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Begging for a Question

November 21, 2014

“Does a court owe deference to an executive agency’s interpretation of a law that contemplates both criminal and administrative enforcement?”


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That’s the question posed by Supreme Court Justice Antonin Scalia, joined by Justice Clarence Thomas. In doing so, the Justices asks, just how much deference do courts owe to agency interpretations.

Justice Scalia posed these questions when he took the unusual step of attaching a statement to the order denying certiorari in Whitman v. U.S., where petitioner Douglas Whitman sought review of his insider trading conviction. Although Justices Scalia and Thomas concurred in the decision to deny certiorari, they noted that Whitman’s case involved an unsettled area of insider trading law: what must be established in order to prove that a downstream tippee engaged in insider trading.

The Second Circuit, which had affirmed Whitman’s conviction, employs a lower standard of proof which simply requires establishing that the tippee trades “while in knowing possession of nonpublic information material to those trades.” Other Courts have a higher standard, finding liability only if the inside information was a “significant factor” in the investment choice.

The Second Circuit based its standard of proof on the SEC’s interpretation of Section 10(b) but, Justice Scalia asks, is that appropriate where, as here, the administrative interpretation of Congressional intent has both criminal and civil implications? Justice Scalia notes, “The rule of lenity requires interpreters to resolve ambiguity in criminal laws in favor of defendants. Deferring to the prosecuting branch’s expansive views of these statutes ‘would turn their normal construction upside down, replacing the doctrine of lenity with a doctrine of severity.’”

Justice Scalia’s statement notes that Whitman did not seek review on the issue of deference, and so the question was not properly before the Court. But, he concludes, “when a petition properly presenting the question comes before us, I will be receptive to granting it.”

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