As noted yesterday, today we'll discuss Wisconsin Central v. US, the SAS Institute case, and Chavez-Meza v. US. These deal, respectively, with the definition of "compensation" for tax purposes, patent law administrative challenges, and the use of the sentencing guidelines.
Coming off of the dispute we discussed yesterday, which placed employees and management in stark opposition, Wisconsin Central may seem refreshing and even wholesome: a private company and its employees working together to oppose a government encroachment on their dealings (successfully, it turns out.)
Actually, various subsidiaries of the Canadian National Railway Company sued the United States for a $13 million tax refund. Their attorneys argued on the basis of the language in the Railroad Retirement Tax Act, which says that the compensation to be taxed includes "any form of money remuneration paid to an individual for services rendered as an employee." The US has been taxing the CNRC subsidiaries for the stock options they've granted to their employees. But if the statute had meant "any form of remuneration" it could have said so. Instead, the term "money" is in there as a modification/limitation on the term "remuneration."
That argument presumes a rather careful word-by-word understanding of how legislation gets drafted. My understanding is it can be rather slapdash. Still, I'm all for reading ambiguities AGAINST the tax grabbers.
Aside from that: Why care? Not only do I seldom comment on tax law in this blog, but I might as well say here that Wisconsin Central was only the second most important tax-law decision issued by SCOTUS on the day that it was issued. Only minutes later, the Justices came out with their decision authorizing the states to tax internet sales, and that is of vastly more significance in dollars and cents terms, though you'll read nothing more about it here.
I have preferred cogitating about Wisconsin Central because it allows me to hark back to an earlier era when the rails were central to the economy, and it allows me as well to savor a win for people and institutions trying to hang on to their own wealth, if necessary by transferring it to one another in non-monetary forms. Yeah, team!
Breyer, in dissent, makes the intriguing point that if we define money as a medium of exchange, a stock option might be as money-like as a paycheck. Neither is cash or a debit card. Neither can be handed over to a cashier in the check-out lane of a grocery store. If the employer hands an employee a payroll check, the employee takes THAT to the bank, either converting it to dead-presidents cash or leaving it in there and using a debit card at checkout lanes. So ... was it "money" already when it was a payroll check?
I think common use of language is still on the majority's side here, though. If I have a choice whether to take a certain portion of my pay as a check or as a stock option, and I check the box that says "check," I probably do so precisely because I'm thinking of that as money, and of a stock option as something that, though it could (fairly simply) be liquidated, is not yet money. Good try, Justice Breyer, though.
Patent Law
Patent law in the US seems still to be very much in the get-the-bugs out phase of a fairly new feature to the system called "inter pares review," created by the Leahy-Smith America Invents Act of 2011. The idea is that petitioners who object to a newly issued patent can try to get the patent office to change its mind, for example by showing that it infringes on the rights extended by an already existing patent. I wrote about another controversy concerning the interpretation of Leahy-Smith two years ago at this time, reviewing another SCOTUS decision.
This year ... the take-away is SAS Institute v. Iancu (April 24). In this decision, a 5 Justice majority, Gorsuch writing, invalidating some of the administrative rules that the patent office had been using for these proceedings. It's back-to-the-drawing board, folks.
Specifically, the office had created rules that allowed it to reject certain challenges within a given petition out of hand, leaving and doing a full trial-like review only of those it deems substantive. This means that it created a non-statutory filter for the statutory process. out of hand. That, Gorsuch said, is in violation of the Leahy-Smith language, which says that the board "shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner." He has a point. The language ("shall" and "any") certainly makes it seem that Congress envisioned a binary choice: either hear the petition or reject it outright and, if the petition is heard, hear all of it.
Although this doesn't seem like a typical polarizing right/left issue, it did create the usual right/left split on the court. Breyer wrote for the four dissenters, joined by Kagan, Sotomayor, Ginsburg. The usual. This surprised me. These fairly technical administrative-review issues don't usually breakdown along the same lines that one might expect from, say, decisions about management/labor disputes.
Breyer thinks the statutory language ambiguous enough to require deference to the agency under the Chevron rule. And THAT may be the reason for the familiar 5-4 split. Just as the Trumpets rail against the "deep state," Gorsuch and other rightward jurisprudes complain of the "administrative state" and may be aiming at overturning Chevron when an appropriate opportunity presents itself.
Sentencing Guidelines
The question in Chavaz-Meza was how fully a trial court must explain itself, in particular its sentence reduction decision under the 1984 Act's statutory guidelines, in order to pass appellate muster. That statute was essentially re-written by SCOTUS in 2005, in the BOOKER case, and now the Justices have to interpret their (or their predecessors') re-writing.
The specific case at issue is fairly typical of the (ever insane) "war on drugs." Chavaz-Meza pleaded guilty to conspiracy and possession with intent to distribute methamphetamines. The probation department said that his guidelines range was between 135 and 168 months. I'll do the division for you -- the low end of that range is 11 years, three months. The high end is 14 years. He received a sentence at the low end of that, 135 months.
In the following year (2014) the Sentencing Commission changed the guidelines, to make the punishments somewhat less draconian, and Chavaz-Meza filed a motion asking that his sentenced be reconsidered. The probation dept looked at it again and fixed a new range of 108 to 135. So the bottom end of the new range was 9 years.
In response, the judge filled out a standard two-page form, the AO-247, reducing the sentence to 114 months, which is 9 and a half years. He provided no explanation beyond checking a box that said that he had taken into account the "policy statement set forth in USSG sect, 1B1.10 and the sentencing factors set forth in 18 USC sect, 3553(a)."
Chavaz-Meza contended (in effect) that since his sentence was at the bottom of the earlier sentencing range, and the commission had lowered the whole range, the default assumption is that the judge should have modified to the bottom of the new range, what his lawyers called a "proportional" reduction. Since the judge didn't so so, he ought to have provided an explanation, reviewable by courts above, as to the reason he thought Chavaz-Meza should be in the middle of the new range.
SCOTUS took this case because the Circuit Courts have split as to whether the sentencing judge ought to provide an explanation, and as to what that entails if it is required.
This did NOT turn out to be a stereotypical left/right split, in that although the court's majority took the "right" side of the split, Justice Breyer was not only part of that majority, he wrote the decision for it. He wrote that "what the District Court did here was sufficient." He stayed within the guideline limit and he checked the box. The check mark is enough to make it clear that he relied upon the record, considered the arguments, and has taken account of the statutory factors.
A word about the vote. It was 5 - 3, with Gorsuch not participating. Suppose the three dissenters (Who are exactly whom one would guess) had persuaded Breyer to take their view of it: that would have made this a 4-4 vote. THAT would have left the (10th circuit) Court of Appeals judgment in place. But since the decision here was upholding the view of the appellate court, that would have amounted to the same result for this litigant.
This is unfortunate. That judges taking such actions in complicity with what is truly a monstrous system don't have to do any more than check a box is a slap on the face. But when the system is gunning down the Chevez-Meras of the world, slapping them on the face as they fall is a relatively minor barbarism.
See you tomorrow for a discussion of some of the big constitutional cases this term.
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