Skilling v. United States (08-1394), Black v. United States (08-876) and Weyhrauch v. United States (08-1196)
Greetings, Court fans!
The Court just released its final batch of decisions, bringing an end to the October 2009 Term! With today's batch and those remaining from last Thursday, I have eleven decisions left to bring you. I intend to break them up, sending several Updates. This Update – Part I – will cover the trilogy of decisions released last week in which the Court limited the reach of the honest services fraud statute and vacated the convictions in Skilling v. United States (08-1394), Black v. United States (08-876), and Weyhrauch v. United States (08-1196).
The Court decided two issues in Skilling v. United States, one that's been making the news (i.e., the viability of the honest services fraud statute) and one about the news circa 2001-2004 (i.e., whether media coverage had prevented the defendant from getting a fair trial). Turning to the old news first: After Enron's collapse, former COO Jeff Skilling was tried and convicted of 19 counts, including conspiracy to commit securities fraud and "honest services" wire fraud. On appeal, Skilling argued that the district court erred in refusing to move the trial out of Houston, Enron's former base of operations. The Fifth Circuit agreed with Skilling that negative media coverage, a co-defendant's guilty plea shortly before trial, and the large number of victims in the Houston area created a presumption of juror prejudice. But the Fifth Circuit found that the presumption had been rebutted in this case by careful voir dire. A 5-4 majority of the Court, led by Justice Ginsburg, also rejected Skilling's fair-trial arguments. Unlike the Fifth Circuit, the Court found that no presumption of prejudice was warranted. The news stories about Skilling were unkind but not blatantly prejudicial, and their impact was diluted by Houston's size and diversity. In any event, no actual prejudice contaminated Skilling's jury. The Court was unmoved by Skilling's complaints that the trial court held voir dire for only five hours and failed to inquire into potential juror biases. Jurors had been pre-screened through a lengthy questionnaire drafted mostly by the defense. The district court conducted both group and individual voir dire and gave each side two extra preemptory challenges. Reviewing the questionnaires and voir dire transcripts of the seated jurors, the Court did not find the manifest error that would be required to overturn the trial court's finding of impartiality. The fact that the jury acquitted Skilling of several insider trading counts further demonstrated their impartiality.
Justice Alito wrote a separate opinion concurring in the judgment to reject Skilling's argument that once a presumption of jury prejudice arose, the presumption was irrebuttable and required a change of venue. While evidence of pretrial publicity and community hostility played a role in the bias inquiry, the relevant Sixth Amendment inquiry is whether the jury actually seated is impartial. Justice Sotomayor, joined by Justice Stevens and Breyer, dissented from the Court's fair-trial determination. Justice Sotomayor painted a grimmer picture of the impact of Enron's collapse on the Houston community, and the pervasive media animosity that followed. The dissenters reluctantly agreed with the Court that it was possible to seat an unbiased jury under the conditions presented in this case, but disagreed that the voir dire here was adequate to guarantee an unbiased jury. The dissenters catalogued a number of deficiencies in the voir dire, including failure to follow up on inconsistent or equivocal answers, and indications that potential jurors had talked to each other about the case against the court's orders.
Now for the current headline-maker. Federal law has long prohibited the use of the mails or wires to advance "any scheme or artifice to defraud." The honest services statute, 18 U.S.C. § 1346, provides that the scheme or artifice described in the mail and wire fraud statutes includes "a scheme or artifice to deprive another of the intangible right of honest services." Skilling argued that his conviction for conspiracy was flawed because § 1346 was unconstitutionally vague. The Court held that, beyond proscribing a core of bribery and kickback offenses, § 1346 was indeed unconstitutionally vague, and unconstitutionally vague as applied to Skilling. This time, Justice Ginsburg headed a 6-3 majority, with the Chief, Stevens, Breyer, Alito, and Sotomayor. The Court started from the principle that, when possible, it should "construe, not condemn, Congress' enactments." The honest services doctrine had been developed and applied by lower courts until the Court rejected it in McNally v. United States (1987). In McNally, the Court limited mail fraud to the protection of property rights, and stated: "If Congress desires to go further, it must speak more clearly than it has." Congress came back immediately with § 1346. Thus, there was no doubt that Congress intended § 1346 to refer to and incorporate the honest services doctrine recognized by the lower courts prior to McNally. The core of that case law involved bribery or kickback schemes in violation of a fiduciary duty: the doctrine arose from bribery cases, the vast majority of prosecutions involved bribery or kickbacks, and McNally itself was a kickback case. Because there could be no doubt that Congress intended § 1346 to reach at least bribery and kickbacks, the statute was not unconstitutionally vague as applied to those offenses. But because the pre-McNally case law was much less clear beyond that core, reading § 1346 to proscribe a wider range of offenses would raise due process concerns. The Court rejected the Government's argument that "undisclosed self-dealing by a public official or private employee" (which would presumably encompass Skilling's conduct) should join bribery and kickbacks at the core of § 1346. The relatively few conflict-of-interest prosecutions had generated intercircuit inconsistencies, and thus the rule of lenity counseled against adding conflict-of-interest to the core of § 1346 absent a clear instruction from Congress. In conclusion, because Skilling was not accused of bribery or kickbacks, his conviction for conspiracy to commit fraud including honest services fraud had to be vacated. The Court left open on remand whether the error was harmless, given the other allegations of fraud. The Court also left open on remand whether reversal on the conspiracy count would necessitate reversal on other counts.
Justice Scalia, joined by Thomas and Kennedy, concurred in the judgment. Unlike the majority, they saw the honest services statute as irredeemably vague. They agreed that Congress meant to adopt in § 1346 the lower court case law that had developed prior to McNally. The problem was that the early case law was hopelessly indeterminate, with conflicting opinions about when the doctrine applied to private individuals, the source and scope of the fiduciary duty protected, and what constituted a breach. Even if it were true that the majority of pre-McNally cases involved bribery or kickbacks, it did not necessarily follow that Congress meant to reach only bribery and kickbacks. Thus, the majority's decision to save this part of § 1346 was "not interpretation but invention." In a section not joined by Justice Kennedy, Justice Scalia tried to reconcile his position in this case with his statements in earlier cases questioning whether it is ever appropriate for courts to strike down a statute, by explaining that Skilling only asked for his own conviction to be reversed, not for facial invalidation. The Court could grant Skilling his requested remedy and let stare decisis do the rest.
The Court's decision on honest services fraud in Skilling carried over to Black v. United States (08-876), where the Government had pursued both money-or-property and honest services theories of fraud against the former executives of Hollinger International. At trial, the defendants objected to the Government's proposal that special interrogatories be submitted to the jury to determine whether the jury based its verdict on one or both theories. The defendants also objected to the court's jury instruction on honest services fraud (a broad instruction, which would be wrong under Skilling). On appeal, the Seventh Circuit held that even if the jury instructions were wrong (and the Seventh Circuit did not think they were at the time), the defendants had waived their right to object by refusing to go along with the special interrogatories. The Seventh Circuit reasoned that defendants' challenge to the honest services instruction might have been moot if the jury could have indicated that they convicted on the money-or-property theory of fraud. The Court reversed, 6-3. Writing again for the majority, Justice Ginsburg observed that the Federal Rules of Criminal Procedure contain no provisions for special interrogatories. And the Rule for objections to jury instructions only required a party to inform the court of the specific objection and grounds for objection prior to jury deliberation. The Seventh Circuit therefore erred in devising a forfeiture sanction "unmoored to any federal statute or criminal rule" and without notice to the defendants. As in Skilling, the Court vacated the conviction but left for remand the question whether the error was harmless. Justice Kennedy and Justice Alito (joined by Justice Thomas) wrote separate opinions concurring in the judgment to reiterate their view that § 1346 is unconstitutionally vague in toto.
Finally, the Court issued a per curiam decision in Weyhrauch v. United States (08-1196) vacating and remanding for further consideration in light of the Court's decision in Skilling.
For those counting down, that makes three down, and eight to go! Look for another Update soon.