In a statutory interpretation case last week that was very similar to the statutory interpretation issues in the “foreign official” challenge, the Supreme Court reminded us that the law means what actual words in a specific statute say (not what other similar statutes may say) and not what the SEC interprets words in a statute to mean.
The issue in last week’s Supreme Court opinion Digital Realty Trust v. Somers was, in the words of the court, “does the anti-retaliation provision of Dodd-Frank extend to an individual who has not reported a violation of the securities laws to the SEC and therefore falls outside the Act’s definition of “whistleblower”?
The Supreme Court, in an opinion authored by Justice Ginsberg, answered that question no, “to sue under Dodd-Frank’s anti-retaliation provision, a person must first “provid[e] … information relating to a violation of the securities laws to the Commission.”
To get there, the Court had to wrestle with the potential intersection of another statute. As stated by the Court:
“Endeavoring to root out corporate fraud, Congress passed the Sarbanes-Oxley Act of 2002 and the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Both Acts shield whistleblowers from retaliation, but they differ in important respects. Most notably, Sarbanes-Oxley applies to all “employees” who report misconduct to the Securities and Exchange Commission (SEC or Commission), any other federal agency, Congress, or an internal supervisor. Dodd-Frank delineates a more circumscribed class; it defines “whistleblower” to mean a person who provides “information relating to a violation of the securities laws to the Commission.”
Much of the Court’s opinion, as well as concurring opinions, focused on statutory construction including the importance of legislative history and the below quotes have direct relevant to many FCPA statutory interpretation issues.
“When a statute includes an explicit definition, we must follow that definition,” even if it varies from a term’s ordinary meaning.
“[W]hen Congress includes particular language in one section of a statute but omits it in another[,] . . . this Court presumes that Congress intended a difference in meaning.”
“Legislative history is of course not the law, but that does not mean it cannot aid us in our understanding of a law.”
“Legislative history can be particularly helpful when a statute is ambiguous or deals with especially complex matters. But even when, as here, a statute’s meaning can clearly be discerned from its text, consulting reliable legislative history can still be useful, as it enables us to corroborate and fortify our understanding of the text. Moreover, confirming our construction of a statute by considering reliable legislative history shows respect for and promotes comity with a coequal branch of Government. For these reasons, I do not think it wise for judges to close their eyes to reliable legislative history—and the realities of how Members of Congress create and enact laws—when it is available.”
I was directly involved in the “foreign official” challenges (i.e. are employees of so-called state-owned or state-controlled enterprises “foreign officials” under the FCPA) between 2011 and 2014.
Among other things: (i) I was engaged in connection with the original Carson challenge which relied in part on my “foreign official” declaration; (ii) I was engaged in connection with the Lindsey Manufacturingchallenge which also relied in part on my declaration; (iii) I assisted the families of Joel Esquenazi and Carlos Rodriguez secure competent appellant FCPA counsel and assisted the pro bono counsel in that case; and (iv) after the 11th Circuit’s flawed “foreign official” decision in Esquenazi in 2014 (for a full discussion, see this article), I urged the Supreme Court in this amicus brief to accept cert.
In short, I am very familiar with the challenges and the statutory interpretation issues presented to the Supreme Court.
Because of how the DOJ has enforced the FCPA (the vast majority of corporate enforcement actions are resolved without any meaningful judicial scrutiny and the vast majority of corporate enforcement actions lack individual prosecutions), it was not a huge surprise that the Supreme Court denied cert. After all, the “foreign official” issue was only addressed by one appellate court and ordinarily the Supreme Court prefers to let issues percolate in the lower courts before agreeing to hear a case.
Even though the Supreme Court denied cert in Esquenazi, in recent years the Supreme Court has heard several cases concerning aggressive theories of federal criminal prosecution and/or implicating the same general statutory interpretation issues at issue in Esquenazi. Last week’s Somers decision was just the latest.
In each of the analogous decisions the Supreme Court (often by wide margins) rejected the government’s statutory interpretation and if the Supreme Court had accepted cert in Esquenazi it is probable that the Supreme Court would have overturned the convictions.
Even though the current Supreme Court is often ideologically divided, the Court has shown remarkable consistency in decisions in which the Court was called upon to interpret federal criminal statutes or other issues using accepted cannons of statutory interpretation.
For instance in U.S. v. Skilling (2010), the Supreme Court rejected the DOJ’s “honest services fraud” theory of criminal prosecution. Instead of the broad construction the DOJ urged, the Court adopted a narrow interpretation of the relevant statute and reiterated “if Congress desires to go further, it must speak more clearly.”
Likewise in Bond v. U.S. (2013), the Supreme Court unanimously rejected the DOJ’s theory of criminal prosecution. Instead of the expansive construction of the term “chemical weapons” the DOJ urged, the Court adopted a narrow interpretation stating that the DOJ’s interpretation “would sweep in everything from the detergent under the kitchen sink to the stain remover in the laundry room.”
Similarly, as highlighted in this prior post, in U.S. v. Yates (2015), the Supreme Court again rejected the DOJ’s theory of criminal prosecution in the infamous are fish “tangible objects” case. Calling the DOJ’s enforcement theory an “unrestrained” and “unbounded” reading of relevant statute, the Court reversed the 11th Circuit’s opinion affirming the criminal conviction.
Most recently, in U.S. v. McDonnell, (see here for the prior post), the Supreme Court again rejected the DOJ’s theory of criminal prosecution. Calling the DOJ’s theory of prosecution “boundless,” the Court adopted a narrow interpretation of the meaning of “official action” (a term that also appears in the FCPA) in the federal bribery statute. As stated by the Court:
“There is no doubt that this case is distasteful; it may be worse than that. But our concern is not with tawdry tales of Ferraris, Rolexes, and ball gowns. It is instead with the broader legal implications of the Government’s boundless interpretation of the federal bribery statute. A more limited interpretation of the term “official act” leaves ample room for prosecuting corruption, while comporting with the text of the statute and the precedent of this Court.”
The McDonnell court further stated (internal citations omitted)
“[W]e cannot construe a criminal statute on the assumption that the Government will “use it responsibly.” The Court in Sun-Diamond declined to rely on “the Government’s discretion” to protect against overzealous prosecutions under §201, concluding instead that “a statute in this field that can linguistically be interpreted to be either a meat axe or a scalpel should reasonably be taken to be the latter.” A related concern is that, under the Government’s interp0retation, the term “official act” is not defined “with sufficient definiteness that ordinary people can understand what conduct is prohibited,” or “in a manner that does not encourage arbitrary and discriminatory enforcement.” Under the “‘standardless sweep’” of the Government’s reading, public officials could be subject to prosecution, without fair notice, for the most prosaic interactions. “Invoking so shapeless a provision to condemn someone to prison” for up to 15 years raises the serious concern that the provision “does not comport with the Constitution’s guarantee of due process.” Our more constrained interpretation of §201(a)(3) avoids this “vagueness shoal.””
The Esquenazi cert petition presented the Supreme Court with many of the same statutory interpretation issues addressed by the Supreme Court in Skilling, Bond, Yates, McDonnell and Somers.
Indeed, the statutory interpretation issues in Esquenazi were even more compelling because: (i) competing versions of the FCPA Congress considered yet rejected, specifically included state-owned or state-controlled enterprise (SOE) concepts; and (ii) laws passed both before the FCPA and after the FCPA contain the term “instrumentality” as well as SOE concepts.
Many people in the FCPA space view the “foreign official” issue as settled because of one appellate court decision, flawed as it was.
Yet, as indicated by the above cases, the current Supreme Court has clearly, and consistently, rejected the government’s boundless interpretation of other federal criminal statutes or laws and it is probable that if the Court had accepted the Esquenazi case it would have done the same.
FCPA Institute - Boston (Oct. 3-4)
A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learning. Learn more, spend less. CLE credit is available.