Sentenza

SUPREME COURT OF THE UNITED STATES GABELLI ET AL. v. SECURITIES AND EXCHANGE COMMISSION CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUPREME COURT OF THE UNITED STATES
GABELLI ET AL. v. SECURITIES AND EXCHANGE
COMMISSION
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
No. 11–1274. Argued January 8, 2013—Decided February 27, 2013
The Investment Advisers Act makes it illegal for investment advisers todefraud their clients, 15 U. S. C. §§80b–6(1), (2), and authorizes theSecurities and Exchange Commission to bring enforcement actionsagainst investment advisers who violate the Act, or against individuals who aid and abet such violations, §80b–9(d). If the SEC seeks civil penalties as part of those actions, it must file suit “within five years from the date when the claim first accrued,” pursuant to a general statute of limitations that governs many penalty provisions throughout the U. S. Code, 28 U. S. C. §2462.In 2008, the SEC sought civil penalties from petitioners Alpert andGabelli. The complaint alleged that they aided and abetted investment adviser fraud from 1999 until 2002. Petitioners moved to dismiss, arguing in part that the civil penalty claim was untimely. Invoking the five-year statute of limitations in §2462, they pointed out that the complaint alleged illegal activity up until August 2002 butwas not filed until April 2008. The District Court agreed and dismissed the civil penalty claim as time barred. The Second Circuit reversed, accepting the SEC's argument that because the underlying violations sounded in fraud, the “discovery rule” applied, meaningthat the statute of limitations did not begin to run until the SEC discovered or reasonably could have discovered the fraud.
Held: The five-year clock in §2462 begins to tick when the fraud occurs, not when it is discovered. Pp. 4–11.
(a)
This is the most natural reading of the statute. “In common parlance a right accrues when it comes into existence.” United States
v.
Lindsay, 346 U. S. 568, 569. The “standard rule” is that a claim accrues “when the plaintiff has ‘ “a complete and present cause of ac2
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tion.” ' ” Wallace v. Kato, 549 U. S. 384, 388. Such an understandingappears in cases and dictionaries from the 19th century, when the predecessor to §2462 was enacted. And this reading sets a fixed datewhen exposure to the specified Government enforcement efforts ends, advancing “the basic policies of all limitations provisions: repose,elimination of stale claims, and certainty about a plaintiff's opportunity for recovery and a defendant's potential liabilities.” Rotella v. Wood, 528 U. S. 549, 555. Pp. 4–5.
(b) The Government nonetheless argues that the discovery rule should apply here. That doctrine is an “exception” to the standardrule, and delays accrual “until a plaintiff has ‘discovered' ” his cause of action. Merck & Co. v. Reynolds, 559 U. S. ___, ___. It arose from the recognition that “something different was needed in the case offraud, where a defendant's deceptive conduct may prevent a plaintifffrom even knowing that he or she has been defrauded.” Ibid. Thus “where a plaintiff has been injured by fraud and ‘remains in ignorance of it without any fault or want of diligence or care on his part,the bar of the statute does not begin to run until the fraud is discovered.' ” Holmberg v. Armbrecht, 327 U. S. 392, 397. This Court, however, has never applied the discovery rule in this context, where the plaintiff is not a defrauded victim seeking recompense, but is insteadthe Government bringing an enforcement action for civil penalties.The Government's case is not saved by Exploration Co. v. United States, 247 U. S. 435. There, the discovery rule was applied in favorof the Government, but the Government was itself a victim; it had been defrauded and was suing to recover its loss. It was not bringing an enforcement action for penalties.
There are good reasons why the fraud discovery rule has not beenextended to Government civil penalty enforcement actions. The discovery rule exists in part to preserve the claims of parties who have no reason to suspect fraud. The Government is a different kind of plaintiff. The SEC's very purpose, for example, is to root out fraud,and it has many legal tools at hand to aid in that pursuit. The Government in these types of cases also seeks a different type of relief. The discovery rule helps to ensure that the injured receive recompense, but civil penalties go beyond compensation, are intended to punish, and label defendants wrongdoers. Emphasizing the importance of time limits on penalty actions, Chief Justice Marshall admonished that it “would be utterly repugnant to the genius of ourlaws” if actions for penalties could “be brought at any distance oftime.” Adams v. Woods, 2 Cranch 336, 342. Yet grafting the discovery rule onto §2462 would raise similar concerns. It would leave defendants exposed to Government enforcement action not only for fiveyears after their misdeeds, but for an additional uncertain period into
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the future. And repose would hinge on speculation about what the Government knew, when it knew it, and when it should have known it. Deciding when the Government knew or reasonably should haveknown of a fraud would also present particular challenges for the courts, such as determining who the relevant actor is in assessingGovernment knowledge, whether and how to consider agency priorities and resource constraints in deciding when the Government reasonably should have known of a fraud, and so on. Applying a discovery rule to Government penalty actions is far more challenging thanapplying the rule to suits by defrauded victims, and the Court declines to do so. Pp. 5–11.
653 F. 3d 49, reversed and remanded.
ROBERTS, C. J., delivered the opinion for a unanimous Court.
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NOTICE: This opinion is subject to formal revision before publication in thepreliminary print of the United States Reports. Readers are requested tonotify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in orderthat corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 11–1274
MARC J. GABELLI AND BRUCE ALPERT,
PETITIONERS v. SECURITIES AND
EXCHANGE COMMISSION
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SECOND CIRCUIT
[February 27, 2013]
CHIEF JUSTICE ROBERTS delivered the opinion of theCourt.
The Investment Advisers Act makes it illegal for investment advisers to defraud their clients, and authorizes the Securities and Exchange Commission to seek civil penalties from advisers who do so. Under the generalstatute of limitations for civil penalty actions, the SEC hasfive years to seek such penalties. The question is whetherthe five-year clock begins to tick when the fraud is complete or when the fraud is discovered.
I
A
Under the Investment Advisers Act of 1940, it is unlawful for an investment adviser “to employ any device,scheme, or artifice to defraud any client or prospectiveclient” or “to engage in any transaction, practice, or courseof business which operates as a fraud or deceit upon any client or prospective client.” 54 Stat. 852, as amended, 15
U. S. C. §§80b–6(1), (2). The Securities and Exchange Commission is authorized to bring enforcement actions
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against investment advisers who violate the Act, or individuals who aid and abet such violations. §80b–9(d).
As part of such enforcement actions, the SEC may seekcivil penalties, §§80b–9(e), (f) (2006 ed. and Supp. V), inwhich case a five-year statute of limitations applies:
“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 if, within the same period, the offender or the property is found within the United States in order that proper service may be made thereon.” 28 U. S. C. §2462.
This statute of limitations is not specific to the InvestmentAdvisers Act, or even to securities law; it governs manypenalty provisions throughout the U. S. Code. Its originsdate back to at least 1839, and it took on its current form in 1948. See Act of Feb. 28, 1839, ch. 36, §4, 5 Stat. 322.
B Gabelli Funds, LLC, is an investment adviser to a mutual fund formerly known as Gabelli Global Growth Fund(GGGF). Petitioner Bruce Alpert is Gabelli Funds' chief operating officer, and petitioner Marc Gabelli used to beGGGF's portfolio manager. In 2008, the SEC brought a civil enforcement actionagainst Alpert and Gabelli. According to the complaint, from 1999 until 2002 Alpert and Gabelli allowed one GGGF investor—Headstart Advisers, Ltd.—to engage in“market timing” in the fund.As this Court has explained, “[m]arket timing is a trading strategy that exploits time delay in mutual funds' daily valuation system.” Janus Capital Group, Inc. v. First Derivative Traders, 564 U. S. ___, ___, n. 1 (2011)
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(slip op., at 2, n. 1). Mutual funds are typically valuedonce a day, at the close of the New York Stock Exchange. Because funds often hold securities traded on different exchanges around the world, their reported valuation may be based on stale information. If a mutual fund's reported valuation is artificially low compared to its real value,market timers will buy that day and sell the next to realize quick profits. Market timing is not illegal but can harm long-term investors in a fund. See id., at ___–___, and n. 1 (slip op., at 2–3, and n. 1).
The SEC's complaint alleged that Alpert and Gabelli permitted Headstart to engage in market timing in exchange for Headstart's investment in a hedge fund run by Gabelli. According to the SEC, petitioners did not discloseHeadstart's market timing or the quid pro quo agreement, and instead banned others from engaging in market timing and made statements indicating that the practicewould not be tolerated. The complaint stated that duringthe relevant period, Headstart earned rates of return of up to 185%, while “the rate of return for long-term investors in GGGF was no more than negative 24.1 percent.” App.
73.
The SEC alleged that Alpert and Gabelli aided and abetted violations of §§80b–6(1) and (2), and it sought civil penalties under §80b–9. Petitioners moved to dismiss, arguing in part that the claim for civil penalties was untimely. They invoked the five-year statute of limitationsin §2462, pointing out that the complaint alleged market timing up until August 2002 but was not filed until April 2008. The District Court agreed and dismissed the SEC's civil penalty claim as time barred.1
The Second Circuit reversed. It acknowledged that
—————— 1The SEC also sought injunctive relief and disgorgement, claims the District Court found timely on the ground that they were not subject to§2462. Those issues are not before us.
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§2462 required an action for civil penalties to be brought within five years “from the date when the claim firstaccrued,” but accepted the SEC's argument that becausethe underlying violations sounded in fraud, the “discoveryrule” applied to the statute of limitations. As explained bythe Second Circuit, “[u]nder the discovery rule, the statuteof limitations for a particular claim does not accrue untilthat claim is discovered, or could have been discovered with reasonable diligence, by the plaintiff.” 653 F. 3d 49, 59 (2011). The court concluded that while “this rule does not govern the accrual of most claims,” it does govern the claims at issue here. Ibid. As the court explained, “forclaims that sound in fraud a discovery rule is read into the relevant statute of limitation.” Id., at 60.2
We granted certiorari. 567 U. S. ___ (2012).
II
A
This case centers around the meaning of 28 U. S. C.§2462: “an action . . . for the enforcement of any civil fine, penalty, or forfeiture . . . shall not be entertained unless commenced within five years from the date when the claim first accrued.” Petitioners argue that a claim basedon fraud accrues—and the five-year clock begins to tick—when a defendant's allegedly fraudulent conduct occurs.
That is the most natural reading of the statute. “In common parlance a right accrues when it comes into existence . . . .” United States v. Lindsay, 346 U. S. 568, 569 ——————
2The court distinguished the discovery rule, which governs when aclaim accrues, from doctrines that toll the running of an applicablelimitations period when the defendant takes steps beyond the challenged conduct itself to conceal that conduct from the plaintiff. 653
F. 3d, at 59–60. The SEC abandoned any reliance on such doctrinesbelow, and they are not before us. See Response and Reply Brief for SEC Appellant/Cross-Appellee in No. 10–3581 (CA2), p. 34 (“The Commission is not seeking application of the fraudulent concealment doctrine or other equitable tolling principles”).
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(1954). Thus the “standard rule” is that a claim accrues “when the plaintiff has a complete and present cause ofaction.” Wallace v. Kato, 549 U. S. 384, 388 (2007) (internal quotation marks omitted); see also, e.g., Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corp. of Cal., 522 U. S. 192, 201 (1997); Clark v. Iowa City, 20 Wall. 583, 589 (1875). That rule has governed since the1830s when the predecessor to §2462 was enacted. See, e.g., Bank of United States v. Daniel, 12 Pet. 32, 56 (1838); Evans v. Gee, 11 Pet. 80, 84 (1837). And that definition appears in dictionaries from the 19th century up untiltoday. See, e.g., 1 A. Burrill, A Law Dictionary and Glossary 17 (1850) (“an action accrues when the plaintiff has aright to commence it”); Black's Law Dictionary 23 (9th ed.2009) (defining “accrue” as “[t]o come into existence as an enforceable claim or right”).
This reading sets a fixed date when exposure to thespecified Government enforcement efforts ends, advancing “the basic policies of all limitations provisions: repose, elimination of stale claims, and certainty about a plain- tiff 's opportunity for recovery and a defendant's potential liabilities.” Rotella v. Wood, 528 U. S. 549, 555 (2000). Statutes of limitations are intended to “promote justice bypreventing surprises through the revival of claims thathave been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.” Railroad Telegraphers v. Railway Express Agency, Inc., 321 U. S. 342, 348–349 (1944). They provide “security and stability to human affairs.” Wood v. Carpenter, 101 U. S. 135, 139 (1879). We have deemed them “vital to the welfare of society,” ibid., and concluded that “even wrongdoers are entitled to assume that their sins may be forgot- ten,” Wilson v. Garcia, 471 U. S. 261, 271 (1985).
B Notwithstanding these considerations, the Government
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argues that the discovery rule should apply instead. Under this rule, accrual is delayed “until the plaintiff has ‘discovered'” his cause of action. Merck & Co. v. Reynolds, 559 U. S. ___, ___ (2010) (slip op., at 8). The doctrine arose in 18th-century fraud cases as an “exception” to the standard rule, based on the recognition that “something different was needed in the case of fraud, where a defendant's deceptive conduct may prevent a plaintiff from even knowing that he or she has been defrauded.” Ibid. This Court has held that “where a plaintiff has been injured by fraud and ‘remains in ignorance of it without any fault or want of diligence or care on his part, the bar of the statute doesnot begin to run until the fraud is discovered.'” Holmberg
v. Armbrecht, 327 U. S. 392, 397 (1946) (quoting Bailey v. Glover, 21 Wall. 342, 348 (1875)). And we have explained that “fraud is deemed to be discovered when, in the exercise of reasonable diligence, it could have been discovered.” Merck & Co., supra, at ___ (slip op., at 9) (internal quotation marks and alterations omitted).
But we have never applied the discovery rule in this context, where the plaintiff is not a defrauded victim seeking recompense, but is instead the Government bringing an enforcement action for civil penalties. Despite thediscovery rule's centuries-old roots, the Government cites no lower court case before 2008 employing a fraud-baseddiscovery rule in a Government enforcement action forcivil penalties. See Brief for Respondent 23 (citing SEC v. Tambone, 550 F. 3d 106, 148–149 (CA1 2008); SEC v. Koenig, 557 F. 3d 736, 739 (CA7 2009)). When pressed atoral argument, the Government conceded that it was aware of no such case. Tr. of Oral Arg. 25. The Government was also unable to point to any example from the first 160 years after enactment of this statute of limitations where it had even asserted that the fraud discovery rule applied in such a context. Id., at 26–27 (citing only United States v. Maillard, 26 F. Cas. 1140, 1142 (No.
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15,709) (SDNY 1871), a “fraudulent concealment” case, see
n. 2, supra).
Instead the Government relies heavily on Exploration Co. v. United States, 247 U. S. 435 (1918), in an attempt to show that the discovery rule should benefit the Government to the same extent as private parties. See, e.g., Brief for Respondent 10–11, 16, 17, 33–34, 41–45. In that case, a company had fraudulently procured land from the United States, and the United States sued to undo the trans- action. The company raised the statute of limitations as adefense, but this Court allowed the case to proceed, concluding that the rule “that statutes of limitations upon suits to set aside fraudulent transactions shall not beginto run until the discovery of the fraud” applied “in favor of the Government as well as a private individual.” Exploration Co., supra, at 449. But in Exploration Co., the Government was itself a victim; it had been defrauded and was suing to recover its loss. The Government was not bringing an enforcement action for penalties. Exploration Co. cannot save the Government's case here.
There are good reasons why the fraud discovery rule has not been extended to Government enforcement actions for civil penalties. The discovery rule exists in part to preserve the claims of victims who do not know they areinjured and who reasonably do not inquire as to any injury. Usually when a private party is injured, he is immediately aware of that injury and put on notice that his time to sue is running. But when the injury is self-concealing,private parties may be unaware that they have beenharmed. Most of us do not live in a state of constant investigation; absent any reason to think we have beeninjured, we do not typically spend our days looking for evidence that we were lied to or defrauded. And the law does not require that we do so. Instead, courts have developed the discovery rule, providing that the statute oflimitations in fraud cases should typically begin to run
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only when the injury is or reasonably could have beendiscovered.
The same conclusion does not follow for the Government in the context of enforcement actions for civil penalties. The SEC, for example, is not like an individual victim who relies on apparent injury to learn of a wrong. Rather, a central “mission” of the Commission is to “investigat[e] potential violations of the federal securities laws.” SEC, Enforcement Manual 1 (2012). Unlike the private partywho has no reason to suspect fraud, the SEC's very purpose is to root it out, and it has many legal tools at hand toaid in that pursuit. It can demand that securities brokers and dealers submit detailed trading information. Id., at
44. It can require investment advisers to turn over theircomprehensive books and records at any time. 15 U. S. C. §80b–4 (2006 ed. and Supp. V). And even without filing suit, it can subpoena any documents and witnessesit deems relevant or material to an investigation. See §§77s(c), 78u(b), 80a–41(b), 80b–9(b) (2006 ed.).
The SEC is also authorized to pay monetary awards towhistleblowers, who provide information relating to violations of the securities laws. §78u–6 (2006 ed., Supp. V). In addition, the SEC may offer “cooperation agreements” to violators to procure information about others in exchange for more lenient treatment. See Enforcement Manual, at 119–137. Charged with this mission and armed with these weapons, the SEC as enforcer is a far cry from the defrauded victim the discovery rule evolved to protect.
In a civil penalty action, the Government is not only adifferent kind of plaintiff, it seeks a different kind of relief. The discovery rule helps to ensure that the injured receive recompense. But this case involves penalties, which gobeyond compensation, are intended to punish, and labeldefendants wrongdoers. See Meeker v. Lehigh Valley R. Co., 236 U. S. 412, 423 (1915) (a penalty covered by the
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predecessor to §2462 is “something imposed in a punitive way for an infraction of a public law”); see also Tull v. United States, 481 U. S. 412, 422 (1987) (penalties are “intended to punish culpable individuals,” not “to extractcompensation or restore the status quo”).
Chief Justice Marshall used particularly forceful language in emphasizing the importance of time limits onpenalty actions, stating that it “would be utterly repugnant to the genius of our laws” if actions for penalties could “be brought at any distance of time.” Adams v. Woods, 2 Cranch 336, 342 (1805). Yet grafting the discovery rule onto §2462 would raise similar concerns. It would leave defendants exposed to Government enforcementaction not only for five years after their misdeeds, but foran additional uncertain period into the future. Reposewould hinge on speculation about what the Government knew, when it knew it, and when it should have known it. See Rotella, 528 U. S., at 554 (disapproving a rule thatwould have “extended the limitations period to many decades” because such a rule was “beyond any limit thatCongress could have contemplated” and “would havethwarted the basic objective of repose underlying the verynotion of a limitations period”).
Determining when the Government, as opposed to anindividual, knew or reasonably should have known of afraud presents particular challenges for the courts. Agencies often have hundreds of employees, dozens of offices,and several levels of leadership. In such a case, when does “the Government” know of a violation? Who is the relevant actor? Different agencies often have overlapping responsibilities; is the knowledge of one attributed to all?
In determining what a plaintiff should have known, weask what facts “a reasonably diligent plaintiff would havediscovered.” Merck & Co., 559 U. S., at ___ (slip op., at 8). It is unclear whether and how courts should consider agency priorities and resource constraints in applying that
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test to Government enforcement actions. See 3M Co. v. Browner, 17 F. 3d 1453, 1461 (CADC 1994) (“An agency may experience problems in detecting statutory violations because its enforcement effort is not sufficiently funded; orbecause the agency has not devoted an adequate number of trained personnel to the task; or because the agency's enforcement program is ill-designed or inefficient; or because the nature of the statute makes it difficult to uncover violations; or because of some combination of these factors and others”). And in the midst of any inquiry as to what it knew when, the Government can be expectedto assert various privileges, such as law enforcement, attorney-client, work product, or deliberative process,further complicating judicial attempts to apply the discovery rule. See, e.g., App. in No. 10–3581 (CA2), p. 147(Government invoking such privileges in this case, in response to a request for documents relating to the SEC'sinvestigation of Headstart); see also Rotella, supra, at 559 (rejecting a rule in part due to “the controversy inherent indivining when a plaintiff should have discovered” a wrong).
To be sure, Congress has expressly required such inquiries in some statutes. But in many of those instances, theGovernment is itself an injured victim looking for recompense, not a prosecutor seeking penalties. See, e.g., 28
U. S. C. §§2415, 2416(c) (Government suits for money dam- ages founded on contracts or torts). Moreover, statutes applying a discovery rule in the context of Govern-ment suits often couple that rule with an absolute provision for repose, which a judicially imposed discovery rulewould lack. See, e.g., 21 U. S. C. §335b(b)(3) (limiting certain Government civil penalty actions to “6 years afterthe date when facts material to the act are known or reasonably should have been known by the Secretary but in no event more than 10 years after the date the acttook place”). And several statutes applying a discovery
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rule to the Government make some effort to identify theofficial whose knowledge is relevant. See 31 U. S. C. §3731(b)(2) (relevant knowledge is that of “the official of the United States charged with responsibility to act in the circumstances”).
Applying a discovery rule to Government penalty actions is far more challenging than applying the rule to suits by defrauded victims, and we have no mandate fromCongress to undertake that challenge here.
* * * As we held long ago, the cases in which “a statute oflimitation may be suspended by causes not mentioned inthe statute itself . . . are very limited in character, and areto be admitted with great caution; otherwise the courtwould make the law instead of administering it.” Amy v. Watertown (No. 2), 130 U. S. 320, 324 (1889) (internal quotation marks omitted). Given the lack of textual, historical, or equitable reasons to graft a discovery rule onto the statute of limitations of §2462, we decline to do so. The judgment of the United States Court of Appeals for the Second Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.