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ADLER v. BERG HARMON ASSOCS.

April 27, 1992

EDWARD ADLER, et al., Plaintiffs, against BERG HARMON ASSOCIATES, et al., Defendants.

Conner


The opinion of the court was delivered by: WILLIAM C. CONNER

CONNER, D.J.:

 This action is presently before the Court on the motion of plaintiffs, Edward Adler, et al., pursuant to Section 476 of the Federal Deposit Insurance Corporation Improvement Act of 1991, Pub. L. No. 102-242, to be codified as Section 27A of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa-i, to reinstate their claims under Section 10(b) of the Exchange Act ("Section 27A").

 BACKGROUND

 This case arises out of plaintiffs' purchase of interests in a number of limited partnerships (the "Berg Harmon Partnerships") sponsored by defendants. On or about December 7, 1989, plaintiffs commenced this action alleging violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j ("Exchange Act"), Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 78q, the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and of various state laws. Thereafter, defendants moved to dismiss the Complaint under Rules 9(b) and 12(b)(6), Fed. R. Civ. P. Subsequently, defendants moved for partial summary judgment on the Section 10(b) cause of action based upon the one-year/three-year limitations period adopted by the Second Circuit in Ceres Partners v. GEL Assocs., 918 F.2d 349 (2d Cir. 1990). On June 20, 1991, the Supreme Court held that actions brought under § 10(b) of the Exchange Act must be commenced within one year of the discovery of the facts constituting the violation and no later than three years after the violation. Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 115 L. Ed. 2d 321, 111 S. Ct. 2773 (1991). As a result of the decision in James B. Beam Distilling Co. v. Georgia, 115 L. Ed. 2d 481, 111 S. Ct. 2439 (1991), decided on the same day as Lampf, the one-year/three-year rule became retroactively applicable to all existing cases, including the present one. In light of Lampf and Beam, on July 2, 1991, plaintiffs amended their Complaint to delete the Section 10(b) claims, except to the extent the securities fraud claims served as predicate acts to a RICO action. *fn1" The Court then directed that the motion to dismiss be rebriefed to reflect the dismissal of the securities claims. *fn2"

 On December 19, 1991, Congress amended the Securities Exchange Act of 1934 by enacting Section 27A to modify the retroactive effect of Lampf. Section 27A provides for reinstatement upon motion of certain actions dismissed under Lampf, provided the action was commenced prior to June 19, 1991 and had been timely filed according to the statute of limitations applicable on June 19, 1991. It is pursuant to this statute that plaintiffs argue for reinstatement of their Section 10(b) claims.

 DISCUSSION

 Motion to Reinstate Section 10(b) Claims

 A. Section 27A Analysis

 Section 27A of the Exchange Act overrides the retroactive application of the one-and-three-year limitations rule announced by the Supreme Court in Lampf. Section 27A provides, in pertinent part:

 (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 existed 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.

 Plaintiffs claim that under this provision they are entitled to reinstatement of their Section 10(b) claims, which were effectively dismissed pursuant to Lampf. *fn3" Defendants *fn4" submit that plaintiffs' motion should be denied because (1) plaintiffs' Section 10(b) claims are untimely even under the law as it existed in this Circuit, including principles of retroactivity, on June 19, 1991; (2) Lampf and Beam are the laws which were applicable on June 19, 1991 since the Supreme Court did not make new law when it issued those decisions but simply found the law as it then existed; and (3) Section 27A is unconstitutional because by enacting that provision (a) Congress has prescribed rules of decision to the judiciary in cases pending before it without repealing or amending the underlying law, (b) Congress has required courts to disregard their traditional function "to decide cases before them based upon their best current understanding of the law," and (c) Congress has required courts to reopen final judgments rendered in private civil actions.

 1. Plaintiffs Added After June 19, 1991

 Plaintiffs who joined this action by Amendments to the Complaint on July 2, 1991 and October 7, 1991 are not entitled to move for reinstatement under Section 27A. The plain language of the statute permits reinstatement only of claims commenced prior to June 20, 1991 and dismissed pursuant to Lampf and Beam. Moreover, the Court disagrees with plaintiffs' argument that the claims of the post-Lampf plaintiffs relate back to the date of the filing of the original Complaint in 1989 pursuant to Rule 15(c), Fed. R. Civ. P.

 Rule 15(c) in effect at the time of the filing of the Second Amended Complaint provided:

 Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading. An amendment changing the party against whom a claim is asserted relates back if the foregoing provision is satisfied and, within the period provided by law for commencing the action against the party to be brought in by amendment that party (1) had received such notice of the institution of the action that the party will not be prejudiced in maintaining his defense on the merits, ...


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