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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1995
- **Citation:** 514 U.S. 211

## Text

JTON FILED

In THE
Supreme Court of the United Siates

Octosper TERM, 1994

Ep PLAUT, et al.,
Vv.

Petitioners,

SPENDTHRIFT FARM, INC., et al.,
Respondents.

On Writ of Certiorari to the
United States Court of Appeals
for the Sixth Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE
AND BRIEF AMICUS CURIAE
FOR PACIFIC MUTUAL LIFE INSURANCE CO.
IN SUPPORT OF PETITIONERS

RICHARD G. TARANTO
(Counsel of Record)
H. BARTOW Fark, ITI
FARR & TARANTO
2445 M Street, NW
Washington, DC 20037
(202) 775-0184
STEWART M. WELTMAN
STEWART M. WELTMAN
& ASSOCIATES, P.C.

135 S. LaSalle Street
Chicago, IL 60603

WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

In THE
Supreme Court of the Anited States

OCTOBER TERM, 1994

No. 93-1121

Ep PLAUT, et al.,

‘ Petitioners,

SPENDTHRIFT FARM, INC., ef al.,
Respondents.

On Writ of Certiorari to the
United States Court of Appeals
for the Sixth Circuit

MOTION FOR LEAVE TO FILE A BRIEF
FOR PACIFIC MUTUAL LIFE INSURANCE CO.
AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

Pacific Mutual Life Insurance Company hereby moves,
pursuant to Rule 37.4 of the Rules of this Court, for
leave to file the attached brief amicus curiae in support
of petitioners. Counsel for petitioners, for respondents
Spendthrift Farm, Gibson, Dunn & Crutcher, and Francis
M. Wheat, Deloitte & Touche, and for the United States
have consented to the filing. Counsel for respondent
Bateman, Eichler, Hill Richards, Inc. has declined to
consent. Counsel for Norman D. Owens and American
International Bloodstock Agency, Inc., has not responded
to the request for consent.*

The question presented in this case—the constitutional
validity of Section 27A(b) of the Securities Exchange

* Pacific Mutual has no parent corporation, and its subsidiaries,
other than wholly owned ones, are World-Wide Holdings Ltd (‘a
United Kingdom corporation) and United Planners Group, Inc. ‘an
Arizona corporation). See 8. Ct. R. 29.1.

Act (Pub. L. No. 102-242, § 476, 105 Stat. 2236, 2387,
codified at 15 U.S.C. § 78aa-1(b))—was presented last
Term in Morgan Stanley & Co. et al. v. Pacific Mutual
Life Ins. Co., No. 93-609. The Court there affirmed, by
an equally divided vote, the Fifth Circuit’s judgment hold-
ing Section 27A(b) constitutional. 114 S. Ct. 1827
(1994). The Court subsequently denied the petitioners’
request for rehearing or a stay of mandate in Morgan
Stanley, returning the case to the lower courts, where
(if the Fifth Circuit sends the case back to the district
court) Pacific Mutual will resume pre-trial and trial pro-
ceedings on its claim for damages from securities fraud
committed by the Morgan Stanley petitioners. 62 U.S.L.W.
3862 (1994). The Morgan Stanley petitioners have al-
ready indicated that, if the Court holds Section 27A(b)
invalid in the present case and the Morgan Stanley litiga-
tion is still pending at that time, they will raise the ruling
as a ground for dismissing Pacific Mutual’s complaint.
See Brief in Support of Rehearing, No. 93-609, at 5.
Pacific Mutual therefore has a substantial interest in the
resolution of this case, as well as an additional perspec-
tive on the questions presented, sharpened in the litiga-
tion of those issues last Term.

For those reasons, Pacific Mutual asks that its motion
be granted.
Respectfully submitted,

RICHARD G. TARANTO
(Counsel of Record)
H. BARTOW FARR, ITI
FARR & TARANTO
2445 M Street, NW
Washington, DC 20037
(202) 775-0184

STEWART M. WELTMAN
STEWART M. WELTMAN

& ASSOCIATES, P.C.

135 S. LaSalle Street

Dated: July 21, 1994 Chicago, IL 60603

QUESTION PRESENTED

Whether Section 27A(b) of the Securities Exchange
Act of 1934, 15 U.S.C. Section 78aa-1, to the extent that
it purports to require reinstatement of Section 10(b) ac-
became final prior to the enactment of Section 27A(b),

(i)

SUMMARY OF ARGUMENT
I. SEPARATION OF POWERS —
i ND acticcctecnecsieeseneenenecetncenmenstinsiones
ARGUMENT... ilieeaiapanedincganipennionssianimanniciniasiananscsiiivinniies
I. SECTION 27A(b) DOES NOT VIOLATE

THE CONSTITUTIONAL SEPARATION OF
A. Section 27A(b) Does Not Impose Non-

B. Section 2TA(b) i ile ila ote
gressional Usurpation of Judicial Authority.

C. Section 27A(b) Sper gmene amead
tion of Powers Principle =

panned 27A (b) DOES NOT VIOLATE THE

A. Gestion STAG) Resilty Pesses tho Aastion-
ee eee

C. A Recent Judgment for a Defendant on
Limitations Grounds Generates No Vested
Right to Avoid Answering Substantive
Charges Under a New Limitations Rule.

(iii)

vo fF NOS

18

CASES

iv

TABLE OF AUTHORITIES

Adams v. Merrill Lynch Pierce Fenner & Smith,

888 F.2d 696 (10th Cir. 1989)
Block v. North Dakota, 461 U.S. 273 (1983) enmgmante
Bournias v. Atlantic Maritime Co., Ltd., 220 F.2d

152 (2d Cir. 1955) .
Bowen 9. Georgetown Univ. Hosp., 488 U.S. 204
Dunters v. "Syner, 478 U.S. 714 (1986) niiisniatiion
Campbell v. Holt, 115 U.S. 620 (1885) 22, 28, 27
Capello v. D.C. Board of Education, 669 F. one.

8 aE 8
Carpenter v. Wabash R. Co., 309 US. 23 ( 1940)... 5
CFTC v. Schor, 478 U.S. 833 (1986) ee oe 18, 19
Chase Sec. Corp. v. Donaldson, 325 US. 304

ES eee ee ee 5, 26, 27
Cherokee Nation v. United States, 270 US. 476

— 11,17
Chevron Oil Co. v. Huson, 404 U.S. 97 (1971). «
Chicago & Southern Air Lines, Inc. v. Waterman

SS. Corp., 333 US. 108 (1948) _................... 10, 12
Commissioner v. Sunnen, 333 U.S. 591 (1948) a 26
Concrete Pipe & Prods., Inc. v. Construction Labor-

ers Pension Trust, 113 S. Ct. 2264 (1993)_.
ee Sa eset 475 US.

211 (1986) . +

gaR8 KR RW 4g

poner -amanghnrwng Site, es. v. . Cowan, 309 US. 382
—
District of Columbia v. Eslin, 183 U.S. 62 (1901).
Electrical Workers Local 790 v. Robbins & Myers,
Inc., 429 U.S. 229 (1976) _ a
Ettor v. City of Tacoma, 208 Us. 148 (1913)
Farrey v. Sanderfoot, 111 S. Ct. 1825 (1991)...
Fleming v. Rhodes, 331 U.S. 100 (1947) 23
Forbes Pioneer Boat Line v. Board of Comm'rs,
258 U.S. 338 (1922) —
Freeborn v. Smith, 69 US. (2 Wall.) ‘160 (1864). 5. 16,: 23
Freeland v. Williams, 131 U.S. 405 (1889) _
Freytag v. i , 111 S. Ct. 2631 (1991). “4

ah
=
ne
Rte
*8
iy

Sa Bai a

on
=

BY RRS

~—

Gates thtmee thomehe, 1984.62. 1008 (1992). 3,20

ero

TABLE OF AUTHORITIES—Continued

Page
Gondeck v. Pan American World Airways, Inc.,

382 U.S. 25 (1965) —_ 23
Gordon v. United States, 117 US. 697 (1885) 10
Gordon v. United States, 69 U.S. (2 Wall.) 561

(1864) i 9

Graham & Foster v. Goodcell, 282 U.S. 409 (1981) . 5, 26
Harper v. Virginia Dep't of Taxation, 113 S. Ct.

2510 (1993) __.... 19
Hayburn’s Case, 2 U.S. (2 Dall.) 409 eamngen
Hill v. Hawes, 320 U.S. 520 (1944) _ oe 14
Hodges v. Snyder, 261 U.S. 600 (1923) _. a 23
INS wv. Chadha, 462 U.S. 919 (1983) .. es 17
In re Sanborn, 148 U.S. 222 (1893) 10
Kaiser Aluminum & Chem. Corp. v. Bonjorne, 494

U.S. 827 (1990) _ a 5, 22
La Abra Silver Mining Co. v. United States, 175

US. 423 (1899) 10

Lampf{, Pleva, Lipkind, Prupiz é Petigvew 9 v. Git
berston, 111 S. Ct. 2773 (1991)
Landgraf v. USI Film Products, 114 S. Ct. 1483
(1994) - 5, 24
Liljeberg v. Health Servs. Acquisition Corp., 436
U.S. 847 (1988) 22
22

Matarese v. LeFevre, 801 F.2d 98 (24 Cir. 1986),
cert. denied, 480 U.S. 908 (1987) _.. ia ”
McCullough v. Virginia, 172 U.S. 102 (1898) 24
McGrath v. Potash, 199 F.2d 166 (D.C. Cir. 1952). 23
Metropolitan Wash. Airports Auth. v. Citizens for
an Ince., 111 8. Ct.

2298 (1991) . 17
Mistretta v. United States, 488 US. 361 (1989). 8, 17, 18
Morrison v. Olson, 487 U.S. 654 (1988) a
Muskrat v. United States, 219 U.S. 346 (1911). 10
National R.R. Passenger Corp. v. Atchison, T. &

SF. R.R., 470 U.S. 451 (1985) _ 22
Paramino Lumber Co. v. Marshall, 309 US. 370

_ (1940) ceDAOCAaeRAOUROA ASTORIA ETS RELIRSIIEES on, $B, 35, 38
nia v. Wheeling é Belmont Bridge Co.,

59 U.S. (18 How.) | = 41, 23, 24

vi

TABLE OF AUTHORITIES—Continued
Page
Pension Benefit Guar. Corp. v. R.A. Gray & Co.,

467 U.S. T17 (1984) . 3, 5, 20, 22
Politea v. United States, 964 Us S. 426 (1960) 23
Pope v. United States, 323 U.S. 1 (1944) 11,17
Robertzon v. Seattle Audubon Soe'y, 112 S&S. Ct.

Redd EI a SF
Sampeyreac v. United ‘States, 92 US. (7 Pet.)

"922 , (1833) — —aS *
Stephens v. Cher ce Nation, 174 US. M5 (1899) 5, 16,

23
Stewart v. Keyes, 295 U.S. 403 (1925) ———s~
Sun Oil Co. ». Wortman, 486 U.S. T17 (1988) 26
The Clinton Pridge, T7 US. (10 Wall) 454

(1870) . 12
Tonya K. rv. _ Board of Eéucation, ‘BAT F.2d 1243

(7th Cir. 1988) . o
United States v. Carlton, 114 Ss. ct. 218 (1994). 2, 20, 21
United States v. Ferreira, 54 US. (13 How.) 40

(1851) . ad 9
U nited States » t. . Jeffereen Elec. Mio. Co., 291 us

2 Se alia 10

Tnited States v. Jones, 119 US. ATT (1886) 7 10
Vnited States v. Klein, 9) US. (13 Wall.) 128

0 SE ES Re | 14

United States vr. Locke, 471 U.S. 84 (1985) (4,22
United States v. O'Grady, 99 U.S. (22 Wall.) 641

By A — 10
‘nited States +. ‘Ron Pair Enters., 429 US. 235
United ‘States v. Seh nomner Peggy, 5 US. 1

United States r. Slouz Nation, 148 Us. “3n
a 3,11,17
United States v. Sperry Corp.. 493 US. 52 (1989). 5, 7,20
United States v. Utah Constr. & Mining Co., 3284
U.S. 394 (1966) -- 25
United States v. Waters, 133 US. 208 (1890) 11
University nd Tennessee v. Elliott, 478 US. 728

= ” _, = NN

vii
TABLE OF AUTHORITIES—Continued
Page
Usery v. Turner Elkhorn Mining Co., 428 US. 1
Suiee a ‘Mercer, 33 US. (& Pet.) 8% (1834) _ Liat 5
Weat Lynn Creamery, Inc. v. Jonathan Healy, 62
US.L.W. 4518 (1994) . 18
Yee wv. City of Eacondido, 112 S. Ct. 1522 (1992). 7
STATUTES
1US.C.§506 Lo RIT net ae a
33 U.S.C. § 921 | yasonmecssereens 25

Section 27A (bh) of the Securities Exechar re
Pub. L. No. 102-242, § 476, 105 Stat. 2236, 2387,
—_- 15 USC. sdesiemanbtiti ee

CONGRESSIONAL MATERIALS
Securities Inveatora Legal Rights: Hearing on
H.R. 4185 Before the Subcomm. on Telecommu-
nications and Finance of the House Comm. on
Energy and Commerce, 102d Cong., lat Sessa.

(1991)... 21
137 Cong. Ree. $18,623-24 (Nov. 27, 1991) | — 21
OTHER MATERIALS
CSS ae 22
D. Epstein, J. Landers, & S. Nickles, Debtors and
Creditors (3d ed. 1987) . a 22

Moore's Federal Practice (2d vy 1993) te ‘14,26

Judicial Action by the Provincial Legislature of
Massachusetts, 15 Harv. me Tie. 208 esas. 15

26

te

IN THE

Supreme Court of the United States

OCTOBER TERM, 1994

No. 93-1121

Ep PLAUT, et al.,
. Petitioners,
SPENDTHRIFT FARM, INC., et al.,
Respondents.

On Writ of Certiorari to the
United States Court of Appeals
for the Sixth Circuit

BRIEF FOR PACIFIC MUTUAL LIFE INSURANCE CO.
AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

INTEREST OF AMICUS CURIAE

The interest of Pacific Mutual Life Insurance Com-
pany is stated in the accompanying motion.'

SUMMARY OF ARGUMENT

Congress enacted Section 27A of the Securities Ex-
change Act, 15 U.S.C. § 78aa-1, to create, retroactively,
a new statute of limitations for certain securities fraud
plaintiffs. The Sixth Circuit, while accepting the validity
of subsection (a)’s application of the new statute of limi-
tations to pending cases, invalidated subsection (b)’s ap-
plication of the new rule to cases under the old statute

1 Pacific Mutual has no parent corporation, and its subsidiaries,
other than wholly owned ones, are World-Wide Holdings Ltd. (a
United Kingdom corporation) and United Planners Group, Inc. (an
Arizona corporation). See S. Ct. R. 29.1.

2

that had come to an end (“final cases”), finding a rigid
constitutional rule protecting the sanctity of “final” judg-
ments. See Plaut v. Spendthrift Farm, Inc., 1 F.3d
1487 (1993). It rested this rule on the Constitution’s
separation of powers. But the rigid pending final rule
the court of appeals announced, and its consequent invali-
dation of Section 27A(b), are simply insupportable un-
der a straightforward analysis of separation-of-powers
principles, or of due process principles.

I. SEPARATION OF POWERS

As affirmative authority, the court relied entirely on the
principle of Hayburn’s Case, 2 U.S. (2 Dall.) 409
(1792), but that principle is irrelevant here. Hayburn’s
Case and its progeny state a limit on the courts’ jurisdic-
tion, applicable where a statute at the time of judicial
decision renders the court unable on its own to award
relief, treating it instead as a first step in a process re-
quiring further independent determination by another
Branch; such a statute effectively makes the court into a
magistrate for another Branch and deprives the dispute
of its character of a “case or controversy.” That bar on
assignment of non-judicial powers to the Article III courts
has never been used, and could not logically be used, to
invalidate a post-judgment statute because of its effect
on a prior judgment. The doctrine of Hayburn’s Case is
simply beside the point in respondents’ challenge to Sec-
tion 27A(b).

Complementing the constitutional bar on assignment of
non-judicial power to Article III courts (which is irrele-
vant here) is the constitutional bar on congressional usur-
pation of the judicial power, which seems to have been
the real concern of the Sixth Circuit. See Plaut, 1 F.3d at
1498-99. But that principle, in terms of both text and
underlying values, provides no support for the Sixth Cir-
cuit’s formal, absolute pending final line. What this core
principle prohibits is congressional adjudication of specific
cases—which is equally forbidden regardless of the pend-
ing or final status of the case Congress is adjudicating.

3

Section 27A(b) is obviously immune from this flaw, as
the recognized validity of Section 27A(a), applying the
limitations rule to pending cases, inescapably implies.
Congress has not engaged in case-specific adjudication,
but has altered the preexisting governing (limitations)
law, leaving for the courts the entire task of finding facts,
interpreting the law, and applying the law to the facts.
See, e.g., Robertson v. Seattle Audubon Soc’y, 112 §S. Ct.
1407 (1992); United States v. Sioux Nation, 448 US.
371 (1980). Congress therefore has not usurped the
judicial power.

Nor does Section 27A(b) violate any broader struc-
tural separation-of-powers principle barring impairment
of the courts’ independent functioning. The statutory
purpose plainly reflects no questioning of the independent
law-interpreting or fact-finding judgment of the courts:
it alters the substantive law, a properly legislative func-
tion, for the most legitimate of reasons. And the effect
of the statute, which is of course narrowly confined to
an unusual problem presented in a small number of cases,
is in no sense to hamper the courts’ functioning.

Il. DUE PROCESS

Section 27A(b) readily meets the rationality standard
for assessing substantive due process challenges to retro-
active statutes even where they clearly upset settled ex-
pectations. See, e.g., General Motors v. Romein, 112
S. Ct. 1105, 1112 (1992); Pension Benefit Guar. Corp.
v. R.A. Gray & Co., 467 U.S. 717, 730 (1984): Usery
v. Turner Elkhorn Mining Co., 428 U.S. 1 (1976). The
retroactivity of Section 27A(b) precisely serves two re-
lated interests. First, it protects the legitimate expecta-
tions of plaintiffs who sued based on the governing limi-
tations law prior to Lampf, Pleva, Lipkind, Prupis &
Petigrow v. Gilberston, 111 §. Ct. 2773 (1991). See
Plaut, | F.3d at 1498 (“True, the litigants had proceeded
under the assumption that the Kentucky Blue Sky law
would apply,” making the suit timely). Second, it en-

4

sures that a class of defendants accused of securities
fraud are not allowed to escape liability without even
having to answer the fraud charges. Indeed, these pur-
poses, together with the implausibility of the claim that
Section 27A(b) upsets defendants’ reasonably settled ex-
pectations at all, mean that Section 27A(b) survives due
process scrutiny under any standard short of an absolute
rule protecting “final judgments.”

There is no basis for such a rule. No holding of this
Court establishes such a rule; and in any event, what-
ever language may appear in opinions from a bygone era
of substantive due process, “vested rights” like contract
and property rights are now covered by the rationality
test. See, e.g., United States v. Locke, 471 U.S. 84, 104-
O05 (1985). The presence of a judgment “vesting” a
preexisting legal right supplies no ground for a different
standard. Indeed, it would be bizarre to afford higher
(much less) absolute protection to rights sufficiently in
dispute to have been litigated, simply because a final
judgment has resolved the dispute, when property or con-
tract rights so clear that they were never disputed in
litigation remain subject to the lesser protection of the
rationality standard.

Finally, if any judgments warrant any special protec-
tion against legislative disturbance, the judgments affected
by Section 27A(b) are not among them. These judg-
ments, entered only months before the legislation was en-
acted, had no effect but to relieve alleged malefactors of
having to answer fraud charges on their merits, based
entirely on a determination that the suits were not timely
filed—under an interpretation of the governing statute
of limitations that itself was unexpected. The statute then
simply removed the limitations objection from the case.
There is no justification for any special bar on legislation
that thus reaches briefly back in time to eliminate a pro-
cedural defect to the consideration of serious charges
on their merits, even if that defect resulted in an unap-
pealed judgment.

5

ARGUMENT

Congress indisputably has broad legislative power to
enact new legal standards and apply them to past events,
protecting interests unprotected by preexisting law.? In
particular, Congress may enact a new statute of limita-
tions for plaintiffs who are out of time under the old
statute, enabling them to pursue recovery for the wrongful
conduct of defendants.* Under those principles, as the
federal circuits have uniformly held, it is not seriously
questionable that Congress could validly create a new
(limitations) rule in Section 27A and make that rule
available to plaintiffs whose cases under the preexisting
rule were meritless (out of time) if those plaintiffs’ cases
were still “pending,” whether in the district courts, in the
courts of appeals, or in this Court. See, e.g., Plaut, 1
F.3d at 1493 n.11, 1495, 1496. The Sixth Circuit held,
however, that the Constitution draws a sharp line pro-
hibiting Congress from extending any new rule (here,
the new limitations rule) to plaintiffs whose cases under
the preexisting rule were meritless (here, out of time) if
those cases had become “final” in a particular sense, i.e.,
were no longer subject to trial-court or appellate-court
review under currently applicable statutes and Rules.

* See, e.g., United States v. Carlton, 114 8. Ct. 2018, 2021-22
(1994); Landgraf v. USI Film Products, 114 8S. Ct. 1488, 1501
(1994); United States v. Sperry Corp., 493 U.S. 52 (1989); R.A.
Gray & Co., 467 U.S. at 729-33; Turner Elkhorn, supra; United
States v. Schooner Peggy, 5 U.S. (1 Cranch) 103, 110 (1801). See
also Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827,
844, 849 (1990) (Scalia, J., concurring), citing, as cases involving
express retroactive legislation, Watson v. Mercer, 33 U.S. (8 Pet.)
88 (1834); Graham & Foster v. Goodcell, 282 U.S. 409 (1931):
Freeborn v. Smith, 69 U.S. (2 Wall.) 160 (1864): Stephens v.
Cherokee Nation, 174 U.S. 445 (1899) ; Carpenter v. Wabash R. Co..
309 U.S. 23 (1940); and Dickinson Indus. Site, Inc. v. Cowan, 309
U.S. 382 (1940).

* See Electrical Workers Local 790 v. Robbins & Myers, Inc., 429
U.S. 229, 243-44 (1976) ; Chase Sec. Corp. v. Donaldson, 325 U.S.
304, 316 (1945).

6

The immediate consequences of this rigid line between
pending and final cases should by themselves be enough
to raise doubts about the court of appeals’ constitutional
ruling. Under that ruling, defendants who have obtained
final judgments under preexisting law acquire a constitu-
tional immunity from the application of new law to them.
But when Congress decides to confer a new legal right
on individuals, it is hard to see why Congress should be
constitutionally entitled to extend the right to individuals
who never brought claims under preexisting law and to
individuals who brought claims that are still pending, but
not to individuals who brought claims that were finally
adjudicated—such claims being equally meritless in all
three situations (which is precisely why Congress finds
it necessary to create the new right). In barring the equal
treatment manifested in Section 27A, moreover, the Sixth
Circuit’s ruling would penalize those plaintiffs who are
diligent enough to press their rights but responsible
enough to refrain from pursuing merely dilatory appeals,
_ and thus encourage the filing of meritless appeals to keep
cases alive while awaiting expected legislation.’ These
results produce windfalls to certain defendants and dis-
parities in treatment unrelated to any apparent interest in
justice and, indeed, an incentive toward litigation conduct
that is hardly consistent with the idea of respect for the
courts.

Although the court of appeals rested its decision en-
tirely on a rigid, formal line between pending and final

* All of the cases affected by Section 27A(b) could have been
kept alive by filing purely protective appeals or certiorari petitions.
This case, for example, was dismissed in mid-August 1991. Wich
30 days for an appeal and 90 days for a certiorari petition ‘t
gether with minimal periods for responses and judicial setiem).
the case, like all others affected by the June 1991 decision Lewepy,
could easily have been maintained in “pending” states enti) the
mid-December enactment of Section 27A. Of course while appeals
at the time “would have been . . . meritless and indeed sancetionable”
(Plaut, 1 F.3d at 1489), the enactment of Section 277A would hawe
transformed such appeals from sanctionable mes inte indispetably
meritorious ones.

tory). In fact, no sound constitutional derivation of the
pending final line is possible. The constitutional chai
lenge to Section 27A(b). in the end, rests only on formal
invocation of labels and cannot be rooted in the sul>
stance of the relevant constitutional principles.*

I. SECTION Z7A(b) DOES NOT VIOLATE THE CON-
STITUTIONAL SEPARATION OF POWERS.

ee ee 0 ey

paced. "Any such reaction “howl he dispelled hy strait
od th TT light of those principles } relevant precedents.
which shows that Section 27A(b) presents no constitu-
tional problem. Congress hes not (i) assigned non-
judicial power to the Article Il courts, (ii) itself usurped

— ee

* This case presents no claim onder the takings clause. See 62
US.L.W. 3806 (1994) (stating question presented); Yer ©. City
of Eacondide, 112 S. Ct. 1622, 1591-44 (1992). Ner could it: if the
due process attack om Section Z7A(b) faile. an it does, the argw-
Trost, 112 S. Ct. 2264, 2280-92 (1998); Connolly ©. Peasicn
Benefit Guar. Corp.. 41% US. 211, 222-23 (1986): see also Sperry
Corp.. supra. It could not reasonably be said that the defendant«
whom Section Z7A‘(b) compels to answer securities-fraud suits
Comerete Pipe, 113 S. Ct. at 2292 « voting Armatrong ©. United
States, %4 US. 4. 49 (1960)). Not surprisin ;

Gnd precedent treating 2 mere judgment of acn-liability, which is
net readily viewed as a transferable asset with market walue. *«
“property” within the meaning of the takings clause. Of course, a
judgment awarding a sum of money «rf confirming title to propertr
would present a quite different situation under the takings clause.

f judicia power, or (iii) otherwise i

A. Section Z7A(b) Does Not Impose Non-Jadicial
Functions on the Article III Courts in Violation of
Hayburn’s Case.

The court of appeals’ separation-of-powers conclusion
relied entirely on Hayburn's Case, which, the court de-
clared, firmly established a “rule that Congress may not

disturb final judgments of the Federal courts”
i F.3d st 1493). SS Oe ee See ee see

ae parties (id. at 1497-98). But
Gis canting of Mastants Cane and ts guageny dimly
misunderstands their holdings and their rationales. That

* We note that we have been unable to determine how often in
. the past Congress has enacted statutes, like Section 27A(b). setting
new legal standards and applying them retroactively to parties
with final judgments under old legal standards. On the one hand.
it seems unlikely that, for example, coal miners who had finally
lest claims for black lung benefite under preexisting law were
excluded from the coverage of the legislation at inave in Turner
Elkhorn, supra. On the other hand, one would expect laws like
Section 27A(b) to be relatively rare, given Congress's avoidance
of retreactive lsws generally and this Court's long approval, entil
making it less necessary for Congress to act te protect sellance
interests of litigants as it did in Section 27A. See Cherron Off Co.
v. Huson, 404 US. 97 (1971). One prominent recent statute affect-
ing “final” judgments—retroactively providing for atiorney’s fees
for handicapped children suing to enforce their education rights —
was upheld by the lower courts. See Tonya K. ©. Board of Educa
tion, S47 F 2d 1243 (7th Cir. 1988); Capello +. D.C. Board of Edu-
cation, 669 F. Sepp. 14 (D.D.C. 1987).

Of course, the novelty of a measure is not itself a reason for
finding it unconstitutional See. «9. Mistretta «. United Stat-+.
488 US. 361 (1989): Morrison ©. Olson, 487 US. 654 (1988):
CFTC «. Schor, 478 U.S. 833 (1986).

9

ct here statutes im place atthe time of the Jo
court could not itself afford relief (but would require, to
be effective, some subsequent independent action by an-
other Branch). This bar on assigning “non-judicial” tasks
to the Article If1 courts is utterly irrelevant here: it sim-
ply has nothing to do with, and has never been used to
challenge, a statute that is enacted after a judgment has
ee ee

us should be paid. 1 Stat. 243 11792). The opinions
of several Justices, sitting as Circuit Judges, explained
could have any effect, to the action of non-Article III
authorities. 2 US. (2 Dall.) at 411-14. The result was

10
an appeal from a decision by the Court of Claims because

Unteod Seates 9. Jones, 119 US. 477, 478 (1886) (quot-
ing Chief Justice Taney’s explanation in announcing judg-
ment in Gordon); see Gordon, 117 US. 697, 703
(1885).’ In In re Sanborn, 148 US. 222 (1893), the

Court likewise held that it could not take jurisdiction over
an appeal from certain Court of Claims decisions that
were still subject to non-Article Ill revision." And in
Chicago & Southern Air Lines, Inc. v. Waterman SS.
oe 333 Us. 103, 113-14 (1948), the Court held

in place at the time, = te tition ding st
mendation to the President.” /d. at 113."

* Immediately after Gordon was decided, Congress repealed the

provision subjecting the relevant Court of Claims decisions to ex-
ecutive revision, and those decisions thereby became fit for Article
IT! review. United States v. Jones, supra; see aleo La Abra Silver
Mining Co. +. United States, 175 US. 423 (1899).

*In District of Colum via ©. Eslin, 183 US. 62 (1901), the Court

estion, Guiites odied Gumentite Sp Mento Gites Gtaten, ooo
US. 346, 352-55 (1911), the Court again relied on the principle
established in Hayburn's Case, Ferreira, and Gordon to hold that
an Article III court may not render a purely advisory opinion (on
a statute's constitutionality), where the decision would furnish no
conerete relief. See also United States v. Jefferson Elec. Mig. Co

291 US. 286 ‘1934) (Article Il] courts cannot “give or review
judgments” that, at the time, are “conditioned” on agency revisory
authority; therefore, plaintiff's entitlement to money must be de-
cided in refund action).

° United States +. ey 9 US. (22 Wal.) on (1874), heid

aul is a She Ee there
times a live case or controversy for the district court

resolve—with no lack of concrete stakes, no deficiency
in adversarial incentive, and no threat to judicial inde-

pendence (or dignity) from acting as a magistrate for
another co-equal Branch. Sie Gsutst const Bad any ont

is after Lampf. and still anot
restored the My so limitations period. But at every

iy ltd annten enantio
Case is betrayed by the need it found to make two excep

tions to its initially absolute rule forbidding congressional
sea, act pincipte Sve shen to the excopens, the
ing pocspestine edied-—ao tan cxraplos Sa ane
this Court's decisions in United States v. Sioux Nation,
448 US. 371 (1980) (and Cherokee Nation v. United
States, 270 US. 476 (1926). and Pope v. United States,
323 US. 1 (1944)): the second accommodating the de-
andhy Cand caataats gone: to dite the tow ont

Taims judgment before paying it. United States rv.
Waters, 133 US. 208 (1990), likewise turned on a statutory
conclusion.

12

59 US. (18 How.) 421 (1855); The Clinton Bridge, 77
U.S. (10 Wall.) 454 (1870)). But the doctrine of
Mayberts Cam Giiitly in SONS en eameen Se
prospective judgments (¢.g., Chicago & Southern Air
Lines, Inc. v. Vann S.S. Corp., supra) nor an ex-
ception for cases against the United States (see Hayburn’s
Case, Ferreira, Gordon, etc.). The Sixth Circuit’s need
to trim the doctrine to fit the desired focus on post-
judgment statutes confirms that the doctrine has nothing
to do with such statutes.

Contrary to the Sixth Circuit's evident misunderstand-
ing. Hayburn’s Case does not state a constitutional bar on
Se ee ee oe ee court judgments.

enacted while the case was pending on aaa But
Hayburn's Case has no such effect (see. ¢.¢., Schooner
Peggy, supra), because such a statute does not somchow
retroactively undo the case-or-controversy character of
the district court judgment at the time it was entered. A
statute enacted after appellate review is exhausted no
more impairs the Article III nature of earlier eee

ern Air Lines, 333 US. at 114. There was no such
statute in this case. Accordingly, any separation-of-powers
claim that Section 27A(b) is invalid because of its effect
on pre-enactment judgments must look to some principle
other than that found in Hayburn’'s Case.

he i glace

gs from ehrcing adh por au thn pric

13

whether Section 27A(b) represents a of
cial power. | F.3d at 1499. oe ry “4

To accuse Congress of having usurped judicial author-
ity in this case, then. the Sixth Circuit had to disregard

the nature of the congressional action and focus exclu-
sively on the reopening of a final judgment as a per se
assumption of judicial power—even by a non-adjudica-
we hoy og ~Lnye KD _ But such a refusal to

14

é isti judici . See, é.g.,
defining characteristic of the judicial power See
Robertson, 112 S. Ct. at 1413 (“we find nothing in [the
statute] that purported to direct any particular oe
of fact or application of law, old or new, to fact );
Freytag v. Commissioner, 111 S. Ct. 2631, 2655 (1991)

(Scalia, J., concurring) (to “ ‘adjudicate,’ Le., .. . deter-
mine facts, apply a rule of law to those facts, and thus
arrive at a decision . . . [is a] necessary... condition| |

for the exercise of federal judicial power”). Because
Congress engaged in no case-specific adjudication, it did
not exercise judicial power in enacting Section 27A(b).

The Sixth Circuit’s focus on “finality” for its own sake,
rather than on the nature of the congressional decision,
finds no support in the text of Article Ill. Nothing there
speaks of “finality,” much less assumes or constitutional-
izes any particular set of rules for appealing, reopening,
or otherwise further reviewing judgments—rules that, of
course. have changed considerably over the years. _Nor
do the historical materials cited by the Sixth Circuit (1

10 One aspect of the bar on congressional exercise of the cmon
power is presented in United States v. Klein, 80 US. (18 Wall.
128 (1871), where Congress ordered a disposition of a specific case
(directing this Court, in a case on appeal from the Court of Claims,
to order dismissal of the complaint) based on an improper con-
gressional determination of the legal effect of a presidential pardon.
As the Sixth Circuit itself recognized (1 F.3d at 1497 n.14), Klein
could not support the asserted rigid bar on congresssional reopen-
ing of “final” judgments. Moreover, Section 27A(b), as a ome
of law with adjudication left to the courts, does not otherwise
present any problem under Klein. This Court’s recent decision in
Robertson, supra, is nonetheless instructive here, in its unanimous
understanding that a law-changing statute was not judicial "7
though it addressed particular cases by docket number. 112 S. Ct.
at 1411.

11 For example, under the old “term” system, a district court had
plenary authority to alter its judgments during the same “term,
which in many instances would have continued during the —
to-December period required for all cases affected by Section -
to have been “pending.” See, e.g., Hill v. Hawes, 320 US. —_ oes
(1944); 6A J. Moore & J. Lucas, Moore’s Federal Practice § 60.04,
at 60-31 (2d ed. 1993); 7 id. | 60.09, at 60-65.

~ oe Se ee, ¥

15

F.3d at 1490-91} reveal any objection to impairment
of finality per se. Rather, the common feature of the
identified legislative actions was their case-specific adjudi-
catory character—dquite irrespective of whether there had
previously been any final judgment or, indeed, any ju-
dicial proceedings at all.’

Not surprisingly, then, the central policy underlying
the separation of the Article III courts into a politically
independent Branch has nothing to do with finality for
its own sake. That guarantee of independence, instead,
has everything to do with the case-specific nature of gov-
ernmental determinations: political independence is im-
portant for deciding the rights of identified parties
through adjudicatory determinations—findings of fact, in-
terpretations of existing law, fashioning of case-specific
remedies, etc. Political independence is irrelevant, and
indeed antithetical, to the enactment of new legal stand-
ards, including a new statute of limitations.

Precedent, too, supports rejection of the notion that
congressional reopening of an Article III judgment is
per se an exercise of judicial power. This Court has up-
held statutes even when Congress has not changed the
governing law, but instead only provided fo- reopening
(or, what seems the same thing, further appellate review
not otherwise available), even in individually identified
cases. That was, in fact, precisely the holding of United
States v. Sioux Nation, supra.” And contrary to the Sixth

‘2 The quotes set forth in the Sixth Circuit opinion (1 F.3d at
1490-91 & nn.7, 8) speak for themselves in this regard. So, too,
the listing of legislative actions in Judicial Action by the Provincial
Legislature of Massachusetts, 15 Harv. L. Rev. 208 (1901-02)
(cited at 1 F.3d at 1490 n.7), discloses that the common thread
making them “judicial” was their case-specific adjudicatory charac-
ter; nothing distinctive about final judgments can be inferred from
the mix of listed actions—some of which affected final judgments,
some pending cases, and some disputes not in litigation at all.

'S This Court has likewise upheld such s.atutes as applied to the
judgments (treated as such for full faith and credit purposes) of
territorial courts and administrative tribunals. See, e.g., Paramino
Lumber Co. v. Marshall, 309 U.S. 370 (1940) ; Stephens v. Cherokee

16

Circuit’s view, the fact that the United States was a party
in Sioux Nation is irrelevant to the Article III issue of
whether congressional reopening of an Article III judg-
ment is per se an exercise of judicial power.

The question of congressional authority to require re-
litigation of the claim presented in Sioux Nation, without
res judicata, necessarily involved two components: is
reopening automatically an exercise of judicial authority?
and if not, what specific legislative authority does Con-
gress have in Article I to eliminate res judicata? The
party status of the United States was key to the second
step in the Court’s upholding of the statute—namely, to
locate the particular legislative power underlying the en-
acted statute, which merely directed the Court of Claims
to ignore res judicata. The Court held that the debt-
paying power set forth in Article I, § 8, authorized the
waiver of res judicata. But the waiver notion and debt-
paying power have no bearing on the Sioux Nation
Court’s first necessary step, concluding that reopening a
final judgment of an Article III court is not a uniquely
judicial power. It is that proposition, unaffected by the
identity of the defendant, which suffices to undermine the
Sixth Circuit’s holding here.”

In any event, Section 27A(b) presents even less of a
separation-of-powers issue than the statute upheld in Sioux
Nation, since Section 27A(b) undeniably creates new law

Nation, supra; Freeborn v. Smith, supra; Sampeyreac v. United
States, 32 U.S. (7 Pet.) 222 (1833).

14 After all, the “waiver of res judicata” that the Court found
authorized by the debt-paying power could easily have been exer-
cised by Congress itself, a Committee, or some Article I tribunal.
The validity of requiring involvement of the Article III courts
requires reasoning apart from the notion of waiver. By the same
token, the interest of the Article III courts in independent func-
tioning does not change based on the identity of the parties before
them.

15 Of course, the source of legislative power in this case presents
no difficulty, since Section 27A(b) plainly rests on the Commerce
Clause power to enact a statute of limitations for securities cases.

- ee

17

applicable in a generally defined class of cases, as op-
posed to merely requiring an Article III court to en-
gage in relitigation of one individually identified dispute.
See, e.g., Pope v. United States, supra; Cherokee Nation
v. United States, supra. Thus, Section 27A(b) does not
present either of the two features that appear key to the
dissent in Sioux Nation: the statute in Sioux Nation
applied to precisely one identified case and changed no
law except the rule of finality (res judicata, preclusion).”*
Thus, this Court need not decide here in what circum-
stances, if any, Congress may have power to enact stat-
utes changing only finality rules for purely private cases.
Section 27A(b) plainly does more: it applies to a gen-
erally described class of cases and it does change the law
to be applied. That is a proper legislative, not a judicial,
act.

Section 27A(b), then, is in substance nothing but the
creation of a new cause of action for certain securities
fraud plaintiffs. In the absence of a formal bright line
in the Constitution itself, there is no sound basis for re-
fusing to look to the substance of this legislation in judg-
ing its validity.’ Indeed, where as here the text does not

16 The majority in Sioux Nation viewed the statute as creating
“a new legal right” (448 U.S. at 407), whereas the dissent viewed
it otherwise. 448 U.S. at 431 (“Congress has not changed the rule
of law, it simply directed the judiciary to try again.”).

17In this respect, this case is quite different from INS v.
Chadha, 462 U.S. 919 (1983), Bowsher v. Synar, 478 U.S. 714
(1986), and Metropolitan Wash. Airports Auth. v. Citizens for the
Abatement of Aircraft Noise, Inc., 111 S. Ct. 2298 (1991), each
of which ultimately rested on vextually plain reasoning (supported
by underlying structural principles): “If the power is executive,
the Constitution does not permit an agent of Congress to exercise
it. If the power is legislative, Congress must exercise it in con-
formity with the bicameralism and presentment requirements of
Art. I, § 7.” 111 S. Ct. at 2312. Moreover, even the dissents in
Morrison v. Olson, supra, and Mistretta, supra, rested on the view,
rooted in the text, that each challenged statute involved an exercise
of governmental power outside the constitutional structure in the
simple sense that the power was not exercised by, or subject to the

18

speak clearly, this Court has ruled repeatedly that “ ‘prac-
tical attention to substance rather than doctrinaire reli-
ance on formal categories should inform application of
Article Il.” CFTC v. Schor, 478 US. 833, 848 (1986)
(quoting Thomas v. Union Carbide Agricultural Prod.
Co., 473 U.S. 568, 587 (1985)); see Robertson, 112
S. Ct. at 1414 (rejecting argument based on form of law
where equivalent in substance was constitutional). See
also, e.g., West Lynn Creamery, Inc. v. Jonathan Healy,
62 US.L.W. 4518, 4523 (1994) (rejecting form over
substance in Commerce Clause application ).

That focus on substance means, in the present context,
that what matters is whether Congress has engaged in
case-specific adjudication. If it has, the congressional
action should be invalid whether the affected case is
pending or final. But if it has not, the congressional ac-
tion should be valid whether the affected cases are pend-
ing or final. As the accepted validity of Section 27A(a)
establishes, Section 27A(b) falls into the latter category
—valid as a legislative, not judicial, exercise of power.

C. Section 27A(b) Violates No Broader Separation of
Powers Principle.

Section 27A(b) readily passes muster under a broader,
less textually focused separation-of-powers standard for-
bidding congressional actions that unduly encroach on or
impair the effective functioning of another Branch, in-
cluding the Article III courts. See, e.g., Mistretta v.
United States, 488 U.S. at 381-82: CFTC v. Schor, 478
U.S. at 850. A serious problem would be presented if
Congress took action with the purpose or with the effect
of chilling or impairing the courts’ independent perform-
ance of their adjudicatory duties—by, for example, im-
posing a general rule requiring or approving relitigation

control of. the Congress, the President, or the courts—the sole
repositories of the powers vested by Article I, Article II, and
Article III. The Sixth Circuit's pending/final rule, by contrast,
cannot in any comparable way be read off the face of the Consti-

tution’s assignment of powers.

19

of massive numbers of already-decided cases or by forcin

relitigation for no reason other than a change in judicial
personnel. But such improper purposes or effects, which
may equally infect a statute applicable to pending cases
cannot support the Sixth Circuit’s special rule for laws
affecting final cases. And Section 27A(b) cannot re-
motely be faulted as effecting any systemic impairment

or serving purposes inconsistent with th ituti
poses ini e constitution
commitment of judicial independence. ‘

. Section 27A(b) has no disabling impact on the func-
tioning of the Article III judiciary. Although not case-
specific (there is no evidence Congress knew what cases
would be pending or final when Section 27A was en-
acted), the provision applies only to the very small num-
ber of cases that were caught by surprise by Lampf. Cf
CFTC vy. Schor, 448 U.S. at 851-57 (narrow scope of
measure supports its validity). And the purpose of Sec-
tion 27A( b) has nothing to do with any questioning of
the independent judgment of courts. Congress made a
substantive change of legal standards (applying it retro-
actively, as it is entitled to do) because of a perceived
injustice in the preexisting state of the law. This purpose
is no more offensive to any constitutional value as ap-
plied to cases where no further review is available (Sec-
tion 27A(b)) than it is as applied to pending cases (Sec-
tion 27A(a)), where it is unquestionably valid. Indeed
it is at the heart of Congress’s responsibility to recon-

sider (and, if necessary ) amend statutes after the courts
make clear their present meaning.”

18 In addition, the properly legislative char i
of considerations relevant to prospectivity rach pb eetriceige
law-changing decisions follows, as a matter of both doctrinal
logic and practical need, from this Court’s recent decisions su on
ing that such balancing is not properly a judicial task. See Has >
v. Virginia Dep’t of Taxation, 113 S. Ct. 2510 (1993), saad

20

Il. SECTION 27A(b) DOES NOT VIOLATE THE DUE
PROCESS CLAUSE,

Section 27A(b) readily satisfies the settled substantive
due process standards applicable to retroactive legislation.
And there is no sound basis in “vested rights” notions for
creating a special due process standard for laws that up-
set otherwise-final judgments. (Of course, the takings
clause and contract clause, neither at issue here, provide
specific protections for certain vested rights.) Indeed, the
judgment at issue here is particularly undeserving of any

expansive due process protection.

A. Section 27A(b) Readily Passes the Applicable
Rationality Test for Retroactive Legislation.

The standard governing the assessment whether retro-
active legislation violates due process is by now firmly
established. “Retroactive legislation presents problems of
unfairness that are more serious than those posed by
prospective legislation, because it can deprive citizens of
legitimate expectations and upset settled transactions.
For this reason, ‘[t]he retroactive aspects of [economic]
legislation, as well as the prospective aspects, must meet
the test of due process’: a legitimate legislative purpose
furthered by rational means.” General Motors v. Romein,
112 S. Ct. at 1112 (quoting R.A. Gray & Co., 467 US.
at 730). See Carlton, supra; Sperry Corp., supra; Turner
Elkhorn, supra. This test thus recognizes that settled
expectations can constitutionally be upset, as long as the
legislature is rationally pursuing a legitimate objective in
doing so. See Turner Elkhorn, 428 US. at 16 (“legisla-
tion readjusting rights and burdens is not unlawful solely
because it upsets otherwise settled expectations”) (citing
numerous cases) (quoted in R.A. Gray & Co., 467 US.
at 729-30).

That standard is easily satisfied here. Retroactivity is
justified by obvious dual purposes: to protect the expec-
tation interests of plaintiffs who had relied on pre-Lampf
limitations periods and pursued securities fraud claims;
at the same time, to prevent a host of alleged malefactors

21

from escaping even having to answer fr
leging damages in the billions of y= Heagy Hoyo oA
Investors Legal Rights: Hearing on H.R. 3185 Before
the Subcomm. on Telecommunications and Finance of
the House Comm. on Energy and Commerce, 102d
Cong., Ist Sess. 3-6 (1991); 137 Cong. Rec. $18.623-24
(Nov. 27, 1991) (statement of Sen. Bryan). Both of
these purposes extend equally to cases where dismissals
under Lampf were on appeal and cases where no appeals
were pending. And the means adopted—a law reaching
back only a few months, and no further than the am
of legislative consideration (see Carlton, 114 §. Ct. at
2023 )—were precisely tailored to achieve those objec-
tives: indeed, these means were proposed by proelln on
tives of the securities industry." Section 27A(b) is :
measure that, far from upsetting the expectations of the
rats yy party, affirmatively serves the very fairness
st in preservin i "
me A Some t g expectations for which due process

B. Invocation of “Vested Rights”
Governing ' £ Does Not Alter the

Because Section 27A(b) so plainly meets i
due process standard, and indeed eae Ag PA rare
settled expectations at all, any due process challenge m!
the statute must depend on establishing a special rule
treating final judgments as sacrosanct. But this Court's
decisions setting forth the modern standard for retroactive
legislation, as quoted above, give no hint that judgment-
based rights are outside the standard, let alone accorded
the absolute protection without which any due process
challenge to Section 27A(b) must fail. In particular

invocation of “v ‘ohte” 2
pring ra ested rights” cases cannot justify such a

19
= Py a — of Morgan Stanley, testifying on behalf
pede) ye ustry Association, proposed that “the timeli-
~ “ cases pending at the time of the Lampf decision—
— ae not those cases since have been dismissed—should be
~ rmi by application of the law as it stood at that time.”
curities Investors Legal Rights, supra, at 91-92; see id. at 71-18

22

To begin with, as this Court pointed out more than
one hundred years ago, there is no “vested rights” clause
in the Constitution; claims under the due process clause
must instead be analyzed in due process terms. Campbell
v. Holt, 115 U.S. 620, 628 (1885). Not surprisingly,
therefore, it is clear that the established rationality stand-
ard applies to “vested” contract or property rights, both
constituting “property” under the due process clause. See,
e.g., United States v. Locke, 471 U.S. at 104-05; National
R.R. Passenger Corp. v. Atchison, T. & S.F. R.R., 470
U.S. 451, 471-72 (1985); R.A. Gray & Co., supra;
Kaiser Aluminum, 494 U.S. at 856 (Scalia, J., concur-
ring). Nothing about the advancement of a final judg-
ment as the basis for the “vested” right provides a reason
to fashion any different standard of due process protec-
tion.”

Even aside from the far-from-sacrosanct character of
“final” judgments (see Fed. R. Civ. P. 60(b)),” rejection

“It is important to distinguish two roles a judgment may
play: it may create a property right, or it may vest a property
right. The former—-as when a judgment gives rise to a judgment
lien—is irrelevant here, having nothing to do with the pending/
final line at issue or with “vested rights” doctrine. In any event,
nothing about judgment-created property rights warrants distinc-
tive protection over other forms of property (or contract) rights.
For example, judicial liens do not have any general priority over
liens arising from contracts. See, e.g., D. Epstein, J. Landers, &
S. Nickles, Debtors and Creditors 9, 48, 346 (3d ed. 1987); United
States v. Ron Pair Enters., 489 U.S. 235 (1989). Under 11 U.S.C.
§ 506, there is generally “no distinction between consensual and
nonconsensual! liens.” Ron Pair, 489 U.S. at 242 n.5. Pre-Code
bankruptcy law often gave less protection to judgment-based liens
than to ~onsensual liens (id. at 246-48; id. at 253-54 (O’Connor, J.,
dissenti. g)), as does at least one provision of the current Code
(11 U.S.C. §522(f); see Farrey v. Sanderfoot, 111 S. Ct. 1825
(1991)).

*! Rule 60(b) permits reopening where “ ‘appropriate to accom-
plish justice,’” with a strong practical eye on systemic needs for
finality. See Liljeberg v. Health Servs. Acquisition Corp., 486 U.S.
847, 864 (1988). This authority has been used to reopen judgments
based on a change of law. See, e.g., Adams v. Merrill Lynch Pierce
Fenner & Smith, 888 F.2d 696, 702 (10th Cir. 1989); Matarese

23

of a unique standard of protection follows from a straight-
forward recognition of precisely what the vesting of a
right by a final judgment is. The right that is vested is
the underlying right at issue in the litigation, which itself
must be a “property” interest protected by due process;
and what the final judgment does is to settle, i.e., con-
firm or eliminate grounds for dispute about, that right
under then-applicable law.” But there is no due process
reason why a property right sufficiently in doubt to have
produced litigation should gain absolute (or even ele-
vated) protection simply because the courts have resolved
the dispute, while the generally applicable rationality
standard applies to property rights (e.¢., in a bond, title
to property, limits on contractual obligations) that were
so clear and indisputable as never to have been litigated.
Indeed, such a ranking of rights would turn the due proc-
ess interest in settled expectations on its head.

Precedent in no way compels such a senseless result.
Absolute protection could hardly be squared with this
Court's decisions on many occasions and for many rea-
sons sustaining laws that upset final judgments.“ And
the Court specifically said in Fleming v. Rhodes that
“rights acquired by judgments have no different standing”
for due process purposes from that afforded other “vested”

v. LeFevre, 801 F.2d 98, 106 (2d Cir. 1986), cert. denied, 480 U.S.
908 (1987); McGrath v. Potash, 199 F.2d 166, 167 (D.C. Cir.
1952); cf. Polites v. United States, 364 U.S. 426, 433 (1960).

See also Gondeck v. Pan American World Airways, Inc., 382 US.
25 (1965) (granting rehearing four years after denial! of certiorari).

2 See, e.g., Stewart v. Keyes, 295 U.S. 403, 417 (1935): Campbell
v. Holt, 115 U.S. at 623. Without such a final judgment, a court
presented with a due process (or takings) challenge to a deprivation
of some property would have to establish at the outset that the
plaintiff did in fact enjoy the asserted property right under pre-
existing law. A pre-enactment final judgment would typically re-
move that issue from litigation.

* See Fleming v. Rhodes, 331 U.S. 100 (1947) ; Hodges v. Snyder,
261 U.S. 600 (1923); Pennsylvania v. Wheeling & Belmont Bridge,
supra; Paramino Lumber Co. v. Marshall, supra; Stephens v. Chero-
kee Nation, supra; Freeborn v. Smith, supra; Freeland v. Williams,
131 U.S. 405 (1889); Sampreyeac v. United States, supra.

24

rights, such as those gained by contract. 331 U.S. at 107;
see Turner Elkhorn, 428 U.S. at 16 (citing Fleming,
which involved a statute upsetting otherwise-final judg-
ments, in setting forth current rationality test for retroac-
tive legislation ).

Of course, it is possible to find statements in opinions
from an earlier era asserting the special protection of
“vested rights” based on final judgments. It is noteworthy,
however, that the Court appears never to have rested a
holding on such a proposition, not even in McCullough
v. Virginia, 172 U.S. 102, 123-24 (1898), cited by the
Sixth Circuit (1 F.3d at 1493 n.12).%* Perhaps more
important, those statements come from an era when other
“vested rights” were likewise given special protection,”
and that era has long since passed. See Landgraf, 114
S.Ct. at 1500-01. Thus, nothing about the older prece-
dents could fairly require repudiation of the modern ra-
tionality test where rights settled by final judgments are
present.

*4 Statements that respondents may rely on can be found, for
example, in Pennsylvania v. Wheeling & Belmont Bridge Co., supra,
The Clinton Bridge, supra, and Hodges v. Snyder, supra, but each
of those decisions upheld laws that disturbed (prospective) final
judgments.

As for McCullough, the relevant passage (172 U.S. at 122-23)
neither mentions due process nor actually rules on the constitu-
tional validity of the statute allegedly disturbing a final judgment,
but leads only to the conclusion that the challenged statute did not
in fact have that effect. Moreover, before that passage, the Court
had already disposed of this threshold question of state law, noting
that the state supreme court had not read the statute to apply to
the judgment before it. Finally, and in any event, the statute at
issue was indisputably passed while the case was pending (on appeal
in the state courts). McCullough’s opaque passage, dictum in sev-
eral ways and perhaps not even meant as a constitutional conclu-
sion, can hardly settle the question here.

25 See, e.g., Forbes Pioneer Boat Line v. Board of Comm'rs, 258
U.S. 338, 340 (1922); Stewart v. Keyes, supra; Coombes v. Getz,
285 U.S. 434, 442 (1932); Etter v. City of Tacoma, 228 U.S. 148,
156 (1913).

|

25

C. A Recent Judgment for a Defendant on Limitations
Grounds Generates No Vested Right to Avoid
Answering Substantive Charges Under a New Limi-
tations Rule.

Even if this Court were to conclude that some types
of judgments warrant special due process protection, the
particular type of judgment at issue here is the very last
sort that deserves special protection as a “vested right”
against legislation like Section 27A(b). First, the affected
judgments, aside from being quite recent, neither con-
firmed title to some specific property nor awarded money.
Instead, their only concrete effect was to give the defendants
a future protection against having to answer securities-
fraud charges under 10b-5. Thus, Section 27A(b) takes
away no concrete “property” awarded by a judgment.
See Paramino Lumber Co., supra (upholding statute re-
opening a specific damages dispute between private par-
ties after a final adjudication for defendant by an ad-
ministrative tribunal).” See also note 5, supra (takings
clause).

Second, and more narrowly, Section 27A(b) upsets no
interest of defendants in the resolution of a specific issue
previously decided by the court—any more than does Sec-
tion 27A(a). The statute changes the law on the sole
issue previously decided, making the prior determination
immaterial. In substance, Section 27A(b) does nothing
other than provide the affected plaintiffs with a new claim
—for securities fraud with a new limitations period. No
due process fairness notion creates a “vested” right to
immunity from having to answer the altered claim, which
in its current form was not, and could not have been,

26The reopened judgment in Paramino was by law deemed
“final” when no judicial review was sought (33 U.S.C. § 921), was
subsequently cited by this Court as a final judgment (Fleming v.
Rhodes, 331 U.S. at 107 n.12), and would, at least today, have had
the preclusive effect of a final judgment (see University of Tennes-
see v. Elliott, 478 U.S. 788 (1986); United States v. Utah Constr.
& Mining Co., 384 U.S. 394 (1966)). For due process purposes,
then, the upset judgment in Paramino is indistinguishable from the
judgments at issue here.

26

litigated in the original action. Cf. Commissioner v.
Sunnen, 333 U.S. 591, 599 (1948) (collateral estoppel
“is not meant to create vested rights in decisions that have
become obsolete or erroneous with time”). And no due
process protection for settled expectations could reason-
ably elevate form over substance to distinguish Section
27A from a law using the label of “new cause of action.”

Third, and of course most narrowly, the issue on
which the affected judgments rest is a statute of limita-
tions—where, indeed, it was the old rather than new limi-
tations rule that upset litigants’ expectations. Plaut, |
F.3d at 1498. This Court has often noted the distinc-
tively weak character of claims assertedly “vested” as a
result of a procedural or administrative defect, including
timeliness bars. See, e.g., Paramino Lumber Co., 309
U.S. at 378: Graham & Foster, 282 U.S. at 427, 429-30.
The reasons are simple. Disturbing a “repose” that rests
on limitations grounds does not make unlawful any con-
duct that was lawful at the time. Cf. Bowen v. George-
town Univ. Hosp., 488 U.S. 204, 219 (1988) (Scalia, J.,
concurring) (classically retroactive law “alter[s] the past
legal consequences of past actions”). And, as the Court
observed in Chase Sec. Corp., 325 U.S. at 316, the law
need not indulge any assumption that the affected defend-
ants’ “conduct would have been different if the present

27 Historically, statutes of limitations have been treated as “pro-
cedural” for choice-of-law and other purposes. See Sun Oil Co. v.
Wortman, 486 U.S. 717 (1988); Bournias v. Atlantic Maritime Co.,
Ltd., 220 F.2d 152 (2d Cir. 1955); Restatement (Second) of Con-
flict of Laws $$ 142, 143 (1971). One consequence has been that
there is no guarantee of freedom from having to answer the sub-
stance of a claim, or freedom from liability, based on a dismissal
for untimeliness of the suit, because the same claim might be
permitted in another jurisdiction. 1B J. Moore, J. Lucas & T.
Currier, Moore’s Federal Practice { 0.409(6), at III-162 (2d ed.
1993); Restatement (Second) of Conflict of Laws §§ 142, 143;
Restatement (Second) of Judgments § 19 Comment f.

See also Block v. North Dakota, 461 U.S. 273, 291-92 (1983)
(limitations bar does not determine underlying title to real prop-
erty, even after final judgment).

27

rule had been known and the change [made by Secti
27A(b) | foreseen.” 7 pg

Because statutes of limitations “represent expedients,
rather than principles” (Chase, 325 U.S. at 314), “it can-
not be said that lifting the bar of a statute of limitation
So as to restore a remedy lost through mere lapse of time
is per se an offense against the Fourteenth Amendment.”
Id. at 316; see Electrical Workers Local 790, supra.”
There is simply no good reason for a different conclusion
for those plaintiffs who had the lapse of time adjudicated
against them before the legislature lengthened the period.
There is still less reason for a different result where, as
here, the superceded claim-barring limitations rule was
itself the result of an unexpected judicial decision and the
curative statute merely restored all parties to their original

expectations. Section 27A(b), as such a statute, should
be upheld.

28 The Court in Campbell v. Holt, 115 U.S. at 628, specifically
rejected the notion that “a right to defeat a just debt by the statute
of limitations is a vested right, so as to be beyond legislative power
in a proper case. The statutes of limitation, as often asserted, and
especially by this court, are founded in public needs and public
policy—are arbitrary enactments by the law-making power... .
No man promises to pay money with any view to being released
from that obligation by lapse of time. It violates no right of his,
therefore, when the legislature says time shall be no bar, though
such was the law when the contract was made. The authorities we
have cited, especially in this court, show that no right is destroyed
when the law restores a remedy which had been lost.”

28

CONCLUSION
The judgment of the court of appeals should be
reversed.
Respectfully submitted,

RICHARD G. TARANTO
(Counsel of Record)
H. BARTOW FArkR, III
FARR & TARANTO
2445 M Street, NW
Washington, DC 20037
(202) 775-0184

STEWART M. WELTMAN
STEWART M. WELTMAN
& ASSOCIATES, P.C.
135 S. LaSalle Street
Dated: July 21, 1994 Chicago, IL 60603

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0482%3A12. Public record. Not legal advice.