And Breyer rejoined, "No, it is not a problem of fairly recent vintage. I'd say for 200 years there is no case. The only case, as far as I have been able to discover, which is why I am asking, is that what created the problem of recent vintage is that the Seventh Circuit, I guess, or a couple of other circuits decided that this discovery rule did apply to an effort by the government to assert a civil penalty. Before that, there was no problem. It was clear the government couldn't do it."
What is extraordinary, said Justice Antonin Scalia, is "that the government has never asserted this, except in the 19th century, when it was rebuffed and repudiated its position."
Chief Justice John Roberts Jr. said it seemed almost impossible for somebody to prove that the government should have known about some fraud, as the discovery rule requires. "And which part of the government?" he asked. "I mean, it's a big, big government, and particular agencieswell, you say, 'The Defense Contractor Board should have known,' but does that mean that the U.S. attorney's office or the defense counsel's office should have known?
"It's certainly not a lot of repose if the idea is, 'Well, I've got to establish that this particular government agency should have known about this.'"
Justice Ruth Bader Ginsburg called the five-year statute of limitations a "generous" period and asked why the SEC waited from 2003 to 2008 to file suit when the fraud was discovered in 2003. Wall replied that there was "a lot of back and forth" between parties, document exchanges, and hopes for settlement.
Gabelli's counsel, Liman, told the court that Congress had provided a "clear and easily administered" time limit on the government's power to punishfive years.
"The position that the SEC is taking now is a novel position that to our knowledge has not been taken by other regulators and hasn't been taken by the SEC until quite recently," he said. "This statute's been on the books for quite a long time, and it's notable that agencies have not urged that interpretation."
Marcia Coyle writes for The National Law Journal, a Daily Report affiliate.