Side-Effect of Santos: New Legs for the Rule of Lenity?

August 11, 2008 WCC Bulletin

Originally printed in the WCC Bulletin, the ABA's White Collar Crime newsletter.

The United States Supreme Court's recent decision, United States v. Santos, 128 S.Ct. 2020 (2008), is being hailed as a landmark decision on money-laundering and rightfully so. We look forward to many interesting district court interpretations and much scholarship in the coming year. In addition to the major impact on money-laundering prosecutions, an interesting side effect of the decision is that it appears to have breathed new life into the rule of lenity. If this is indeed the case, Santos may impact more cases far outside the purview of money-laundering statutes than within them. On June 2, 2008, the Supreme Court handed down this landmark decision in which a plurality of the Court affirmed the District Court for the Northern District of Indiana and the Seventh Circuit's decision to vacate the defendants' convictions under the federal money-laundering statute. Id. at 2031. Justice Scalia's plurality opinion rests on the underutilized rule of lenity. As explained in the opinion, when there is ambiguity as to the proscribed conduct, "[u]nder a long line of our decisions, the tie must go to the defendant. The rule of lenity requires ambiguous criminal laws to be interpreted in favor of the defendants subjected to them." Santos, 128 S.Ct. at 2025. Justice Scalia's view echo those voiced by Justice Holmes in McBoyle v. U.S., in which Justice Holmes held that "a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed. To make the warning fair, so far as possible the line should be clear." McBoyle v. U.S., 283 U.S. 25, 27 (1931). Due to the Supreme Court's recent use of the rule of lenity, courts nationwide will have this significant precedent to stand on and thus be more likely to apply the rule of lenity in favor of defendants when the applicable criminal law is unclear.

In Santos, the defendants were involved an illegal lottery in which they gathered bets, which were used to pay the salaries of those involved as well as to pay the winning gamblers. Santos, 128 S.Ct. at 2020-21. The defendants had been convicted under the federal money-laundering statute, which prohibits various activities that involve the use of criminal “proceeds.” Id. at 2023. Because the word “proceeds” was not defined in the statute, the Court conducted an analysis to determine its meaning. Id. The Court explained, “‘[p]roceeds’ can mean either ‘receipts’ or ‘profits.’ Both meanings are accepted, and have long been accepted, in ordinary usage.” Id. at 2024. In an effort to determine which meaning applied, the Court considered the ways Congress has defined ‘proceeds’ in the past and the context of ‘proceeds’ as used in the federal money-laundering statute, ultimately finding that under either definition, “all provisions of the federal money-laundering statute are coherent; no provisions are redundant; and the statute is not rendered utterly absurd.” Id. at 2025. At that point the Court turned to the rule of lenity, finding that “[b]ecause the ‘profits’ definition of ‘proceeds’ is always more defendant-friendly than the ‘receipts’ definition, the rule of lenity dictates that it should be adopted.” Id. Because neither of the defendants’ actions could be characterized as involving the “profits” of the lottery, the Court affirmed the Seventh Circuit and the District Court’s holdings vacating the convictions. Id. at 2031. This recent precedent will provide ample support for the application of the rule of lenity in the interpretation of ambiguous criminal laws as well as a sound argument that unclear criminal laws must be interpreted in favor of defendants.

The trend of relying on the rule of lenity to interpret ambiguous criminal law may have already taken stride. The Court of Appeals for the District of Columbia recently looked to the Santos opinion when it was confronted the issue of “when a young adult becomes too old to be sentenced under the Youth Rehabilitation Act” (the “YRA”). Holloway v. U.S., 2008 WL 2444533, *1 (D.C. Ct. App. 2008). The special sentencing provisions of the YRA apply to defendants twenty-two years of age or less “at the time of sentencing.” Id. The Court was faced with determining whether the act also applies to defendants who are younger than twenty-two years of age at the time of conviction but reach the age of twenty-two before sentencing. Id. After considering the legislative intent behind the act and the plain meaning of the statutory language, the court “observe[d] that since there is ambiguity in the language of the YRA and two reasonable constructions of the age eligibility requirement, the rule of lenity counsels the result we reach.” Id. at *6. Citing Santos, the Court held that “‘[t]he rule of lenity requires ambiguous criminal laws to be interpreted in favor of the defendants subjected to them.’” Id., (quoting Santos, 128 S.Ct. at 2025). In this case, the Court held that “[t]he rule of lenity favors an interpretation that a corrigible youth convicted before the age of twenty-two, but not sentenced until after the age of twenty-two, who is still worthy of rehabilitation, should where consistent with public safety and other relevant considerations, be permitted a second chance to rethink his or her life.” Id.

Practitioners with experience in defending prosecutions based on complex regulatory schemes are aware that a motion to dismiss grounded on the rule of lenity can be a powerful tool. All too often, however, District Judges are reluctant to grant such motions. These two recent decisions, Santos and Holloway, appear to represent the beginning of a trend among the courts to apply the rule of lenity in favor of defendants in situations where the applicable criminal law is ambiguous. It will be interesting to see if this trend expands in the coming months.