Appeal from the United States District Court for the Northern District of California. D.C. No. CV-90-02600-JPV. John P. Vukasin, Jr., District Judge, Presiding. D.C. No. CV-88-04636-CAL. D.C. No. CV-87-04629-CAL. Charles A. Legge, District Judge, Presiding.
Before: Alfred T. Goodwin, Ferdinand F. Fernandez, and Thomas G. Nelson, Circuit Judges. Opinion by Judge Goodwin.
Gray, Cope and Simon present one common issue: the constitutionality of section 27A of the Securities Exchange Act of 1934 ("1934 Act"). Appellees argue that section 27A is unconstitutional in several respects: (1) it violates the separation of powers doctrine, as interpreted in United States v. Klein, 80 U.S. (13 Wall.) 128, 20 L. Ed. 519 (1872), by directing a rule of decision in pending cases without changing the underlying substantive law; (2) it violates the separation of powers doctrine by impermissibly interfering with the effect of final judgments; (3) it contradicts the Supreme Court's holding in James B. Beam Distilling Co. v. Georgia, 115 L. Ed. 2d 481, 111 S. Ct. 2439 (1991), which Appellees claim is a constitutionally-based rule providing that the Court's decisions must be applied evenly to all pending cases; and (4) it violates the equal protection component of the Due Process Clause of the Fifth Amendment. The district courts held section 27A unconstitutional. On this issue,*fn1 we reverse.
These cases involve federal securities fraud claims under section 10(b) of the 1934 Act, 15 U.S.C. § 78j(b), and S.E.C. Rule 10b-5. Because the private 10b-5 suit is a judicially created "implied right of action," section 10(b) and Rule 10b-5 contain no statute of limitations provision. At the time the Appellants here filed their complaints, the law of this circuit applied to these cases a statute of limitations period derived or "borrowed" from state law. See Reeves v. Teuscher, 881 F.2d 1495, 1500 (9th Cir. 1989).
On June 20, 1991, however, in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 115 L. Ed. 2d 321, 111 S. Ct. 2773 (1991), the Supreme Court resolved a split among the circuits by declaring a national, uniform statute of limitations for the § 10(b) implied right of action: Rule 10b-5 actions "must be commenced within one year after the discovery of the facts constituting the violation and within three years after such violation." Id. at 2782. The Court retroactively applied its new rule to the parties in Lampf and dismissed the claims as untimely. Id. Read in conjunction with James B. Beam Distilling Co. v. Georgia, 115 L. Ed. 2d 481, 111 S. Ct. 2439, 2448 (1991) ("When the Court has applied a rule of law to the litigants in one case it must do so with respect to all others not barred by procedural requirements or res judicata."), Lampf requires the retroactive application of its new statute of limitations rule to all pending cases. Because these three cases were pending when Lampf and Beam were handed down, Lampf 's new rule was applied and these actions were dismissed as untimely.
In response to the Court's decision in Lampf, Congress enacted section 27A of the 1934 Act, 15 U.S.C. § 78aa-1. Concerned that " Lampf changed the rules in the middle of the game for thousands of fraud victims who already had suits pending," 137 Cong. Rec. 18,624 (daily ed. Nov. 27, 1991) (Sen. Bryan), Congress passed this legislation to "return plaintiffs and defendants to exactly the position that they had on June 19, 1991" - the day before the Court announced its decisions in Lampf and Beam. Section 27A provides:
(a) Effect on pending causes of action. The limitation period for any private civil action implied under section 78j(b) of this title 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 causes of action. Any private civil action implied under section 78j(b) of this title 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 limitation 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 [enacted Dec. 19, 1991].
The purpose and effect of section 27A were to negate on fairness grounds the retroactive application of Lampf 's new rule. Section 27A legislatively overrides the application of the retroactivity principles the Court announced in Beam.
In the three cases before us, the district courts denied plaintiffs' motions for reinstatement under section 27A on the grounds that section 27A was unconstitutional, although on different theories. In both Cope v. Price Waterhouse and Simon v. Orsi, the same district court concluded that section 27A was unconstitutional because (1) it violated Klein 's separation of powers principles by directing a result in pending cases without changing the underlying substantive law; (2) it impermissibly reversed final judgments of federal courts; and (3) it impermissibly contravened the Court's retroactivity principles in Beam, which the district court concluded were constitutionally based. See generally In re Brichard Securities Litigation, 788 F. Supp. 1098 (N.D. Cal. 1992). The district court in Gray v. First Winthrop Corp. concluded that there was no Klein violation because Congress had changed the underlying substantive law with section 27A. Still, the district court there found section 27A violated Beam 's retroactivity principles, which the court deemed to be constitutionally based.
The constitutionality of a statute is a question of law which we review de novo. Seattle Audubon Soc'y v. Robertson, 914 F.2d 1311, 1314 (9th Cir. 1990), rev'd on other grounds, 118 L. Ed. 2d 73, 112 S. Ct. 1407 (1992).
A court should invalidate a statutory provision only "'for the most compelling constitutional reasons.'" Mistretta v. United States, 488 U.S. 361, 384, 102 L. Ed. 2d 714, 109 S. Ct. 647 (1989) (quoting Bowsher v. Synar, 478 U.S. 714, 736, 106 S. Ct. 3181, 92 L. Ed. 2d 583 (1986) (Stevens, J., Concurring)). Moreover, courts are obliged to impose a saving interpretation of an otherwise unconstitutional statute so long as it is "fairly possible to interpret the statute in a manner that renders it constitutionally ...