Gabelli v. SEC (11-1274)

argument 11-1274

Gabelli v. SEC

Supreme Court of the United States 1h 0m 5 speakers 8 chapters transcribed 4 days ago official recording ↗

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What statutory limitation does the IAA impose on government penalty claims?

John G. Roberts 0:01

We will hear argument first this morning in Case 11-1274, Gabelli v. Elbert v. the Securities and Exchange Commission. Mr. Lyman. MR. Mr. Chief Justice,

Unknown 0:13

and may it please the Court, this case concerns a statute dealing exclusively with penalty claims brought by government agencies to punish conduct made unlawful by statute. Congress provided a clear an easily administered statutory time limitation on the government's power to punish, five years except as otherwise provided by Congress. The case does not concern, the statute does not concern the government's power to seek remedial remedies such as disgorgement and injunctions. Consistent with Congress's normal approach in penal situations, Congress fixed a statute of limitations for penalties. The Court below, for the first time over the centuries the statute has been in existence, sweepingly concluded that unless Congress clearly directed otherwise,

Unknown 1:16

The statute and the five years did not begin to run from the time the defendant violated the law, the ordinary rule for statutes providing for accrual. But instead — JUSTICE SOTOMAYOR. Mr. Lyman, you are typing this a penalty case. The government says, yes, accrual is the ordinary rule, but discovery is the rule when there's fraud, and fraud is alleged here. So how does the Court decide whether to type this case a penalty case, as you urge, or a fraud case, as the government urges, when both captains fit? Your Honor, I think there are two answers to that. The first is that the Court doesn't need to decide. Congress has decided. Congress made it quite clear that the rule of accrual applied to all penalty claims, and as this Court held in Clark v. Martinez, the same word in a statute cannot be given different interpretations depending on the underlying statute to which it is applied.

Unknown 2:29

The second reason, though, Justice Ginsburg, is that it is not correct to say, and this Court has never said, that either the Bailey rule or or the injury accrual rule applies to a statutory fraud claim where the government is seeking to punish. That would — JUSTICE BREYER- Excuse me. Justice Ginsburg points out that you're talking about the statute, but the statute uses the term accrual. Is it correct to say that the term accrual is not used in statute of limitations for crimes generally? For crimes. For crimes, the general word that is used is time period from the violation. Right. And this talks about accrual. So that is indicative of the fact that Congress is using a civil analog in the drafting of its statutes.

Unknown 3:30

Your Honor, it indicates that Congress is using accrual as it is understood at common law. Common law, it means when the claim becomes ripe and the plaintiff has the ability to sue. What that means is, as the D.C. Circuit said in 3M, and we think the D.C. Circuit got it right on this, that you look to the underlying statute that pursuant to which the government is seeking a penalty to see when the claim became right. In a penalty situation and under the IAA, which is what this concerns, it doesn't concern a common law fraud claim. It doesn't concern a claim where there's even any element of deception that's required. It's a breach of fiduciary duty. What the IAA says is that The government can sue when the violation occurs.

Elena Kagan 4:30

Mr. Lyman, I understand your argument, but I have a fundamental difficulty, okay? Bailey and Exploration Company, which statute is not too dissimilar from this one, who read the discovery rule into a fraud claim, both for a civil litigant and for the government. The only way that I can tease out a potential difference between exploration and this case is somehow that the penalty in this case is not for injury but for punishment, as you called it, government as enforcer rather than government as victim. Some of us would say that the commonweal is injured whenever someone breaks a law. So that that distinction between enforcer and victim makes no sense. How do you answer that

Unknown 5:34

point? Justice Sotomayor, let me give you the precise answer to that, which is that in this case where the government is seeking a penalty, it is not acting on behalf of underlying investors, and the recovery is not one that is brought by way of damages or discord.