Subject:  LAMPF v. GILBERTSON, Syllabus



 
    NOTE: Where it is feasible, a syllabus (headnote) will be released, as
is being done in connection with this case, at the time the opinion is
issued.  The syllabus constitutes no part of the opinion of the Court but
has been prepared by the Reporter of Decisions for the convenience of the
reader.  See United States v. Detroit Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES


Syllabus



LAMPF, PLEVA, LIPKIND, PRUPIS & PETIGROW v. GILBERTSON et al.

certiorari to the united states court of appeals for the ninth circuit

No. 90-333.  Argued February 19, 1991 -- Decided June 20, 1991

During 1979 through 1981, plaintiff-respondents purchased units in seven
Connecticut limited partnerships, with the expectation of realizing federal
income tax benefits.  Among other things, petitioner, a New Jersey law
firm, aided in organizing the partnerships and prepared opinion letters
addressing the tax consequences of investing.  The partnerships failed,
and, subsequently, the Internal Revenue Service disallowed the claimed tax
benefits.  In 1986 and 1987, plaintiff-respondents filed complaints in the
Federal District Court for the District of Oregon, alleging that they were
induced to invest in the partnerships by misrepresentations in offering
memoranda prepared by petitioner and others, in violation of, inter alia,
MDRV 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and
asserting that they became aware of the alleged misrepresentations only in
1985.  The court granted summary judgment for the defendants on the ground
that the complaints were not timely filed, ruling that the claims were
governed by Oregon's 2-year limitations period for fraud claims, the most
analogous forum-state statute; that plaintiff-respondents had been on
notice of the possibility of fraud as early as 1982; and that there were no
grounds sufficient to toll the statute of limitations.  The Court of
Appeals also selected Oregon's limitations period, but reversed, finding
that there were unresolved factual issues as to when plaintiff-respondents
should have discovered the alleged fraud.

Held: The judgment is reversed.

895 F. 2d 1418, reversed.

    Justice Blackmun delivered the opinion of the Court with respect to
Parts I, II-B, III, and IV, concluding that:

    1. Litigation instituted pursuant to MDRV 10(b) and Rule 10b-5 must be
commenced within one year after the discovery of the facts constituting the
violation and within three years after such violation, as provided in the
1934 Act and the Securities Act of 1933.  State-borrowing principles should
not be applied where, as here, the claim asserted is one implied under a
statute also containing an express cause of action with its own time
limitation.  The 1934 Act contemporaneously enacted a number of express
remedial provisions actually designed to accommodate a balance of interests
very similar to that at stake in this litigation.  And the limitations
periods in all but one of its causes of action include some variation of a
1-year period after discovery combined with a 3-year period of repose.
Moreover, in adopting the 1934 Act, Congress also amended the 1933 Act,
adopting the same structure for each of its causes of action.  Neither the
5-year period contained in the 1934 Act's insider-trading provision, which
was added in 1988, nor state-law fraud provides a closer analogy to MDRV
10(b).  Pp. 7-11.

    2. The limitations period is not subject to the doctrine of equitable
tolling.  The 1-year period begins after discovery of the facts
constituting the violation, making tolling unnecessary, and the 3-year
limit is a period of repose inconsistent with tolling.  Pp. 12-13.

    3. As there is no dispute that the earliest of plaintiff-respondents'
complaints was filed more than three years after petitioner's alleged
misrepresentations, plaintiff-respondents' claims were untimely.  P. 13.

Blackmun, J., delivered the opinion of the Court with respect to Parts I,
II-B, III, and IV, in which Rehnquist, C. J., and White, Marshall, and
Scalia, JJ., joined, and an opinion with respect to Part II-A, in which
Rehnquist, C. J., and White and Marshall, JJ., joined.  Scalia, J., filed
an opinion concurring in part and concurring in the judgment.  Stevens, J.,
filed a dissenting opinion, in which Souter, J., joined.  O'Connor, J.,
filed a dissenting opinion, in which Kennedy, J., joined.  Kennedy, J.,
filed a dissenting opinion, in which O'Connor, J., joined.
------------------------------------------------------------------------------




Subject: 90-333 -- OPINION, LAMPF v. GILBERTSON

 


NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports.  Readers are requested
to notify the Reporter of Decisions, Supreme Court of the United States,
Washington, D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print goes to
press.

SUPREME COURT OF THE UNITED STATES


No. 90-333



LAMPF, PLEVA, LIPKIND, PRUPIS & PETIGROW, PETITIONER v. JOHN GILBERTSON et
al.

on writ of certiorari to the united states court of appeals for the ninth
circuit

[June 20, 1991]



    Justice Blackmun delivered the opinion of the Court, except as to Part
II-A.

    In this litigation we must determine which statute of limitations is
applicable to a private suit brought pursuant to MDRV 10(b) of the
Securities Exchange Act of 1934, 48 Stat. 891, 15 U. S. C. MDRV 78j(b), and
to Securities and Exchange Commission Rule 10b-5, 17 CFR MDRV 240.10b-5
(1990), promulgated thereunder.
I
    The controversy arises from the sale of seven Connecticut limited
partnerships formed for the purpose of purchasing and leasing computer
hardware and software.  Petitioner Lampf, Pleva, Lipkind, Prupis & Petigrow
is a West Orange, N. J., law firm that aided in organizing the partnerships
and that provided additional legal services, including the prepa ration of
opinion letters addressing the tax consequences of investing in the
partnerships.  The several plaintiff-respondents purchased units in one or
more of the partnerships during the years 1979 through 1981 with the
expectation of realizing federal income tax benefits therefrom.
    The partnerships failed, due in part to the technological obsolescence
of their wares.  In late 1982 and early 1983, plaintiff-respondents
received notice that the United States Internal Revenue Service was
investigating the partnerships.  The IRS subsequently disallowed the
claimed tax benefits because of overvaluation of partnership assets and
lack of profit motive.
    On November 3, 1986, and June 4, 1987, plaintiff-respondents filed
their respective complaints in the United States District Court for the
District of Oregon, naming as defendants petitioner and others involved in
the preparation of offering memoranda for the partnerships.  The complaints
alleged that plaintiff-respondents were induced to invest in the
partnerships by misrepresentations in the offering memoranda, in violation
of, among other things, MDRV 10(b) of the 1934 Act and Rule 10b-5.  The
claimed misrepresentations were said to include assurances that the
investments would entitle the purchasers to substantial tax benefits; that
the leasing of the hardware and software packages would generate a profit;
that the software was readily marketable; and that certain equipment
appraisals were accurate and reasonable.  Plaintiff-respondents asserted
that they became aware of the alleged misrepresentations only in 1985
following the disallowance by the IRS of the tax benefits claimed.
    After consolidating the actions for discovery and pretrial proceedings,
the District Court granted summary judgment for the defendants on the
ground that the complaints were not timely filed.  App. to Pet. for Cert.
22A.  Following precedent of its controlling court, see, e. g., Robuck v.
Dean Witter & Co., 649 F. 2d 641 (CA9 1980), the District Court ruled that
the securities claims were governed by the state statute of limitations for
the most analogous forum-state cause of action.  The court determined this
to be Oregon's 2-year limitations period for fraud claims, Ore. Rev. Stat.
MDRV 12.110(1) (1989).  The court found that reports to
plaintiffrespondents detailing the declining financial status of each
partnership and allegations of misconduct made known to the general
partners put plaintiff-respondents on "inquiry notice" of the possibility
of fraud as early as October 1982.  App. to Pet. for Cert. 43A.  The court
also ruled that the distribution of certain fiscal reports and the
installation of a general partner previously associated with the defendants
did not constitute fraudulent concealment sufficient to toll the statute of
limitations.  Applying the Oregon statute to the facts underlying
plaintiff-respondents' claims, the District Court determined that each
complaint was time barred.
    The Court of Appeals for the Ninth Circuit reversed and remanded the
cases.  See Reitz v. Leasing Consultants Associates, 895 F. 2d 1418 (1990)
(judgment entry).  In its unpublished opinion, the Court of Appeals found
that unresolved factual issues as to when plaintiff-respondents discovered
or should have discovered the alleged fraud precluded summary judgment.
Then, as did the District Court, it selected the 2-year Oregon limitations
period.  In so doing, it implicitly rejected petitioner's argument that a
federal limitations period should apply to Rule 10b-5 claims.  App. to Pet.
for Cert. 8A.  In view of the divergence of opinion among the Circuits
regarding the proper limitations period for Rule 10b-5 claims, {1} we
granted certiorari to address this important issue.  --- U. S. --- (1990).
II
    Plaintiff-respondents maintain that the Court of Appeals correctly
identified common-law fraud as the source from which MDRV 10(b) limitations
should be derived.  They submit that the underlying policies and
practicalities of MDRV 10(b) litigation do not justify a departure from the
traditional practice of "borrowing" analogous state-law statutes of
limitations.  Petitioner, on the other hand, argues that a federal period
is appropriate, contending that we must look to the "1-and-3year" structure
applicable to the express causes of action in MDRV 13 of the Securities Act
of 1933, 48 Stat. 84, as amended, 15 U. S. C. MDRV 77m, and to certain of
the express actions in the 1934 Act, see 15 U. S. C. 15 78i(e), 78r(c), and
78cc(b). {2}  The Solicitor General, appearing on behalf of the Securities
Exchange Commission, agrees that use of a federal period is indicated, but
urges the application of the 5-year statute of repose specified in MDRV 20A
of the 1934 Act, 15 U. S. C. MDRV 78t-1(b)(4), as added by MDRV 5 of the
Insider Trading and Securities Fraud Enforcement Act of 1988, 102 Stat.
4681.  The 5-year period, it is said, accords with "Congress's most recent
views on the accommodation of competing interests, provides the closest
federal analogy, and promises to yield the best practical and policy
results in Rule 10b-5 litigation."  Brief for Securities and Exchange
Commission as Amicus Curiae 8.  For the reasons discussed below, we agree
that a uniform federal period is indicated, but we hold that the express
causes of action contained in the 1933 and 1934 Acts provide the source.
A
    It is the usual rule that when Congress has failed to provide a statute
of limitations for a federal cause of action, a court "borrows" or
"absorbs" the local time limitation most analogous to the case at hand.
Wilson v. Garcia, 471 U. S. 261, 266-267 (1985); Auto Workers v. Hoosier
Cardinal Corp., 383 U. S. 696, 704 (1966); Campbell v. Haverhill, 155 U. S.
610, 617 (1895).  This practice, derived from the Rules of Decision Act, 28
U. S. C. MDRV 1652, has enjoyed sufficient longevity that we may assume
that, in enacting remedial legislation, Congress ordinarily "intends by its
silence that we borrow state law."  Agency Holding Corp. v. Malley-Duff &
Associates, Inc., 483 U. S. 143, 147 (1987).
    The rule, however, is not without exception.  We have recognized that a
state legislature rarely enacts a limitations period with federal interests
in mind, Occidental Life Ins. Co. v. EEOC, 432 U. S. 355, 367 (1977), and
when the operation of a state limitations period would frustrate the
policies embraced by the federal enactment, this Court has looked to
federal law for a suitable period.  See, e. g., DelCostello v. Teamsters,
462 U. S. 151 (1983); Agency Holding Corp., supra; McAllister v. Magnolia
Petroleum Co., 357 U. S. 221, 224 (1958).  These departures from the
state-borrowing doctrine have been motivated by this Court's conclusion
that it would be "inappropriate to conclude that Congress would choose to
adopt state rules at odds with the purpose or operation of federal
substantive law."  DelCostello, 462 U. S., at 161.
    Rooted as it is in the expectations of Congress, the "stateborrowing
doctrine" may not be lightly abandoned.  We have described federal
borrowing as "a closely circumscribed exception," to be made "only `when a
rule from elsewhere in federal law clearly provides a closer analogy than
available state statutes, and when the federal policies at stake and the
practicalities of litigation make that rule a significantly more
appropriate vehicle for interstitial lawmaking.' "  Reed v. United
Transportation Union, 488 U. S. 319, 324 (1989), quoting DelCostello, 462
U. S., at 172.
    Predictably, this determination is a delicate one.  Recognizing,
however, that a period must be selected, {3} our cases do provide some
guidance as to whether state or federal borrowing is appropriate and as to
the period best suited to the cause of action under consideration.  From
these cases we are able to distill a hierarchical inquiry for ascertaining
the appropriate limitations period for a federal cause of action where
Congress has not set the time within which such an action must be brought.
    First, the court must determine whether a uniform statute of
limitations is to be selected.  Where a federal cause of action tends in
practice to "encompass numerous and diverse topics and subtopics," Wilson
v. Garcia, 471 U. S., at 273, such that a single state limitations period
may not be consistently applied within a jurisdiction, we have concluded
that the federal interests in predictability and judicial economy counsel
the adoption of one source, or class of sources, for borrowing purposes.
Id., at 273-275.  This conclusion ultimately may result in the selection of
a single federal provision, see Agency Holding Corp., supra, or of a single
variety of state actions.  See Wilson v. Garcia (characterizing all actions
under 42 U. S. C. MDRV 1983 as analogous to a state-law personal injury
action).
    Second, assuming a uniform limitations period is appropriate, the court
must decide whether this period should be derived from a state or a federal
source.  In making this judgment, the court should accord particular weight
to the geographic character of the claim:

"The multistate nature of [the federal cause of action at issue] indicates
the desirability of a uniform federal statute of limitations.  With the
possibility of multiple state limitations, the use of state statutes would
present the danger of forum shopping and, at the very least, would
`virtually guarante[e] . . . complex and expensive litigation over what
should be a straightforward matter.' "  Agency Holding Corp., 483 U. S., at
154, quoting Report of the Ad Hoc Civil RICO Task Force of the ABA Section
of Corporation, Banking and Business Law 392 (1985).


    Finally, even where geographic considerations counsel federal
borrowing, the aforementioned presumption of state borrowing requires that
a court determine that an analogous federal source truly affords a "closer
fit" with the cause of action at issue than does any available state-law
source.  Although considerations pertinent to this determination will neces
sarily vary depending upon the federal cause of action and the available
state and federal analogues, such factors as commonality of purpose and
similarity of elements will be relevant.
B
    In the present litigation, our task is complicated by the
nontraditional origins of the MDRV 10(b) cause of action.  The text of MDRV
10(b) does not provide for private claims. {4}  Such claims are of judicial
creation, having been implied under the statute for nearly half a century.
See Kardon v. National Gypsum Co., 69 F. Supp. 512 (ED Pa. 1946), cited in
Ernst & Ernst v. Hochfelder, 425 U. S. 185, 196, n. 16 (1976).  Although
this Court repeatedly has recognized the validity of such claims, see Blue
Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 730 (1975); Affiliated Ute
Citizens v. United States, 406 U. S. 128, 150-154 (1972); Superintendent of
Insurance v. Bankers Life & Cas. Co., 404 U. S. 6, 13, n. 9 (1971), we have
made no pretense that it was Congress' design to provide the remedy
afforded.  See Ernst & Ernst, 425 U. S., at 196 ("[T]here is no indication
that Congress, or the Commission when adopting Rule 10b-5, contemplated
such a remedy.") (footnotes omitted).  It is therefore no surprise that the
provision contains no statute of limitations.
    In a case such as this, we are faced with the awkward task of
discerning the limitations period that Congress intended courts to apply to
a cause of action it really never knew existed.  Fortunately, however, the
drafters of MDRV 10(b) have provided guidance.
    We conclude that where, as here, the claim asserted is one implied
under a statute that also contains an express cause of action with its own
time limitation, a court should look first to the statute of origin to
ascertain the proper limitations period.  We can imagine no clearer
indication of how Congress would have balanced the policy considerations
implicit in any limitations provision than the balance struck by the same
Congress in limiting similar and related protections.  See DelCostello, 462
U. S., at 171; United Parcel Service, Inc. v. Mitchell, 451 U. S. 56, 69-70
(1981) (opinion concurring in judgment).  When the statute of origin
contains comparable express remedial provisions, the inquiry usually should
be at an end.  Only where no analogous counterpart is available should a
court then proceed to apply state-borrowing principles.
    In the present litigation, there can be no doubt that the
contemporaneously enacted express remedial provisions represent "a federal
statute of limitations actually designed to accommodate a balance of
interests very similar to that at stake here -- a statute that is, in fact,
an analogy to the present lawsuit more apt than any of the suggested
state-law parallels."  DelCostello, 462 U. S., at 169.  The 1934 Act
contained a number of express causes of action, each with an explicit
limitations period.  With only one more restrictive exception, {5} each of
these includes some variation of a 1-year period after discovery combined
with a 3-year period of repose. {6}  In adopting the 1934 Act, the 73d
Congress also amended the limitations provision of the 1933 Act, adopting
the 1-and-3-year structure for each cause of action contained therein. {7}
    Section 9 of the 1934 Act, 15 U. S. C. MDRV 78i, pertaining to the
willful manipulation of security prices, and MDRV 18, 15 U. S. C. MDRV 78r,
relating to misleading filings, target the precise dangers that are the
focus of MDRV 10(b).  Each is an integral element of a complex web of
regulations.  Each was intended to facilitate a central goal: "to protect
investors against manipulation of stock prices through regulation of
transactions upon securities exchanges and in over-thecounter markets, and
to impose regular reporting requirements on companies whose stock is listed
on national securities exchanges."  Ernst & Ernst, 425 U. S., at 195,
citing S. Rep. No. 792, 73d Cong., 2d Sess., 1-5 (1934).
C
    We therefore conclude that we must reject the Commission's contention
that the 5-year period contained in MDRV 20A, added to the 1934 Act in
1988, is more appropriate for MDRV 10(b) actions than is the 1-and-3-year
structure in the Act's original remedial provisions.  The Insider Trading
and Securities Fraud Enforcement Act of 1988, which became law more than 50
years after the original securities statutes, focuses upon a specific
problem, namely, the "purchasing or selling [of] a security while in
possession of material, nonpublic information," 15 U. S. C. MDRV 78t-1(a),
that is, "insider trading."  Recognizing the unique difficulties in
identifying evidence of such activities, the 100th Congress adopted MDRV
20A as one of "a variety of measures designed to provide greater
deterrence, detection and punishment of violations of insider trading."  H.
R. Rep. No. 100-910, p. 7 (1988).  There is no indication that the drafters
of MDRV 20A sought to extend that enhanced protection to other provisions
of the 1934 Act.  Indeed, the text of MDRV 20A indicates the contrary.
Section 20A(d) states: "Nothing in this section shall be construed to limit
or condition the right of any person to bring an action to enforce a
requirement of this chapter or the availability of any cause of action
implied from a provision of this chapter."  15 U. S. C. MDRV 78t-1(d).
    The Commission further argues that because some conduct that is
violative of MDRV 10(b) is also actionable under MDRV 20A, adoption of a
1-and-3-year structure would subject actions based on MDRV 10(b) to two
different statutes of limitations.  But MDRV 20A also prohibits
insider-trading activities that violate sections of the 1934 Act with
express limitations periods.  The language of MDRV 20A makes clear that the
100th Congress sought to alter the remedies available in insider trading
cases, and only in insider trading cases.  There is no inconsistency.
    Finally, the Commission contends that the adoption of a 3year period of
repose would frustrate the policies underlying MDRV 10(b).  The inclusion,
however, of the 1-and-3-year structure in the broad range of express
securities actions contained in the 1933 and 1934 Acts suggests a
congressional determination that a 3-year period is sufficient.  See Ceres
Partners v. GEL Associates, 918 F. 2d 349, 363 (CA2 1990).
    Thus, we agree with every Court of Appeals that has been called upon to
apply a federal statute of limitations to a MDRV 10(b) claim that the
express causes of action contained in the 1933 and 1934 Acts provide a more
appropriate statute of limitations than does MDRV 20A.  See Ceres Partners,
supra; Short v. Belleville Shoe Mfg. Co., 908 F. 2d 1385 (CA7 1990), cert.
pending, No. 90-526; In re Data Access Systems Securities Litigation, 843
F. 2d 1537 (CA3), cert. denied sub nom. Vitiello v. I. Kahlowski & Co., 488
U. S. 849 (1988).
    Necessarily, we also reject plaintiff-respondents' assertion that
state-law fraud provides the closest analogy to MDRV 10(b).  The analytical
framework we adopt above makes consideration of state-law alternatives
unnecessary where Congress has provided an express limitations period for
correlative remedies within the same enactment. {8}
III
    Finally, we address plaintiff-respondents' contention that, whatever
limitations period is applicable to MDRV 10(b) claims, that period must be
subject to the doctrine of equitable tolling.  Plaintiff-respondents note,
correctly, that "[t]ime requirements in law suits . . . are customarily
subject to `equitable tolling.' "  Irwin v. Veterans Administration, --- U.
S. ---, --- ( 1990) (slip op. 5), citing Hallstrom v. Tillamook County, 493
U. S. 20, --- (1989) (slip op. 6).  Thus, this Court has said that in the
usual case, "where the party injured by the fraud remains in ignorance of
it without any fault or want of diligence or care on his part, the bar of
the statute does not begin to run until the fraud is discovered, though
there be no special circumstances or efforts on the part of the party
committing the fraud to conceal it from the knowledge of the other party."
Bailey v. Glover, 21 Wall. 342, 348 (1874); see also Holmberg v. Armbrecht,
327 U. S. 392, 396-397 (1946).  Notwithstanding this venerable principle,
it is evident that the equitable tolling doctrine is fundamentally
inconsistent with the 1-and-3-year structure.
    The 1-year period, by its terms, begins after discovery of the facts
constituting the violation, making tolling unnecessary.  The 3-year limit
is a period of repose inconsistent with tolling.  One commentator explains:
"[T]he inclusion of the three-year period can have no significance in this
context other than to impose an outside limit."  Bloomenthal, The Statute
of Limitations and Rule 10b-5 Claims: A Study in Judicial Lassitude, 60 U.
Colo. L. Rev. 235, 288 (1989).  See also ABA Committee on Federal
Regulation of Securities, Report of the Task Force on Statute of
Limitations for Implied Actions 645, 655 (1986) (advancing "the inescapable
conclusion that Congress did not intend equitable tolling to apply in
actions under the securities laws").  Because the purpose of the 3-year
limitation is clearly to serve as a cutoff, we hold that tolling principles
do not apply to that period.
IV
    Litigation instituted pursuant to MDRV 10(b) and Rule 10b-5 therefore
must be commenced within one year after the discovery of the facts
constituting the violation and within three years after such violation. {9}
As there is no dispute that the earliest of plaintiff-respondents'
complaints was filed more than three years after petitioner's alleged
misrepresentations, plaintiff-respondents' claims were untimely. {10}
    The judgment of the Court of Appeals is reversed.
It is so ordered.
 
 
 
 
 
 

------------------------------------------------------------------------------
1
    See, e. g., Nesbit v. McNeil, 896 F. 2d 380 (CA9 1990) (applying state
limitations period governing common-law fraud); Bath v. Bushkin, Gaims,
Gaines and Jonas, 913 F. 2d 817 (CA10 1990) (same); O'Hara v. Kovens, 625
F. 2d 15 (CA4 1980), cert. denied, 449 U. S. 1124 (1981) (applying state
blue sky limitations period); Forrestal Village, Inc. v. Graham, 179 U. S.
App. D. C. 225, 551 F. 2d 411 (1977) (same); In re Data Access Systems
Securities Litigation, 843 F. 2d 1537 (CA3), cert. denied sub nom. Vitiello
v. I. Kahlowski & Co., 488 U. S. 849 (1988) (establishing uniform federal
period); Short v. Belleville Shoe Mfg. Co., 908 F. 2d 1385 (CA7 1990),
cert. pending, No. 90-526 (same).

2
    Although not identical in language, all these relate to one year after
discovery and to three years after violation.

3
    On rare occasions, this Court has found it to be Congress' intent that
no time limitation be imposed upon a federal cause of action.  See, e. g.,
Occidental Life Ins. Co. v. EEOC, 432 U. S. 355 (1977).  No party in the
present litigation argues that this was Congress' purpose in enacting MDRV
10(b), and we agree that there is no evidence of such intent.

4
    Section 10 of the 1934 Act provides:
    "It shall be unlawful for any person, directly or indirectly, by the
use of any means or instrumentality of interstate commerce or of the mails,
or of any facility of any national securities exchange --
 
    . . . . .


    "(b) To use or employ, in connection with the purchase or sale of any
security . . . any manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the Commission may prescribe
as necessary or appropriate in the public interest or for the protection of
investors."  15 U. S. C. MDRV 78j.
    Commission Rule 10b-5, first promulgated in 1942, now provides:
    "It shall be unlawful for any person, directly or indirectly, by the
use of any means or instrumentality of interstate commerce, or of the mails
or of any facility of any national securities exchange,
    "(a) To employ any device, scheme, or artifice to defraud,
    "(b) To make any untrue statement of a material fact or to omit to
state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading,
or
    "(c) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person,

"in connection with the purchase or sale of any security."  17 CFR MDRV
240.10b-5 (1990).

5
    Section 16(b), 15 U. S. C. MDRV 78p(b), sets a 2-year rather than a
3-year period of repose.  Because that provision requires the disgorgement
of unlawful profits and differs in focus from MDRV 10(b) and from the other
express causes of action, we do not find MDRV 16(b) to be an appropriate
source from which to borrow a limitations period here.

6
    Section 9(e) of the 1934 Act provides:
    "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."  15 U. S. C. MDRV 78i(e).

Section 18(c) of the 1934 Act provides:
    "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 cause of action and within three years after such
cause of action accrued."  15 U. S. C. MDRV 78r(c).

7
    Section 13 of the 1933 Act, as so amended, provides:
    "No action shall be maintained to enforce any liability created under
section 77k or 77l(2) of this title unless brought within one year after
the discovery of the untrue statement or the omission, or after such
discovery should have been made by the exercise of reasonable dilligence,
or, if the action is to enforce a liability created under section 77l(1) of
this title, unless brought within one year after the violation upon which
it is based.  In no event shall any such action be brought to enforce a
liability created under section 77k or 77l(1) of this title more than three
years after the security was bona fide offered to the public, or under
section 77l(2) of this title more than three years after the sale."  15 U.
S. C. MDRV 77m.

8
    Justice Kennedy would borrow the one-year limitations period contained
in the 1934 Act but not the accompanying period of repose.  In our view,
the one-and-three-year scheme represents an indivisible determination by
Congress as to the appropriate cutoff point for claims under the statute.
It would disserve that legislative determination to sever the two periods.
Moreover, we find no support in our cases for the practice of borrowing
only a portion of an express statute of limitations.  Indeed, such a
practice comes close to the type of judicial policymaking that our
borrowing doctrine was intended to avoid.

9
    The Commission notes, correctly, that the various 1-and-3-year periods
contained in the 1934 and 1933 Acts differ slightly in terminology.  To the
extent that these distinctions in the future might prove significant, we
select as the governing standard for an action under MDRV 10(b) the
language of MDRV 9(e) of the 1934 Act, 15 U. S. C. MDRV 78i(e).

10
    Section 313(a) of the Judicial Improvements Act of 1990, 104 Stat.
5114, reads:
    "Except as otherwise provided by law, a civil action arising under an
Act of Congress enacted after the date of the enactment of this section may
not be commenced later than 4 years after the cause of action accrues."

Section 313(b) states that the "amendments made by this section shall apply
with respect to causes of action accruing on or after the date [December 1,
1990] of the enactment of this Act."  This new statute obviously has no
application in the present litigation.





Subject: 90-333 -- CONCUR, LAMPF v. GILBERTSON

 


 
SUPREME COURT OF THE UNITED STATES


No. 90-333



LAMPF, PLEVA, LIPKIND, PRUPIS & PETIGROW, PETITIONER v. JOHN GILBERTSON et
al.

on writ of certiorari to the united states court of appeals for the ninth
circuit

[June 20, 1991]



    Justice Scalia, concurring in part and concurring in the judgment.

    Although I accept the stare decisis effect of decisions we have made
with respect to the statutes of limitations applicable to particular
federal causes of action, I continue to disagree with the methodology the
Court has very recently adopted for purposes of making those decisions.  In
my view, absent a congressionally created limitations period state periods
govern, or, if they are inconsistent with the purposes of the federal act,
no limitations period exists.  See Agency Holding Corp. v. Malley-Duff &
Associates, Inc., 483 U. S. 143, 157-170 (1987) (Justice Scalia, concurring
in judgment), see also Reed v. United Transportation Union, 488 U. S. 319,
334 (1989) (Justice Scalia, concurring in judgment).
    The present case presents a distinctive difficulty because it involves
one of those so-called "implied" causes of action that, for several
decades, this Court was prone to discover in -- or, more accurately, create
in reliance upon -- federal legislation.  See Thompson v. Thompson, 484 U.
S. 174, 190 (1988) (Justice Scalia, concurring in judgment).  Raising up
causes of action where a statute has not created them may be a proper
function for common-law courts, but not for federal tribunals.  See id., at
191-192; Cannon v. University of Chicago, 441 U. S. 677, 730-749 (1979)
(Powell, J., dissenting).  We have done so, however, and thus the question
arises what statute of limitations applies to such a suit.  Congress has
not had the opportunity (since it did not itself create the cause of
action) to consider whether it is content with the state limitations or
would prefer to craft its own rule.  That lack of opportunity is
particularly apparent in the present case, since Congress did create
special limitations periods for the Securities Exchange Act causes of
actions that it actually enacted.  See 15 U. S. C. 15 78p(b), 78i(e),
78r(c); see also MDRV 77m.
    When confronted with this situation, the only thing to be said for
applying my ordinary (and the Court's pre-1983 traditional) rule is that
the unintended and possibly irrational results will certainly deter
judicial invention of causes of action.  That is not an unworthy goal, but
to pursue it in that fashion would be highly unjust to those who must
litigate past inventions.  An alternative approach would be to say that
since we "implied" the cause of action we ought to "imply" an appropriate
statute of limitations as well.  That is just enough, but too lawless to be
imagined.  It seems to me the most responsible approach, where the
enactment that has been the occasion for our creation of a cause of action
contains a limitations period for an analogous cause of action, is to use
that.  We are imagining here.  And I agree with the Court that "[w]e can
imagine no clearer indication of how Congress would have balanced the
policy considerations implicit in any limitations provision than the
balance struck by the same Congress in limiting similar and related
protections."  Ante, at 8.
    I join the judgment of the Court, and all except Part IIA of the
Court's opinion.
------------------------------------------------------------------------------




Subject: 90-333 -- DISSENT, LAMPF v. GILBERTSON

 


    SUPREME COURT OF THE UNITED STATES


No. 90-333



LAMPF, PLEVA, LIPKIND, PRUPIS & PETIGROW, PETITIONER v. JOHN GILBERTSON et
al.

on writ of certiorari to the united states court of appeals for the ninth
circuit

[June 20, 1991]



    Justice Stevens, with whom Justice Souter joins, dissenting.

    In my opinion the Court has undertaken a lawmaking task that should
properly be performed by Congress.  Starting from the premise that the
federal cause of action for violating MDRV 10(b) of the Securities Exchange
Act of 1934, 48 Stat. 891, 15 U. S. C. MDRV 78j(b), was created out of
whole cloth by the judiciary, it concludes that the judiciary must also
have the authority to fashion the time limitations applicable to such an
action.  A page from the history of MDRV 10(b) litigation will explain why
both the premise and the conclusion are flawed.
    The private cause of action for violating MDRV 10(b) was first
recognized in, Kardon v. National Gypsum Co., 69 F. Supp. 512 (ED Pa.
1946).  In recognizing this implied right of action, Judge Kirkpatrick
merely applied what was then a wellsettled rule of federal law.  As was
true during most of our history, the federal courts then presumed that a
statute enacted to benefit a special class provided a remedy for those
members injured by violations of the statute.  See Texas and Pacific R. Co.
v. Rigsby, 241 U. S. 33, 39-40. (1916). {1}  Judge Kirkpatrick did not make
"new law" when he applied this presumption to a federal statute enacted for
the benefit of investors in securities that are traded in interstate
commerce.
    During the ensuing four decades of administering MDRV 10(b) litigation,
the federal courts also applied settled law when they looked to state law
to find the rules governing the timeliness of claims.  See Del Costello v.
International Brotherhood of Teamsters, 462 U. S. 151, 172-173 (1983)
(Stevens, J., dissenting). {2}  It was not until 1988, that a federal court
decided that it would be better policy to have a uniform federal statute of
limitations apply to claims of this kind.  See In re Data Access System
Security Litigation, 843 F. 2d 1537 (CA3).  I agree that such a uniform
limitations rule is preferable to the often chaotic traditional approach of
looking to the analogous state limitation.  I believe, however, that
Congress, rather than the federal judiciary, has the responsibility for
making the policy determinations that are required in rejecting a rule
selected under the doctrine of state borrowing, long applied in MDRV 10(b)
cases, and choosing a new limitations period and its associated tolling
rules. {3}  When a legislature enacts a new rule of law governing the
timeliness of legal action, it can -- and usually does -- specify the
effective date of the rule and determine the extent to which it shall apply
to pending claims.  See e. g., 104 Stat. 5114, quoted ante, at 13, n. 8.
When the Court ventures into this lawmaking arena, however, it inevitably
raises questions concerning the retroactivity of its new rule that are
difficult and arguably inconsistent with the neutral, non-policy making
role of the judge.  See Chevron Oil Co. v. Hudson, 404 U. S. 97 (1971); In
re Data Access, 843 F. 2d, at 1551 (Seitz J., dissenting).
    The Court's rejection of the traditional rule of applying a state
limitations period when the federal statute is silent is not justified by
this Court's prior cases.  Despite the majority's recognition of the
traditional rule, ante, at 4-5, it effectively repudiates it by holding
that "only where no analogous counterpart [within the statute] is available
should a court then proceed to apply state-borrowing principles."  Ante, at
8.  The Court's principal justification for this departure is that it took
similar action in Del Costello, supra.  I registered my dissent in that
case for reasons similar to those I express today.  In that case there was
nothing in the statute to lead me to believe that Congress intended to
depart from our settled practice of looking to analogous state limitations.
Id., at 171-173.  Likewise in this case, I can find nothing in the
Securities Act of 1934 that leads me to believe that Congress intended us
to depart from our traditional rule and overrule four decades of
established law.
    The other case on which the Court primarily relies, Agency Holding
Corp. v. Malley-Duff & Associates, 483 U. S. 143 (1987), is distinguishable
from this case.  Agency Holding, did not involve a change in a rule of law
that had been settled for forty years.  Furthermore in that case, the Court
found an explicit intent to pattern the RICO private remedy after the
Clayton Act's private antitrust remedy.  The remedy in the Clayton Act was
subject to a four-year statute of limi tations, and the Court reasonably
inferred that Congress wanted the same limitations period to apply to both
statutes.  The Court has not found a similar intent to pattern MDRV 10 of
the 1934 Securities Act after those sections subject to a 1-and-3 year
limitation.  See ante, at 9-10.
    The policy choices that the Court makes today may well be wise -- even
though they are at odds with the recommendation of the Executive Branch --
but that is not a sufficient justification for making a change in what was
well-settled law during the years between 1946 and 1988 governing the
timeliness of action impliedly authorized by a federal statute.  This Court
has recognized that a rule of statutory construction that has been
consistently applied for several decades acquires a clarity that "is simply
beyond peradventure."  Herman & MacLean v. Huddleston, 459 U. S. 375, 380
(1983).  I believe that the Court should continue to observe that principle
in this case.  The Court's occasional departure from that principle does
not justify today's refusal to comply with the Rules of Decision Act.  See
e. g. Shearson/American Express v. Mcmahon, 482 U. S. 220, 268 (1987)
(Stevens, J., dissenting).  Accordingly, I respectfully dissent.

 
 
 
 
 

------------------------------------------------------------------------------
1
    In Texas & Pacific R. Co. v. Rigsby, 241 U. S. 33 (1916) a unanimous
Court stated this presumption:
    "A disregard of the command of the statute is a wrongful act, and where
it results in damage to one of the class for whose especial benefit the
statute was enacted, the right to recover the damages from the party in
default is implied, according to a doctrine of the common law. . . .  This
is but an application of the maxim, Ubi jus ibi remedium."  Id., at 39-40.

2
    Federal judges have `borrowed' state statutes of limitations because
they were directed to do so by the Congress of the United States under the
Rules of Decision Act, 28 U. S. C. 1652.  Del Costello v. International
Brotherhood of Teamnsters, 462 U. S. 151, 172-3 (1983) (Stevens, J.,
dissenting); See also Agency Holding Corp. v. Malley-Duff & Associates, 483
U. S. 143, 157-165 (1987) (Scalia, J., concurring).

3
    Congress is perfectly capable of making these decisions.  When
confronted with the same need for uniformity in treble damages litigation
under the antitrust laws in 1955, it enacted MDRV 5 of the Clayton Act to
provide a four-year period of limitations.  See 69 Stat. 283, 15 U. S. C.
MDRV 15b.





Subject: 90-333 -- DISSENT, LAMPF v. GILBERTSON

 


    SUPREME COURT OF THE UNITED STATES


No. 90-333



LAMPF, PLEVA, LIPKIND, PRUPIS & PETIGROW, PETITIONER v. JOHN GILBERTSON et
al.

on writ of certiorari to the united states court of appeals for the ninth
circuit

[June 20, 1991]




    Justice O'Connor, with whom Justice Kennedy joins, dissenting.

    I agree that predictability and judicial economy counsel the adoption
of a uniform federal statute of limitations for actions brought under MDRV
10(b) and Rule 10b-5.  For the reasons stated by Justice Kennedy, however,
I believe we should adopt the one year from discovery rule, but not the
threeyear period of repose.  I write separately only to express my
disagreement with the Court's decision in Part IV to apply the new
limitations period in this case.  In holding that respondent's suit is
time-barred under a limitations period that did not exist before today, the
Court departs drastically from our established practice and inflicts an
injustice on the respondents.  The Court declines to explain its
unprecedented decision, or even to acknowledge its unusual character.
    Respondents, plaintiffs below, filed this action in Federal District
Court in 1986.  Everyone agrees that, at that time, their claims were
governed by the state statute of limitations for the most analogous state
cause of action.  This was mandated by a solid wall of binding Ninth
Circuit authority dating back more than 30 years. {1}  See ante, at 2.  The
case proceeded in the District Court and the Court of Appeals for almost
four years.  During that time, the law never changed; the governing
limitations period remained the analogous state statute of limitations. {2}
Notwithstanding respondents' entirely proper reliance on this limitations
period, the Court now holds that their suit must be dismissed as untimely
because respondents did not comply with a federal limitations period
announced for the first time today -- four-and-one-half years after the
suit was filed.  Quite simply, the Court shuts the courthouse door on
respondents because they were unable to predict the future.
    One might get the impression from the Court's matter-offact handling of
the retroactivity issue that this is our standard practice.  Part IV of the
Court's opinion comprises, after all, only two sentences: the first
sentence sets out the 1- and 3-year rule; the second states that
respondents' complaint is untimely for failure to comply with the rule.
Surely, one might think, if the Court were doing anything out of the
ordinary, it would comment on the fact.
    Apparently not.  This Court has, on several occasions, announced new
statutes of limitations.  Until today, however, the Court had never applied
a new limitations period retroactively to the very case in which it
announced the new rule so as to bar an action that was timely under binding
Circuit precedent.  Our practice has been instead to evaluate the case at
hand by the old limitations period, reserving the new rule for application
in future cases.
    A prime example is Chevron Oil Co. v. Huson, 404 U. S. 97 (1971).  The
issue in that case was whether state or federal law governed the timeliness
of an action brought under a particular federal statute.  At the time the
lawsuit was initiated, the rule was that federal law governed.  This Court
changed the rule, holding that the timeliness of an action should be
governed by state law.  The Court declined to apply the state statute of
limitations in that case, however, because the action had been filed long
before the new rule was announced.  The Court recognized, sensibly, that
its decision overruled a long line of Court of Appeals' decisions on which
the respondent had properly relied, id., at 107; that retroactive
application would be inconsistent with the purpose of using state statutes
of limitations, id., at 107-108; and that it would be highly inequitable to
pretend that the respondent had " `slept on his rights' " when, in reality,
he had complied fully with the law as it existed and could not have
foreseen that the law would change.  Id., at 108.
    We followed precisely the same course several years later in Saint
Francis College v. Al-Khazraji, 481 U. S. 604 (1987).  We declined to apply
a decision specifying the applicable statute of limitations retroactively
because doing so would bar a suit that, under controlling Circuit
precedent, had been filed in a timely manner.  We relied expressly on the
analysis of Chevron Oil, holding that a decision identifying a new
limitations period should be applied only prospectively where it overrules
clearly established Circuit precedent, where retroactive application would
be inconsistent with the purpose of the underlying statute, and where doing
so would be "manifestly inequitable."  Saint Francis College, supra, at
608-609.
    Chevron Oil and Saint Francis College are based on fundamental notions
of justified reliance and due process.  They reflect a straightforward
application of an earlier line of cases holding that it violates due
process to apply a limitations period retroactively and thereby deprive a
party arbitrarily of a right to be heard in court.  See Wilson v.
Iseminger, 185 U. S. 55, 62 (1902); Brinkerhoff-Faris Trust & Savings Co.
v. Hill, 281 U. S. 673, 681-682 (1930).  Not surprisingly, then, the
Court's decision in Chevron Oil and Saint Francis College not to apply new
limitations periods retroactively generated no disagreement among members
of the Court: the opinion in Chevron Oil was joined by all but one Justice,
who did not reach the retroactivity question; Saint Francis College was
unanimous.
    Only last Term, eight Justices reaffirmed the commonsense rule that
decisions specifying the applicable statute of limitations apply only
prospectively.  See American Trucking Associations, Inc. v. Smith, 496 U.
S. --- (1990).  The question presented in American Trucking was whether an
earlier decision of the Court -- striking down as unconstitutional a
particular state highway tax scheme -- would apply retroactively.  In the
course of explaining why the ruling would not apply retroactively, the
plurality opinion relied heavily on our statute of limitations cases:


"When considering the retroactive applicability of decisions newly defining
statutes of limitations, the Court has focused on the action taken in
reliance on the old limitation period -- usually, the filing of an action.
Where a litigant filed a claim that would have been timely under the prior
limitation period, the Court has held that the new statute of limitation
would not bar his suit."  Id., at --- (slip op., at 23).


    Four other Justices, while disagreeing that Chevron Oil's retroactivity
analysis should apply in other contexts, reaffirmed its application to
statutes of limitations.  The dissenting Justices stated explicitly that it
would be "most inequitable to [hold] that [a] plaintiff ha[s] ` "slept on
his rights" ' during a period in which neither he nor the defendant could
have known the time limitation that applied to the case."  Id., at ---
(Stevens, J., dissenting), quoting Chevron Oil, supra, at 108.
    After American Trucking, the continued vitality of Chevron Oil with
respect to statutes of limitations is -- or should be -- irrefutable;
nothing in James B. Beam Distilling Co. v. Georgia, --- U. S. --- (1991),
alters this fact.  The pres ent case is indistinguishable from Chevron Oil
and retroactive application should therefore be denied.  All three Chevron
Oil factors are met.  First, in adopting a federal statute of limitations,
the Court overrules clearly established Circuit precedent; the Court admits
as much.  Ante, at 2.  Second, the Court explains that "the federal
interes[t] in predictability" demands a uniform standard.  Ante, at 6.  I
agree, but surely predictability cannot favor applying retroactively a
limitations period that the respondent could not possibly have foreseen.
Third, the inequitable results are obvious.  After spending
four-and-one-half years in court and tens of thousands of dollars in
attorney's fees, respondents' suit is dismissed for failure to comply with
a limitations period that did not exist until today.
    Earlier this Term, the Court observed that "the doctrine of stare
decisis serves profoundly important purposes in our legal system."
California v. Acevedo, --- U. S. --- (1991) (slip op., at 13).  If that is
so, it is difficult to understand the Court's decision today to apply
retroactively a brand new statute of limitations.  Part IV of the Court's
opinion, without discussing the relevant cases or even acknowledging the
issue, declines to follow the precedent established in Chevron Oil, Saint
Francis College, and American Trucking, not to mention Wilson and
Brinkerhoff-Faris.    The Court's cursory treatment of the retroactivity
question cannot be an oversight.  The parties briefed the issue in this
Court.  See Brief for Respondents 45-48; Reply Brief for Petitioner 18-20.
In addition, the United States, filing an amicus curiae brief on behalf of
the Securities and Exchange Commission, addressed the issue explicitly,
urging the Court to remand so that the lower court may address the
retroactivity question in the first instance.  Nevertheless, the Court, for
reasons unknown and unexplained, chooses to ignore the issue, thereby
visiting unprecedented unfairness on respondents.
    Even if I agreed with the limitations period adopted by the Court, I
would dissent from Part IV of the Court's opinion.  Our prior cases dictate
that the federal statute of limitations announced today should not be
applied retroactively.  I would remand so that the lower courts may
determine in the first instance the timeliness of respondents' lawsuit.
------------------------------------------------------------------------------
1
    See Robuck v. Dean Witter & Co., 649 F. 2d 641, 644 (1980); Williams v.
Sinclair, 529 F. 2d 1383, 1387 (1976); Douglass v. Glenn E. Hinton
Investments, Inc., 440 F. 2d 912, 914-916 (1971); Hecht v. Harris, Upham &
Co., 430 F. 2d 1202, 1210 (1970); Royal Air Properties, Inc. v. Smith, 312
F. 2d 210, 214 (1962); Fratt v. Robinson, 203 F. 2d 627, 634-635 (1953).
2
    See Davis v. Birr, Wilson & Co., 839 F. 2d 1369, 1369-1370 (CA9 1988);
Volk v. D. A. Davidson & Co., 816 F. 2d 1406, 1411-1412 (CA9 1987); Semegen
v. Weidner, 780 F. 2d 727, 733 (CA9 1985); SEC v. Seaboard Corp., 677 F. 2d
1301, 1308-1309 (CA9 1982).





Subject: 90-333 -- DISSENT, LAMPF v. GILBERTSON

 


    SUPREME COURT OF THE UNITED STATES


No. 90-333



LAMPF, PLEVA, LIPKIND, PRUPIS & PETIGROW, PETITIONER v. JOHN GILBERTSON et
al.

on writ of certiorari to the united states court of appeals for the ninth
circuit

[June 20, 1991]



    Justice Kennedy, with whom Justice O'Connor joins, dissenting.

    I am in full agreement with the Court's determination that, under our
precedents, a uniform federal statute of limitations is appropriate for
private actions brought under MDRV 10(b) of the Securities Exchange Act of
1934 and that we should adopt as a limitations period the
1-year-from-discovery rule Congress employed in various provisions of the
1934 Act.  I must note my disagreement, however, with the Court's
simultaneous adoption of the three-year period of repose Congress also
employed in a number of the 1934 Act's provisions.  This absolute time-bar
on private MDRV 10(b) suits conflicts with traditional limitations periods
for fraud-based actions, frustrates the usefulness of MDRV 10(b) in
protecting defrauded investors, and imposes severe practical limitations on
a federal implied cause of action that has become an essential component of
the protection the law gives to investors who have been injured by unlawful
practices.
    As the Court recognizes, in the absence of an express limitations
period in a federal statute, courts as a general matter should apply the
most analogous state limitations period or, in rare cases, no limitations
period at all.  This rule does not apply, however, "when a rule from
elsewhere in federal law clearly provides a closer analogy than available
state statutes, and when the federal policies at stake and the practical
ities of litigation make that rule a significantly more appropriate vehicle
for interstitial lawmaking."  DelCostello v. Teamsters, 462 U. S. 151, 172
(1983); see Reed v. United Transportation Union, 488 U. S. 319, 324 (1989).
Applying this principle, the Court looks first to the express private
rights of action in the 1934 Act itself to find what it believes are the
appropriate limitations periods to apply here.  One cannot fault the
Court's mode of analysis; given that MDRV 10(b) actions are implied under
the 1934 Act, it makes sense for us to look to the limitations periods
Congress established under the Act.  See DelCostello, supra, at 171; United
Parcel Service, Inc. v. Mitchell, 451 U. S. 56, 68, n. 4 (1981).  That does
not relieve us, however, of our obligation to reject a limitations rule
that would "frustrate or significantly interfere with federal policies."
Reed, 488 U. S., at 327.  When determining the appropriate statute of
limitations to apply, we must give careful consideration to the policies
underlying a federal statute and to the practical difficulties aggrieved
parties may have in establishing a violation.  Ibid.; Wilson v. Garcia, 471
U. S. 261, 268 (1985).
    This is not a case where the Court identifies a specific statute and
follows each of its terms.  As the Court is careful to note, the 1934 Act
does not provide a single limitations period for all private actions
brought under its express provisions.  Rather, the Act makes three separate
and distinct references to statutes of limitations.  The Court rejects
outright one of these references, a 2-year statute of repose for actions
brought under MDRV 16 of the 1934 Act, 15 U. S. C. MDRV 78p(b), and
purports to follow the other two.  15 78i(e), 78r(c).  The latter two
references employ 1-year, 3-year schemes similar to one the Court
establishes here, but each has its own unique wording.  The Court does not
identify any reasons for finding one to be controlling, so it is
unnecessary to engage in close gramatical construction to separate the
1-year discovery period from the 3-year statute of repose.
    It is of even greater importance to note that both of the statutes in
question relate to express causes of action which in their purpose and
underlying rationale differ from causes of action implied under MDRV 10(b).
The limitations statutes to which the Court refers apply to strict
liability violations or, in the case of MDRV 78i(e), to a rarely used
remedy under MDRV 9 of the 1934 Act.  See L. Loss, Fundamentals of
Securities Regulation 920 (2d ed. 1988).  Neither relates to a cause of
action of the scope and coverage of an implied action under MDRV 10(b).
Nor does either rest on the common law fraud model underlying most MDRV
10(b) actions.
    Section 10(b) provides investors with significant protections from
fraudulent practices in the securities markets.  Intended as a
comprehensive antifraud provision operating even when more specific laws
have no application, MDRV 10(b) makes it unlawful to employ in connection
with the purchase or sale of any security "any manipulative or deceptive
device or contrivance" in violation of the Securities and Exchange
Commission's rules.  15 U. S. C. MDRV 78j.  Although Congress gave the
Commission the primary role in enforcing this section, private MDRV 10(b)
suits constitute "an essential tool for enforcement of the 1934 Act's
requirements," Basic Inc. v. Levinson, 485 U. S. 224, 231 (1988), and are "
`a necessary supplement to Commission action.' "  Batemen Eichler, Hill
Richards, Inc. v. Berner, 472 U. S. 299, 310 (1985) (quoting J. I. Case Co.
v. Borak, 377 U. S. 426, 432 (1964)).  We have made it clear that rules
facilitating MDRV 10(b) litigation "suppor[t] the congressional policy
embodied in the 1934 Act" of combating all forms of securities fraud.
Basic, supra, at 245.
    The practical and legal obstacles to bringing a private MDRV 10(b)
action are significant.  Once federal jurisdiction is established, a MDRV
10(b) plaintiff must prove elements that are similar to those in actions
for common-law fraud.  See Herman & MacLean v. Huddleston, 459 U. S. 375
(1983).  Each requires proof of a false or misleading statement or material
omission, Santa Fe Industries, Inc. v. Green, 430 U. S. 462 (1977),
reliance thereon, Basic, 485 U. S., at 243; cf. id., at 245 (reliance
presumed in MDRV 10(b) cases proving "fraud-on-themarket"), damages caused
by the wrongdoing, Randall v. Loftsgaarden, 478 U. S. 647, 663 (1986), and
scienter on the part of the defendant, Ernst & Ernst v. Hochfelder, 425 U.
S. 185 (1976).  Given the complexity of modern securities markets, these
facts may be difficult to prove.
    The real burden on most investors, however, is the initial matter of
discovering whether a violation of the securities laws occurred at all.
This is particularly the case for victims of the classic fraud-like case
that often arises under MDRV 10(b).  "[C]oncealment is inherent in most
securities fraud cases."  American Bar Association, Report of the Task
Force on Statute of Limitations for Implied Actions, 41 Bus. Lawyer 645,
654 (1985).  The most extensive and corrupt schemes may not be discovered
within the time allowed for bringing an express cause of action under the
1934 Act.  Ponzi schemes, for example, can maintain the illusion of a
profit-making enterprise for years, and sophisticated investors may not be
able to discover the fraud until long after its perpetration.  Id., at 656.
Indeed, in Ernst & Ernst, the alleged fraudulent scheme had gone undetected
for over 25 years before it was revealed in a stock broker's suicide note.
425 U. S., at 189.
    The practicalities of litigation, indeed the simple facts of business
life, are such that the rule adopted today will "thwart the legislative
purpose of creating an effective remedy" for victims of securities fraud.
Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U. S. 143, 154
(1987).  By adopting a 3-year period of repose, the Court makes a MDRV
10(b) action all but a dead letter for injured investors who by no
conceivable standard of fairness or practicality can be expected to file
suit within three years after the violation occurred.  In so doing, the
Court also turns its back on the almost uniform rule rejecting short
periods of repose for fraud-based actions.  In the vast majority of States,
the only limitations periods on fraud actions run from the time of a
victim's discovery of the fraud.  Shapiro & Blauner, Securities Litigation
in the Aftermath of In Re Data Access Securities Litigation, 24 New England
L. Rev. 537, 549-550 (1989).  Only a small minority of States constrain
fraud actions with absolute periods of repose, and those that do typically
permit actions to be brought within at least five years.  See, e. g., Fla.
MDRV 95.11(4)(e) (1991) (5-year period of repose); Ky. MDRV 413.120(11)
(1990) (10-year period of repose); Mo. MDRV 516.120(5) (1986) (10-year
period of repose).  Congress itself has recognized the importance of
granting victims of fraud a reasonable time to discover the facts
underlying the fraud and to prepare a case against its perpetrators.  See,
e. g., Interstate Land Sales Full Disclosure Act, 15 U. S. C. MDRV
1711(a)(2) (action may be brought within three years from discovery of
violation); Insider Trading and Securities Fraud Enforcement Act of 1988,
15 U. S. C. MDRV 78t-1(b)(4) (action may be brought within five years of
the violation).  The Court, however, does not.
    A reasonable statute of repose, even as applied against fraud-based
actions, is not without its merits.  It may sometimes be easier to
determine when a fraud occurred than when it should have been discovered.
But more important, limitations periods in general promote important
considerations of fairness.  "Just determinations of fact cannot be made
when, because of the passage of time, the memories of witnesses have faded
or evidence is lost."  Wilson, 471 U. S., at 271.  Notwithstanding these
considerations, my view is that a 3-year absolute time bar is inconsistent
with the practical realities of MDRV 10(b) litigation and the congressional
policies underlying that remedy.  The 1-year-fromdiscovery rule is
sufficient to ensure a fair balance between protecting the legitimate
interests of aggrieved investors, yet preventing stale claims.  In the
extreme case, moreover, when the period between the alleged fraud and its
discovery is of extraordinary length, courts may apply equitable principles
such as laches should it be unfair to permit the claim.  See DelCostello,
462 U. S., at 162; Holmberg v. Armbrecht, 327 U. S. 392 (1946).  A 3-year
absolute bar on MDRV 10(b) actions simply tips the scale too far in favor
of wrongdoers.
    The Court's decision today forecloses any means of recovery for a
defrauded investor whose only mistake was not discovering a concealed fraud
within an unforgiving period of repose.  As fraud in the securities markets
remains a serious national concern, Congress may decide that the rule
announced by the Court today should be corrected.  But even if prompt
congressional action is taken, it will not avail defrauded investors caught
by the Court's new and unforgiving rule, here applied on a retroactive
basis to a pending action.    With respect, I dissent and would remand with
instructions that a MDRV 10(b) action may be brought at any time within one
year after an investor discovered or should have discovered a violation.
In any event, I would permit the litigants in this case to rely upon
settled Ninth Circuit precedent as setting the applicable limitations
period in this case, and join Justice O'Connor's dissenting opinion in
full.

------------------------------------------------------------------------------
