The opinion of the court was delivered by: CHARLES A. LEGGE
On September 13, 1991, this court dismissed, on the ground of the statute of limitations, the § 10(b)-5 claims which plaintiffs had brought against defendant Price Waterhouse & Co. Plaintiffs now bring this motion pursuant to section 27A of the Federal Deposit Insurance Corporation Improvement Act of 1991, asking the court to reinstate those claims. Price Waterhouse opposes this motion on the ground that section 27A violates the constitutional separation of powers between the judicial and legislative branches.
The court considered the moving and opposing papers, the applicable authorities, and the legislative history of section 27A, and held hearings. On February 26, 1992, the court stated its intention to declare section 27A unconstitutional. Notice was given to the United States Attorney General pursuant to 28 U.S.C. 2403(a). The United States and the Securities and Exchange Commission filed a statement of interest and a brief in support of plaintiffs' position, which this court has also considered. This court now enters this opinion and order denying plaintiffs' motion, on the ground that section 27A is unconstitutional.
This series of cases began in 1987 when plaintiffs filed this suit against a number of defendants for securities fraud. On May 10, 1989 Price Waterhouse moved for dismissal of plaintiffs' § 10(b)-5 claims on the ground that they were untimely. At that time, the statute of limitations for § 10(b)-5 claims was governed by California law. Stitt v. Williams, 919 F.2d 516, 522 (9th Cir. 1990). This court looked to the California limitations period, found that plaintiffs' claims were timely and denied defendant's motion.
On June 20, 1991, while these cases were pending, the United States Supreme Court announced its decision in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 115 L. Ed. 2d 321, 111 S. Ct. 2773 (1991). The Court held that § 10(b)-5 claims are to be governed by a three year statute of repose and a one year statute of discovery. The Court then applied these limitations periods to the Lampf litigants.
On the same day, the Court decided James B. Beam Distilling Co. v. Georgia, 115 L. Ed. 2d 481, 111 S. Ct. 2439 (1991).
The issue before the Court was the retroactive effect of its decision in Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 82 L. Ed. 2d 200, 104 S. Ct. 3049 (1983).
The Beam court noted that a decision announced by a federal court could be applied in three ways: First, "a decision may be made fully retroactive, applying both to the parties before the court and to all others by and against whom claims be pressed, consistent with res judicata and procedural barriers * * * *" Beam, 111 S. Ct. at 2443. Second, there is a purely prospective method, "under which a new rule" is applied neither to the parties before the court announcing the decision nor to others similarly situated who stand behind the parties in time. Id. Third, a "court may apply a new rule in the case which it is pronounced, then return to the old one with respect to all others arising on facts predating the pronouncement." Id. at 2444; this third method the Court called selective prospectivity. The Court determined that selective prospectivity violates Article III of the Constitution.
Therefore, the Court held that it is "error to refuse to apply a rule of federal law retroactively [to other similarly situated litigants in pending cases] after the case announcing the rule has already done so." Id. at 2446.
On December 21, 1991, Congress passed and the President signed the Federal Deposit Insurance Corporation Improvement Act of 1991, Pub. L. No. 102-242 §§ 476, 27A, 105 stat. 2236. Section 476 of the Act amended the Securities Exchange Act of 1934 by adding Section 27A. 15 U.S.C. § 78aa. Section 27A provides:
Sec. 27A(a) Effect on Pending Causes of Action. The limitation period for any private civil 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 Cause of Action. Any private 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 limitations 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.
Within sixty days after the enactment of section 27A, plaintiffs filed this motion for reinstatement of their 10(b)-5 claims.
This court is aware that it must construe section 27A in a way that renders it constitutional if reasonably possible. Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg. & Constr. Trades Council, 485 U.S. 568, 575, 99 L. Ed. 2d 645, 108 S. Ct. 1392 (1988). In determining whether section 27A violates the Constitution, this court is guided by three cannons of statutory interpretation.
First, unless the language of the statute "compels an odd" or "absurd" result, the court must look at the plain meaning of the statute. Green v. Bock Laundry Machine Co., 490 U.S. 504, 509, 104 L. Ed. 2d 557, 109 S. Ct. 1981 (1989); Public Citizen v. United States Dept. of Justice, 491 U.S. 440, 470-71, 105 L. Ed. 2d 377, 109 S. Ct. 2558 (1989) (Kennedy, J., concurring); Church of the Holy Trinity v. United States, 143 U.S. 457, 459, 36 L. Ed. 226, 12 S. Ct. 511 (1892).
Second, in certain circumstances the court may turn to the legislative history and the circumstances of the enactment. The strict view is that courts may resort to legislative history only when a literal reading of the act compels an "odd" result or when the meaning of the statute is uncertain. E.g., Public Citizen, 491 U.S. at 470-71. When the language of a statute casts doubt on its constitutionality, the court should turn to the legislative history in an attempt to alleviate that doubt. Barcellos and Wolfsen Inc. v. Westlands Water Dist., 899 F.2d 814, 831 (9th Cir. 1990) (Fernandez, J., dissenting); Daylo v. Administrator of Veterans' Affairs, 163 App. D.C. 251, 501 F.2d 811, 819 (D.C. Cir. 1974). However, recent Supreme Court cases suggest that in all questions of statutory interpretation, a court may examine the legislative history in order to avoid an "unreflective" reading of a statute. Public Citizen, 491 U.S. at 453 & n. 9.
Third, if the "inevitable effect of a statute on its face" is unconstitutional, the legislative purpose or intent is irrelevant. United States v. O'Brien, 391 U.S. 367, 384-85, 20 L. Ed. 2d 672, 88 S. Ct. 1673 (1968); see Lydo Enterprises, Inc. v. City of Las Vegas, 745 F.2d 1211, 1215 (9th Cir. 1984). "There is a basic difference between filling a gap left by Congress' silence and rewriting rules that Congress has affirmatively and specifically enacted." Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 625, 56 L. Ed. 2d 581, 98 S. Ct. 2010 (1978). See also United States v. Locke, 471 U.S. 84, 95, 85 L. Ed. 2d 64, 105 S. Ct. 1785 (1985); Richards v. United States, 369 U.S. 1, 9, 7 L. Ed. 2d 492, 82 S. Ct. 585 (1962). Courts are bound to read a statute in a constitutional manner if "fairly possible" and "reasonable." NLRB v. Catholic Bishop of Chicago, 440 U.S. 490, 510-11, 59 L. Ed. 2d 533, 99 S. Ct. 1313 (1979) (Brennan J., dissenting); Pernell v. Southall Realty, 416 U.S. 363, 365, 40 L. Ed. 2d 198 , 94 S. Ct. 1723 (1974). A court, however, cannot "press statutory construction 'to the point of disingenuous evasion' even to avoid a constitutional question." Locke, 471 U.S. at 96 (quoting Moore Ice Cream Co. v Rose, 289 U.S. 373, 379, 77 L. Ed. 1265, 53 S. Ct. 620 (1933)).
The basic issue in this motion is whether Congress exceeded its authority under Article I by enacting legislation that intrudes into powers reserved to the judiciary under Article III.
The Supreme Court has acknowledged that Congress is not foreclosed from enacting legislation that affects rights and duties retroactively so long as "the retroactive application of the legislation is itself justified by a rational legislative purpose." United States v. Sperry Corp. 493 U.S. 52, 64, 107 L. Ed. 2d 290, 110 S. Ct. 387 (1989). The Court also recognizes that Congress may enact legislation that affects pending cases. United States v. The Schooner Peggy, 5 U.S. (1 Cranch) 103, 2 L. Ed. 49 (1801); P. Bator, P. Mishken, D. Shapiro & H. Wechsler, Hart and Wechsler's The Federal Courts and the Federal System 316 n.4 (2d ed. 1973). See also National Juvenile Law Center Inc. v. Regnery, 238 App. D.C. 61, 738 F.2d 455 (D.C. Cir. 1984). Both of these principles presuppose a substantive or procedural change in law made by Congress that is then applied retroactively.
However, Congress may not usurp the judicial responsibility to adjudicate cases. Therefore, Congress may not enact legislation that "perscribes rules of decision to the judicial department of the government in cases pending before it" unless it changes an underlying substantive or procedural law. United States v. Sioux Nation of Indians, 448 U.S. 371, 398, 65 L. Ed. 2d 844, 100 S. Ct. 2716 (1980) United States v. Klein, 80 U.S. (13 Wall.) 128, 20 L. Ed. 519 (1871); Seattle Audubon Society v. Robertson, 914 F.2d 1311, 1315 (9th Cir. 1990), rev'd on other grounds, Robertson v. Seattle Audobon Society, 112 S. Ct. 1407, 118 L. Ed. 2d 73 (U.S. 1992). Nor may Congress enact a law that reverses or allows for review of a final judgment of either the Supreme Court or the lower federal courts. Georgia Ass'n of Retarded Citizens v. McDaniel, 855 F.2d 805, 810 (11th Cir. 1988), cert. denied, 490 U.S. 1090, 104 L. Ed. 2d 988, 109 S. Ct. 2431 (1989). In addition, Congress may not enact a law that effects a substantive or procedural change but otherwise contravenes Article III. Seattle Audubon Soc. v. Robertson, 914 F.2d at 1315. For example, Congress may not enact a change in law that upsets the results of the final judgments of the courts. 12 C. Wright & A. Miller, Federal Practice & Procedure § 3529.1 (1975); Hayburn's Case, 2 U.S. (2 Dall.) 408 (1792); Daylo v. Administrator of Veterans' Affairs, 163 App. D.C. 251, 501 F.2d 811 (D.C. Cir. 1974). Nor may Congress enact a change in law that contradicts a constitutional decision of the Supreme Court. Marbury v. Madison, 5 U.S. (1 Cranch) 137, 2 L. Ed. 60 (1803).
The prohibition against allowing Congress to disrupt final decisions of the courts is "consistent with separation of powers" because it "protects judicial action from superior legislative review, a 'regime * * * obviously * * * subversive of the judicial branch of government.'" Georgia Ass'n of Retarded Citizens, 855 F.2d at 810. "Judicial jurisdiction implies the power to hear and determine a cause, and inasmuch as the Constitution does not contemplate that there shall be more than one Supreme Court, it is quite clear that Congress cannot subject the judgments of the Supreme Court to the re-examination and revision of any other department of government." United States v. O'Grady, 89 U.S. (22 Wall.) 641, 647-48, 22 L. Ed. 772 (1874); Georgia Ass'n of Retarded Citizens, 855 F.2d at 810. Such congressional review would also undermine Article III in that it would transform judgments into advisory opinions and thereby subvert their finality. Hayburn's Case, 2 U.S. (2 Dall.) 408 (1792); 13 Wright & Miller, supra at § 3529.1.
Having stated these principles, this court emphasizes several important points about section 27A. First, the section did not enact any underlying substantive law. Second, it did not enact a statute of limitations for § 10(b)-5 cases, but left the Lampf rule untouched. What section 27A did was to say that the Lampf rule should not, contrary to the Beam and Lampf decisions of the Supreme Court, be applied by the federal courts to existing cases.
As will be discussed, the section violates the constitutional separation of powers. It improperly directs a result in pending cases, and it reverses final judgments of the federal courts. And by changing the constitutional rule announced in Beam, it intrudes on the ...