Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995).

pp. 21–22

Facts

In 1987, Ed Plaut (plaintiff) and several other shareholders in Spendthrift Farm, Inc. (defendant) brought suit against Spendthrift Farm, claiming that certain previous stock sales of the corporation in 1983 and 1984 violated § 10(b) and Rule 10(b)(5) of the Securities and Exchange Act of 1934.
- The Supreme Court later ruled in 1991 that any actions brought under these provisions of the Securities and Exchange Act had to be brought within one year of discovering the facts giving rise to the violation, and within three years of the violation itself.
- The shareholders’ actions did not meet the statute of limitations, so a district court judge dismissed the suit in August 1991.
Later, in December 1991, Congress passed the Federal Deposit Insurance Corporation (FDIC) Improvement Act, which required the courts to reinstate cases dismissed because they violated the statute of limitations created by the Supreme Court’s 1991 decision.
The shareholders then filed a motion to reinstate their actions. However, the district court denied their motion on the grounds that the FDIC Improvement Act itself was unconstitutional because Congress violated the Constitution’s separation of powers by requiring the courts to reopen matters that had previously received final judgments.
- The shareholders appealed, but the Sixth Circuit affirmed the lower court’s decision on the same grounds.

Does Congress violate the Constitution’s separation of powers by requiring the federal courts to reopen completely settled cases?

Yes. Ordering courts to reopen cases that have received final judgments usurps power accorded to the judicial branch in Article III of the Constitution and thus violates the separation-of-powers principle.

Specifically, Article III of the Constitution reserves for the courts the power to “say what the law is,” which necessarily includes the power to render final judgments that are respected by the other branches of government.
In this case, in attempting to enact retroactive legislation, Congress tried to change the Court’s ability to render a final decision on the outcome of the shareholders’ actions.
The Supreme Court has the power to review and make final decisions on matters previously decided by lower courts. Congress does not.

Takeaway: Congress may not pass retroactive legislation that has the effect of forcing the courts to reopen final judgments, because this violates the separation of powers in the Constitution.