WASHINGTON - The Supreme Court yesterday left intact a federal appeals court ruling upholding a law that reinstated securities fraud claims that had been dismissed in the wake of the so-called Lampf case.
Because the justices did not hear arguments in the case and issue an opinion, yesterday's action is not considered binding national precedent. However, the lower court ruling is binding within the territory covered by the U.S. Court of Appeals for the 11th Circuit, which upheld the law on Sept. 11, 1992.
Ruling in Scientific-Atlanta Inc. v. Henderson, the appeals court rejected claims that the law violated the U.S. Constitution's separation of powers doctrine.
The challenged provisions, contained in the Federal Deposit Insurance Corp. Improvement Act of 1991, reinstated fraud claims that were dismissed in the wake of the Supreme. Court's June 20, 1991, ruling in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson.
The court in that case disapproved of lower courts' common practice of borrowing state statutes of limitations in federal lawsuits brought under the antifraud section of the Securities Act of 1934. Instead, the court said a uniform federal limitations period must be applied to all such cases. The limitations standard is one year from discovery of securities fraud, but in no event more than three years from the acts giving rise to the claim.
The same day, the Supreme Court also ruled in a separate case that its rulings generally must be given retroactive effect.
As a result of the two rulings, many pending securities fraud claims were dismissed because they did not meet the federal limitations period.