When Ed Plaut bought shares in a Kentucky horse farm in 1983, he couldn’t have known that he would wind up at the intersection of a power struggle between two branches of government. But that’s exactly what happened in the case of Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995).
Plaut and a group of investors sued Spendthrift Farm in federal court, accusing it of violations of the Securities Exchange Act. Because there was no federal statute of limitations for securities-fraud cases, federal courts simply borrowed state statutes of limitations.
Plaut’s case was most likely timely under state law. But while his case was pending, the United States Supreme Court handed down a ruling that all such cases had to be filed within three years of the fraud or one year of its discovery. Plaut’s case was dismissed as having been filed outside the new, uniform statute of limitations.
Subsequently, though, a new federal law was passed that softened the Court’s ruling and required reinstatement of cases that had been dismissed pursuant to it. This set the stage for the United States Supreme Court to consider whether Congress could pass a law requiring the judiciary to reopen closed cases and disturb final judgments.
The Court struck down the portion of the law requiring the courts to reconsider final judgments and, in so doing, laid out a powerful statement on the separation-of-powers doctrine.
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