Monthly Archives: September 2014

Agency Holding Corp. v. Malley-Duff & Associates, Inc.

483 U. S. 143

June 22, 1987

One insurance company was accused of defrauding another in the year 1978. A RICO action was filed against the accused company in 1981. The question was how long the RICO statute of limitations lasted. Usually, when a federal law had no limitation, one was borrowed from a closely analogous state law. This approach can be difficult when it’s hard to determine the most closely analogous state law though.

O’Connor wrote for an 8-1 Court, and ruled that a nationally uniform limitation was needed for RICO, due to the complexity of the cases, and the common tendency for conspiracies to cross state lines. Thus, O’Connor turned away from state laws entirely in favor of federal laws. The Court found the Clayton Act to be a very close parallel to RICO – indeed, legislative history confirmed that it served as the basic framework and model when RICO was written. Thus, its four year statute of limitations was adopted by the Court. Because 1981 was less than four years after 1978, the suit could go forward.

Scalia concurred in judgment, but only because he didn’t think there was any statute of limitation at all due to the lack of a good state law analogy to RICO. Scalia carefully considered several musty old cases from the 1820s and 1830s, and concluded that the concept of borrowing limitations from state laws was originally grounded in the concept of preemption. It was thought that all state law on the subject was applicable unless preempted by federal law. Under this paradigm, it made no sense to borrow from another federal law. Worse yet, the Court had absolutely no judicial authority to abandon the traditional state law rule when it went¬† “prowling hungrily through the Statutes at Large for an appetizing federal limitations period, and pouncing.” Congress could neither have expected nor intended any such thing.

Another Scalia classic. What makes him a great Justice is his willingness to question the assumptions that all the other Justices make. When other Justices look solely at the branches, he examines the roots. There’s no real answer for this particular dissent. O’Connor and the majority simply preferred to blindly adhere to recent tradition out of convenience. Shame.


Tanner v. United States

483 U. S. 107

June 22, 1987

Government gives funds to local electric company. Electric company wants access roads built. Two guys named Conover and Tanner finagle contract to build access road. Sounds good, right? The government didn’t think so, and accused Conover and Tanner of defrauding them. An initial trial resulted in a hung jury, and the second trial’s jury convicted them. Later, jurors came forward with testimony that several jurors not only drank to excess, but also used marijuana and cocaine. Tanner and Conover accordingly sought to have the jury’s guilty verdict thrown out.

The Court ruled 5-4 that there could not even be an evidentiary hearing on the matter. O’Connor elucidated the rule that a jury verdict could not be questioned on the basis of juror testimony, unless it had to do with outside influence such as bribery. This rule, she said, was necessary to keep the jury system from effective destruction through unending post-conviction challenges to its verdicts. O’Connor further found this classic rule to be in harmony with the most recent version of the Federal Rules of Civil Procedure based on a reading of legislative history. The majority concluded by listing other ways jury behavior can be policed during a trial.

Marshall, joined by Brennan, Blackmun, and Stevens, dissented. Simply put, he felt all defendants had a right to a competent jury, and that Tanner’s jury was plainly incompetent. He found the legislative history of the Federal Rules unconvincing, and also expressed his view that drugs were essentially ‘outside’ forces on deliberation, similar to bribery. Finally, Marshall argued that safeguards during the trial stage on jury competence were inadequate in situations like Tanner’s.

On one crucial point though, O’Connor’s opinion was unanimous. Tanner argued that they had in no way defrauded the US government – at worst, they had only defrauded the electric company. The government made the astonishing claim that it was defrauded any time a recipient of its funds is defrauded. Thankfully, the Court saw that this was an unfathomably broad reading of the statute, and not subject to any useful limiting principle. The lower court was instructed to find Tanner guilty only if the evidence showed he conspired to cause the electric company to make misrepresentations to the government.

American citizens really dodged a bullet on the defrauding issue. As to the jury issue, there really doesn’t seem to be any good answer. The jury system has some massive flaws, but it’s frankly hard to think of a decent way to guard against them. Regardless, I have little sympathy for the dissenters – on this case, they were hoisted by their own petard. Constitutional law is packed to the brim with overbearing rules designed to protect defendants. The stringent rule against questioning jury verdicts is one of them. If you’re going to insist on all these silly prophylactic rules, it’s hardly fair to turn around and start complaining in the very rare instances where one of these rules works to the disadvantage of a defendant.

Commissioner v. Fink

483 U. S. 89

June 22, 1987

Hoping to attract some outside buyers, Mr. and Mrs. Fink, who were majority shareholders in a small Michigan company, gave up thousands of company shares (they still retained majority ownership though). On their tax return, they claimed several thousand dollars worth of deductions due to the surrendered shares. The IRS said that giving up the shares was not a ‘loss’ entitling them to a tax reduction, because it was done with the direct aim to increase the value of their remaining shares.

The Court sided with the IRS in an 8-1 ruling. Powell admitted that for a long time lower courts had allowed the actions taken by the Finks, but found these precedents not controlling. Powell observed that a voluntary infusion of capital into a corporation does not entitle an owner to a deduction, and thought that voluntarily surrendering stock was little different. In both instances, the goal is to realize long term personal monetary gains. As a policy matter, the Fink scheme would encourage owners of failing companies to dump shares en masse.  On the facts of this case, the Court found it especially significant that the Finks remained majority shareholders, and that the surrender was clearly aimed at making the company more profitable.

White’s short concurrence stated his belief that the Fink’s continued status as majority shareholders was completely irrelevant to the legal analysis. Scalia concurred in judgment. He hated the analogy to an infusion of capital, and simply found a deduction inappropriate under the internal revenue code’s literal language. Blackmun concurred in the result without opinion. And thus, left to be the lonely voice of reason was… Justice Stevens!??

Yes, Justice Stevens. He showed that the IRS had allowed deduction for stock surrenders for more than three decades, and only changed its mind after the Finks filed their tax return. This was a paradigmatic case, Stevens demonstrated, where stare decisis is the only fair and just judicial response. The statutory language was ambiguous, and people like the Finks had a right to rely on a longstanding judicial gloss.

One of the biggest surprises for me in reading through all the term’s cases is how often Stevens has the best opinion. He’s still the worst Justice overall, but he truly can get it emphatically right on occasion. I normally dislike stare decisis, but if there’s ever a time when it’s a practical necessity, it’s in cases like this. The majority opinion here was especially horrible because it left the door wide open to legal abuse and harassment of taxpayers by the IRS. Nearly three decades later, ordinary citizens are still reaping the bitter consequences of this decision.

Sumner v. Shuman

483 U. S. 66

June 22, 1987

Raymond Wallace Shuman was imprisoned for life without parole for first degree murder. While in prison, he murdered a fellow inmate. Under Nevada law, murdering an inmate while serving life without parole results in an automatic death sentence. Shuman sued, arguing that the Eighth Amendment requires individualized sentencing in every circumstance.

Blackmun wrote for the six Justice majority. He reviewed the Court’s precedents since Gregg, and found individualized consideration to be a fundamental ingredient for death sentencing, because of “respect for humanity,” or some nonsense like that. Blackmun fretted that Shuman could not introduce mitigating evidence under the Lockett-Eddings line of cases, and argued that even Shuman’s second murder might possess important mitigating circumstances. Blackmun was unmoved by Nevada’s claim that Shuman might escape effectual punishment, and responded that he could still potentially be sentenced to death.

White dissented, joined by Rehnquist and Scalia. He stated the common sense observation that no amount of mitigating evidence, or lack of aggravating evidence, could possibly make imposition of the death penalty “cruel and unusual” in cases where a lifer without parole murders a fellow inmate. And he’s absolutely right. This is yet another cowardly anti-justice decision from a Court that plainly hates the basic concept of punishing evil. I’d say more, but it would be mere repetition of what I’ve already said in the term’s numerous other death penalty cases, so I’ll leave it at that.

Rock v. Arkansas

483 U.S. 44

June 22, 1987

Vickie Rock was charged with killing her husband with a gun. Her memory of the event was hazy, so she had a psychologist hypnotize her in hopes of remembering more. Arkansas had a per se rule against hypnotically refreshed testimony, and any testimony which Rock could not prove as antedating the hypnosis was excluded. In practice, this meant that her testimony was strictly limited to a few sentences of notes made by the psychologist before the hypnosis.

The Court ruled 5-4 that Arkansas could not automatically exclude hypnotically refreshed testimony. Blackmun stressed the importance of a defendant’s Constitutional right to testify. It was a necessary corollary of the right to remain silent, as well as the right to call witnesses on one’s behalf. Here, said Blackmun, the interest of Arkansas in barring all testimony was not strong enough. It effectively deprived Rock of a chance to tell her side of the story. Furthermore, while hypnosis sometimes produces false memories, the Court pointed out that it produced correct memories too. The judge and jury, Blackmun argued, are competent to weight the evidence in each individual case.

Rehnquist dissented, and was joined by White, O’Connor, and Scalia. He briefly stated his belief that states are entitled to impose evidentiary rules designed to prevent inaccurate testimony, and that the Court had no business overturning the considered judgment of the Arkansas criminal system. Once again, I find myself actually agreeing with the liberals in a criminal process case. Personally, I strongly dislike restrictive evidence rules, and want as much stuff to come in as possible. Wrongly or rightly, I do think judges and juries are generally competent to weigh evidence properly, and that more testimony, both inaccurate and accurate, is generally better.