

Oe Se Pts GUID cencescentcnnsecsciiniinnntntstentusnismunien 2,4

§ 10(b), 15 U.S.C. 78j (b) (1988)... 2, 3, 4, 7, 13, 17,

19, 32, 38

§ 27A, 15 U.S.C. 78aa-1 (Supp. IV 1992)... 2, 4, 5,

17, 37, 38

§ 27A(a), 15 U.S.C. 78aa-1(a) (Supp. IV

EEO ae ae ee ee ae 4

§ 27A(b), 15 U.S.C. 78aa-1(b) (Supp. IV

Seas eereee Meee Re ee Oe passim

Soldiers’ and Sailors’ Civil Relief Act of 1940,

I a a 25

28 U.S.C. 1655 ................. Ne ee ee 25

I ees 21

I 23

28 U.S.C. 2107(a) (Supp. 1V 1992) cuaibaieeeeniel aD 5

EER PTE A Se a ee Ne 6

| eR a Re ee seer 6

17 C.F.R. 240.10b-5 (Rule 10b-5) —.00000 2, 25

Fed. R. Civ. P.:

| AE SR aC Rc 24

EEE RAR TAR RE COIL aueiaiel 8, 23, 24, 36

I i eee 6

Miscellaneous:

Paul M. Bator, Daniel J. Meltzer, Paul J. Mishkin

& David L. Shapiro, Hart & Wechsler’s The

Federal Courts and The Federal System (3d ed.

PLA Fe Ra VE SNS eee SA SR eee

137 Cong. Rec. S$18,623-S18,624 (daily ed. Nov.

SERS Ses A IS oe a ee

CRS Memorandum (Sept. 26, 1991), reprinted in

Securities Investor Protection Act of 1991:

Hearings on S. 1583 Before the Suecomm. on

Securities of the Senate Comm. on Banking,

Housing, and Urhan Affairs, 102d Cong., 1st

a aa ectne

Edward S. Corwin, Court Over Constitution

A eS Coe

The Federalist Papers:

No. 48 (James Madison) (C. Rossiter ed.

a ciel ictarhaialeatisiacac beatin tatetehetain sic neaceatiiaaaatitiadianes

No. 81 (Alexander Hamilton) (C. Rossiter

NRE SUSE SEES RS ERe een soanseee keen

Thomas Jefferson, Notes on the State of Virginia

i I, FU i eemeesetniean

Judicial Action by the Provincial Legislature of

Massachusetts, 15 Harv. L. Rev. 208 (1901)...

Maeva Marcus and Robert Teir, Hayburn’s Case:

A Misinterpretation of Precedent, 1988 Wis. L.

ST aa a a i

7 James Wm. Moore, Moore’s Federal Practice (2d

Securities Investor Protection Act of 1991: Hear-

ings on S. 15383 Before the Subcomm. on Securi-

ties of the Senate Comm. on Banking, Housing,

and Urban Affairs, 102d Cong., 1st Sess.

| RE ac a RE PEE EC SS ae

Securities Investors’ Legal Rights: Hearings on

H.R. 3185 Before the Subcomm., on Telecommu-

nications and Finance of the House Comm, on

Energy and Commerce, 102d Cong., 1st Sess.

aE 2

Gordon S. Wood, Creation of the American —

lie (1969) .. ssdabieninatbbietiiememniatemeniameneietbies

Page

io |

28-29

Miscellaneous—Continued:

13 Charles A. Wright, Arthur R. Miller & Edward

H. Cooper, Federal Practice & Procedure (2d

ed. 1984)

tte ee ee eee eee ee eee eee ee

Page

In the Supreme Court of the United States

OCTOBER TERM, 1994

No. 93-1121

ED PLAUT, ET AL., PETITIONERS

Vv.

SPENDTHRIFT FARM, INC., ET AL.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

BRIEF FOR THE UNITED STATES

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 3a-

30a) is reported at 1 F.3d 1487. The opinion of the

district court (Pet. App. 3la-39a) is reported at 789

F. Supp. 231.

JURISDICTION

The judgment of the court of appeals was entered

on August 3, 1993. The petitions for rehearing were

denied on October 14, 1993. Pet. App. la-2a. The

petition for a writ of certiorari was filed on Jan-

uary 11, 1994, and was granted on June 6, 1994.

(1)

The jurisdiction of this Court rests on 28 U.S.C.

1254(1).

STATUTORY PROVISION INVOLVED

Section 27A of the Securities Exchange Act of

1934, 15 U.S.C. 78aa-1 (Supp. IV 1992), is repro-

duced at App., infra, la.

STATEMENT

1. In November 1987, petitioners filed a private

securities fraud action in the United States District

Court for the Eastern District of Kentucky. The

complaint alleged claims arising under Section 10(b)

of the Securities Exchange Act of 1934, 15 U.S.C.

78j(b) (1988) (Exchange Act), and Securities and

Exchange Commission Rule 10b-5, 17 C.F.R. 240.-

10b-5, as well as pendent state law claims. Pet. App.

31la-32a.

When the suit was filed, the Exchange Act did not

contain a statute of limitations expressly applicable

to claims under Section 10(b) or Rule 10b-5. In the

absence of an express federal statute of limitations,

the Sixth Circuit, like most other courts of appeals,

had held that private Rule 10b-5 actions were sub-

ject to limitations periods borrowed from state law.

See, e.g., Carothers v. Rice, 633 F.2d 7, 8-9 (6th Cir.

1980), cert. denied, 450 U.S. 998 (1981).

On June 20, 1991, while petitioners’ action was

pending before the district court, this Court issued

its decision in Lampf, Pleva, Lipkind, Prupis &

Petigrow v. Gilbertson, 111 S. Ct. 2773 (1991).

Lampf held that private actions under Section 10(b)

are subject to a uniform federal limitations period

drawn from Section 9(e) of the Exchange Act, 15

U.S.C. 78i(e). Under Section 9(e), a suit may not

be brought more than one year after the fraud is dis-

covered or more than three years after it occurs. 111

S. Ct. at 2782. Having adopted that new limitations

period for Section 10(b) actions, the Court applied

the rule to the parties in Lampf itself. See id. at

2782; see also id. at 2785-2786 (O’Connor, J., dis-

senting).

On the same day that Lampf was decided, this

Court also issued its decision in James B. Beam Dis-

tilling Co. v. Georgia, 111 S. Ct. 2489 (1991). Un-

der Beam, if the Court in a civil case applies a new

interpretation of the law in the decision that an-

nounces it, courts must apply that interpretation of

law to all other pending cases, even if the change in

interpretation was not foreseeable and the parties

had reasonably relied on prior judicial interpreta-

tions. The effect of Beam was to make Lampf’s view

of the governing limitations period applicable to all

pending Section 10(b) actions, whether or not the

plaintiffs in those cases had relied on settled prece-

dents establishing longer limitations periods. In

August 1991, relying on Lampf and Beam, the dis-

trict court dismissed petitioners’ federal securities

claims as time-barred and entered final judgment

against petitioners. Petitioners did not appeal the

judgment,’ and the time for appeal expired in Sep-

tember 1991. Pet. App. 5a, 32a.

2. In December 1991, four months after the dis-

missal of the federal securities claims in this case,

Congress enacted legislation adding Section 27A, 15

U.S.C. 78aa-1 (Supp. IV 1992), to the Exchange

1 As the court of appeals noted, petitioners “did not file

what they believed (correctly) would have been a meritless

and indeed sanctionable appeal.” Pet. App. 5a.

Act. See Federal Deposit Insurance Corporation Im-

provement Act of 1991, Pub. L. No. 102-242, § 476,

105 Stat. 2387. Section 27A represents Congress’s

decision to protect victims of federal securities fraud

who filed suit within the limitations periods set by

pre-Lampf precedents, but whose suits were retro-

actively rendered untimely by the Court’s decisions

in Lampf and Beam.

Section 27A applies to private Section 10(b) ac-

tions that were commenced before June 20, 1991, the

date that Lampf and Beam were decided. With re-

spect to such actions, Section 27A(a) provides that

the limitations period “shall be the * * * period pro-

vided by the laws applicable in the jurisdiction * * *

as such laws existed on June 19, 1991,” the day be-

fore Lampf was decided. 15 U.S.C. T78aa-1(a)

(Supp. IV 1992). In jurisdictions (such as the Sixth

Circuit) that applied a longer limitations period be-

fore Lampf, Section 27A has the effect of changing

the governing law by substituting the longer limita-

tions period for the “l-and-3” period that Lampf bor-

rowed from Section 9(e) of the Exchange Act.

When Section 27A became law, many of the actions

that were rendered untimely under Lampf were still

pending in the federal system, either in the district

courts or on appeal. Those pending cases are ad-

dressed by Section 27A(a), which is not at issue in

this case.* Some suits, however, had been dismissed

2 The courts of appeals have uniformly sustained the con-

stitutionality of Section 27A(a). See Cooperativa de Ahorro

y Credito Aguada V. Kidder, Peabody & Co., 993 F.2d 269 (1st

Cir.), petition for cert. pending, No. 93-564 (filed Oct. 12,

1993); Axel Johnson Inc. Vv. Arthur Andersen & Co., 6 F.3d

78 (2d Cir. 1993); Cooke v. Manufactured Homes, Inc., 998

F.2d 1256 (4th Cir. 1993); Berning v. A.G. Edwards & Sons,

on the basis of Lampf and had not been appealed

within the 30-day time limit imposed by Congress on

private civil appeals. See 28 U.S.C. 2107 (1988 &

Supp. IV 1992). To account for such cases, Congress

enacted Section 27A(b), the provision at issue here.*

Section 27A(b) provides a mechanism for the re-

instatement of actions that had been “dismissed as

time barred” following this Court’s decision in

Lampf. 15 U.S.C. 78aa-1(b) (Supp. IV 1992). Dur-

ing a 60-day period beginning on December 19, 1991,

the date of Section 27A’s enactment, plaintiffs whose

suits had been the subject of such dismissals could

file motions seeking reinstatement. A district court

presented with a reinstatement motion under Section

27A(b) must consider the timeliness of the suit by

applying “the limitation period provided by the laws

applicable in the jurisdiction” before Lampf. 15

990 F.2d 272 (7th Cir. 1993); Gray Vv. First Winthrop Corp.,

989 F.2d 1564 (9th Cir. 1993); Anixter v. Home-Stake Prod.

Co., 977 F.2d 1533 (10th Cir. 1992), cert. denied, 113 S. Ct.

1841 (1993); Henderson v. Scientific-Atlanta, Inc., 971 F.2d

1567 (11th Cir. 1992), cert. denied, 114 S. Ct. 95 (1993).

3 Before enacting Section 27A, Congress obtained a memo-

randum from the American Law Division of the Congressional

Research Service (CRS) regarding the constitutional issues

raised by the bill that became Section 27A. See CRS Memo-

randum (Sept. 26, 1991), reprinted in Securities Investor

Protection Act of 1991: Hearings on S. 1533 Before the

Subcomm. on Securities of the Senate Comm. on Banking,

Housing, and Urban Affairs, 102d Cong., 1st Sess. 374-379

(1991). The CRS memorandum concluded that the bill would

survive review under the “rational basis test” and that the

bill’s effect on “final judicial orders” would not violate the

separation of powers doctrine, “the controlling consideration

appearing to be whether the congressional enactment is ‘out-

come determinative.’” CRS Memorandum, at 6.

U.S.C. 78aa-1(b) (Supp. IV 1992). If the court de-

termines that the suit is timely under that limita-

tions period, the court is required to reinstate the ac-

ion; if the court determines that the suit remains

untimely, the motion for reinstatement is denied.

3. In February 1992, within the prescribed 60-

day period, petitioners moved to reinstate their claims

under Section 27A(b). In April 1992, the district

court denied the reinstatement motion. The court ac-

knowledged that petitioners satisfied the statutory

requirements for reinstatement under subsection (b),

but held that subsection (b) violates the Constitu-

tion’s separation of powers and the Due Process

Clause of the Fifth Amendment. Pet. App. 33a-39a.

Petitioners appealed from the denial of their rein-

statement motion, and the United States intervened,

pursuant to 28 U.S.C. 2403, to defend the constitu-

tionality of subsection (b) of Section 27A.* The court

of appeals affirmed. Relying on Hayburn’s Case, 2

U.S. (2 Dall.) 409 (1792), the court held that Sec-

tion 27A(b) violates the separation of powers doc-

trine. Pet. App. 5a-27a. According to the court, Sec-

tion 27A(b)’s reopening of final judgments of federal

courts in cases involving private parties constitutes

an exercise by Congress of the judicial power. Pet.

* When the constitutionality of an Act of Congress “affect-

ing the public interest” is called into question in a federal

suit to which the United States is not a party, courts are

directed to “permit the United States to intervene for presen-

tation of evidence * * * and for argument on the question of

constitutionality.” 28 U.S.C. 2403(a). Because the United

States intervened as a party in the court of appeals in this

case, it is a respondent in this Court. Sup. Ct. R. 12.4. The

government is submitting this brief as a respondent in support

of petitioners’ position, pursuant to the Rules of this Court.

Ibid.

App. 18a-l4a, 27a. The court did not address. the

constitutionality of subsection (b) under the Due

Process Clause. Pet. App. 14a n.12.

SUMMARY OF ARGUMENT

I. Section 27A(b) of the Securities Exchange Act

of 1934 does not violate the separation of powers doc-

trine. While it has long been established that the

decisions of Article III courts are not subject to re-

view and reversal by another branch, and that Article

III courts may not be assigned the nonjudicial func-

tion of making advisory recommendations to other

Branches, Section 27A(b) infringes neither of those

constitutional concerns. Section 27A(b) does not

place the Legislative or Executive Branch in the role

of reviewing the merits of the decisions of federal

courts, and it does not reverse the holdings of federal

courts. Nor does Section 27A(b) convert judicial de-

cisions into nonbinding recommendations or advisory

opinions.

In Section 27A(b), Congress legislated a new stat-

ute of limitations for the class of securities fraud

cases that had been dismissed in light of this Court’s

adoption of a new (and in many cases shorter) fed-

eral limitations period for implied Section 10(b)

claims. Congress also provided a procedural vehicle

for reinstating dismissed cases in order for the new

law to be applied by the courts. Congress’s actions

were an exercise of legislative, not judicial, power.

And, under Section 27A(b), courts have only judicial

functions to perform: the application of law to fact

in particular cases and the rendering of judgments

on the merits.

Nothing in Section 27A(b) undermines the institu-

tional mission of the Article III courts to determine

facts and to interpret and apply the governing law

in particular cases. Nor does the reopening of the

class of judgments covered by Section -27A(b) con-

stitute a threat to judicial independence. Proce-

_durally, Section 27A(b) is analogous to Fed. R. Civ.

P. 60(b). Substantively, the provision is no different

in effect than the creation of a new federal cause of

action with a longer statute of limitations. Neither

history nor this Court’s decisions cast doubt on the

validity of legislation of that character. In sum, Sec-

tion 27A(b) respects the division between legislative

and judicial functions that the Constitution requires.

II. Section 27A(b) does not violate the Due Proc-

ess Clause. Under this Court’s jurisprudence, eco-

nomic legislation that impinges on property interests

is constitutional if it has a rational basis and serves

a legitimate government interest. The notion that

“vested rights” in a judicial judgment are immune

to government regulation finds no support in modern

cases, which recognize that Congress may affect prop-

erty interests through retroactive, as well as prospec-

tive, legislation. The Court has specifically rejected

the claim that rights represented by a judgment,

alone of all property rights, are exempt from rational

regulation. Here, Section 27A(b) is justified because

it is a reasonable measure to protect the interests of

victims of securities fraud whose cases retroactively

became untimely.

Even if Section 27A(b) were analyzed under older

decisions describing a “vested rights” doctrine, how-

ever, the provision is constitutional. If there were

any special protection for judgments under those

cases, a judgment such as the one here, which repre-

sents a finding only that a now-superseded limitations

period had run, would be the least worthy of consti-

tutional protection. In any event, this Court’s vested

rights cases have always acknowledged that a legisla-

ture may provide for further judicial review of a

judgment, even after the time for appeal has run.

And those cases further hold that it does not violate

due process for the legislature to provide new sub-

stantive rules of decision for application in the new

review proceedings. Those cases establish that the

concept of “vested rights” does not invalidate provi-

sions, like Section 27A(b), that provide for further

review of a claim, notwithstanding a prior judgment,

in light of new substantive law.

ARGUMENT

SECTION 27A(b) OF THE SECURITIES EXCHANGE

ACT OF 1934 IS CONSTITUTIONAL

I. SECTION 27A(b) DOES NOT VIOLATE THE SEPA-

RATION OF POWERS UNDER THE CONSTI-

TUTION

Section 27A(b) provides a mechanism for reinstate-

ment of a limited class of securities fraud cases

based on an application of a change in the governing

statute of limitations; it does not adjudicate the

timeliness of those actions under the revised law, and

it does not dictate the ultimate judgments to be ren-

dered. Nevertheless, relying on principles announced

in Hayburn’s Case, 2 U.S. (2 Dall.) 409 (1792), the

court of appeals concluded that Section 27A(b)

crosses the constitutional line that separates the leg-

islative power under Article I from the judicial

power under Article III. Section 27A(b), however,

does not raise the constitutional concerns considered

in Hayburn’s Case. Section 27A(b) neither involves

an attempted exercise of the judicial power by another

Branch of the government, nor requires the federal

courts to exercise the non-judicial function of render-

ing a decision subject to review in another Branch.

Nor does Section 27A(b) violate general separation

of powers principles, or the historical understanding

of Article III’s purposes.

A. Section 27A(b) Is Consistent With The Principles

Of Hayburn’s Case

The basic separation of powers principles invoked

by the court of appeals trace their source to Hay-

burn’s Case. The constitutional concerns expressed

in Hayburn’s Case, however, do not apply to Section

27A(b).

1. Hayburn’s Case involved the administration of

a pension statute for disabled Revolutionary War

veterans. Act of Mar. 23, 1792, ch. 11, 1 Stat. 243.

Under that statute, the circuit courts created by the

Judiciary Act of 1789 were directed to examine pen-

sion applicants to determine the nature and degree

of their disability, and to “transmit the result of

their inquiry” to the Secretary of War, if “in their

opinion, the applicant should be put on the pension

list.” §2, 1 Stat. 244. The Secretary of War, in

turn, was authorized to “withhold the name of such

applicant from the pension list, and make report

* * * to Congress,” in any case in which he had

“cause to suspect imposition or mistake.” § 4, 1 Stat.

244. The statute thus subjected a circuit court’s rul-

ing that an applicant should be put on the pension

list to revision and reversal by the Secretary of War.

Hayburn’s Case itself became moot before this

Court had occasion to address the constitutionality

of the pension statute. See 2 U.S. (2 Dall.) at 409-

410; Act of Feb. 28, 1793, ch. 17, 1 Stat. 324 (repeal-

ing challenged provision). Five of the six Justices of

this Court, however, expressed their views on the

statute in their capacity as circuit judges.’ Those

views, which are collected in the report of Hayburn’s

Case, 2 U.S. (2 Dall.) at 410-414, “have since been

taken to reflect a proper understanding of the role

of the Judiciary under the Constitution.” Morrison

v. Olson, 487 U.S. 654, 677 n.15 (1988).

All of the Justices who considered the statute

stated that the Constitution did not authorize review

and revision of the judgments of federal courts by

the Executive or Legislative Branch. Chief Justice

Jay and Justice Cushing stated that “by the Consti-

tution, neither the Secretary at War, nor any other

Executive officer, nor even the Legislature, are au-

thorized to sit as a court of errors on the judicial

acts or opinions of this court.” 2 U.S. (2 Dall.) at

410. Justices Wilson and Blair likewise concluded

that the “revision and controul” of judicial judgments

by the Executive and Legislative Branches conflicted

“with the independence of that judicial power which

is vested in the courts.” Jd. at 411. And Justice

Iredell concluded that “no decision of any court of

the United States can, under any circumstances * * *

agreeable to the Constitution, be liable to a rever-

sion, or even suspension, by the Legislature itself,

in whom no judicial power of any kind appears to

be vested, but the important one relative to impeach-

ments.” /d. at 413.

5‘ Circuit courts for the districts of New York, Pennsyl-

vania, and North Carolina addressed the validity of the law,

and each panel wrote letters to the President to express its

views. See Maeva Marcus and Robert Teir, Hayburn’s Case:

A Misinterpretation of Precedent, 1988 Wis. L. Rev. 527,

529-534.

The opinions in Hayburn’s Case reflect two related

Article III concerns. First, because the Constitution

vests “the judicial Power” exclusively in the federal

courts, neither the Executive Branch nor Congress

may act as a “court of errors,” Hayburn’s Case, 2

U.S. (2 Dall.) at 410, by reviewing the judgments

of Article III courts. Second, Article III precludes

the federal courts themselves from carrying out “any

duties, but such as are properly judicial * * *.” [bid.

Because “the judicial Power” reposed in the courts

by Article III, $ 1, contemplates the authority to find

facts and determine the rights of the parties under

the law, a statute like the one in Hayburn’s Case,

which called on Article III courts to make nonbind-

ing recommendations, requires the courts to play a

role that “is not judicial.”* Hayhwrn’s Case, 2 U.S.

(2 Dall.) at 410.

*In Hayburn’s Case, Chief Justice Jay and Justice Cushing

construed the statute as an invitation to federal judges to

“execute this act in the capacity of commissioners,’ 2 U.S. (2

Dall.) at 410, on the theory that individual members of the

federal judiciary may carry out non-Article III responsibili-

ties by accepting appointment to nonjudicial offices. The other

Justices declined to exercise the jurisdiction conferred by the

statute, id. at 411-414, and Chief Justice Jay and Justice

Cushing later concluded that the statute did not authorize

them to act as commissioners. See United States v. Ferreira,

54 U.S. (13 How.) 40, 49-50, 52-53 (1851) (discussing

Hayburn’s Case and the Court’s subsequent consideration of

the same statute in the unreported decision of United States

Vv. Yale Todd (1794)). While inviting or requiring Article III

judges to serve as commissioners might raise the question

whether such an assignment is consistent with Article III, cf.

Mistretta v. United States, 488 U.S. 361, 402-404 (1989), that

issue was not examined in Hayburn’s Case and is not involved

here.

2. The principles of independent judicial decision-

making voiced in Hayburn’s Case are not threatened

by Section 27A(b). Section 27A(b) neither places

another Branch as a “court of errors” in review of

decisions rendered by Article III courts, nor requires

federal courts to carry out functions that are not

“judicial” in character.

a. Section 27A(b) does not constitute an exercise

by Congress of the “judicial Power” conferred on the

Article III courts. In enacting Section 27A(b), Con-

gress did not “sit as a court of errors,” Hayburn’s

Case, 2 U.S. (2 Dall.) at 410, to review the validity

of judicial judgments under existing rules of decision.

Instead, Congress exercised its “legislative Powers”

by passing a law, in response to Lampf, that pre-

scribes a new rule of decision to be applied by the

urts. See Robertson vy. Seattle Audubon Society,

112 S. Ct. 1407 (1992); see also Rivers v. Roadway

Express, Inc., 114 S. Ct. 1510, 1515 (1994) (“Con-

gress may * * * decide to announce a new rule that

operates retroactively to govern the rights of parties

whose rights would otherwise be subject to the rule

announced in the judicial decision.”). Section

27A(b) changes the limitations periods for pre-

Lampf Section 10(b) cases, see Musick, Peeler &

Garrett v. Employers Ins. of Wausau, 113 §. Ct.

2085, 2089 (1993); provides a vehicle for applica-

tion of that law to dismissed cases; and leaves to the

courts the judicial functions of finding facts in par-

ticular cases, applying the new limitations periods

to those facts, and, in cases that are found timely,

to adjudicate the merits of the controversy. The

provision thus preserves for the courts “[t]he es-

sence of judicial decisionmaking—applying general

rules to particular situations[.]” Rivers v. Roadway

Express, Ine., 114 S. Ct. at 1519.

Section 27A(b) is fundamentally different from

the pension statute in Hayburn’s Case. That law

prescribed the legal standards to be applied by the

courts regarding eligibility for military pensions,

but authorized the Secretary of War to overturn the

decisions of federal courts on a case-by-case basis if

the Secretary had cause “to suspect imposition or

mistake” in the court’s determinations under exist-

ing law. Executive review of judicial action in par-

ticular cases involves impermissible oversight of the

decisions of the courts. Section 27A(b), in contrast,

does not involve any oversight of the way in which

courts have applied law to fact in particular cases.

The prior judgments are to be reopened because the

law has changed and courts applying the new law

have found the conditions for reopening satisfied, not

because Congress determined in individual cases that

the courts had applied prior law incorrectly.’

It would be one thing if Congress enacted a self-

executing statute that purported to set aside the

judgment of a court. Section 27A(b), however, does

™The court of appeals therefore erred in stating that

“Ti]f the statute which gave rise to Hayburn’s Case violated

the Constitution, then § 27A(b) cannot stand, a fortiori,”

because “[i]n enacting § 27A, Congress has not simply re-

served such power [to sit as a ‘court of errors’], as in Hay-

burn’s Case, but actually exercised it.” Pet. App. 13a-l4a.

Section 27A(b) does not represent the exercise by Congress

of powers belonging to a court of errors. Rather, Section

27A(b) provides a vehicle for courts to apply a change in the

governing law that is within Congress’s power to enact—a

statute of limitations. To designate the class of cases that

will be governed by a change in statutory law is a legislative,

not a judicial, function.

not of its own force reopen any judgments. Under

Section 27A(b), the plaintiff must file a motion with

the court invoking the legal standards provided by

Section 27A; the court then applies those standards.

A remedy that requires a court, on motion of a

party, to reopen a judgment in order to apply new

law does not usurp the judicial power. As this Court

has held, establishing a procedural avenue to have a

new legal standard applied to a case is a legislative,

not a “judicial,” function. Sampeyreac v. United

States, 32 U.S. (7 Pet.) 222, 239 (1833) (statute

authorizing court to “reverse and annul any prior

decree or adjudication” that is found to rest on

forged evidence, whether or not the prior judgment

was final and conclusive between the parties, “is in

no respect the exercise of judicial powers’’) ; see also

Freeborn v. Smith, 69 U.S. (2 Wall.) 160, 175

(1864) (act restoring lapsed right to Supreme Court

review of territorial court decisions, after the terri-

tory became a State, was “of a remedial character,

and * * * the peculiar subject[] of legislation. [It

was] not liable to the imputation of being [the] as-

sumption[] of judicial power.” ) .*

b. Section 27A(b) does not require federal courts

to play a role that “is not judicial.” Hayburn’s Case,

2 U.S. (2 Dall.) at 410. The task assigned to dis-

trict courts by Section 27A(b) is a fundamentally

judicial one—that of finding facts and applying a

* Sampeyreac and Freeborn involved prior judgments of

territorial courts. The Court’s conclusion, however, that the

statutes involved in those cases did not involve exercises of

judicial power by Congress, but constituted proper forms of

legislation, did not turn on the nature of the tribunal that

had rendered the judgments. Those holdings turned, rather,

on the nature of the statutes at issue.

legal rule (the statute of limitations) to a contro-

versy between the parties. The courts, not Congress,

determine the effect of the legal rule in the circum-

stances of a particular case. Nothing in Section

27A(b) precludes a court from denying reinstate-

ment in an individual case, if it determines either

that “the law[] applicable in the jurisdiction” before

Lampf provides the same limitations period adopted

in Lampf, or that the suit was untimely even under

a different limitations period. And, if the court finds

the suit timely, Section 27A(b) has no effect on the

way a court will resolve the merits of the securities

fraud claim itself. The ultimate judgment to be

rendered remains within the control of the judiciary.

Section 27A(b) does, of course, require courts to

reinstate cases that have been dismissed, if they have

first determined that the suits are timely under the

new limitations period prescribed by Congress. But

a law providing a reopening remedy is not analogous

to a law requiring the courts to render nonbinding

determinations, as in Hayburn’s Case. The prior de-

termination of the district court in this case was that

the statute of limitations, as decreed by Lampf,

barred this action. Congress has not “reviewed”’ that

conclusion under the rule of Lampf, or “reversed”

the district court’s holding. Rather, Congress has

provided a procedure for the district court to rein-

state the action if the new statute of limitations is

satisfied, and then to adjudicate the case on the

merits. 15 U.S.C. 78aa-1(b) (Supp. IV 1992).

In concluding that the statute in Hayburn’s Case

required the courts to assume a role that “is not ju-

dicial,” 2 U.S. (2 Dall.) at 410, Chief Justice Jay

articulated concerns that resemble those underlying

the prohibition against advisory opinions. See Musk-

rat v. United States, 219 U.S. 346, 352-353, 361-362

(1911). Federal courts cannot be required to give

“an expression of opinion” on an issue of law, when

the judgment will not affect the rights of parties.

Id. at 362. Section 27A(b), however, does not con-

vert the judgments rendered in the underlying Sec-

tion 10(b) cases into advisory opinions. See 13

Charles A. Wright, Arthur R. Miller & Edward H.

Cooper, Federal Practice and Procedure § 3529.1, at

302, 306-307 (2d ed. 1984) (distinguishing the jus-

ticiability issues raised in cases such as Hayburn’s

Case from “cases dealing with the power of Congress

to upset the results of final judicial judgments by

legislation adopted after judgment’). Those judg-

ments finally determined the application of prior

limitations law to the cases at hand. Section 27A

changes that law, and that change is the reason for

reopening the judgment. A prior judgment is not

rendered “advisory” in the Article III sense when a

court is obligated to revise it as a consequence of

legislation enacted pendente lite, see United States v.

The Schooner Peggy, 5 U.S. (1 Cranch) 103 (1801),

and it is not rendered “advisory” when the parties’

legal rights are altered by legislation enacted after

the litigation has concluded, see Pennsylvania v.

Wheeling & Belmont Bridge Co., 59 U.S. (18 How.)

421, 431 (1855).

B. Section 27A(b) Is Consistent With Broader Sepa-

ration Of Powers Principles

Section 27A(b) is also constitutional when con-

sidered in light of the broader purposes of the Con-

stitution’s separation of powers. Because Article III

protects the independence of courts and the right of

litigants to politically independent adjudicators, Com-

modity Futures Trading Commission v. Schor, 478

U.S. 833, 848, 850 (1986), this Court has guarded

against a “provision of law [that] impermissibly

threatens the institutional integrity of the Judicial

Branch.” Mistretta v. United States, 488 U.S. 361,

383 (1989) (citations and internal quotation marks

omitted). Section 27A(b) does not threaten the in-

dependence or institutional integrity of the Judicial

Branch, because it does not constitute an impermissi-

ble intrusion on the courts’ power to decide cases or

to enter judgments.

1. The Constitution contains a variety of restric-

tions that prevent Congress from engaging in adju-

dicatory functions assigned to the Article III courts.

The prohibitions against “ex post facto Law[s]”®

and “Bill[s] of Attainder” * prevent Congress from

* Art. I, §9, Cl. 3. The Ex Post Facto Clause, applicable

solely to criminal laws, Calder v. Bull, 3 U.S. 3 (3 Dall.) 386

(1798), protects against “arbitrary and potentially vindictive

legislation,” Weaver v. Graham, 450 U.S. 24, 29 (1981), which

may represent “the use of the political process to punish or

characterize past conduct of private citizens.” Landgraf v.

USI Film Products, 114 S. Ct. 1483, 1498 n.20 (1994). The

Clause thus represents a judgment that “[i]t is the judicial

system, rather than the legislative process, that is best

equipped to identify past wrongdoers[.]” Ibid.

1 Art. I, § 9, Cl. 3. The prohibition against bills of attainder

bars “legislative Acts inflicting punishment.” Nixon v. Ad-

ministrator of General Services, 433 U.S. 425, 474 (1977).

“Just as Art. III confines the Judiciary to the task of adjudi-

cating concrete ‘cases or controversies,’ so too the Bill of

Attainder Clause was found to ‘reflect . . . the Framers’ belief

that the Legislative Branch is not so well suited as politically

independent judges and juries to the task of ruling upon the

blameworthiness of, and levying appropriate punishment

upon, specific persons.’” Id. at 469, quoting United States v.

“singling out disfavored persons and meting out

summary punishment for past conduct.” Landgraf v.

USI Film Products, 114 S. Ct. 1483, 1497 (1994).”

The principles of United States v. Klein, 80 U.S. (18

Wall.) 128, 146-147 (1872), prevent Congress, in

certain contexts, from directing a decision in a pend-

ing case.” And Congress may not assign certain ad-

Brown, 381 U.S. 487, 445 (1965). As Brown recognized, the

Clause is thus an aspect of the “separation of powers.” 381

U.S. at 442-443.

11 “The linking of bills of attainder and ex post facto laws

is explained by the fact that a legislative denunciation and

condemnation of an individual often acted to impose retroac-

tive punishment.” Nizon v. Administrator of General Serv-

ices, 433 U.S. 425, 468 n.30 (1977).

122In Klein, suit was brought to recover private property

sold by the United States during the Civil War. Proof that

the property owner had not aided the rebellion was made by

showing that he had received a Presidential pardon. Congress

then enacted a law providing that the receipt of the pardon

was proof of disloyalty, rather than loyalty, and that this

Court was required to dismiss any appeal in a case in which

the plaintiff had established his loyalty through a pardon.

This Court held that the law’s limitation on the Supreme

Court’s jurisdiction and Congress’s regulation of the effect

of the Presidential pardon violated the Constitution. 80 U.S.

(13 Wall.) at 146-148. There is considerable question about

the scope and rationale of Klein. See Paul M. Bator, Paul

J. Mishkin, Daniel J. Meltzer & David L. Shapiro, Hart &

Wechsler’s The Federal Courts and The Federal System, 369

& n.4 (3d ed. 1988). Even if the case were read broadly,

however, as invalidating a statutory rule of decision requiring

a court to decide a pending case in a particular way, but see

Robertson v. Seattle Audubon Society, supra; Pope v. United

States, 323 U.S. 1, 8-10 (1944), Klein would be inapplicable

here. Section 27A(b) does not dictate the outcome of any

particular Section 10(b) case, nor does it require courts to

judicatory functions to non-Article III decision-

makers. See, e.g., Northern Pipeline Construction

Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982).

Those protections are not violated by Section 27A(b).

Section 27A(b) does not single out particular per-

sons for punishment. It does not dictate the decision

on the merits of a particular case. And it does not

transfer responsibility for deciding cases to another

Branch of the government.

The court of appeals stated that “if Congress may

by legislation reverse or vacate the final judgments

of Federal courts, then Congress has rendered the

whole function of the judiciary futile: whether ‘the

whole power of one department is exercised by the

hands which possess the whole power of another de-

partment,’ Mistretta, 488 U.S. at 381 (quoting The

Federalist No. 47 (Madison) ) is left subject only to

the self-restraint of the legislature.” Pet. App. 25a.

Section 27A(b), however, does not usurp even part

of a power that the judiciary exclusively possesses,

let alone the “whole power of another department.”

The courts retain their fact-finding and law-applica-

tion roles under Section 27A(b); Congress has sim-

make particular findings of fact or applications of law. Sec-

tion 27A(b) is more general in operation that the law

at issue in Robertson v. Seattle Audubon Society, supra,

which was directed at only two pending cases. The Court’s

holding in Robertson, 112 S. Ct. at 1414—that when Congress

“amend[s] applicable law,” its action does not implicate the

principles underlying Klein—applies here as well. The court

of appeals itself recognized that its objection to Section

27A(b) was that it “forces the courts to rule again on cases

they have dismissed with prejudice, not that it forces the

courts to rule on those cases (or any cases) in a particular

way.” Pet. App. 2la n.14.

ply specified the class of cases to which that law

applies.

2. Nor does Section 27A(b) have “practical con-

sequences” that raise constitutional difficulties “in

light of the larger concerns that underlie Article

III.” Commodity Futures Trading Commission v.

Schor, 478 U.S. at 857. The Constitution does not

generally address the nature and degree of finality

that a federal judgment will have.” It might be sug-

gested that an Act of Congress totally abrogating the

finality of all federal court judgments would raise

Article III concerns. Such a law might be vulnerable

to the objection that it undermined the judiciary’s

institutional mission as a forum for decision of cases

and controversies, and, at the same time, it is diffi-

cult to imagine a sufficient legislative justification

for such a law. Cf. Schor, 478 U.S. at 885. Section

27A(b), however, does not work a wholesale aboli-

"The Double Jeopardy Clause of the Fifth Amendment,

perhaps the Constitution’s only specific requirement of final-

ity with respect to a judgment, prevents Congress from re-

quiring multiple trials for the same criminal offense after a

defendant’s prior acquittal or conviction. Insofar as that pro-

vision protects judgments per se, its protection is confined to

the criminal sphere. See, e.g., United States v. Wilson, 420

U.S. 332, 343 (1975). The Full Faith and Credit Clause,

Article TV, $1, requires “every State to give to a judgment

at least the res judicata effect which the judgment would be

accorded in the State which rendered it.” Durfee v. Duke,

375 U.S. 106, 109 (1963). That Clause does not impose inde-

pendent standards of finality for judgments. And it does not

apply to federal judgments at all; those judgments are ad-

dressed by 28 U.S.C. 1738. See Stoll v. Gottlieb, 305 U.S. 165,

170 (1938).

tion of the finality of judgments,“ and it is sup-

ported by a substantial legislative justification.”

Section 27A(b) defines a discrete class of cases

consisting of securities fraud actions that were

deemed timely under pre-Lampf limitations law, that

were dismissed as untimely solely on the basis of

™% Nor does it abolish the common-law principle of res

judicata that a final judgment is generally not subject to

reopening based on subsequent judicial decisions. See Feder-

ated Dep’t Stores, Inc. Vv. Moitie, 452 U.S. 394 (1981).

1° This Court has described res judicata as a “common-law

doctrine[ ],” and has stated that “[c]ourts do not, of course,

have free rein to impose rules of preclusion, as a matter of

policy, when the interpretation of a statute is at hand.”

Astoria Federal Savings & Loan Ass’n V. Solimino, 501 U.S.

104, 107-108 (1991); see also Williams v. Amroyd, 11 U.S.

(7 Cranch) 423, 433-434 (1813). Moreover, there are con-

texts in which federal courts themselves have found that res

judicata principles have no force in protecting judgments.

See McCleskey v. Zant, 499 U.S. 467, 479-488 (1991); Sanders

v. United States, 373 U.S. 1, 7 (1963) (“[a]t common law, the

denial by a court or judge of an application for habeas corpus

was not res judicata”; applying that principle under 28 U.S.C.

2255); see also Braxton v. United States, 500 U.S. 344, 348

(1991) (Congress delegated to the Sentencing Commission the

power “to decide whether and to what extent its amendments

reducing sentences [presumably covered by valid final judg-

ments] will be given retroactive effect”). Whether or not any

constitutional problems would be raised by a total abolition

of res judicata in the ongoing adjudication of cases in the

federal judicial system, the limited effect on finality occasioned

by Section 27A(b) does not raise such problems. See Com-

modity Futures Trading Commission v. Schor, 478 U.S. at

852 (while “wholesale importation of concepts of pendent or

ancillary jurisdiction into the agency context may create

greater constitutional difficulties” under Article III, the Court

will not require an “absolute prohibition * * * out of fear of

where some hypothetical ‘slippery slope’ may deposit us”).

ee ee ae Sa

Lampf, and that went to final judgment because the

plaintiffs did not file “meritless and indeed sanction-

able” appeals. Pet. App. 5a. Congress’s determina-

tion that those plaintiffs should have an opportunity

to litigate the merits of their complaints in federal

court impairs neither the “independent” judiciary

nor the right of litigants to a judge free from “poten-

tial domination by other branches of government.”

Commodity Futures Trading Commission vy. Schor,

478 U.S. at 848. This is true whether Section

27A(b) is regarded as a modification of procedure

or as the creation of new substantive rights.

a. As a matter of procedure, Congress’s provision

for the reopening of certain judgments because of a

change in the limitations period is a small variation

on current practice. Rule 60(b) of the Federal Rules

of Civil Procedure embodies longstanding principles

providing for the setting aside of the final judgment

of a federal district court in appropriate circum-

stances. See 7 James Wm. Moore, Moore’s Federal

Practice {J 60.09-60.27, at 60-65 to 60-306 (2d ed.

1993); see also page 36, infra. While Rule 60(b)

was adopted by this Court (pursuant to 28 U.S.C.

2072-2074), Article III does not bar Congress from

identifying additional circumstances requiring re-

opening of a judgment when, in Congress’s view, con-

siderations akin to those that animated Rule 60(b)

and its historical antecedents warrant that relief.

“[JJudicial rulemaking” comes within a “twilight

area” in the Constitution’s allocation of powers

among the three Branches, and this Court has long

upheld congressional delegations of rulemaking power

to federal courts. Mistretta v. United States, 488

U.S. at 386-387. The promulgation of court rules,

however, “is nonjudicial in the sense that rules im-

pose standards of general application divorced from

the individual fact situation which ordinarily forms

the predicate for judicial action.” Jd. at 392. Accord-

ingly, Congress, acting pursuant to its power to es-

tablish inferior federal courts (Art. I, § 8, Cl. 9)

and the Necessary and Proper Clause (Art. I, § 8,

Cl. 18), “has undoubted power to regulate the prac-

tice and procedure of federal courts.” Sibbach v.

Wilson & Co., 312 U.S. 1, 9 (1941); Wayman v.

Southard, 23 U.S. (10 Wheat.) 1, 22 (1825).

When Congress exercises its power to prescribe

rules of judicial procedure, Article III does not pre-

vent Congress from requiring, rather than simply

permitting, the reopening of a judgment in specified

circumstances. Indeed, when the legal standards are

settled, Rule 60(b) itself imposes a non-discretionary

duty on district courts to reopen particular judg-

ments.” A provision requiring the reopening of final

judgments in certain in rem actions has also long

%6 See Printed Media Services, Inc. Vv. Solna Web, Inc., 11

F.3d 838, 842-843 (8th Cir. 1993) (judgment void for failure

to serve party); Carimi v. Royal Carribean Cruise Line, Inc.,

959 F.2d 1344 (5th Cir. 1992) (same); Thos. P. Gonzalez

Corp. Vv. Consejo Nacional De Produccion De Costa Rica, 614

F.2d 1247, 1256 (9th Cir. 1980) (default judgment against

defendant protected by sovereign immunity); Hopkins v.

Coen, 431 F.2d 1055, 1059 (6th Cir. 1970) (abuse of discre-

tion to deny defendants’ Rule 60(b) motion “where verdicts

in the same case are inconsistent on their faces, indicating

that the jury was either in a state of confusion or abused its

power’); Pittston Co. v. Reeves, 263 F.2d 328 (7th Cir. 1959)

(abuse of discretion to deny motion where dismissal was en-

tered without notice to all members of plaintiff class as re-

quired by Fed. R. Civ. P. 23(c)).

Qe en AP Rates ee

been part of federal statutory law.’ While Congress

may not dictate the outcome of a particular case by

specifying the facts to be found or by actually apply-

ing a legal rule to those facts, it may establish a

procedure for the reopening of a judgment for fur-

ther review within the court system without trans-

gressing any constitutionally grounded concept of

finality.

b. As a matter of substance, Section 27A(b) is no

different in effect than the creation of a new right of

action that duplicates the elements of Rule 10b-5, but

that contains a new, and longer, statute of limita-

tions.“ Such a statute would raise no Article III

concerns. See Pope v. United States, 323 U.S. 1, 9-10

(1944) (rejecting Article III challenge to statute

creating new governmental obligation to pay claims,

despite prior final judgment rejecting those claims).

17 See 28 U.S.C. 1655 (providing that defendant who was

not personally served (but was served by publication) in an

action in rem may, within one year after final judgment,

“enter his appearance, and thereupon the court shall set aside

the judgment and permit such defendant to plead on payment

of such costs as the court deems just”); Perez v. Fernandez,

220 U.S. 224 (1911) (enforcing predecessor of Section 1655

without any suggestion that the statutory mandate that an

otherwise final judgment be set aside violates the Constitu-

tion). Another example of a legislative reopening provision

is contained in the Soldiers’ and Sailors’ Civil Relief Act of

1940, 50 U.S.C. App. 520(4).

* This Court, in Article ITI challenges, has often “[1]ook[ed]

beyond form to the substance of what [a provision] accom-

plishes.” Thomas v. Union Carbide Agricultural Products

Co., 473 U.S. 568, 589 (1985); see also Pope v. United States,

323 U.S. 1, 9 (1944) (rejecting claim that “inartistically

drawn” statute violated Article III, where its “purpose and

effect” were permissible) .

Congress is free to determine that the interest in

having a claim heard and decided on the merits out-

weighs the equities and practical considerations that

normally favor repose. And with the defense of res

judicata removed from the case, the courts cannot

decline to hear a case by invoking Article III. See

United States v. Sioux Nation of Indians, 448 U.S.

371, 406-407 (1980).

In Sioux Nation, this Court rejected a separation

of powers attack on a statute requiring the Court of

Claims to entertain, “without regard to the defense

of res judicata,” an application by the Sioux Nation

for further review of a takings claim that had previ-

ously gone to final judgment in favor of the United

States. 448 U.S. at 391. The Court explained:

When Congress enacted the amendment direct-

ing the Court of Claims to review the merits of

the Black Hills [takings] claim, it neither brought

into question the finality of that court’s earlier

judgments, nor interfered with that court’s judi-

cial function in deciding the merits of the claim.

When the Sioux returned to the Court of Claims

following passage of the amendment, they were

there in pursuit of judicial enforcement of a new

legal right. Congress had not “reversed” the

Court of Claims’ holding that the claim was

barred by res judicata, nor, for that matter, had

it reviewed the 1942 decision rejecting the Sioux’

claim on the merits.

Id. at 406-407.

Contrary to the view of the court of appeals, the

logic of Sioux Nation is not limited to cases in which

Congress, in the exercise of its power to pay the Na-

tion’s debts, waives the res judicata effect of a judg-

ment rejecting a claim against the United States.

Pet. App. 20a, 22a-23a. If res judicata were com-

pelled by Article III to safeguard the structural inde-

pendence of the courts, the doctrine would not be

subject to waiver by any party litigant or in the

exercise of any constitutional power. See Commodity

Futures Trading Commission vy. Schor, 478 U.S. at

850-851 (parties cannot waive the structural prin-

ciple of Article III that “prevent[s] the encroachment

or aggrandizement of one branch at the expense of

the other,” because those “limitations serve institu-

tional interests [of the courts] that the parties can-

not be expected to protect”). The principles of Arti-

cle III jurisprudence expressed in Sioux Nation are

therefore applicable whenever Congress lifts the bar

of res judicata in the exercise of a constitutionally

granted power, such as the power to regulate com-

merce that is at issue here. See 15 U.S.C. 78b.

The reasoning of Sioux Nation thus establishes

that a statute creating “a new legal right” to sue for

securities fraud, with an extended statute of limita-

tions, would not infringe the Article III power of the

courts to render final judgments. The impact on the

judicial system of adjudicating a hypothetical “new

cause of action,” however, is no different in substance

from the impact of Section 27A(b)—except that a

statute requiring the filing of new complaints to rein-

stitute the actions would have been more cumbersome.

Because the courts’ judicial role is not undermined

by a congressional decision to authorize litigation of

a “new claim” that was previously concluded by a

judgment, Congress’s choice to employ the procedural

route of providing for reinstatement of a previously

dismissed case does not violate Article ITI.

C. Section 27A(b) Does Not Conflict With The His-

torical Understanding Or Later Implementation Of

Article Il

The court of appeals believed that this Nation’s

experience with legislative usurpation of judicial

powers in the eighteenth century leads to an under-

standing of Article III under which Section 27A(b)

is invalid. Pet. App. 7a-10a. The historical under-

pinnings of Article III, however, do not suggest the

existence of an overriding “finality” principle that

absolutely precludes Congress from providing for re-

opening of a judgment for further review under a

new legal rule. Nor does the interpretation of Hay-

burn’s Case in decisions of this Court suggest the

existence of such a principle.

1. The backdrop to the adoption of Article III was

the exercise by colonial legislatures of powers that

were understood to be judicial in nature. “In 1787

judicial interpretation of the law was often not final

even in the decision of cases, it being common prac-

tice for the legislature, in the exercise of a species of

equity jurisdiction, to reverse decisions of the ordi-

nary courts, to order cases retried or appeals granted,

and even to adjudicate controveries itself.” Edward

S. Corwin, Court Over Constitution 13-14 (1938);

see Gordon S. Wood, Creation of the American Re-

public 154-155 (1969); Judicial Action by the

Provincial Legislature of Massachusetts, 15 Harv. L.

19 “The assemblies constantly heard private petitions, which

often were only the complaints of one individual or group

against another, and made final judgments on these com-

plaints. They continually tried cases in equity, occasionally

extended temporary equity power to some common law court

for a select purpose, and often granted appeals, new trials,

and other kinds of relief.” Gordon S. Wood, supra, at 154-155.

Rev. 208 (1901) (collecting examples of the 1708-

1709 Massachusetts Legislature acting in a judicial

capacity in particular cases). Madison singled out

for criticism the practice of the Virginia and Penn-

sylvania legislatures rendering decision in specific

cases, at the expense of the prerogatives of the courts.

See James Madison, The Federalist Papers, No. 48,

at 311 (C. Rossiter ed. 1961) (quoting Thomas

Jefferson, Notes on the State of Virginia 120 (W.

Peden ed. 1955) ; emphasis added by Madison) ) (Vir-

ginia legislature “decided rights which should have

been left to judiciary controversy’) ; id. at 312 (not-

ing criticism by Council of Censors in Pennsylvania

that “cases belonging to the judiciary department.

frequently [have been] drawn within legislative

cognizance and determination”).* Justice Powell has

noted that, before the adoption of the Constitution,

the rights of individuals were often determined in

particular controversies through “tri! by a legisla-

ture.” INS v. Chadha, 462 U.S. 919, 961-962 (1983)

(Powell, J., concurring). “[T]o prevent the recur-

rence of such abuses,” Justice Powell concluded, “the

Framers vested the executive, legislative, and judicial

powers in separate branches.” Jd. at 962.

The independent Judicial Branch created by the

Constitution was intended to free the federal courts

from the sort of congressional or executive interfer-

ence that had undermined pre-constitutional judges.

*° Alexander Hamilton also expressed the view that the

reversal of a judicial judgment in an individual cas> was not

a proper legislative function. See Alexander Hamilton, The

Federalist Papers, No. 81, at 484 (C. Rossiter ed. 1961) (em-

phasis added) (“A legislature, without exceeding its province,

cannot reverse a determination once made in a particular case;

though it may prescribe a new rule for future cases.”’).

The historical examples that excited the Framers’

attention, however, were far more intrusive and

quite different from Section 27A(b), because they

were indistinguishable from the powers exercised by

the courts themselves. Section 27A(b), in contrast

to those exercises, does not withdraw a specific case

from the courts, require a trial to be conducted be-

fore the legislature, or reverse a judicial determina-

tion based on a disagreement about the underlying

facts or the application of existing law to those facts.

The purpose and effect of the provision is to change

the law and to permit, notwithstanding a prior judg-

ment, the enforcement of substantive legal! rights.

Nothing in the history of Article III suggests that

the Framers intended to prohibit legislation having

that sort of impact on a judgment.

2. Because Section 27A(b) does not threaten the

separation of powers principles articulated in Hay-

burn’s Case, it is not surprising that none of this

Court’s decisions applying those principles casts

doubt on the constitutionality of Section 27A(b). The

statutes at issue in most of those cases, unlike the

one in Hayburn’s Case itself, provided for executive

or legislative review of decisions of non-Article III

tribunals. See United States v. Ferreira, 54 U.S. (13

How.) 40 (1851); Gordon v. United States, 69 U.S.

(2 Wall.) 561 (1864) (opinion of Chief Justice

Taney); In re Sanborn, 148 U.S. 222 (1893); Chi-

cago & Southern Air Lines, Inc. v. Waterman Steam-

ship Corp., 333 U.S. 103 (1948). When presented

with disputes arising under such statutes, this Court

has regarded the exercise of executive or legislative

review (as well as the initial assignment of adjudica-

tory tasks to non-Article III decisionmakers) as

valid, and has held only that the availability of

executive or legislative review precludes judicial re-

view by Article III courts.” In other cases applying

the logic of Hayhurn’s Case, the Court held that

executive or legislative revision was not available at

all.”

21 See United States v. Ferreira, supra (federal court hear-

ing claims for which United States was liable under treaty

with Spain, whose decisions were subject to review by Sec-

retary of the Treasury, was not exercising judicial power,

and no appeal lay to Supreme Court); Gordon v. United

States, supra (Court of Claims judgments, which may be

paid only after Secretary of the Treasury estimates the claim,

are not the exercise of judicial power); Jn re Sanborn, supra

(Court of Claims’ resolution of facts, rendered on referral

from Executive Department and reported back to that De-

partment, is not within class of cases that are by statute

subject to Supreme Court review); Chicago & Southern Air

Lines, Inc. Vv. Waterman Steamship Corp., 333 U.S. at 112-114

(federal court may not review administrative order granting

or denying application for foreign air route, where the

President has final authority to approve or disapprove agen-

cy’s action). See also District of Columbia v. Eslin, 183

U.S. 62, 65 (1901) (declining to review Court of Claims deci-

sion in light of intervening legislation providing that Con-

gress would not pay the judgment).

22 See United States v. O’Grady, 89 U.S. (22 Wall.) 641

(1874) (government could not reduce judicially determined

debt by applying, as an offset, an asserted claim that the

government possessed, but had failed to assert as a counter-

claim); United States v. Waters, 133 U.S. 208, 213 (1890)

(award of counsel fees to district attorney by Court of Claims

was “a judicial act of a court of competent jurisdiction, [and]

was not subject to the reexamination or reversal of the At-

torney General”); United States v. Jefferson Elec. Mfg. Co.,

291 U.S. 386 (1934) (under statute defining its jurisdiction,

Court of Claims, when hearing a tax refund claim, is required

to resolve ail elements of the claim; it cannot render a judg-

ment subject to later proof of one element to the IRS).

None of those cases has application here. As de-

scribed above, Section 27A(b) does not authorize

review of merits adjudications in securities cases by

executive or legislative officials. Nor has any execu-

tive or legislative official claimed the right to make

such a determination. Unlike a statute that gives

final authority to determine the outcome of an in-

dividual case to another Branch, Section 27A(b) con-

templates final resolution of federal securities claims

by the courts. In sum, the limited right conferred by

Section 27A(b) to have a final judgment reopened

does not violate the separation of powers.

II. SECTION 27A(b) DOES NOT VIOLATE THE DUE

PROCESS CLAUSE

The Due Process Clause of the Fifth Amendment

provides that “[n]o person shall be * * * deprived of

life, liberty, or property, without due process of

law.” There is no foundation to the view that the

Due Process Clause prohibits alteration of all inter-

ests determined by a judgment, and Congress did not

violate the due process rights of securities fraud de-

fendants by providing for the revival of Section

10(b) actions previously held to be time-barred.

A. The Due Process Clause Protects Property Inter-

ests, Not “Vested Rights”

1. By its terms, the Due Process Clause speaks

of “life,” “liberty,” and “property,” not “vested

rights.” See Campbell v. Holt, 115 U.S. 620, 628

(1885) (“[T]he word[s] ‘vested right’ [are] no-

where used in the constitution, neither in the orig-

inal 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 in-

corporeal hereditaments. But when we get beyond

this, although vested rights may exist, they are bet-

ter described by some more exact term, as the phrase

itself is not one found in the language of the con-

stitution.”). While courts occasionally characterize

certain interests as “vested rights,” see, e.g., Land-

graf v. USI Film Products, 114 S. Ct. at 1499;

Weaver v. Graham, 450 U.S. 24, 29 (1981), at most,

those rights are a form of “property” for due process

purposes. The characterization of property rights

as “vested” does not immunize those rights from the

normal due process test that applies to legislation

that regulates economic rights. See United States v.

Locke, 471 U.S. 84, 104 (1985) (“Even with respect

to vested property rights, a legislature generally has

the power to impose new regulatory constraints on

the way in which those rights are used, or to con-

dition their continued retention on performance of

certain affirmative duties.”). Rather, a finding that

a right has “vested” in some sense appears only to be

a precondition for application of the Due Process

Clause. Weaver v. Graham, 450 U.S. at 29-30; see

Board of Regents v. Roth, 408 U.S. 564, 576-577

(1972).

; The Due Process Clause does not prohibit depriva-

tions of property; it requires only that deprivations

be accompanied by “due process of law.” In the

realm of social and economic legislation, due process

demands only that the legislature pursue a legitimate

public purpose and that the impact on private prop-

erty interests be rationally related to the public ends

of the law. See, e.g., United States v. Carlton, No.

92-1941 (June 13, 1994); Concrete Pipe & Products

of California, Inc. v. Construction Laborers Pension

Trust, 113 S. Ct. 2264, 2286-2287 (1993); Usery v.

Lis ;

Turner Elkhorn Mining Co., 428 U.S. 1 (1976). By

the same token, the Due Process Clause does not

foreclose legislatures from affecting property inter-

ests through retroactive laws. United States v. Carl-

ton, supra, slip op. 4-5; Landgraf v. USI Film Prod-

ucts, 114 S. Ct. at 1501 (“the constitutional impedi-

ments to retroactive civil legislation are now mod-

est”). The burden of sustaining retroactive legisla-

tion under the Due Process Clause is “met simply by

showing that the retroactive application of the leg-

islation is itself justified by a rational legislative

purpose.” Pension Benefit Guaranty Corp. v. R.A.

Gray & Co., 467 U.S. 717, 730 (1984) ; United States

v. Sperry Corp., 493 U.S. 52, 64-65 (1989).

Because retroactive laws can pose “problems of

unfairness that are more serious than those posed by

prospective legislation,” General Motors Corp. v.

Romein, 112 S. Ct. 1105, 1112 (1992), the Court has

employed a “presumption against retroactivity” that

“allocates to Congress responsibility for fundamental

policy judgments concerning the proper temporal

reach of statutes.” Landgraf v. USI Film Products,

114 S. Ct. at 1501; Rivers v. Roadway Express, Inc.,

114 S. Ct. at 1514. But “the test of due process”

for the retroactive aspects of [economic] legislation,

as well as the prospective aspects,” is whether they

advance “a legitimate legislative purpose * * * by ra-

tional means.” Romein, 112 S. Ct. at 1112. Retroac-

tive legislation that meets those standards satisfies

the Due Process Clause “even though the effect of the

legislation is to impose a new duty or liability based

on past acts.” Usery, 428 U.S. at 16; Romein, 112

S. Ct. at 1112; Sperry, 493 U.S. at 64-65.

There is no exception to that due process principle

for so-called “vested rights” in a judgment. Quite

apart from the absence of any constitutional text

supporting the claim that rights or interests ad-

dressed by a judgment enjoy absolute immunity from

retroactive legislation, the claim to special treatment

for judgments is analytically unsound. If the expec-

tation interests in enforcing private contracts, see

National R.R. Passenger Corp. y. Atchison, T. & S.F.

Ry., 470 U.S. 451, 472 (1985), other property rights,

see United States v. Locke, 471 U.S. at 104-105, or

settled rules of the common law, Duke Power Co. v.

Carolina Environmental Study Group, Inc., 438 U.S.

59, 88 n.32 (1978), do not impose an absolute bar-

rier to change by legislation, a judgment, which sim-

ply confirms rights already reflected in the law, has

no greater claim to inviolability. Most retroactive

legislation can be said to upset expectation interests.

When a legislature imposes monetary liability retro-

actively, and thereby compels an individual to as-

sume liability that did not exist when the relevant

acts occurred, see, e.g., Usery, 428 U.S. at 17, the

effect on the individual’s expectations can be quite

dramatic. If that effect is permissible, so too is legis-

lation that retroactively regulates expectation inter-

ests arising from a judgment.

Any suggestion that rights “vested” by a final

judgment lie beyond the regulatory authority of Con-

gress cannot be squared with this Court’s decision in

Fleming v. Rhodes, 331 U.S. 100 (1947). In that

case, landlords obtained valid state court judgments

of eviction during a gap in the application of federal

price control statutes. Jd. at 101-102. When the

price controls were reinstated, federal law made

them retroactive and precluded evictions under the

prior judgments. Jd. at i02 n.3. Relying on the

theory that “the vested rights, created by the prior

judgments * * *, could not be destroyed by subse-

quent legislation,” the landlords claimed that the new

law violated the Due Process Clause. 331 U.S. at 102.

This Court rejected the claim that “vested rights” in

“valid judgments” were immune from regulation:

So long as the Constitution authorizes the subse-

quently enacted legislation, the fact that its pro-

visions limit or interfere with previously ac-

quired rights does not condemn it. Immunity

from federal regulation is not gained through

forehanded contracts. * * * The rights acquired

by judgments have no different standing.

Id. at 107. See also Federal Housing Admin. v.

Darlington, 358 U.S. 84, 91 n.6 (1958) (Fleming

holds that “any ‘vested’ rights by reason of the

state judgment were acquired subject to the possi-

bility of their dilution through Congress’ exercise of

its paramount regulatory power’).

If rights “vested” in a judgment were made in-

violate by the Due Process Clause, Fed. R. Civ. P.

60(b) would be constitutionally suspect. Rule 60(b)

sets forth a variety of grounds that justify reopening

of otherwise final judgments, and some courts have

exercised the reopening power in light of changes in

the law. See Adams v. Merrill Lynch Pierce Fenner

& Smith, 888 F.2d 696, 702 (10th Cir. 1989);

Matarese v. LeFevre, 801 F.2d 98, 106 (2d Cir.

1 '86), cert. denied, 480 U.S. 908 (1987). This

Court as well has reopened a final judgment, when

a change in legal terrain rendered the prior judg-

ment inequitable. See Gondeck v. Pan American

World Airways, Inc., 382 U.S. 25 (1965) (per

curiam) (granting second petition for rehearing,

filed four Terms after certiorari had been denied,

because of a change in decisional law governing eli-

gibility for compensation, and because other victims

of the same accident had won compensation awards

in other courts). If the Due Process Clause permits

those interferences with “vested rights” in a judg-

ment, it also permits reopenings under standards

enacted by Congress.

2. Under the due process standards that govern

review of economic legislation, Section 27A(b) is

constitutional. Section 27A is designed to protect

the reliance interests of plaintiffs who filed suit be-

fore this Court’s decision in Lampf and whose ac-

tions were timely under the limitations periods in

effect in their jurisdictions. Congress acted to pre-

vent the perceived unfairness that would result if the

change in the limitations period brought about by

Lampf were applied “to those cases that were pend-

ing at the time that the decision came down.” 137

Cong. Rec. $§18,623-S18,624 (daily ed. Nov. 27, 1991)

(Sen. Bryan). Congress was also concerned about

the adverse impact of Lampf and Beam upon private

enforcement of the securities laws.“ Congress had

particular reason to protect those plaintiffs whose

suits were rendered untimely by Lampf and whose

judgments became final only because they refrained

from taking appeals that the court of appeals indi-

cated would be “meritless” and “sanctionable.” Pet.

App. 5a. Those legislative goals are plainly legiti-

23 See Securities Investor Protection Act of 1991: Hearings

on S. 1533 Before the Subcomm. on Securities of the Senate

Comm. on Banking, Housing, and Urban Affairs, 102d Cong.,

Ist Sess. 2 (1991) (Sen. Bryan); id. at 15-16 (Richard C.

Breeden, Chairman, SEC); Securities Investors’ Legal Rights:

Hearings on H.R. 3185 Before the Subcomm. on Telecommu-

nications and Finance of the House Comm. on Energy and

Commerce, 102d Cong., Ist Sess. 38-39 (1991) (Rep. Markey

and Chairman Breeden); id. at 21-24 (Chairman Breeden).

mate ones, and Section 27A(b) is directly tailored

to advance them.

At the same time, given the circumstances sur-

rounding the enactment of Section 27A(b), the de-

fendants in those cases cannot plausibly claim that

the statute prejudices any legitimate reliance inter-

ests on their part. Before this Court’s decision in

Lampf, the law of the Sixth Circuit, where this suit

arose, made clear that claims under Section 10(b)

of the Exchange Act were governed by state limita-

tions periods. See, e.g., Carothers v. Rice, 633 F.2d

7, 8-9 (6th Cir. 1980), cert. denied, 450 U.S. 998

(1981). Far from disrupting settled expectations

concerning the applicable limitations period, Section

27A gives effect to those expectations. When the

Court retroactively mandated the application of a

“1-and-3” rule in Lampf and Beam, Congress moved

quickly to restore the pre-Lampf rule, enacting Sec-

tion 27A in less than six months and requiring mo-

tions for reinstatement to be filed within 60 days.

See United States v. Carlton, supra, slip op. 6 (“Con-

gress acted promptly and established only a modest

period of retroactivity.”). In this case, for example,

only a few months passed between the district court’s

dismissal of the Section 10(b) claims and the enact-

ment of Section 27A. In those circumstances, any

potential “reliance” interests created by the dismissal

order are insufficient “to establish a constitutional

violation.” Carlton, supra, slip op. 7; Usery, 428

U.S. at 16."

* Respondents did not invoke the Takings Clause of the

Fifth Amendment below, nor was that issue addressed by the

court of appeals. As a result, the issue is not properly before

this Court. See Granfinanciera Vv. Nordberg, 492 U.S. 33, 38-

39 (1989). In any event, Section 27A(b) does not “take” any

B. The “Vested Rights” Doctrine, Even If It Has Con-

tinuing Significance, Does Not Invalidate Section

27A(b)

As demonstrated above, the Due Process Clause

does not create a special category of “vested rights”

in judgments that are exempt from congressional

regulation. This case provides no justification for

recognizing such a doctrine, and even under older

precedents of this Court, the “vested rights” claim

fails.

compensable property interest. All that has been “taken” by

Section 27A(b) is the “right” fortuitously bestowed on some

defendants by Lampf and Beam not to litigate federal securi-

ties claims. The financial burden of litigation is hardly the

kind of deprivation that entitles litigants to compensation

under the Fifth Amendment. Cf. United States v. Bodcaw

Co., 440 U.S. 202, 208 (1979) (per curiam) (litigation ex-

penses are not just compensation); Renegotiation Board v.

Bannercraft Clothing Co., 415 U.S. 1, 24 (1974) (“Mere liti-

gation expense, even substantial and unrecoupable cost, does

not constitute irreparable injury.”’).

The Takings Clause would not entitle defendants to com-

pensation by the federal government even if they are found

to have violated the federal securities laws and are ultimately

required to pay damages. In that event, the damages would

be due to fraudulent acts that were illegal when committed

and that gave rise to liability under already-existing federal

laws. Reimposing liability to injured persons for actions that

were tortious and unlawful when taken can hardly constitute

a “taking” of “property” within the meaning of the Takings

Clause. The object of that provision is “to bar Government

from forcing some people alone to bear public burdens which,

in all fairness and justice, should be borne by the public as a

whole.” Dolan v. Tigard, No. 93-518 (June 24, 1994), slip op.

9. There is “no constitutionally compelled reason to require

the Treasury to assume the financial burden,” Connolly Vv. .

Pension Benefit Guaranty Corp., 475 U.S. 211, 228 (1986),

for the fraud, if any, committed by private defendants.

1. The claim that “vested rights” in a judgment

deserve absolute constitutional protection is at its

weakest with respect to the judgment at issue here:

a judgment resting on the statute of limitations,

rather than an adjudication of the merits of the

underlying dispute. Such a judgment does not create

or declare any property right in the defendant; it

merely protects the defendant from a particular suit.

When a case is dismissed solely because it is time-

barred under then-governing law, the dismissal does

not necessarily extinguish the underlying claim,

which may continue to be asserted. Cf. Block v.

North Dakota, 461 U.S. 273, 291 (19838) (final dis-

missal of claimant’s quiet title action against the

United States on the ground that the limitations

period had expired would not divest the claimant of

whatever property rights it possesses, which may be

asserted in another proceeding); Bank of the United

States v. Donnally, 33 U.S. (8 Pet.) 361, 370 (1834)

(“As the contract, upon which the original suit was

brought was made in Kentucky, and is sought to be

enforced in the state of Virginia, the decision of the

case in favor of the defendant, upon the plea of the

statute of limitations, will operate as a bar to a sub-

sequent suit in the same state; but not necessarily as

an extinguishment of the contract elsewhere, and

especially in Kentucky.”). And revival of the cause

of action underlying the judgment of dismissal does

not impose liability retroactively on a transaction

that was lawful at the time. See Graham & Foster

v. Goodcell, 282 U.S. 409, 429 (1931) (rejecting

“vested rights” challenge to curative statute restoring

tax liability after statute of limitations had run).

Section 27A(b) does not change the rules that pro-

hibited respondents from committing fraud in securi-

ties transactions; it merely permits application of

those rules notwithstanding the prior judgment,

which was entered without reaching the merits. Sec-

tion 27A(b) therefore does not deprive the defendant

of any property interest.

As a general matter, the Due Process Clause does

not prohibit legislatures from retroactively reviving

claims that have become barred by the running of a

statute of limitations. Chase Securities Corp. v.

Donaldson, 325 U.S. 304 (1945); International

Union of Electrical Workers v. Robbins & Myers,

Inc., 429 U.S. 229, 243-244 (1976); Campbell v.

Holt, 115 U.S. at 628. A judgment that confirmed

the running of the former limitation period does not

add much to a defendant’s due process objection to

subsequent legislation that removes the time-bar to

suit.

2. Even if this case were analyzed wnder older

precedents that suggest that there is special protec-

tion accorded to some interests in a judgment, Sec-

tion 27A(b) passes constitutional muster. As the

court of appeals noted, Pet. App. 14a n.12, this Court

stated in McCullough v. Virginia, 172 U.S. 102, 123

(1898), that “[i]t is not within the power of a legis-

lature to take away rights which have been once

vested by a judgment.” McCullough’s application of

its “rule” protecting vested rights in a judgment,

however, is inconsistent with this Court’s decisions,

both before and since. The judgment at issue in

McCullough was that of a trial court; the case was

pending on appeal when the state legislature changed

the relevant law. Despite the quoted statement in

McCullough, it is well established that a change in

law may be applied to a pending case when the legis-

lature has so indicated with the requisite degree of

clarity.”

Moreover, this Court has never foreclosed legisla-

tive action affecting even a final judgment in the

unqualified fashion suggested by McCullough. To the

contrary, the Court has upheld a wide range of fed-

eral and state statutes that have divested litigants of

the benefits of final judgments. See, e.g., Fleming v.

Rhodes, supra; Paramino Lumber Co. v. Marshall,

309 U.S. 370 (1940); Hodges v. Snyder, 261 U.S.

600, 603-604 (1923); Stephens v. Cherokee Nation,

25 In McCullough, the Court reviewed 2 Virginia law that

rescinded the right of a bondholder to use coupons to pay state

taxes, and instead required taxes to be paid in cash. 172 U.S.

at 103-105, 122. The bulk of the Court’s opinion sustained the

bondholder’s claim that the right to use the coupons was pro-

tected from state impairment by the Contract Clause of the

Constitution, Art. I, § 10, Cl. 1. 172 U.S. at 109-123. The lan-

guage regarding “rights which have once been vested by a

judgment” appears in a section of the opinion that rejected

the claim that the bondholder’s action had to be dismissed

because after the judgment was rendered in the trial court,

and the case was on appeal, Virginia repealed the “statute

authorizing this particular form of suit.” Jd. at 128. McCul-

lough’s statement that the legislature cannot repeal the right

to sue while a case is pending on appeal from a judgment

conflicts with cases dating from The Schooner Peggy, 5 U.S.

(1 Cranch) at 110 (“the court must decide [a case] according

to existing laws, and if it be necessary to set aside a judgment,

rightful when rendered, but which cannot be affirmed, but

in violation of law, the judgment must be set aside’), to

Landgraf Vv. USI Film Products, 114 S. Ct. at 1501 (“in many

situations, a court should apply the law in effect at the time

it renders its decision, * * * even though that law was enacted

after the events that gave rise to the suit”). The result in

McCullough can be explained, however, as protecting the bond-

holder’s right to enforce a contract with the State against

state impairment in the form of the withdrawal of a remedy.

174 U.S. 445, 477-478 (1899); Freeland v. Williams,

131 U.S. 405, 417-421 (1889); Pennsylvania v.

Wheeling & Belmont Bridge Co., 59 U.S. (18 How.)

421, 431 (1855). In particular, this Court has held

that the concept of vested rights does not invalidate

legislation, like Section 27A(b), that directs the re-

opening and reexamination of final judgments, even

when the legislation is enacted after the judgments

have become final and the reexamination requires the

application of new rules of law.

In Freeland, for example, a land owner obtained a

money judgment against a soldier who stole cattle

during the Civil War. 131 U.S. at 406. In 1867,

the Supreme Court of West Virginia affirmed the

judgment, which rejected a defense based on the

soldier’s status as a belligerent. Jd. at 407-408. In

1872, before the land owner had executed the judg-

ment, West Virginia amended its constitution to pro-

vide that no person “shall be liable in any proceed-

ing, * * * nor shall his property be seized or sold

under final process issued upon judgments or decrees

heretofore rendered,” for military actions that were

consistent with “the usages of civilized warfare” dur-

ing the Civil War. Jd. at 411.

Invoking the new law, the defendant in Freeland

brought a bill to enjoin execution of the plaintiff’s

final judgment. 131 U.S. at 407-409. The plaintiff

challenged the constitutionality of the law, raising a

“vested right” argument: .

The proposition of the plaintiff * * * is, that by

the judgment of the [trial court] he had ac-

quired a vested right in that judgment; that the

judgment was his property; and that any act of

the State which prevents his enforcing that judg-

ment * * * is depriving him of property without

due process of law * * *. This right of the plain-

tiff to enforce that judgment is insisted upon as

a vested right with which no authority can law-

fully interfere.

Id. at 417. This Court rejected the vested right claim

and sustained West Virginia’s power to bar enforce-

ment of the final judgment. Jd. at 417-421. The

Court explained that “[j]udgments, however solemn,

however high the court which rendered them, and

however conclusive in a general way between the

parties,” may constitutionally be “subject[ed] to re-

view, to reconsideration, to reversal and to modifica-

tion by various modes,” such as writs of error and

bills of review. Jd. at 418. The Court further held

that the legislature could retroactively “remov[e] ob-

jections and obstructions” to such review procedures,

even when the “objections and obstructions” con-

sisted of the substantive legal rules that supported

the original judgment. Jd. at 419-420.

In concluding that due process of law allowed the

expansion of opportunities to review a judgment,

even after the judgment became final, the Court

stated in Freeland that “[p]rior to the adoption of

the 14th Amendment the power to provide such rem-

edies, although they may have interfered with what

were called vested rights, seems to have been fully

conceded.” 131 U.S. at 420 (citing Calder v. Bull,

3 U.S. (3 Dall.) 386 (1798); Satterlee v. Matthew-

son, 27 U.S. (2 Pet.) 380 (1829); Sampeyreac v.

United States, 32 U.S. (7 Pet.) 222 (1833); Watson

v. Mercer, 33 U.S. (8 Pet.) 88 (1834); and Freeborn

v. Smith, 69 U.S. (2 Wall.) 160 (1864)). Freeland

concluded that the adoption of the Fourteenth Amend-

ment did not cast doubt on the validity of statutes of

that character. 131 U.S. at 420.

In Stephens, individuals obtained decrees of Indian

citizenship from the United States Court for the In-

dian Territory in what is now Oklahoma. 174 U.S.

at 476. The statute under which the suits were

brought provided that “the judgment of the court

shall be final.” Jbid. After the judgments were en-

tered, Congress enacted legislation permitting the

losing parties to reopen the judgments by appealing

them to this Court. Jd. at 476-477. The individuals

who had prevailed in the trial court attacked the

retroactive legislation on the ground, inter alia, that

it was “destructive of vested rights.” Jd. at 477.

Citing Freeland, this Court summarily rejected that

contention, stating that “the grant of a new remedy

by way of review has been often sustained under

particular circumstances.” Jd. at 478. The court dis-

missed the vested rights claim as inapposite where

“the right asserted to be vested is only the exemption

of the[] judgments from review.” Ibid.

The Court applied the same principles again in

Paramino. There, a federal agency issued an admin-

istrative judgment affording only limited compensa-

tion to a longshoreman under the Longshoremen’s

and Harbor Workers’ Compensation Act. 309 U.S. at

374-375. The longshoreman did not seek review of

the judgment, which by statute became final after

30 days. Id. at 375. Five years later, Congress en-

acted a private bill “ordering the Compensation Com-

mission to review [the] case and to issue a new

order, the provisions in the Compensation Act limit-

ing time for reviewing awards ‘to the contrary not-

withstanding.’” Jbid. The defendant employer ar-

gued that the legislation violated the Due Process

Clause. 309 U.S. at 377. Relying on McCullough, the

defendant contended that “[t]he compensation award

was a final adjudication vesting property rights” that

were “not alterable by subsequent legislation.” /d.

at 372. This Court rejected the invocation of McCul-

lough, reasoning that “the immunity obtained by the

lapse of the time for review is [not] the type of im-

munity which protects its beneficiary from retroac-

tive legislation authorizing review of the claim.” Id.

at 378.

Section 27A(b) plays precisely the same role as

the legislation upheld in Freeland, Stephens, and

Paramino. In this case and others governed by Sec-

tion 27A(b), the losing party failed to seek review

of an adverse judgment within a statutory time limit

imposed by the legislature, and the judgment became

final as a result. Congress thereafter enacted legisla-

tion providing for further review by the courts, not-

withstanding the finality of the original judgment,

and it provided for the courts to apply a new rule of

law on the limitations issue when doing so. This

Court’s decisions confirm the constitutionality of Sec-

tion 27A(b) in each of those respects. They show

that no doctrine of vested rights forecloses the legis-

lature from directing review after the statutory time

for review has already run and the judgment has

become final (Paramino), or from retroactively cre-

ating a review procedure that did not previously ex-

ist (Stephens). And they show that the legislature

may direct tribunals to reexamine their judgments

not only to determine their correctness under the law

that existed at the time the judgment was entered,

but also to take account of subsequent, retroactive

changes in the substantive rules of law (Freeland).

It is true that Freeland, Stephens, and Paramino did

not involve Article III tribunals, but neither did

McCullough itself, the case said to establish the vested

rights doctrine. If vested rights in judgments exist,

there is no reason to find that only federal courts can

create them.

In sum, Section 27A(b) does nothing that this Court

has not already sustained in Freeland, Stephens, and

Paramino. Because Section 27A(b) is indistinguish-

able for due process purposes from the statutes up-

held in those cases, the provision meets the require-

ments of the Due Process Clause regardless of

whether this Court treats the vested rights doctrine

as a constitutional anachronism or, instead, as an

aspect of current due process analysis.

CONCLUSION

The judgment of the court of

MF appeals should be

Respectfully submitted.

Drew S. Days, III

Solicitor General

SIMON M. LORNE FRANK W. HUNGER

General Counsel Assistant Attorney General

PAUL GONSON EDWIN S. KNEEDLER

Solicitor Deputy Solicitor General

JACOB H. STILLMAN MICHAEL R. DREEBEN

Associate General Counsel Assistant to the Solicitor

LESLIE E. SMITH General

Senior Litigation Counsel BARBARA C. BIDDLE

Securities and Exchange Scott R. McINTosH

Commission Attorneys

JULY 1994

APPENDIX

Section 27A of the Securities Exchange Act of

1934, 15 U.S.C. 78aa-1 (Supp. IV 1992), 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 appli-

cable 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 ex-

isted on June 19, 1991,

shall be reinstated on motion by the plaintiff not

later than 60 days after the date of enactment

of this section.

(la)

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.