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Posts Tagged ‘Davis’

1. In a previous post, I criticized the Fourth Circuit’s habeas grant in MacDonald v. Moose. The Fourth Circuit held in that case that one textual provision of Virginia’s more encompassing “crimes against nature” statute was facially unconstitutional under Lawrence v. Texas. As my post indicated, and as some comments to the post discussed in detail, the Fourth Circuit was not making this determination de novo but rather under AEDPA’s deferential standard of review for claims adjudicated on the merits in state court proceedings.  The relevant state court determinations in MacDonald were that the statute was constitutional as applied to petitioner’s conduct and that he lacked standing to bring his facial challenge. Here is the reasoning with respect to the facial challenge:

MacDonald contends the sodomy statute, Code § 18.2-361(A), is facially unconstitutional because it violates the Due Process Clause of the Fourteenth Amendment. In accord with our previous decisions, we hold that MacDonald lacks standing to assert this claim. See McDonald v. Commonwealth, 48 Va. App. 325, 329, 630 S.E.2d 754, 756 (2006) (“[W]e will only consider the constitutionality of Code § 18.2-361(A) as applied to appellant’s conduct.”); Singson v. Commonwealth, 46 Va. App. 724, 734, 621 S.E.2d 682, 686 (2005) (defendant lacks standing to challenge statute generally); Tjan v. Commonwealth, 46 Va. App. 698, 706, 621 S.E.2d 669, 673 (2005) (same); see also Grosso v. Commonwealth, 177 Va. 830, 839, 13 S.E.2d 285, 288 (1941) (“It is well settled that one challenging the constitutionality of a provision in a statute has the burden of showing that he himself has been injured thereby.”); Coleman v. City of Richmond, 5 Va. App. 459, 463, 364 S.E.2d 239, 241 (1988) (“generally, a litigant may challenge the constitutionality of a law only as it applies to him or her”).

According to the Fourth Circuit panel opinion, however, one discrete textual provision of Virginia’s statute was facially unconstitutional, and “the state court’s standing determination, as endorsed by the district court, was contrary to and involved an unreasonable application of clearly established federal law, as determined by the Supreme Court of the United States” (emphasis added).

2. Nine days after the Fourth Circuit issued its opinion in MacDonald v. Moose, the court issued an opinion in Woollard v. GallagherWoollard was a Second Amendment challenge to Maryland’s “good and substantial reason” permitting requirement for gun possession outside one’s home. The district court in Woollard had held that this requirement was facially unconstitutional. In addition to rejecting Woollard’s claim that the permitting requirement was unconstitutional as applied to him, the panel opinion held that Woollard lacked standing to bring his facial challenge:

Because we conclude that the good-and-substantial-reason requirement is constitutional under the Second Amendment as applied to Appellee Woollard, we also must reject the Appellees’ facial challenge. See Masciandaro, 638 F.3d at 474. As the Supreme Court has explained, “a person to whom a statute may constitutionally be applied will not be heard to challenge that statute on the ground that it may conceivably be applied unconstitutionally to others, in other situations not before the Court.” Broadrick v. Oklahoma, 413 U.S. 601, 610 (1973); see also Gonzales v. Carhart, 550 U.S. 124, 168 (2007) (“It is neither our obligation nor within our traditional institutional role to resolve questions of constitutionality with respect to each potential situation that might develop.”).

On its face, this reasoning looks just like the reasoning that the Fourth Circuit held was “contrary to and involved and unreasonable application of clearly established federal law, as determined by the Supreme Court of the United States” when that reasoning was used by Virginia’s Court of Appeals in MacDonald.

3. The tension between the two cases cannot be explained on the grounds that the Woollard panel was unaware of the recent MacDonald decision. According to the date listed on the opinions, the two appeals were argued on the same day and two out of the three judges were the same in both cases (Judge King and Judge Diaz). And most importantly, Judge King authored both opinions.

4. The doctrine surrounding facial and as-applied challenges is notoriously murky. Some may view it as complex; others may view it as simply confused. In my view, the labels “facial” and “as-applied” hurt more than they help insofar as each lacks a stable meaning across cases. But to the extent that MacDonald’s facial challenge was an overbreadth-type (“bottom-up”) challenge, in which facial unconstitutionality depends on the proportion of unconstitutional applications to constitutional applications, then the reasoning used by the Virginia Court of Appeals in refusing to adjudicate the challenge seems unimpeachable (as the Fourth Circuit’s use of that reasoning in Woollard would seem to indicate). (For a discussion of the distinction between valid-rule  (or “top-down”) facial challenges and overbreadth-type (or “bottom-up”) facial challenges, see Richard H. Fallon, Jr., Fact and Fiction about Facial Challenges, 99 Cal. L. Rev. 915, 931 (2011), a law review article cited by Judge King’s majority opinion in MacDonald.)

5. According to the portion of the appellant’s brief quoted by the panel opinion in MacDonald, the facial challenge in that case was an overbreadth-type challenge:

MacDonald maintains that he possesses standing to pursue his facial challenge under the Due Process Clause because the anti-sodomy provision was rendered unconstitutional by Lawrence. He relies on established Supreme Court authority for the proposition that standing exists: “where the statute in question has already been declared unconstitutional in the vast majority of its intended applications, and it can fairly be said that it was not intended to stand as valid, on the basis of fortuitous circumstances, only in a fraction of cases it was originally designed to cover.” Br. of Appellant 14 (quoting United States v. Raines, 362 U.S. 17, 23 (1960)).

6. Virginia’s petition for en banc review is pending at the court. Its principal focus is the application of 2254(d) with respect to the state court’s as-applied understanding of Lawrence v. Texas. If the Fourth Circuit does grant en banc review, perhaps it will also take the opportunity to clarify the law surrounding facial and as-applied challenges more generally.

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The Fourth Circuit affirmed the grant of summary judgment to the defendant in a copyright infringement claim brought by a Charlotte, NC architecture firm (Building Graphics, Inc.) against a multi-state building company (Lennar Corp.) and an architecture firm hired by that company (Drafting & Design, Inc.). The appellate court concluded that the plaintiff firm had not “marshaled sufficient evidence to support a finding that there exists a reasonable possibility that [the defendants] had access to its copyrighted plans.” Judge Davis wrote the opinion for the court in Building Graphis v. Lennar Corp., in which Judge Keenan and Judge Gibney (EDVA) joined. (For those who are interested in the potential similarities, an appendix to the opinion includes floor plans and pictures of the houses.)

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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).

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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.

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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.”

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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.

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As the United States and a new Somali defendant gear up for trial this week in front of Judge Doumar, one question is on the mind of all concerned: Where are the Fourth Circuit’s piracy decisions?

The Fourth Circuit has been considering the definition of piracy for over a year now. Last spring, a three-judge panel consisting of Judge King, Judge Davis, and Judge Keenan heard oral arguments in an appeal arising out of an attack on the U.S.S. Ashland. Last September, the same panel heard oral arguments in an appeal arising out of an attack on the U.S.S. Nicholas. At the time of the Nicholas arguments, it appeared that the panel had put the case on some sort of fast track after the Ashland appeal was caught up in some procedural confusion. But the Nicholas appeal has not been quickly resolved even though, as I have previously argued, the procedural issue that seemed to dog the Ashland appeal has been resolved  by a different panel in a different case.

Regardless of the outcome of the Ashland appeal, it is curious that the decision in the Nicholas appeal has not yet been issued. Various judges on the panel did show interest at oral argument in issues beyond the definition of piracy, such as the extraterritorial application of Miranda and the unit of prosecution under 924(c). But the panel did not press the government very hard on the definition-of-piracy issues, as one would expect if the judges’ pre-argument review of the case pointed toward a ruling against the government.

There can be many reasons for the passage of so much time without a decision. And in big cases, the decisions can take a long time. Perhaps the panel is deeply fractured on one or more of the issues. Perhaps the judges have been busy working on other cases (as seems to be at least part of the explanation given lengthy or controversial opinions that have been released in recent months by the panel members in other cases). Or perhaps the opinion or opinions at issue raise knotty questions about other aspects of the Fourth Circuit’s case law that need to be smoothed out. At this point, it is all speculative from the outside.

That speculation could start building if more stories like yesterday’s AP story about the upcoming piracy trial begin to appear. As the story explains, “[t]he trial of a Somali man U.S. authorities consider the highest-ranking pirate they have ever captured will begin this week in Virginia under a cloud of uncertainty about what the definition of piracy is.” Part of the uncertainty is whether the crime of piracy requires that the pirate actually took possession of the target ship, committing robbery at sea. Two district courts have gone different ways on that question. These are the two cases currently on appeal to the Fourth Circuit.

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