Rousey v. Jacoway (03-1407)

April 4, 2005 Supreme Court Update

Greetings, Court fans!
Before officially recessing for two weeks, the Court surprised us with two more opinions. We'll try to be brief . . . .
In Rousey v. Jacoway, No. 03-1407, a unanimous Court (Thomas, J.) held that IRA assets may be exempted from a bankruptcy estate under 11 U.S.C. § 522(d)(10)(E). The Rouseys declared bankruptcy several years after depositing distributions from their employer-sponsored pension plans (assets clearly exempt under the statute) into their IRAs. During the bankruptcy proceedings, they sought to shield portions of their IRAs by claiming them as similarly exempt. Jacoway, the bankruptcy trustee, disputed this claim, and the bankruptcy court all the way up to the Eighth Circuit agreed with him, creating a split with the Fifth, Sixth and Ninth Circuits. The Court reversed. In order to be exempt under the statute, the right to receive payment: (1) must be from a stock bonus, pension, profit-sharing, annuity, or similar plan; and (2) must be "on account of illness, disability, death, age or length of service." Such assets are then exempt to the extent "reasonably necessary" to support the accountholder or his dependents (an issue not before the Court). The Court found IRAs to be similar to the enumerated plans because they share the core characteristic of "provid[ing] a substitute for wages." The Court rejected Jacoway's claim that the right to payment from an IRA was not "on account of" age since IRA assets can be withdrawn at any time, explaining that the "substantial" 10 penalty for early IRA withdrawals effectively prevents access to the entire balance until age 59½.
Building on its decision last week in Rhines v. Weber, the Court provided additional guidance on the AEDPA's one-year time limit on federal habeas petitions in Johnson v. United States, No. 03-9685. The limitations period runs from the latest of four alternative dates, the last of which is "the date on which the facts supporting the claim . . . could have been discovered through the exercise of reasonable diligence." Johnson concerned whether an order vacating a state court conviction that was the basis for a federal sentencing enhancement was a "fact" that would restart the limitations period. The majority (Souter, for Rehnquist, O'Connor, Thomas and Breyer) held that it was, but also held that Johnson could not take advantage of this fact because he was not diligent in seeking to vacate his state conviction.
A bit of history may be helpful: Johnson pled guilty to a federal drug charge, and his conviction became final on April 22, 1996 (just prior to the enactment of AEDPA). His received an enhanced sentence as a career offender based on two prior Georgia drug convictions. On April 25, 1997, Johnson sought an extension of time to file his federal habeas petition, which was denied as untimely (while courts have unanimously permitted those with pre-AEDPA convictions to file petitions within a year of AEDPA's enactment, Johnson's motion was still one day late under this rule!). In 1998, Johnson filed a habeas petition in Georgia that ultimately vacated one of the state convictions that gave him "career criminal" status, and three months after that victory he filed a federal habeas petition seeing to revise his sentence. If this petition was timely, he would have to be resentenced. The Eleventh Circuit, however, held that the state court order was not a "fact" but rather a legal proposition obtained at Johnson's behest and which did not restart the limitations period, meaning Johnson's time for filing a habeas petition expired back in 1997. The government did not argue this position to the Supreme Court, but instead argued that the one-year period should run from discovery of the facts that led to vacatur of state court convictions, rather than the vacatur itself.
The Court declined to accept any of these positions in its entirety, and instead carved its own path. The Court easily and unanimously concluded that an order vacating a conviction was a "fact." The majority, however, was concerned that a petitioner who was dilatory in challenging his state convictions might use this rule to avoid AEDPA's focus on the date when supporting facts "could have been discovered through the exercise of reasonable diligence." Therefore, the Court held that a petitioner must be diligent in seeking vacatur of his state court conviction once he knows or should know that it will enhance his federal sentence. Courts should measure diligence from the date of the federal court judgment (not the date it becomes final). If a petitioner has been diligent, the one-year limit will run from discovery of the order vacating the state court conviction. Here, Johnson was not diligent, waiting four years from the federal court judgment to file his state habeas petition, and his federal petition was barred.
The dissent (Kennedy, joined by Stevens, Scalia and Ginsburg) would not engraft upon AEDPA an additional requirement that the petitioner's pursuit of state court relief must be diligent. In their view, states are in the best position to legislate the time period within which a state habeas petition may be filed. Moreover, to the extent that the Court chooses to impose this additional requirement, due diligence should be measured from the date that the federal judgment is final, not the date on which judgment is entered. Given the scarcity of criminal defense resources, those resources should first be directed at the direct appeal and not collateral state court proceedings.
The Court granted cert in one case today, Central Virginia Community College v. Katz (04-885). The question presented is: "May Congress use the Constitution's Bankruptcy Clause (article I, section 8, clause 4) to abrogate states' sovereign immunity?"
Finally, in another order of note, the Court granted permission for the petitioners to file a supplemental brief in McCreary County, Kentucky v. ACLU of Kentucky (03-1693), which concerns whether two counties' courthouse displays of the Ten Commandments violate the Establishment Clause. The new brief notifies the Court that the counties had "repealed and repudiated" the resolutions that justified the displays in religious terms. The Court's order simply allowed the petitioners to file their new brief, but said nothing about the merits of the case. As we've noted in past updates, Jeff Babbin and Ken filed an amicus brief in this case and Van Orden v. Perry (03-1500) on behalf of the ADL, arguing that the displays do run afoul of the Establishment Clause.
Thanks, as always, for reading! We'd promise nothing more until April 18th, but you can never be entirely sure!
Kim & Ken
From the Appellate Practice Group at Wiggin and Dana. For more information, contact Kim Rinehart, Ken Heath, Aaron Bayer, or Jeff Babbin at 203-498-4400