Retroactive vs. Prospective Application of a Judicial Decision

From Wright v. Owens Corning, 450 B.R. 541 (W.D. Pa. 2011):

In Harper v. Virginia Department of Taxation, 509 U.S. 86, 113 S. Ct. 2510, 125 L. Ed. 2d 74 (1993), the Supreme Court of the United States held that

[w]hen [the] Court applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate [the] announcement of the rule.

Id. at 97. In reaching its decision, the Court opined that "[n]othing in the Constitution alters the fundamental rule of 'retrospective operation' that has governed "[j]udicial decisions . . . for near a thousand years.'" Id. at 94 (quoting Kuhn v. Fairmont Coal Co., 215 U.S. 349, 372, 30 S. Ct. 140, 54 L. Ed. 228 (1910)).

In the civil context, the Court had previously carved out a limitation to this rule if "the denial of retroactive effect to "a new principle of law,'" id., would avoid ""injustice or hardship'" without retarding the operating of the new rule in question. Chevron Oil Co. v. Huson, 404 U.S. 97, 107, 92 S. Ct. 349, 30 L. Ed. 2d 296 (1971) (abrogated by Harper, 509 U.S. 86, 113 S. Ct. 2510, 125 L. Ed. 2d 74 (1993)).

Footnote 12. Under the Chevron Oil framework, courts were to consider whether a ruling should apply in a purely prospective fashion. Kolkevich v. Attorney General, 501 F.3d 323, 338 n.9 (3d Cir. 2007). The Chevron Oil test required courts to consider three factors: (1) whether the decision to be applied nonretroactively established a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not clearly foreshadowed; (2) whether retrospective operation would further or retard the new rule's operation; and (3) whether the equities cut in favor of prospective application. Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S. Ct. 349, 30 L. Ed. 2d 296 (1971); see Kolkevich, 501 F.3d at 338 n.9.

The Court in Harper took issue with this exception and noted its ruling made clear that "the Chevron Oil test cannot determine the choice of law by relying on the equities of the particular case' and that the federal law applicable to a particular case does not turn on "whether [litigants] actually relied on [an] old rule [or] how they would suffer from retrospective application' of a new one." Harper, 509 U.S. at 95 n.9 (quoting James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 111 S. Ct. 2439, 115 L. Ed. 2d 481 (1991)); see Atl. Coast Demolition & Recycling, Inc. v. Bd. of Chosen Freeholders of Atl. Cnty., 112 F.3d 652, 672 (3d Cir. 1997) (Harper "overruled Chevron Oil's equitable balancing test as the determinant of whether a new principle of law will be applied retroactively"). The Court "reasoned that "the nature of judicial review' strips [the Court] of the quintessentially 'legislat[ive]' prerogative to make rules of law retroactive or prospective as [the Court] see[s] fit." Id. at 95 (quoting Griffith v. Kentucky, 479 U.S. 314, 323, 107 S. Ct. 708, 93 L. Ed. 2d 649 (1987)).

In light of those principles, the Court concluded that "a rule of federal law, once announced and applied to the parties to the controversy, must be given full retroactive effect by all courts adjudicating federal law," id. at 96, and extended ""to other litigants whose cases were not final at the time of the [first] decision.'" Id. (quoting Beam, 501 U.S. at 544 (White, J., opinion concurring in judgment)).

Courts have not hesitated to extend Beam and Harper's principles to decisions outside the Supreme Court's purview. See United States v. Goodner Bros. Aircraft, Inc., 966 F.2d 380, 385 (8th Cir. 1992) (applying the principles from Beam, the court gave retroactive effect to a decision from a sister circuit to the parties before it because "full retroactivity is the normal rule in civil cases" and Chevron Oil was a test for prospectivity); Sterling v. Block, 953 F.2d 198, 199 (5th Cir. 1992) (because the holding in the court of appeal's prior decision was applied retroactively to the parties in that case, it applied retroactively in the case sub judice); Ashley v. Cunningham, No. 99-506, 2002 U.S. Dist. LEXIS 7305, 2002 WL 655486, at *2 (D. Del. Apr. 10, 2002) (applying a new rule of law handed down by the Court of Appeals for the Third Circuit retroactively after considering Harper); see also Laborers' Int'l Union of North Am. v. Foster Wheeler Corp., 26 F.3d 375, 386 n.8 (3d Cir. 1994) (noting that, although Beam and Harper "dealt with decisions issued by the Supreme Court, given the ratio decidendi of both cases . . . there [was] no cogent basis for distinguishing decisions handed down by the inferior federal courts").

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