Feeds:
Posts
Comments

Archive for May, 2012

Michael Gerson’s column on Vice President Biden this evening is a gem. It opens:

What to make of Vice President Biden? Sometimes he is gaffe-prone comic relief. Sometimes he is the possessor of the worst geopolitical judgment in Washington — as when he opposed the Osama bin Laden raid or advocated the partition of Iraq. And sometimes he seems to be the last genuine human being in American politics.

Read Full Post »

The mastermind of a major mortgage fraud conspiracy in North Carolina was able to shed his money laundering convictions with a merger argument. In United States v. Cloud, the Fourth Circuit held today that money laundering convictions premised on the payment of money to third parties simply to cover essential operating expenses for the underlying fraud merged into the underlying fraud and could not be punished under a since-amended federal money laundering statute. Judge Diaz wrote the opinion for the court, in which Judge Gregory and Judge Davis joined.

This decision in Cloud rests on the Fourth Circuit’s decision in United States v. Halstead, 634 F.3d 270 (4th Cir. 2011). That case sets forth Fourth Circuit’s interpretation of the Supreme Court’s 4-1-4 decision in United States v. Santos, 553 U.S. 507 (2008).

Read Full Post »

Four owners of a trucking company sold the business’s sole remaining asset–a warehouse–and retired. After selling the warehouse, the businessmen sold their company stock to an investment company that promised to pay the company’s taxes. The investment company never did pay those taxes, and the IRS came after the former owners of the trucking company for the tax bill, which was in the neighborhood of $880,000. The IRS said the transaction with the investment company was a tax shelter scam, but the Tax Court sided with the former owners of the trucking company. A split panel of the Fourth Circuit affirmed. Judge Davis wrote the opinion for the Court in Starnes v. Commissioner, in which Judge Niemeyer joined. Judge Wynn wrote a dissenting opinion.

Depending on one’s view of the facts, either (a) the former owners of the trucking company were victims of unscrupulous cheats, persecuted by an overeager federal government out to take away their hard-earned retirement money, or (b) they pulled a fast one on the federal government, saving themselves over $100,000 each in taxes. Depending on one’s view of the law, either (a) the government should have stayed its hand because it misunderstood North Carolina law, or (b) the government was denied the benefit of federal law elevating substance over form in evaluating the tax consequences of transactions like the one at issue here.

The first few paragraphs of Judge Wynn’s dissent summarize his view of the case:

This case involves a straightforward transaction made complicated so as to facilitate the fraudulent avoidance of a tax liability. Simply put, the petitioners, former shareholders of Tarcon, reduced the sole asset of Tarcon to cash by selling that asset, a warehouse, for $3,180,000. After that October 30, 2003 sale, Tarcon had $3,091,955 in its bank account and no  tangible assets. As a result of the warehouse sale, Tarcon incurred a federal tax liability of $733,699 and a North Carolina tax liability of $147,931, for a total of $881,628. If the story had ended there, the four former shareholders, each of whom owned 25 percent of Tarcon, would have completed the liquidation of Tarcon by paying those tax liabilities and dividing the remaining sum, allowing each to receive a distribution of approximately $552,582.

Of course, the story doesn’t end there. Instead, MidCoast entered with a fraudulent scheme that would allow the former shareholders to avoid paying their $881,628 tax liability. Under its proposal, MidCoast would pay the former shareholders $2,621,136 for their Tarcon stock and legal fees; in return, Tarcon would transfer its sole asset, roughly $3.1 million in cash, to MidCoast. Why, though, would the shareholders turn over Tarcon’s $3.1 million to MidCoast and receive only $2.6 million in return?

The answer is evident when Tarcon’s outstanding tax liabilities of $881,627 are factored into the equation. Indeed, it then becomes clear that the former shareholders actually negotiated to be paid $2.6 million in cash—for cash that in reality totaled only $2,210,425, resulting in a windfall of $410,711. That windfall was, in fact, a cut from Tarcon’s $881,627 tax liability, transferred to MidCoast when it purchased the former shareholders’ stock, and which it undoubtedly was scheming to avoid under the guise of offering an “asset recovery premium.” While I recognize the intricacies of MidCoast’s subsequent actions to avoid paying the full liability of $881,627, this transaction cannot escape its ultimately simple  label: a transparent scam designed by the parties to fraudulently evade paying taxes. Accordingly, I must respectfully dissent.

Read Full Post »

From a letter by Thomas Jefferson to Spencer Roane, written in response to Roane’s transmission of his Hampden essays published in the Richmond Enquirer:

In denying the right they usurp of exclusively explaining the constitution, I go further than you do, if I understand rightly your quotation from the Federalist, of an opinion that “the judiciary is the last resort in relation to the other departments of the government, but not in relation to the rights of the parties to the compact under which the judiciary is derived.” If this opinion be sound, then indeed is our constitution a complete felo de se. For intending to establish three departments, co-ordinate and independent, that they might check and balance one another, it has given, according to this opinion, to one of them alone, the right to prescribe rules for the government of the others, and to that one too, which is unelected by, and independent of the nation. For experience has already shown that the impeachment it has provided is not even a scarecrow; that such opinions as the one you combat, sent cautiously out, as you observe also, by detachment, not belonging to the case often, but sought for out of it, as if to rally the public opinion beforehand to their views, and to indicate the line they are to walk in, have been so quietly passed over as never to have excited animadversion, even in a speech of any one of the body entrusted with impeachment. The constitution, on this hypothesis, is a mere thing of wax in the hands of the judiciary, which they may twist, and shape into any form they please. It should be remembered, as an axiom of eternal truth in politics, that whatever power in any government is independent, is absolute also; in theory only, at first, while the spirit of the people is up, but in practice, as fast as that relaxes. Independence can be trusted nowhere but with the people in mass. They are inherently independent of all but moral law. My construction of the constitution is very different from that you quote. It is that each department is truly independent of the others, and has an equal right to decide for itself what is the meaning of the constitution in the cases submitted to its action; and especially, where it is to act ultimately and without appeal. I will explain myself by examples, which, having occurred while I was in office, are better known to me, and the principles which governed them.

Jefferson then provides three examples illustrating independent executive judgment about a legal question: his pardon of individuals convicted under the sedition act; his decision to withhold Marbury’s commission; and his refusal to submit a treaty to the Senate for its consideration.

Read Full Post »

Federal law authorizes immigration authorities to detain a criminal alien without a bond hearing “when the alien is released” from some other custody, such as state imprisonment. See 8 U.S.C. 1226(c)(1). The Board of Immigration Appeals has held that this statute authorizes mandatory detention even if the immigration authorities arrest and detain the individual well after his state custody has ended. The Fourth Circuit held today in Hosh v. Lucero that the BIA’s determination was entitled to Chevron deference and that the immigration-law version of the rule of lenity did not require an alternative outcome. Senior Judge Moon (WDVA) wrote the opinion for the court, in which Judge Keenan and Judge Floyd concurred.

Several district courts have been on both sides of the issue resolved by the Fourth Circuit in this case, although the Fourth Circuit’s decision appears to be the first circuit-level decision on this issue.

Read Full Post »

The Fourth Circuit today issued published opinions in piracy prosecutions arising out of foiled attacks on the U.S.S. Ashland and the U.S.S. Nicholas. In both, the federal government won and the pirates lost.

The principal opinion, United States v. Dire, affirms the convictions and life-plus sentences of the Somali defendants against several challenges, including the claim “that their fleeting and fruitless strike on the Nicholas did not, as a matter of law, amount to a § 1651 piracy offense.” Judge King wrote the opinion for the Court, in which Judge Davis and Judge Keenan joined.

The other opinion, United States v. Said, vacates the dismissal of the § 1651 piracy count in the prosecution arising out of the attack on the U.S.S. Ashland. Judge King wrote the opinion for the Court, in which Judge Davis and Judge Keenan joined.

The Dire decision is a ringing endorsement of the thorough analysis provided by Judge Mark Davis (EDVA) earlier in the case. See United States v. Hasan, 747 F. Supp. 2d 599 (EDVA 2010). The Fourth Circuit’s opinion states: “Simply put, we agree with the conception of the law outlined by the court below. Indeed, we have carefully considered the defendants’ appellate contentions–endorsed by the amicus curiae brief submitted on their behalf [filed by counsel for the Said defendants]–yet remain convinced of the correctness of the trial court’s analysis.”

Read Full Post »

The Fourth Circuit today affirmed the dismissal of a First Amendment challenge to Arlington, Virginia’s prohibition of a doggy daycare’s mural near the Shirlington Dog Park. Judge Diaz wrote the opinion for the Court in Wag More Dogs, LLC v. Cozart, which was joined in by Judge Duncan and Judge Keenan. The challenger was represented by the Institute for Justice, which has a case page with background and more information, together with a response to today’s decision.

My preliminary reaction is that the opinion’s First Amendment analysis is overly deferential to the government. In assessing whether the challenged sign ordinance is content-based or content-neutral, the opinion follows the regrettable path of focusing almost exclusively on whether the ordinance was enacted because of disagreement with the message conveyed. The most underdeveloped part of the opinion, however, is its application of intermediate scrutiny, particularly the narrow tailoring prong. The county asserted that its ordinance serves two interests: promoting traffic safety and enhancing the County’s aesthetics. The county’s enforcement of its ordinance with respect to the challenged mural raises serious questions about how the ordinance is “narrowly tailored” to serve these interests, questions that the opinion simply does not address. The county told Wag More Dogs that the mural would not run afoul of the ordinance if (1) it depicted anything other than pictures relating to the doggy daycare business, or (2) it included the phrase “Welcome to Shirlington Park’s Community Canine Area.” Given the conceded lawfulness of hypothetical alternative murals that comply with either (1) or (2), it is hard to see how the ordinance is tailored at all, much less narrowly tailored, to the promotion of traffic safety or the enhancement of the County’s aesthetics. Instead of examining this issue, however, the opinion conclusorily asserts that the ordinance’s sign and location restrictions do no more than eliminate the exact source of the evil it sought to remedy.

Read Full Post »

Following the Supreme Court oral arguments in the health care litigation, there has been much more after-argument augmention of merits analyses than severability analyses. That is unfortunate because an incorrect approach to severability poses a more significant problem of long-term distortion of the federal judicial role in constitutional adjudication. This PPACA severability series is an attempt to continue the conversation about severability.

The primary obstacle to clear thinking about severability is a pernicious metaphor that describes invalidation as excision, which is in turn understood as a legislative function. The operation of this metaphor can be seen, for example, in a recent article by Tom Campbell, Dean and Donald P. Kennedy Chair in Law, and Professor of Economics, Chapman University: Severability of Statutes, 62 Hastings L.J. 1495 (2011).

The major premise of Dean Campbell’s article is that “[c]ourts legislate when they engage in ‘severability analysis,’ allowing part of a law to continue in force after having struck down other parts as unconstitutional.” [1495] More precisely,  “making something into law that was not precisely the text that had been approved by Congress and signed by the President is exactly what a court does when it exercises severability authority.” [1498-99]

From this characterization of severance as creating new legislation, the rest of Dean Campbell’s argument follows. Because a presidential “line-item veto” that would accomplish such legislative handiwork without bicameralism and presentment is impermissible, so too is judicial severance that operates just like a line-item veto. Dean Campbell accordingly calls for “the complete abolition of the severability doctrine.” [1497] According to Dean Campbell’s proposed approach, the unconstitutionality of one provision of a bill enacted into law would result in the invalidation of the entire bill of which that unconstitutional provision was a part.

As I have previously argued, the legislative characterization of the severability function is endemic in modern scholarly discourse and unreflectively implicit in existing doctrine. If one accepts Dean Campbell’s premise that severance creates new legislation, then his proposal makes sense as a way of enforcing the bicameralism and presentment requirements for creating new legislation. Dean Campbell’s proposal therefore presents a challenge to all those who accept an excision-based framework for judicial review.

In my view, however, the major premise is incorrect. A judicial refusal to enforce is not equivalent to amending the law or to exercising a judicial line-item veto. “When a court holds part of a statute unconstitutional, it issues a judgment saying so (and, in some cases, an injunction against its future enforcement). By virtue of precedent and preclusion, this judgment and the reasoning in support of it prevent the unconstitutional part of the statute from having legal effect going forward. Nothing about the actual text of the statute changes as a direct consequence of judicial action.” 85 N.Y.U. L. Rev. at 747.

The real challenge for those who advocate inseverability is to justify the transformation of (A) judicial refusal to give effect as law to one provision in resolving a case, into (B) a command that nobody (in the judiciary or otherwise) should give effect as law to any other provisions of the bill that contained the unconstitutional provision. I do not see how that justification of turning (A) into (B) can be done consistently with traditional separation of powers principles.

Read Full Post »

The Fourth Circuit will hear oral argument tomorrow in United States v. Danielczyk, a First Amendment challenge to a federal ban on corporate contributions to candidates. The legal arguments in Danielczyk grow out of Citizens United, in which the Supreme Court held unconstitutional a federal ban on independent expenditures by corporations.

The key reasoning in Judge Cacheris’s Danielczyk opinion focused on the idea that “corporations and human beings are entitled to equal political speech rights.” Because a flat contribution ban imposed on human beings would be unconstitutional, so is a flat contribution ban on corporations (who should at least be permitted to contribute within the limits imposed on contributions by human beings). Thus reasoned the district court. Now it’s the Fourth Circuit’s turn.

Apart from interesting issues of campaign finance law, the case presents questions about the proper role of inferior federal courts in assessing whether an earlier Supreme Court decision has been so radically undermined by a later Supreme Court decision as to be effectively overruled. The federal government’s brief focuses primarily on the claim that the issue in this appeal is controlled by the Supreme Court’s decision in FEC v. Beaumont (which reversed a Fourth Circuit decision invalidating the same statutory provision challenged in this appeal).

[UPDATE: The Washington Post is running an AP story by reporter Larry O'Dell on the oral argument. The story notes that one of the judges on the panel was Chief Judge Traxler. The other panelists were Judge Gregory and Judge Diaz. I was unable to attend the oral argument, but this panel seems like a good draw for the government. Judge Gregory authored the panel dissent from the Fourth Circuit decision reversed by the Supreme Court in Beaumont. And while it is dangerous to infer too much from one question, particularly without the context of the argument as a whole, the statement by Chief Judge Traxler quoted in the AP story is a favorable one for the federal government. According to the AP report, Chief Judge Traxler responded to an argument  by Jeffrey Lamken, attorney for one of the challengers, by stating, "That may be a great argument, but I just get a little uncomfortable when you’re asking me to overrule the Supreme Court.”]

Read Full Post »

The Fourth Circuit held today in Robertson v. Sea Pines Real Estate that putative class actions challenging two MLS services in South Carolina under Section 1 of the Sherman Act could go forward. On interlocutory appeal, the appeals court affirmed denial of the defendants’ motion to dismiss. Judge Wilkinson wrote the opinion for the Court, in which Judge King and Judge Agee joined. The decision is notable not only for its discussion of Section 1 caselaw, but also for its application of Twiqbal.

Read Full Post »

The Fourth Circuit today reinstated the claim of a Muslim prisoner incarcerated in Virginia who sued state correctional officials under the federal Religious Land Use and Institutionalized Persons Act (“RLUIPA”) after they refused to permit him to grow a short beard for religious reasons. The decision means that the prisoners claim can go forward, but further proceedings will be needed to determine whether the prisoner actually wins on the merits.

Chief Judge Traxler wrote the opinion for the court in Couch v. Jabe, in which Justice O’Connor and Judge Shedd joined. Here is the opening of the opinion:

William R. Couch, a Sunni Muslim currently incarcerated in a state correctional facility, brought this action alleging that prison officials violated the Religious Land Use and Institutionalized Persons Act (“RLUIPA”) by refusing to permit him to grow a one-eighth-inch beard in compliance with the requirements of his faith. The district court granted summary judgment to the prison officials, and Couch appeals. Because the prison officials did not explain how a one-eighth-inch beard would implicate health or security concerns, they failed
to satisfy their burden under RLUIPA of showing that the general grooming policy that they rely upon is the least restrictive means of furthering a compelling governmental interest. Accordingly, we vacate the grant of summary judgment and remand for further proceedings.

Read Full Post »

By 11-3 vote, the en banc Fourth Circuit in Al Shimari v. CACI International has dismissed the consolidated appeals of military contractors who worked at Abu Ghraib and other locations in Iraq. The contractors had appealed from the denial of their motions to dismiss claims brought by Iraqi nationals. The defendants’ motions to dismiss were premised on various grounds related to their status as military contractors in a theatre of armed conflict.

Judge King wrote the opinion for the court, in which Chief Judge Traxler, and Judges Motz, Gregory, Duncan, Agee, Davis, Keenan, Wynn, Diaz, and Floyd joined.

Judge Duncan authored a concurring opinion, in which Judge Agee joined, urging the district courts to “give due consideration to the appellants’ immunity and preemption arguments . . . which are far from lacking in force.”

Judge Wynn wrote a concurrence emphasizing that the court’s jurisdictional opinion “offers no guidance to the district court on the underlying merits of these matters.” (While this is true as a technical matter, the lawyers on both sides will undoubtedly parse the language very closely for future use in the litigation.)

Judge Wilkinson, Judge Niemeyer, and Judge Shedd dissented. Their grounds for dissent were set forth in dissenting opinions by Judge Niemeyer and Judge Wilkinson.

All told, the opinions take up 114 pages. It will take some time to digest them. In the normal case, the dismissal of appeals for lack of jurisdiction would mean the decisions go back down to the district court. But these consolidated cases are not normal cases, and they very well could end up in the Supreme Court next Term. If the contractors do seek Supreme Court review, that will place the Obama Administration in an awkward position given the “equivocal” nature of the position the federal government has thus far taken in the litigation (as observed by various Fourth Circuit judges at oral argument).

For some flavor of the passion aroused by this jurisdictional ruling, consider the following excerpts from the opening of Judge Wilkinson’s dissent:

The actions here are styled as traditional ones and wrapped in the venerable clothing of the common law. Even on common law terms, however, they are demonstrably incorrect, and the impact which tort doctrine will have on military operations and international relations magnifies the difficulties immeasurably. I dare say none of us have seen any litigation quite like this and we default if we accept uncritically or entertain indefinitely this novel a violation of the most basic and customary precepts of both common and constitutional law.

Sadly, the majority’s opinion does precisely this. After reading its decision, one could be forgiven for thinking that the issue before us is a simple jurisdictional question arising out of ordinary tort suits. But these are not routine appeals that can be quickly dismissed through some rote application of the collateral order doctrine. This case instead requires us to decide whether the contractors who assist our military on the battlefield will be held accountable through tort or contract, and that seemingly sleepy question of common law remedies goes to the heart of our constitutional separation of powers. Tort suits place the oversight of military operations in an unelected judiciary, contract law in a politically accountable executive. And in the absence of some contrary expression on the part of the Article I legislative branch, the basic principles of Article II require that contractual, not tort, remedies apply.

The majority emphatically decides this weighty question by pretending not to decide, as its dismissal of these appeals gives individual district courts the green light to subject military operations to the most serious drawbacks of tort litigation. But arrogating power to the Third Branch in a contest over military authority is the wrong call under our Constitution, and there is no garb for this decision so benign as to obscure the import of what the majority has done.

We tread this territory at our peril. This decision is contrary to decades of Supreme Court admonitions warning federal courts off interference with international relations. Of course military contractors should be held accountable, and it is important that a framework be set in place to accomplish this task. But instead of establishing that framework, the majority succumbs to mere drift and in so doing places courts in the most damaging and least defensible legal landscape possible. None of us have any idea where exactly all this is headed or whether the damage inflicted on military operations will be only marginal or truly severe. At a minimum, however, today’s decision breaches a line that was respected by our predecessors on courts high and low. I would not cross this boundary even if the collateral order doctrine could cloak my steps. With all respect for my fine colleagues, I would remand these actions to the district court with direction that they be dismissed.

Read Full Post »

The Fourth Circuit’s decision today in Belk, Inc. v. Meyer Corp. provides a detailed primer–at one party’s expense, unfortunately–on the requirements of Rule 50(b) and various other issue-preservation matters. Judge Davis’s opinion for the court, which was joined in by Judge Duncan and Judge Keenan, affirms a jury verdict on federal trade dress infringement and North Carolina Unfair and Deceptive Trade Practices Act claims that resulted in an award of $1.26 million. Because so few business disputes actually make it to trial in federal court, and of those that do, so few result in published appellate opinions, the opinion is worth reading is a refresher for anyone interested in presenting issues so that they are properly preserved for appeal.

Read Full Post »

A split Fourth Circuit issued an opinion yesterday in the continuing saga of school desegregation litigation in North Carolina’s Pitt County. The decision vacates and remands a district court decision that had ruled in the school board’s favor in rejecting a challenge to a recent student assignment plan.

The current chapter of the story began with the filing in April 2011 of a motion for injunctive relief by a parents’ group who complained that the School Board’s 2011-12 Assignment Plan insufficiently addressed racial disparities. But the story cannot simply pick up there because a key part of the School Board’s defense to this April 2011 action was that its 2011-12 Assignment Plan complied with a 2009 Settlement Agreement/Release and Order that was reached in mediation of a dispute over the 2006-07 Assignment Plan.

The 2006-07 dispute–known as the Everett litigation–also involved the Greenville Parents’ Association. The Association had filed a complaint with the federal Office of Civil Rights (Department of Education) objecting to the Board’s use of race in the 2006-07 Assignment Plan.

In the litigation over the 2006-07 plan, then, the School Board was being hit from both sides–by some parents for not doing enough about racial disparities and by others for placing too much emphasis on race in student assignments.

The 2009 mediated settlement agreement and order in the Everett litigation created a process for input from all sides in creating the 2011-12 Assignment Plan. The Board and the various interested parties went through this agreed-upon process, but the resulting plan was not satisfactory to the plaintiffs. That dissatisfaction led to the motion for injunctive relief at issue in the appeal decided yesterday.

As presented to the Fourth Circuit, the principal issue was who bore the burden of proof in seeking injunctive relief. The appeal also presented a question about appellate jurisdiction.

In an opinion authored by Judge Wynn, and joined in by Judge Diaz, the Fourth Circuit held in Everett v. Pitt County Board of Education that the district court erred “by failing to apply, and requiring the School Board to rebut, a presumption that racial disparities in the 2011-2012 Assignment Plan resulted from the School Board’s prior unconstitutional conduct in operating a racially segregated school district.” Judge Niemeyer dissented, arguing that the majority’s disposition “overlooks . . . the procedural posture of his case and, most importantly, the impact of the settlement agreement reached by the parties ‘as to all matters in dispute’ from the date of the original desegregation orders to the date of the court’s approval of the settlement agreement in a consent order, dated November 4, 2009.”

The decision is a victory for UNC’s Center for Civil Rights, which represented the plaintiffs. Their background page on the case contains links to the appellants’ brief, the school board’s brief, and the reply brief.

The case raises difficult issues about continuing judicial oversight of a school district that has not yet achieved unitary status. It is difficult to evaluate the dueling opinions without further study of the record, including the precise terms of the settlement agreement/release and order, though my preliminary impression is that the majority opinion does not adequately address the dissent’s contentions about the effect of the 2009 settlement agreement/release and order. The one thing that is clear, though, is that the litigation will continue for the foreseeable future.

Read Full Post »

The Fourth Circuit held yesterday that bail bondsmen are not entitled to qualified immunity. Judge Diaz wrote the opinion for the court in Gregg v. Ham, in which Judge Niemeyer and Judge Motz joined.

The appeal came from a jury verdict in favor of a disabled woman whose home was invaded by bail bondsmen in search of a fugitive who had passed through her property a couple days earlier (when fleeing a chase). Given the facts of the case, it may be that the bail bondsman would not have been entitled to qualified immunity even if eligible for it, but the appeals court held categorically that bail bondsmen are not entitled to qualified immunity.

(Although it makes no difference to the outcome here, a cautionary note is in order with respect to the opinion’s description of qualified immunity analysis. Relying on the Fourth Circuit’s en banc decision last year in Henry v. Purnell, the opinion states that “[t]he defense of qualified immunity involves a two-step procedure “that asks first whether a constitutional violation occurred and second whether the right violated was clearly established.” This formulation leaves out the Supreme Court’s holding in Pearson v. Callahan that courts are not bound to apply these two steps sequentially.)

Read Full Post »

Follow

Get every new post delivered to your Inbox.

Join 289 other followers

%d bloggers like this: