As I discussed here in detail, on February 27, 2013 the U.S. Supreme Court unanimously rejected the Securities and Exchange Commission's argument that the clock on its five-year statute of limitations to bring fraud cases should not begin to run until the time when the fraud is discovered. The 9-0 decision led many critics, including The Wall Street Journal, to lash out at the agency in an editorial for zealously pursuing a "discovery rule" that lacked a solid basis in the law:

It isn't easy to lose 9-0 on the current ideologically divided Supreme Court. So ironic congratulations are in order for the Securities and Exchange Commission, which managed the feat in a unanimous ruling on Wednesday....

As Justice Elena Kagan noted at January's oral argument, "The government, which has not asserted this power for 200 years, is now coming in and saying, 'We want this.'" Justice Antonin Scalia asked the government's attorney, "Is there much difference between the rule you are arguing for and a rule that there is no statute of limitations?" Chief Justice John Roberts wrote for the Court that "we have never applied the discovery rule in this context."

The WSJ editorial on the subject concluded that "the people at the SEC who invented and pursued this legal humiliation deserve to be fired."

It seems quite unlikely that any heads will actually roll at the SEC as a result of the Gabelli decision, but two members of Congress are not ready to let the matter drop. In a letter to SEC Chairman Elisse Walter dated March 22, 2013, Reps. Jeb Hensarling (R., Texas), who chairs the House Financial Services Committee, and Scott Garrett (R., N.J.) reportedly asked the SEC to disclose the total number of staff hours dedicated to the Gabelli case, including the total number of SEC staff labor hours spent litigating and appealing the case; the exact dollar figure associated with that labor; and any funds paid to outside counsel. Hensarling and Garrett added that the SEC should “use its limited resources more productively… rather than pursue baseless legal claims through several layers of appeal.”

The legislators' letter asked the SEC to provide this information by Friday, April 5, so we'll see soon how the SEC chooses to respond to this unusual inquiry.

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