Plaut v. Spendthrift Farm, Inc.

PETITIONER: Ed Plaut et al.
RESPONDENT: Spendthrift Farm, Inc., et al.
LOCATION: Spendthrift Farm

DOCKET NO.: 93-1121
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 514 US 211 (1995)
ARGUED: Nov 30, 1994
DECIDED: Apr 18, 1995

ADVOCATES:
Michael R. Dreeben - on behalf of the Federal Respondent supporting the Petitioners
Theodore B. Olson - on behalf of the Private Respondents
William W. Allen - for petitioners
William H. Allen - on behalf of the Petitioners

Facts of the case

In 1987, several Spendthrift Farm shareholders, including Ed Plaut, brought suit against the corporation claiming stock sales in 1983 and 1984 had violated the Securities and Exchange Act of 1934. The Supreme Court's ruling in Lampf v Gilbertson (1991) set a universal time limit of three years after an alleged violation for suits stemming from the relevant portion the Securities and Exchange Act. Based on this ruling, a district court judge dismissed the shareholders' case on August 13, 1991. On December 19, 1991, Congress enacted the FDIC Improvement Act, which required courts to reinstate cases dismissed under the Supreme Court's limitation in Lampf. The shareholders filed a motion to reinstate. A district court judge agreed the act required the case be reinstated, but denied the request on the ground that Congress had violated separation of powers in requiring the courts to reopen settled matters. On appeal, the United States Court of Appeals for the Sixth Circuit affirmed the lower court's conclusion on the same ground.

Question

Did Congress violate separation of powers by requiring federal courts reopen settled cases as part of the FDIC Improvement Act?

Media for Plaut v. Spendthrift Farm, Inc.

Audio Transcription for Oral Argument - November 30, 1994 in Plaut v. Spendthrift Farm, Inc.

Audio Transcription for Opinion Announcement - April 18, 1995 in Plaut v. Spendthrift Farm, Inc.

William H. Rehnquist:

The opinion of the Court in number 93-1121 Plaut v. Spendthrift Farm, Inc. will be announced by Justice Scalia.

Antonin Scalia:

This case is here on petition for certiorari to the Sixth Circuit.

In a civil action brought 1987, petitioners alleged that in 1983 and 1984 respondents had committed fraud and deceit in the sale of stock in violation of Federal Securities Laws.

The District Court dismissed the action following this Court's decision in a case called Lamp.

The effect of which was to make petitioner’s suit time barred.

After the judgment became final Congress enacted §27A (b) of the Securities Exchange Act of 1934 which is the provision at issue here.

It provides through reinstatement on the plaintiff’s motion on the any action commenced before Lamp was decided but dismissed after Lamp as time barred.

If the date of filing of that action no late under Lamp would have been timely under applicable state law which is what some lower Federal Courts had been using as the standard before we decided Lamp.

Petitioners move to reopen their case under the statute, the District Court denied the motion on the ground that §27A (b) is unconstitutional.

The United States Court of Appeals for the Sixth Circuit affirmed that.

Last time we heard argument with one justice not participating in the similar case Morgan Stanley & Co. v. Pacific Mut. Life Ins. Co.

At that time, we were equally divided on the outcome of the case so according to custom we affirm the judgment under review without opinion.

We granted certiorari in the present case to consider the question again with full Court.

We hold today that §27A (b) violates the constitution separation of powers because it requires Federal Courts to reopen final judgments entered before its enactment.

Article III of the constitution, provides that the judicial power of the United States shall be vested in one Supreme Court and in such Inferior Courts as the Congress may from time-to-time ordain and establish.

This article establishes a judicial department with as Chief Justice Marshall said in Marbury v. Madison, “the province and duty to say what the law is in particular cases and controversies” he Framers crafted this charter with an expressed understanding that it gives the Federal Judiciary the power, not merely to rule on cases, but conclusively to decide them, subject to review only by Superior Courts in the Article III hierarchy.

History makes clear that the right against which the constitution doctrine of separation of powers was meant to protect was not merely legislative reversal of judicial judgments but also legislative setting aside of judicial judgments.

In the 17th and 18th centuries colonial assemblies and legislatures often vacated final judgments and the populism that swept the country during the revolution increased the frequency of that practice.

The period from about 1780 to 1787 saw a reaction against these developments and a sense of sharp necessity to separate the legislative from the judicial power motivated the Framers of the new federal constitution.

As Hamilton Road in Federalist No. 81, “a legislature without exceeding its problems cannot reverse the determination once made in a particular case that would may prescribe a new rule for future cases.

Petitioners are correct that Congress can always revise the judgment of a Lower Article III Court in one sentence.

When a new law makes clear that it is retroactive a Court of Appeals must apply it in reviewing judgments still on appeal that were rendered before the law was enacted and must alter the outcome of the Lower Court accordingly.

However, once the judgment has achieved finality in the highest court in the hierarchy the decision becomes the last word of the judicial department with regard to that particular case or controversy, and Congress may not declare by retroactive legislation that the law applicable to that case was other than what the Court said.

It is irrelevant that §27A (b) reopens final judgments in a whole class of cases rather than in a particular suit and that the final judgments reopened vested on the bar of the statute limitations rather than on some other ground.

Our decision have uniformly provided fair warning that legislations such as §27A (b) which establishes new law to be applied to cases already finally decided exceeds congressional power.

Apart from §27A (b) we know of no instance in which Congress has attempted to set aside the final judgment of an Article III Court by retroactive legislation.

Congresses prolonged reticence would be amazing, if such interference were not understood to be constitutionally proscribed by the constitutions separation of powers.

Accordingly, the judgment of the United States Court of Appeals for the Sixth Circuit is affirmed.

Justice Breyer has filed an opinion concurring in the judgment; Justice Stevens has filed the dissenting opinion in which Justice Ginsberg joins.