Opinion ID: 610593
Heading Depth: 3
Heading Rank: 1

Heading: Individual Rights

Text: 46 The Constitution's Fifth Amendment prohibits Congress from depriving any person of property without due process of law. The Defendants claim that § 27A(b) contravenes the Fifth Amendment by compromising two of their property rights as recognized by the Supreme Court. 47
48 Each of the defendants in these cases (collectively Defendants) possessed final, nonappealable judgments dismissing the plaintiffs' § 10(b) claims. Unlike § 27A(a), § 27A(b) effectively nullifies these judgments, so the cases addressing the constitutionality of § 27A(a) have nothing to say about whether § 27A(b) unconstitutionally abrogates any right to a final judgment. 10 For guidance on this question, we turn to the Supreme Court. 49 The Defendants rely upon McCullough v. Virginia, 172 U.S. 102, 19 S.Ct. 134, 43 L.Ed. 382 (1898) and its progeny to argue that § 27A(b) cannot constitutionally take away their judgments. McCullough obtained a judgment against Virginia in 1892, but a Virginia appellate court reversed that judgment. Id. at 106-07, 19 S.Ct. at 135. Between the time of judgment and its reversal, Virginia's legislature repealed the statute that authorized McCullough's suit. When the Supreme Court agreed to hear McCullough's appeal, Virginia asked the Court to apply the new law repealing authorization for the suit and dismiss McCullough's appeal. Id. at 123-24, 19 S.Ct. at 142. The Court emphatically refused Virginia's request: 50 It is not within the power of a legislature to take away rights which have been once vested by a judgment. Legislation may act on subsequent proceedings, may abate actions pending, but when those actions have passed into judgment the power of the legislature to disturb the rights created thereby ceases. Id. 11 51 Our research indicates that the Court has never applied this holding in McCullough to decide another case. Moreover, both before and after McCullough, the Court has decided cases with identical relevant facts according to a different rule. 12 Accordingly, we must carefully scrutinize McCullough's rationale in assessing the precedential value of its broad statement concerning rights vested by judgment. 52 The McCullough Court did not explicitly ground its holding in the Constitution. In subsequent decisions, however, the Court explained that the Fifth Amendment's Due Process Clause is the source of constitutional protection for judgments, including the one that belonged to McCullough. E.g., Hodges v. Snyder, 261 U.S. 600, 602, 43 S.Ct. 435, 436, 67 L.Ed. 819 (1923). Thus, we decide this case according to the jurisprudence that the Court has developed to describe how due process protects individuals from retroactive legislation. The Defendants stress a vested rights theory exemplified by McCullough, but we find talk of vested rights to merely state due process conclusions, and thus unnecessarily confusing. The Court explains: 53 the words vested right are nowhere used in the constitution, neither in the original instrument nor in any of the amendments to it. We understand very well what is meant by a vested right to real estate, to personal property, or to incorporeal hereditaments. But when we get beyond this, although vested rights may exist, they are better described by some more exact term, as the phrase itself is not one found in the language of the constitution. 54 Campbell v. Holt, 115 U.S. 620, 628, 6 S.Ct. 209, 213, 29 L.Ed. 483 (1885). A seminal treatise recognizes what has happened when courts have departed from the Constitution in search of an amorphous vested rights theory: 55 Judicial opinions are full of standards which purport to govern decision[s] concerning the legality of retroactive application of new law. On close examination most of them turn out to be little more than ways to restate the problem. Probably the most hackneyed example of such a rule is to the effect that a law cannot be retroactively applied to impair vested rights. But the statement of that proposition does nothing more than focus attention on the question concerning what circumstances qualify a right to be characterized as vested. 56 NORMAN J. SINGER, 2 SUTHERLAND STATUTORY CONSTRUCTION § 41.05, at 364-65 (C. Sands 4th ed. 1986); accord Constitutionality of Retroactive Legislation, 73 Harv.L.Rev. at 696. We waste no further time with the vested rights language, and turn to due process. 57 When the Court rendered McCullough, it may have held the absolutist view, indicated by the statement quoted above, that the Due Process Clause protects all final judgments from retroactive legislation. But the Court has retreated from this view. The Court permits retroactive legislation to annul private judgments that affect public rights, Hodges, 261 U.S. at 602, 43 S.Ct. at 436, or private injunctions upon changed circumstances. System Federation No. 91, Ry. Employees' Dept., AFL-CIO v. Wright, 364 U.S. 642, 647, 81 S.Ct. 368, 371, 5 L.Ed.2d 349 (1961) (modifying a permanent injunction to conform with subsequently-enacted amendments to the Railway Labor Act). The dispositive retreats from any absolute McCullough rule, however, come in Fleming v. Rhodes, 331 U.S. 100, 67 S.Ct. 1140, 91 L.Ed. 1368 (1947) and Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 96 S.Ct. 2882, 49 L.Ed.2d 752 (1976). 58 In Fleming, landlords obtained valid final judgments from a Texas court entitling them to evict certain tenants upon the lapse of wartime price regulations. Congress cured the lapse within two months, and included a law which prohibited the eviction of the tenants with its extension of price regulations. 331 U.S. at 103 n. 3, 67 S.Ct. at 1141 n. 3. A price-control administrator asked a federal district court to apply this law to enjoin the landlords and state officials from executing their judgments, but the district court held that the federal statute violated the Fifth Amendment's Due Process Clause. Id. at 102, 67 S.Ct. at 1141-42. The Supreme Court reversed, explaining that 59 Federal regulation of future action based upon rights previously acquired by the person regulated is not prohibited by the Constitution. So long as the Constitution authorizes the subsequently enacted legislation, the fact that its provisions limit or interfere with previously acquired rights does not condemn it. Immunity from federal regulation is not gained through forehanded contracts. Were it otherwise the paramount powers of Congress could be nullified by prophetic discernment. The rights acquired by judgments have no different standing. The protection of housing accommodations in defense-areas through the price control acts may be accomplished by the [administrator] notwithstanding these prior judgments. The preliminary injunctions should have been granted. 60 Id. at 107, 67 S.Ct. at 1144 (footnotes omitted and emphasis added), cited with approval in Federal Housing Admin. v. Darlington, Inc., 358 U.S. 84, 91 & n. 6, 79 S.Ct. 141, 146 & n. 6, 3 L.Ed.2d 132 (1958) ([A]ny 'vested' rights by reason of the state judgment were acquired subject to the possibility of their dilution through Congress' exercise of its paramount regulatory power.). 61 Usery arose from Congress' efforts to provide disability compensation to coal miners and their survivors. The disputed legislation establishes an administrative procedure under which victims of the disease known as black lung may collect benefits from coal companies, mandates certain presumptions against the coal companies, and operates retroactively. 428 U.S. at 9, 96 S.Ct. at 2889-90. The companies argued that the statute unconstitutionally deprived them of their property because it imposed upon them an unexpected liability for past, completed acts that were legally proper and, at least in part, unknown to be dangerous at the time. Id. at 15, 96 S.Ct. at 2892. The Court responded: 62 It is by now well established that legislative Acts adjusting the burdens and benefits of economic life come to the Court with a presumption of constitutionality, and that the burden is on one complaining of a due process violation to establish that the legislature has acted in an arbitrary and irrational way.... 63 To be sure, insofar as the Act requires compensation for disabilities bred during employment terminated before the date of enactment, the Act has some retrospective effect.... And it may be that the liability imposed by the Act for disabilities suffered by former employees was not anticipated at the time of actual employment. But our cases are clear that legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations. See Fleming v. Rhodes.... 64 Id. at 15-16, 96 S.Ct. at 2892-93 (citations and footnotes omitted). The Court then assessed the practical consequences of the Act's retrospective imposition of liability and concluded that this imposition is justified as a rational measure to spread the costs of the employees' disabilities to those who have profited from the fruits of their labor.... Id. at 18, 96 S.Ct. at 2893. 65 The Defendants would have us distinguish Fleming and Usery on the ground that the Court in neither case permitted a retroactive statute to upset a final, nonappealable judgment; they maintain that the rights created by judgments are sacrosanct above other due process rights, and that the McCullough rule endures for judgment-based rights. This argument fails to distinguish Fleming or Usery. 66 While the Fleming Court noted that the retroactive legislation which it upheld only compromised the landlords' ability to enforce their judgment rights as opposed to any compromise of the rights themselves, 331 U.S. at 106, 67 S.Ct. at 1144, the Court has also recognized (as do we) that the removal of a remedy has the same effect as the removal of a right. See Chase Sec. Corp. v. Donaldson, 325 U.S. 304, 313, 65 S.Ct. 1137, 1142, 89 L.Ed. 1628 (1945) ([I]t is troublesome to sustain as a 'right' a claim that can find no remedy for its invasion.); Lynch v. United States, 292 U.S. 571, 580, 54 S.Ct. 840, 844, 78 L.Ed. 1434 (1934) (Contracts between individuals or corporations are impaired ... whenever the right to enforce them is taken away or materially lessened.). 67 Usery teaches that Congress can, under some circumstances, create private civil liability for past acts. We recognize nothing in the Usery Court's analysis that would limit Congress from retroactively creating liability for securities fraud if it justified this retroactive effect with reasons comparable to those recited in Usery. See 428 U.S. at 18, 96 S.Ct. at 2893-94. Because Usery allows Congress to avert questions of judgment rights altogether, there is no due process reason why Congress cannot reach the same result by upsetting a judgment. 68 Moreover, FED.R.CIV.P. 60(b) itself destroys the Defendants' position that final, nonappealable judgments confer sacrosanct due-process rights on individuals. Rule 60(b) permits courts to relieve a party ... from a final judgment ... for ... any ... reason justifying relief from the operation of the judgment. The Court has repeatedly acknowledged that Rule 60 provides courts with authority 'adequate to enable them to vacate judgments whenever such action is appropriate to accomplish justice.'  Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 864, 108 S.Ct. 2194, 2204, 100 L.Ed.2d 855 (1988) (citation omitted). The Tenth Circuit is especially likely to disturb final judgments under Rule 60(b) upon subsequent changes in the law: a change in relevant case law by the United States Supreme Court warrants relief under Fed.R.Civ.P. 60(b)(6). Adams v. Merrill Lynch Pierce Fenner & Smith, 888 F.2d 696, 702 (10th Cir.1989). 69 Rule 60(b) has spawned an extensive jurisprudence; no doubt remains as to its constitutionality. And we know of nothing to indicate that an individual holds any greater constitutional right against one branch of government than she holds against another. This reasoning establishes that, despite McCullough, judgments that are final and nonappealable do not create rights that are absolutely immune from congressional manipulation. 70 It is not our place to state general rules as to when the Due Process Clause permits Congress to disturb judgments. We limit our inquiry to the facts before us. Fortunately, the Court provides ample guidance in Donaldson. See 325 U.S. at 311-16, 65 S.Ct. at 1141-43. 71 Donaldson sued a securities broker under Minnesota statutory and common-law fraud theories. A state judge ruled that the broker violated the Minnesota securities statute and that Donaldson timely filed his claim because his absence from the state tolled Minnesota's limitations period. Minnesota's Supreme Court held the latter ruling erroneous, and remanded for further proceedings. Id. at 306, 65 S.Ct. at 1138. Meanwhile, Minnesota's legislature enacted a limitations statute which permitted any securities fraud claim to be brought within one year of the statute if the securities were delivered more than five years before the statute's enactment date. Donaldson met the five year delivery requirement and availed himself of the new statute in Minnesota's courts. Id. at 308, 65 S.Ct. at 1139. The broker appealed to the Supreme Court, arguing that Minnesota deprived him of due process by applying the new limitations period to him. We quote extensively from the Court's unanimous refutation of this argument because we find it applicable here: 72 Statutes of limitation find their justification in necessity and convenience rather than in logic. They represent expedients, rather than principles. They are practical and pragmatic devices to spare the courts from litigation of stale claims, and the citizen from being put to his defense after memories have faded, witnesses have died or disappeared, and evidence has been lost.... They represent a public policy about the privilege to litigate. Their shelter has never been regarded as what now is called a fundamental right or what used to be called a natural right of the individual. He may, of course, have the protection of the policy while it exists, but the history of pleas of limitation shows them to be good only by legislative grace and to be subject to a relatively large degree of legislative control. 73 .... 74 .... The Fourteenth Amendment [Due Process Clause] does not make an act of state legislation void merely because it has some retrospective operation.... Some rules of law probably could not be changed retroactively without hardship and oppression.... Assuming that statutes of limitation like other types of legislation could be so manipulated that their retroactive effects would offend the Constitution, certainly it cannot be said that lifting the bar of a statute of limitation so as to restore a remedy lost through mere lapse of time is per se an offense against the Fourteenth Amendment. Nor has the appellant pointed out special hardships or oppressive effects which result from lifting the bar in this class of cases with retrospective force. This is not a case where appellant's conduct would have been different if the present rule had been known and the change foreseen. It does not say, and could hardly say, that it sold unregistered stock depending on a statute of limitation for shelter from liability. The nature of the defenses shows that no course of action was undertaken by appellant on the assumption that the old rule would be continued. When the action was commenced, it no doubt expected to be able to defend by invoking Minnesota public policy that lapse of time had closed the courts to the case, and its legitimate hopes have been disappointed. But the existence of the policy at the time the action was commenced did not, under the circumstances, give the appellant a constitutional right against change of policy before final adjudication. 75 Id. at 314-15, 65 S.Ct. at 1142-43 (citations and footnotes omitted). 76 The Defendants understandably stress the last phrase of the quoted passage, and observe that while Donaldson permits a legislature to retroactively change limitations periods, it says nothing about whether a legislature can divest a party of a final judgment. The problem with this argument is that Donaldson predates both Fleming and Usery, which we understand to establish that Congress may upset final judgments under some circumstances. To decide whether § 27A(b) can constitutionally upset final judgments, we observe that the Court in Donaldson, Fleming, and Usery invariably considered whether the legislature acted rationally toward the party asserting a due process violation to determine whether retroactive legislation deprived those parties of rights without due process. 13 77 In Fleming, the Court understood the landlords asserting due process rights to have taken advantage of an inadvertent two-month lapse in price-control regulation of defense-area housing during wartime, and held that Congress could rationally exercise its commerce authority to deny them this advantage. 331 U.S. at 106, 67 S.Ct. at 1143-44. In Usery, the Court analyzed the effect of the retroactive legislation on the coal companies to determine whether the legislation me[t] the test of due process and concluded that the legislation was justified as a rational measure to spread the costs of the employees' disabilities. 428 U.S. at 16, 96 S.Ct. at 2893. Likewise, as we quote above, the Donaldson Court carefully considered the effect of the retroactive limitations statute on the broker before holding that Minnesota's legislature worked no injustice. 325 U.S. at 315-16, 65 S.Ct. at 1143. And recently, the Court upheld a statute that retroactively assessed a fee for use of the Iran-United States Claims Tribunal against a due process challenge by applying this standard: the test of due process for [t]he retroactive aspects of legislation is met if the retroactive application of the legislation is itself justified by a rational legislative purpose. United States v. Sperry Corp., 493 U.S. 52, 64, 110 S.Ct. 387, 396, 107 L.Ed.2d 290 (1989) (quoting Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 730, 104 S.Ct. 2709, 2718, 81 L.Ed.2d 601 (1984)). 78 Donaldson frees us from speculating as to the bounds of due-process rationality when a legislature promulgates retroactive laws. Like the statute at issue in Donaldson, § 27A(b) restores a remedy that PMLI and Simmons lost through lapse of time. Like the fraud-based cause of action at issue in Donaldson, the Defendants' conduct would not have been different if they would have foreseen § 27A(b). Like the effect of the retroactive legislation at issue in Donaldson, § 27A(b) subjects the Defendants to a lawsuit. 79 As a matter of practical effect on the parties, § 27A(b) differs from the Donaldson legislation in one important respect. The Donaldson Court characterized the broker's expectation that the limitation law would remain as it was when suit was filed as a legitimate hope[ ], yet held this expectation insufficient to render Minnesota's retroactive limitations statute violative of due process. Id. Section 27A(b) represents Congress' complementary view that courts should honor the expectations of plaintiffs and defendants as they ascertained § 10(b) limitations law upon the filing of these suits before Lampf. Section 27A(b) fulfills the hopes that the Donaldson Court found legitimate, and is thus a stronger candidate for retroactivity than the statute upheld by the Court; strong enough, we hold, to upset the Defendants' final, nonappealable judgments. 14 80
81 The Defendants argue that even if Congress can legitimately upset their judgments with § 27A(b), the statute still contravenes due process because it creates civil liability for past acts. Their argument rests on William Danzer & Co. v. Gulf & S.I.R. Co., 268 U.S. 633, 45 S.Ct. 612, 69 L.Ed. 1126 (1925), where the Court distinguishes between time-bar statutes that bar the remedy of suit in court, and those that extinguish the liability altogether. Id. at 637, 45 S.Ct. at 613; see also Donaldson, 325 U.S. at 312 n. 8, 65 S.Ct. at 1141 n. 8 (distinguishing Danzer according to its remedy/liability dichotomy). If a time-bar statute extinguishes liability, the Danzer Court held that a legislature cannot constitutionally amend such a statute to revive liability once extinguished. 268 U.S. at 637, 45 S.Ct. at 613. To do so would retroactively ... create liability and thus deprive the defendant of its property without due process of law in contravention of the Fifth Amendment. Id. 82 The Defendants point to the Lampf Court's distinction between a one-year statute of limitation and a three-year statute of repose, and its holding that Congress effectively created this time-bar structure in 1934. See --- U.S. at ----, 111 S.Ct. at 2780. They observe that, like the statute at issue in Danzer, the three-year repose period recognized by the Lampf Court is an absolute bar not subject to equitable tolling. Compare id. at ----, 111 S.Ct. at 2782 with Danzer, 268 U.S. at 637, 45 S.Ct. at 613. From this, they reason that Congress in 1934 enacted an absolute three-year limit on liability for § 10(b) violations. Because § 27A(b) operates in these cases to lift this three-year outside limit, the Defendants argue that the statute retroactively ... creates liability in contravention of due process according to Danzer. 83 As a preliminary matter, we note that the Usery Court squarely held that Congress may retroactively create liability for past acts, and thus compromises Danzer's holding that such legislation per se contravenes due process. See Usery, 428 U.S. at 16, 96 S.Ct. at 2893 (legislation is not unlawful solely because the effect of the legislation is to impose a new duty or liability based on past acts) (citations omitted). The Court has also questioned the continued validity of a dichotomy between remedy and right, at least where extinction of the remedy has the same effect as extinction of the right. See Donaldson, 325 U.S. at 314, 65 S.Ct. at 1142; see also Lynch, 292 U.S. at 580, 54 S.Ct. at 844. And the last time a party asked the Court to apply Danzer, the Court did not even make a determination as to whether the time-bar statute at issue affected remedy or liability. International Union of Elec., Radio & Mach. Workers v. Robbins & Myers, Inc., 429 U.S. 229, 244, 97 S.Ct. 441, 450-51, 50 L.Ed.2d 427 (1976). 84 But even if Danzer remains good law, it does not help the Defendants. Danzer and its progeny are inapposite to statutes that bar remedies, while leaving liability intact. We need look no further than Lampf to determine whether the three-year statute of repose asserted by the Defendants bars liability. 85 The Lampf Court strove for crystal clarity in stating its holding: [T]he governing standard for an action under § 10(b) [is] the language of § 9(e) of the 1934 Act, 15 U.S.C. § 78i(e). --- U.S. at ---- n. 9, 111 S.Ct. at 2782 n. 9. Section 9(e) as passed by Congress in 1934, provides: 86 No action shall be maintained to enforce any liability created under this section, unless brought within one year after the discovery of the facts constituting the violation and within three years after such violation. 87 This language unequivocally bars an action to enforce a liability, and says nothing about the continued existence of that liability. Nowhere does the Lampf Court even imply that the absolute three-year statute of repose extinguishes liability under § 10(b). We hold that it does not. 88 This holding conflicts with the Tenth Circuit's holding in Anixter v. Home-Stake Production Co., 939 F.2d 1420, 1434 (10th Cir.1991) that § 13 of the 1933 Act limits liability and not remedy. The Lampf Court relied upon § 13 to hold that § 9(e) governs § 10(b) limitations periods, yet mentioned nothing about limitation of liability. --- U.S. at ---- & n. 7, 111 S.Ct. at 2780 & n. 7. And like § 9(e), the language of § 13 unequivocally indicates a limitation of remedy, not of liability. 15 We disagree with the Anixter court's opposite conclusion. 89 The Defendants wrongly assume that a statute of repose must go to liability rather than remedy. See City of El Paso v. Simmons, 379 U.S. 497, 508 n. 9, 85 S.Ct. 577, 582 n. 9, 13 L.Ed.2d 446 (1965) ([T]he statute of repose challenged here is an alteration of remedy rather than obligation.). They are also mistaken that a time-bar statute limits liability merely because a legislature structures it as an absolute bar that is not subject to equitable tolling. In Short v. Belleville Shoe Manufacturing Co., 908 F.2d 1385 (7th Cir.1990), the court discussed § 13 as follows: 90 Courts say that equitable tolling does not apply under § 13, but this is not strictly accurate. It is better to say that equitable tolling and related doctrines do not extend the period of limitations by more than the two-year grace period § 13 allows. Congress did not obliterate these valuable doctrines so much as it set bounds on the length of delay. 91 Id. at 1391 (citations omitted). Rather than assess whether a statute is characterized as one of repose or limitation, or whether it is subject to equitable tolling, the relevant inquiry under Danzer is whether the legislature intended liability or remedy to be extinguished by a time bar. Donaldson, 325 U.S. at 311 n. 8, 65 S.Ct. at 1141 n. 8. The primary evidence of this intent is, of course, the language of the statute. 16 In this case, we understand Congress to have decided in § 9(e) that the three-year time bar goes to remedy only. 92 Accordingly, the Defendants have failed to establish that § 27A(b) unconstitutionally deprives them of any right.