to the federal government under the recovery statute, and that acceptance of a pardon was, under most circumstances, conclusive evidence that the individual had given aid to the Confederacy. The statute also directed the Supreme Court and the Court of Claims to make a factual determination that any claimant who accepted a presidential pardon without disclaiming previous disloyalties was in fact disloyal and, therefore, not entitled to proceeds under the recovery statute. The statute further directed the Supreme Court to dismiss any case in which a claimant had prevailed in the Court of Claims if the claimant prevailed upon proof of loyalty by presidential pardon. Id. at 136-143.
The Supreme Court found that the statute violated the separation of powers doctrine because it "impaired the effect of a pardon, . . . thus infringing the constitutional power of the Executive." 80 U.S. at 147. The Court also found that the statute prescribed a rule of decision in a case pending before the courts without changing the substantive law underlying the litigation, and did so in a manner that required the courts to decide the case in the government's favor. Id. at 146-147.
In ruling that the legislation addressed inKlein was unconstitutional, the court noted:
"In the case before us no new circumstances have been created by the legislation. But the court is forbidden to give effect to evidence which, in its own judgment, such evidence should have, and is directed to give it an effect precisely the contrary. We must think that Congress has inadvertently passed the limit which separates the legislative from the judicial power."
Klein, 80 U.S. at 147. In Klein, the court was directed to ignore the presidential pardon and make certain findings of law and fact. The legislation violated the separation of powers between Congress and the Executive by attempting to invalidate the effects of the presidential pardons. The statute also violated the separation of powers between Congress and the Judiciary by directing courts to make certain findings of law and fact. Congress had no authority to do either of those acts.
In contrast, Section 10(b) was changed as a result of the enactment of Section 27A. Prior to the December 19, 1991 enactment of Section 27A, the statute of limitations for all Section 10(b) claims was that contained in the Supreme Court's decision in Lampf. In James B. Beam Distilling Co. v. Georgia, 115 L. Ed. 2d 481, 111 S. Ct. 2439 (1991), decided the same day as Lampf, the Court held that it is "error to refuse to apply a rule of federal law retroactively after the case announced by the rule has already done so." Id. at 2446. Accordingly, courts that have applied Lampf have done so retroactively. By enacting Section 27A, Congress changed the law by reviving those claims which had been timely filed prior to the Court's decisions in Lampf and Beam. Section 27A does not "proscribe a rule for a decision of a cause in a certain way. . . . " Klein, 80 U.S. at 147. Section 27A substantively changes the statute of limitations applicable to Section 10(b) cases filed on or before June 19, 1991.
This interpretation of Klein is supported by recent Ninth Circuit authority. In Atmospheric Testing Litigation, 820 F.2d 982 (9th Cir. 1987), cert. denied, 485 U.S. 905, 99 L. Ed. 2d 235, 108 S. Ct. 1076 (1988), the court held:
"the better reading of Klein is quite narrow and construes the case as holding only that Congress violates the separation of powers when it presumes to dictate how the court should decide an issue of fact (under the threat of loss of jurisdiction), and purports to bind the court to decide a case in accordance with a rule of law independently unconstitutional on other grounds."
820 F.2d at 992 (emphasis added) (citing United States v. Brainer, 691 F.2d 691, 695 (4th Cir. 1982) (quoting Hart & Wechsler's The Federal Court and the Federal System 316 n.4 (2d ed. 1973)).
Under Klein, the challenged legislation is independently unconstitutional on other grounds if congress attempts to control the court's ultimate decision on the merits of a claim. United States v. Sioux Nation of Indians, 448 U.S. at 405. The Supreme Court's decision in Lampf effectively created a statute of limitations defense for certain Section 10(b) and Rule 10b-5 claims. In enacting Section 27A Congress substantively changed the law by withdrawing the statute of limitations defense. Where challenged legislation merely withdraws a defense so that the legal claim can be decided on the merits, no conflict exists between the constitution and the legislation. Id.2
Section 27A neither directs the courts to make certain findings of fact, nor mandates the application of law "independently unconstitutional on other grounds". Section 27A changed the statute of limitations for certain Section 10(b) claims, but leaves the application of the rules of law entirely to the judiciary. Accordingly, the separation of powers doctrine is not offended. Atmospheric Testing Litigation, 820 F.2d at 992.
For the foregoing reasons plaintiff's motion for reinstatement of its Section 10(b) claims is GRANTED.
Dated: June 26, 1992
Barbara A. Caulfield
United States District Judge