Gabelli v. Securities and Exchange Commission, 568 U.S. 442 (2013) (U.S. Supreme Court)
Gabelli v. SEC is a landmark Supreme Court decision clarifying when the government's clock starts ticking to bring enforcement actions seeking civil penalties.
Does the five-year statute of limitations in 28 U.S.C. § 2462 for actions seeking civil penalties accrue when the government discovers (or should have discovered) the alleged fraud, or when the alleged violation occurs?
Under 28 U.S.C. § 2462, an action for the enforcement of any civil fine, penalty, or forfeiture must be commenced within five years from the date when the claim first accrued. A claim generally accrues when the plaintiff has a complete and present cause of action—i.e., when the violation occurs—not upon discovery. The judicially created discovery rule that sometimes applies to private fraud claims does not extend to government actions seeking civil penalties under § 2462. The Court did not decide whether equitable doctrines (such as fraudulent concealment or equitable tolling) apply to § 2462.
The five-year limitations period in § 2462 for civil penalties begins to run when the alleged fraud or violation occurs, not when it is discovered by the government. The discovery rule does not apply to government penalty actions under § 2462. The Second Circuit's judgment was reversed.
Gabelli reshapes the enforcement landscape by fixing the start of the five-year limitations period for government civil penalties at the moment of violation, not discovery. Practically, it forces agencies like the SEC to detect and file penalty actions more quickly, to consider tolling agreements, and to focus on ongoing or recent misconduct. For defendants, it provides greater repose and predictability. For law students, Gabelli is a core statutes-of-limitations case demonstrating the ordinary accrual rule, the limited reach of the discovery rule, and how institutional roles (private victims vs. public enforcers) inform accrual doctrines. The decision also set the stage for later cases refining remedies and limitations, including Kokesh v. SEC (2017), which held that SEC disgorgement as then practiced was a "penalty" subject to § 2462's five-year limit, and Liu v. SEC (2020), which constrained disgorgement to net profits as equitable relief. Together, these cases underscore the importance of accurately characterizing remedies and understanding when the limitations clock starts and stops.