Plaut v. Spend Thrift Farm, Inc.

Supreme Court of the United States · 1995 · Administrative Law

Administrative LawConstitutional LawFederal CourtsSeparation of PowersArticle IIIFinal JudgmentsRetroactive LegislationArticle III

Facts

Petitioners filed a private § 10(b) and Rule 10b-5 action in federal district court in 1987 based on alleged securities fraud in 1983 and 1984. After the Supreme Court decided Lampf in 1991 and Beam required application of new federal rules to cases pending on direct review, the district court dismissed petitioners' action with prejudice as time barred; petitioners did not appeal, so the judgment became final. Later in 1991, Congress enacted § 27A(b), which required reinstatement on timely motion of certain pre-June 20, 1991, § 10(b) actions dismissed as untimely after June 19, 1991, if they would have been timely under pre-Lampf law. Petitioners then moved to reinstate their case, and the courts below held § 27A(b) unconstitutional.

Issue

Whether § 27A(b) of the Securities Exchange Act, insofar as it requires federal courts to reopen final judgments in private § 10(b) actions, violates the Constitution's separation of powers. The Court also identified, but did not need to reach, a Fifth Amendment due process challenge.

Rule

Article III gives the federal judiciary the power to decide cases conclusively, subject only to review within the Article III hierarchy. Congress may change applicable law and make it retroactive for cases still pending on direct review, but it may not by retroactive legislation require Article III courts to reopen final judgments already entered before the legislation's enactment.

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In federal district court in Chicago, Nora Patel sued Lakeview Devices LLC under a federal employment statute. The court dismissed the action with prejudice for failure to satisfy a statutory exhaustion requirement, and Nora did not appeal within the time allowed, so the judgment became final. Six months later, Congress amended the statute and directed all federal courts to reinstate previously dismissed exhaustion-based cases if the employee filed a motion within 90 days.

Is the congressional reinstatement command constitutional as applied to Nora's already final federal judgment?

Explanation. The majority held that Article III gives federal courts power to decide cases conclusively, subject only to review within the Article III hierarchy. Congress may amend applicable law and make it retroactive for cases still pending on direct review, but it may not retroactively command federal courts to reopen judgments that were already final when the statute was enacted. It does not matter that the underlying rule is statutory or that the reopening provision is framed generally. (Derived from Plaut v. Spend Thrift Farm, Inc. (1995).)