1992 WL 3694, at *5 (N.D. Ill. Jan. 6, 1992) (By enacting Section 27A, Congress has not directed "the courts to make a particular factual finding or to reach a particular decision on the merits of any securities fraud claim.").
The Supreme Court's recent decision in Robertson v. Seattle Audubon Society, 118 L. Ed. 2d 73, 60 U.S.L.W. 4273, 112 S. Ct. 1407 (U.S. March 25, 1992), lends further support to this view. In Robertson, the Supreme Court reversed the Ninth Circuit, which had held that the statute in question violated the separation of powers doctrine because it directed results in certain cases without changing the underlying law. The statute in Robertson explicitly referred to two pending cases and affected the outcome of those cases. The Supreme Court, however, found that since the new law did not "direct any particular findings of fact or applications of law, old or new, to fact," it was not unconstitutional. Id. at 4276. Under Robertson, therefore, a law will not be found to be unconstitutional, even where it may effect the outcome of a case, unless it directs particular findings.
Section 27A does not direct particular findings. As to actions that fall under its purview, Section 27A merely turns back the legal clock to the period just prior to Lampf and then permits courts independently to adjudicate any reopened actions on the basis of the law as they determine it then existed. As Judge Lasker noted in Axel Johnson, Inc.:
[Section 27A] does not refer to this or any other case by name, nor does it dictate specific findings of fact or conclusions of law in any case. Plaintiffs in each case within the scope of § 27A must demonstrate that their case was timely filed under the law of the jurisdiction in which the case was brought as it existed on June 19, 1991, and the court in each such case is free to determine whether or not the plaintiff has made the required showing. Notably absent from § 27A, unlike the statute held unconstitutional in Klein, is a specific directive as to what evidence a court may consider in determining the timeliness of the suit's filing or the case's merits.
Slip op. at 6-7.
Moreover, Section 27A represents a change in the law. Prior to the enactment of Section 27A, all Section 10(b) claims were subject to the one-year/three-year limitations period, applied retroactively pursuant to Beam. Section 27A changed the law by limiting the one-year/three-year rule to prospective application only and by subjecting Section 10(b) claims filed prior to June 19, 1991 to the limitations period determined to be applicable by the court in which the action was filed. See Bankard, 1992 WL 3694, at *5 (It might seem that Section 27A did not effect a change in the law "only because instead of delineating fully the change of law, Congress has made the change by reference, incorporating the prevailing law in the applicable jurisdiction.").
The Harmon defendants also challenge the constitutionality of the new statute on the ground that Section 27A mandates the practice of "selective prospectivity," whereby a court applies a new rule in the case in which it is pronounced, but returns to the old one with respect to all others arising on 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. 115 L. Ed. 2d 481, 111 S. Ct. 2439, 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, a McCullough v. Virginia, 172 U.S. 102, 43 L. Ed. 382, 19 S. Ct. 134 (1898); Daylo v. Administrator of Veterans' Affairs, 163 U.S. App. D.C. 251, 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 814-15 (denying motion of Veterans' Administration for relief, in light of newly enacted statute, from a judgment requiring payment of widows' benefits).
While it is true that "it is not within the power of the legislature to take away rights which have been once vested by Judgment," McCullough, 172 U.S. at 123, this rule does not apply where the judgment was not based upon the merits 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, 311-12, 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 notions of due process inherent in the Fourteenth Amendment.
The Supreme Court has noted that the timeliness defense has never been considered a "'fundamental' right . . . [and] the history of pleas of limitation shows [statutes of limitation] 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 the 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 addressed the true merits of the disputes in question." Axel Johnson, Inc., slip op. at 16.
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, pursuant to an Act passed by Congress a mere six months later, creates no special hardship or unfair surprise. See Venturtech II, supra.
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