Supreme Court Update: Rosemond v. United States, Lozano v. Montoya Alvarez and BG Group PLC v. Republic of Argentina (12-138)

March 10, 2014 Supreme Court Update

Greetings, Court fans!

We're back to wrap up last week's decisions: Rosemond v. United States (12-895), on criminal aiding and abetting; Lozano v. Montoya Alvarez (12-820), addressing international child abduction; and BG Group PLC v. Republic of Argentina (12-138), discussing arbitration agreements in international bilateral investment treaties.

Before we get started, though, we need to say a fond farewell to Julie Loughran, a dedicated author of the Update for two years. Julie has decided to take a new path as the Director of Development and Communications at the Connecticut Community Foundation. We will miss her. Tadhg Dooley, a closet Court fan (and past silent contributor), will be officially joining us as an author today.

First, Justice Kagan delivered a primer on § 2 of the criminal code – aiding and abetting – in Rosemond v. United States (12-895). Two men, Justus Rosemond and Ronald Joseph, set out with a woman, Vashti Perez, intending to sell a pound of marijuana to one Ricardo Gonzales. When Gonzales instead stole the drugs and ran off, one of the men, Rosemond or Joseph, fired shots at him from a semiautomatic handgun. Police arrested the three dealers and Joseph and Perez cut deals with the Government, leaving Rosemond alone to face trial. The Government charged Rosemond with violating 18 U.S.C. § 924(c), a "double-barreled crime," in Justice Kagan's parlance, which imposes an extra five-year minimum sentence on "any person who, during and in relation to any crime of violence or drug trafficking crime[,] . . . uses or carries a firearm." For good measure (because it wasn't clear which of the men used the handgun), the Government charged Rosemond alternatively under §2 with aiding and abetting a violation of §924(c). Rosemond maintained that, though he had knowingly participated in the drug transaction, he did not know a gun would be used and was not the one who fired it. But the judge instructed the jury that it could convict if Rosemond knowingly participated in the drug trafficking crime and "knew his cohort used a firearm in the drug trafficking crime," regardless of when he knew it. The jury convicted Rosemond by a general verdict that did not make clear whether he was found guilty of the primary 924(c) offense or as an accomplice under §2. The Tenth Circuit affirmed.

The Supreme Court reversed. Writing for seven (and with the two dissenters-in-part on board for most of the opinion), Justice Kagan began with the basics. "As at common law, a person is liable under §2 for aiding and abetting a crime if (and only if) he (1) takes an affirmative act in furtherance of that offense, (2) with the intent of facilitating the offense's commission." The Court held that the first element is satisfied if the defendant "facilitates any part—even though not every part—of a criminal venture." "After all," Kagan noted, "every little bit helps—and a contribution to some part of a crime aids the whole." The first element was therefore met in Rosemond's case: Even if he didn't know about the gun, he aided the drug transaction, which, notwithstanding Rosemond's contrary argument, is an equally important part of the §924(c) combo.

With respect to the second element, intent, the Court held that "the intent must go to the specific and entire crime charged—so here, to the full scope (predicate crime plus gun use) of §924(c)." That doesn't mean that the accomplice must desire that a gun be used in the course of the predicate offense (as Rosemond had argued), but he must at least know that the gun will be involved. Justice Kagan went on to explain—and here, the dissent parted company—that for a defendant to have this requisite intent, his knowledge that a firearm will be involved "must be advance knowledge," meaning knowledge at a time when the defendant had a "realistic opportunity" to walk away. In this respect, the district court's jury instructions were erroneous because they allowed the jury to convict if Rosemond "knew his cohort used a gun" regardless of whether he had advance knowledge of the firearm's prospective involvement in the crime.

Justice Alito, along with Justice Thomas, concurred with most of Justice Kagan's opinion ("the first 12 pages" of it, to be precise), but "strongly disagree[d]" with the majority's so-called "realistic opportunity to quit" standard, which he regarded as a "radical" departure from established law. In particular, Alito rejected the majority's view that an accomplice could escape liability under §924(c) if he learned about the gun at a time when the risk of walking away (and therefore angering the principal) exceeded the risk of leaving well enough alone and completing the predicate drug sale. This postulation, Alito argued, effectively took the affirmative defense of necessity—which excuses the defendant if he can prove that he committed the crime because the harm of not committing the crime was even greater under the circumstances—into an element of the offense that must be proved beyond a reasonable doubt by the prosecution. This was both improper and unworkable, in Alito's view, prompting him to dissent "from that portion of the Court's opinion which places on the Government the burden of proving that the alleged aider and abettor in a §924(c) offense had what the court terms a ‘realistic opportunity' to refrain from engaging in the conduct at issue."

Justice Scalia opted out of a portion of the majority opinion as well. Without explanation, he declined to join in footnotes 7 and 8 (in which the majority commented on issues it did not decide). Astute readers will recall that, earlier in the term, Justice Sotomayor joined all but footnote 7 of Scalia's opinion in Sandifer v. U.S. Steel (2014). We'll be sure to keep an eye on that lucky footnote in the rest of the term's opinions.

The Court turned next to international child abduction in Lozano v. Montoya Alvarez (12-820). Montoya Alvarez, the mother of a little girl, left her husband and eventually moved from London to the United States with the child. Montoya Alvarez concealed the child's whereabouts and claimed that she fled because her husband abused both her and the child. Lozano, the father of the child, took a number of steps to find the girl, but months passed and by the time he filed his petition for return, the child had been in the United States for 16 months. Under the Hague Convention on the Civil Aspects of International Child Abduction (the "Convention"), a court "shall order the return of a child forthwith" if a petition is filed within one year of the child's removal from the country, subject to certain narrow exceptions. This allows the country of habitual residence to make the ultimate custody determination. After one year, a court is also required to order return the child "unless it is demonstrated that the child is now settled in its new environment." In the district court, Lozano argued that the one year period for petitions that are entitled to mandatory return should be equitably tolled given Montoya Alvarez's concealment of the child, which prohibited Lozano from bringing the petition more promptly. The district court found that equitable tolling did not apply to the one year period. Turning to the facts, the court held that the child was settled in the United States and declined to order return. The Second Circuit affirmed.

Justice Thomas penned the Court's unanimous decision, affirming. First, Thomas noted the important distinction between federal statutes and multilateral treaties. When Congress enacts a statute, it legislates against background common law principles, such as the doctrine of equitable tolling. As a result, equitable tolling is presumed to apply to federal statutes so long as tolling would be consistent with the purpose of the statue. Treaties, by contrast, are agreements between multiple independent nations. There is no evidence that all parties to the Convention have a background principle of equitable tolling and intended it to apply here. In fact, other countries that have considered the issue have found no equitable tolling of the one year period. Thus, there can be no presumption of equitable tolling. Second, equitable tolling applies to statutes of limitations and the one year period in the Convention is not one. Limitations periods are concerned with protecting defendants, eliminating stale claims and promoting certainty. The one year period in the Convention does not eliminate a parent's right to seek redress under the Convention; it merely permits the courts to take into account the child's interest in remaining settled when determining whether return should be ordered. Third, the Convention's language makes clear that equitable tolling was not intended. The Convention specifically states that the one year period shall run from the date of wrongful removal, rather than from the date the parent discovers the location of the child. Since concealment would have been an obvious concern given the nature of the statute, the decision to use the date of removal was clearly intentional. While the Convention is aimed at deterring child abduction, that does not mean that it pursues this goal "at all costs." Instead, after one year, the Convention balances the rights of the parents against the interests of the child in remaining settled.

Justice Alito, joined by Justices Breyer and Sotomayor, concurred to note that the fact that a child is "settled" is not the only factor that courts may take into account when determining whether to order return after one year. Courts have equitable discretion to take into account many other factors, including the concealment, in making the determination. "The final clause indicates when the obligation [of mandatory return] terminates; it does not substitute for that obligation a prohibition on ordering return."

Turning from international abduction to international arbitration, in BG Group plc v. Republic of Argentina (12-138), the Court considered a bilateral investment treaty between the United Kingdom and Argentina that governs the relationship between foreign investors and those two nations. The treaty contains a dispute-resolution mechanism that permits investors to seek arbitration if certain preconditions are met. As relevant here, a complainant seeking arbitration must first submit the dispute to a local court. If the local court does not give a decision within 18 months, the complainant may then submit the dispute to an arbitrator. Ultimately, the question that reached the Supreme Court was whether U.S. courts enforcing an arbitration award made under the Treaty "should interpret and apply the local litigation requirement de novo, or with the deference that courts ordinarily owe arbitration decisions." By a 7-2 majority, the Court held that "the matter is for the arbitrators, and courts must review their determinations with deference."

The underlying dispute involved a British company, BG Group, which had had the good fortune to purchase a majority interest in a recently privatized gas utility in Argentina. However, when Argentina suffered its economic meltdown in the early 2000s, it enacted several emergency measures with the result that the utility's "profits were quickly transformed into losses." BG Group believed these new laws violated the Treaty and sought arbitration in Washington, D.C., but did so without first litigating its claims in Argentina. The arbitration panel determined that it nonetheless had jurisdiction to hear the dispute because Argentina's conduct in passing the emergency measures hindered access to Argentine courts, to the point where the local litigation provision was constructively waived. The arbitration panel awarded BG Group $187 million.

The U.S. District Court for the District of Columbia confirmed the award, reasoning that it owed deference to the arbitrators' ruling that Argentina had waived the local litigation requirement. The D.C. Circuit reversed, holding that interpretation of the local litigation provision was a matter for the courts, which had to be reviewed de novo. On that de novo review, the D.C. Circuit held that Argentina's conduct was insufficient to constitute a waiver.

The Supreme Court reversed, in an opinion by Justice Breyer. In order to determine whether to review the arbitrator's decision de novo or with deference, the Court first had to decide who—court or arbitrator—bears the responsibility for interpreting and applying the "local litigation requirement." To decide this issue, the Court took a two-step approach. First, it analyzed the bilateral investment treaty as if it were an ordinary contract. Generally, there is a presumption that questions of "arbitrability"—such as disputes over formation—are left to the courts. Questions of procedural preconditions—such as waiver, delay, and laches—presumptively are left to the arbitrator. The Court determined that the "local litigation provision" was a procedural precondition because it governed when the contractual duty to arbitrate arises, not whether there is a contractual duty to arbitrate. The Court likened the provision to a claims-processing rule governing when the arbitration may begin, but not whether it may occur or what its outcome will be. Second, the majority considered whether the fact that the provision occurred in a treaty changed this ordinary analysis. The Court noted that treaties are really just contracts between nations and that U.S. law applied because the arbitration occurred in the U.S. The Court held that the local litigation provision was not a condition of consent, noting that other treaties—such as the bilateral investment agreement between the United States and Korea—contain provisions explicitly labeled "conditions of consent." Moreover, the treaty requires the use of international arbitrators, who are governed by rules that leave to the arbitrators decisions regarding such procedural preconditions. The Court held that the text and structure of the treaty indicated that the local litigation provision was a procedural precondition. Accordingly, the Court concluded that it had to review the arbitrators' decision using a deferential standard. Applying that standard, the Court concluded that the arbitrators did not abuse their power and upheld the $187 million award.

Justice Sotomayor concurred and wrote separately to emphasize that there may be situations in which a country does make a local litigation provision a precondition to the country's consent to arbitrate, and not just a procedural precondition. In that situation, satisfaction of that precondition would be a question for the courts, to be reviewed de novo. Justice Sotomayor stressed, however, that the UK–Argentina treaty did not make that clear and therefore the local litigation requirement should be interpreted as a procedural precondition to be reviewed with deference to the arbitrator.

The dissenters, Chief Justice Roberts and Justice Kennedy, argued that, by treating the UK–Argentina treaty as an ordinary contract between private parties, the majority "begins by deciding a different case." "It should come as no surprise," the dissent noted, "that, after starting down the wrong road, the majority ends up at the wrong place." An arbitration clause can only be an ordinary contractual provision if there is a contract between the arbitrating parties. The dissent criticized the majority for failing to explain when and how Argentina agreed with BG Group to submit to arbitration. Here, the treaty was an agreement between the Argentina and the United Kingdom; there was no contract between Argentina and BG Group. Without an express agreement to arbitrate, something else must happen to create an agreement. The dissent argued that the local litigation provision was a unilateral contract to arbitrate that investors could only "accept" by filing litigation in Argentinian court. The local litigation provision was, in other words, a precondition to Argentina's consent to arbitrate, not a procedural precondition. Accordingly, whether Argentina had waived the precondition was a question for the courts to be decided de novo. The facts of this case, the dissent argued, showed why it is "no trifling matter" for a sovereign nation to subject itself to international arbitration. Here, the arbitrators reviewed a sovereign state's public policies "and effectively annul[led] the authoritative acts of its legislature, executives, and judiciary." Given these high stakes, the dissent reasoned, "one would expect the United Kingdom and Argentina to have taken particular care in specifying the limited circumstances in which foreign investors can trigger the Treaty's arbitration process."

We'll be back at you shortly with today's decision and orders. As always, thanks for reading!

Kim, Jenny & Tadhg

From the Appellate and Complex Legal Issues Practice Group at Wiggin and Dana. For more information, contact Kim Rinehart or any other member of the Practice Group at 203-498-4400