Supreme Court Briefs Filed in Kawashima

The petitioners’ and respondent’s briefs have been filed in Kawashima v. Holder, Sup. Ct. Docket No. 10-577, appealing 615 F.3d 1043 (9th Cir. 2010).  As described in our original post, that case involves the question of whether pleas to section 7206 offenses (subscribing to false statements and assisting same) are “aggravated felonies” that result in deportation under the immigration laws.  The case turns largely on the statutory interpretation of the relevant portion of 8 U.S.C. §1101(a)(43)(M).

The petitioners’ position is essentially the same as it was below (although more developed).  The primary argument is based on the language of 8 U.S.C. §1101(a)(43)(M), which provides, in relevant part, that an aggravated felony includes an offense that:

(i) involves fraud or deceit in which the loss to the victim or victims exceeds $10,000; or

(ii) is described in section 7201 of the Internal Revenue Code of 1986 (relating to tax evasion) in which the revenue loss to the Government exceeds $10,000.

The crime to which petitioners pled is plainly not an aggravated felony under the second prong, because petitioner pled to section 7206 and not to section 7201.  Petitioners argue that section 7206 offenses cannot be covered by the first prong either.  They base this argument on ordinary principles of statutory construction.

First, petitioners argue that the use of the term “revenue loss” in the second prong of the statute indicates Congressional intent that the term “loss to the victim or victims” in the first prong does not include a revenue loss to the government.  The purposeful use of different terms in each section seems to imply such an intent.  Furthermore, the response that this difference simply reflects a different purpose for each prong (one that focuses on governmental loss and one that does not) ultimately supports petitioners’ overall argument that the first prong was not intended to reach losses to the government such as through non-section 7201 tax crimes.

Second, petitioners posit that interpreting tax crimes to fall into the first statutory prong would render the second superfluous.  As we previously discussed, this seems to be a strong argument.  At a minimum, it would be odd for Congress to place one tax crime in a specific statutory provision and all other tax crimes in a vague and broad provision that covers many other offenses.  And the analysis in Leocal v. Ashcroft, 543 U.S. 1 (2004) (cited by petitioners) strongly implies that Congress should not be considered to have intended that meaning.

Finally, petitioners argue that the reference in the second prong to “tax evasion” helps to define (and limit) the scope of the term “fraud or deceit” in the first prong and that the sentencing guidelines support this view.  Petitioners’ analysis in this respect is largely based on the application of the interpretative canon that the specific limits the more general.  Because terms like “revenue loss” and “tax evasion” are used in the second prong, it is not appropriate — under petitioners’ application of this canon — to read those terms into the first prong. Petitioners’ reliance on the sentencing guidelines seems to be a stretch given that there is no direct support for the premise that Congress actually considered these guidelines when formulating the aggravated felony definition.  (Petitioners argue that Congress “likely” considered same given the timeline of adoption of the various provisions.)

In the alternative, the Kawashimas argue that their pleas did not involve fraud or deceit (and thus could not be included in the first prong anyway) and that, even if they might be included in that prong, the whole scheme is so confusing that the rule of lenity should apply to exempt them from a strict application.  The first argument relies on the elemental approach to the determination of whether a crime is an aggravated felony as applied by the Court in Nijhawan v. Holder, 555 U.S. 1131 (2009) and earlier rulings.  Under that approach, courts are supposed to determine whether the relevant factors for aggravated felony purposes (here, among others, fraud or deceit) were necessarily elements of the crime for which the defendant was convicted and not to focus on the specific conduct committed by the specific defendant.  See also Leocal, 543 U.S. at 7.  Because the elements of section 7206 do not require a finding of fraud or deceit (petitioners characterize it, not altogether unfairly, as a tax perjury statute), under this “elements and nature” approach, a section 7206 offense cannot amount to an aggravated felony under the first prong of 8 U.S.C. §1101(a)(43)(M).  This second argument is a Hail Mary and implicitly relies on the confusing state of the immigration law in this area as demonstrated in the rest of petitioners’ brief.  While immigration rules are ludicrously complex in this area, so is much of criminal law.  Unless the members of the Court are prepared to hold that any issue complex enough to find its way into their hands is necessarily unclear or confusing enough to give rise to the rule of lenity, it would seem an odd way to resolve the case (although a refusal by the Court to apply ludicrously complex rules might convince Congress to be more rational in drafting statutes).

The Solicitor General’s brief generally tracks the petitioners’ arguments in substance but not in order.  The government takes issue with the petitioners’ assertion that section 7206 does not require an element of fraud or deceit by focusing more on the dictionary definition of deceit than the historic application of section 7206 in jurisprudential context.  As to the question of fraud, the government attempts to equate material falsehoods (required for section 7206) with fraud (or at least deceit).  This appears to be a difficult argument to sustain unless the Court is prepared to depart from principles that are fairly well settled in the lower courts.  The Tax Court and several Circuit Courts of Appeals have held that a conviction under section 7206 does not necessarily trigger fraud penalties or the fraud period of limitations in the civil side of the Internal Revenue Code.  See, e.g., Wright v. Commissioner, 84 T.C. 636 (1985).  It is hard to reconcile the government’s argument with these authorities.  Perhaps the best way to distinguish these authorities is on the basis that the material falsehoods at issue did not amount to a showing that the taxpayer intended to prepare a fraudulent return (i.e., to commit tax evasion) and that the aggravated felony test asks the (different) question of whether any fraud was conducted against a “victim.”  The logical problem with this argument is that it assumes that there is some other way for the government to suffer a loss than the fraudulent return.  If the fraud has to be linked to the loss, then the interpretation of section 7206 in cases like Wright seems inconsistent with the government’s argument in its brief.

The government attacks petitioners’ specific-over-general argument on the basis that the second prong does not by its terms encompass all tax offenses (it refers only to section 7201, the capstone tax offense).  While this is true, it raises the question of why Congress would have isolated one tax offense from all of the others (assuming all of the others are included in the first prong).  This, in turn, drives into petitioners’ superfluity argument.  On that question (where much of the merit rests in our opinion), the government starts with the premise that Congress sometimes wishes to be superfluous.  It then argues that the failure of the second prong to cover all tax offenses (as opposed to section 7201) would render that prong ambiguous.  This argument seems baseless.  The only way prong one is rendered ambiguous by petitioners’ argument is if you are predisposed to assume that all tax offenses are either in prong one or in prong two.  If you come to the statutory interpretation exercise without that excess luggage, it is perfectly natural for prong two to deal with the sole exemplar of a tax offense that is an aggravated felony and for prong one to include no tax offenses at all.  (This is arguably the most natural reading of the provision).  The government’s efforts to force ambiguity into prong one by arguing that Congress might have wanted to make really, really, really sure that a tax statute — section 7201 — that for all time has stood as the capstone of tax fraud/evasion would be interpreted as involving fraud or deceit seem to us a bit of a stretch.

The government finishes by focusing on the legislative disconnect between the aggravated felony rules and the sentencing guidelines (fairly chastising petitioners for failing to prove a direct connection).  It also dismisses the applicability of the rule of lenity on the ground that mere ambiguity is insufficient to trigger that rule (the case law indicates the ambiguity must be grievous).  Finally, the government notes that the agency never formally addressed the question of whether non-section 7201 tax crimes can be aggravated felonies.  In the government’s view the agency should be allowed to do so on any remand and any such decision should be accorded Chevron deference.  As mentioned above, we doubt that the Court will resolve the case on either of these bases.

Petitioners’ reply brief is due October 31, and the case is scheduled for oral argument on November 7.