The applicability of section 2462's statute of limitations to SEC enforcement suits in light of the Remedies Act of 1990.

• Author: Maxson, Catherine E.

Since Roman times, legal systems have imposed time restrictions on the ability of plaintiffs to sue.(1) Traditional justifications for these statutes of limitations include providing a release for defendants from old liabilities, encouraging plaintiffs to bring cases while the evidence is still obtainable and the witnesses' memories fresh, and giving property owners security in their rights.(2) Despite these benefits, the common law courts have long exempted government initiated suits from time restrictions in the absence of specific legislative authorization for imposing such time bars.(3) This exemption for the government developed in England to protect the prerogative of the sovereign.(4) The practice took root in the United States, despite the absence of a sovereign, because of a desire to preserve the government's right to revenues and to ensure the enforcement of public policy.(5) In order for this exemption to apply, however, the state must sue in its governmental capacity, meaning that it is primarily acting to protect the public's rights rather than its own interests.(6)

Because the government's immunity from statutes of limitations conflicts with the policy behind having such provisions, Congress has created time bars that explicitly override the exemption. Many federal regulatory schemes include their own statutes of limitations applicable to certain actions brought under their authority.(7) Additionally, three general statutes of limitations found in title 28 of the United States Code restrict civil suits by the government. One such time bar, section 2462, governs suits to impose any civil fines, penalties, or forfeitures that are authorized by federal statute." Another, section 2415, controls federal government actions for damages based in contract or tort law.(9) In 1990, Congress added a third general statute of limitations to title 28 applicable to all civil suits based on federal laws enacted after December 1, 1990.(10)

Despite the existence of the general statutes of limitations in title 28, many government suits remain unrestricted by any time bar.(11) Notably, courts have never dismissed an action by the Securities and Exchange Commission (SEC) for violating a statute of limitations(12) not contained within the securities laws themselves.(13) Courts have decided not to apply either section 2462 or section 2415 of title 28 because the equitable forms of relief traditionally available to the SEC in enforcement suits 14 places these suits outside the reach of these statutes.(15) To bolster their decisions against applying the limitations provisions of title 28, courts often cite the important policy objectives served by the securities laws with which the imposition of time bars could interfere.(16) Although courts have held that securities enforcement suits brought by the government are not subject to any time bar contained in title 28,(17) this position must be reassessed in light of the passage of the Securities Enforcement Remedies and Penny Stock Reform Act of 1990 (Remedies Act),18 which gives the SEC the authority to request the type of relief - civil fines and penalties - that brings enforcement suits within the scope of section 2462.(19)

This Note argues that section 2462's limitations period reaches all SEC civil suits for monetary fines but not those SEC actions seeking equitable relief. Part I interprets section 2462 and, in the process, demonstrates that the statute controls SEC enforcement suits for civil penalties. Part Il argues that SEC actions requesting injunctions or disgorgement of profits, unlike those seeking monetary fines, are not subject to the time bar. Finally, Part III asserts that SEC administrative enforcement proceedings should not be immune from the statute of limitations found in section 2462 of title 28 because exempting administrative proceedings would be tantamount to making the limitations period optional given the SEC's control over the forum in which its enforcement actions are litigated.

1. The Ambiguities Within Section 2462 and the

   Securities Laws

   With the passage of the Remedies Act in 1990, the SEC received an expanded arsenal of civil and administrative sanctions.(20) The SEC now can impose monetary fines for violations of the Securities Act,(21) the Securities Exchange Act,(22) the Investment Company Act,(23) and the Investment Advisers Act.(24) The SEC can also now obtain civil penalties, disgorgement, and cease-and-desist orders in administrative proceedings.(25)

   Because the Remedies Act authorizes the SEC to obtain civil fines, suits requesting such relief fall within the ambit of section 2462 which governs suits for "civil fines, penalties, and forfeitures." While section 2462's applicability may on the surface seem quite clear, no court has explicitly addressed this issue, and the ambiguities in the language of section 2462 as well as in the securities laws could lead future courts to apply the presumption that statutes of limitations do not run against the government in the absence of clear congressional intent that they do so.(26) This Part concludes that Congress wished section 2462 s limitations period to apply to SEC proceedings seeking civil fines. Section I.A utilizes the legislative and judicial history of the statute to interpret the ambiguous term enforcement as encompassing actions to impose penalties, as well as attempts to collect fines owed by the defendant from earlier proceedings. Section I.B argues that the inclusion of statutes of limitations in some sections of the securities laws does not indicate that Congress intended no limitations to apply to other sections.

   1. The Interpretation of Enforcement

      The meaning of the term enforcement is left somewhat ambiguous by the current language in section 2462: "Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued ...."(27) The statute's stated application to actions for the enforcement of civil fines could lead to the conclusion that it only governs proceedings to collect penalties levied in earlier actions from defendants. Such an interpretation would free most SEC civil prosecutions from section 2462's restriction because these suits impose penalties, rather than merely collect fines already owed.

      The circuit courts have not decided upon a uniform interpretation of enforcement. Most courts assume without debate that section 2462 applies to suits seeking to impose penalties or forfeitures.(28) In Capozzi v. United States,(29) however, the Second Circuit maintained that enforcement "is the collection of amounts owed, not the assessment of them."(30) The District of Columbia Circuit in 3M Co. v. Browner subsequently rejected the Capozzi definition of enforcement.(31) In 3M Co., the Enviromental Protection Agency (EPA) argued that enforcement "connotes an action to collect a penalty already imposed."(32) 3M countered with the argument that enforce equals impose and, as further support, pointed out that no statute of limitations would apply to the EPA in this situation if the court adopted the EPA's interpretation.

      The court sided with 3M because the history of section 2462 demonstrates that Congress intended the section to cover suits that impose penalties as well as collection actions.(33) From 1799 through its initial codification in title 28 in 1940 as section 791, the language of the general statute of limitations, now found in section 2462, remained essentially unchanged. The earlier version of the statute stated that "[no] suit or prosecution for any penalty or forfeiture, pecuniary or otherwise, accruing under the laws of the United States, shall be maintained, except in cases where it is otherwise specially provided, unless the same is commenced within five years from the time when the penalty or forfeiture accrued."(34) When Congress modified the rules governing the federal judiciary in 1948, it added the word enforcement to the description of the actions to which the statute applies and removed the term prosecution.(35) In the legislative history accompanying the 1948 revisions to the judicial code, Congress referred to these adjustments as mere changes to phraseology,"(36) thereby indicating that it did not intend to revise the substance of the statute. Furthermore, traditional notions of statutory construction hold that such modifications to language do not alter the meaning of the statute.(37)

      Interpretations of section 2462's predecessors thus apply with equal force to section 2462. Because the prior versions of section 2462 unambiguously provided a statute of limitations for any suit seeking to impose a fine, penalty, or forfeiture, the addition of the word enforcement to section 2462 should not limit the statute's relevance to suits collecting fines assessed in earlier proceedings.(38) This demonstration of congressional intent is sufficient to override the presumption that statutes of limitation do not run against the government.

   2. The Effect of the Doctrine of Expressio Unius et Exclusio

      Alterius Est

      The SEC has used the doctrine of expressio unius et exclusio alterius est to challenge the applicability of statutes of limitations to its suits. This statutory-construction doctrine holds that the express inclusion of one thing means the exclusion of all others.(39) Because the securities laws contain statutes of limitations governing private causes of action, the SEC reasons that the absence of time bars from most of the statutory provisions granting it the authority to sue must indicate a congressional intention not to restrict the SEC.(40)

      Two considerations reduce the impact of the doctrine in the context of the securities laws. First, evidence of contrary legislative intent overrides the doctrine.(41) As discussed in section I.A...