The Clock Is Ticking

The Supreme Court of the United States, in Gabelli v. SEC, 133 S.Ct. 1216 (2013), and the District Court for the Southern District of New York, in SEC v. Straub (Straub II), No. 11 Civ. 9645 (RJS), 2016 WL 5793398 (S.D.N.Y. Sep. 30, 2016), rejected tolling arguments long used by government agencies to buy more time under the catch-all limitations period contained in 28 U.S.C. § 2462. Section 2462 provides that the government has five years to bring a civil enforcement action for violations that otherwise have no specific time limit. In Gabelli, the Supreme Court ruled that the equitable toll that prevents limitations periods for fraud-based claims from beginning to run until the plaintiff discovers the fraud — commonly known as the “discovery rule” — is unavailable in actions governed by § 2462, primarily because the equitable considerations underlying this tolling doctrine are inapplicable in the civil enforcement context. In Straub II, the district court ruled that § 2462's statutory text and legislative history foreclosed the SEC's argument that a defendant's presence outside bought the SEC more time to commence a civil enforcement action.

Gabelli and Straub II recognized that the government should be held to a higher standard than private plaintiffs when it comes to bringing a timely civil action. It remains to be seen if the courts will allow government agencies to use other tolling doctrines to extend the limitations period under § 2462 or if they will interpret such doctrines narrowly in civil enforcement actions in the wake of Gabelli and Straub II. Similarly, it remains to be seen if Congress will reexamine § 2462 in light of these recent decisions and other policy considerations that call into question the need for statutory tolling in civil enforcement actions.