SCOTUS News, March 23rd, 2018: Cyan Switch-Up

SCOTUS is back to its steady release of cases after a quiet couple of weeks. Let’s take a look.

Marinello v. US

Petitioner Marinello failed for many years to properly file taxes. He did so knowingly, violating specific clauses of the so-called Omnibus Clause of the Tax Code. Marinello tried to argue, however, that the government must show that a violator intended their violation in order for the Omnibus Clause to prevail.

The hole in the government’s case, and the reason SCOTUS reverses in favor of Marinello, is in the specific way the Omnibus Clause works. To be convicted under the Omnibus Clause, a defendant must be aware of the pending investigation in order to be charged with somehow obstructing that investigation. Marinello was able to show that he did not intend to impede the IRS’ investigation of him, a more specific situation than the undisputed fact that he failed to file taxes in the first place.

A seven-Justice majority ruled along this narrower reading of the clause. The majority, led by Justice Breyer, also refers to House and Senate Reports written when Congress enacted the Omnibus Clause. The relevant sections emphasize that the Clause is intended to punish those who threaten agents, officers, or employees of the IRS or US government in general. Marinello did not threaten IRS agents, he only failed to report income. The majority went on to say that the broad interpretation the government favored would potentially punish an overly large group of non-serious offenders of the Tax Code.

Justice Thomas, joined by Alito, strongly dissents, based on the cumbersome nature of legislative intent versus plain language. He further bolsters the narrower reading of the Omnibus Clause by pointing to the varying levels of mens rea determination (i.e. Marinello knew he was violating the Tax Code), and the majority’s less-than-perfect usage of established precedent.

Ayestas v. Davis

A district court sentenced petitioner Ayestas to death. Ayestas claimed that trial counsel did not conduct a proper investigation of his history to find evidence to mitigate his death sentence. He requested investigation funds to prove two separate ineffective-assistance-of-counsel claims. The appellate court denied these requests on procedural grounds. SCOTUS intervened to settle the question of whether Ayestas’ funding request to the appellate court had merit.

In a unanimous decision, SCOTUS holds that Ayestas’ request had merit, and that the Fifth Circuit applied the wrong legal standard in their dismissal. SCOTUS cites many different precedents, most famously Strickland v. Washington, as well as Martinez v. Ryan, and Trevino v. Thaler more recently. In addition, the Court holds that petitioner’s funding requests, and the proceedings around it, qualify as adversarial judicial proceedings, contrary to the argument put forth by the Texas Department of Corrections.

Justice Alito drives the point home when discussing the necessity of investigative funds: “[The law] appears to use the term “necessary” to mean something less than essential. Because it makes little sense to refer to something as being “reasonably essential,” the Court concludes that […] a reasonable attorney would regard the services as sufficiently important”.

Justice Sotomayor, with Ginsburg joining, concurs with the majority. She goes further still, however, arguing against remand. Instead, she shows how Ayestas has a valid claim for investigation funding, because he only has to prove the merits of an investigation, which by the concurrence’s reckoning, he has shown. She also points to other evidence that the Fifth Circuit did not rule correctly in denying Ayestas’ claims. Ayestas’ trial counsel did not conduct a necessary investigation of his mitigating background, despite a compelling need to do so.

Cyan Inc. v. Beaver County Employees Retirement Fund

The only surprise for the FantasySCOTUS Crowd this week came with Cyan Inc. v. Beaver County Employees Retirement Fund.

This case concerns a statute in the 1933 Securities Act regarding class-action lawsuits. Complicating matters, Congress has passed amendments to the 1933 Act since its original passage after the Great Depression. The disputed primacy of these amendments gave rise to this case. Cyan sold stock to several investors (including the Retirement Fund). When Cyan’s stock took a plunge, these investors brought a damages class action.

The investors brought their suit in state court under federal law. This is an important distinction. Cyan tried to have the suit dismissed because the amendments to the Securities Act bar state-law class-action claims. The Circuit Courts rejected Cyan’s argument.

So does SCOTUS. In a rather surprising 9-0 affirmance, Justice Kagan writes circles around Cyan’s attempts to have the investors’ claims dismissed. First, she explains the authority of the amendments. Congress wrote the amendments to remove state-level class action claims to federal court for the purpose of dismissal. Essentially, the intent of the clauses was to expediently dismiss state-law class action claims so that federal law would control. But this does not mean that the Act says, or was intended to say, that state courts could not adjudicate class action litigation based on federal law. The intent was to add a bit of streamlining to the litigation of these kinds of claims. Class-action claims should be filed under federal law. Cyan argued that class action claims must be filed under federal law and in federal court, but on this point SCOTUS disagrees.

Cyan’s arguments fail, because this is not even the type of litigation the investors attempted. The relevant statutory language does bar state-law class action claims from being litigated under the Securities Act. But, in Kagan’s own words, “…the section says nothing, and so does nothing, to deprive state courts of jurisdiction over class actions based on federal law.”

cyan beaver

Cyan Inc. v. Beaver County Employees Retirement Fund

This case threw the Crowd for a loop, mainly due to how rare it is for SCOTUS to unanimously affirm a lower court ruling. But that still is only the Crowd’s third miss of the season. There are sure to be more surprises along the way. Sign up for FantasySCOTUS today and cast your predictions for the remainder of the term!

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