US Supreme Court Rules That the Government Does Not Have an Unlimited Amount of Time in Which to Bring Civil Penalty Actions

February 28, 2013

In a unanimous decision written by Chief Justice John G. Roberts, Jr., the United States Supreme Court has ruled that the Government does not have an unlimited amount of time to bring civil penalty actions based on fraud. In Gabelli v. Securities and Exchange Commission, 11-1274 (U.S. Feb. 27, 2013), the Supreme Court ruled that 28 U.S.C. § 2462, the five-year statute of limitations applicable to civil penalty actions brought by the Government, starts running on the date the allegedly fraudulent conduct occurred and is not subject to a discovery rule in cases based on fraud. Section 2462 states that “[e]xcept as otherwise provided by Act of Congress,” an action for a civil penalty “shall not be entertained unless commenced within five years from the date when the claim first accrued.” The Securities and Exchange Commission (the “SEC”) had argued that a civil penalty claim sounding in fraud accrues when the Government discovers or reasonably should have discovered the violation. But the Court squarely rejected the SEC’s argument, noting the “lack of textual, historical, or equitable reasons to graft a discovery rule onto the statute of limitations of § 2462.”

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