Wednesday, April 6, 2011

Commentary on Skilling Remand Decision

As noted here, the 5th Circuit entered its remand decision in the Skilling case, following the Supreme Court's ruling that honest services would be limited to bribery and kickbacks. Jeffrey Skilling had won the issue of honest services in the United States Supreme Court, but this highest court had sent it back for the lower court to determine if the error was harmless and how far it extended - did it affect other crimes he was convicted upon.

There was never any issue of Skilling being involved in bribery of kickbacks, the only aspect of honest services that remained after this Supreme Court decision.  So, it was clear that the lower decision had erred.  But merely having error is not enough these days.  The error also has to be either a fundamental one or not harmless error in order for a defendant to receive relief.

This remand decision is a most interesting decision for several reasons:

  • Justice Ginsberg wrote the Supreme Court's decision in the Skilling case. One of the issues before the Court pertained to the honest services statute. Justice Ginsburg wrote that it was clear that "Skilling did not commit honest-services fraud." She also wrote that "Skilling's conviction is flawed." She then cites to the case of Hedgpeth v. Pulido, which held that when you have alternative theories of guilt and the jury is given a general verdict, you use harmless error to determine the viability of the conviction.  Justice Ginsburg in Skilling noted that the "[t]he parties vigorously dispute whether the error was harmless."  She says that she "leave[s] this dispute for resolution on remand." 
  • Footnote 46 will go down in history as important in the Supreme Court decision in Skilling, as it is in this footnote that she says that the Fifth Circuit's prior statement that the conviction needs to be set aside if any of the objects of the conspiracy count are set aside, is incorrect.  She tells the 5th Circuit that the Pulido case is not limited to cases on collateral review, but includes cases on direct appeal. And so the Skilling case was remanded to the 5th circuit which initially said if the court took out the honest services aspect of the case, the conspiracy count had to fall.
  • But before we move onto looking at the remanded 5th circuit decision that just came down, one side note to look even further back in constitutional jurisprudence and examine the Pulido decision.  This was a per curiam decision. But, guess who dissented - Justice Stevens, Souter and Ginsburg. The jury could have applied the instructions in an "unconstitutional way,"  they said.   There was no need to remand the case, they said, the district court and court of appeals already examined the harmless-error issue.  The majority, however, in Pulido remanded the case, and it was sent back to the court of appeals - the ninth circuit in this case. The 9th Circuit  then held that "'with fair assurance, after pondering all that happened without stripping the erroneous action from the whole, that the judgment was not substantially swayed' by the instructional errors.  Because Pulido did not suffer any actual prejudice, he is not entitled to habeas relief." (citations omitted).   And yes, there is a dissent, and of course the dissent cites to the Supreme Court's dissent in Pulido.  
  • Lets now look at the 5th Circuit decision just entered on the remand from the United States Supreme Court in Skilling.  The 5th Circuit states that it now abandons the "impossible to tell" standard.  That is, when you have an alternate theory case with an error in one part - and you can't tell whether the error affected the jury decision because the jury entered a general verdict - this used to be reversible error.  But now, the test is whether it is harmless error.
  • But who gets to decide whether it is harmless error? The Supreme Court didn't want that responsibility.  They sent it to the 5th Circuit.  But my question is whether this should be a question for the fact-finder court, as opposed to an appellate court? The 5th Circuit does remand it for resentencing, a resentencing premised upon its prior decision.
  • Do we really want appellate court's reviewing the nuances of every aspect of a case to try to discern what the jury was thinking and how they might have decided the case. Or do we need to re-evaluate the standard being used in Pulido? Does a jury always rest its decision on an evaluation of all the evidence, or do they sometimes focus on one piece of evidence that they consider important?
  • The 5th Circuit Court handling the Skilling remand does not think it important that the government argued "only once" about Skilling and honest services fraud. The times the government referred to Ken Lay and honest services fraud don't count for Skilling, they say. The court states:

"This single reference to Skilling's honest services, in light of the Government's extensive argument on securities fraud, merely permitted the jury to decide the case on the wrong theory.  It did not force or urge it to do so, and therefore, it shows only that an alternative-theory error occurred, not that the error was not harmless."

  • Some cases can go on for a long time, and sometimes this is necessary as a part of our judicial process.

See also Doug Berman, Sentencing Law & Policy, Fifth Circuit makes former Enron CEO Skilling's SCOTUS victory Pyrrhic


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Ellen - what do you think the 5th Circuit would have done if the gov't had not charged 10b-5 and then relied solely on that alternative? Could it have as easily found a traditional money/property loss based on the government arguments that Skilling manipulated the financials in order to get his salary? To trade on inside information?

Posted by: David Shapiro | Apr 7, 2011 10:03:23 AM

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