Less than two years after
trying to sort out the proof federal prosecutors must offer to get convictions
for bank fraud, the Supreme Court on Monday decided to try again even though
few lower-court judges have yet applied the Justices’ prior ruling.
The Court granted review of the new case, Shaw v. United
States, despite the government’s argument that very
little was at stake. The Court also took on a case about court review of
orders to provide restitution to victims of crime.
Both cases will be heard and
decided in the next Term starting in October. So far, with Monday’s
orders included, the Justices have put on the new Term’s docket only ten cases,
including five that are being carried over from the current Term. The
pace of grants has fallen off since the Court wound up with
eight members, after the death of Justice Antonin Scalia in February.
The new bank fraud case is a
sequel to the Court’s ruling in June 2014, seeking to sort out the links
between two parts of the federal law against bank fraud. Only one of
those was at issue then, and the other is the only one at issue in the new
case, but the Court has felt obliged to try to read them together, finding
considerable overlap between them.
The law makes it a crime to
carry out a scheme, first, that involves fraud against a financial institution,
and second, that involves gaining money, credit or other property held or
controlled by a financial institution. (Technically, those are the first
and second sections of 18 U.S.C. § 1344.)
In its 2014 decision in Loughrin v. United
States, the Court focused primarily on the second
section. It concluded that a conviction under that provision does
not require proof of an intent to commit fraud against a financial institution,
nor does it require proof that the fraud caused a loss for that
institution. In reaching that result, the Court indicated it was
seeking to harmonize the two sections.
So far, according to the
Justice Department, only one federal court of appeals — in the Ninth Circuit —
has interpreted the impact of that decision on the other provision in the bank
fraud law. The Justices on Monday agreed to review that court of
appeals decision in the new Shaw case.
The Ninth Circuit concluded that there is no need for proof that a scheme was
carried out with an intent to expose a bank to a loss or risk of
loss. It upheld the fraud conviction of a Californian, Lawrence
Eugene Shaw, and his sentence to fifty-seven months in prison.
Citing a conflict among lower
courts, Shaw’s attorneys asked the Court to rule that, under the first section
of the law, prosecutors were required to prove an intent to deceive a
bank, as well as an attempt to cheat it out of some of its funds.
Shaw’s complex financial maneuverings, his lawyers contended,
were designed only to divert to himself the bank account of a businessman
who had left the country to live in Taiwan. The bank itself had any
losses covered by others, the petition noted.
Shaw’s case, the petition
said, raised an issue on which all of the federal appeals courts had now taken
a position and had split widely, with the majority ruling as Shaw would prefer.
The Justice Department urged the Justices to deny review, contending that
only the Ninth Circuit had confronted the proof needed under the fraud
law’s first section, using the Loughrin approach,
and that the split among appeals courts on that question actually predated the Loughrin ruling.
The Court granted review, refusing
the government’s request to pass up the question.
In the other newly granted
case, Manrique v. United
States, the Court also accepted review over the federal
government’s objection. The case involves a Florida man, Marvelo
Manrique, convicted of possessing a movie showing an adult male sexually
assaulting a young child.
Besides sentencing the man to
six years in prison and a life term of supervision, a federal judge ruled that
an award of restitution had to be made to the child. The amount of that
obligation was not set at the time, but was put off for a later hearing.
Manrique then filed a formal notice that he was appealing the sentence.
Later, the judge ordered
restitution of $4,500. Manrique did not file a new notice that he was
appealing, but relied on the earlier notice. The U.S. Court of
Appeals for the Seventh Circuit ruled that it had no authority to rule on the second
appeal as to the restitution order, because of the failure to file a new appeal
notice.
His petition asked the Supreme
Court to decide that his initial notice that he was appealing on restitution
should have been sufficient to put the issue validly before the court of
appeals. He argued that the lower courts are split on the issue.
The Justice Department opposed review by the Justices, conceding that there was
some disagreement among lower courts but that the Eleventh Circuit’s ruling was
the correct one.
Besides its grant of review of
the two new cases, the Court turned aside — as it has several times before — an
attempt to persuade the Court to overrule its 1985 precedent requiring those
who seek to challenge government seizures of their private property in federal
court to first use all the remedies they could have in state court before
taking their case to a federal court. That precedent is Williamson County v.
Hamilton Bank. The new case challenging that precedent was Arrigoni Enterprises
v. Durham.
Justice Clarence Thomas,
joined by Justice Anthony M. Kennedy, dissented from the denial of review,
arguing that the 1985 precedent cannot be squared with the “Takings Clause” in
the Constitution’s Fifth Amendment. The dissenters noted that
several Justices in the past have called for reopening the issue.
[Disclosure: Kevin
Russell of Goldstein & Russell, P.C., whose attorneys contribute to this
blog in various capacities, was among the counsel to the petitioner in Loughrin v. United States. The author of this post,
however, is not affiliated with the firm.]
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