On Wednesday last, the Supreme Court issued its opinion in Yates v. US, No. 13–7451 (02/25/2015). Defendant, a redeless fisherman, was prosecuted for dumping undersized fish identified by a federal inspector instead of preserving them for evidence. The Supreme Court held, 5-4, that defendant could not be charged with destroying, concealing, and covering up undersized fish to impede a federal investigation, in violation of 18 USC section 1519. That provision was part of the Sarbanes-Oxley Act,“legislation designed to protect investors and restore trust in financial markets following the collapse of [the] Enron Corporation.”
Section 1519 provides that a person may be fined or imprisoned for up to 20 years if he “knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence” a federal investigation.
Justice Ginsburg, writing for an odd alliance of Justices Breyer and Sotomayor and Chief Justice Roberts, concluded that ‘[t]angible object’ in § 1519 . . . is better read to cover only objects one can use to record or preserve information, not all objects in the physical world.” The meaning of a term in legislation turns on “the specific context in which that language is used, and the broader context of the statute as a whole.”
Thus, the Court’s analysis hinges in part on the placement of section 1519 under a caption stating “Destruction, alteration, or falsification of records in Federal investigations and bankruptcy;” on the next-higher caption, “Criminal penalties for altering documents;” and the caption of a companion section, “Destruction of corporate audit records.” It forms part of a series of document-related provisions. (See sections 1516 (audits of recipients of federal funds); 1517 (federal examinations of financial institutions); and 1518 (criminal investigations of federal health care offenses)) Thus, section 1519 was part of a litany of “specialized provisions expressly aimed at corporate fraud and financial audits.”
A provision subsequent to section 1519, section 1512, provides: “(c) Whoever corruptly— (1) alters, destroys, mutilates, or conceals a record, document, or other object, or attempts to do so, with the intent to impair the object’s integrity or availability for use in an official proceeding . . . “ is subject to criminal penalties. All parties agreed that “other object” meant any object in the world, and therefore was duplicative of section 1519 unless “tangible object” meant a category less inclusive than section 1512’s ”other object.”
Section 1549 details acts of obstruction: “alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object.” These were deemed acts not comparable to ditching undersized groupers overboard.
Applying the maxim, “noscitur a sociis,” i.e., a word is known by the company it keeps, section 1519 could not be given “a meaning so broad that it is inconsistent with its accompanying words, thus giving unintended breadth to the Acts of Congress.”
In addition, the Court cited “ejusdem generis,” interpreted as “Where general words follow specific words in a statutory enumeration, the general words are [usually] construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words.”
Justice Alito, in a concurring opinion, added that for him, the captions, nouns, and verbs cognate to section 1519 were determinative. For example, concerning the relevant nouns, “A fish does not spring to mind—nor does an antelope, a colonial farmhouse, a hydrofoil, or an oil derrick.”
“Where noscitur a sociis and ejusdem generis apply, ‘known unknowns’ [in catch-all terms] should be similar to known knowns, i.e., here, records and documents.”
As to the verbs, such as “alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in,” Alito noted that:
“Although many of those verbs could apply to nouns as far-flung as salamanders, satellites, or sand dunes, the last phrase in the list—“makes a false entry in”—makes no sense outside of filekeeping. How does one make a false entry in a fish?”
As will be seen, unintended consequences follow Yates in King v. Burwell, a statutory construction case, and Tsarnaev-related prosecutions for violations of section 1519.
Yates’ Statutory Construction May Roil King v. Burwell
Wednesday, the Supreme Court will hear oral arguments in King v. Burwell, No. 14-114, an existential challenge to the Patient Protection and Affordable Care Act, or ACA, or Obamacare.
“To increase the availability of affordable insurance plans, the Act provides for the establishment of ‘Exchanges,’ through which individuals can purchase competitively-priced health care coverage. See ACA §§ 1311, 1321. Critically, the Act provides a federal tax credit to millions of low- and middle-income Americans to offset the cost of insurance policies purchased on the Exchanges. See 26 U.S.C. § 1311. The Exchanges facilitate this process by advancing an individual’s eligible tax credit dollars directly to health insurance providers as a means of reducing the upfront cost of plans to consumers.” (King v. Burwell, No. 14–1158 (4th Cir. 07/22/2014)
The ACA gave states the opportunity to opt-out. “§ 1321 of the Act clarifies that a state may ‘elect’ to establish an Exchange. Section 1321(c) further provides that if a state does not ‘elect’ to establish an Exchange . . . , ‘the Secretary [of HHS] shall ․ establish and operate such exchange within the State․’ ACA § 1321(c)(1). Only sixteen states plus the District of Columbia have elected to set up their own Exchanges; the remaining thirty-four states rely on federally-facilitated Exchanges.”
The IRS awarded credits to those who joined health plans through any exchange in any state, regardless of whether the state or the federal government created the exchange. Plaintiffs demurred.
“The plaintiffs’ primary rationale for their interpretation is that the language says what it says, and that it clearly mentions state-run Exchanges under § 1311. If Congress meant to include federally-run Exchanges, it would not have specifically chosen the word ‘state’ or referenced § 1311. The federal government is not a ‘State,’ and so the phrase ‘Exchange established by the State under [§ ] 1311,’ standing alone, supports the notion that credits are unavailable to consumers on federal Exchanges.”
The Circuit found that, consistent with the Yates approach, “a reviewing court should not confine itself to examining a particular statutory provision in isolation. Rather, [t]he meaning — or ambiguity – of certain words or phrases may only become evident when placed in context.” Thus, “[g]iven that Congress defined ‘Exchange’ as an Exchange established by the state, it makes sense to read § 1321(c)’s directive that HHS establish ‘such Exchange’ to mean that the federal government acts on behalf of the state when it establishes its own Exchange.”
An examination of the credit reporting requirements shows that several categories of the report would be extraneous if the tax credits were not available on both state- and federally-facilitated Exchanges. Section 1311 of the ACA provides that only “qualified individuals” may purchase health plans in the individual markets offered through the Exchanges, and explains that a “qualified individual” is a person who “resides in the State that established the Exchange.” The ACA could hardly have meant that individuals in 34 states were not “qualified,” although there is a certain circularity in this argument.
Ultimately, the Circuit was unable to resolve the statute’s ambiguity and instead chose to adopt the IRS’ expansive interpretation of the statute:
“Widely available tax credits are essential to fulfilling the Act’s primary goals and that Congress was aware of their importance when drafting the bill. The IRS Rule advances this understanding by ensuring that this essential component exists on a sufficiently large scale. The IRS Rule became all the more important once a significant number of states indicated their intent to forgo establishing Exchanges. With only sixteen state-run Exchanges currently in place, the economic framework supporting the Act would crumble if the credits were unavailable on federal Exchanges. Furthermore, without an exception to the individual mandate, millions more Americans unable to purchase insurance without the credits would be forced to pay a penalty that Congress never envisioned imposing on them. The IRS Rule avoids both these unforeseen and undesirable consequences and thereby advances the true purpose and means of the Act.”
It was inevitable that no one would be happy with one-half of a baby, and both sides to the argument had reason to complain about side-stepping the words of the ACA and instead choosing to lay the whole issue (and blame) on the IRS, already a much-abused entity. Why should centerpiece national legislation turn on what an administrative agency thought Congress meant?
It is entirely possible that Yates, a relatively minor case, may influence King, a case of magisterial importance for the nation. Should the Circuit have gone with its gut feelings about the true meaning of section 1311 and will the Supreme Court now do so?
Applying the maxim, “noscitur a sociis,” does section 1311 obtain the general meaning from its cognate ACA provisions, i.e. that state exchanges include federally-created exchanges for the state? This interpretation would seemingly give unintended breadth to the ACA relative to section 1311.
In addition, “ejusdem generis,” applied to King, seems to bar the use of general words, i.e. the other credit award and administration provisions, to expand the specific words in section 1311. However, this turns on assuming that section 1311 was advisedly, from Congress’ point of view, more specific than the other provisions.
In other words, the Yates maxims of construction seem to start with the assumption that the challenged provision is primus inter pares. But who is to say that the challenged provision is the key provision of the legislation in question? Is section 1311 the center of the ACA world? If any other ACA provision is the key provision, than section 1311 must be judged against it instead of the other way around.
Finally, in terms of Supreme Court augury, the Yates majority consisted in part of Alito and Roberts. At the very least, it appears there will be a King majority composed of liberal and conservative Justices committed to actual and definitive statutory construction of section 1311 and that certiorari was granted because of the Circuit’s refusal to engage in actual and definitive statutory construction. However, unless the majority also see that the Yates rules assume a primacy in section 1519 that might not be justified with regard to section 1311, the ACA could well be headed for a downfall.
Tsarnaev’s Backpack and the Substance of Section 1519
Does it make more sense to apply section 1519 to a backpack than undersized groupers? On April 15, 2013, two explosions blasted the finish line of the Boston Marathon. The blasts were caused by fireworks explosives contained in pressure cookers. (US v. Kadyrbayev, No. 1:13-cr-10238-DPW (D. Mass 2013))
Dzhokhar Tsarnaev and Tamerlan Tsarnaev were named as the principal perpetrators of the bombings. On April 19, Dzhokhar Tsarnaev was arrested in Watertown, Massachusetts. His brother, Tamerlan Tsarnaev, had been killed earlier that day following a shootout with police.
Dias Kadyrbayev and Azamat Tazhayakov were fellow students of Dzhokhar Tsarnaev at the University of Massachusetts at Dartmouth. On the evening of April 18, 2013, Kadyrbayev showed Tazhayakov a text message he had received from Dzhokhar Tsarnaev, which read, “If yu [sic] want yu [sic] can go to my room and take what’s thereQ but ight [sic] bro [sic] Salam aleikum.”
On April 21, the FBI searched Dzhokhar Tsarnaev’s dormitory room pursuant to a search warrant. However, on April 18, Kadyrbayev and Tazhayakov had entered Dzhokhar Tsarnaev’ s dormitory room, removed several items from the room, including Tsarnaev’s laptop computer and a backpack. Kadyrbayev placed Dzhokhar Tsarnaev’s backpack, which contained several items including fireworks, in a garbage bag and placed it in a dumpster. On April 26, Dzhokhar Tsarnaev’s backpack was found in landfill. Inside the backpack, the agents recovered fireworks.
Kadyrbayev and Tazhayakov were charged with a violation of 18 USC section 1519 because they sought to destroy the backpack and its contents. On July 21, 2014, Tazhayakov was found guilty after a jury trial. Kadyrbayev pleaded guilty on August 21. These convictions are clearly in jeopardy under Yates, as a backpack and the explosives therein may not be “tangible objects” within the scope of section 1510, as they are not records or documents. To paraphrase Justice Alito, how does one make a false entry on a backpack or explosives?
Like a butterfly’s wing-strokes influencing events half a world away, Yates has created immediate unanticipated effects in diverse cases. In King v. Burwell, the use of the maxims “noscitur a sociis” and “ejusdem generis” may arguably help or hurt the parties, but surely they cannot be ignored, having been proferred in a Supreme Court statutory construction case only a week old. And Yates has enormous importance to those convicted of a violation of section 1519, as in the Tsarnaev-related concealment and attempted destruction of the bomber’s backpack and its contents.