Split Noted: Is Application of a Lengthened Limitations Period Retroactive?

Per U.S. ex rel. Carter v. Halliburton Co. (4th Cir. Mar. 18, 2013)

All qui tam plaintiffs should take note of this opinion, if only because has the effect of freezing the False Claims limitations bar in October 2002 (and thus also lengthens any potential damages period).

In dissent, Judge Agee notes (29 n.4) a circuit split on whether application of a limitations period that is lengthened after the relevant conduct is retroactive (and hence impermissible).  To provide an example, on Date X, Defendant does something for which there is a 1 year limitations period.  At some point after Date X, the legislature changes the period to 2 years.  In year 2, plaintiff files suit.  Can Defendant raise a viable limitations defense?

Judge Agree agrees with the CA6 that the answer is no.  Giving effect to the new limitations period is not retroactive, because limitations regulates not the underlying conduct, but when the Plaintiff may file suit.  In the words of the CA6 opinion cited by Judge Agee, "the 1991 Act applies to Forest's conduct, the filing of the complaint, which occurred after the enactment of the statute. Therefore, application of the 90-day statute is prospective in this case."  Thus, in this view, the new limitations period applies because the key date for retroactivity is the filing of the complaint.

I disagree, and side with the CA9.  The key date is not when Plaintiff finally files suit, but rather the date of passage/enactment of the limitations period.  Under this analysis, whether the hypothetical defendant can raise a limitations defense depends on whether the legislature acted in year 1 (no), or in year 2 (yes).

If the legislature acted in year 1, all is fine.  Plaintiff still had a viable claim, we presume he was on notice of the statute lengthening the limitations period.  The longer period thus did not affect anybody's substantive rights:  Plaintiff still had a cause of action, Defendant still had potential liability.

But if the legislature acted in year 2, then applying the new statute of limitations is retroactive.  Plaintiff no longer had a viable cause of action, defendant had escaped liability.  Applying the new limitations period would thus create a new substantive right in plaintiff, and a new liability in Defendant, when both had previously expired at the end of year 1.

Thus, the key point for retroactivity analysis is (1) the status of Plaintiff's claim on (2) the date the statute was passed/took effect.

Ultimately, this analysis calls to mind Justice Scalia's concurrence in Landgraf itself.  Justice Scalia, joined by Justices Thomas and Kennedy, criticized the majority for focusing on the substance/procedural divide, rather than looking at what conduct the statute was meant to regulate.  As any Civ Pro student knows, categorizing limitations periods as substantive or procedural so flummoxed the Supreme Court in Guarantee Trust that Justice Frankfurter crafted the outcome-determinative test to hold that--as with other parts of substantive law--state limitations periods should be applied in federal courts in diversity.  This result alone demonstrates how limitations periods can affect substantive rights.  By following the concurring opinion, one is left with the conclusion that the CA9 was correct in holding:

We do not find the substantive/procedural dichotomy helpful in deciding this case.  Regardless of whether a statute is "substantive" or "procedural," it may not apply to cases pending at the time of enactment if the new statute would prejudice the rights of one of the parties. . . . [W]e hold that a newly enacted statute that lengthens the applicable statute of limitations may not be applied retroactively to revive a plaintiff's claim that was otherwise barred under the old statutory scheme because to do so would "alter the substantive rights" of a party and "increase a party's liability."

Split Noted: Can A Defendant Obtain Fees Based On A Rejected Rule 68 Offer of Judgment?

Per UMG Recordings, Inc v. Shelter Capital Partners LLC (9th Cir. Mar. 14, 2013)

I have always been surprised how few defendants use Rule 68.  To facilitate settlement, that rule
authorizes defendants to make an "offer of judgment" before trial.  Such offer must specify terms (money, injunction, apology, etc.) to be entered as a formal court judgment if accepted.

The rule itself encourages defendants to make such offers because they come at no cost (other than the offered/confessed judgment) to defendants.  To encourage Plaintiffs to accept such offers, or at least consider them, the rule provides that, "[i]f the judgment that the [plaintiff] finally obtains is not more favorable than the unaccepted offer, the [plaintiff] must pay the costs incurred after the offer was made."  Fed. R. Civ. P. 68(d).

In Marek v. Chesney, 473 U.S. 1, 9 (1985), the Supreme Court held that "costs" for purposes of Rule 68 included "all costs properly awardable under the relevant substantive statute or other authority. . . .
Thus, . . . where the underlying statute defines 'costs' to include attorney's fees, we are satisfied such fees are to be included as costs for purposes of Rule 68."

Given this authority, it would seem clear that where a plaintiff (1) brings a federal suit under a fee shifting statute that defines costs to include fees, (2) rejects an offer of judgment, and (3) ultimately receives a judgment less favorable than the offer, the defendant would be entitled to costs, including its post-offer fees.

But that is not the position of the majority of courts, as this CA9 opinion notes.  (p. 58 n.25.)  Indeed, it appears that only the CA11 adheres to this view, while the CAs DC, 1, 4, 5, 7, 8, and 9 all disagree.

I agree with the CA11.  The majority misreads Marek's use of "properly awardable."  For example, many majority-school opinions find fees not "properly awardable" because the underlying statute authorizes  fees only to the "prevailing party", and defendants did not prevail.

This mistakes the baseline for determining who "prevailed."  The proper yardstick is not the status quo ante litem, but rather the status quo post confessionem (my translation of offer).  For example, before litigation, the damages baseline for prevailing is $0.  But after an offer, the damages baseline for prevailing becomes the amount of the offer.  Thus, if a plaintiff achieves more than an offer, it has still prevailed.  But, if a plaintiff rejects an offer and ultimately receives less, the defendant has prevailed.

The structure of the rules mandates utilizing the status quo post confessionem yardstick.  For example, Rule 54(d) presumes that costs--other than fees--will be awarded to the prevailing party.  But nobody, not even the CA9 here, disputes that Rule 68 mandates that post-offer, non-fee costs be awarded to the offeror.  Thus, Rule 68(d) in essence renders the offeror the prevailing party for purposes of non-fee costs.

No majority-school opinion offers any convincing reason why Rule 68(d) should alter the meaning of "prevailing party" for non-fee costs under Rule 54(d), or at least suspend operation of Rule 54(d)'s "prevailing party" provision for non-fee costs, but not do the same for "prevailing party" statutes where fees are defined as an element of costs.  (One could try to tease out a theory based on the Rules Enabling Act, but Marek rejected such a theory, which was espoused in Justice Brennan's dissent.)

Moreover, as a policy matter, the majority-school creates a one-way ratchet that is inconsistent with the objectives of Rule 68.  The fee shifting statute at issue here allows both prevailing defendants and plaintiffs to recover their fees equally.  (Thus distinguishing the Supreme Court's gloss on the civil-rights attorneys' fees.)  Thus, there is no policy reason to be more protective of plaintiffs in this situation.  Yet, the CA9 permits plaintiffs to avoid paying defendants' attorneys fees even if they recover less than an offer, but still recover their own attorneys' fees if they recover more.  This undermines the incentives to settle, contrary to the express purpose of Rule 68.

This is an issue ripe for review, or at least rulemaking.  Given the Court's concern about floods of litigation, one would think that a stronger interpretation of Rule 68--i.e., the CA11--should win out.

Split Noted: Who Bears The Burden On Earmarking for 11 U.S.C. 547(b)

Per In re ESA Environmental Specialists, Inc. (4th Cir. Mar. 1, 2013)

Under 11 U.S.C. 547(b), "[a] trustee in bankruptcy may avoid any transfer of an interest of the debtor in property" to a creditor for an antecedent debt made within 90 days of the petition, while the debtor was insolvent, that enables the creditor to recover more than it would in bankruptcy.

Courts have created an earmarking "affirmative defense" to such avoidance actions.  The earmarking defense applies when new creditor makes a loan to the debtor specifically for (or earmarked for) the payment of a designated old creditor.  In brief, the defense recognizes that the new loan never becomes part of the debtor's estate.  Moreover, the position of other creditors are not hurt by such an earmarked loan--the new creditor is simply substituted for the old creditor, and will receive the same pro-rata share of the bankruptcy proceeds as all other creditors.

In this opinion, the CA4 notes a circuit split on who bears the burden of proving the earmarking "affirmative defense."  (p. 8-9, n.6.)  It is unquestioned that the trustee bears the general burden of proving the avoidability of a transfer.  But a majority of circuits (the CAs 3, 6, and 9) hold that, if the trustee proves the general avoidability of a transfer, the burden shifts to the defendant to prove that the funds were earmarked.  In contrast, the CA8 holds that the trustee has the burden of proving that the earmarking defense does not apply.

I agree with the CA8.  To be sure, the majority school is consistent with the general rule that the burden of proving affirmative defenses is on the defendant.  But I do not believe that the earmarking defense is actually an affirmative defense (the CAs 3 and 9 hold as much).  Rather, it is a negative defense--if proven, it shows that the transfer was not "of an interest of the debtor."  The debtor never acquired full--i.e., equitable and legal--title to the transferred funds.  Instead, to the extent the debtor receives earmarked funds, it acts more in the capacity of a trustee, receiving legal but not equitable title to the funds, with no independent control but instead subject to an obligation to transfer the funds to the old debtor.  Thus, the burden of disproving this negative defense rests with the party bearing the burden of proof--the trustee.

Split Noted: Does U.S.S.G. 3C1.2 Require Nexus?

Per United States v. Gray (10th Cir. Mar. 5, 2013)

This unpublished disposition notes the CA10's continued disagreement with opinions from the CAs 5 and 6 holding that the 2-level adjustment for reckless endangerment by flight in U.S.S.G. 3C1.2 requires some nexus to the offense of conviction.  (p.10-11.)  Here, as before, the CA10 determines it is unnecessary to resolve this issue because--whether or not required--nexus is present.  (p. 12.)  The full text of the Guideline is:

If the defendant recklessly created a substantial risk of death or serious bodily injury to another person in the course of fleeing from a law enforcement officer, increase by 2 levels.

On its face, this language does not require nexus.  But the CA5 relied on a different provision (U.S.S.G. 1B1.3(a)(1)) to conclude that nexus was still nonetheless required.   I had written a post sharply critical of the CA5's position before I realized that the Commission's website provided an inaccurate html version of U.S.S.G. 1B1.3.  More on the website issues anon.  Now, with the accurate version, I am inclined to agree with the CA5 for four reasons.

First, U.S.S.G. 1B1.3(a)(1) provides in relevant part that "adjustments in Chapter Three[] shall be determined on the basis of . . . all acts and omissions committed . . . by the defendant . . . that occurred during the commission of the offense of conviction . . .  or in the course of attempting the avoid detection or responsibility for that offense."  The emphasized language indicates that must be a link between the flight proscribed by U.S.S.G. 3C1.2 and the underlying offense.

Second, the introductory commentary to Chapter 3 of the guidelines, where U.S.S.G. 3C1.2 is located, provides that the "following adjustments are included in this Part because they may apply to a wide variety of offenses."  Thus, the commentary also suggests an offense-specific linkage.

Third, the offense-specific linkage is supported by the history of U.S.S.G. 3C1.2.  When the Guidelines were first propounded, there was no "flight" adjustment.  And when the flight adjustment of 3C1.2 was added in 1990, the Commission made explicit that it derived from 3C1.1, governing obstruction.  (This relation is also documented in the title of Part C of Chapter 3--"Obstruction and Related adjustments).  The guideline for obstruction--to which the flight adjustment must be related--clearly requires a linkage to the offense, calling for a two-level increase if  "the defendant willfully obstructed or impeded . . . the administration of justice with respect to . . . the instant offense of conviction."

Finally, another part of the history of 3C1.2 supports an offense-specific linkage.  One year after the flight adjustment was created, the Commission made clear that "during flight" was to be construed broadly, such that reckless endangerment of a police officer in flight was at least subject to a 2-level increase under U.S.S.G. 3C1.2, if a 3-level increase under U.S.S.G. 3A1.2(b) did not apply.  At the time, 3A1.2(b) also created an explicit offense-specific link, requiring assaultative conduct creating "during the course of the offense or immediate flight therefrom", i.e., "proximate in time to the commission of the offense."  I view the distinction between these two as whether the flight is assaultative conduct.  That said, this is the weakest argument, becuase it could be argued that the amendment was intended to encompass situations that were not linked, or proximate in time, to the offense of conviction.

The counter-argument, though not explicitly made by the CA10, is that U.S.S.G. 1B1.3(a)(1) is not exclusive.  U.S.S.G. 1.1B3(a)(4) permits Chapter Three adjustments to be determined on the basis of "any other information specified in the applicable guideline," and the commentary to this provision explicitly states that it is intended to include information related to the defendant's "state of mind."  Thus, U.S.S.G. 3C1.2 calls for consideration of "other information" relating to a defendant's "state of mind":  namely whether "the defendant recklessly created a substantial risk of death or serious bodily injury to another person in the course of fleeing from a law enforcement officer."   Moreover, this counter-argument is bolstered by the fact that nexus does not appear to be required for U.S.S.G. 3A1.2(c)(2), which no published opinion has construed (at least that I found).

Ultimately, although I agree with the CA5, there is valid room for dispute.  This dispute may not matter all that much, because  if nexus is required, a sentencing court can (and should, in my view) vary 2 levels up to take into account the defendant's behavior where nexus is lacking.

What does matter to practitioners, however, is that the Sentencing Commission's website be accurate.  And it is not.  The Commission provides materially different versions of U.S.S.G. 1B1.3(a)(1),  depending on whether one is viewing the Guidelines in pdf form, or html form.

Here is the PDF version, as quoted above:

(1)      (A) all acts and omissions committed, aided, abetted, counseled, commanded, induced,  
                procured, or willfully caused by the defendant; and

          (B) in the case of a jointly undertaken criminal activity (a criminal plan, scheme, endeavor,
                or enterprise undertaken by the defendant in concert with others, whether or not    
                charged as a conspiracy), all reasonably foreseeable acts and omissions of others in
                furtherance of the jointly undertaken criminal activity,

          that occurred during the commission of the offense of conviction, in preparation for that      
          offense, or in the course of attempting to avoid detection or responsibility for that offense;

In this version, the structure of the paragraphs makes clear that the last sentence, beginning "that occurred", modifies both (A) and (B).  In contrast, the HTML version provides:

(1)      (A) all acts and omissions committed, aided, abetted, counseled, commanded, induced,  
           procured, or willfully caused by the defendant; and

          (B)in the case of a jointly undertaken criminal activity (a criminal plan, scheme, endeavor, or
           enterprise undertaken by the defendant in concert with others, whether or not charged as a
           conspiracy), all reasonably foreseeable acts and omissions of others in furtherance of the
           jointly undertaken criminal activity, that occurred during the commission of the offense of
           conviction, in preparation for that offense, or in the course of attempting to avoid detection
           or responsibility for that offense;

In the HTML version, the structure of the paragraphs erroneously suggests that the clause beginning "that occurred" modifies only (B).  This inference is grounded in the location of the semi-colons and the last antecedent rule ("that" would modify "reasonably foreseeable acts and omissions").

The Sentencing Commission needs to change its coding.

Split Widened: Is Use of a Fake Social Security Card for Employment Morally Turpitudinous?

Per Marin-Rodriguez v. Holder (7th Cir. Mar. 6, 2013)

This Seventh Circuit opinion widens one split, while continuing another.

The first, already extant split concerns whether immigration courts (IJs or the BIA) may consider material outside the record of conviction when determining whether a crime constitutes a crime of moral turpitude.  This blog already discussed the split here.  In brief, the CA7 and the Attorney General have concluded that, because the immigration context does not raise Sixth Amendment concerns, immigration courts should not be limited to the categorical and modified-categorical approaches to past convictions.  (p. 6-7.)  The CAs 3, 4, 8, and 11 have rejected this position.  (Id. at n.3.)  For the reasons discussed in my prior post, I am persuaded by the minority of the CA7 and AG, although the majority also has strong arguments (primarily based on a 1951 Supreme Court precedent holding that the words "moral turpitude" had a positive and fixed meaning).  To say the least, this is an issue ripe for certiorari review.

But not in this case.  This case did not even reach outside the modified categorical approach, which revealed that the alien had used a fake social security card for employment.  The CA7 joins with the CAs 5, 6, and 8 in determining that such fraudulent actions necessarily involve moral turpitude, because the false social security card is used to deceive the employer, or anyone examining the employer's records.  (Fraud is a prototypical example of moral turpitude.)  The minority--only the CA 9--relies on an entirely different statute, 42 U.S.C. 408(e)), which grants amnesty for having previously used false social security cards to aliens granted citizenship.  The CA9 believes that the exemption demonstrates that the use of a false social security card is only malum prohibitum, and not malum in se.  I would conclude the opposite.  The amnesty demonstrates that the use of a false social security card is malum in se, but to be forgiven when the alien is given a new shot at becoming a law-abiding citizen.

In all, a correct--and well-written--opinion by Judge Manion, but certainly some issues that may warrant certiorari review if a better vehicle presents itself.

Split Noted: When Does Restoration Civil Rights Discount a Conviction for the ACCA?

Per United States v. Swims (7th Cir. Feb. 28, 2013)

18 U.S.C. 922(g)(1) renders the interstate shipping, transporting, or receiving of a firearm a crime for any person who has been convicted in any court of a crime punishable by imprisonment for a term exceeding one year.  In turn, 18 U.S.C. 920(a)(2) excludes certain crimes from the statutory term "a crime punishable by imprisonment for a term exceeding one year," and further defines that term as:

What constitutes a conviction of such a crime shall be determined in accordance with the law of the jurisdiction in which the proceedings were held.  Any conviction which has been expunged, or set aside or for which a person has been pardoned or has had civil rights restored shall not be considered a conviction for purposes of this chapter, unless such pardon, expungement, or restoration of civil rights expressly provides that the person may not ship, transport, possess, or receive firearms.

In this case, upon serving his state sentence for aggravated robbery, Swims received a letter informing him "of the restoration of your right to hold offices . . . . [and] the right to restoration of licenses granted to you."  The letter did not mention Illinois's standing prohibition on gun ownership by felons.  Thus, Swims contended that this letter meant that he "has had civil rights restored," such that the aggravated robbery adjudication did not count as a conviction.

The Seventh Circuit rejects this argument, reasoning that the letter has to include restoration of "the big three" civil rights--i.e., the right to vote, hold office, and serve on a jury--in order to trigger the second sentence of the statute.  The Seventh Circuit notes, however, a circuit split over the "anti-mousetrapping" doctrine, which concerns the "unless" clause of the second sentence.  (p.4)

The anti-mousetrapping doctrine says that any restoration of civil rights itself must notify a convict that he is still forbidden from possessing firearms for the "unless" clause to apply.  Five circuits (the CAs 5, 7, 9, 11 & DC) follow this rule, while four (the CAs 4, 6, 8, & 10) hold that if the restoration is silent, but state law still would prohibit firearm ownership, the "unless" clause nonetheless applies.

 I side with in the middle of this split.  To recap only the relevant statutory language:

Any conviction  for which a person has had civil rights restored shall not be considered a conviction unless such restoration of civil rights expressly provides . . . [the] firearms [restriction]. 

The plain text of the "unless" clause, i.e., the words "such" and "expressly" require reference to the document restoring civil rights.  If--as here--a convict receives a letter notifying him of the restoration of civil rights, and that letter does not also notify him of a restriction on gun ownership, the convict could reasonably believe that the clause does not apply to his conviction.  To the extent there is any ambiguity, both the rule of lenity and the doctrine of fair notice should require the same result.  If, however, a convict does not receive any notification of the restoration of rights, but the restoration happens automatically--and silently--by operation of state law, the same "document" restoring civil rights, i.e., the code book,  expressly provides the firearms restriction.

 The circuit split at issue here is caused by an antecedent issue, on which all circuits and the Supreme Court agree: "'restoration of civil rights' does not" "connote[] a case-by-case determination."  Caron v. United States, 524 U.S. 308, 313 (1998).  Despite the uniformity, I disagree for multiple reasons.

First, the terms of the unless clause (the exception to the exception), referring to "such . . . restoration of civil rights . . . expressly ," suggest that the restoration must take place by an individualized, affirmative action, rather than by silent operation of a blanket law.  To the extent relevant, legislative history confirms this suggestion.  When the relevant language was originally passed in 1981, the Senate Committee report described its effect:  "In the event that the official granting the pardon, restoration of rights or expungement of record does not desire it to restore the right to firearm ownership, this provision is rendered inapplicable where the order or pardon expressly provides that the person may not possess firearms."  S. Rep. 97-476 at 18.

Second, the statutory term "restoration of civil rights" is ambiguous (e.g., as to what rights matter), so I would resort to noscitur a sociis.  All of the other statutory actions with respect to a conviction--i.e., expungement, setting aside, or pardoning--require an individual determination.  (Even routine expungements, such as for juvenile convictions, require the court to take an individual action with respect to one person's record, and can be prevented by an individualized showing of the need for continued collateral consequences.)

Third, requiring an individualized determination is likely the only way to harmonize the first and second sentences of the statute.  Where a state restores certain civil rights by operation of law, such as Illinois did here, its law still treats the convict as a convict for all purposes, including the rights restored and the rights still denied.  Thus, the first sentence (providing that state law governs whether a state conviction qualifies) would mandate that the convict still be treated as convict.  In contrast, where a state restores civil rights by individual order, that order itself will determine for what purposes state law will treat the convict as a convict.  Thus, even the first sentence would--as the second sentence actually does--require reference to the individual order granting a restoration of rights.

Fourth, the entire second sentence of the statute is an exception to the first, thus triggering the canon that provisos be narrowly construed.  Requiring case-by-case determinations is certainly more narrow than crediting all operations of state law.

Finally, the overall purpose of the second sentence's exception appears to be the discounting of convictions where public officials have determined that individual circumstances (whether rehabilitation, or lack of original criminal intent) render unnecessary continued, generally-applicable deprivations of civil rights.  Thus, if a state has determined that an individual convict does not pose a threat to the public such that he may have his rights restored, the criminal code provides no reason to overturn that determination and still count the conviction.