About This Blog

Note: After July 1, 2011, no new posts will appear on this blog.  The existing posts will remain accessible for anyone who finds them useful.  I greatly appreciate the positive reaction that I received after I started the blog on August 1, 2009.

—Gregory L. Poe

Apr 12th, 2011The Responsible Corporate Officer Doctrine

I’ve written a paper entitled “The Responsible Corporate Officer Doctrine: Defending Individuals in FDCA Cases” (available here). The paper will be included in the materials available at the ABA’s 21st Annual National Institute on Health Care Fraud in Miami Beach, Florida on May 11-13, 2011 (brochure available here). I’ll be participating in a panel discussion on May 12th entitled “Enforcement Actions Against Individuals.” The panel members will address the recent increase in criminal and civil enforcement actions against individuals and the basis for individual liability in health care fraud cases. Jonathan Diesenhaus from Hogan Lovells will be the moderater. Other participants will include officials from the Department of Justice, the Department of Health and Human Services, and the Food and Drug Administration. Here are the first two paragraphs of the paper:

To the extent intended by Congress and permitted by the Constitution, courts may impose criminal sanctions on individual corporate officers who were in positions of authority to have prevented or corrected wrongdoing within a corporation but failed to do so. That concept, which has come to be known as the responsible corporate officer (RCO) doctrine, was first developed under the Food, Drug & Cosmetic Act of 1938 (FDCA). See United States v. Dotterweich, 320 U.S. 277 (1943); United States v. Park, 421 U.S. 658 (1975); 21 U.S.C. §§ 331(a), 333(a)(1), 352. Under the RCO doctrine, the government is not required to prove that an officer participated in wrongdoing or even knew about it. The RCO concept also exists outside of the FDCA context – principally under environmental laws. See, e.g.United States v. Hanousek, 176 F.3d 116 (9th Cir. 1999) (construing the Clean Water Act to allow conviction of a misdemeanor offense punishable by a prison term not exceeding one year without a showing of mens rea).

Sometimes characterized as imposing a form of strict vicarious liability, and sometimes characterized as requiring a showing of negligence, the RCO doctrine under the FDCA is a powerful weapon for federal prosecutors and (at least indirectly) the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA). The potential criminal consequences of a FDCA conviction under the RCO doctrine include a term of imprisonment up to 12 months and at least a six figure fine. The potential collateral consequences of such a conviction include, as a practical matter, exclusion by HHS from participation in the medical device and pharmaceutical industries. Given the lack of a mens rea requirement and the potential sanctions involved, the RCO doctrine provides profound leverage to federal prosecutors to resolve cases through plea agreements, stipulated facts, and uncontested proceedings. As a result, it gives great leverage to other federal enforcement agencies, especially HHS in the exercise of its exclusion authority, and stands as a tool for efficiently advancing the broader regulatory goals of the FDA. Whether that approach to law enforcement is fair or appropriate in any given case is another question.

Aug 24th, 2010The Ex Post Facto Clause and the United States Sentencing Guidelines

The Second Circuit recently decided a case, United States v. Kumar, Nos. 06-5654-cr, 06-5482-cr (August 12, 2010), that implicates a basic principle of punishment: May a defendant’s sentence in a federal criminal case be increased based on sentencing guidelines that were created after the criminal conduct at issue? According to two members of the panel, the answer is yes. According to the panel’s dissenting judge, the answer is no. That disagreement itself, as important as it is, masks an even more basic dispute among lower federal courts: whether the U.S. Constitution’s Ex Post Facto clause (art. I, § 9, cl. 3) applies to the advisory federal sentencing guidelines at all.

In Kumar, the government charged the former CEO of Computer Associates, a publicly traded company, along with the company’s head of North American sales, with various crimes relating to a securities fraud scheme. The case arose out of a fraudulent accounting practice known as the “35-day month.” The company had backdated contracts executed in the first few days of a financial quarter to recognize revenue from those contracts in the prior quarter. The illegal purpose of the practice was to make investors believe that the company had met or exceeded its quarterly earnings estimates. Eventually, the defendants pleaded guilty to fraud and other offenses. They were sentenced in November 2006.

Ordinarily, a sentencing court is required to apply the guidelines in effect at the time of sentencing. See U.S.S.G. § 1B1.11(a). If the application of that rule creates an ex post facto problem, however, then a sentencing court is required to apply the guidelines in effect at the time of the offense conduct. The binary choice required under the guidelines is commonly known as the “one-book rule.” See U.S.S.G. § 1B1.11(b)(1); Miller v. Florida, 482 U.S. 423, 430 (1987) (Ex Post Facto clause implicated if a law applies to events that occurred before its enactment and disadvantages the defendant affected by the law);  Weaver v. Graham, 450 U.S. 24, 30 (1981) (“the lack of fair notice and governmental restraint when the legislature increases punishment beyond what was prescribed when the crime was consummated” is central to the ex post facto prohibition).

The conduct underlying the charged fraud offenses in Kumar ended in 2000. Certain uncharged obstructive conduct relating to the fraud offenses had continued until 2005. The district court applied the 2005 guidelines (the version in effect at the time of sentencing) instead of the 1998 guidelines (the version in effect at the time of the offense conduct). The 2005 version of the guidelines contained several sentencing enhancements that did not exist in the 1998 version, including an enhancement for obstructive conduct. The district court, after deciding that defendants had obstructed the government’s investigation of the underlying conduct, applied the enhancement.

On appeal, the defendants argued that they were unfairly punished by application of the 2005 guidelines under the one-book rule because the enhancement did not exist before 2000 at the time of the offense conduct. The panel majority decided that the application of the 2005 guidelines clearly disadvantaged the defendants under the Miller standard because their sentencing ranges under the guidelines were much higher than they would have been if the 1998 guidelines had been applied. But the panel majority concluded that no ex post facto problem existed under Miller because the application of the 2005 guidelines was not retrospective. According to the Kumar majority, the defendants had fair notice of the consequences of committing obstructive conduct postdating the offense conduct because the one-book rule had been adopted before their offense conduct occurred.

Judge Sack, in dissent, stated that “the majority give[s] insufficient attention to the quality of notice that ex post facto jurisprudence requires. It is not notice simpliciter, but notice that is ‘fair.’” Slip op. at 19. In other words, Judge Sack stated a view that any notice created by the existence of the one-book rule existed at a level of generality too high to permit an enhancement based on an amendment to the guidelines that had been promulgated after the offense conduct. Ultimately, the disagreement between the panel majority and Judge Sack involves the types of line-drawing and contextual issues concerning the scope and meaning of notice that are often present in litigation under the Due Process Clause.

All of this invites a more basic question: What practical difference does ex post facto analysis make when the sentencing guidelines are simply one non-binding factor that a court must consider under 18 U.S.C. § 3553(a)? The Seventh Circuit, in an opinion by Judge Posner, has held squarely that the Ex Post Facto clause does not even apply to the post-Booker advisory sentencing guidelines. See United States v. Demaree, 459 F.3d 791, 795 (7th Cir. 2006) (“We conclude that the ex post facto clause should apply only to laws and regulations that bind rather than advise[.]”). According to Demaree, a sentencing judge who agrees with a guideline enhancement that was promulgated after the offense conduct can reach the same result through another means under 18 U.S.C. § 3553(a) as if he or she were directly applying the guideline enhancement. Id. (“[A] rule that a guidelines change cannot be applied retroactively if it would be adverse to the defendant would have in the long run a purely semantic effect”). (Even before United States v. Booker, when the sentencing guidelines were mandatory, Judge Easterbrook took the position that “sentencing guidelines are not ‘laws’ within the scope of [the Ex Post Facto] clause.” See United States v. Vivit, 214 F.3d 908, 924 (7th Cir. 2000) (concurring opinion).) Other circuits have disagreed with Demaree.  See, e.g., United States v. Turner, 548 F.3d 1094, 1099-1100 (D.C. Cir. 2008).

In Kumar, the district court had held (consistent with Demaree) that “because the Guidelines [are] advisory, the Ex Post Facto clause [is] not implicated by sentencing decisions.” Slip op. at 8. The court of appeals, however, chose to sidestep that bedrock question entirely. See slip op. at 25 n.12 (majority opinion); id. at 11 n.7 (dissenting opinion). Presumably, the Second Circuit proceeded in that manner because the government on appeal disclaimed any reliance on the district court’s position. Slip op. at 25 n.12. In Demaree, the government similarly had argued on appeal that the Ex Post Facto clause applies to the advisory guidelines. Not mincing words, Judge Posner characterized the government’s position as a “rearguard action against Booker” and an effort to make the guidelines “bind as tightly as possible.” 459 F.3d at 795.  (Now, the government has taken a position at odds with its stance in Demaree and Kumar. See United States v. Lanham, et al., Nos. 08-6504/6506, 09-5094/5095, slip op. at 20 (6th Cir., Aug. 24, 2010) (rejecting government’s argument that harsher, post-conduct version of the guidelines applied and stating that advisory nature of guidelines does not eliminate ex post facto concerns).  This is either a change of course or the Acting Solicitor General will need to impose order here.)

Whether one chooses to accept Judge Posner’s brand of legal realism, there is no question that a district judge has broad discretion to reach results under Section 3553(a) that vary substantially from the guidelines. In Kumar itself, the district court varied downward from life sentences recommended by the guidelines and imposed sentences of 7 years and 12 years. In the end, the type of intense legal skirmishing exemplified by Kumar may demonstrate, more than anything else, that the advisory guidelines continue to have a tethering effect despite their status under Section 3553(a) as a single factor among many that must be considered by courts in federal sentencing proceedings.

Feb 6th, 2010What is the Purpose of Restitution in a Federal Criminal Case?

A recent Tenth Circuit case, United States v. Speakman, No. 08-1332 (Feb. 2, 2010), presents an interesting question in federal criminal practice: May a district court order a defendant to pay restitution for the purpose of punishment even if the payment does not compensate the victim? According to the Tenth Circuit, the answer is no. The ruling, which conflicts with at least one other decision, highlights ongoing disagreements about the scope and meaning of the federal restitution statute. And it raises a more philosophical question about the meaning of punishment itself.

In Speakman, the defendant pleaded guilty to wire fraud in violation of 18 U.S.C. § 1343. The plea agreement stipulated that the defendant defrauded his ex-wife by forging her signature and transferring her funds to himself. The district court sentenced the defendant to a term of imprisonment and ordered restitution.

The district court’s restitution order had two components. First, the court ordered the defendant to pay a brokerage firm $1,225,000. That was the amount paid by the firm to the defendant’s ex-wife in an arbitration proceeding after the fraud was discovered. Second, the court ordered the defendant to pay $194,205.77 – the remainder resulting from the fraud as calculated by the court – to the Crime Victims Fund because defendant’s ex-wife had expressly declined to receive further restitution from the defendant. (The Crime Victims Fund is an entity created by Congress in 1984 to assist victims of crime. See http://www.ojp.usdoj.gov/ovc.) The district court believed that the governing statute mandates an order of restitution even when the victim declines to receive compensation.

On appeal, the defendant challenged both components of the restitution order. First, he argued that the brokerage firm was not a “victim” within the meaning of the governing statute. The Tenth Circuit held that the record was unclear on that issue and remanded the case for further factual development. Second, the defendant argued that the court lacked authority to order payment to the Crime Victims Fund. The court of appeals agreed and reversed that portion of the restitution order.

As the Tenth Circuit stated, “‘[f]ederal courts possess no inherent authority to order restitution, and may only do so as explicitly empowered by statute.’” Slip op. at 20 (citation omitted). Although the governing statute permits a victim to assign an interest in restitution to the Crime Victims Fund, the victim in Speakman had not done that. Without an assignment, the Tenth Circuit held that the tangle of relevant federal statutory provisions does not permit restitution when the victim declines payment.

Unlike the Tenth Circuit, the Second Circuit has affirmed a district court’s order requiring a defendant to make restitution to the Crime Victims Fund without an assignment of interest by the victim.  See United States v. Johnson, 378 F.3d 230, 244 (2d Cir. 2004). In Speakman, the Tenth Circuit explicitly disagreed with the Second Circuit’s construction of the governing statute. Slip op. at 24. More broadly, however, the Tenth Circuit identified a “deeper disagreement between our two courts about the nature of restitution.” Id. at 25. According to the Tenth Circuit, the federal statute governing restitution “does not inflict criminal punishment, and thus is not punitive.” Id. (citation omitted; emphasis in original). Thus, “[i]f the victim declines restitution but the court nevertheless orders the defendant to pay a sum of money to another entity, this punishes the defendant without in any way compensating the victim[,]” which the court held is improper. Id. The Second Circuit, in contrast, takes the position that “[r]estitution undoubtedly serves traditional purposes of punishment.” United States v. Brown, 744 F.2d 905, 909 (2d Cir. 1984).

The federal restitution statute is the subject of ongoing disputes. Just last month, for instance, the Supreme Court granted review in Dolan v. United States, No. 09-367, which presents the question whether a district court may enter a restitution order beyond the time limit prescribed by 18 U.S.C. § 3664(d)(5). Over the years, Congress has acted many times to modify the statutory framework with unsatisfactory results. Short of more careful congressional action, conflicts like the one identified in Speakman, and the uncertainty they engender, will persist, subject only to the policing that the Supreme Court may choose (or not choose) to perform.

Dec 31st, 2009Sentencing in Fraud Cases Involving Shareholder Loss

Eventually, the Supreme Court probably will need to decide whether sentences in criminal fraud cases involving publicly traded stock may be based on relatively crude estimates of shareholder loss. In civil cases, the Court already has spoken. In Dura Pharmaceuticals v. Broudo, 544 U.S. 336 (2005), the Court held in a case brought under the federal securities laws that a plaintiff must adequately allege and prove that fraudulent conduct caused the value of his stock to drop after the truth was revealed to the market. In other words, a plaintiff in such a case will not survive a motion to dismiss merely by alleging that he purchased stock at an artificially inflated price. As the Court put it: “[A]s a matter of pure logic, at the moment the transaction takes place, the plaintiff has suffered no loss; the inflated purchase payment is offset by ownership of a share that at that instant possesses equivalent value. . . . [T]he most logic alone permits us to say is that the higher purchase price will sometimes play a role in bringing about a future loss.” Id. at 341-43 (emphasis in original).

The logic behind Dura has enormous importance in federal criminal cases involving publicly traded securities. Under the advisory United States Sentencing Guidelines, the calculation of a sentence in a fraud case is largely driven by the amount of “loss” caused by the fraud. U.S.S.G. Section 2B1.1.  “Actual loss” is defined as the “reasonably foreseeable pecuniary harm that resulted from the offense.” Id., Commentary, 3(A)(i). Under the guidelines, a district court is required only to make a “reasonable estimate of loss.” Id., Commentary, 3(C). If a corporate executive – Enron’s Jeff Skilling and WorldCom’s Bernie Ebbers are two prominent examples – is convicted of fraud involving hundreds of millions of dollars in decreased market capitalization, he or she may be subject to decades in prison under the guidelines (or what amounts to a life sentence).

Given the liberty interests involved in a criminal case, one might think that the standards would be at least as strict as those that apply in a civil case. Not so. Recently, the Ninth Circuit rejected the proposition that Dura should apply to sentencing in a federal criminal case. See United States v. Berger, No. 08-50171 (9th Cir., Nov. 30, 2009). According to the Ninth Circuit, the criminal sentencing context is different because “a court gauges the amount of loss caused, i.e., the harm that society as a whole suffered from the defendant’s fraud.” Slip op. at 15629 (emphasis in original). But that reasoning is utterly circular. Whether “society as a whole” suffered any loss depends on the facts involved. If a fraud is committed but is never disclosed to the market, it is possible that the fraud did not actually affect share price at all. And even if a fraud is disclosed, the actual harm to any particular purchaser can’t simply be determined by subtracting the share price on the date of purchase from the price on the date the fraud was revealed. The effect of the fraud needs to be isolated from the many other variables that affect share price over time.

Other courts of appeals, as the Ninth Circuit recognized in Berger, have embraced the logic of Dura in the criminal context. See United States v. Rutkoske, 506 F.3d 170, 179 (2d Cir. 2007) (“we see no reason why considerations relevant to loss causation in a civil fraud case should not apply, at least as strongly, to a sentencing regime in which the amount of loss caused by a fraud is a critical determinant of the length of a defendant’s sentence.”); United States v. Olis, 429 F.3d 540, 546 (5th Cir. 2005) (“The civil damage measure should be the backdrop for criminal responsibility both because it furnishes the standard of compensable injury for securities fraud victims and because it is attuned to stock market complexities.”). Still, the practical reach of those cases may be limited in light of the requirement in the guidelines that a court need only make a “reasonable estimate of loss.” Defendants will argue that the government must prove actual loss with sophisticated analysis; the government will argue that no such exactitude is required.  See United States v. Ferguson, 584 F. Supp.2d 447, 451-52 (D. Conn. 2008).

Time will tell whether the Ninth Circuit’s view of Dura in the criminal context will stand. Even in the Ninth Circuit, however, Berger cannot be allowed to end the story. In every federal criminal case involving alleged shareholder loss, defense counsel must be prepared to advocate Dura’s plain logic. To the extent that a sentencing court views Dura as inconsistent with the sentencing guidelines, defense counsel must be prepared to convince the court that the guidelines don’t deserve to be followed. They are merely advisory.  A district court is free to disagree with a policy of the Sentencing Commission that has not been mandated by Congress. See Kimbrough v. United States, 128 S. Ct. 558, 564 (2008).

Congress has not mandated that criminal defendants faced with potentially long prison sentences be subject to standards less exacting than those applicable to defendants in civil cases. To the contrary, Congress has mandated that a sentencing court must consider the “nature and circumstances of the offense and the history and characteristics of the defendant” and that a court “court shall impose a sentence sufficient, but not greater than necessary,” to “reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense,” and to “afford adequate deterrence to criminal conduct” and “protect the public from further crimes of the defendant.” See 18 U.S.C. Section 3553(a). Those principles, and proof of actual harm, must be guiding lights in all cases involving alleged shareholder loss.  Anything less exacting serves to elevate administrative convenience and excessive retribution over fundamental fairness.

Oct 30th, 2009The Problem of “Willfulness”

The use of the term “willful” in connection with federal criminal statutes remains needlessly confusing and harmful to the fair administration of justice. A recent Fifth Circuit case offers yet another example. In United States v. Allen, No. 08-11041 (5th Cir., Oct. 28, 2009), a defendant was convicted of criminal contempt under 18 U.S.C. § 401(3). The elements of criminal contempt under that statute (according to the Fifth Circuit) are “‘(1) a reasonably specific order; (2) violation of the order; and (3) the willful intent to violate the order.’” Slip op. at 10 (citation omitted). The district court, asked to define “willful” by defense counsel, stated: “I don’t think that’s necessary, but one of the things I obviously took into account is whether it was done – it was a volitional act done by someone who knew or reasonably should have been aware that his or her conduct was wrong.” Id. at 11.

On appeal, the defendant argued that the district court incorrectly defined the term “willful.” The Fifth Circuit agreed: “We have explained that ‘willfulness’ in the context of the criminal contempt statute at a minimum requires a finding of recklessness, which requires more than a finding that an individual ‘reasonably should have known’ that the relevant conduct was prohibited. Thus, the district court clearly erred.” Slip op. at 12. Defense counsel had failed to object in the district court so the Fifth Circuit applied the plain error doctrine and affirmed the conviction.  Id.

The term “willful” in federal criminal practice is used to describe any number of mental states. Although the district court’s conflation of willfulness and negligence in Allen is an extreme example, the Fifth Circuit’s own doctrine in the contempt context – which equates willfulness with recklessness – is itself remarkable. “As a general matter, when used in the criminal context,” the Court stated in Bryan v. United States, 524 U.S. 184, 191 (1998), “a ‘willful’ act is one undertaken with a ‘bad purpose.’” Id. at 191. The use of the term “willful” in a federal criminal statute frequently invites battles over whether Congress intended to require proof that a defendant violated a known legal duty. See, e.g., id. at 196 (holding that the term “willfully” in 18 U.S.C. § 924(a)(1)(D) does not require proof that defendant actually knew of a federal licensing requirement); Ratzlaf v. United States, 510 U.S. 135, 149 (1994) (holding that Congress intended, in 31 U.S.C. § 5322(a), that a jury must conclude that defendant knew that structuring currency transactions was prohibited by law before a conviction for a “willful” violation may occur). The term “willful” is not alone in its lack of repute. The concepts of “specific intent” and “general intent” create similar confusion. See Liparota v. United States, 471 U.S. 419, 433 n.16 (1985) (commenting that a “useful” jury instruction might “eschew use of difficult legal concepts like ‘specific intent’ and ‘general intent’”).

The drafters of the Model Penal Code got it right by banishing the terms “willfully,” “specific intent,” and “general intent.” See Dixon v. United States, 548 U.S. 1, 16 (2006) (noting that Section 2.02(2) of the Model Penal Code does not embrace the term “willfully” but instead defines “purposely,” “knowingly,” “recklessly,” and “negligently”). As Judge Learned Hand, in an exchange with Professor Herbert Wechsler (the reporter for the Model Penal Code), put it: “[Willfully is] an awful word! It is one of the most troublesome words in a statute that I know. If I were to have the index purged, ‘willful’ would lead all the rest in spite of its being at the end of the alphabet.” United States v. Aversa, 984 F.2d 493 (1st. Cir. 1993), vacated sub nom. Donovan v. United States, 510 U.S. 1069 (1994) (quoting American Law Institute, Model Penal Code § 2.20, at 249 n. 47 (1985)).  That Congress and so many judges, after all these decades, have failed to absorb Judge Hand’s message is cause for serious concern.

Sep 25th, 2009Venue, Prejudice, and Science in Criminal Trials

Any time a federal court of appeals states that a district court is not required to consider evidence, without any qualifying statement concerning the reliability of that evidence, one tends to take notice. Earlier this week, the Eighth Circuit held (in a case involving grisly and heartbreaking facts) that a district court is not required even to “consider public opinion polls when ruling on change-of-venue motions.” United States v. Rodriguez, No. 07-1316 (8th Cir., Sept. 22, 2009) (slip op. at 6) (emphasis added). The defendant was charged with kidnapping a young woman, Dru Kathrina Sjodin, and transporting her across state lines, resulting in her death. Slip op. at 1. After a trial, a jury returned a conviction and recommended a sentence of death. Id. at 3. The district court accepted the recommendation and imposed a death sentence. Ibid.

The question of venue in notorious criminal prosecutions is often difficult. The Supreme Court has held that a presumption of prejudice arises when “the influence of the news media” in “the community at large” is sufficiently pervasive. Murphy v. Florida, 421 U.S. 794, 799 (1975); see Sheppard v. Maxwell, 384 U.S. 333, 362-63 (1966). Consider the case of Jeff Skilling (Enron’s former president). Skilling was convicted of various financial crimes in connection with Enron’s collapse. From the beginning, Skilling’s lawyers argued that he could not receive a fair trial in Houston (asserting, among other things, that one in three Houstonians knew someone who had been harmed by Enron’s demise). The district court rejected the venue argument. On appeal, the Fifth Circuit held that the district court should have applied a presumption of prejudice, but further held that the government had successfully rebutted the presumption by showing that an impartial jury actually had been impaneled. The second question presented in Skilling’s pending petition for certiorari concerns whether such a rebuttal is permissible or whether a change of venue (or, in the post-trial context, automatic reversal of the conviction) is the appropriate remedy. See Skilling v. United States, No. 08-1394.

Changes of venue in criminal cases (and remedies for failures to change venue) do occur. The most famous instance is probably the Sheppard case in which a Cleveland physician, convicted of murdering his pregnant wife, ultimately was granted a new trial after having served 10 years in prison. 383 U.S. 333. Recently, a district judge in Iowa ordered a change of venue for trial from the Northern District of Iowa to the District of South Dakota in a well-publicized case involving alleged undocumented workers that stemmed from a raid on a meatpacking plant. See United States v. Agriprocessors, Inc., et al., No. 08-CR-1324-LRR (N.D. Iowa) (docket entry 656). But changes of venue are unusual.

Given the standards involved in venue challenges, the Eighth Circuit’s  rejection of the venue argument in Rodriguez is hardly surprising. The holding that a district court is not required to consider evidence, however, is another matter. There is nothing inherently unreliable or invalid about a public opinion poll. The Advisory Committee Notes to Fed. R. Evid. 703, for instance, specifically recognize “public opinion poll evidence.” The U.S. Bureau of the Census first used statistical sampling techniques in 1937. See http://www.census.gov/history/www/innovations. The Federal Judicial Center has addressed the use of sampling techniques in detail. See Manual for Complex Litigation (3d ed.), Section 21.493 (“Sampling/Opinion Surveys”). If a public opinion survey is based on unreliable methods or lacks validity, or if the survey has an attenuated relationship to the issue at hand, a district court is certainly free to reject or minimize the significance of the data. The Eighth Circuit, however, has made a categorical pronouncement that misstates prevailing law and has the effect of denigrating science. That is not a desirable result for anyone.

Sep 5th, 2009Conrad Black and Special Verdicts

The Conrad Black case, now in the Supreme Court, has received a great deal of recent attention largely because the Court has agreed to revisit the scope of 18 U.S.C. § 1346 (which states that “the term ‘scheme or artifice to defraud’” as used in the mail and wire fraud statutes “includes a scheme or artifice to deprive another of the intangible right of honest services”). Black’s petition, however, also presents a second question that the Court has agreed to review: “Whether a court of appeals may avoid review of prejudicial instructional error by retroactively imposing an onerous preservation requirement not found in the federal rules.” That question, which has received little or no scrutiny by the media, implicates an important set of issues that all criminal trial lawyers will want to follow closely.

Black, once one of the largest newspaper magnates in the world, was charged in a high-profile indictment with defrauding his former employer, Hollinger International, and obstructing justice. In 2007, a federal jury in Chicago acquitted him on numerous counts but convicted him on certain fraud and obstruction charges. On appeal, Black’s lawyers raised a number of important issues. Among others, the lawyers asserted that Black was entitled to a new trial on two of the fraud charges. Although the government’s theories were somewhat opaque, the government had asserted at trial that Black conspired fraudulently to deprive his employer of (1) money or property and (2) his honest services in connection with certain payments that benefited him. According to Black’s counsel, the “honest services” instruction to the jury was erroneous because it allowed the jury to convict him without concluding that he contemplated economic harm to his employer and that the harm was at his employer’s expense. Furthermore, Black’s counsel argued, the convictions on those counts were subject to reversal under Yates v. United States, 354 U.S. 298 (1957) even if the money/property theory was valid because the honest services instruction was flawed and thus allowed the jury to return a guilty verdict solely on a legally invalid ground.

The case was argued on June 5, 2008 before a panel that included Judge Richard A. Posner. Judge Posner authored an opinion that was issued on June 25, 2008 — fewer than three weeks after the argument. The opinion affirmed the conviction and sentence in all respects. Judge Posner did not pause in rejecting the honest services argument. Nor did he pause in stating that Black had forfeited his right to the Yates argument, even if Black’s honest services argument was correct, because Black had objected, before jury deliberations, to a special verdict form proposed by the government that would have had the jury specify the theory of conviction (honest services or money/property) underlying its verdict on those counts.

Black filed his petition for certiorari on January 9, 2009. The first question presented concerns the scope of the honest services statute. The second question presented, as framed by the petition, is “[w]hether a court of appeals may avoid review of prejudicial instructional error by retroactively imposing an onerous preservation requirement not found in the federal rules.” On May 18, 2009, the Supreme Court granted the petition on both questions presented.

The second question presented, which concerns the special verdict issue, has broad importance for criminal trial lawyers. Federal prosecutors use conspiracy charges as powerful tools in pursuit of convictions. As a “darling of the modern prosecutor’s nursery[,]” Harrison v. United States, 7 F.2d 259, 263 (2d Cir.1925) (L. Hand, J.), a conspiracy charge provides enormous leverage to the government in a criminal case. From the standards governing admission of co-conspirator hearsay evidence (Bourjaily v. United States, 483 U.S. 171 (1987)) to the fact that a conspiracy count may charge multiple objects (Braverman v. United States, 317 U.S. 49 (1942)), the federal law governing the use of conspiracy charges is very favorable to the government. Yates stands as a (relatively modest) check on that power in the sense that a forward-thinking prosecutor will reflect before including a weak theory in a multiple-object conspiracy count. A weak theory may increase the likelihood of a conviction but will also increase the risk of reversal down the road.

The federal rules of criminal procedure do not specify the form that a verdict must take. A general verdict form does not require a jury to specify the ground for its conviction. A special verdict form or special interrogatories, in contrast, may require a jury to identify (to some extent) the rationale for its decision. In a criminal case, a special verdict forms or special interrogatories may run a serious risk of interfering with the jury’s deliberations in violation of a defendant’s Sixth Amendment right to have the jury make the ultimate determination of guilt because the questions may have the effect of guiding the jury to its conclusion.

In the ordinary multiple-object conspiracy case, a prosecutor takes his or her chances. The theories are chosen and stated in the indictment, the evidence is presented, and the jury returns a general verdict subject to the rule in Yates. In the Black case, however, the prosecutors proposed a special verdict form (of sorts) by which the jury would specify for the conspiracy count whether its conviction was based on the honest services fraud theory or the money/property deprivation theory. As one might predict, the defense lawyers objected on the ground that such a form would unfairly skew deliberations. By holding that Black had forfeited his right to complain about the honest services instruction under Yates because he could have accepted the special verdict form, the panel created an election rule. The judges apparently believed that Black unfairly was trying to have it both ways by avoiding the special verdict form at trial and then taking refuge in Yates on appeal.

The basic legal problem with Judge Posner’s approach, as stated by the second question presented in Black’s petition, is that it is not rooted in any federal rule. More broadly, it risks undue pressure on the jury’s deliberations and thus threatens the criminal defendant’s Sixth Amendment rights. The election rule created by Judge Posner may have some superficial appeal as an equitable principle in litigation.  But the rule actually gives rise to more inequity.  The Seventh Circuit’s opinion fails to appreciate that the election rule creates a disincentive for federal prosecutors to choose the theories in a multiple-object conspiracy count carefully.  From that perspective, it could be called a non-election rule — one that increases the already-profound prosecutorial leverage in the conspiracy context against the interests of criminal defendants.  Although the focus on the Black case will continue to be on the honest services issue, the special verdict issue deserves close attention as well.

Aug 1st, 2009The Rule of Lenity

I considered various topics for my initial blog post and settled on the rule of lenity. The spirit of the rule of lenity – fundamental fairness – lies at the heart of a respectable criminal justice system. See McBoyle v. United States, 283 U.S. 25, 27 (1931) (the principle of “fair warning” motivates the lenity rule) (Holmes, J.). At a high level of generality, we all agree that ambiguous criminal statutes must be construed in favor of the accused. But the rule of lenity is often not taken seriously. After all, the Supreme Court itself has articulated two plainly conflicting standards. In one formulation, the Court has stated that “where text, structure, and history fail to establish that the Government’s position is unambiguously correct[,]” a court must “apply the rule of lenity and resolve the ambiguity in [defendant's] favor.” United States v. Granderson, 511 U.S. 39, 54 (1994). In another formulation, the Court has held that a statute must contain a “‘grievous ambiguity or uncertainty’” before the rule of lenity may be applied.  Muscarello v. United States, 524 U.S. 125, 138-29 (1998) (quoting Staples v. United States, 511 U. S. 600, 619, n. 17 (1994)). From the perspective of a criminal defendant facing a loss of liberty, such a state of affairs doesn’t exactly inspire confidence in the system.

Despite a recent tease, the Supreme Court hasn’t made matters any more coherent. In United States v. Santos, 128 S.Ct. 2020 (2008), the Court held that the definition of “proceeds” in the federal money laundering statute, 18 U.S.C. § 1956, covers only criminal receipts, not profits. Writing for himself and Justices Thomas, Souter, and Ginsburg, Justice Scalia stated:

From the face of the statute, there is no more reason to think that ‘proceeds’ means ‘receipts’ than there is to think that ‘proceeds’ means ‘profits.’ Under a long line of our decisions, the tie must go to the defendant. The rule of lenity requires ambiguous criminal laws to be interpreted in favor of the defendants subjected to them. See United States v. Gradwell, 243 U. S. 476, 485 (1917); McBoyle v. United States, 283 U. S. 25, 27 (1931); United States v. Bass, 404 U. S. 336, 347– 349 (1971). This venerable rule not only vindicates the fundamental principle that no citizen should be held accountable for a violation of a statute whose commands are uncertain, or subjected to punishment that is not clearly prescribed. It also places the weight of inertia upon the party that can best induce Congress to speak more clearly and keeps courts from making criminal law in Congress’s stead. Because the ‘profits’ definition of ‘proceeds’ is always more defendant-friendly than the ‘receipts’ definition, the rule of lenity dictates that it should be adopted.

128 S.Ct. at 2025. Justice Stevens provided the fifth vote for the Court’s narrow holding but did not join Justice Scalia’s view of the rule of lenity. Concurring only in the judgment, Justice Stevens concluded that “proceeds” under Section 1956 can mean “receipts” in some instances and “profits” in others depending on the type of predicate criminal activity involved. 129 S.Ct. at 2031-34. To that, Justice Scalia responded for the plurality: “Our obligation to maintain the consistent meaning of words in statutory text does not disappear when the rule of lenity is involved.” Id. at 2030.

The plurality opinion in Santos, which was decided during the October 2007 Term, has marked a high point for the rule of lenity. Since then, the Court has retreated in its approach to the concept. See United States v. Hayes, 129 S.Ct. 1079 (2009); Dean v. United States, 129 S.Ct. 1849 (2009). The majorities in both Hayes and Dean invoked Muscarello‘s “grievous ambiguity” standard. Moreover, the lineup of Justices in Hayes and Dean is rather startling given Santos.

In Hayes, the defendant was prosecuted under 18 U.S.C. § 922(g)(9) for possession of a firearm after having been convicted of a misdemeanor crime of domestic violence. Writing for a seven-Justice majority (including Justices Thomas and Souter, who joined Justice Scalia’s plurality opinion in Santos), Justice Ginsburg (who also joined the Santos plurality opinion) stated that the requisite domestic relationship must be established beyond a reasonable doubt but need not be a defining element of the predicate offense. 129 S.Ct. at 1084-89. Rejecting the application of the rule of lenity, the Court stated: “Section 921(a)(33)(A)’s definition of ‘misdemeanor crime of domestic violence,’ we acknowledge, is not a model of the careful drafter’s art. See Barnes, 295 F.3d, at 1356. But neither is it ‘grievous[ly] ambigu[ous].’ Huddleston v. United States, 415 U.S. 814, 831  [] (1974).” In a dissent, Chief Justice Roberts (joined by Justice Scalia), stated: “This is a textbook case for application of the rule of lenity. . . . If the rule of lenity means anything, it is that an individual should not go to jail for failing to conduct a 50-state survey or comb through obscure legislative history. Ten years in jail is too much to hinge on the will-o’-the-wisp of statutory meaning pursued by the majority.” 129 S.Ct. at 1093.

In Dean, decided two months after Hayes, the Court held that a statutory sentencing enhancement under 18 U.S.C. § 924(c) for discharge of a firearm during the commission of a violent crime does not require proof of intent. 129 S.Ct. at 1856. Chief Justice Roberts, writing for seven Justices (including every member of the Santos plurality), invoked Muscarello‘s “grievous ambiguity” standard in holding that the rule of lenity was not implicated:

‘The simple existence of some statutory ambiguity, however, is not sufficient to warrant application of that rule, for most statutes are ambiguous to some degree.’ Muscarello v. United States, 524 U.S. 125, 138 [] (1998); see also Smith, supra, at 239, 113 S.Ct. 2050 (‘The mere possibility of articulating a narrower construction, however, does not by itself make the rule of lenity applicable’). ‘To invoke the rule, we must conclude that there is a grievous ambiguity or uncertainty in the statute.’ Muscarello, supra, at 138-139, 118 S.Ct. 1911 (internal quotation marks omitted). In this case, the statutory text and structure convince us that the discharge provision does not contain an intent requirement. Dean’s contrary arguments are not enough to render the statute grievously ambiguous.

129 S.Ct. at 1856. Dissenting, Justice Stevens invoked the rule of lenity. Id. at 1858-59 (Stevens, J., dissenting). Justice Breyer, in a separate dissent, stated that “the ‘rule of lenity’ tips the balance against the majority’s position.” Id. at 1861.

Despite the plurality opinion in Santos, a majority of the Justices now appear to have embraced Muscarello‘s “grievous ambiguity” standard with renewed vigor. The Justices’ treatment of the rule of lenity the last two Terms has been at best curious. Justice Scalia himself, after writing the Santos plurality opinion and joining the Hayes dissent, joined a majority opinion in Dean that articulates an especially narrow version of the rule of lenity.

If the Justices are unwilling to frame a consistent standard, lower court judges are far less likely to take the rule of lenity seriously and apply it meaningfully. Why can’t the Supreme Court set it straight? Given a description of Santos, Hayes, and Dean, the legal realists in the 1930s (and the so-called critical legal theorists in the 1980s) might have said that the Justices are using the rule of lenity, like canons of statutory construction, as nothing more than a vehicle to reach a desired result in a given case. Let’s hope that is not true. The rule of lenity, rooted in our deepest constitutional principles, is no mere interpretive tool. Although cynicism may be appropriate, it would be a serious mistake to accede to the ‘grievous ambiguity’ standard because the Court itself does not appear to be sure what it wants. So the focus must remain sharp: convincing district judges every day that the rule of lenity has real force – and eventually convincing five Justices to articulate a consistent standard that gives the rule of lenity its due.