The opinion of the court was delivered by: ROBERT W. SWEET
Plaintiff Sheldon Rabin ("Rabin") has moved for an order pursuant to § 476 of the Federal Deposit Insurance Corporation Improvement Act of 1991, Pub. L. No. 102-242, 105 Stat. 2236 (codified at § 27A of the Securities and Exchange Act of 1934, 15 U.S.C. § 78aa), reinstating his claims under § 10(b) of the Securities and Exchange Act of 1934 ("§ 10(b)) against the defendants in this action.
For the following reasons, the motion is granted.
Rabin, a resident of Great Neck, New York filed this suit on July 23, 1990, alleging claims under § 10(b) and state law (the "Complaint"). Rabin's claims arose out of his investment in a limited partnership known as BP Associates Limited Partnership ("BP Associates"), which was organized in 1985 to acquire, improve, own, operate and eventually sell the BP Shopping Center. Rabin purchased his limited partnership interests in BP Associates some time in 1986, allegedly in reliance on certain allegedly fraudulent Offering Materials prepared, issued, distributed and communicated by the defendants. The complaint was subsequently amended and served on October 24, 1990 (the "Amended Complaint").
In December of 1990 the defendants moved to dismiss the Amended Complaint contending, among other things, that the § 10(b) claims were time-barred under Ceres Partners v. GEL Associates, 918 F.2d 349 (2d Cir. 1990). In light of the Supreme Court's June 20, 1991 decision in Lampf, Plevis, Lipkind, Prupis & Petigrow v. Gilbertson, 115 L. Ed. 2d 321, 111 S. Ct. 2773, reh. denied, 112 S. Ct. 27 (1991), on July 2, 1991, this court denied the motion to dismiss as well as Rabin's motion for class certification with leave to renew based on Lampf. On July 10 and 12, 1991, the Defendants renewed their motion. By request of the parties, decision on the motion was deferred pending rehearing of the Lampf decision, and, on October 3, 1991, this court dismissed the § 10(b) claims as time-barred under Lampf's one-year/three-year uniform federal statute of limitations for § 10(b) actions, which was made retroactive by James B. Beam Distilling Co. v. Georgia, 115 L. Ed. 2d 481, 111 S. Ct. 2439 (1991) (hereinafter "Beam"). Final judgment was entered on January 15, 1992.
On December 19, 1991, President Bush signed into law § 476 of the Federal Deposit Insurance Corporation Improvement Act of 1991, Pub. L. No. 102-242, 105 Stat. 2236 (codified at § 27A of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa), which proscribed pro forma retroactive application of the Lampf rule. New section 27A provides that:
(a) EFFECT ON PENDING CAUSES OF ACTION -- The limitation period for any private 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 applicable 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 existed on June 19, 1991,
shall be reinstated on motion by the plaintiff no later than 60 days after the date of enactment of this section.
1. Timeliness of Rabin's § 10(b) Claims Under § 27A
A federal court is not to decide constitutional questions unnecessarily. See, e.g., Jean v. Nelson, 472 U.S. 846, 854, 86 L. Ed. 2d 664, 105 S. Ct. 2992 (1985) ("'Prior to reaching any constitutional questions, federal courts must consider nonconstitutional grounds for decision.'" (citations omitted)). Thus, before reaching the defendants' constitutional challenge, it must first be determined whether Rabin's § 10(b) claims were timely filed under the statute of limitations applicable under § 27A(b).
There is no dispute that Rabin has established three of the four elements necessary for reinstatement pursuant to § 27A(b): he filed this action prior to June 19, 1991; his claims were dismissed as time-barred subsequent to June 19, 1991; and he brought his motion to reinstate on February 3, 1991, within 60 days of the enactment of § 27A on December 19, 1991.
The defendants contend, however, that Rabin's § 10(b) claims would not have been timely under "the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991." There is no dispute that "the jurisdiction" to which the court must look for the applicable law in this case is the Second Circuit.
On June 19, 1991, the statute of limitations for § 10(b) claims within this jurisdiction was the one-year/three-year period established in Ceres Partners v. GEL Associates, 918 F.2d 349 (2d Cir. Nov. 8, 1990) "applied sparingly in light of the retroactivity principles enunciated in Welch [v. Cadre Capital, 923 F.2d 989 (2d Cir. Jan. 22, 1991) ("Welch I"), vacated and remanded sub nom., Northwest Savs. Bank PaSa v. Welch, 115 L. Ed. 2d 1048, 111 S. Ct. 2882, aff'd, 946 F.2d 185 (2d Cir. 1991) "Welch II")]." Henley v. Slone, 961 F.2d 23, 26 (2d Cir. 1992).
In Ceres, the Second Circuit followed the Third and Seventh Circuits in adopting a uniform statute of limitations for § 10(b) actions of one year after the discovery of the alleged fraud and three years after the occurrence of the alleged conduct. Ceres, 918 F.2d at 359 (following Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385 (7th Cir. 1990); In re Data Access Sys. Secs. Litig., 843 F.2d 1537 (3d Cir.) (en banc), cert. denied, 488 U.S. 849, 109 S. Ct. 131, 102 L. Ed. 2d 103 (1988)). The court thereby broke from its longstanding practice of applying the forum state's most analogous state statute of limitations, including so-called "borrowing statutes," to claims under § 10(b). See, e.g., Armstrong v. McAlpin, 699 F.2d 79, 86-87 (2d Cir. 1983); Stull v. Bayard, 561 F.2d 429, 431-32 (2d Cir. 1977), cert. denied, 434 U.S. 1035, 54 L. Ed. 2d 783, 98 S. Ct. 769 (1978); Arneil v. Ramsey, 550 F.2d 774 (2d Cir. 1977). Although the Ceres court left for the future the question of whether its rule was to have retroactive effect, see id. at 364, the Second Circuit soon dispelled any suspense about the matter in Welch v. Cadre Capital, 923 F.2d 989 (2d Cir.) ("Welch I"), vacated and remanded sub nom., Northwest Savs. Bank, PaSa v. Welch, 115 L. Ed. 2d 1048, 111 S. Ct. 2882, aff'd, 946 F.2d 185 (2d Cir. 1991). After conducting the three-part test set forth in Chevron Oil Co. v. Huson, 404 U.S. 97, 30 L. Ed. 2d 296, 92 S. Ct. 349 (1971), the Welch I court held that the limitations period established in Ceres did not apply retroactively to the case before it.
The effect of Welch I, therefore, was to establish that the retroactive application of Ceres must be determined on a case-by-case basis according to the Chevron test. See Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb Inc., 967 F.2d 742 (2d Cir. 1992); Grondahl v. Merritt & Harris, Inc., 964 F.2d 1290 (2d Cir. 1992); Henley, 961 F.2d at 25-26.
If retroactive application is denied, the ...