Argument preview: Legal advice as property
on Apr 22, 2013 at 7:02 pm
At 10 a.m. tomorrow, the Supreme Court will hold one hour of oral argument on the novel issue of whether a lawyer’s legal advice can be treated as a kind of property that can be taken by extortion. The argument time in the case of Sekhar v. United States (docket 12-357) will be divided equally between the two sides. Arguing for Massachusetts financier Giridhar Sekhar will be Paul D. Clement of the Washington law firm of Bancroft PLLC. Representing the federal government will be Sarah E. Harrington, an Assistant to the U.S. Solicitor General.
Background
A lawyer’s advice — depending on how good it turns out to be — can be something of value. But is it property, the kind of property that would be involved when a hoodlum might say: “Your advice, or else”? That is the rather bizarre issue that the Supreme Court will now seek to settle in a case involving the Hobbs Act — a federal law enacted in 1946 that makes it a crime to take someone else’s property by the use of a threat of force or violence.
The Hobbs Act is commonly used against mob figures who use threats as a way of doing their criminal deeds. In this case, however, the law was used against a Brookline, Mass., man, financier Giridhar Sekhar, when the government accused him of threatening to expose an alleged extra-marital affair if a lawyer for the state of New York did not give legal advice that could benefit Sekhar’s financial interests.
In a well-known decision in 2003, Scheidler v. National Organization for Women (a case about attempts to use the Hobbs Act against a plot to shut down abortion clinics), the Supreme Court appeared to have narrowed the scope of the Act, but that ruling was of no help to the Massachusetts financier. He was convicted of one count of extortion and six counts of interstate transmission of threats of extortion, and was sentenced to fifteen months in prison on each count (with the sentences to be served concurrently).
The case focuses on the meaning of the word “property” in the Hobbs Act: while legal advice is not physical property, is it a form of intangible property? The facts of the case are more complex than the legal issue.
In New York State, there is an employee pension fund for state or local government workers — the Common Retirement Fund. The fund puts its assets into various investments, as decided by the state comptroller A commitment to put money into a particular investment signals that that opportunity has the backing of the fund, thus attracting other investors.
The comptroller had made a commitment in 2008 to put $35 million into a fund managed by a group named FA Technology Ventures, but that never matured into an actual investment. In October 2009, the comptroller considered another potential $35 million investment in two funds operated by FA Tech, which potentially would give FA Tech management fees of nearly $8 million, and possibly more, over a ten-year period.
The general counsel of the Retirement Fund was considering whether to sign off on this new investment. But the legal office learned that the state attorney general was investigating the placement agent that had advised FA Tech on the earlier potential investment, but not the one in 2009. The general counsel wrote an internal memo advising against the new investment proposal. The comptroller then chose not to make that deal.
FA Tech’s management heard rumors that the general counsel of the Retirement Fund was having an extra-marital affair. The government would later charge one of the management partners — Giridhar C. Sekhar — with writing e-mail messages to the general counsel, mentioning an ethical issue.
One of the messages accused the state legal officer of black-balling a recommendation of the Retirement Fund. It threatened that,if the general counsel did not recommend going ahead on the second FA Tech investment, that the general counsel’s wife, the comptroller, the attorney general, and the press will be told that the general counsel was having an affair.
Made aware of the e-mails, the FBI traced them to Sekhar’s computer at his home in Brookline. He admitted that he was the sender. He was then accused under the Hobbs Act of attempting to obtain by threats a favorable ruling by the general counsel on the FA Tech deal. Sekhar’s lawyers moved to have the charges dismissed, contending that a recommendation by a government staff lawyer paid by the state was not a form of property that could be sought by threats.
The judge rejected the challenge, concluding that a state lawyer’s legal advice was a form of intangible property under the Hobbs Act. The judge ruled that federal prosecutors needed only to prove that Sekhar believed that the general counsel’s advice was the determining factor on whether the investment commitment would go ahead. He was convicted, and the judge threw out a post-verdict motion to wipe out the verdict, on the same property definition point.
The case went to the Second Circuit Court, and it agreed that the general counsel’s advice was property under the Hobbs Act. A state staff lawyer, the Circuit Court declared, had the right to make legal recommendations without being subjected to threats to influence them. Making recommendations, the decision said, is the way lawyers make their living.
Sekhar’s lawyers took the case on to the Supreme Court last September.
Petition for certiorari
The Sekhar petition raised the single legal issue of whether a recommendation by a salaried state attorney in a single instance is “intangible property that can be the subject of an extortion attempt” under the Hobbs Act.
The petition argued that the Second Circuit ruling had “radically” changed the meaning of “property” in three ways that were wrong: by treating the right of an official to make a recommendation as property of that official, by turning virtually any attempt at coercion into extortion when all that was involved was a lawyer’s legal advice, and by holding that the prosecution need not show that the property involved has any value to that lawyer.
Sekhar’s lawyers contended that the Second Circuit ruling conflicted with the Justices’ 2003 decision in the Scheidler case, arguing that the Court had narrowed the concept of property under the Hobbs Act to something of value that a person can exercise, transfer, or sell, including tangible assets that are subject to an individual’s control.
The Justice Department urged the Court not to grant review, asserting that the Second Circuit got the issue right, and that there was no conflict among the federal appeals courts on that question. On the correctness of the decision below, the Department argued that the concept of property “includes not only the tangible and intangible assets of a business, but also the control over those assets.” That includes, the brief in opposition said, control of a business in any legitimate manner.
A lawyer’s advice, according to the government, is something that an attorney sells to a client and thus it amounts to intangible property subject to extortion.
The government also contended that the Second Circuit did not contradict the Justices’ Scheidler decision, because that ruling turned on the meaning of the word “obtain” in the Hobbs Act, not the word “property.”
Briefs on the merits
Giridhar Sekhar’s brief on the merits asked the Court to look closely as to what had actually been done when the Retirement Fund’s general counsel made a legal recommendation. It is not something that has been transferred to anyone else, and certainly was not transferred to Sekhar. Once delivered, a piece of legal advice does not become property of someone else, the brief added.
What the general counsel did, in his official state-paid duties, according to the brief, was to make routine, case-by-case recommendations as part of an internal government decision-making process. If, as the Supreme Court has held, a license not yet issued by a government agency and its issuance by the agency do not make it property, then internal legal advice cannot become property, Sekhar contended.
If the general counsel had retracted his earlier advice to veto the proposed investment and had made a recommendation more favorable to FA Tech’s interest, the brief said, that did not create property that could be acquired.
What the Second Circuit did in trying to salvage the guilty verdict, Sekhar argued, was to come up with the theory that the “property” at issue was the general counsel’s right to give legal advice without being subjected to threats. That “right” is no more property than the recommendation itself, his brief asserted.
What the Court did in the Scheidler opinion, the brief said, was to use common sense. And the Scheidler limitation of the Hobbs Act, the document added, reflected the congressional judgment to make it a federal crime to engage in extortion, but not to engage in mere “coercion.”
Finally, Sekhar’s lawyers argued that the “rule of lenity” and the need to avoid “federalizing” many crimes counseled against extending the definition of extortion to include legal advice by a paid government attorney. If what Sekhar did constituted extortion under federal law, and not mere coercion, that would bring many forms of “social protest and labor activism” under the Hobbs Act, the brief said.
The federal government’s merits brief argued that the Hobbs Act extends to “intangible rights with economic value,” noting that the federal law was modeled on New York State’s extortion law. That state law had been interpreted, as long ago as 1892, to mean that it covered property beyond “tangible articles alone,” according to the brief. State courts had read that law to include “the right to run a business and the right to labor.” Congress passed the Hobbs Act against that broad background, the brief argued.
When one interferes with someone else’s “right to pursue one’s existing business or occupation free from improper interference,” that constitutes a violation of the basic principles of the Hobbs Act, the government asserted. “The right to work in order to earn a living is among the most important intangible rights protected as property, as a variety of sources of law recognize,” the brief said.
When Congress enacted the Hobbs Act, it did so, the Department’s lawyers contended, to fight racketeering and the habit of racketeers of using extortion to take control of legitimate businesses and labor unions. That aim would be frustrated if Sekhar’s view of the Hobbs Act were to prevail, the document said.
On the details of what the Retirement Fund’s general counsel was doing in this case, the government brief said the state lawyer was giving substantive legal advice to the comptroller and that what Sekhar attempted to do was to take control of the general counsel’s advice and turn it to his own property.
The government argued that interpreting the Hobbs Act to reach what Sekhar did would not intrude upon states’ interests in enforcing their own laws. Congress passed the law knowing that it would reach conduct that states already made crimes under their own laws, and it enacted the law under its extensive Commerce Clause powers, the document said.
Finally, the government’s lawyers argued that “the rule of lenity” “has no role to play in this case,” because that is “a tie-breaking rule” that helps resolve competing interpretations of a criminal law when they are in balance. The meaning of “property” under extortion principles is clear, and thus there is no balance to strike.
Sekhar’s side in the case is supported by the National Association of Criminal Defense Lawyers and by the Cato Institute, a libertarian advocacy organization. Their amicus brief contended that Sekhar’s case illustrated “a recurring pattern in federal criminal law,” with Congress passed a law directed at a specific problem, federal prosecutors seek to enlarge its meaning to other problems they perceive, some courts accept those expanding arguments, and then the Supreme Court “steps in to return the statute to the limits that the text and principles of statutory interpretation require.”
That brief echoed Sekhar’s expressions of concern about the impact on federalism principles, and on the need to apply the “rule of lenity” to a criminal statute.
Analysis
If the Supreme Court were to view this case as confined to the Hobbs Act, it might well be easier for the federal government to win. It is unusual to think of legal advice as “property,” but it is not too hard to think of it as having economic value, and that puts an extort to steer it by threats closer to the concept of extortion.
But an expansive definition of “property” in this case, embracing the right to run a business and the right to make a living, probably could not be confined to Hobbs Act jurisprudence. It could set the stage for many other assertions of rights that are insulated from interference by government regulation or control. This is a Supreme Court that is not particularly fond of reading federal laws to create original new forms of “rights.”
The government, then, has to depend quite heavily upon the Court examining the Hobbs Act, and its New York antecedent state law, and finding there an expansive notion of how to define intangible property that can be confined to the extortion context.
Giridhar Sekhar’s appeal, aside from relying upon a claim that treating legal advice as either a form of “property” or as a form of a “property right” as absurd, probably made its strongest points in arguing that a criminal statute should not be extended out to novel reach without Congress having contemplated that specifically, and in arguing against “federalization” of the crime of coercion.
What may well work against Sekhar, though, are the facts of the case of what he was accused of doing: using a threat of damaging publicity and damaging reports to a lawyer’s superiors in order to get a policy decision turned around so that he and his firm could pocket millions in management fees. That was hardly a form of petitioning government for a redress of grievances, so much as it has the aroma of pure manipulation for economic gain. His lawyers need to find ways to keep the Justices thinking about legal arguments and not focus too heavily upon the prosecution’s evidence.
