principle of law), which would allow the court to proceed to a balancing test employing the second and third factors. Welch I, 923 F.2d at 994. Thus, a determination of the appropriate statute of limitations requires an application of the Chevron factors to the case at bar.
Chevron's first factor is whether the decision "establishes a new principle of law, either by overruling clear past precedent on which litigants may have relied, . . . or by deciding an issue of first impression whose resolution was not clearly foreshadowed." Id., at 993. In Welch I, the Second Circuit held that Ceres met that first requirement, reasoning that the one year/three year rule was a distinctive change in practice in the Circuit. I am bound by that holding.
As to Chevron's second factor, whether the application of the new statute of limitations would further the purposes behind the rule, Welch I concluded that the "application of a shorter limitations period not yet in existence at the time the suit was commenced clearly does not further either of the competing interests [of deterrence and repose]." Welch I, 923 F.2d at 995. Applying a new rule to the case at bar could not change plaintiffs' behavior in any way. Moreover, it certainly would not impair the purposes in the 1934 Act to have a handful of cases (those still pending on July 19, 1991, but filed before November 8, 1990) continue with the longer limitations period. Id.
Balancing into the equation the third Chevron factor, whether the equities favor the application of the old rule, I think that plaintiffs' make a strong case for application of the old rule, since the new rule would bar their claim. Plaintiffs did not delay in any attempt to maneuver a procedural advantage. Nor has defendant alleged that the timing of plaintiffs' federal filing has prejudiced him in any way.
Accordingly, I conclude that taking into account the factors set forth in Chevron, the retroactive application of the Ceres rule is not required in these circumstances. Plaintiffs should have the benefit of the application of the pre-Ceres rule.
II. Constitutionality of Section 27A
Defendant's second argument is that Section 27A is unconstitutional, as it violates the Separation of Powers Clause of Article III, the Supremacy Clause of Article IV, and the Equal Protection and Due Process Clauses of the Fifth Amendment.
The Second Circuit has not yet addressed this question. It has declined to do so until it is squarely presented with a case raising that issue. Henley, 961 F.2d at 26. The only indication of the Court of Appeals' sentiments is found in a footnote in Litton Industries, Inc. v. Lehman Brothers Kuhn Loeb, Inc., 967 F.2d 742, 752, n. 6 (2d Cir. 1992), where it noted that it was "unimpressed by the cogency" of analyses finding Section 27A unconstitutional.
The district courts in this circuit that have been confronted with the issue have unanimously found the statute constitutional. See Adler v. Berg Harmon Associates, 790 F. Supp. 1235 (S.D.N.Y. 1992); Brown v. Hutton Group, 795 F. Supp. 1307 (S.D.N.Y. 1992); Axel Johnson, Inc. v. Arthur Andersen & Co., 790 F. Supp. 476 (S.D.N.Y. 1992); Kalmanson v. McLaughlin, 1992 WL 190139 (S.D.N.Y. 1992); In Re Crazy Eddie Securities Litigation, 802 F. Supp. 804, 811 (E.D.N.Y. 1992).
Although other district courts have reached a different conclusion as to constitutionality, see In Re Brichard Sec. Litigation, 788 F. Supp. 1098 (N.D. Cal. 1992); Bank of Denver v. Southeastern Capital Group, Inc., 789 F. Supp. 1092 (D. Colo. 1992), I am persuaded by the reasoning in Axel Johnson, Inc. v. Arthur Andersen, 790 F. Supp. 476, and Adler v. Berg Harmon Assoc., 790 F. Supp. 1235, that Section 27A is constitutional as I have applied it.
III. Reinstatement of Plaintiffs' Claims
Defendant argues that even if the Court finds that Section 27A constitutionally requires reinstatement of plaintiffs' § 10(b) claims, the Court should not reinstate plaintiffs' RICO and common law causes of action, which the court dismissed on November 12, 1991, on the grounds of abstention. He also contends that the § 10(b) claim is time-barred even under the application of New York's "two year/six year" rule.
Defendant asks this Court to go beyond the purposes of the limited remand from the Second Circuit. The Second Circuit remanded this case solely so this Court could decide whether or not to vacate its November 12, 1991 order. I have concluded that plaintiffs' motion to vacate should be granted for the reasons set forth above. I will not consider any of defendant's other contentions until they are properly before this Court.
The Clerk of the Court is directed to vacate the Court's order of November 12, 1991. The parties are invited to attend a status conference on Friday, March 19, 1993 at 3:00 p.m. in Room 307 of the United States Courthouse. If any party wishes to make a further substantive motion, it will have the opportunity to do so after that conference.
It is SO ORDERED.
Dated: New York, New York
February 23, 1993
CHARLES S. HAIGHT, JR.