Opinion Recap: US v. Santos

Below, Amy discusses one of the decisions released on Monday.

At issue in No. 06-1005, United States v. Santos, was whether the term “proceeds,” as used in the federal money-laundering statute, means “receipts” (as the United States contended) or “profits” (as the respondents argued). Until Monday, courtwatchers were less interested in what the Court was going to do in Santos than they were in when it was going to do something: as Marty noted shortly after the opinion was released, Santos was the oldest case still remaining from the October sitting, and certainly few people would have anticipated that we would have had to wait longer for Santos than for more high-profile cases (such as Medellin) from the same sitting. And although Monday’s decision answered the “when” question, it left open others, such as (again, as Marty observes) what behind-the-scenes machinations caused the decision to take so long, and how exactly one should read the Court’s opinion.

The first signal that the opinion itself is going to be an unusual one comes at the outset: “Justice Scalia announced the judgment of the Court and delivered an opinion, in which Justice Souter and Justice Ginsburg join, and in which Justice Thomas joins as to all but Part IV.” (As Eugene Volokh noted on Monday, this line-up is not unprecedented but is “noteworthy.”) In the plurality’s view, the term “proceeds” is inherently ambiguous: “there is no more reason to think that ‘proceeds’ means ‘receipts’ than there is to think that ‘proceeds’ means ‘profits.’” In such a scenario, the plurality continues, the rule of lenity prevails, and it dictates a “profits” definition of proceeds.

The plurality rejects the government’s arguments that a “profits” definition will “fail[] to give the federal money-laundering statute its proper scope.” It notes (among other things) that any “speculat[ion] about congressional purpose . . . would also have to confront . . . [what] respondents have described as a ‘merger problem’” – that is, the likelihood that “any specified unlawful activity, an episode of which includes transactions which are not elements of the offense and in which a participant passes receipts on to someone else, would merge with money laundering.” The plurality found no reason why Congress might have wanted to “radically increase” a defendant’s sentence based on a transaction for which it had already provided a punishment elsewhere.

The plurality is also unmoved, to say the least, by the government’s suggestion that a “profits” interpretation will “hinder[] effective enforcement of the law.” Characterizing that argument as favoring a “‘receipts’ interpretation because—quite frankly—it is easier to prosecute,” Justice Scalia explains first that even to the extent that a “profits” interpretation requires additional work by the government, Congress “has imposed similar proof burdens” in other criminal statutes. In any event, he emphasizes, “the Government exaggerates the difficulties,” as prosecutors need only to show “that a single instance of specified unlawful activity was profitable and gave rise to the money involved in a charged transaction.” And the government can satisfy the knowledge element of the money-laundering statute, Scalia explains, through circumstantial evidence such as a long-running relationship between the launderer and the criminal.

Finally, the plurality rejects Justice Stevens’s interpretation, outlined in his concurring opinion (more on this below), of the term “proceeds” as meaning “profits” in some circumstances but “receipts” in others. Observing that such an interpretation was not advanced by either the federal government nor any amicus and, moreover, that “it has no precedent in our cases,” the plurality emphasizes that the Court’s “obligation to maintain the consistent meaning of words in statutory text does not disappear when the rule of lenity is involved.” And while the plurality acknowledges that “the Court’s holding is limited” by Justice Stevens’s narrower opinion, it explains that “the narrowness of his ground consists of finding that ‘proceeds’ means ‘profits’ when there is no legislative history to the contrary. That is all that our judgment holds.”

Concurring in the judgment, Justice Stevens provided a fifth vote to affirm the judgment below. But although he agreed with the plurality that, “[f]aced with both a lack of legislative history speaking to the definition of ‘proceeds’ when operating a gambling business is the ‘specified unlawful activity’ and . . . that Congress could not have intended the perverse result that would obtain in this case under Justice Alito’s opinion, the rule of lenity may weigh in the determination,” he would construe the term “proceeds” to mean “receipts” – rather than “profits” – when the legislative history reflects Congress’s intent to do so.

Justice Breyer joined Justice Alito’s dissent but also filed a separate opinion in which he expressed his “doubt that Congress intended the money laundering statute automatically to cover financial transactions that constitute an essential part of a different underlying crime.” But he parted ways with the plurality on how to solve the “merger problem.” Rather than “look[ing] to the word ‘proceeds’ for a solution,” he suggested in particular that the problem could be solved by the U.S. Sentencing Commission, “without resort to creating complex interpretations of the statute’s language.”

In his dissent, Justice Alito began – like the plurality – with an analysis of the text of Section 1956(a). In his view, the “primary definition” of the term “proceeds” is “the total amount brought in.” However, even to the extent that the term “proceeds” has “more than one meaning,” Justice Alito would not “abandon any effort at interpretation and summon in the rule of lenity,” but would instead “ask what the term ‘proceeds’ customarily means in the context that is relevant here—a money laundering statute.” Other money laundering statutes, Alito points out, define the term in terms of “the total amount brought in,” as do an international treaty and fourteen states. They do so, Justice Alito continues, because such a definition serves the two purposes of money-laundering statutes: deterring criminal activity and preventing the growth of criminal enterprises. By contrast, the plurality’s narrower construction of “proceeds” would both exclude conduct that was not profitable even when the enterprises responsible for the conduct were generally successful and would “introduce[] pointless and difficult problems of proof.” Thus, the dissent concludes, “the term ‘proceeds’ . . . means gross receipts, not net income.” Moreover, he continues, “contrary to the approach taken by Justice Stevens, I do not see how the meaning of the term . . . can varying depending on the nature of the illegal activity that produced the laundered funds.” Finally, Justice Alito dismissed the other justices’ concerns about the “merger” problem as “misplaced.” Like Justice Breyer, Justice Alito regards “the so-called merger problem” as “fundamentally a sentencing problem” that, in any event, “occurs in only a subset of money laundering cases.”

So what exactly does all this mean? If you’re Efrain Santos and Benedicto Diaz, it’s all good: the opinion is a get-out-of-jail-sooner pass. The implications for everyone else – or, at least, everyone else who is not charged with operating similar gambling operations – are, as Marty discussed on Monday, far less clear.