Plaut v. Spendthrift Farm, Inc.
514 U.S. 211 (1995)
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Rule of Law:
A federal statute that requires Article III courts to reopen final judgments entered before the statute's enactment violates the constitutional separation of powers.
Facts:
- In 1983 and 1984, Plaut and other investors purchased stock from Spendthrift Farm, Inc.
- Plaut and the other investors later alleged that Spendthrift Farm had committed fraud and deceit in connection with these stock sales.
- On June 20, 1991, the U.S. Supreme Court, in an unrelated case, Lampf v. Gilbertson, established a new, uniform, and shorter statute of limitations for these types of securities fraud claims.
- This new rule was significantly shorter than the state-law-based limitations periods that had been previously applied by many federal courts.
- On December 19, 1991, Congress enacted Section 27A of the Securities Exchange Act of 1934.
- Subsection (b) of this new law mandated the reinstatement of any securities fraud case commenced before June 19, 1991, that had been dismissed as time-barred after that date specifically because of the Lampf decision.
Procedural Posture:
- Plaut and other investors sued Spendthrift Farm, Inc. in the U.S. District Court for the Eastern District of Kentucky in 1987 for securities fraud.
- Following the Supreme Court's 1991 decision in Lampf v. Gilbertson, the District Court dismissed Plaut's action with prejudice as time-barred.
- Plaut did not appeal, and the judgment became final 30 days later.
- After Congress enacted Section 27A in December 1991, Plaut filed a motion in the District Court to reinstate the action.
- The District Court denied the motion, ruling that Section 27A(b) was unconstitutional.
- Plaut, as appellant, appealed to the U.S. Court of Appeals for the Sixth Circuit, which affirmed the district court's decision.
- The U.S. Supreme Court granted Plaut's petition for a writ of certiorari.
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Issue:
Does Section 27A(b) of the Securities Exchange Act of 1934, which requires federal courts to reopen final judgments in private civil actions, violate the constitutional principle of separation of powers?
Opinions:
Majority - Justice Scalia
Yes. Section 27A(b) violates the separation of powers by retroactively commanding federal courts to reopen final judgments, which infringes upon the core judicial power under Article III to render dispositive judgments. Article III's vesting of 'the judicial Power' in the courts grants them the authority not merely to rule on cases but to decide them conclusively. History shows the Framers deliberately separated legislative and judicial powers to prevent the legislature from overturning judicial decisions, a practice common and problematic in the colonies. Once a judicial decision has achieved finality by the exhaustion or expiration of appeals, it becomes the last word of the judicial department for that case. Congress cannot then declare by retroactive legislation that the law applicable to that finally decided case was different from what the courts determined it to be. While Congress can change the law for cases still pending on appeal, it cannot cross the constitutional line of finality. This infringement on judicial power is not excused because it applies to a class of cases rather than a single one, nor because the underlying judgment was based on a statute of limitations; a dismissal on such grounds is a final judgment on the merits, protected from legislative reversal.
Concurring - Justice Breyer
Yes. Section 27A(b) is unconstitutional on narrower grounds than the majority's absolute rule. The statute violates the separation of powers because its combined features—being exclusively retroactive, applying to a limited and closed class of individuals, and reopening closed judgments—demonstrate that Congress is impermissibly applying law to specific cases rather than making law of general applicability. This kind of targeted legislation, which lacks the safeguards of prospectivity and generality, poses a risk of oppressive 'singling out' that the separation of powers doctrine is designed to prevent. While some legislative acts may permissibly alter the effect of court decrees, this particular statute's lack of any mitigating features makes it an unconstitutional encroachment on the judicial function. An absolute 'high wall' between the branches is unnecessary; the analysis should depend on the degree of encroachment and whether the legislation contains assurances against the legislative exercise of judicial power.
Dissenting - Justice Stevens
No. Section 27A(b) is a valid remedial statute that does not violate the separation of powers. Congress was permissibly correcting an injustice created by the Court's own 'surprising announcement' of a new, retroactively applied limitations period in Lampf. Throughout history, Congress has enacted remedial laws that provide for the reopening of final judgments, such as Fed. R. Civ. P. 60(b), and the Court has upheld them. This statute does not decide the merits of any case or direct a particular outcome; it merely removes a procedural impediment that the Court itself created and establishes a neutral rule for courts to apply. Rather than encroaching on judicial power, this law represents a cooperative effort between the branches to ensure fairness, which is a classic and legitimate exercise of legislative power. The majority's rigid, formalistic rule unnecessarily hinders Congress's ability to address inequities that arise from judicial decisions.
Analysis:
This decision establishes a strong 'rule of finality,' treating a final, unappealed judgment from an Article III court as a constitutional boundary that Congress cannot cross with retroactive legislation. It clarifies that 'the judicial Power' under Article III includes the authority to render final, conclusive resolutions of cases, which are immune from subsequent legislative reversal. The ruling significantly limits Congress's power to 'correct' judicial interpretations of statutes once those interpretations have resulted in a final judgment. Future legislative attempts to provide relief to litigants who have lost cases based on a particular judicial ruling will be unconstitutional if they seek to reopen judgments that are already final.
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