Argument report: Reach of the federal bank fraud statute remains unclear
on Apr 3, 2014 at 1:21 pm
Oral argument at the Supreme Court often provides strong indications of how the case will be decided. But after reading the sixty-one-page transcript of Tuesday’s argument in Loughrin v. United States, I find myself no closer to knowing the answers to the questions discussed in my preview of the case. I would bet that the Justices would like this case to be decided unanimously if possible, because it is hardly the biggest case of the Term and a unanimous view of the federal bank fraud statute would be better for the national administration of the law. But all that the Justices appeared to unanimously agree on, at argument, was that neither side’s position was very satisfying. If I had to guess, and taking the accepted wisdom that Justice Kennedy represents the center of the Court, I’d bet on the Court adopting the “fallback position” that the Solicitor General presented. “I think it does a lot of work,” said Justice Kennedy of that position, toward the end of Loughrin’s rebuttal.
But my guess is that this is one of the cases in which the Justices retired to Conference and asked each other, “does anyone here think they can craft an opinion that we can all agree on?” They care less about the specific resolution than they do that the case be resolved with as little dispute as possible. (Justice Scalia may have adverted to this, when he noted that the case might actually implicate an intent question not really before the Court; if so, he suggested, then “there’s a lot less to this case than meets the eye.”) Assuming (this is my speculation based merely on their questions) that Justice Kennedy or Alito volunteered to try to craft a unanimous position, the Justices – and we the breathless public – will wait to see what the opinion author can come up with.
The text of the federal bank fraud statute presents a very broad reach
If you’ve read this far, you probably recall the issue. 18 U.S.C. § 1344 specifies a sentence of up to thirty years in prison for anyone who:
“[K]nowingly executes, or attempts to execute, a scheme or artifice –
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities, or other property
owned by, or under the custody or control of, a financial institution, by means of
false or fraudulent pretenses, representations, or promises.”
The question presented by this case is whether Clause (2) reaches as far as its text appears to, criminalizing any scheme, even a simple bad check written to a third party, if there is a false representation in the transaction somewhere and the check might result in “moneys … under the custody or control” of a bank going out the door. When Justice Kennedy asked Assistant to the Solicitor General Anthony Yang whether there is any example of a case involving a check “where the money doesn’t come from a bank,” Yang responded that “in the check context, I think there is none.” And when Justice Kagan proposed a hypothetical in which someone sells a painting, falsely representing it to “be by a famous artist [when] in fact I just made it in my kitchen,” and the buyer pays by check, Yang responded that the government’s plain-language reading would cover that case as well. “So you have federalized every fraudulent transaction in the economy whenever a check is involved?” asked Justice Kennedy. “Absolutely,” answered Justice Scalia, before Yang could even respond. As Justice Scalia had earlier summed it up, the government’s purely textual view “extend[s] federal law enormously into the kind of stuff that we’ve usually left to the states.”
But if the reach is too far, what limitations are available and where do they come from?
However, the Justices were hardly satisfied by the extra-textual limitations offered by Kevin Russell’s opening argument, appearing on behalf of petitioner Kevin Loughrin. Justice Ginsburg asked the first question, noting that “it’s the words Congress used.” She later noted that Loughrin was “asking us” to read a non-textual meaning into the statute. Loughrin’s view is basically that Clause (2) should be read to include the same intent as Clause (1) — an intent “to deceive a financial institution” – but, as Justice Alito noted, “your interpretation makes subsection (1) surplusage.” Justice Sotomayor also noted that when the provision was enacted in 1984, the courts of appeals had uniformly read two similar clauses in the mail fraud statute as describing different offenses. She asked “why would Congress have any reason to believe they were passing a singular charge” here?
After this somewhat hostile questioning from Justices whom a lawyer for a criminal defendant might hope to be on his side, Russell was permitted to argue for a number of pages without interruption – often not a good sign. Justice Kennedy then asked directly about “the government’s fallback position,” pointing Russell to the precise page in the Solicitor General’s brief. Justice Scalia soon asked (perhaps referring to the fallback), “why doesn’t that principle cover most of the cases you’re worried about?” Justices Sotomayor and Alito also appeared to ask about the fallback view. This perhaps provides the best clue about where the case is headed: Justices coming from different perspectives seemed to focus on concepts that would limit the broad text, without damaging legitimate federal prosecution interests.
The “fallback position” of the government is to suggest that the “means” mentioned in Clause (2) could be limited to false representations that “would foreseeably or inherently be directed to the bank.” Justice Sotomayor (along with Justices Scalia and Kennedy) ultimately directed Yang there, noting that “if we are concerned about federalizing every case involving a check, your brief does give us an alternative.” But Justice Sotomayor then quickly noted that “my problem is, I can’t locate that alternative in the language of the statute.” (Of course, this is also a “problem” with Loughrin’s position.) Yang did not warmly embrace his own fallback position, stressing that “we’re not asking you to actually make that interpretation,” and conceding that it was based on giving a limiting interpretation to the “silence” in Clause (2) regarding the target of the falsity. Yang repeatedly asked the Court not to reach the fallback unless the broader textual reading was “problematic.” But I’d say a majority of the Justices so indicated.
Writing or receiving?
Justice Scalia did add one light moment, when Russell noted that often with bad checks, the bank’s own money is not at risk because “ordinarily if you give a check that goes to a bank and there’s not sufficient funds, they bounce the check.” “That’s certainly been my experience,” noted Justice Scalia, wryly invoking a frustration many of us have had. The audience laughed, and Justice Scalia did not further explain which end of such a transaction he has experienced.
In the end, Russell appeared to see some handwriting on the wall, arguing in rebuttal that “if you’re choosing between our [limiting] test and their [limiting] test,” then the government’s test is “just plain strange.” That may be so, but stranger things have happened in the little-noticed (by the media, anyway) world of federal criminal statutory interpretation. (I’ll offer the Court’s 1987 decision in McNally v. United States as exhibit A.) Expect a decision relatively soon (mid-May or early June), as the Court clears its decks for various freedom/establishment of religion and other cases more likely to be hotly disputed to the very end.
[Disclosure: Kevin Russell of Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is among the counsel to the petitioners on this case. However, the author of this post is neither affiliated with the firm nor otherwise involved in the case.]