facts predating the pronouncement, which defendants contend was held by the Supreme Court in Beam to be constitutionally proscribed. This Court, however, does not read Beam as disapproving of the selective prospectivity principle on constitutional grounds.
Only three Justices out of nine found a constitutional basis for the Court's conclusion that selective prospectivity of judicial decisions was impermissible -- Justices Blackmun, Marshall and Scalia found that retroactive application of judicial decisions is required by Article III of the Constitution. 111 S. Ct. at 2450-51. Justice Souter, writing for the Court and joined by Justice Stevens, stated that "selective prospectivity . . . breaches the principle that litigants in similar situations should be treated the same, a fundamental component of stare decisis and the rule of law generally." 111 S. Ct. at 2444. Justice Souter viewed the retroactivity issue very narrowly, as "an issue of choice of law" and refused to "speculate as to the bounds or propriety of pure prospectivity."
Id. at 2448. Justice White, in his concurring opinion, agreed with the "narrower ground employed by Justice Souter," rejecting the constitutionality argument made by Justice Scalia. Id. at 2449. The three dissenting Justices totally rejected Justice Scalia's constitutional interpretation of retroactivity in favor of utilizing the Chevron Oil analysis. Id. at 2453-56. Accordingly, since Beam did not declare unconstitutional the practice of "selective prospectivity," this Court cannot conclude that Congress impermissibly revived that practice in enacting Section 27A.
Defendants' argument that Section 27A unconstitutionally divests defendants of the benefit of dismissal is equally flawed. In support of their contention, defendants cite, inter alia, McCullough v. Virginia, 172 U.S. 102, 43 L. Ed. 382, 19 S. Ct. 134 (1898), Daylo v. Administrator of Veterans' Affairs, 501 F.2d 811 (D.C. Cir. 1974) and Georgia Association of Retarded Citizens v. McDaniel, 855 F.2d 805 (11th Cir. 1988). But defendants' reliance on these cases is misplaced. Rather than involving the modification of a technical defense, the cases cited by defendants specifically involved divestiture of a substantive right, such as the right to receive a monetary award. See Daylo, 501 F.2d at 814-815 (refusing to grant the Veterans' Administration's motion for relief, in light of a newly enacted statute, from a judgment requiring payment of Widows' benefits).
While it is true that "it is not within the power of a legislature to take away rights which have been once vested by a judgment," McCullough, 172 U.S. at 123, this does not apply where the judgment was not based on the substantive merit of the claim, but instead was the result of the application of the defense of statute of limitations, a mere technical rule. Federal Courts have long held that unless the passage of the statute of limitations creates a prescriptive property right, such as title in adverse possession, Congress is free to revive a cause of action after the limitations period has expired. See Campbell v. Holt, 115 U.S. 620, 29 L. Ed. 483, 6 S. Ct. 209 (1885). In Chase Securities Corp. v. Donaldson, 325 U.S. 304, 89 L. Ed. 1628, 65 S. Ct. 1137 (1945), the Supreme Court reaffirmed the vitality of Campbell, and found that revival of a personal civil cause of action which did not involve the creation of title did not offend Fourteenth Amendment notions of due process.
As the Supreme Court further noted with respect to Statutes of Limitation "their shelter has never been regarded as what is now called & 'fundamental' right . . . the history of pleas of limitation shows them to be good only by legislative grace and to be subject to a relatively large degree of legislative control." Chase Securities, 325 U.S. at 314. Moreover, statutes of limitation "are by definition arbitrary, and their operation does not discriminate between "are just and the unjust, or the voidable and unavoidable delay." Id. "Legislation to alter such a technical defense, and its application even to dismissed cases, goes far less to the heart of the judicial function than would a legislative attempt to reverse adjudications which had addreessed the true merits of the disputes in question." Alex Johnson, Inc., slip op. at 16.
Thus, although the Supreme Court's decision in Lampf may have given defendants an opportunity to avoid litigating the Section 10(b) claims, the reinstatement of those claims through an alteration in the statute of limitation creates no special hardship or unfair surprise.
Lastly, the Court rejects defendants' contention that the statute is irrational and creates arbitrary classifications in contravention of the Fifth Amendment's Guarantee of Equal Protection.
Retroactive legislation, even legislation reversing Supreme Court decisions and reopening judgments, is not violative of due process or equal protection as long as "retroactive application of a statute is supported by a legitimate legislative purpose furthered by rational means." PBGC v. R.A. Gray & Co., 467 U.S. 717, 729, 104 S. Ct. 2709, 81 L. Ed. 2d 601 (1984). Here, Congress had a rational basis for applying Section 27A only to those claimants who filed claims prior to June 19, 1991, the date Lampf was decided. "Lampf changed the rules in the middle of the game for thousands of fraud victims who already had suits pending." 137 Cong. Rec. S18623 (daily ed. November 27, 1991) (comments of Senator Richard Bryan). "All those who filed claims subsequent to the Lampf and Beam decisions did have notice of the change in the law and of the fact they would be precluded from pursuing claims which accrued outside of the one-year/three-year period of limitations." Ayers, supra, at *5-6. Accordingly, the Court finds that Section 27A withstands defendants' equal protection clause challenge because Congress had a legitimate legislative purpose, to protect the reasonable expectations of those claimants who filed prior to Lampf, that was furthered by enacting Section 27A.
For the foregoing reasons, plaintiffs' motion to reinstate the Section 10(b) claims is granted.
Dated: New York, New York
April 27, 1992
William C. Conner
United States District Judge