Plaut v. Spendthrift Farm, Inc. (1995)
Plaut v. Spendthrift Farm, Inc. (1995)
514 U.S. 211
In 1987 petitioners alleged in a civil action that respondents committed fraud and deceit in 1983 and 1984 in the sale of stock in violation of the Securities Exchange Act of 1934. The District Court for the Eastern District of Kentucky dismissed petitioners’ action with prejudice following the Supreme Court’s decision in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350 (1991), which required suits such as the petitioners’ be commenced within one year after the discovery of the facts constituting the violation and within three years after such violation. Once the district court’s judgment had become final, Congress enacted §27A(b) of the Securities Exchange Act, which provided for reinstatement on motion of any action commenced before Lampf but dismissed thereafter as time barred, if the action would have been timely filed under applicable pre-Lampf state law. Although finding the statute’s terms required that petitioners’ ensuing §27A(b) motion be granted, the district court denied the motion on the ground that §27A(b) was unconstitutional. The Court of Appeals for the Sixth Circuit affirmed.
Opinion of the Court: Scalia, Rehnquist, O’Connor, Kennedy, Souter, Thomas.
Concurring in the judgment: Breyer.
Dissenting opinion: Stevens, Ginsburg.
JUSTICE SCALIA delivered the opinion of the Court.
Respondents submit that §27A(b) violates both the separation of powers and the Due Process Clause of the Fifth Amendment. Because the latter submission, if correct, might dictate a similar result in a challenge to state legislation under the Fourteenth Amendment, the former is the narrower ground for adjudication of the constitutional questions in the case, and we therefore consider it first. Ashwander v. TVA (1936) (Brandeis, J., concurring). We conclude that in §27A(b) Congress has exceeded its authority by requiring the federal courts to exercise “the judicial Power of the United States,” U.S. Const., Art. III, §1, in a manner repugnant to the text, structure and traditions of Article III. . . .
Article III establishes a “judicial department” with the “province and duty . . . to say what the law is” in particular cases and controversies. Marbury v. Madison (1803). The record of history shows that the Framers crafted this charter of the judicial department with an expressed understanding that it gives the Federal Judiciary the power, not merely to rule on cases, but to decide them, subject to review only by superior courts in the Article III hierarchy—with an understanding, in short, that “a judgment conclusively resolves the case” because “a ‘judicial Power’ is one to render dispositive judgments.” By retroactively commanding the federal courts to reopen final judgments, Congress has violated this fundamental principle.
. . . The Framers of our Constitution lived among the ruins of a system of intermingled legislative and judicial powers, which had been prevalent in the colonies long before the Revolution, and which after the Revolution had produced factional strife and partisan oppression. In the 17th and 18th centuries colonial assemblies and legislatures functioned as courts of equity of last resort, hearing original actions or providing appellate review of judicial judgments. Often, however, they chose to correct the judicial process through special bills or other enacted legislation. It was common for such legislation not to prescribe a resolution of the dispute, but rather simply to set aside the judgment and order a new trial or appeal.
. . . The sense of a sharp necessity to separate the legislative from the judicial power, prompted by the crescendo of legislative interference with private judgments of the courts, triumphed among the Framers of the new Federal Constitution. The Convention made the critical decision to establish a judicial department independent of the Legislative Branch by providing 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.” Before and during the debates on ratification, Madison, Jefferson, and Hamilton each wrote of the factional disorders and disarray that the system of legislative equity had produced in the years before the framing; and each thought that the separation of the legislative from the judicial power in the new Constitution would cure them. Madison’s Federalist No. 48, the famous description of the process by which “[t]he legislative department is every where extending the sphere of its activity, and drawing all power into its impetuous vortex,” referred to the report of the Pennsylvania Council of Censors to show that in that State “cases belonging to the judiciary department [had been] frequently drawn within legislative cognizance and determination.” Madison relied as well on Jefferson’s Notes on the State of Virginia, which mentioned, as one example of the dangerous concentration of governmental powers into the hands of the legislature, that “the Legislature . . . in many instances decided rights which should have been left to judiciary controversy.”
If the need for separation of legislative from judicial power was plain, the principal effect to be accomplished by that separation was even plainer. As Hamilton wrote in his exegesis of Article III, §1, in The Federalist No. 81:
It is not true . . . that the parliament of Great Britain, or the legislatures of the particular states, can rectify the exceptionable decisions of their respective courts, in any other sense that might be done by a future legislature of the United States. The theory neither of the British, nor the state constitutions, authorises the revisal of a judicial sentence, by a legislative act. . . . A legislature without exceeding its province cannot reverse a determination once made, in a particular case; though it may prescribe a new rule for future cases.
The essential balance created by this allocation of authority was a simple one. The Legislature would be possessed of power to “prescrib[e] the rules by which the duties and rights of every citizen are to be regulated,” but the power of “[t]he interpretation of the laws” would be “the proper and peculiar province of the courts.” The Federalist No. 78. The Judiciary would be, “from the nature of its functions, . . . the [department] least dangerous to the political rights of the constitution,” not because its acts were subject to legislative correction, but because the binding effect of its acts was limited to particular cases and controversies. Thus, “though individual oppression may now and then proceed from the courts of justice, the general liberty of the people can never be endangered from that quarter: . . . so long as the judiciary remains truly distinct from both the legislative and executive.” The Federalist No. 78.
Judicial decisions in the period immediately after ratification of the Constitution confirm the understanding that it forbade interference with the final judgments of courts. . . .
Section 27A(b) effects a clear violation of the separation-of-powers principle we have just discussed. It is, of course, retroactive legislation, that is, legislation that prescribes what the law was at an earlier time, when the act whose effect is controlled by the legislation occurred—in this case, the filing of the initial Rule 10b-5 action in the District Court. When retroactive legislation requires its own application in a case already finally adjudicated, it does no more and no less than “reverse a determination once made, in a particular case.” The Federalist No. 81. . . .
It is true, as petitioners contend, that Congress can always revise the judgments of Article III courts in one sense: When a new law makes clear that it is retroactive, an appellate court must apply that law in reviewing judgments still on appeal that were rendered before the law was enacted, and must alter the outcome accordingly.
. . . But a distinction between judgments from which all appeals have been forgone or completed, and judgments that remain on appeal (or subject to being appealed), is implicit in what Article III creates: not a batch of unconnected courts, but a judicial department composed of “inferior Courts” and “one supreme Court.” Within that hierarchy, the decision of an inferior court is not (unless the time for appeal has expired) the final word of the department as a whole. It is the obligation of the last court in the hierarchy that rules on the case to give effect to Congress’s latest enactment, even when that has the effect of overturning the judgment of an inferior court, since each court, at every level, must “decide according to existing laws.” Having achieved finality, however, a judicial decision becomes the last word of the judicial department with regard to a particular case or controversy, and Congress may not declare by retroactive legislation that the law applicable to that very case was something other than what the courts said it was. Finality of a legal judgment is determined by statute, just as entitlement to a government benefit is a statutory creation; but that no more deprives the former of its constitutional significance for separation-of-powers analysis than it deprives the latter of its significance for due process purposes.
To be sure, §27A(b) reopens (or directs the reopening of) final judgments in a whole class of cases rather than in a particular suit. We do not see how that makes any difference. The separation-of-powers violation here, if there is any, consists of depriving judicial judgments of the conclusive effect that they had when they were announced, not of acting in a manner—viz., with particular rather than general effect—that is unusual (though, we must note, not impossible) for a legislature. To be sure, a general statute such as this one may reduce the perception that legislative interference with judicial judgments were prompted by individual favoritism; but it is legislative interference with judicial judgments nonetheless. Not favoritism, nor even corruption, but power is the object of the separation-of-powers prohibition. The prohibition is violated when an individual final judgment is legislatively rescinded for even the very best of reasons, such as the legislature’s genuine conviction (supported by all the law professors in the land) that the judgment was wrong; and it is violated 40 times over when 40 final judgments are legislatively dissolved.
It is irrelevant as well that the final judgments reopened by §27A(b) rested on the bar of a statute of limitations. The rules of finality, both statutory and judge-made, treat a dismissal on statute-of-limitations grounds the same way they treat a dismissal for failure to state a claim, for failure to prove substantive liability, or for failure to prosecute: as a judgment on the merits.
. . . Apart from the statute we review today, we know of no instance in which Congress has attempted to set aside the final judgment of an Article III court by retroactive legislation. That prolonged reticence would be amazing if such interference were not understood to be constitutionally proscribed.
. . . [T]he doctrine of separation of powers is a structural safeguard rather than a remedy to be applied only when specific harm, or risk of specific harm, can be identified. In its major feature (of which the conclusiveness of judicial judgments is assuredly one) it is a prophylactic device, establishing high walls and clear distinctions because low walls and vague distinctions will not be judicially defensible in the heat of interbranch conflict. . . . We think legislated invalidation of judicial judgments deserves the same categorical treatment accorded by Chadha to congressional invalidation of executive action. The delphic alternative suggested by the concurrence (the setting aside of judgments) is all right so long as Congress does not “impermissibly tr[y] to apply, as well as make, the law,” simply prolongs doubt and multiplies confrontation. Separation of powers, a distinctively American political doctrine, profits from the advice authored by a distinctively American poet: “Good fences make good neighbors.”
We know of no previous instance in which Congress has enacted retroactive legislation requiring an Article III court to set aside a final judgment, and for good reason. The Constitution’s separation of legislative and judicial powers denies it the authority to do so. Section 27A(b) is unconstitutional to the extent that it requires federal courts to reopen final judgments entered before its enactment. The judgment of the Court of Appeals is affirmed.
JUSTICE BREYER, concurring in the judgment.
I agree with the majority that §27A(b) of the Securities Exchange Act of 1934 is unconstitutional. In my view, the separation of powers inherent in our Constitution means that at least sometimes Congress lacks the power under Article I to reopen an otherwise closed court judgment. And the statutory provision here at issue, §27A(b), violates a basic “separation of powers” principle—one intended to protect individual liberty. Three features of this law—its exclusively retroactive effect, its application to a limited number of individuals, and its reopening of closed judgments—taken together, show that Congress here impermissibly tried to apply, as well as make, the law. Hence, §27A(b) falls outside the scope of Article I. But, it is far less clear, and unnecessary for the purposes of this case to decide, that separation of powers “is violated” whenever an “individual final judgment is legislatively rescinded” or that it is “violated 40 times over when 40 final judgments are legislatively dissolved.” I therefore write separately.
[B]ecause the law before us both reopens final judgments and lacks the liberty-protecting assurances that prospectivity and greater generality would have provided, we need not, and we should not, go further—to make of the reopening itself, an absolute, always determinative distinction, a “prophylactic device,” or a foundation for the building of a new “high wal[l]” between the branches. Indeed, the unnecessary building of such walls is, in itself, dangerous, because the Constitution blends, as well as separates, powers in its effort to create a government that will work for, as well as protect the liberties of, its citizens. That doctrine does not “divide the branches into watertight compartments,” nor “establish and divide fields of black and white.” And, important separation of powers decisions of this Court have sometimes turned, not upon absolute distinctions, but upon degree. As the majority invokes the advice of an American poet, one might consider as well that poet’s caution, for he not only notes that “Something there is that doesn’t love a wall,” but also writes, “Before I built a wall I’d ask to know / What I was walling in or walling out.”
JUSTICE STEVENS, with whom JUSTICE GINSBURG joins, dissenting.
The majority’s rigid holding unnecessarily hinders the Government from addressing difficult issues that inevitably arise in a complex society. This Court, for example, lacks power to enlarge the time for filing petitions for certiorari in a civil case after 90 days from the entry of final judgment, no matter how strong the equities. If an Act of God, such as a flood or an earthquake, sufficiently disrupted communications in a particular area to preclude filing for several days, the majority’s reasoning would appear to bar Congress from addressing the resulting inequity. If Congress passed remedial legislation that retroactively granted movants from the disaster area extra time to file petitions or motions for extensions of time to file, today’s holding presumably would compel us to strike down the legislation as an attack on the finality of judgments. Such a ruling, like today’s holding, would gravely undermine federal courts’ traditional power “to set aside a judgment whose enforcement would work inequity.”
. . . The Court has drawn the wrong lesson from the Framers’ disapproval of colonial legislatures’ appellate review of judicial decisions. The Framers rejected that practice, not out of a mechanistic solicitude for “final judgments,” but because they believed the impartial application of rules of law, rather than the will of the majority, must govern the disposition of individual cases and controversies. Any legislative interference in the adjudication of the merits of a particular case carries the risk that political power will supplant even handed justice, whether the interference occurs before or after the entry of final judgment. Section 27A(b) neither commands the reinstatement of any particular case nor directs any result on the merits. Congress recently granted a special benefit to a single litigant in a pending civil rights case, but the Court saw no need even to grant certiorari to review that disturbing legislative favor. In an ironic counterpoint, the Court today places a higher priority on protecting the Republic from the restoration to a large class of litigants of the opportunity to have Article III courts resolve the merits of their claims.
“We must remember that the machinery of government would not work if it were not allowed a little play in its joints.” Bain Peanut Co. of Texas v. Pinson (1931) (Holmes, J.). The three Branches must cooperate in order to govern. We should regard favorably, rather than with suspicious hostility, legislation that enables the judiciary to overcome impediments to the performance of its mission of administering justice impartially, even when, as here, this Court had created the impediment. Rigid rules often make good law, but judgments in areas such as the review of potential conflicts among the three coequal Branches of the Federal Government partake of art as well as science. That is why we have so often reiterated the insight of Justice Jackson:
The actual art of governing under our Constitution does not and cannot conform to judicial definitions of the power of any of its branches based on isolated clauses or even single Articles torn from context. While the Constitution diffuses power the better to secure liberty, it also contemplates that practice will integrate the dispersed powers into a workable government. It enjoins upon its branches separateness but interdependence, autonomy but reciprocity.
Youngstown Sheet & Tube Co. v. Sawyer (1952) (concurring opinion).
We have the authority to hold that Congress has usurped a judicial prerogative, but even if this case were doubtful I would heed Justice Iredell’s admonition in Calder v. Bull (1798) that “the Court will never resort to that authority, but in a clear and urgent case.” An appropriate regard for the interdependence of Congress and the judiciary amply supports the conclusion that §27A(b) reflects constructive legisl