Congress has provided that most federal agencies filing civil enforcement actions for penalties, fines or forfeitures must act within five years of the accrual of the government’s “claim,” which generally means within five years of the challenged conduct. In Gabelli et al. v. Securities and Exchange Commission, the Supreme Court considered the issue of whether the SEC could file claims of fraud against an investment adviser after this deadline had passed on the argument that it had not discovered the violation until more recently. Courts sometimes apply a “discovery rule” of this sort to keep alive otherwise-lapsed securities claims by investors and other private parties alleging fraud.
The Cato Institute weighed in with a November amicus brief in support of the petitioner-defendants. As we noted then:
Statutes of limitations exist for good reason: Over time, evidence can be corrupted or disappear, memories fade, and companies dispose of records. Moreover, people want to get on with their lives and not have legal battles from their past come up unexpectedly. Plaintiffs thus have a responsibility to bring charges within a reasonable time of injury so that the justice system can operate efficiently and effectively — and that is doubly so when the would-be plaintiff is the government, with all its tools for investigation and enforcement. …[After noting strong historical reasons to read the statute as excluding a discovery rule] …even if courts could alter rather than merely interpret the meaning of statutes, there’s no basis for creating a discovery rule for government enforcement actions. Government agencies with broad investigatory powers — indeed, whose purpose is to monitor regulatory compliance — don’t face the same difficulty as private plaintiffs in identifying causes of action which give rise to the discovery rule. Adding a discovery rule to § 2462 would create an indefinite threat of government lawsuits and invite agencies to review decades of past conduct of selectively disfavored companies and individuals — inevitably chilling innocent and valuable economic activity. To preserve individual liberty in the face of an ever-burgeoning regulatory state and ensure constitutional separation of powers, we urge the Court to reverse the Second Circuit’s decision and hold that no discovery rule applies in Gabelli v. SEC.
Read more at http://www.cato.org/blog/gabelli-v-sec-fairness-wins-9-0
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