WMU-Cooley Law School Law Review Summer 2021 - Volume 36 Issue 1

WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW Volume 36

Summer 2021

Issue 1

Articles Then and Now: Pestilence, Police Power, And Private Property Samuel Saul Richardson Michigan’s Helter-Skelter Landscape of NoFault PTSD Cases Belies Science Professor Brad Charles Domestic Drones_The Rise of The Flying Machines: Is Big Brother Watching You? Lewis Langham, Jr. Comment on Limitations Periods and Return-Preparer Fraud Peter J. Mancini, Esq. Distinguished Briefs People of the State of Michigan v. Kelly Morgan David Porter People of the State of Michigan v. Gary Gilmore Amanda Morris Smith A Publication of Western Michigan University Thomas M. Cooley Law School

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Cite this volume as 36 W. MICH. U. COOLEY L. REV.(2021).

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WESTERN MICHIGAN UNIVERSITY THOMAS M. COOLEY LAW SCHOOL James McGrath, President & Dean BOARD OF DIRECTORS Hon. Louise Alderson, Vice Chair Aaron V. Burrell Christina L. Corl Scott A. Dienes Sharon M. Hanlon Kenneth V. Miller Edward H. Pappas Cherie L. Beck – Corporate Secretary

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PROFESSORS Frank C. Aiello B Brendan Beery Paul Carrier V Victoria Cruz-Garcia Renalia Dubose Gerald Fisher Marjorie Gell Emily Horvath Tonya Krause-Phelan Daniel W. Matthews Martha Moore Kimberly O’Leary Devin Schindler Paul Sorensen David Tarrien Emily Horvath Victoria Vuletich

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Amy Bandow Kristina Bilowus Charles Bullock Lindsay Canan Joseph Celello Elizabeth Devolder Michelle Donovan Lisa Fadler Richard Garcia Phillip Green Nancy Hillary Timothy Innes Caroline Johnson Levine Michael Leffler Matthew Lucas Matthew Marin Ellen Mason Scott Mertens Andrea MurotoBilabaye Nicholas Nazaretian Kevin Peterson Kerry Przybylo Antoinette Raheem Christopher Sabella Michael Shea Samantha Sliney Cari Sullivan Miriam Velez Geoffrey Weed

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WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW TRINITY 2021

BOARD OF EDITORS Katrina R. Davis Executive Symposium Editor

Chigozirim M. Ego-Osuala Editor-in-Chief

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MANAGING ASSOCIATE EDITORS

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SENIOR ASSOCIATE EDITORS Emily Gudwer Terri Weishaus Brittanie Wilson

ASSOCIATE EDITORS

Inayah Smith-Marsette Ashley Palmer

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Ariane Bertoli Starkey Alma Lezama Perez Zoe Guiney James Sherbin

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JOHN D. VOELKER AWARD

This award is presented to the Senior Associate Editor of the Western Michigan University Cooley Law Review who made the most significant contributions to the publication of the Law Review.

Trinity 2021 Recipients: Alma Lezama Perez

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Trinity 2021 Recipients: Casey Strong

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Trinity 2021 Recipients: Brianne Coxon

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WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW HILARY 2021

BOARD OF EDITORS Chigozirim M. Ego-Osuala Interim Editor-in-Chief

Sylvonna J. Reed Editor-in-Chief

Sean Parent Executive Managing Editor

Katrina R. Davis Executive Symposium Editor

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Melissa B. Heinz Executive Articles Editor

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Katie Buehner Interim Executive Articles Editor

MANAGING ASSOCIATE EDITORS

Robert Busch, Jr. Duaa Alkinani Ariane Bertoli Starkey Cory Brevig Samantha Buckert Gabrielle Bernice Clark Karissa Falcon Laura Kane Devon Mayse Caylen J. McPherson Emily Gudwer Jeanneth Miranda

Veronica Femminineo

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Emily Paulson Derienne Perkins Leanna Poole Sarah Roberge James Sherbin Samara Slocombe Laura Skenderas Nicole Stocker Lauren Tunison Brittanie Wilson Mina Woodard

JOHN D. VOELKER AWARD

This award is presented to the Senior Associate Editor of the Western Michigan University Cooley Law Review who made the most significant contributions to the publication of the Law Review.

Hillary 2021 Recipients: Katrina Davis

EUGENE KRASICKY AWARD

This award is presented to the Assistant Editor of the Western Michigan University Cooley Law Review who made the most significant contributions to the publication of the Law Review.

Hillary 2021 Recipients: James Sherbin

DAWN C. BEACHNAU AWARD

This award is presented to the member of the Western Michigan University Cooley Law Review Voting Board of Editors who made the most significant contributions to the Law Review through leadership and dedication.

Hillary 2021 Recipients: Melissa Heinz

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WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW MICHAELMAS 2020 BOARD OF EDITORS Sylvonna J. Reed Editor-in-Chief

J. Grant Martin Executive Managing Editor

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Katrina Davis Interim Executive Symposium Editor

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MANAGING ASSOCIATE EDITORS

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ASSOCIATE EDITORS Devon M. Mayse Laura Skenderas

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Adriana Piccirilli Nicole Stocker Chanelle C. Williams Lauren Tunison

JOHN D. VOELKER AWARD

This award is presented to the Senior Associate Editors of the Western Michigan University Cooley Law Review who made the most significant contributions to the publication of the Law Review.

Trinity 2020 Recipients: Jessica McLemore Michaelmas 2020 Recipients: Kennedy Winnie

EUGENE KRASICKY AWARD

This award is presented to the Assistant Editors of the Western Michigan University Cooley Law Review who made the most significant contributions to the publication of the Law Review.

Trinity 2020 Recipients: Vincent Najor Michaelmas 2020 Recipients: Dan Campbell

DAWN C. BEACHNAU AWARD

This award is presented to the member of the Western Michigan University Cooley Law Review Voting Board of Editors who made the most significant contributions to the Law Review through leadership and dedication.

Trinity 2020 Recipients: Hope Finney Michaelmas 2020 Recipients: Asja Jackson

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WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW

VOLUME 36

SUMMER 2021

ISSUE 1

CONTENTS FROM THE EDITOR...................................................................XIII ARTICLES Then and Now: Pestilence, Police Power, and Private Property Samuel Saul Richardson ............................................. 1 Michigan’s Helter-Skelter Landscape Of No_Fault PTSD Cases Belies Science Professor Brad Charles ............................................ 23 Domestic Drones-The Rise of the Flying Machines: Is Big Brother Watching You? Professor Lewis Langham, Jr. .................................. 69 Comment on Limitations Periods and Return-Preparer Fraud Peter J. Mancini, Esq................................................ 95 DISTINGUISHED BRIEFS People of the State of Michigan v. Kelly Morgan David Porter ........................................................... 150 People of the State Of Michigan v. Gary Gilmore Amanda Morris Smith............................................. 191

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The Executive Board of Editors is honored to present you with another edition of our journal. First, I thank all our readers for their sustained support and patronage of our publication. Second, I thank all WMU Cooley Law Review members for tirelessly working on the articles presented in this edition; their devotion and quest for excellence speak for themselves in the finished project. Finally, I thank the authors for their confidence in our team and for allowing us to collaborate in advancing the legal discourse in their individual fields.

This edition brings you four articles that offer solutions to current legal issues based on lessons learned in the past. The first article attempts to find the balance between the government’s right to protect the safety and health of its citizens with the right of private property owners not to have their property taken for public use without just compensation.

The second article questions courts’ current handling of no-fault claims in PTSD cases. The third article discusses the government’s use of unmanned aerial vehicles (UAVs) and the implications on fourth Amendment rights—particularly privacy rights that protect citizens from unreasonable government searches.

The final article discusses whether the IRS should be time limited on recovering from a taxpayer for an incorrect tax filing. The article further discusses cases holding that where a tax preparer misrepresented a taxpayer's information, the IRS may hold the taxpayer accountable.

As our nation’s courts face legal and societal challenges, there is much we can draw from our past, our legal precedent, and our ever-evolving jurisprudence. Thus, we will continue developing solutions crafted with insight from our history and foresight for our future. I know you will enjoy this edition and wish you the very best in your endeavors.

With appreciation, Chigozirim Ego-Osuala

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Then and Now: Pestilence, Police Power, and Private Property SAMUEL SAUL RICHARDSON1 TABLE OF CONTENTS I. Introduction ..................................................................................... 1 II. Historical ........................................................................................ 2 III. Takings Jurisprudence Evolution.................................................. 8 IV. COVID-19 .................................................................................. 10 A. Pennsylvania: Friends of Devito v. Wolf.................................................... 11 B. Connecticut: Auracle Homes, LLC v. Lamont ............................................ 15 C. Tennessee: TJM 64, Inc. v. Harris............................................................. 16

V. Analysis........................................................................................ 18 VI. Conclusion .................................................................................. 22 I. Introduction Community health emergencies, such as pandemics or epidemics, have plagued humankind for all of recorded history.2 The impact of these emergencies varies greatly depending on the type of disease, scientific knowledge at the time, and government response. With a new pandemic, Coronavirus, or COVID-19, the impact of these emergencies is back in the spotlight.

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Samuel Saul Richardson received a Juris Doctorate from Mississippi College School of Law in 2021 and a Bachelor of Science Degree from the Clarion University of Pennsylvania in 2017. This paper was selected as Honorable Mention in the American Planning Association Law and Planning Division's 37th Annual SmithBabcock-Williams Writing Competition. The author would like to thank Professor Donald Campbell for his guidance. The author would also like to thank his wife, Rebecca Richardson, for the motivation and support during the writing process.

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The earliest recorded pandemic occurred during the Peloponnesian War in 430 B.C. Pandemics That Changed History, History (Jan. 30, 2020), . https://www.history.com/topics/middle-ages/pandemics-timeline.

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Local governments in the United States have taken a wide variety of approaches when community health emergencies have occurred, relying on the police power granted to states, which is the power to regulate and protect the health, safety, and morals of a states’ citizens.

Police power has been recognized since the beginning of this country and still has great power today in the form of zoning ordinances, building codes, and nuisance regulations. By exercising these powers though, the government has encountered resistance from property owners. During community health emergencies, property owners have been forced to give up their houses to be used as hospitals, forced to shut down their businesses, and have even had their property destroyed to avoid the spread of disease.

This paper examines examples from our past and present and seeks to find a balance between the right of the government to protect the health, safety, and morals of its citizens, with the right of private property owners not to have their property taken for public use without just compensation.3 Section II covers “takings” cases spanning between 1840 and 1900. During that time, the United States suffered a variety of community health emergencies, from smallpox to typhoid, even the bubonic plague; and the government reacted in a variety of manners to each potential catastrophe. Section III covers the development of takings jurisprudence between 1900 and modern times. Takings cases have been analyzed in dramatically different ways over the years, and the addition of the regulatory takings doctrine in the 1920s expanded the potential claims under the Fifth Amendment. Section IV covers the Coronavirus pandemic, which is occurring at the time of this writing. With the development of takings jurisprudence over the last 100 years, this paper looks at the few cases that have been heard on COVID-19 and how they balance the police powers and the right of private property owners. Section V is an analysis of the way the COVID-19 cases have applied the takings jurisprudence to the modern pandemic and what should be done by the courts to better address and balance the needs of the community with the rights of landowners.

II. Historical “Throughout the course of the nineteenth and twentieth centuries, the United States faced multiple epidemics of deadly diseases. In the face 3

U.S. Const. amend. V.

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of such epidemics, and often in moments of panic, governments instituted significant quarantines.”4 This is what happened in Utica, New York, in 1840. Richard Evans and his family had immigrated from North Wales, and were visiting a friend when two of his children became sick with smallpox.5 Evans rented some rooms in a local hotel for a day or two until he was removed by Harry Bushnell, an alderman of the city, to a house owned by Mr. Boom.6 Alderman Bushnell claimed that his right to take Boom’s house and move Evans into it was given to him by the town council on the grounds that certain persons within the city had smallpox.7 However, “there was no written resolution on the subject, nor any memorandum of any such action of the board, in the minutes. The reason . . . for the omission . . . in the minutes was, the fear that it would create an alarm in the country.”8 The house on the lot was improved and medical staff were hired to attend the Evans family, both were paid out of city funds; despite there not being any resolution of the town council approving these purchases and the town treasurer having no knowledge of the removal and housing of the Evans family.9 Boom was not only prohibited from use and enjoyment of his house, but also from any use and enjoyment of the property on which the house stood “by the fact that it was deemed dangerous to approach the house in which a patient was sick of a contagious disease.”10 The referee who originally heard the case awarded Boom $75 for the loss of use of his house and property.11 Unfortunately for Boom, the New York Supreme Court questioned whether Boom should have recovered at all because he sued the city for the taking of his property, opposed to Bushnell or Evans individually.12 The Court found that although the town council had the right to order the removal of Evans from the hotel, it did not have the right to forcibly seize and occupy Boom’s house.13 In fact, the Court found that “[t]he city cannot be made liable 4

Felice Batlan, Law in the Time of Cholera: Disease, State Power, and Quarantines Past and Future, 80 Temp. L. Rev. 53, 55-56 (2007).

5 Boom v. City of Utica, 2 Barb. 104, 105 (N.Y. Gen. Term 1848).

6 Id. 7 Id. at 106.

8 Id. 9 Id. 10 Id. 11 Id. at 106-07.

12 Id. at 107 (emphasis in original).

13 Id. at 110.

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for this unlawful occupation of the plaintiff’s house by Alderman Bushnell, because 1st. The common council had no power to authorize such an act. And 2dly [sic] They never did authorize it.”14 The Court further found that it is not “necessary or expedient to confer a power upon any body of men to seize the property of another, and appropriate it, without his consent, to such a purpose as this.”15 In short, Alderman Bushnell acted on his own in occupying the house, was not authorized by the city, and it was not, therefore, a compensable taking.

A similar situation arose in Georgia in 1863; three Justices of the Inferior Court of Fulton County, Georgia, took a man’s land to set up a smallpox hospital.16 When the landowner challenged the action, the Justices claimed that it was within their official authority to set up smallpox hospitals for the county, and the trial court agreed, informing the jury that if it was necessary for the Justices to take the property for the public good to prevent the spread of contagion, then the Justices should not be held liable.17 The Georgia Supreme Court, however, pointed out that “the act of the legislature authorizing the Inferior Courts to provide suitable hospitals for small-pox patients, makes no provision for compensation, from which we infer that it was not contemplated that private property should be taken or impressed for that purpose.”18 Therefore, similar to New York in 1840,19 the Justices here acted as trespassers in their individual capacity and no legal taking was found.20 An 1884 case from Massachusetts also addressed a smallpox outbreak.

A house was split between two families; part of the house was occupied by the owner, and part was occupied by a tenant.21 “Smallpox broke out in the family of the tenant and the Board of Health of Hyde Park, Massachusetts, took possession of the home and turned it into a hospital.22 The Board “may . . . incur expenses or make contracts, within their lawful powers, for which the towns would be liable.”23 14

Id. at 111.

Id. at 112.

16 Markham v. Brown, 37 Ga. 277 (1867).

17 Id. at 281.

18 Id. at 282.

19 Boom, 2 Barb. at 104.

20 Markham, 37 Ga. at 283.

21 Spring v. Hyde Park, 137 Mass. 554, 556 (1884).

22 Id. 23 Id. at 555.

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However, the statutes creating the Board did not say how the contracts the Board formed would be paid or how “the contracts they [were] authorized to make are to be performed.”24 Unlike the previous two cases where the court found that the alderman or the justices simply did not act within the authority of the town and therefore it was not a taking, the central question, in this case, was whether the implied contract made by the Board when it took possession of the plaintiff’s house to prevent the spread of disease was within its authority.25 If so, the town was bound to pay for the taking; if not, it was a simple trespass by the Board, where members of the Board would be responsible for the compensation and not the city.

The court turned to Lynde v. Rockland.26 In Lynde, the town of Rockland, Maine, had a statute providing that if sick people could not be removed from a home without causing danger, then the house they were located in would be deemed a hospital.27 However, when the Board of Health seized a hotel and tried to turn it into a hospital, it was held that the Board never held power to seize property, just to create hospitals, and therefore the town was not held liable.28 Relying on this reasoning, the court in Spring held that the Board had no authority to take possession of another’s house for use as a hospital and therefore the town was not liable for the contract made by the Board,29 but not before holding that: [I]n order that the public health may be protected, and the spread of infection prevented . . . the right to impose such regulations as to the management has always been held to be quite distinct from that of appropriating private property, when an emergency requires it, to public use. . . . [T]he owner who is subjected to such regulation has of right no title to any compensation, even if the value of the property is thereby diminished. It is a necessary burden which he

24

Id. Id. at 556-57.

26 Lynde v. City of Rockland, 66 Me. 309 (1876).

27 Spring, 137 Mass. at 558 (citing Lynde, 66 Me. at 314).

28 Id. at 558-59.

29 Id. at 560.

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bears as a member of society in common with all others similarly situated.30 Such a powerful statement about the extent of police power, where the interests of the community prevail over private property rights, comes before zoning ordinances were upheld by the United States Supreme Court31 and also before the regulatory takings doctrine was developed32 — both areas of land regulation that reinforces the notion that regulations to protect health and welfare are the cost of being a member of a community. The court in Spring holds that private property is subject to regulations to help the community during an emergency for the first time, and it is not a taking.

The police power also grants the government a sort of immunity from committing a public nuisance if the action furthers the resolution of a public need. In Frazer v. Chicago, the plaintiffs sued Chicago because the city built and maintained a smallpox hospital on city property directly across from the plaintiffs’ property.33 In the complaint, plaintiffs alleged that the existence of the hospital across from his property: [D]amaged and will greatly damage plaintiffs’ lands in a way not common to the general public; . . . that such acts of the defendant constitute a permanent injury for the benefit of the public, within the meaning of the section of the constitution prohibiting the damaging of private property for public use without compensation and unreasonably limit the use to which plaintiffs’ lands might be put, whereby plaintiffs have sustained special damage not common to the general public.34 The city argued that it was necessary to build a smallpox hospital and that it was built on the land of the city and therefore any damage done 30

Id. at 559.

See generally Euclid v. Ambler Realty Co., 272 U.S. 365 (1926) (holding the first approval of zoning powers).

32 See generally Pa. Coal Co. v. Mahon, 260 U.S. 393 (1922) (holding for the first time the existence of regulatory takings).

33 Frazier v Chicago, 186 Ill. 480, 482 (1900).

34 Id. at 483.

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to the plaintiffs is compensated for in the benefit they receive from other city police powers.35 The court stated that: [T]here are certain injuries which are necessarily incident to the ownership of property in towns or cities which directly impair the value of private property, for which the law does not and never has afforded relief. For instance, the building of a jail, police station, or the like will generally cause a direct depreciation in the value of neighboring property.36 The court continued: [E]very citizen holds his property subject to the proper exercise of th[is] police power, either by the State legislature directly, or by public or municipal corporations, to which the legislature may delegate it . . .. It is well settled that laws and regulations of this character, though they may disturb the enjoyment of individual rights, are not unconstitutional, though no provision is made for compensation for such disturbance.37 No taking was found. Although the plaintiff was arguing for compensation because of a taking, there was no physical taking. This was a new argument for a nuisance committed by the government, which the court did not recognize.

As stated above, although none of these cases found a taking, it is unlikely that many of them would be considered a taking today because of the expressed public need and the appropriate use of the police power. Boom, Markham, and Spring all were on the verge of 35

Id. at 484. This argument is an early version of one shown in Friends, infra, where no compensation is granted when the government action is through the police power, regardless of the effect that it has on private property. Infra note 57.

36 Frazer, 186 Ill. at 485 (quoting Rigney v. Chicago, 102 Ill. 64, 80 (1882)).

37 Frazer, 186 Ill. at 488. The idea that certain injuries are necessarily incident to the ownership of property is made the rule in Lucas, infra, note 48, where the court does not limit the police power when it comes to nuisances and injuries necessarily incident as a matter of state law.

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being considered takings, but ultimately the property owners lost out on compensation due to overzealous city officials exceeding their statutory power. At the time, public officials and courts alike were extremely concerned with maintaining control during the community medical emergency, regardless of the outcome it may have had on property owners. As the court stated in Spring, those regulations and controls were simply a necessary burden to those who live within society,38 but at the same time, the court stated that the health officials who committed the acts were doing so of their own accord, rather than under the authority of the city. This gave health officials the leeway needed to complete their objectives without holding cities responsible, by mitigating the effects of the health emergency without bankrupting them. The police powers were not fully realized when most of these cases were decided, requiring the courts to rely on the ultra vires actions of the officials; with over 100 years passing between these cases and the Coronavirus pandemic, the laws and jurisprudence for the taking of private property as related to a medical emergency have vastly changed.

III. Takings Jurisprudence Evolution Although some 19th century judges were in favor of protecting private property rights, even when an action was justified by the police power, Section II highlights that takings were only found by lower courts.

Later, they were then overruled by higher courts that either gave deference to the medical officials or held that the medical officials did not have the authority to do what they did in the first place. The time that has passed between these cases and the outbreak of COVID-19 has seen a lot of development take place where takings of private property are concerned.

First, and perhaps one of the most important developments, was the creation of the regulatory taking doctrine developed in Pennsylvania Coal Co. v. Mahon.39 The Court put a limit on the use of the police power. It found that although property may be regulated to a certain extent without a taking, “if regulation goes too far it will be recognized as a taking.”40 This created a second type of taking by the government, in addition to physical takings: regulatory takings.

38

Spring, 137 Mass. at 559.

Pa. Coal Co. v. Mahon, 260 U.S. 393 (1922).

40 Id. at 415.

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With the Court upholding zoning ordinances41 and holding that regulations that go “too far” are takings, the next jurisprudential development was determining when regulations go too far. Penn Central Transportation Co. v. New York City42 held that the city’s restrictions on property deemed a landmark was not a taking, nor was it a denial of due process. In Penn Central, the Court held that the “Fifth Amendment’s guarantee . . . is designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole,” but also identified that it was unable to develop a formula for what justice and fairness specifically call for.43 The Court identified the “economic impact of the regulation on the claimant, and particularly, the extent to which the regulation has interfered with distinct investment-backed expectations [as] . . . relevant considerations.”44 The Court also held that a taking is most likely to be found when the government interference is a physical invasion rather than one arising out of a public program promoting the common good,45 a signal of the everpresent police power still having power.

A further expansion on the physical taking of property came in Loretto v. Teleprompter Manhattan CATV Corp.46 In Loretto, state law required a landlord to allow a cable television company to install its cable facilities on the landlord’s property, including wires and cable boxes which occupied a small portion of the property.47 Although this was a minimal taking, it was still deemed to be a taking, and compensation was due.48 Regulatory takings jurisprudence was further developed in Lucas v.

S.C. Coastal Council.49 After Lucas bought property on the South Carolina coast, intending to build houses, the state legislature felt the need to preserve the beaches and passed a law that prohibited any type 41

Euclid, supra, note 30.

Penn Cent. Transp. Co. v. New York City, 438 U.S. 104 (1978).

43 Id. at 123-24 (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)).

44 Id. at 124.

45 Id. 46 Loretto v. Teleprompter Manhattan Catv Corp., 458 U.S. 419 (1982).

47 Id. at 421-22.

48 Id. at 441.

49 Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992).

42

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of development on land along the coast.50 This meant that Lucas could not build on his land. Ultimately, the Court held that a taking occurs when a regulation removes all economical use of the property.51 The Court noted, however, that use of the police power to prevent owners from committing a nuisance was not a taking, nor was the police power prohibited from acting if the injury was a part of title upon the landowners purchase of the land under state law because the right to commit a nuisance is not a right given in the bundle of sticks to property owners.52 Tahoe-Sierra Pres. Council v. Tahoe Reg’l Planning Agency limited Lucas by holding that a temporary taking, even if it prevented all economical use of the property, was not a taking that required just compensation.53 The Court relied on the Penn Central factors, instead of creating a new rule when it came to temporary takings.54 The Court also did not give a definition of what is temporary but stated that “any moratorium that lasts for more than one year should be viewed with special skepticism.”55 With these major changes in takings jurisprudence, a more defined balance between government actions and the rights of private property owners has been outlined. With a new medical emergency taking its toll on the United States, the claims brought today will be analyzed under a more expansive and developed takings jurisprudence than was applied to cases described in Section II. IV. COVID-19 In late January 2020, COVID-19, also known as the Coronavirus, appeared within the United States.56 Efforts were made to slow the 50

Id. at 1007.

Id. at 1030-31.

52 Id. at 1026-27.

53 See generally Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302 (2002) (holding that a 32-month moratorium on development was not a taking that required just compensation).

54 Id. at 342.

55 Id. at 341.

56 Erin K. Stokes et al., Coronavirus Disease 2019 Case Surveillance- United States, January 22-May 30, 2020, Centers for Disease Control and Prevention (June 19, 2020), https://www.cdc.gov/mmwr/volumes/ 69/wr/mm6924e2.htm.

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spread of the disease both at the federal and state levels. At the time of this writing, 34 states and the District of Columbia require a facecovering of some sort in public.57 Landowners in several states affected by the regulations challenged whether the impact of the regulations rose to the level of a taking.

A. Pennsylvania: Friends of Devito v. Wolf In Friends of Devito v. Wolf, both businesses and individuals in Pennsylvania sought relief from the governor’s executive orders to close “physical operations of all non-life-sustaining business[es] to reduce the spread of the novel coronavirus disease (COVID-19).”58 In early March 2020, the governor issued a series of executive orders closing businesses not deemed life-sustaining, allowing life-sustaining businesses to remain open but mandating that they follow social distancing practices, and explicitly prohibiting the operation of bars and restaurants with the exception of carry-out, delivery, and drivethrough.59 The Governor relied on the police powers test from Lawton v. Steele, “first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and, second, that the means are reasonably necessary for the accomplishment of that purpose, and not unduly oppressive upon individuals.”60 In Lawton, the plaintiffs placed nets in public waters owned by the state of New York for the purpose of fishing, in direct violation of a statute that they claimed was unconstitutional.61 The game and fish officer took the nets and destroyed them as ordered by the statute which stated that “any net . . . in or upon any of the waters of this State, . . . in violation of any existing or hereafter enacted statutes . . . is hereby declared to be, and is, a public nuisance, and may be abated and summarily destroyed by any person[.]”62 The court held that the police powers are “universally conceded to include everything essential to the public safety, health, 57

Andy Markowitz, State-by-State Guide to Face Mask Requirements, AARP, https://www.aarp.org/health/healthy-living/info-2020/states-mask-mandatescoronavirus.html (last updated Sept. 2, 2020).

58 Friends of Danny DeVito v. Wolf, 227 A.3d 872, 876 (Pa. 2020) cert. denied, 141 U.S. 239 (2020).

59 Id. at 877-80.

60 Id. at 890 (quoting Lawton v. Steele, 152 U.S. 133, 136 (1894)).

61 Lawton, 152 U.S. at 134.

62 Id. at 135.

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morals, and to justify the destruction or abatement, by summary proceedings, of whatever may be regarded as a public nuisance.”63 The governor: [H]as no right arbitrarily to declare that to be a nuisance which is clearly not so, a good deal must be left to its discretion in that regard, and if the object to be accomplished is conductive to public interests, it may exercise a large liberty of choice in the means employed.64 Therefore, the closure of businesses may be conductive to public interests, and can be declared a nuisance under Lawton, giving the governor the power under the police powers to ‘destroy,’ or in this case, ‘fix’ the public nuisance by closing businesses during the pandemic.

The petitioners made three arguments in response. First, that the public interest is not served by mass closures because the public needs to continue receiving goods and services of the businesses.65 Second, that closing of the businesses is unnecessary to prevent the spread of COVID-19 if there have been no reports of contagion at their businesses.66 Lastly, that closing their businesses was unduly burdensome and was “just about the most burdensome thing that can happen to a business[.]”67 The Pennsylvania Supreme Court rejected the first two of these arguments stating that the nature of the emergency supports these actions by the government, although conceding that some economists and social scientists would undoubtedly agree with the petitioners.68 In the final argument, however, the court did admit that the burden was oppressive on the businesses, but found that it was not unduly oppressive, because the government was protecting the health and lives of 12.8 million Pennsylvania citizens and that protecting citizens was the essential purpose of the police powers.69 63

Id. at 136.

Id. at 140.

65 Friends, 227 A.3d at 890.

66 Id. 67 Id. 68 Id. at 890-91.

69 Id. at 892 (emphasis in original).

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The petitioners’ second argument was that the executive order amounted to a taking of private property without just compensation in violation of the Fifth Amendment to the United States Constitution.70 Although the order is not a physical taking of the property, the petitioners view the order as a government regulation that “deprive[s] an owner of all economically beneficial or productive use of land[.]”71 The state responded that “the payment of just compensation is not required where the regulation of property involves the exercise of the Commonwealth’s police power,”72 and argued further that: [E]minent domain is the power to take property for public use. The City must provide just compensation for any property taken pursuant to this power. The police power, on the other hand, involves the regulation of property to promote the health, safety, and general welfare of the people. . . . It does not require that the City provide compensation to the property owner, even if the property is damaged or destroyed.73 This broad assertion of power was based on Pennsylvania Supreme Court74 cases expanding upon the Lawton distinction between eminent domain and the police power. The court held that there is a critical distinction between eminent domain, which is the power to take property for public use, where just compensation must be paid,75 and the police power, where no payment is required for a diminution in use, so long as there “be a reasonable and substantial relation between the thing acted on and the end to be attained.”76 The court also held that Lucas was not applicable here because “the public health rationale for imposing the restrictions . . . to suppress the 70

Id. at 893.

Id. (citing Machipongo Land & Coal Co. v. Dep’t of Envtl. Prot., 799 A.2d 751, 754 (Pa. 2002)).

72 Friends, 227 A.3d at 893.

73 Id. at 894 (quoting Balent v. City of Wilkes-Barre, 669 A.2d 309, 314 (Pa. 1995)).

74 See generally White’s Appeal, 134 A. 409 (Pa. 1926) (holding that the proper use of the police power does not grant compensation) and Balent v. City of Wilkes-Barre, 669 A.2d 309 (Pa. 1995) (holding that the destruction of a building not up to code was a proper use of the police power and therefore no compensation was required).

75 Friends, 227 A.3d at 894 (quoting Balent, 669 A.2d at 314).

76 Id. at 893-94 (quoting White, 134 A. at 411).

71

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spread of the virus throughout the Commonwealth, is a stop-gap measure and, by definition, temporary,”77 and instead relied on Tahoe.

In Tahoe,78 the United States Supreme Court held that when “regulations had only a temporary impact on petitioners’ fee interest, no categorical taking had occurred,”79 and the Court avoided setting a hard rule on when temporary takings became permanent takings80 and simply left it to the courts to determine when regulations are reasonable under the principles of fairness and justice.81 In the end, the Pennsylvania Supreme Court held that the executive order: [R]esults in only a temporary loss of the use of [p]etitioners’ business premises, and the [g]overnor’s reason for imposing said restrictions on the use of their property, namely to protect the lives and health of millions of Pennsylvania citizens, undoubtedly constitutes a classic example of the use of the police power to ‘protect the lives, health, morals, comfort, and general welfare of the people[.]’ . . . Moreover, the public health rationale for imposing the restrictions in the Executive Order, to suppress the spread of the virus throughout the Commonwealth, is a stop-gap measure and, by definition, temporary.

While the duration of COVID-19 as a natural disaster is currently unknown, the development of a vaccine to prevent future outbreaks, the development of an immunity in individuals previously infected and the availability of widespread testing and contact tracing are all viewed as the basis for ending the COVID-19 disaster.82 Unlike the historical cases discussed above, where local officials acted with power greater than that granted by the cities, the court here identifies the scope of the governor’s ability to issue said order as it 77

Friends, 227 A.3d at 895.

Tahoe, 535 U.S. 302 (2002).

79 Id. at 342.

80 Id. at 341.

81 Id. at 342.

82 Friends, 227 A.3d at 896 (quoting Manigault v. Springs, 199 U.S. 473, 480 (1905)).

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relates to a natural disaster,83 further clarifying that “[i]t is beyond dispute that the COVID-19 pandemic is unquestionably a catastrophe that results in . . . hardship, suffering, or possible loss of life.”84 B. Connecticut: Auracle Homes, LLC v. Lamont Pennsylvania was not the only state to institute strict regulations to attempt to mitigate the effect of the Coronavirus. An action by the Connecticut governor to mitigate the effects of the Coronavirus was to “limit the ability of residential landlords to initiate eviction proceedings against tenants and allow tenants to apply security deposit funds to past due rents[.]”85 Although the landlords in Connecticut “concede that making it easier for people to stay home during a pandemic is a significant public purpose and that controlling and reducing the spread of COVID-19 is an important government objective,”86 they claim that this order is a taking of their property because it “forces the Plaintiffs and landlords like them to suffer the public burden of paying rent for the state’s non-paying tenants”87 and “effectively create[s] an actual, state-sponsored occupancy of the Plaintiffs’ properties.”88 Although the landlords argued a physical taking, the court pointed out that the “Plaintiffs here voluntarily rented their land to residential tenants” and the executive order “merely regulate[s] Plaintiffs’ use of their land by regulating the relationship between landlord and tenant.”89 “The government effects a physical taking only where it requires the landowner to submit to the physical occupation of his land.”90 The “government has [not] required any physical invasion of the [plaintiffs’] property,”91 simply that the plaintiffs may not evict tenants that they have already voluntarily rented to.

83

Id. at 885-88.

Id. at 888 (internal quotations removed).

85 Auracle Homes, LLC v. Lamont, 2020 U.S. Dist. LEXIS 141500 at *2-3 (D. Conn.

Aug. 7, 2020).

86 Id. at *18 (internal quotations omitted).

87 Id. at *19 (internal quotations omitted).

88 Id. (internal quotations omitted).

89 Id. at *36 (internal quotations omitted) (citing Yee v. City of Escondido, Cal., 503 U.S. 519, 527-28 (1992)).

90 Yee, 503 U.S. at 527.

91 Id. at 528.

84

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The court then also notes that the executive order, like the one in Pennsylvania, was not a regulatory taking because “[p]laintiffs continue to enjoy economic benefits of ownership and ‘can continue to accept rental payments from tenants not facing financial hardship, while also covering the cost of ownership by collecting security deposit funds from consenting tenants who have been affected by the pandemic.’”92 Ultimately, the court concludes that “[j]ust because Plaintiffs cannot derive as much ‘profit from their properties . . . as . . . under a marketbased system’ does not mean the loss of value equates to a taking”93 because “[t]he Executive Orders also do not prevent Plaintiffs from collecting or continuing to accrue unpaid rent, and importantly, nothing in the Executive Orders shall relieve a tenant of liability for unpaid rent or the obligation to comply with other terms of a rental agreement or statutory obligations pursuant to Connecticut law.”94 C. Tennessee: TJM 64, Inc. v. Harris In Tennessee, a coalition of bars and restaurants in Shelby County challenged their governor’s COVID-19 restrictions as an unlawful taking as well. The executive order here required all bars, restaurants, and clubs to shut down because of a spike in COVID-19 cases.95 Similar to the court in Friends, the court found that “Plaintiffs have not shown that their properties have lost all economic value” despite: [T]he testimony of the owners of these businesses indicat[ing] that Plaintiffs will likely be out of business by August or September . . . [and] that it would be financially impractical to operate curbside or takeout food and beverage services. Each owner testified that they would lose money if they offered such services.96 92

Id. at *37 (citing Elmsford Apt. Assocs., LLC v. Cuomo, 2020 U.S. Dist. LEXIS 115354 at *9 (S.D.N.Y. June 29, 2020)).

93 Id. at 43 (quoting Federal Home Loan Mortg. Corp. v. New York State Div. of Hous. & Comty. Renewal, 83 F.3d 45, 48 (2d Cir. 1996)).

94 Id. at 74 (internal quotations omitted).

95 TJM 64, Inc. v. Harris, 2020 U.S. Dist. LEXIS 134037 at 3 (W.D. Tenn. July 29, 2020).

96 Id. at 16-17.

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Furthermore, “[t]he record is uncontroverted that Plaintiffs will suffer devastating economic injury if the Closure Orders remain in effect.”97 Although recognizing the harm to the plaintiffs, the court stated that if they enjoined the closure orders, it would likely cause substantial harm to other members of the community and deferred the decision of what actions to take to the local health department.98 This deference to the judgment of local officials is similar to the cases in Section II, supra.

There, health officials did what they thought was in the best public interest. They exceeded the scope of their authority. Then, due to a lack of regulatory takings, an undeveloped jurisprudence on physical takings, and the police powers, the property owners were without remedy. In modern times, we have regulatory takings as a means to protect private property from government over-regulation. However, when it comes to an emergency such as protecting public health, the courts hesitate to “compensate every individual or property owner whose property use was restricted for the purpose of protecting public health”99 under the idea it: [E]xceed[s] the scope of the Takings Clause by “transforming the principle that all property in this country is held under the implied obligation that the owner’s use of it shall not be injurious to the community” to one that requires compensation whenever the state asserts its power to enforce it.100 This theme presented by the court operates on the idea that “legal scholars seem ready to cede authority to medical experts who will supposedly exercise their power in a neutral, scientific, and objective manner. History, however, has demonstrated repeatedly that this has not always—or even usually—been the case.”101

97

Id. at 23.

Id. at 23-24.

99 TJM 64, Inc., 2020 U.S. Dist. LEXIS at 22 (emphasis in original).

100 Id. (quoting Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 492 (1987)).

101 Batlan, supra at note 3, at 60 (citing Lawrence O. Gostin, Pandemic Influenza: Public Health Preparedness for the Next Global Health Emergency, 32 J.L. Med. & Ethics, 565, 571 (2004)).

98

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V. Analysis Takings jurisprudence has developed slowly. Over the course of the many community medical emergencies that have affected the United States, this jurisprudence has developed in the light of an expansive understanding of the police powers. The police power “is the chief attribute of a sovereign power, for if in its exercise there is conflict with parts of the Constitution, the police power exercised to promote its major objects will prevail[.]”102 In Section II, the government took every action to protect the health of the citizens in the town, whether it be setting up hospitals or confining sick people to homes, and no takings were ultimately upheld. In Section IV, there was government action that forced businesses to shut down, and landlords to not evict tenants, and no takings were found.

As the jurisprudence of both the police power and takings developed, the police power retained its strength and courts always find an exception to takings under the police power. Throughout Section II, takings were not found due to the health officials often overreaching in their authority; however, it is not stated that had the health officials had the authority to do those actions, that they would be considered takings. In Lucas, we saw the first real limit on the police powers.103 The court in Lucas determined that when a regulation removed all economical use of the property that it was a taking,104 however, it still carved out an exception for the proper use of the police powers. “The government must pay just compensation for such takings ‘except to the extent that background principles of nuisance and property law’ independently restrict the owner’s intended use of the property.”105 By granting this nuisance exception, it permitted the continued use of the police powers without paying just compensation for property taken.

In the time of COVID-19, the court in Friends does not explicitly name the normal operation of a business during a pandemic as a nuisance, which is why they did not need to rely on a Lucas analysis. However, “[a] public nuisance is an unreasonable interference with a right 102

White, 134 A. at 411.

Although regulatory takings began with Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922), with the determination that a regulation that goes too far could be a taking, Lucas gives us the direct answer as to when ‘too far’ becomes a taking.

104 Lucas, 505 U.S. 1003 (1992).

105 Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 537 (2005) (quoting Lucas, 505 U.S. at 1032).

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common to the general public . . . [w]hether the conduct involves a significant interference with the public health, the public safety, the public peace, the public comfort or the public convenience[.]”106 Therefore, the court could have deemed it a nuisance, applied a Lucas analysis, and found that this action was within the nuisance exception recognized by the court for the proper use of the police powers.

Instead, the court relied on the temporary nature and applied a Tahoe analysis.107 The question remains though, is there a limit on the police power when it comes to community medical emergencies and private property?

Likely yes, although few courts have taken the opportunity to find it.

In a general application of the police power, for something permanent as in Lucas, if the regulation takes all economical use of the property, then it becomes a taking, which is arguably a restriction on the police power. However, what determines loss of all economic use is something that the courts are still battling with.108 If the police power is taken for something not facially permanent, where the regulation does not have a set ending, as shown in the COVID-19 cases, it is entirely unclear whether there is a limit to the police power. In Friends, “the majority repeatedly stresse[d] that such closure is temporary, this may in fact not be so for businesses that are unable to endure the associated revenue losses. Additionally, the damage to surviving businesses may be vast.”109 If a business permanently closes as a result of these temporary regulations, is this considered a taking? No court has addressed this. The court in Connecticut also asks another question that is not answered. If the landlords “can continue to accept rental payments from tenants not facing financial hardship,”110 how are they to go about making the determination of who is facing a financial hardship during this time and who is not?

106

Machipongo Land & Coal Co. v. Dep’t of Envtl. Protection, 799 A.2d 751, 773 (Pa. 2002) (citing Restatement (Second) of Torts § 821B (1965)).

107 See Tahoe, 535 U.S. 302 (2002).

108 See generally Machipongo Land & Coal Co. v. Dep’t of Envtl. Prot., 799 A.2d 751 (Pa. 2002) (where the court determined that although coal cannot be mined from parcels of property, property could still be stripped of timber or sold for residential uses).

109 Friends, 227 A.3d at 904 (C.J. Saylor, dissenting) (internal citations omitted).

110 Auracle Homes, LLC, 478 F. Supp. 3d at 221(citing Elmsford Apt. Assocs., LLC, 2020 U.S. Dist. LEXIS at *9).

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Additionally, “the Supreme Court of the United States has admonished that the impermanent nature of a restriction ‘should not be given exclusive significance one way or the other’ in determining whether it is a proper exercise of police power.”111 With no end of the Coronavirus in sight, although temporary now, there is no way of knowing if or when these regulations end. In Tahoe, the regulation in question was set at 32 months and all parties knew when the restrictions would be lifted.112 In fact, the Court in Tahoe held very narrowly “that regulations with built-in expiration dates generally cannot effectuate Lucas takings[.]”113 “The reasoning driving Tahoe-Sierra applies only to facially temporary regulations, not to regulations that are temporary only in retrospect. . .. The situation changes, however, when a regulation is facially unbounded.”114 These regulations restricting the use of property can last as long as the Coronavirus pandemic, which will last for an unknown period of time. The Court has also “recognized that a later amendment to a regulation or a judicial invalidation cannot erase any taking ‘for the period of time during which regulations deny a landowner all use of his land.’”115 Additionally, it has been held in lower courts that a “prospectively permanent restriction on economically viable use effect[s] a taking of the parcel as a temporal whole, regardless of the interests that revert[ ] to the landowner upon [the state’s] subsequent amendment.”116 Although “[p]roperty is held under the implied obligation that the owner shall use it in such way as not to be injurious to the community”117 and the definition of a public nuisance being wideranging,118 the protection of private property should still be respected.

The government should be able to protect the health, safety, and morals 111

Friends, 227 A.3d at 904 (C.J. Saylor, dissenting) (quoting Tahoe, 535 U.S. at 337).

112 See generally Tahoe, 535 U.S. 302 (2002).

113 Bridge Aina Le’a, LLC v. State Land Use Comm’n, No. 11-00414 SOM-KJM, 2018 U.S. Dist. LEXIS 107583 at *30 (D. Haw. June 27, 2018).

114 Id. at *35.

115 Id. (quoting First English Evangelical Lutheran Church v. Cnty of L.A., 482 U.S. 304, 318 (1987)).

116 Res. Invs., Inc. v. United States, 85 Fed. Cl. 447, 481 (2009) (emphasis in original).

117 White’s Appeal, 134 A. 409, 412 (Pa. 1926).

118 Machipongo Land & Coal Co. v. Dep’t of Envtl. Prot., 799 A.2d 751, 773 (Pa. 2002).

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of its citizens through the police power; however, property owners should know when, if ever, they will be able to use their properties in the way that they deem fit. Courts should not give such wide deference to regulations that are ‘temporary’ in nature when it comes to events that no parties can control or see an end to, like community medical emergencies. In natural disasters such as hurricanes, fires, or floods, the damage to private property can be catastrophic. Still, the time frame to rebuild can be calculated or anticipated. Simply having a good goal, and the power to make that goal a potential reality, is not enough to ignore the constitutional rights that private property owners have.

[G]ood intentions toward a laudable end are not alone enough to uphold governmental action against a constitutional challenge. Indeed, the greatest threats to our system of constitutional liberties may arise when the ends are laudable, and the intent is good — especially in a time of emergency. In an emergency, even a vigilant public may let down its guard over its constitutional liberties only to find that liberties, once relinquished, are hard to recoup and that restrictions — while expedient in the face of an emergency situation may persist long after immediate danger has passed.119 Courts need to address the difference between permanent, temporary, and takings of unknown length to ensure both the government and the citizens have full access to their rights. In a situation that calls for a potential taking of unknown length, such as a community medical emergency, the government defaults to the decisions of medical officials. These medical officials make predictions on the length and effect of these medical emergencies.120 Those predictions need to be heeded and analyzed under Tahoe. The Court then needs to define what is temporary or admit that the restrictions are prospectively permanent and hold them as a taking. If the pandemic will last within the 1-year reasonableness limit suggested within Tahoe,121 then the 119

Cty. of Butler v. Wolf, No. 2:20-CV-677, 2020 U.S. Dist. LEXIS 167544 at 3 (W.D. Pa. Sept. 14, 2020) (emphasis in original).

120 Megan Scudellari, How the Pandemic Might Play Out in 2021 and Beyond, Nature (Aug. 5, 2020), https://www.nature.com/articles/d41586-020-02278-5.

121 See Tahoe, 535 U.S. at 341(holding that “[i]t may well be true that any moratorium that lasts for more than one year should be viewed with special skepticism.”).

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police powers are controlling. Courts should stay the rulings on takings claims related to community medical emergencies, or any taking claim for that matter, until at least one year has passed. After one year, courts need to view the restrictions with “special skepticism” and determine them as permanent takings under Lucas. The police powers do not allow a ‘temporary’ taking to go on indefinitely without any compensation paid to the property owners, and “a hypothetical point at which the parcels’ future use interests would spring back into existence[]”122 is not sufficient simply because “[a]ll takings are ‘temporary,’ in the sense that the government can always change its mind at a later time[.]”123 Private property rights have more power than being left to the whims of whether or not the government will change its mind in the future.

VI. Conclusion This paper used examples from the past and present to find a balance between the government’s right to protect the health, safety, and morals of its citizens, with private property owners’ rights to not have their property taken for public use. Cases from past pandemics highlighted that individuals often acted outside of their authority to protect the citizens' health, safety, and morals. While their actions were not held to be government action, it still allowed the government to complete its objectives and mitigate medical emergencies. A development of takings jurisprudence was given, showing steps the courts have made in an effort to better balance the rights of property owners with the government over the last 100 years. Lastly, the cases stemming from the COVID-19 outbreak have shown where the courts currently are while highlighting questions that remain unanswered, yet desperately needed, to truly balance the police powers with private property rights.

122 123

Res. Invs., Inc., 85 F. Cl. at 481 (emphasis omitted).

Hendler v. United States, 952 F.2d 1364, 1376 (Fed. Cir. 1991).

Michigan’s Helter-Skelter Landscape of NoFault PTSD Cases Belies Science PROFESSOR BRAD CHARLES124 Abstract A lyric from the early 1900s goes like this: Perhaps you’re broke and paralyzed Perhaps your memory goes But it’s only just called shell shock For you’ve nothing there that shows.125 Most Michigan cases, even in the past decade, agree with this centuryold belief that post-traumatic stress disorder (PTSD) is not real because there’s “nothing there that shows.” These outdated beliefs bely current, corroborated, and credible scientific studies about PTSD. In fact, one gets the sense while reading these cases that those who have PTSD from auto accidents need an exorcism rather than competent medical care.

For a plaintiff with PTSD from a severe auto accident to recover noneconomic damages, they must prove that they suffered “serious impairment of body function.”126 It’s defined as “an objectively manifested impairment of an important body function that affects the plaintiff’s general ability to lead a normal life.”127

124

Professor Charles teaches all things writing at WMU-Cooley: Research & Writing, Advocacy, and Scholarly Writing. He also teaches international law classes and co-coaches the Jessup International Law Moot Court team. Before joining Cooley, Professor Charles dabbled in labor law and condominium law. Then he was honored to serve as a judicial attorney for the 21st Circuit Court in Isabella County, Michigan. Since then, he’s maintained a steady pro bono and low-fee practice. He has written several articles, authored an online course for learning legal research, and written a book on the U.S. Supreme Court’s reasoning techniques.

125

BEN SHEPARD, A WAR OF NERVES: SOLDIERS AND PSYCHIATRISTS TWENTIETH CENTURY 74 (Harvard University Press 2003).

126 MICH. COMP. LAWS § 500.3135(1) (2019).

127 Id.

IN THE

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From the first no-fault PTSD case in 1979128 to present day, almost every panel hearing these cases has held that a PTSD impairment cannot be “objectively manifested” and does not affect an “important body function.” Yet, paradoxically, a couple cases say that PTSD does satisfy these elements with the same evidence. This “arbitrary discretion”129 has led to an inconsistent and contradictory no-fault landscape.

The disarray among cases, at least until the turn of the century, had been justifiable because science had not yet progressed to competent understanding of the disorder. “It was not long ago in medicine that PTSD was debatable, obtuse, and poorly understood,”130 according to one Michigan Court of Appeals judge. But now, she says, “It is real. It is an injury.” This lone judge’s view is supported by even PTSD’s past harshest critics in the medical community who now recognize that the disorder exists and that it does physically affect several physical body functions.131 This article does not posit that more PTSD-from-car-accident sufferers should recover. To the contrary, the third element of a nofault claim – that one’s general ability to lead their normal life has been affected – should continue to act to filter out malingering plaintiffs with exaggerated injuries.

TABLE OF CONTENTS PTSD Defined................................................................................... 25 Living with mild PTSD..................................................................... 27 Living with chronic PTSD................................................................ 28 The PTSD response to trauma has a long history............................. 29 1800s: Railway Spine ................................................................................... 30 1900s: Shell Shock ....................................................................................... 31 2000s: Science and Psychiatry ...................................................................... 34 128

Luce v. Gerow, 280 N.W.2d 592 (Mich. Ct. App. 1979).

McCormick v. Carrier, 795 N.W.2d 517, 534 (Mich. 2010) (citation omitted).

130 Overweg v. Thomas, 308785, 2013 WL 1920735, at *6 (Mich. Ct. App. May 9, 2013) (J. Markey writing majority opinion).

131 Rebecca Izzo, In Need of Correction: How the Army Board for Correction of Military Records Is Failing Veterans with PTSD, 123:5 YALE L. J. 1587, 1594 (March 2014).

129

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Noneconomic-Damage Threshold: Serious Impairment of Body Function ............................................................................................ 35 Michigan’s Pell-Mell Treatment of Whether PTSD Is “Objectively Manifested”....................................................................................... 36 Nascent years: 1973 – 1982........................................................................... 36 Cassidy period: 1982 – 1986. ........................................................................ 38 DiFranco period: 1986 – 1996. ..................................................................... 38 Amended-statute period: 1996 – 2004. .......................................................... 39 Kreiner period: 2004 – 2010. ........................................................................ 40 McCormick period: 2010 – present. ............................................................... 43

PTSD’s impairment of body functions is objectively manifested..... 46 (1) Science unequivocally proves that PTSD affects several particular body functions. ..................................................................................................... 46 i. The endocrine system ................................................................................. 46 ii. The limbic system ...................................................................................... 48 iii. The nervous system .................................................................................. 50 (2) Michigan courts find that memory loss affects a body function; PTSD must also because they are so biologically similar. ................................................. 51 (3) PTSD affects a body function under the Government Tort Liability Act. ... 53 (4) Other states find that PTSD affects a body function. ................................. 54

PTSD Impairs Important Body Functions ........................................ 56 The Time for PTSD Acceptance Has Come..................................... 58 Michigan jurisprudence trends toward recovering for mental injuries.............. 58 Treat PTSD as a closed-head injury............................................................... 60 Trust expert psychotherapists because their methods are reliable. ................... 63 A simple amendment to 500.3135 could bring Michigan jurisprudence in line with science.................................................................................................. 67

Conclusion ........................................................................................ 68 PTSD Defined

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About 7% of all adults have experienced PTSD at some point in their lives.132 And close to 4% currently suffer with it.133 Motor-vehicle accidents are the leading cause of PTSD in the general population.134 And at least two dozen studies have proven that between 25% and 33% of survivors from serious car-accident victims have some level of PTSD.135 PTSD is not a reaction to tragedy like bereavement, chronic illness, business losses, or marital conflict.136 In contrast, according to the American Psychiatric Association (APA), PTSD can come from only the severest experiences: “Exposure to actual or threatened death, serious injury, or sexual violence . . . .”137 Before a psychoanalyst can diagnosis a person with this high PTSD threshold, a person must present with “clinically significant distress or impairment in social, occupational, or other important areas of functioning” for longer than one month.138 The distress or functional impairment must come from these four categories:139 ● Intrusive symptoms: “Recurrent, involuntary, and intrusive distressing memories of the trauma,” “recurrent distressing dreams,” “flashbacks,” or “prolonged psychological distress.”140 ● Avoidance: “Persistent avoidance of stimuli associated with the traumatic event.”141 132

National Institute of Health, Post-Traumatic Stress Disorder (PTSD), NAT’L INST. OF MENTAL HEALTH, https://www.nimh.nih.gov/health/statistics/posttraumatic-stress-disorder-ptsd.shtml (Nov. 2017).

133 Id. 134 American Psychological Association, Motor Vehicle Accidents Are Leading Cause of Posttraumatic Stress Disorder, According to New Book, AM. PSYCHOL. SOC’Y, https://www.apa.org/news/press/releases/2003/12/accidents-ptsd (Dec. 7, 2003).

135 J. Gayle Beck & Scott F. Coffey, Assessment and Treatment of PTSD After a Motor Vehicle Collision: Empirical Findings and Clinical Observations, 38(6) PROF. PSYCHOL., RES., PRAC. 629, 630 (2007).

136 AM. PSYCHIATRIC ASS’N, DIAGNOSTIC AND STATISTICAL MANUAL OF MENTAL DISORDERS 236 (3d ed. 1980); AM. PSYCHIATRIC ASS’N, DIAGNOSTIC AND STATISTICAL MANUAL OF MENTAL DISORDERS 424 (4th ed. 1994).

137 AM. PSYCHIATRIC ASS’N, DIAGNOSTIC AND STATISTICAL MANUAL OF MENTAL DISORDERS 271–72 (5th ed. 2013).

138 Id. 139 Id. 140 Id. 141 Id.

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● Negative cognitions and mood: “Negative alterations in cognitions and mood associated with the traumatic event,” “Inability to remember an important aspect of the traumatic event,” “negative beliefs” (e.g., “My whole nervous system is permanently ruined”), “persistent negative emotional state,” “feelings of detachment or estrangement from others,” or “persistent inability to experience positive emotions.”142 ● Arousal. “Marked alteration in arousal [abnormally heightened state of anxiety] and reactivity [flying off the handle] associated with the traumatic event,” “exaggerated startle response,” “irritable behavior and angry outbursts (with little or no provocation),” “hypervigilance,” “problems with concentration,” or “sleep disturbance.”143 Living with mild PTSD. Because only 7% of the population has ever experienced PTSD,144 most of us don’t know what it looks like, though it’s a term often used in popular culture to refer to anything in our past that we don’t like. So below is one accident victim’s retelling of his symptoms after three car accidents. Both the victim and his primary care physician initially fought the diagnosis because it’s a mild case of PTSD.145 Yet both the primary care physician and the patient’s psychiatrist eventually agreed that he was indeed suffering from PTSD. Here it is: I have had 3 car accidents in the past about 2 ½ years, none of which I’ve had any control over. I told myself it was just a freak thing, but this has bothered me a great deal. Besides nightmares initially – about being in a car – then it became something more general. I

142

Id. Id. 144 National Institute of Health, supra note 8.

145 Murray B. Stein, A 46-Year-OId Man with Anxiety and Nightmares After a Motor Vehicle Collision, 288:12 J. AM. MED. ASS’N 1513, 1514 (Sept. 25, 2002).

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think about things being out of control, things happening to me and not having any choice.

I’m fearful of a great many things that I have not been fearful since I was a child. Sleeping has been a major problem since the time of the accident. Not just the nightmares, but not being able to find any comfortable position. Part of it is having a chunk of my life taken away – there was nothing I could really do for a period of time. I just have this feeling of being very fragile, and it has affected my confidence.

It is so important that my primary care doctor is able to make me feel that he’s there to listen. The coping issues are difficult for me to talk about since I feel like I am and should be so self-reliant.

After this last accident, I unfortunately have a feeling that it’s not over. I know the odds of things happening are so small, and yet they can’t be so small if they’ve happened so frequently. The biggest concern for me is getting control over my life again, and [to figure out] how to do it as quickly as possible.146 Living with chronic PTSD. Now here’s an example of what chronic PTSD from an auto accident looks like as told by the patient’s psychiatrist. This example also is free from exaggeration and malingering because the sessions that led to the diagnosis occurred outside the anticipation of litigation: Stopped at a red light, Mr. O glances in the rearview mirror and sees headlights coming up fast. The sport utility vehicle behind him is not slowing down. He braces himself as the SUV plows into the back of his car, snapping his head back and forth violently.

As white smoke fills his eyes and lungs, Mr. O realizes he has been pushed into the intersection, and for a moment thinks about never seeing his wife and 146

Id. at 1513.

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children again. As he hears tires screeching, his car is struck by a truck.

Mr. O does not die, as he feared, but 6 months later he is “just not ready” to return to work. The doctor who is treating his whiplash injury refers him for evaluation of lingering anxiety. * * * In the 6 months since the accident, Mr. O’s sleep is disrupted by pain and worry; when he can sleep, he frequently has nightmares about the accident. Mr. O feels anxious and irritable, and thoughts of that evening play over and over in his mind.

Mr. O doesn’t like to talk about the accident and has not resumed driving. He avoids all but required trips, such as to doctors’ appointments, which he endures with extreme anxiety. Whenever his wife drives without him, he insists that she immediately call him when she reaches her destination. At the same time, he feels emotionally distant from her and the children.

He shows little interest in hobbies he’d previously enjoyed.147 The PTSD response to trauma has a long history.

Thousands of sources recount PTSD’s history, a simple Google search will show that. This brief recounting will serve – not to numbingly repeat these other sources – but to give a backdrop to Michigan courts’ current jurisprudence and to introduce its primary theme: PTSD is a result of actually impaired body functions; this concept implicates the first two elements of a “serious impairment” claim: (1) objectively manifested impairment (2) of an important body function.

The PTSD condition has been around since recorded history. The earliest known record is the Epic of Gilgamesh from 2100 B.C. “[T]he main character Gilgamesh witnesses the death of his closest friend, Enkidu. Gilgamesh is tormented by the trauma of Enkidu’s death, 147

Eric Kuhn, PhD & Edward J. Hickling, PsyD, Treating Posttraumatic Stress in Motor Vehicle Accident Survivors, 6:5 CURRENT PSYCHIATRY 17, 18 (May 2007).

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experiencing recurrent and intrusive recollections and nightmares related to the event.”148 But, more modernly, we can characterize the prevalence of PTSD in three periods: 1800s, Railway Spine; 1900s, Shell Shock; and 2000s, Science and Psychiatry.

1800s: Railway Spine A condition doctors started calling “railway spine” became prevalent in the 1860s as steam-powered trains became a regular transportation mode.149 Humans had never traveled at such high speeds, for so long, and in such large, dense, and powerful machinery. This inevitably led to serious accidents. In fact, Charles Dickens, the English writer of A Christmas Carol fame, may have experienced mild PTSD from riding the railroad. In 1865, four days after being involved in a railroad accident, he described it in a letter, ending with a surprising reaction, even to himself it seems:150 I don’t want to be examined at the inquest and I don’t want to write about it. I could do no good either way, and I could only seem to speak about it to myself. . . .

I am keeping very quiet here. I have a – I don’t know what to call it – constitutional (I suppose) presence of mind, and was not in the least fluttered at the time. I instantly remembered that I had the MS of a number with me and clambered back into the carriage for it.

But in writing these scanty words of recollection I feel the shake and I am obliged to stop. Ever faithfully, Charles Dickens.151 But most railroad-accident victims, the ones who actually needed treatment, suffered from chronic PTSD that “involved a physical shock, caused by an intense stimulus, resulting in a functional disturbance of the nerves,” according to one doctor who studied 148

PTSD and Shell Shock, HISTORY.COM, http://www.history.com/topics/history-ofptsd-and-shell-shock (Aug. 21, 2018).

149 ANDREAS KILLEN, BERLIN ELECTROPOLIS: SHOCK, NERVES, AND GERMAN MODERNITY 86 (2006).

150 WOLFGANG SCHIVELBUSCH, THE RAILWAY JOURNEY: THE INDUSTRIALIZATION OF TIME AND SPACE IN THE NINETEENTH CENTURY 138 (2014).

151 Id.

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railway spine at the time.152 Firmly believing that PTSD had a physical basis, the doctor’s study “left open the question of whether this shock could also be psychological in nature.”153 As made poignant by today’s Michigan Court of Appeals’ holdings that PTSD is a ghost syndrome, even in the 1800s doctors knew that PTSD—or any of its cousin diagnoses—had origins in physical body functions. The prescient hypothesis wouldn’t be scientifically proven for another 150 years with the advent of MRI, PET, and MEG154 scans.

As one would expect, some railway-spine cases were litigated. In one from the Oregon Supreme Court in 1903, it’s clear from science and law at the time that PTSD, then called “railway spine” or “traumatic neurosis,”155 was recoverable under the same rule from Michigan’s current no-fault jurisprudence: a mental injury caused by a physical injury or a physical injury that causes a mental injury are both recoverable.156 And as proof that human nature is the same from generation to generation, “railway spine” took on the sarcastic moniker of “Litigation Spine” as some litigants appeared to miraculously recover upon receiving a jury award.157 Today’s plaintiffs’ pools have the same minority of malingerers, but the mechanisms of truth-finding—the jury, the judge, and the third “general ability” element of “serious impairment”— can filter out the fakers.

Railway spine was the precursor to shell shock in World War I. 1900s: Shell Shock The 20th century saw two global wars and countless regional ones, so it inevitably led to increased understanding of PTSD, but only after 152

KILLEN, supra note 25 (emphasis added).

Id. 154 magnetic resonance imaging (MRI); positron emission tomography (PET); magnetoencephalography (MEG) 155 Maynard v. Oregon R. Co., 72 P. 590, 592 (Or. 1903).

156 Luce v. Gerow, 280 N.W.2d 592, 593 (Mich. Ct. App. 1979).

157 Duggins v. Intl. Motor Transit Co., 280 P. 50, 52 (Wash. 1929); see also Demenstein v. Richardson, 1893 WL 3396, at *2 (Pa. Com. Pl. 1893) (“In our day it is the ‘Spine,’ for injuries to which millions have been recovered, and which, from its great pre-eminence in this line, is known to suitors as ‘The Railway Spine.’”)

153

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decades of government denial.158 Beginning in the early 1900s, combat trauma went by “shell shock,” denominated just six months into World War I.159 Some estimate that in the first World War 40% of British casualties—those unable to continue fighting—were psychiatric.160 And the same study estimated that, likewise, about one-third of all casualties in World War II were psychiatric.161 A British military doctor published a study in 1915 of three “casualties” of shell shock.162 After explaining three cases of shell shock, the author concluded: They appear to constitute a definite class among others arising from the effects of shell-shock. The shells in question appear to have burst with considerable noise, scattering much dust, but this was not attended by the production of odour. It is therefore difficult to understand why hearing should be (practically) unaffected, and the dissociated “complex” be confined to the sense of sight, smell, and taste (and to memory).163 As you can see from this Lancet study, and just like the studies for railway spine, doctors saw shell shock as a physical condition, affecting actual body functions. For the next several wars, though, the military would treat combat trauma as a ghost syndrome that’s more in someone’s head, telling them basically to suck it up and get over it.164 This eagerness to not understand the PTSD condition could explain why in Vietnam less than 5% of casualties were deemed psychiatric.165 Many believe that number was grossly underreported.166

158

Izzo, supra note 7, at 1589–93.

HISTORY.COM, supra note 24.

160 Izzo, supra note 7, at 1593.

161 Id. 162 Charles S. Myers, M.D., A Contribution to the Study of Shell Shock, 185 THE LANCET 316 (Feb. 13, 1915).

163 Id. at 320.

164 Izzo, supra note 7, at 1593.

165 Id. 166 Id. 159

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The American Psychiatric Association (APA) picks up the PTSD history just after World War II ended. What we now call PTSD was called “gross stress reaction” in the very first Diagnostic and Statistical Manual of Mental Disorders (DSM) in 1952.167 This manual today sets the industry standards for psychiatric diagnoses. In the first DSM, PTSD was considered a personality disorder: “Under conditions of great or unusual stress, a normal personality may utilize established patterns of reaction to deal with overwhelming fear.”168 Then, in 1968, in DSM-2, the authors recategorized it as “transient situational disturbances.”169 The disorder was related to an “acute reaction to overwhelming environmental stress.”170 As a dour side note, and perhaps it’s mere coincidence, but the first DSM manual and each update to it coincides with a war just ending (World War II, Korea, Vietnam, Desert Storm, Afghanistan/Iraq).

PTSD really came into its own in 1980 through DSM-3 when it finally gets the name it is known by today: post-traumatic stress disorder. This updated version of the diagnosis was based on years of researching “people who survived severely traumatic events, including war veterans, Holocaust survivors and sexual trauma victims.”171 “The essential feature is the development of characteristic symptoms following a psychologically traumatic event that is generally outside the range of usual human experience.”172 “The stressor producing the syndrome would evoke significant symptoms of distress in most people . . . .”173 “Frequently,” the APA manual reads, “there is a concomitant physical component to the trauma which may even involve direct damage to the central nervous system . . . .”174 But not just combat veterans have it. Survivors of motor-vehicle accidents experience it, too. The last three DSM manuals have

167

AM. PSYCHIATRIC ASS’N, DIAGNOSTIC AND STATISTICAL MANUAL OF MENTAL DISORDERS 40 (1st ed. 1952).

168 Id. 169 AM. PSYCHIATRIC ASS’N, DIAGNOSTIC AND STATISTICAL MANUAL OF MENTAL DISORDERS 48 (2d ed. 1968).

170 Id. 171 HISTORY.COM, supra, note 24.

172 AM. PSYCHIATRIC ASS’N, supra, note 12, at 236.

173 Id. 174 Id.

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included “severe motor vehicle accidents” 175 as a common cause of PTSD. In a 1999 study, researchers compared victims of motor-vehicle accidents to victims of non-motor-vehicle accidents and found that one month after experiencing a motor-vehicle accident, 34.4% of victims experienced PTSD.176 And even after a year, 14% still experienced PTSD.177 Comparatively, among the non-motor-vehicle-accident victims, only 2.4% and 2.9% experienced PTSD after one month and 12 months, respectively.178 The United States’ combat engagement in the Middle East sparked an onslaught of PTSD studies in the 1990s. In 1994 (and then again with an update in 2000), the APA released DSM-4 and re-categorized PTSD as an anxiety disorder caused by severe stress: “The essential feature of Posttraumatic Stress Disorder is the development of characteristic symptoms following exposure to an extreme traumatic stressor involving direct personal experience of an event that involves actual or threatened death or serious injury . . . .”179 2000s: Science and Psychiatry And, finally, the current manual, DSM-5 published in 2013, moved PTSD from the category of anxiety disorders and into a new chapter for “trauma- and stress-related disorders.”180 So it’s not a ghost syndrome, not a personality disorder as thought in the 1950s, -60s, or -70s, and it’s not even an anxiety disorder. Instead, DSM-5 reflects myriad scientific studies from the past 20 years that dramatically increased our understanding of what physically happens in the body when someone experiences PTSD.181

175

See Id. (DSM-3) (“car accidents with serious physical injury”); AM. PSYCHIATRIC ASS’N (DSM-4), supra note 12, at 424 (“severe automobile accidents”); AM. PSYCHIATRIC ASS’N (DSM-5), supra note 13, at 274 (“severe motor vehicle accidents”).

176 Robert J. Ursano, et al., Acute and Chronic Posttraumatic Stress Disorder in Motor Vehicle Accident Victims, 156:4 AM. J. PSYCHIATRY 589 (Apr. 1999).

177 Id. at 591.

178 Id. 179 AM. PSYCHIATRIC ASS’N (DSM-4), supra note 12, at 424.

180 James Phillips, PTSD in DSM-5: Understanding the Changes, 32:9 PSYCHIATRIC TIMES (Sept. 25, 2015).

181 Kuhn & Hickling, supra note 23; Sherin & Nemeroff, infra note 121; Hupbach, infra note 125; Smerin, Chen, and Li, infra note 141.

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Before the 2000s, it wouldn’t have been surprising to see Michigan court decisions follow the same trajectory of PTSD understanding as we saw in the military: denial for several decades before finally accepting and understanding it. But, as described in this article’s next section, they are largely stuck in the denial period. Because the science is so sound and corroborated, there is simply no reason that attorneys can’t properly prepare a PTSD case and why courts can’t trust experts’ opinions that PTSD is an injury that actually affects important body functions.

Noneconomic-Damage Threshold: Serious Impairment of Body Function The no-fault compromise is that anyone injured in an auto accident turns to their own insurance company to pay medical bills (economic damages).182 In turn, the injured auto passenger gives up the right to sue the accident-causing driver in tort—unless the injury crosses the “serious impairment” threshold.

Before the no-fault automobile insurance system was instituted in 1973, an auto-accident victim could sue the driver who caused the injuries in tort.183 That system was abolished and replaced with the nofault scheme for three principal reasons: First, the pure-tort system led to overcompensation for minor injuries.184 Second, the at-fault system encouraged excessive litigation.185 And, finally, that system seemed to discriminate against uneducated and financially challenged victims because they would settle as soon as possible to get any sum of money.186 The Michigan No Fault Act, which became effective in 1973, established a high threshold for recovering noneconomic damages for auto-accident injuries: “serious impairment of body function.”187 After 182

MICH. COMP. LAWS § 500.3105 (2019).

1972 Mich. Pub. Acts 294. It became effective March 30, 1973.

184 Robert E. Logeman, Michigan No-Fault Automobile Cases § 1.1 (3d ed. 2002); see also Cassidy v. McGovern, 330 N.W.2d 22, 28 (Mich. 1982) (overturned on other grounds).

185 See Cassidy, 330 N.W.2d at 28 (“[T]here were the problems incident to the excessive litigation of motor vehicle accident cases.”)

186 Logeman, supra note 60; see also Cassidy, 330 N.W.2d at 28.

187 MICH. COMP. LAWS § 500.3105 (2019). The popular names it goes by are NoFault Insurance Act or, more simply, No-Fault Act. 183

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the courts kicked that term around for 22 years, the legislature finally amended the Act in 1995188 to give us the cause of action’s current one-sentence definition, which the Michigan Supreme Court has portioned into three elements: (1) an objectively manifested impairment (2) of an important body function (3) that affects the person’s general ability to lead his or her normal life.189 This article finds fault with how the Michigan courts have inconsistently applied the first two elements, which is now even more obvious given the overwhelming scientific understanding of PTSD. This article will address each element in turn.

Michigan’s Pell-Mell Treatment of Whether PTSD Is “Objectively Manifested” The “objectively manifested” element has gone through seven periods from the beginning of the No-Fault Act in 1973 to present day.

Nascent years: 1973 – 1982.

In this early period, the one-sentence definition from above had not been created. Courts simply applied “serious impairment of body function.” But beginning in 1979, a mental injury from an auto accident became recoverable as an impairment to a “body function” if it was caused by physical injury or if it created physical injury.190 This 1979 rule applied to PTSD and other mental-injury cases, like memory loss from an auto accident, for decades.

In Luce v. Gerow,191 the source of this rule, a woman suffered “emotional shock” from seeing her husband injured in a serious car accident.192 This “emotional shock” is what we today would call 188

1995 Mich. Pub. Acts 222.

McCormick v. Carrier, 795 N.W.2d 517, 526 (Mich. 2010) (dividing and enumerating the definition of “serious impairment of an important body function” in MCL 500.3135(5)).

190 Luce v. Gerow, 280 N.W.2d 592, 593 (Mich. Ct. App. 1979).

191 Id. 192 Id. 189

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“PTSD”; that term would be coined a year later when the DSM-3 was published.

Based on the no-fault statute, a bit of legislative history, and precedent, the Luce court held that “mental injuries are considered just as real as physical injuries.”193 The court then established that a mental injury is indeed an injury to a “body function”: “We therefore hold, as a matter of law, that the Legislature did not intend to exclude the possibility of recovering for mental injuries resulting in physical symptoms by using the term ‘body function’ in [the No-Fault Act].”194 A year after Luce was decided, in 1980, the Michigan Supreme Court in effect codified this rule from Luce by adding a jury instruction specifically for mental injuries: “The operation of the mind and of the nervous system are body functions. Mental or emotional injury which is caused by physical injury or mental or emotional injury not caused by physical injury but which results in physical symptoms may be a serious impairment of a body function.”195 This instruction is still given to juries today.

The 1979 Luce opinion is remarkable because the court applied common sense in a nascent period of brain science in finding that mental injuries are recoverable under the No Fault Act. What’s more, Ms. Luce as a bystander was able to recover for a mental injury. Given the general trend in tort law, with the goal to weed out insincere claims, of allowing recovery for only mental injuries caused by direct physical impact, to mental injuries only being associated with a physical consequence, to finally allowing bystanders to recover, the Michigan Court of Appeals incredibly jumped right to allowing a bystander, someone indirectly injured, to collect for a mental injury.196 But since Luce’s quantum leap forward based on a bold understanding of new science, that precedent has largely been given only lip service even though its enduring principle has not been overruled. And in some cases, this precedent is completely ignored.

193

Id. at 593.

Id. 195 MICH. MODEL CIV. JURY INSTRUCTIONS 36.02 (2019). This jury instruction was created in November 1980.

196 See infra 24–25.

194

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Cassidy period: 1982 – 1986.

We have the Michigan Supreme Court case of Cassidy to thank for the phrase “objectively manifested,” the first serious-impairment element, when it wrote this in 1982: “[T]he phrase ‘serious impairment of body function’ . . . demonstrates the legislative intent to predicate recovery for noneconomic loss on objectively manifested injuries.”197 Applying this new phrase, the Court held that Mr. Cassidy, a potato farmer who broke two bones in an auto accident, obviously satisfied the element.

But the hallmark of the Cassidy period is that an injury must be subject to “objective medical measurements.”198 This standard came from Williams v. Payne,199 a 1984 case that interpreted Cassidy.

The Cassidy–Williams duo set up Garris v. Vanderlaan,200 the first PTSD case to come along in the Cassidy period. After an automobile accident caused Ms. Garris’s back injury, her psychiatrist diagnosed her with “post-traumatic neurosis, which is characterized by depression, anxiety, confusion, isolation and may be associated with some type of bodily injury or mental injury.”201 The Michigan Court of Appeals, in a published opinion, said that Ms. Garris’s “alleged symptoms are purely subjective”202 even though a psychiatrist had given her this diagnosis and had sworn to it under oath.

This binding precedent, that PTSD is not objectively manifested, was ignored in a 2010 unpublished opinion that held that PTSD was indeed a physical injury and was objectively manifested based on evidence similar to that in Garris.203 DiFranco period: 1986 – 1996.

197

Cassidy v. McGovern, 330 N.W.2d 22, 30 (Mich. 1982).

Id. at 23, as interpreted by Williams v. Payne, 346 N.W.2d 564, 568 (Mich. Ct. App. 1984) (emphasis added).

199 346 N.W.2d 564 (Mich. Ct. App. 1984).

200 381 N.W.2d 412 (Mich. Ct. App. 1985).

201 Id. at 414.

202 Id. 203 See Baker v. Pent, 290778, 2010 WL 2541060, at *6 (Mich. Ct. App. June 24, 2010).

198

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There are no PTSD cases in the DiFranco period, but it’s important to this history because it sets up a significant overhaul to the No Fault Act. Essentially, the Michigan Supreme Court, by deciding DiFranco v. Pickard,204 allowed more injuries to pass the “objectively manifested” element when it lowered the standard from “medically measured” to “medically identifiable.”205 In support, the Court said that the threshold is “a significant, but not extraordinarily high, obstacle.”206 After DiFranco and its more liberal standard were decided, the automotive insurance industry complained that lawsuits increased by 100%.207 In response, industry lobbyists attempted to galvanize support for two different referendum elections in 1992 and 1994 where they tried to make the no-fault tort threshold “more restrictive.”208 After the Michigan voters soundly defeated both referenda (about 60% against in each election),209 the insurance industry prevailed on the legislature to pass Public Act 222 of 1995.

Amended-statute period: 1996 – 2004.

Public Act 222 of 1995 codified the three elements of “serious impairment” that we have today. Their genesis was in Cassidy, they were dismantled by DiFranco, but then Public Act 222 brought them back for good. One significant change is that the state made it clear that the impairment, not the injury, must be objectively manifested. “[W]hile an injury is the actual damage or wound, an impairment generally relates to the effect of that damage. Accordingly, when considering an ‘impairment,’ the focus ‘is not on the injuries themselves, but how the injuries affected a particular body function.’”210 This makes sense because economic damages cover the actual injury while noneconomic damages cover the effect of the injury.

204

DiFranco v. Pickard, 398 N.W.2d 896, 901, 918 (Mich. 1986).

Id. 206 Id. at 911.

207 House Legislative Analysis Section, No Fault Tort Threshold, House Bill 4341, First Analysis 2 (April 26, 1995).

208 George T. Sinas & Hon. Robert M. Ransom, The 1995 No-Fault Tort Threshold: A Statutory Hybrid, 76 MICH. B. J. 76 (January 1997).

209 Id. 210 McCormick v. Carrier, 795 N.W.2d 517, 527–28 (Mich. 2010) (citation omitted).

205

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After the Act became effective in 1996, there weren’t any PTSD cases to finish out the century. But all of that changed with the beginning of the 21st century and the first Michigan Supreme Court case to interpret the revised Act: Kreiner v. Fischer.211 Kreiner period: 2004 – 2010.

The Kreiner Court said little about the “objectively manifested” element: “Subjective complaints that are not medically documented are insufficient.”212 But later courts read the “medical testing” rule into Kreiner: [T]he current meaning of “objectively manifested” – whether described as “medically measurable,” “medically identifiable,” or “medically documented” – requires that a plaintiff's injury must be capable of objective verification by a qualified medical person either because the injury is visually apparent or because it is capable of detection through the use of medical testing.213 . .

Three PTSD cases were decided under this definition.

In Rammeloo v. Williams,214 the unlucky plaintiff suffered – all within just 11 months – his brother’s death from a car accident followed by the plaintiff’s being the victim in three car accidents. From this, he claimed many injuries, but PTSD being the one pertinent to this article.

The plaintiff alleged that his PTSD-related injuries included “closedhead injury, . . . extreme shock to the nervous system, . . . , and mental anguish.”215 These symptoms are similar to those claimed in other

211

Kreiner v. Fischer, 683 N.W.2d 611, 625 (Mich. 2004), overruled by McCormick, 795 N.W.2d 517.

212 Id. 213 Netter v. Bowman, 725 N.W.2d 353, 362 (Mich. Ct. App. 2006), overruled by McCormick v. Carrier, 795 N.W.2d 517 (Mich. 2010) (citations omitted).

214 Rammeloo v. Williams, 242602, 2003 WL 22801814, at *11 (Mich. Ct. App. Nov. 25, 2003).

215 See Id. at *1.

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cases, leading courts to sometimes say they are objectively manifested216 and other times saying they are not.217 Despite numerous doctors agreeing that the plaintiff labored under chronic PTSD, it held that it was not objectively manifested because the medical evidence proved “a lack of physical problems.”218 The court came to this conclusion after citing Luce for the proposition that PTSD is cognizable only if “a physical injury causing the psychiatric injury, a physical basis, or physical symptoms arising out of the psychiatric injury.”219 But this holding may be attributable more to poor attorney practice than anything else because, after holding that his PTSD wasn’t objectively manifested, the court added that the plaintiff’s complaint didn’t even mention PTSD.220 Two years later, an attorney in Wisniewski v. Demyan, perhaps learning from Rammeloo, argued that a plaintiff’s back and spinal cord injuries caused PTSD; therefore, the PTSD, so the argument went, was objectively manifested because it was caused by a physical injury.221 But the Michigan Court of Appeals roundly rejected that argument because the plaintiff didn’t provide evidence of PTSD. Even after Rammeloo, the attorney couldn’t or didn’t think to provide psychiatric proof of the plaintiff’s PTSD diagnosis.222 Here’s the sum total of the court’s reasoning: This Court held in order to be objectively manifested, an impairment must be (1) medically identifiable; (2) either an injury or a condition; and (3) have a physical basis. Here, plaintiff presented no evidence of any PTSD. Therefore, her injury is not objectively

216

See Baker v. Pent, 290778, 2010 WL 2541060, at *6 (Mich. Ct. App. June 24, 2010).

217 Garris v. Vanderlaan, 381 N.W.2d 412, 414 (Mich. Ct. App. 1985); see also Overweg v. Thomas, 308785, 2013 WL 1920735, at *6 (Mich. Ct. App. May 9, 2013).

218 Rammeloo, 2003 WL 22801814, at *13.

219 Id. 220 Id. 221 Wisniewski v. Demyan, 253053, 2005 WL 1812633, at *1 (Mich. Ct. App. Aug. 2, 2005).

222 Id.

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manifested, and the trial court's grant of defendants' motion for summary disposition was not in error.223 In this Kreiner period, there’s a real sense that attorneys throw in a PTSD diagnosis as additional gloss to their more substantive arguments, but these attorney-pioneers of PTSD litigation were finding their voice in how to plead and argue it. The instruction manual for PTSD itself and definitely for how the law should deal with it is still being written.

It seems that this argument in Wisniewski was half-hearted. Generally, plaintiffs’ and appellants’ attorneys certainly know that for a PTSD argument to pass, they’ll need more than mere self-serving statements from lay witnesses, especially in light of Rammeloo where there was substantial psychiatric proof of PTSD. Given the United States Supreme Court’s Daubert decision and its Michigan progeny, which require high expert standards to exclude unreliable evidence, these PTSD cases where the attorneys called no expert witnesses are perplexing, and may even be cause in themselves for a malpractice claim.224 In the third and final PTSD case in the Kreiner period, Baker v. Pent,225 a woman was rear-ended by a large commercial vehicle. After that, two psychiatrists diagnosed her with PTSD; her symptoms were “anxiety and sleeping problems.”226 After repeating the rule that an objectively manifested impairment “must be a medically identifiable injury or condition that has a physical basis,”227 the court held that PTSD was indeed objectively manifested.

Baker is noteworthy because it’s the only case in the entire no-fault compendium of Michigan cases that has found that a plaintiff’s PTSD is objectively manifested. While not explicitly explaining why, it held Ms. Baker suffered “objectively manifested mental or emotional

223

Id. (citation omitted and emphasis added).

See infra 27–29; Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993); People v. Unger, 749 N.W.2d 272, 283 (Mich. Ct. App. 2008).

225 Baker v. Pent, 290778, 2010 WL 2541060, at *6 (Mich. Ct. App. June 24, 2010).

226 Id. at *1.

227 Id. at *6.

224

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injuries.”228 But we may deduce that this was based on the fact that two different doctors had diagnosed her with PTSD.229 The court implicitly reasoned that it had found some physical connection between the PTSD, her injury, and her “anxiety” and “sleeping problems.”230 In support of its holding that PTSD was an objectively manifested impairment of a body function, the court reiterated this rule dating all the way back to Luce from 1979: Additionally, “[m]ental or emotional injury which [is] caused by physical injury or mental or emotional injury not caused by physical injury but which results in physical symptoms may be a serious impairment of body function.”231 But if Ms. Baker’s hopes were high, they were soon dashed. After finding that her PTSD satisfied the first two serious-impairment elements (objectively manifested and important body function), the court held that they did not satisfy the third element of “general ability to lead a normal life.”232 Baker follows science and as such highlights the inconsistencies in Michigan jurisprudence. The Baker court had to ignore Garris’s holding that PTSD is “purely subjective”233 to follow Luce. But both Ms. Garris and Ms. Baker had psychiatrists’ testimony stating very similar symptoms. That wasn’t enough in 1985, but it was enough in 2010. In yet another twist to come three years later in 2013, similar evidence would contrariwise not be enough to prove the element.

McCormick period: 2010 – present.

228

Id. Id. at **1–2. Baker’s primary care physician, Dr. Bruce Barbour, and her psychiatrist, Dr. Manzar Rajput, both diagnosed her with PTSD. 230 Id. at *1.

231 Baker v. Pent, 290778, 2010 WL 2541060, at *6 (Mich. Ct. App. June 24, 2010).

For this rule, the court cited Guerrero v. Smith, 761 N.W.2d 723, 735 (Mich. Ct. App. 2008), which in turn cited Luce v. Gerow, 280 N.W.2d 592, 593 (Mich. Ct. App. 1979), the case that opened the door for auto-accident-caused mental injuries.

232 Baker, 2010 WL 2541060, at **7–9.

233 Garris v. Vanderlaan, 381 N.W.2d 412, 414 (Mich. Ct. App. 1985).

229

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Later in 2010, just months after Baker was decided, McCormick v.

Carrier234 ushered in yet another reconstruction of the three seriousimpairment elements, this time becoming less restrictive than Kreiner.

This case established the current iteration of “serious impairment.”

With McCormick, in essence, the Michigan Supreme Court nearly completely overruled Kreiner. As for the “objectively manifested” element, the Court established this new rule: “‘Objectively manifested’ means an impairment that is evidenced by actual symptoms or conditions that someone other than the injured person would observe or perceive as impairing a body function. In other words, an ‘objectively manifested’ impairment is commonly understood as one observable or perceivable from actual symptoms or conditions.”235 So they tossed the medical-testing rule from Kreiner in place of objective observations or perceptions. Yes, medical testing would satisfy this new rule, but so would evidence less than that.236 One would think from reading this new definition that plaintiffs with PTSD from auto accidents would have no trouble at all satisfying this rule because psychiatrists can perceive the impairment that manifests as PTSD. But, in fact, the law takes a puzzling turn in the only case to address a no-fault PTSD claim in the McCormick period: Overweg v. Thomas.237 For the first time, a Michigan court said, in the context of a seriousimpairment case, that PTSD is an objectively manifested brain injury.

But it paradoxically said that it is not an impairment to a “particular body function”:238 “While there is no dispute,” the court reasoned, “that plaintiff has PTSD, there is no evidence that plaintiff’s injury – PTSD – affects a particular body function.”239 The part of Overweg that does not make sense is that the court said that PTSD is a brain injury. But it said that the brain injury did not impair 234

McCormick v. Carrier, 795 N.W.2d 517, 534–35 (Mich. 2010).

Id. at 527 (emphasis added).

236 Id. at 527–28.

237 Overweg v. Thomas, 308785, 2013 WL 1920735, at *1 (Mich. Ct. App. May 9, 2013). Overweg was decided by Judge Christopher Murray, Deborah Servitto (concurring in result only), and Jane Markey (dissenting).

238 Id. at *3.

239 Id. 235

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a “particular body function.”240 Over just four paragraphs, the court punctuated seven times that PTSD does not affect a “particular body function” even though it is a brain injury.241 Yet it agreed with the psychiatrist that PTSD is a “physical injury.”242 So, according to the Michigan Court of Appeals, PTSD is a brain injury that affects no brain function. Such a holding makes reason stare, and is probably why one of the two-judge majority concurred in the result only and not the reasoning.243 A psychiatrist’s diagnosis, which was good enough for the Baker court, was not good enough for the Overweg court even though they largely testified to the same physical symptoms: “sleep deprivation, flashbacks and nightmares, heightened anxiety, loss of appetite, being easily startled, and decreased activity.”244 What’s even stranger about this inconsistency is that Baker was decided under the “medical testing” standard established in Cassidy/Williams and continued through the Kreiner era. This standard is much higher than McCormick’s requirement that the impairment be observable or perceivable by others. So, ironically, the higher standard was satisfied in Baker, yet the lower standard was not satisfied in Overweg with similar evidence.

Confusingly, the Overweg court required the plaintiff’s psychiatrist – not a neurosurgeon or biophysicist – o find an “objectively manifested impairment of plaintiff's cognitive or physical function.”245 The psychiatrist did testify “that PTSD can cause trauma to the brain and that plaintiff's brain suffered an actual physical injury from the PTSD.”246 Overweg also ignores Garris, a 1985 binding case. The Garris court held that PTSD does affect an important body function: the mind.

Again, the Overweg court ignores this precedent and says that PTSD 240

Id. at **3–4.

Id. 242 Id. at *3.

243 Judge Servitto concurred in the result only and did not write a concurring opinion.

244 Overweg v. Thomas, 308785, 2013 WL 1920735, at *3 (Mich. Ct. App. May 9, 2013).

245 Id. 246 Id. 241

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does not affect a body function. The Overweg panel should have either (1) applied the precedent-setting Garris rule or (2) explained what part of the brain does not involve a body function.

PTSD’s impairment of body functions is objectively manifested.

Of all of the inconsistencies among the PTSD cases, even after accounting for differences in proofs, the most glaring is on the issue of body function. The Michigan Court of Appeals inconsistently rules on whether PTSD affects a body function, a concept that bridges both elements of “objectively manifested impairment” and “of an important body function.” As described above, Garris (a 1985 published case) and Baker (a 2010 unpublished case) both say that PTSD does affect a body function, i.e., the mind and nervous system. Yet Overweg (a 2013 unpublished case) says that PTSD does not affect a body function. It either does or does not in 1985, 2010, and 2013.

There are four reasons why Michigan courts deciding no-fault cases should hold that PTSD does indeed impair a body function.

(1) Science unequivocally proves that PTSD affects several particular body functions.

Most of the courts described above failed to understand that PTSD is really the dysfunction of several particular body systems or functions.

The three primary functions affected are the endocrine system, the limbic system, and the nervous system.247 The dysfunction of these systems in PTSD sufferers has been proven in countless medical studies.248 i. The endocrine system The endocrine system is a physical body function impaired in PTSD sufferers. When the endocrine system is not functioning properly, the 247

Jonathan E. Sherin & Charles B. Nemeroff, Post-Traumatic Stress Disorder: The Neurobiological Impact of Psychological Trauma, 13:3 DIALOGUES IN CLINICAL NEUROSCIENCE 263, 263–71 (2011).

248 See generally id. See also American Academy of Neurology, PTSD May Be Physical and not Only Psychological: Brain’s Emotional Control Center Shown to Be Physically Larger, SCIENCEDAILY, 11 July 2017, www.sciencedaily.com/releases/2017/07/170711171704.htm.

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stress hormone cortisol is unnaturally regulated.249 This causes the body to overreact in “response to stress”250 and leads to impaired memory capability,251 depression,252 disrupted sleep,253 mild cognitive impairment,254 and the onset of neurological diseases like Alzheimer’s Disease.255 An impaired endocrine system also retards brain cell regeneration.256 The endocrine system produces hormones—chemical messengers that tell body functions to stop and start.257 The three main glands that comprise the endocrine system are the hypothalamus, pituitary, and adrenal glands.

In a normal system, as a person encounters stress, which is where demand is perceived to exceed one’s resources,258 the hypothalamus in the brain secretes a hormone into the bloodstream that talks with the pituitary gland that in turn talks with the adrenal glands that sit on the kidneys.259 This is when a person will first notice a stress response because the adrenal glands release glucose and cortisol.260 According to the Mayo Clinic, Cortisol, the primary stress hormone, increases sugars (glucose) in the bloodstream, enhances your brain’s use of glucose and increases the availability of 249

Sherin & Nemeroff, supra note 123.

Id. at 265.

251 Almut Hupbach & Joelle M. Dorskind, Stress Selectively Affects the Reactivated Components of a Declarative Memory, 128:5 BEHAV. NEUROSCIENCE 614, 618–19 (2014).

252 Dong-dong Qin et al., Prolonged Secretion of Cortisol As a Possible Mechanism Underlying Stress and Depressive Behaviour, SCI. REP. (2016), doi: 10.1038/srep30187.

253 Francesca Pistollato et al., Associations Between Sleep, Cortisol Regulation, and Diet: Possible Implications for the Risk of Alzheimer Disease, 7 ADVANCES NUTRITION 679, 680 (2016), doi:10.3945/an.115.011775.

254 Id. 255 Id. 256 Id. 257 Id. 258 Katarina Dedovic et al., The Brain and the Stress Axis: The Neural Correlates of Cortisol Regulation in Response to Stress, 47:3 NEUROIMAGE 864 (2009), doi: 10.1016/j.neuroimage.2009.05.074.

259 Sherin & Nemeroff, supra note 123, at 265.

260 Dedovic, supra note 134.

250

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substances that repair tissues. Cortisol also curbs functions that would be nonessential or detrimental in a fight-or-flight situation. . . . This complex natural alarm system also communicates with the brain regions that control mood, motivation and fear.261 When this jolt to the system of glucose and cortisol causes those levels to get high enough, the hypothalamus gets the message and turns off its hormone production—in a normal system.262 But when someone has PTSD, the hypothalamus’s braking mechanism malfunctions; it no longer tells the adrenal glands to stop producing elevated levels of cortisol and glucose.263 The brakes are out, and the car keeps on speeding at break-neck speeds.

In terms of physical brain structures, extended increased levels of glucose and cortisol are not healthy: “Sustained glucocorticoid exposure has adverse effects on hippocampal neurons, including reduction in dendritic branching, loss of dendritic spines, and impairment of neurogenesis.”264 In lay terms, brain cells shrink and sometimes die. ii. The limbic system The endocrine system works in concert with another physical body function, the limbic system. The limbic system regulates innate human behaviors like emotion,265 mating, aggression, and defense.266 In a person experiencing PTSD, a malfunctioning limbic system means

261

Mayo Clinic, Chronic Stress Puts Your Health at Risk, MAYO CLINIC (March 19, 2019), https://www.mayoclinic.org/healthy-lifestyle/stress-management/indepth/stress/art-20046037.

262 Sherin & Nemeroff, supra note 123, at 265.

263 Id. 264 Id. 265 DR. C. GEORGE BOEREE, GENERAL PSYCHOLOGY: THE EMOTIONAL NERVOUS SYSTEM (2009), https://webspace.ship.edu/cgboer/limbicsystem.html (e-book).

266 Katie Sokolowski & Joshua G. Corbin, Wired for Behaviors: From Development to Function of Innate Limbic System Circuitry, 5 FRONTIERS MOLECULAR NEUROSCIENCE (2012), doi:10.3389/fnmol.2012.00055.

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that defensive aggression erupts when intrusive memories of the traumatic event occur.267 The limbic system is made up of three brain glands: the hypothalamus, the hippocampus, and the amygdala.268 The hypothalamus, you’ll recall from the previous section, is also a part of the endocrine system.

There’s a reason for that: the limbic system moderates the endocrine system whereby the hippocampus and the amygdala talk to the endocrine system through the hypothalamus.269 Magnetoencephalography (MEG)270 neuroimaging proves that amygdala and hippocampus regions in PTSD patients malfunctioning.271 One study was able to accurately identify through MEG brain imaging people who, according psychotherapists, suffered from PTSD.272

the are just to

Biophysicist Mingxiong Huang, who the United States Department of Veteran Affairs relies on for scientific understanding of PTSD, analyzed the resting brains of 25 military veterans with PTSD and compared them to a control group with healthy brains.273 Huang’s MEG neuroimaging confirmed what fMRI and PET testing had indicated, that the hippocampus and amygdala failed to properly regulate stress responses in patients with PTSD.274 In contrast, in a normal system, the amygdala instigates the stress response, jumping the hypothalamus into high gear to produce hormones that result in the adrenal glands pumping out glucose and cortisol (i.e., the endocrine system doing its job).

267

Stanley E. Smerin, Aiqin Chen, & He Li, Neurophysiology of Aggression in Posttraumatic Stress Disorder, J. PSYCHIATRY (2016), doi:10.4172/23785756.1000364 (last visited May 13, 2019).

268 Sherin & Nemeroff, supra note 123, at 265–71.

269 Id. at 265.

270 See Mingxiong Huang et al., Voxel-wise Resting-state MEG Source Magnitude Imaging Study Reveals Neurocircuitry Abnormality in Active-duty Service Members and Veterans with PTSD, 5 NEUROIMAGE: CLINICAL 408, 411 (2014), doi: 10.1016/j.nicl.2014.08.004.

271 Id. 272 Id. 273 Id. 274 Id. at 411, 416.

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The hippocampus does just the opposite. It slams on the brakes by telling the hypothalamus to stop producing the fear-responding hormones. It brings the system back down to normal. At least it should.

But the amygdala suffering from PTSD hyperresponds to stressors, meaning that the body overreacts to things that are not associated with trauma.275 So the amygdala is rocketing along the path when it should be on a Sunday stroll.276 The physical toll of a too-eager amygdala and a bashful hippocampus?

More irritable and aggressive moods277 and a broken endocrine system: “prolonged exposure to stress and high levels of glucocorticoids in laboratory animals damages the hippocampus, leading to reduction in dendritic branching, loss of dendritic spines, and impairment of neurogenesis.”278 Literal brain damage and withering nervous tissue.279 iii. The nervous system The endocrine and limbic systems are also connected to the nervous system. When the nervous system malfunctions, adrenaline floods the bloodstream even in peaceful situations.280 But it overreacts in body systems affected by PTSD. Such a broken body function results in the classic PTSD symptoms: enhanced vigilance, heightened startle reaction, increased coding of fear memories, sleep disturbance, and short temper.281 The sympathetic nervous system and the parasympathetic nervous system regulate the body’s balance between active and resting states.282 The sympathetic system jumps the nervous system into action 275

Sherin & Nemeroff, supra note 123, at 271.

Id. at 271; See also Huang et al., supra note 146.

277 Smerin, Aiqin, & Li, supra note 143.

278 Sherin & Nemeroff, supra note 123, at 270.

279 Queensland Brain Institute, What Is Neurogenesis?, THE UNIVERSITY OF QUEENSLAND AUSTRALIA, https://qbi.uq.edu.au/brain-basics/brainphysiology/what-neurogenesis.

280 Sherin & Nemeroff, supra note 123, at 268.

281 Id. 282 Grant Hilary Brenner, New Study Shows Brain Change After Psychological Trauma, PSYCHOLOGYTODAY.COM (Dec. 5, 2018), https://www.psychologytoday.com/us/blog/experimentations/201812/new-studyshows-brain-change-after-psychological-trauma.

276

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when there’s a threat, diverting system resources—adrenaline and the accompanying increased blood flow283—to fight-or-flight systems.284 The heart beats faster, our mind becomes much more alert, and we do what it takes to survive.285 Then, under normal circumstances, the parasympathetic system is then supposed to take over and calmly bring the body down to normal, the parasympathetic state.286 But in PTSD victims, the trauma was so great, or it has occurred so frequently, that the sympathetic nervous system is taxed to burn out:287 “In PTSD, the activation in a basic sense appears to persist, almost like a computer glitch, and the sympathetic system gets stuck in higher gear, crudely similar to a car running at high RPMs for too long. . . . The parasympathetic nervous system is not able to properly cool things down.”288 Therefore, when a court is faced with competent and reliable psychiatric testimony that a plaintiff has PTSD, the one element they can confidently find satisfied is that the impairment to several particular body functions is objectively manifested because the endocrine, limbic, and nervous systems are malfunctioning.

(2) Michigan courts find that memory loss affects a body function; PTSD must also because they are so biologically similar.

Just as Michigan courts hold that memory loss from auto accidents is an objectively manifested impairment of a body function, to be consistent, they should likewise find that PTSD affects a body function. Memory and fear and stress responses are both regulated by the hippocampus and amygdala.289 The courts cannot say that a defective amygdala causing memory loss affects a body function while saying that a defective amygdala causing mis-regulated fear and stress responses (i.e., PTSD) is not.

283

Id. Id. 285 Id. 286 Id. 287 Id. 288 Id. 289 Larry R. Squire, The Legacy of Patient H.M. for Neuroscience, 61:1 NEURON 6– 9 (2009), doi:10.1016/j.neuron.2008.12.023.

284

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Several Michigan no-fault cases hold that memory is an important body function.290 In one case, Shaw, a bystander on a road, was hit by a car; this caused him to fly into the air and hit his head on the pavement.291 This caused, among other injuries, memory loss.292 That court said that “memory is an important body function. Memory is a body function which people use in their everyday life. Memory is essential to a person’s performance at work. Memory is also important in social situations such as meeting people, conversing, engaging in hobbies and recreation, and reminiscing with friends.”293 But because the parties disputed the nature and extent of the head injury causing the memory loss, the court remanded the case for the jury to sort out.294 In a more recent memory case - Guerrero v. Smith,295 the Michigan Court of Appeals stated that “memory is an important body function and that neuropsychological testing may suffice to show an objective manifestation of a serious impairment of that body function.”296 The court, when saying that the jury was properly instructed and understood the issues, reinforced the precedent that mental injuries with a physical basis and physical injuries are really the same.

The functioning of the hippocampus and the limbic system is mostly to blame for memory deficits; it’s also the same body function that, when broken, impedes the hyper-vigilant and hyper-startle responses from returning to normal. Similar to the neurological testing in Guerrero, “Studies using functional neuroimaging have further shown that PTSD patients have deficits in hippocampal activation during a verbal declarative memory task.”297 Because scientific testing has shown that memory deficits and PTSD come from the same system, the same body function, courts should consistently hold that PTSD does affect a body function.

290

Shaw v. Martin, 399 N.W.2d 450, 451 (Mich. Ct. App. 1986).

Id. 292 Id. 293 Id. at 453.

294 Id. at 454.

295 Guerrero v. Smith, 761 N.W.2d 723, 735 (Mich. Ct. App. 2008).

296 Id. 297 Sherin & Nemeroff, supra note 123, at 270–71.

291

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(3) PTSD affects a body function under the Government Tort Liability Act. In other areas of Michigan law, PTSD from an auto accident is a “bodily injury”298 that affects a body function and is objectively manifested. In Allen v. Bloomfield Hills,299 a train conductor watched from his train as a school bus attempted unsuccessfully to maneuver around a lowered gate that was blocking cross-traffic as the train went through a busy town. The bus became stuck on the tracks between the lowered gates, the train conductor tried to brake, but there wasn’t enough space, and the train collided with the bus. When the conductor was finally able to stop the bus more than one-half mile later, he ran back to the crash scene. To his relief, the bus was not full of school children as he had feared, but the bus driver was severely injured. The train conductor was subsequently diagnosed with PTSD. He sued the school district that operated the bus under the Government Tort Liability Act (GTLA), which requires plaintiffs to prove that their PTSD is a “bodily injury.”300 The Court of Appeals held that the driver’s PTSD from the accident was indeed a “bodily injury” and explained that it affected several body functions.

After reviewing positron emission tomography (PET) scan evidence from one doctor and psychiatric testimony from another, the court agreed with their conclusions that the “plaintiff presented objective medical evidence that a mental or emotional trauma can indeed result in physical changes to the brain.”301 On this one point, Allen is in line with Overweg because that court said that PTSD was a physical injury, which is the same as a “bodily injury.” But Allen went further. Using doctors’ testimony and PET scans, the court linked PTSD with the functioning of the brain. And then it held that damage to the brain, which PTSD is a manifestation of, is a bodily injury because it “‘causes significant changes in brain chemistry, brain function and brain structure. The brain becomes

298

MICH. COMP. LAWS § 691.1405 (2019).

Allen v. Bloomfield Hills, 760 N.W.2d 811, 812 (Mich. Ct. App. 2008).

300 Id. at 812–13.

301 Id. at 815.

299

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“rewired” to overrespond to circumstances that are similar to the traumatic experience.’”302 The doctors’ testimony was enough to show that PTSD affected “physical functions”303 because a PET scan showed “decreases in frontal and subcortical activity consistent with depression and post traumatic stress disorder” and that “the abnormalities in . . . Allen’s brain as depicted in the . . . PET scan are quite pronounced and clearly different in brain pattern from any of the normal controls.”304 The contradiction between a vehicle accident under the GTLA saying that PTSD affects brain functioning while Overweg (and many others) saying that it does not is especially odd because two of the three panel members that decided Allen in 2008 decided Overweg in 2013.

Honorable Jane Markey wrote the Allen opinion, saying that PTSD was a “bodily injury” that affected brain functioning, and she wrote the dissent in Overweg saying that PTSD is no different from any other injury and definitely affects brain functioning.305 Confusingly, Honorable Deborah Servitto concurred in the Allen decision but then “concurred only in the result” of the Overweg decision. Perhaps she realized that the reasoning of Allen and Overweg were at odds, and so she couldn’t agree to the latter case’s reasoning that contradicted Allen’s reasoning.

(4) Other states find that PTSD affects a body function.

Moving outside of Michigan shows that at least one of the five other pure no-fault states agrees that PTSD does affect particular body functions.306 In New York, which applies a no-fault threshold similar to Michigan’s, courts trust a PTSD diagnosis if it’s based on

302

Id. at 815–16 (emphasis added).

Id. at 815.

304 Id. at 815–16 (emphasis in original).

305 Judge Markey, who wrote the Allen opinion, allegedly espouses Republican principles; Judge Servitto (concurring) was appointed by Jennifer Granholm, so she’s likely a Democrat; and Judge Hoekstra (dissenting) is a Republican (retired in 2018).

306 Florida, New Jersey, New York, and Pennsylvania have no-fault thresholds for noneconomic damages that are similar to Michigan’s “serious impairment of an important body function.” MICH. COMP. LAWS § 500.3135(1) (2019).

303

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“competent medical evidence.”307 And they’ve agreed that PTSD affects a body function going all the way back to 2001.308 Here’s the law for New York: “[A] plaintiff must present competent medical evidence through ‘an expert’s qualitative assessment of a plaintiff’s condition . . . , provided that the evaluation has an objective basis and compares the plaintiff’s limitations to the normal function, purpose and use of the affected body organ, member, function or system.’”309 And, as a side note, even a licensed clinical social worker is qualified to render a PTSD diagnosis in New York.310 Even though this next case is outside of a no-fault scheme, it still goes to the fact that other states have progressed to the point of acknowledging that PTSD does indeed affect body functions. Since 2002, PTSD has been a compensable worker’s compensation claim in Virginia.311 The Virginia Supreme Court established that PTSD is a physical disorder that affects the “neurobiological systems,” as opposed to just a mental illness.312 To support this holding, the court analogized to precedent that a caustic plant’s reaction with the body’s immune system is just like how “traumatic stressors caused reactions in [Plaintiff’s] neurobiological systems.”313 The court also agreed with an expert’s evidence that “[u]nder conditions of acute and severe psychological trauma, the organism mobilizes multiple neurobiological systems for the purpose of survival.”314 However, these neurobiological survival responses, when chronically overused, “may have long-term negative consequences that are related to many of the chronic symptoms of PTSD.”315 307

Vergine v. Phillips, 91 N.Y.S.3d 272, 274 (N.Y. App. Div. 3d Dept. 2018) (citations omitted).

308 See Fillette v. Lundberg, 55 N.Y.S.3d 783, 784 (N.Y. App. Div. 3d Dept. 2017); Hill v. Cash, 985 N.Y.S.2d 345, 347 (N.Y. App. Div. 4th Dept. 2014); Krivit v.

Pitula, 912 N.Y.S.2d 789, 791 (N.Y. App. Div. 3d Dept. 2010); Chapman v.

Capoccia, 725 N.Y.S.2d 430, 431 (N.Y. App. Div. 3d Dept. 2001).

309 Vergine, 91 N.Y.S.3d at 274 (citations omitted and emphasis added).

310 Id. at 274–275.

311 Fairfax County Fire and Rescue Dept. v. Mottram, 559 S.E.2d 698, 702 (Va. 2002).

312 Id. at 702.

313 Id. 314 Id. (emphasis added).

315 Id.

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After the Court held that PTSD was a compensable disease, it then held that PTSD is not a common or ordinary disease but was related to the employee’s job. Therefore, he could recover.

PTSD Impairs Important Body Functions Whereas the “objectively manifested” definition has changed every few years, the definition for the second serious-impairment element, “important body function,” has remained largely consistent from its genesis in Cassidy, through the DiFranco period, even after the codification in 1996, and, strikingly, even through the Kreiner period when the other two elements received drastic overhauls.316 The definition even remained the same after the McCormick decision, though one would never be able to tell that by reading the confusing Overweg opinion.317 The genesis for this element, just like “objectively manifested,” is Cassidy where the Michigan Supreme Court wrote this: “[I]mpairment of body function is better understood as referring to important body functions.”318 In that case, the Court found that walking was an important body function to Mr. Cassidy, a potato farmer.

Of Michigan’s seven no-fault PTSD cases, only two directly addressed the “important body function” element: Garris and Baker.

The Garris court found that the “mind represents an important body function.”319 The court connected the mind to a body function that is affected by what we today call PTSD: “post-traumatic neurosis, which is characterized by depression, anxiety, confusion, isolation and may be associated with some type of bodily injury or mental injury.”320 In the 2010 PTSD case Baker, the court also held that PTSD affects the “mind and nervous systems” and that they “are important body functions.”321 Even though Baker is unpublished, it cited the published 316

See McCormick v. Carrier, 795 N.W.2d 517, 528–529 (Mich. 2010).

Id. 318 Cassidy v. McGovern, 330 N.W.2d 22, 30 (Mich. 1982).

319 Garris v. Vanderlaan, 381 N.W.2d 412, 414 (Mich. Ct. App. 1985).

320 Id. at 414.

321 Baker v. Pent, 290778, 2010 WL 2541060, at *6 (Mich. Ct. App. June 24, 2010).

317

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decision of Guerrero v. Smith322 for the proposition that the “operation of the mind and of the nervous system are body functions.”323 Importantly, the case cited the standard jury instructions for emotional injuries which basically codified Luce.

With these binding cases as precedent, incredulously, the Overweg court said that PTSD does not affect the mind or nervous system because PTSD does not affect any “particular body function.”324 Yet Baker’s and Garris’s opinions hold just the opposite, that PTSD does affect the mind and nervous systems. Today, we know that at least the endocrine, limbic, and nervous systems are involved in what we call “the mind.” These three systems are at the epicenter of the human experience. The hormones and nervous responses that these body functions regulate affect every single waking moment. They are just as important and even more important than most functions that Michigan courts have declared “important body functions”: The mind is an important body function.325 The nervous system is an important body function.326 Memory is an important body function.327 Walking is an important body function.328 The operation of the neck and back are important body functions.329 ● Heart function is an important body function.330 ● The ribs’ function of protecting breathing is an important body function.331 ● Use of an arm is an important body function.332 ● ● ● ● ●

322

Guerrero v. Smith, 761 N.W.2d 723 (Mich. Ct. App. 2008).

Id. at 736.

324 Overweg v. Thomas, 308785, 2013 WL 1920735, at *3 (Mich. Ct. App. May 9, 2013).

325 Garris v. Vanderlaan, 381 N.W.2d 412, 414 (Mich. Ct. App. 1985).

326 Guerrero v. Smith, 761 N.W.2d 723, 735 (Mich. Ct. App. 2008).

327 Shaw v. Martin, 399 N.W.2d 450, 453 (Mich. Ct. App. 1986).

328 Cassidy v. McGovern, 330 N.W.2d 22, 30 (Mich. 1982); see also Lahousse v.

Hess, 336 N.W.2d 219 (Mich. Ct. App. 1983).

329 Harris v. Lemicex, 393 N.W.2d 559 (Mich. Ct. App. 1986); Netter v. Bowman, 725 N.W.2d 353, 363 (Mich. Ct. App. 2006).

330 Kanaziz v. Rounds, 395 N.W.2d 278 (Mich. Ct. App. 1986).

331 Range v. Gorosh, 364 N.W.2d 686 (Mich. Ct. App. 1984).

332 Kroft v. Kines, 397 N.W.2d 822, 824 (Mich. Ct. App. 1986), vacated, 402 N.W.2d 481 (Mich. 1987).

323

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● Vision is an important body function.333 ● Sense of touch is an important body function.334 The Time for PTSD Acceptance Has Come Michigan jurisprudence trends toward recovering for mental injuries.

Unsurprisingly, courts in general have viewed mental injuries with skepticism because they are so easy to fake in an effort to defraud a defendant and their insurance company.335 But over time, courts have eventually allowed recovery for mental injuries, generally going from requiring an accompanying physical injury to accepting just a mental injury as enough.336 Because PTSD is a physical injury—not just a pure emotional injury—courts should allow no-fault PTSD sufferers to recover as well.

For many decades, courts required plaintiffs seeking recovery for emotional distress to prove both a physical injury and that a “physical impact” caused it337 because the injury “may be easily feigned without detection.”338 But the physical-impact requirement was jettisoned in 1970 when the Michigan Supreme Court decided Daley v. LaCroix,339 where it held that a physical impact was no longer required to recover for emotional damages because the Court was “cognizant of the changed circumstances relating to the factual and scientific information available.”340 Not long after dropping the physical-impact requirement, Michigan courts then did away with even the physical-injury requirement for 333

Moore v. Cregeur, 702 N.W.2d 648, 650 (Mich. Ct. App. 2005).

Kosack v. Moore, 375 N.W.2d 742, 745 (Mich. Ct. App. 1985).

335 Nelson v. Crawford, 81 N.W. 335, 335 (Mich. 1899), overruled in part Daley v.

LaCroix, 179 N.W.2d 390 (Mich. 1970).

336 Nelson, 81 N.W. at 335 (“[A] plaintiff cannot recover for injuries occasioned by fright, where there is no immediate personal injury.”); Daley, 179 N.W.2d 390 (eliminating the physical-impact requirement for negligent infliction of emotional distress); Haverbush v. Powelson, 551 N.W.2d 206, 209 (Mich. Ct. App. 1996) (requiring only “severe emotional distress” and no physical consequence for intentional infliction of emotional distress).

337 Daley, 179 N.W.2d at 392.

338 Nelson, 81 N.W. at 335.

339 179 N.W.2d 390, 394 (Mich. 1970).

340 Id. at 395.

334

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intentional infliction of emotional distress while keeping it for negligent infliction of emotional distress.341 Courts are now so trusting of plaintiffs’ proofs and experts that for an IIED claim to succeed, a plaintiff isn’t required “to show that he or she has actually sought treatment for the requisite emotional distress . . . .”342 The next chapter in the evolution of recovering for emotional distress saw recovery even for bystanders: A “plaintiff may recover damages for emotional distress caused by observing the negligently inflicted injury of a third person only if the plaintiff is an immediate member of the victim’s family.”343 While bystanders must currently prove a physical injury from the mental distress, that requirement is likely to be shed at some point as it follows the trend for mental injuries.

The stark irony for those suffering PTSD from auto accidents is that Luce v. Gerow,344 the 1979 opinion discussed above, set the precedent that auto-accident bystanders could recover for a mental injury if it either was caused by or caused a physical injury. So in 1979 the Michigan Court of Appeals was in line with tort law in general for allowing recovery for mental injuries. But that 1979 was a brief bright moment of consistency within Michigan jurisprudence, soon to be eclipsed by 40 years of inconsistent and contradictory opinions.

The final evolution of tort law’s mental-injury recovery in some jurisdictions, but not yet in Michigan,345 allows a plaintiff to recover for emotional distress even from the mere fear of contracting a disease.

Under United States Supreme Court precedent, a plaintiff who suffers a physical injury may recover for associated emotional distress under the Federal Employers’ Liability Act.346 In Norfolk & Western Railway 341

Henry v. Dow Chem. Co., 701 N.W.2d 684, 692 (Mich. 2005) (requiring “physical manifestations of that distress” for negligent infliction of emotional distress); see also Hesse v. Ashland Oil, Inc., 642 N.W.2d 330, 337 (Mich. 2002) (requiring “actual physical harm” for NIED).

342 McCahill v. Commercial Union Insurance Co., 446 N.W.2d 579 (Mich. Ct. App. 1989).

343 Nugent v. Bauermeister, 489 N.W.2d 148, 150 (Mich. Ct. App. 1992).

344 Luce v. Gerow, 280 N.W.2d 592, 593 (Mich. Ct. App. 1979). See supra 9–11.

345 Henry v. Dow Chem. Co., 701 N.W.2d 684, 692 (Mich. 2005) (“Plaintiffs’ fear, however reasonable, is still not enough to state a claim of negligence.”).

346 Norfolk & W. Ry. Co. v. Ayers, 538 U.S. 135 (2003).

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Company v. Ayers, the plaintiff was able to recover for emotional distress from “fear of developing cancer” from his physical injury – asbestosis.347 But the fear had to be “genuine and serious.”348 Confoundingly, Michigan courts seemingly now agree that PTSD is a physical injury,349 yet that’s still not enough even though so many mental-injury causes of action require no physical manifestation at all.

And what’s more, the same rationale for eliminating the physicalimpact and physical-consequences elements in emotional-distress cases applies to PTSD: “changed circumstances relating to the factual and scientific information available.”350 Treat PTSD as a closed-head injury.

The handling of closed-head injuries under the Michigan No Fault Act followed the same trend as emotional-distress torts. And, eventually, that saga ended by the legislature tailoring the Act to fit closed-head injuries. In a nutshell, whether someone has suffered a serious impairment goes straight to the jury “if a licensed allopathic or osteopathic physician who regularly diagnoses or treats closed-head injuries testifies under oath that there may be a serious neurological injury.”351 So a physical injury proven by an MRI was no longer required.352 Because PTSD and closed-head injuries are so biologically similar and because they have similar underlying proof concerns, Michigan courts should treat PTSD as a closed-head injury by agreeing with science that PTSD does impair several brain and body functions that are important.

Traumatic brain injury (TBI) is one type of closed-head injury that often coexists with PTSD.353 “The coexistence of TBI and PTSD is 347

Id. at 141.

Id. 349 See Overweg v. Thomas, 308785, 2013 WL 1920735, at *3 (Mich. Ct. App. May 9, 2013).

350 Daley v. LaCroix, 179 N.W.2d 390, 395 (Mich. 1970).

351 MICH. COMP. LAWS § 500.3135(2) (2019) (emphasis added).

352 Allen v. Bloomfield Hills Sch. Dist., 760 N.W.2d 811, 816 (Mich. Ct. App. 2008).

353 U.S. Department of Veterans Affairs, Traumatic Brain Injury and PTSD, https://www.ptsd.va.gov/understand/related/tbi_ptsd.asp (last visited May 13, 2019).

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frequent . . . .”354 And the United States Department of Veterans agrees: “[M]any of the symptoms that follow a TBI overlap with the common reactions after trauma. Because TBI is caused by trauma and there is symptom overlap, it can be hard to tell what the underlying problem is. In addition, many people who get a TBI also develop PTSD.”355 According to experts that have spent a lifetime studying PTSD and TBI, symptoms in common include fatigue, anxiety, insomnia, depression, irritability, and cognitive deficits.356 Neurochemical evidence proves that TBI injuries and PTSD are very similar. It’s now accepted that one type of adrenaline, the nervous-system hormone that kicks the body into fight-orflight mode, is dysregulated in both patients diagnosed with TBI and those diagnosed with PTSD.357 And “endocrine dysregulation,” the same problem causing spiked and sustained cortisol levels in patients diagnosed with PTSD, “is also found in patients diagnosed with TBI as a result of damage to the pituitary stalk.”358

354

Richard Bryant, Post-traumatic Stress Disorder Vs Traumatic Brain Injury, 13:3 DIALOGUES CLINICAL NEUROSCIENCE 251, 259 (2011).

355 Joel Pieper et al., U.C. San Diego School of Medicine, Co-morbid PTSD with mTBI Is Associated with Increased Amygdala Volume Compared to mTBI Alone in Military-trained Individuals, Poster presentation at 2017 Sports Concussion Conference.

356 Id. 357 Sherin & Nemeroff, supra note 123, at 267.

358 Id. at 265.

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So PTSD and closed-head injuries are biologically very similar because the limbic, endocrine, and nervous systems all malfunction whether a person is suffering from PTSD or TBI. They also share similar proof problems. It’s clear from testimony given before Michigan’s House of Representatives in 1995 that Michigan was struggling with understanding closed-head injuries. History is repeating itself with PTSD. As you can see, the concerns with proving closed-head injuries back in 1995 apply to PTSD today: The problem with imposing an objective manifestation standard with respect to mild brain injury is that it is divorced from clinical reality. Head injuries often produce real and significant problems that medical science cannot yet objectively measure or confirm.359 After this testimony, legislators created the requirement that for traumatic brain injury, the issue of recovery would go straight to the jury if a doctor testified that the victim suffered “serious neurological injury.”360 This precise concern over proving closed-head injuries stated in 1995 was likewise stated in a 1985 dissenting opinion but in regard to PTSD: Soft-tissue injuries and psychiatric trauma are difficult or impossible to measure medically. Yet, persons who suffer with these injuries for years would certainly gladly trade places with those who suffer a badly fractured bone and are incapacitated for 6 or 7 months, but who thereafter are able to lead perfectly normal lives.361 So for whatever reason, Michigan courts in the early 1990s accepted closed-head injuries as real but not PTSD.

359

Testimony of Gloria Perez on Mich. House Bill 4341 (Feb. 14, 1995) (On record with author).

360 MICH. COMP. LAWS § 500.3135(2) (2019).

361 Garris v. Vanderlaan, 381 N.W.2d 412, 415 (Mich. Ct. App. 1985) (J. Ravitz, dissenting).

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While Michigan courts were quibbling over whether closed-head injuries were real and how to prove them, “the medical community was already a long way down the road in developing treatments and strategies for coping with these mere ‘mental, emotional,’ or ‘psychiatric’ injuries.”362 Recognizing this, one courageous Michigan Court of Appeals panel wisely stated, “[T]here should be no difference medically or legally between an objectively demonstrated brain injury, whether the medical diagnosis is a closed head injury, PTSD, Alzheimer's, brain tumor, epilepsy, etc.”363 Trust expert psychotherapists because their methods are reliable.

Just as an osteopathic or allopathic physician is qualified to diagnosis a closed-head injury based on symptoms, a physician, psychiatrist, or psychologist should be able to definitively diagnose PTSD. The dissenting opinion in the 1986 Garris case presciently suggested this approach, which science now supports. Judge Ravitz wrote, “Where the ordinary means of diagnosis and prescription of treatment are such subjective indications from a patient, a doctor's diagnosis of injury should suffice to satisfy the objective manifestation requirement announced in Cassidy.”364 This is precisely how closed-head injuries are now proven in no-fault cases.

Michigan judges and juries can rely on expert testimony because it has been deemed reliable by the gatekeeper, the judge. Michigan Rule of Evidence 702 states: If the court determines that scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise if (1) the testimony is based on sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the

362

Allen v. Bloomfield Hills Sch. Dist., 760 N.W.2d 811, 816 (Mich. Ct. App. 2008).

Id. 364 Garris v. Vanderlaan, 381 N.W.2d 412, 416 (Mich. Ct. App. 1985).

363

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principles and methods reliably to the facts of the case.365 This rule incorporates the United States Supreme Court’s expertvetting from Daubert v. Merrell Dow Pharmaceuticals, Inc.366 to filter out unreliable evidence.367 “[T]he trial court’s role as gatekeeper does not require it to search for absolute truth, to admit only uncontested evidence, or to resolve genuine scientific disputes.”368 Instead, the proper role is to inquire “into whether the opinion is rationally derived from a sound foundation.”369 Myriad medical and scientific studies form a sound foundation of PTSD knowledge. Not a single study has said that PTSD does not affect an important body function. Rather, they all say that PTSD does affect several important body functions.

Doctors, however, are in the best position to diagnose PTSD because they spend many hours, usually at regular intervals, over a long period of time with PTSD sufferers. Judges, in contrast, do not. Judges are experts in the law, not in science. They have become in Michigan precisely what Chief Justice Rehnquist feared: “amateur scientists.”370 The very fact that Michigan suffers from 40 years of inconsistent PTSD holdings underscores that judges’ usurping the jury’s role of assessing credibility is proof that Daubert has been taken to the extreme to the point where judges will determine the science of PTSD instead of allowing experts to testify and juries to assess.

The Michigan Court of Appeals needs to refrain from conflating their role with doctors’, scientists’, and juries’ roles: “The jury has the discretion to believe or disbelieve a witness’s testimony, even when the witness’s statements are not contradicted.”371 And, what’s more, science can predict with 93% accuracy, according to at least one study, whether a psychotherapist has diagnosed a patient

365

Mich. R. Evid. 702.

509 U.S. 579 (1993); see People v. Unger, 749 N.W.2d 272, 283 (Mich. Ct. App. 2008).

367 Unger, 749 N.W.2d at 283.

368 Id. 369 Id. 370 Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 601 (1993).

371 Guerrero v. Smith, 761 N.W.2d 723, 738 (Mich. Ct. App. 2008).

366

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with PTSD.372 That is reliable data proving that psychiatric diagnoses of PTSD are accurate. Because science supports psychotherapists’ diagnoses that PTSD is “objectively manifested” and does affect important “particular body functions,” courts can rely on their evidence to satisfy these two elements. If courts continue requiring both psychotherapist proof of PTSD and biophysical proof of PTSD, then the automotive insurance industry is unnecessarily increasing medical costs and even perhaps shifting them over to the medical branch of the insurance agency. Let’s just trust the science.

But trial courts do trust doctors’ diagnoses of PTSD in almost every other area of the law. For instance, the Michigan Court of Appeals upheld that a certified social worker, not a psychologist or psychiatrist, was competent to give reliable testimony about a plaintiff’s PTSD in an Elliott-Larsen Civil Rights Act case.373 The social worker had 14 years of counseling patients with PTSD and similar injuries.374 Following years of precedent, including Daubert, the court wisely reasoned that any lack in the social worker’s “qualifications are relevant to the weight, not the admissibility, of his testimony.”375 Michigan courts overwhelmingly believe psychotherapists’ diagnosis of PTSD when it comes to removing children from their biological parents. To do so requires a much higher burden of proof: clear and convincing evidence.376 In contrast, a jury or judge has to find that a victim’s PTSD is an objectively manifested impairment of an important body function by only a preponderance of the evidence. In at least 80 cases from the Michigan Court of Appeals, a court relied

372

Mingxiong Huang, PhD, Medical Physicist, University of California, San Diego, Cyber Seminar to the United States Department of Veteran’s Affairs (February 8, 2017), Magnetoencephalography as a Potential Imaging Marker for Mild TBI and PTSD, (transcript at https://www.hsrd.research.va.gov/for_researchers/cyber_seminars/ archives/video_archive.cfm?SessionID=2282).

373 Grow v. W.A. Thomas Co., 601 N.W.2d 426, 435 (Mich. Ct. App. 1999).

374 Id. 375 Id. at 436.

376 “We review for clear error both the trial court’s decision that a ground for termination of parental rights has been proved by clear and convincing evidence and, where appropriate, the court’s decision regarding the child’s best interests.” In re JK, 661 N.W.2d 216, 221 (Mich. 2003).

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on a psychotherapist’s diagnosis of PTSD, usually in a child, as proof that the termination of parental rights was appropriate.377 In the criminal arena, when a prosecutor, as opposed to a defense attorney, relies on PTSD evidence, a court is more willing to go along with it.378 In People v. Hill, for example, a child’s statements about her brother’s fatal beating eight days after the event were considered an “excited utterance” under hearsay exceptions.379 A doctor testified that the child, because she suffered from PTSD, “remained under the excitement of” the beating even more than a week after the beating.380 In Michigan’s criminal jurisprudence, more than any other situation, a doctor’s PTSD diagnosis is accepted as reliable under Daubert when scoring sentencing Offense Variables. When a prosecutor attempts to prove at sentencing that the defendant should be scored higher on Offense Variable 4—“[s]erious psychological injury requiring professional treatment occurred to a victim”381—courts invariably allow a psychotherapist’s diagnosis of PTSD as reliable evidence.382 It seems, then, that when (1) social justice requires it and (2) it doesn’t go against a judge’s personal interest, that courts have no trouble accepting a doctor’s diagnosis of PTSD. But an attorney can greatly help their case by properly preparing their expert to increase the jury’s and judge’s PTSD fluency. This means preparing their experts to be conversant in the lingo of the three elements. For instance, in Overweg, the psychiatrist probably didn’t realize that “objectively manifested” and “particular body function” were terms of art. The psychiatrists were being asked to act as biophysicist like Minxiong Huang.383 The attorney could have 377

See e.g. In re Schadler, 890 N.W.2d 676, 679 (Mich. Ct. App. 2016); In re Stoops, 257220, 2005 WL 477839, at *1 (Mich. Ct. App. Mar. 1, 2005); In re Weber, 339509, 2018 WL 1344968, at *1 (Mich. Ct. App. Mar. 15, 2018); and In re Henderson, 336561, 2017 WL 5473517, at *3 (Mich. Ct. App. Nov. 14, 2017).

378 See People v. Hill, 317294, 2014 WL 6602570, at *2 (Mich. Ct. App. Nov. 20, 2014).

379 Id. at *3.

380 Id. 381 MICH. COMP. LAWS § 777.34 (2019).

382 See e.g. People v. Wellman, 910 N.W.2d 304, 307 (Mich. Ct. App. 2017); People v. Edwards, 333738, 2017 WL 4557266, at *1 (Mich. Ct. App. Oct. 12, 2017); and People v. Coates, 327501, 2016 WL 5328663, at *8 (Mich. Ct. App. Sept. 22, 2016).

383 See Huang, supra notes 146 and 248.

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prepared them for this. At the very least, the attorney representing the plaintiff in Overweg could have told the psychiatrists the elements so they could prepare competent testimony. Then the expert psychiatrists could have cited any number of studies that prove that PTSD does affect several important body functions.

A simple amendment to 500.3135 could bring Michigan jurisprudence in line with science.

A simple amendment to 500.3135 could reconcile the dissonance between accommodating closed-head injuries but not similar injuries like PTSD. The amendment would slightly broaden 500.3135(2)(a)(ii) so that a question of fact is created for the jury about the nature and extent of PTSD and whether it’s a serious impairment of an important body function. The new 500.3135 would look like this: * * * (ii) There is a factual dispute concerning the nature and extent of the person’s injuries, but the dispute is not material to the determination whether the person has suffered a serious impairment of body function or permanent serious disfigurement. However, for a neurological injury, a question of fact for the jury is created if a licensed medical provider who regularly diagnoses or treats neurological injuries testifies under oath that there may be a serious neurological injury. * * * (5) As used in this section, “serious impairment of body function” means an objectively manifested impairment of an important body function that affects the person’s general ability to lead his or her normal life.

(6) As used in this section, “neurological injury” includes, but is not limited to, closed-head injuries, traumatic brain injury, memory loss, and posttraumatic stress disorder.

(7) As used in this section, “licensed medical provider” means a licensed:

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(a) allopathic or osteopathic physician, (b) psychiatrist, (c) psychologist, or (d) certified social worker.

Conclusion In sum, Michigan judges need to fiat justitia ruat caelum—allow justice though the heavens fall.384 It means to make the true and wise decision regardless of the consequences. Justice for victims injured in serious auto accidents requires Michigan judges to apply scientificbased knowledge about PTSD. The consequences are not relevant when the law and science are so clear: PTSD is an objectively manifested impairment of an important body function. It’s not a ghost syndrome.

But whether the victim’s PTSD is serious enough to recover, which is put to the test in the third element of a serious-impairment claim, is a totally different issue that it’s concerned with science. So the goal of the No Fault Act to cut down on overcompensation for minor injuries385 is still achieved even if courts believe the science that PTSD can be objectively manifested and does actually impair several critical body functions.

384

Ellison v. Georgia R.R., 13 S.E. 809, 810 (1891). Inked as a tattoo on many a bold soul. It’s also found inscribed in marble behind the Georgia Supreme Court bench.

See https://www.gasupreme.us/court-information/biographies/ (last accessed April 26, 2019). fiat=let; Justitia=justice; ruat=fall; coelum=heaven 385 Garris v. Vanderlaan, 381 N.W.2d 412, 415 (Mich. Ct. App. 1985) (J. Ravitz, dissenting).

Domestic Drones – The Rise of The Flying Machines: Is Big Brother Watching You? PROFESSOR LEWIS LANGHAM, JR.386 TABLE OF CONTENTS I. Introduction to Unmanned Aerial Vehicles (UAVs)..................... 70 II. Government Agencies Currently Use UAVs Despite Unclear Guidelines Currently in Place with Likely Legal Implications. ....... 71 III. The States Take Varying Stances on Surveillance Drone Usage, and Some State Legislatures Allow their Law Enforcement Agencies to Use Surveillance UAVs................................................................ 76 IV. Law Enforcement’s Use of UAVs Implicates the Fourth Amendment....................................................................................... 78 A. Does the Fourth Amendment prohibit the use of a UAV to conduct aerial surveillance? ................................................................................................ 79

386

Professor Lewis Langham Jr. has expertise and teaches in the areas of Criminal Procedure, Evidence and Trial Skills. Before joining WMU-Cooley in 2007, Professor Langham served as deputy legal counsel and policy adviser for the office of Michigan Governor Jennifer M. Granholm. He assisted the governor's legal counsel on legal issues related to criminal justice, prisons, homeland security, and civil rights. He also served as a liaison between the governor and various interest groups, and advised the governor on all policy or departmental issues related to the Michigan State Police, Department of Corrections, Homeland Security, Military & Veterans Affairs, and Civil Rights. Professor Langham formerly worked as an assistant public defender in the Washtenaw County Office of Public Defender in Ann Arbor, Mich. He also worked as a solo practitioner in Southfield, Michigan, focusing on criminal defense, estate planning, and divorce. Before he entered the legal profession, Professor Langham was a career law enforcement officer. He served 25 years with the Michigan State Police, beginning as a uniformed road trooper and moving up through the department as a Detective Specialist in the Criminal Investigation Division, Narcotics Section; a Detective Sergeant, Southeastern Criminal Investigation Division, Diversion Unit; a Detective Lieutenant, Oakland County Narcotics Enforcement Team; and Detective Lieutenant, Tobacco Products Tax Fraud Team. He was also the liaison to the United States Secret Service where he handled Presidential and Dignitary Protection Detail Assignments. He is a member of the State Bar of Michigan, Washtenaw County Bar Association, Oakland County Bar Association, D. Augustus Straker Bar Association, American Bar Association, and the Michigan State Police Command Officers Association. He was admitted to the Supreme Court of the United States on March 4, 2014, and to United States District Court, Eastern District of Michigan, in June 2002.

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B. What types of technology, if used on the aerial UAVS, would run afoul of the Fourth Amendment? ..................................................................................... 87

V. Some Final Thoughts. .................................................................. 93 I. Introduction to Unmanned Aerial Vehicles (UAVs).

Most everyone over the past decade or so has become aware that the United States Military uses weaponized unmanned aerial vehicles, generally referred to as drones. It is commonly reported that these drones carry out surveillance and intelligence operations in other countries throughout the world assisting in the war on terror and other military conflicts.387These costly, often weaponized, drones are undetected by the human eye due to their ability to hover miles above earth’s surface and are capable of launching precision attacks on an enemy388 while video recording the entire event.389 This article focuses on what many American citizens may not be aware of: that smaller, inexpensive, and non-weaponized drones have made their entry into the United States.390 In contrast to the military drones mentioned previously, these domestic drones are being used to conduct, inter alia, criminal and non-criminal surveillance of the dayto-day activities of American citizens. These types of drones are more commonly referred to as unmanned aerial vehicles (UAVs).

American citizens are quite familiar with stationary surveillance and recording devices that are mounted over portions of freeways, surface streets, private homes, banks, and other business.391These devices function primarily to deter crime and to provide police agencies with video footage and photographs of people that are suspected to be involved in criminal activities, such as in the 2013 Boston Marathon 387

Josh Levs, CNN Explains: U.S. Drones, CNN (Feb. 8, 2013), http://www.cnn.com/2013/02/07/politics/drones-cnn-explains/.

388 BBC, Drones: What are They and How Do They Work?, BBC News (Jan 31, 2012) https://www.bbc.com/news/world-south-asia-10713898.

389 Id. 390 Bart Jansen, FAA Approves First Commercial Drone over Land, USA TODAY (June 10, 2014), http://www.usatoday.com/story/money/business/2014/06/10/faadrones-bp-oil-pipeline-aerovironment-north-shore/10264197/.

391 Mary Madden & Lee Rainie, Americans’ Attitudes about Privacy, Security and Surveillance, Pew Research Center (May 20, 2015), https://www.pewresearch.org/internet/2015/05/20/americans-attitudes-aboutprivacy-security-and-surveillance/.

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bombing case.392 UAVs hovering over American cities, however, is an entirely different governmental activity. These drones are essentially mobile cameras used for surveillance and recording of the day-to-day movements of American citizens.

In highlighting the issues of allowing law enforcement to use unmanned aircraft systems to observe and record the activities of American citizens, this article’s primary concern is balancing the Fourth Amendment implications of such usage against the prerogative of law enforcement. Specifically, how the UAV can be used and the possible impact this use could have on American citizens’ Fourth Amendment rights. For instance, UAVs with video and audio recording capabilities can observe people and places from a vantage point that may be seen as an unreasonable search, thus violating the Fourth Amendment’s protections against unreasonable searches and seizures (as discussed further on). If a UAV did not have these functions, it would be nothing more than a hobby-related aircraft used for recreation, and we would not need to have this discussion as a country. However, as technological advancements appear to be never ending, UAVs have advanced the never-ending conversation on how the changing technology will affect privacy and other matters related to the United States Constitution.

II. Government Agencies Currently Use UAVs Despite Unclear Guidelines Currently in Place with Likely Legal Implications.

In the United States, drone usage has become more prevalent throughout the recent years. According to the Justice Department’s internal watchdog, the Federal Bureau of Investigation (FBI) has been using UAVs to support its law enforcement operations since 2004393 and has spent more than $3 million on the unmanned aircraft.394 Furthermore, the Justice Department's Inspector General (IG), Michael Horowitz, revealed in a memo that the Justice Department also has

392

Heather Kelly, After Boston: The Pros and Cons of Surveillance Cameras, CNN (Apr. 26, 2013), http://www.cnn.com/2013/04/26/tech/innovation/security-cameraboston-bombings/.

393 DOJ Office of the Inspector Gen. Audit Div., Interim Report on the Department of Justice’s Use and Support of Unmanned Aircraft Systems, Rep. 13-37, at 4 (2013).

394 Id.

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awarded over $1.26 million to at least seven local police departments and nonprofit organizations for UAVs.395 UAV usage is likely expanding in the United States and will continue to do so in the coming years as law enforcement relies more and more on the technology. For example, the IG noted that another Justice Department agency, the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), plans to use UAVs to support future operations and have already spent almost $600,000 towards these endeavors.396 As the usage of UAVs increases and technology advances, the concerns for protecting the privacy of United States citizens heightens.

Some privacy concerns have been voiced by various civil liberties groups critical of domestic UAV usage, and the potential invasion on people’s privacy. Other concerns have been voiced on the impact of the physical safety of citizens due to the usage of UAVs. For example, the government worries UAVs could collide with passenger planes, putting those passengers in mortal harm.397 These types of concerns have slowed more widespread adoption of the technology by the government.

In spite of this, statistics show that the usage of UAVs by the United States government is nowhere near being put on hold. From 2004 to May 2013, the Justice Department spent almost $5 million on unmanned aircrafts;398 however, the guidelines for drone usage are unclear and the legal ramifications of such spending seems to have been pushed to the side.399 “The aerospace industry forecasts a worldwide deployment of almost 30,000 drones by 2018, with the United States accounting for half.”400 While the Attorney General’s office formed a working group, the demand for UAVs continued to increase, especially throughout the 395

Id. at 10-11.

Id. at 4.

397 Greg Botelho, FAA Official: Drone, Jetliner Nearly Collided over Florida, CNN (May 11, 2014), http://www.cnn.com/2014/05/09/travel/unmanned-drone-danger/.

398 DOJ Office of the Inspector Gen. Audit Div., Rep. 13-37, at i.

399 Id. at ii.

400 Joan Lowy, Pressure Builds for Civilian Drone Flights at Home, The Post and Courier (Feb. 26, 2012), https://www.postandcourier.com/pressure-builds-forcivilian-drone-flights-at-home/article_ 25795c0c-a829-5061-9015-fed60e1230ee.html.

396

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government agencies.401The UAVs purchased by the Justice Department are what the Federal Aviation Administration (FAA) calls “small UAVs,” unmanned aerial vehicles that “weigh up to 55 pounds.”402 Justice Department officials told the IG's office that none of its drones were armed.403 Two other Justice Department components, the Drug Enforcement Administration (DEA) and the U.S. Marshals Service, have purchased UAVs for testing but said they had no plans to deploy them operationally.404 The U.S. Marshals Service spent $75,000.405 The DEA acquired its drone from another federal agency at no cost, and said it planned to transfer the craft to another agency.406 The U.S. Marshals Service said it planned to destroy its UAVs because they were “obsolete and no longer operable.”407 These agencies recognize the need for clear guidelines. In June 2013, former FBI Director, Robert Mueller, told Congress that the FBI occasionally uses unmanned aerial vehicles but was developing guidelines in anticipation of issues that will arise as UAVs become more omnipresent.408 Further, addressing possible legal ramifications, the FBI responded to an inquiry from Senator Rand Paul revealing it used “UAVs in eight criminal cases and two national security cases” since 2006.409 Among those, UAVs were used in Alabama during a standoff between authorities and Jimmy Lee Dykes, who was holding a 5-year-old boy hostage in an underground bunker.410 The FBI's letter to Senator Paul said that while the Supreme Court had not ruled on the use of UAVs specifically, prior rulings on aerial surveillance held that court warrants were not needed because the areas monitored were “open to public view,” and "there was no reasonable expectation of 401

Oversight of the Federal Bureau of Investigation: Hearing before the Sen. Comm.

Judiciary, 113 Cong. (2013) (statement of Robert Mueller, Dir., FBI).

402 DOJ Office of the Inspector Gen. Audit Div., Rep. 13-37, at i-ii.

403 Id. at ii.

404 Id. at 6.

405 Id. at 4.

406 Id. 407 Id. at 6.

408 Oversight of the Federal Bureau of Investigation, supra note 16.

409 Letter from Stephen D. Kelly, Assistant Director, Office of Congressional Affairs, to Rand Paul, M.D., U.S. Senator, Ky., Information on FBI’s Use of UAVs (July 19, 2013), http://www.paul.senate.gov/files/documents/071913FBIresponse.pdf.

410 Id.

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privacy.”411 The agency also wrote that a warrant wasn’t needed because UAVs do not physically trespass on private property.412 The IG’s response made it unclear how guidelines were being applied and the possible legal ramifications of the FBI usage of UAVs. The IG's report cited the Alabama case only, saying that a review of available records showed that the FBI appeared to be operating UAVs only after obtaining required approvals from the Federal Aviation Administration.413 The IG report, however, suggested that UAVs might present special challenges in the realm of civil liberties.414 For example, the IG report said “[t]he unique capability of small [UAVs] to maneuver effectively yet covertly in the curtilage [of a home]. . .” where expectations of privacy are not clear or well-defined.415 In addition, UAVs are capable of extended flight times of several hours or even days, which could have legal implications whether the tracking was performed on private or public property.416 As an attempt to focus on the unique issues drone usage presented, the IG recommended the formation of a Justice Department working group to determine whether UAVs require their own legal policy, distinct from those of manned aircraft.417 The deputy Attorney General's office agreed with the recommendation.418 Currently, different agencies have varied options on the amount of guidelines that should be put in place. For example, the FBI told the IG that bureau guidelines require that agents get supervisor approval before conducting any aerial surveillance and comply with aviation laws and policies. 419As of May 2013, the ATF said it was developing a checklist to guide how drone operators conduct flights.420 "These 411

Letter from Stephen D. Kelly, Assistant Director, Office of Congressional Affairs, to Rand Paul, M.D., U.S. Senator, Ky., Information on FBI’s Definition of Reasonable Expectation of Privacy UAVs (July 29, 2013), http://www.paul.senate.gov/files/documents/071913FBIresponse.pdf.

412 Id. 413 DOJ Office of the Inspector Gen. Audit Div., supra note 8, at 5.

414 Id. at 8.

415 Id. 416 Id. 417 Id. at 9.

418 Id. at 19-20.

419 Id. at 5.

420 Id. at ii.

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officials did not believe that there was a need to develop additional privacy protocols . . . " for UAVs, the IG's report said.421 Regarding potential privacy concerns, both the FBI and ATF reported to the IG's office that they did not believe there was any practical difference between how a drone collects evidence and how a manned aircraft collects evidence.422 However, the FBI still reported that some guidelines are followed.423 The FBI has said its unmanned aerial vehicles are used only to conduct surveillance operations on stationary subjects.424 In each instance, the FBI first must obtain the approval of the FAA to use the aircraft in a very confined geographic area.425 A senior policy analyst with the American Civil Liberties Union, Jay Stanley, said, "[w]e urge the Justice Department to make good on its plans to develop privacy rules that protect Americans from another mass surveillance technology."426 He added that Congress should pass legislation requiring law enforcement to get “judicial approval before deploying drones, and explicitly forbid the arming of these machines.”427 In addition to the money spent by the FBI and ATF, the Justice Department has awarded $1.2 million in grants since 2007 to at least seven local police departments and nonprofit organizations to purchase drones.428 The Justice Department money was used by Eastern Kentucky University;429 the Sheriff's Association of Texas;430 the Center for Rural Development in Kentucky;431 the Gadsden, Ala., Police Department; the Miami-Dade, Fl. Police Department;432 the 421

Id. at 6.

Id. at ii.

423 FBI Oversight Hearing, supra note 23, at 45.

424 Id. 425 DOJ Office of the Inspector Gen. Audit Div., supra note 8, at 5.

426 Press Release, ACLU, Justice Department Inspector General Releases Report on Domestic Drones (September 26, 2013 ACLU), https://www.aclu.org/technologyand-liberty/justice-department-inspector-general-releases-reportdomestic-drones.

427 Id. 428 DOJ Office of the Inspector Gen. Audit Div., supra note 8, at i.

429 Id. at 11.

430 Id. 431 Id. 432 Id. 422

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North Little Rock, Ark., police department;433 and the San Mateo County, Calif., Sheriff's Office.434 Five of the seven grants were used to buy drones.435 The awards to Miami-Dade and San Mateo were provided solely to evaluate drones for use in the field.436 The drones met with varying success. In 2009, the Gadsden Police Department attempted to use its drone for a surveillance mission.437 "However, Gadsden Police Department officials stated that, during the mission, the ground control station lost communication with the unmanned aircraft system, causing the UAV to collide with a tree."438 III. The States Take Varying Stances on Surveillance Drone Usage, and Some State Legislatures Allow their Law Enforcement Agencies to Use Surveillance UAVs. Drone legislation has been proposed in 36 states so far.439 Much of the proposed legislation requires governments to get a warrant or follow a set of procedures before allowing evidence obtained to be admissible in court. There are variations among the different bills: some ban the attachment of any weapons on the drone,440 some provide extra protection for ranchers,441 some require the law enforcement agencies to conduct more research on how the drones will work in practice,442 and some states specify that the drones can only be used in emergencies such as pursuing fleeing felons or terrorism investigations.443 Some states have enacted moratoriums on drones until their impact can be more fully explored.444 433

Id. Id. 435 Id. at 11-13.

436 Id. at 13.

437 Id. at 12.

438 Id. 439 Allie Bohm, Status of 2014 Domestic Drone Legislation in the States, THE ACLU (April 22, 2014), https://www.aclu.org/blog/technology-and-liberty/status-2014domestic-drone-legislation-states 440 Allie Bohm, Drone Legislation: What’s Being Proposed in the States?, THE ACLU (March 6, 2013), https://www.aclu.org/blog/technology-and-libertynational-security/drone-legislation-whats-beingproposed-states.

441 Id. 442 Id. 443 Id. 444 Id. 434

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In Alaska, the proposed legislation creates a task force to study unmanned aircraft systems.445 The legislature lists out in detail the different types of research and case studies they feel will be the most beneficial.446 Some states’ proposed legislation have comprehensive sets of guidelines in place for drone usage by the government and private individuals. In Michigan, House Bill No. 4455 addresses the use of drones by stating generally that a person who “uses an unmanned aerial vehicle shall comply with all federal aviation administration requirements and guidelines.”447 Michigan mandates that if the government wants to acquire information using an unmanned aerial vehicle, then the governmental agency may only do so in certain circumstances.448 Such circumstances include: 1) written consent; 2) “in circumstances in which it is reasonable to believe that there is an imminent threat to life or safety of a person;”449 3) pursuant to a search warrant; or 4) pursuant to some court orders.450 If the government does not follow these guidelines, any information and evidence derived from its use will be inadmissible.451 Some states have imposed a stricter set of guidelines in an attempt to afford their citizens more privacy protection. Florida,452 Idaho,453 and Tennessee454 require law enforcement agencies obtain a search warrant before using drones for surveillance. Florida enacted a bill prohibiting the use of drones for collecting evidence without a warrant,455 unless to prevent a terrorist attack.456 This bill also requires the government agency to get a warrant to use drones for surveillance and collection of evidence subject to the common warrant exceptions.457 Also, a private cause of action is allowed for any violation.458 445

H.C.R. 6, 28th Leg., (Alaska 2013).

Id. 447 H.R. 4455, 97th Leg., (Mich. 2013).

448 Id. 449 Id. 450 Id. 451 Id. 452 Fla. Stat. § 934.50 (2013).

453 S. 1134, 62nd Leg., 1st Reg. Sess. (Idaho 2013).

454 Tenn. Code Ann. § 39-13-609 (2013).

455 Fla. Stat. § 934.50 (2013).

456 Id. 457 Id. 458 Id. 446

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Idaho enacted legislation requiring a warrant in order to use drones for surveillance,459 except in certain cases such as emergency responses for safety,460 search and rescue operations,461 or controlled substance investigations.462 Like in Florida, Idaho citizens would have a private cause of action for violation of this act by any government agency.463 Additionally, Idaho prohibits the use of drones by private individuals.464 Some states have a general prohibition on the usage of UAVs, but carve out small exceptions. For example, Alabama's proposed legislation prohibits the government's use of drones to gather evidence or other information.465 The bill also provides that any evidence gathered in violation of the act is inadmissible in any criminal prosecution.466 Like other states, Alabama would authorize an aggrieved party to initiate a civil action against the law enforcement agency that violates the act.467 However, Alabama's bill does provide a few exceptions that allow the government agency to use the drones.468 For instance, UAV use would be allowed for preventing terrorist attacks or other specified law enforcement purposes.469 IV. Law Enforcement’s Use of UAVs Implicates the Fourth Amendment.

In order to understand the Fourth Amendment’s impact on the use of UAVs, we must look to the myriad case law. As with many of our most sacred, constitutionally-protected rights, the law has evolved over time to recognize the effects technological advancements have had on the Fourth Amendment’s protection against unreasonable searches and seizures. The Court sometimes embraces and sometimes rejects 459

S. 1134, 62nd Leg., 1st Reg. Sess. (Idaho 2013).

Id. 461 Id. 462 Id. 463 Id. 464 Id. 465 S. 317, 2013 Reg. Leg. (Ala. 2013).

466 Id. 467 Id. 468 Id. 469 Id. 460

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technological factors when analyzing whether a search has occurred for purposes of the Fourth Amendment. For future guidance in this area, this author proposes a two-part inquiry: As a threshold matter, can a UAV be used to conduct aerial surveillance? If so, what types of technology can be used to conduct the search from the UAV platform?

A. Does the Fourth Amendment prohibit the use of a UAV to conduct aerial surveillance?

The Fourth Amendment, states that “[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated . . .” 470 The Fourth Amendment’s protection against unreasonable searches exists when a person has a constitutionally protected reasonable expectation of privacy.471 The United States Supreme Court has shaped the meaning of “unreasonable searches” over many years, and, as technology changes, the scope of protections granted by the Fourth Amendment are continually adjusted. “The Fourth Amendment is to be construed in the light of what was deemed an unreasonable search and seizure when it was adopted, and in a manner which will conserve public interests as well as the interests and rights of individual citizens.”472 The definition of a “search” has been continuously modified as technology advances, significantly changing how the court interprets the Fourth Amendment protections. For example, in Olmstead v.

United States, decided in 1928, the Court held that wiretaps to listen to a telephone conversation were not a “search” in the traditional sense, because without a physical intrusion there could be no trespass.473 The Court said that the government was merely listening to a conversation, which amounted to eavesdropping.474 However, in 1961, the Court departed from older notions by expressly holding that the Fourth Amendment applies to the recording of oral statements even though there was no “technical trespass under . . . local property law.”475 Thus, the Supreme Court made it clear that the protection of the Fourth 470

U.S. CONST. amend. IV. See Katz v. United States, 389 U.S. 347, 361 (1967).

472 Carroll v. United States, 267 U.S. 132, 149 (1925).

473 Olmstead v. U.S., 277 U.S. 438, 464-66 (1928).

474 Id. 475 Silverman v. United States, 365 U.S. 505, 511 (1961).

471

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Amendment does not “turn upon the presence or absence of a physical intrusion into any given enclosure.”476 The Court has not vacated this prior holding that the absence of a physical intrusion does not ipso facto violate the Fourth Amendment. However, recent case law has reintroduced the idea that when a physical trespass occurs, there is an automatic implication of the Fourth Amendment’s protections.477 The Court soon revisited its prior no trespass, no violation ruling. In 1967, the Fourth Amendment’s protections against unreasonable searches in relation to electronic surveillance were upheld by a 7-1 decision in Katz v. United States. In Katz, federal agents bugged a phone booth with an electronic listening device to record phone conversations that Mr. Katz was having, and eventually obtained incriminating evidence through the use of the listening device.478 Mr. Katz argued that his conversation was protected under the Fourth Amendment and because the government did not get a warrant the evidence should not be admissible.479 The government argued that the Fourth Amendment only protects people from places where searches are unreasonable, and a public, glass phone booth would not be protected because there was no expectation of privacy.480 The Court looked beyond its traditional notions of a search, such as ones in Olmstead, and held there was no constitutional significance to the fact that the electronic device used did not penetrate the wall of the phone booth.481 Rejecting the idea that the Fourth Amendment required a trespass to be implicated, the Court noted: These considerations [constitutional safeguards] do not vanish when the search in question is transferred from the setting of a home, an office, or a hotel room to that of a telephone booth. Wherever a man may be, he is entitled to know that he will remain free from unreasonable searches and seizures. 482

476

Katz v. United States, 389 U.S. 347, 353 (1967).

See U.S. v. Jones, 565 U.S. 400, 132 S.Ct. 945 (2012).

478 Katz, 389 U.S. at 349.

479 Id. at 352.

480 Id. 481 Id. at 353.

482 Id. at 359.

477

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The Court held that the government’s actions amounted to a search.483 The Court reasoned that Mr. Katz had a reasonable expectation of privacy–he was having a personal conversation within an enclosed space, he closed the door, and took steps to keep his conversation from being broadcast to the public.484 As such, the Court found that by taking measures to safeguard his conversation, Mr. Katz did not expect the eavesdropping that occurred.485 Once the Court found that there was a search, the issue turned on determining whether the search was conducted in compliance with the constitution.486 The Court found that the government agents ignored “the procedure of antecedent justification . . . that is central to the Fourth Amendment”–a procedure that was required for this kind of electronic surveillance.487 “Over and again this Court has emphasized that the mandate of the [Fourth] Amendment requires adherence to judicial processes,”488 and that searches conducted without prior approval by a judge or magistrate are per se unreasonable under the Fourth Amendment subject only to a few specifically established and well-delineated exceptions.489 Therefore, the Supreme Court held that because the search violated the Constitution the subsequent evidence acquired as a result was inadmissible.490 Katz now became the touchstone in any Fourth Amendment inquiry.

In his concurring opinion, Justice Harlan proposed a two-part test to inquire whether a person has a “constitutionally protected reasonable expectation of privacy.”491 The Katz test is: first, the individual must manifest a subjective expectation of privacy, and, second, the expectation must be recognized by society as reasonable.492 This historic Fourth Amendment analysis is still used today, and is known as “the reasonable expectations doctrine.” For the government 483

Id. Id. at 352.

485 Id. 486 Id. at 354.

487 Id. at 359.

488 Id. at 357 (quoting United States v. Jeffers, 342 U.S. 48, 51 (1951)).

489 Lloyd L. Weinreb, Leading Constitutional Cases on Criminal Justice 562 (West Academic, 2013).

490 Id. at 352-59.

491 California v. Ciraolo, 476 U.S. 207, 211 (1986) (quoting Katz 389 U.S. at 360, (Harlan, J., concurring)).

492 Id. at 211 (citing Smith v. Maryland, 442 U.S. 735, 740 (1979)).

484

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action to be a “search” under the Fourth Amendment, it must first be shown that the citizen has a subjective expectation of privacy, and then it must be determined if society is willing to recognize that expectation of privacy as objectively reasonable.493 While the United States Supreme Court has consistently upheld the Fourth Amendment protections laid out in Katz, those expectations of privacy do not extend to areas where the Court has unambiguously held there is no reasonable expectation of privacy, and in situations where exceptions to the warrant requirement arise. For instance, the open fields doctrine that was first applied in Hester v. United States is still alive today.494 The open fields doctrine was reaffirmed in 1984 in the case of Oliver v. United States.495 In Oliver, government officers saw a marijuana garden outside the curtilage of a home by walking along a footpath that led around a gate onto the defendant's property and continued down the road for nearly a mile where the garden was located.496 The man argued that by placing “no trespassing” signs he had manifested a reasonable expectation of privacy.497 The Court held that there was no reasonable expectation of privacy, so the evidence was admissible.498 Consistent with Katz, the Court reasoned that the Fourth Amendment does not merely protect a person from a subjective expectation of privacy, but that expectation must be one society is prepared to deem reasonable.499 The court further stated, “placement of ‘No Trespassing’ signs on secluded property does not create ‘legitimate privacy interest’ in marihuana fields.”500 Here, using a “No Trespassing” sign will not prevent the general public from viewing open areas from aerial surveillance, so there is no reasonable expectation of privacy.501 Thus, merely taking efforts to restrict access 493

Id. at 361.

See, e.g., Dean v. Superior Court, 35 Cal. App. 3d 112, 118 (1973) (aerial searches of “open fields” not prohibited by the Fourth Amendment; no reasonable expectation of privacy).

495 Oliver v. United States, 466 U.S. 170 (1984).

496 Id. at 173.

497 Id. 498 Id. at 184.

499 Id. at 177.

500 Id. at 182.

501 Id. at 179.

494

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to an area is not an automatic guarantee of Fourth Amendment protections where none would otherwise exist.502 Based on the foregoing, the Court began to address the relevant issue of aerial surveillance in 1986. The Supreme Court ruled that an individual’s private property is not protected by the Fourth Amendment so long as the aircraft used is in a “navigable airspace”— somewhere already accessible to the general public.503 Therefore, what the police could then see by looking with the naked eye did not require a search warrant.504 Also, the plain view exception to the warrant requirement applies to some forms of aerial surveillance, which may justify warrantless aerial surveillance searches.505 In California v. Ciraolo, the police received an anonymous tip that marijuana was growing in Mr. Ciraola’s backyard.506 Mr. Ciraolo’s backyard was enclosed by two fences and was not visible from a ground-level view, so the officers secured a private plane and flew over his house at an altitude of 1,000 feet.507 While in the plane, officers observed marijuana plants growing in Mr. Ciraolo’s yard, and “a search warrant was later obtained on the basis of one of the officer’s naked eye observations; a photograph of the surrounding area taken from the airplane was attached as an exhibit.”508 In Ciraolo, the Court held that the naked-eye aerial observation of the backyard did not violate the Fourth Amendment.509 The Court used the two-part test from Katz to determine if the respondent had manifested a subjective expectation of privacy that society was willing to recognize as reasonable.510 “In pursuing the second inquiry, the test of legitimacy is not whether the individual chooses to conceal assuredly 502

Id. at 178-82.

Ciraolo, 476 U.S. at 208.

504 Id. 505 See, e.g., Katz, 389 U.S. at 351 (“What a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection.”).

See also Florida v. Riley, 488 U.S. 445, 445 (1989) (use of helicopters and binoculars to see marijuana through an opening in roof held not a Fourth Amendment violation).

506 Ciraolo, 476 U.S. at 209.

507 Id. 508 Id. at 209-10.

509 Id. at 215.

510 Id. at 211-15.

503

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‘private activity,’ but whether the government's intrusion infringes upon the personal and societal values protected by the Fourth Amendment.”511 The Court reasoned that the police observation took place within a navigable airspace, and was not physically intrusive.512 Further, the Court found that the police who observed the plants were able to identify them as marijuana because the officers were trained to recognize this type of plant.513 The Court held that because any member of society could have viewed the marijuana plant by looking down while flying in the airspace, the police traveling in that same airspace were not required to get a warrant to observe what anyone could have with the naked eye.514 California v. Ciraolo was a close vote of 5-4, with Chief Justice Burger writing the opinion of the Court.515 In the opinion, the Court stated, “we readily conclude that respondent's expectation that his garden was protected from such observation is unreasonable and is not an expectation that society is prepared to honor.”516 On the other hand, Justice Powell dissented on the grounds that the second prong in the Katz test had not been adequately applied by the majority.517 The dissenting opinion concluded that there was a reasonable expectation of privacy, in this case, reasoning that there was a very small chance the general public would fly over this yard and observe the marijuana plants. 518 This 5-4 split is evidence of how the Supreme Court struggles to define what is a “search,” and in deciding when an individual’s subjective expectation of privacy is one that society, and the Court, would honor as reasonable.

Three years later the discussion continued, and the Court still could not come to a full agreement. In 1989, the Supreme Court decided a similar case in Florida v. Riley, with another close split of 5-4.519 The search in Riley was similar to Ciraolo—a tip that Mr. Riley was growing marijuana on his property.520 The officer circled twice over the Riley 511

Id. Id. 513 Id. 514 Id. 515 Id. at 208 516 Id. at 214.

517 Id. at 222.

518 Id. at 225.

519 Florida v. Riley, 488 US 445, 446 (1989).

520 Id. at 448.

512

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property in a helicopter at the height of 400 feet and observed marijuana growing in a greenhouse with his naked eye.521 Notably, the inside of the greenhouse was not visible from ground level; however, an opening in the roof made the marijuana plants visible from the air.522 The Supreme Court again held that there was no violation of the Fourth Amendment because Mr. Riley did not have a legitimate expectation of privacy that society would honor as reasonable.523 Further, adopting Ciraolo, the Supreme Court reasoned that the police or the public could have inspected the backyard garden from the street or from the “vantage point of an aircraft flying in navigable airspace as this plane was.”524 The majority opinion in Riley made it clear that the Supreme Court was not setting an automatic precedent that society would never consider someone to have a legitimate expectation of privacy in the areas surrounding their home. The Supreme Court pointed out that its holding does not mean that every inspection of the curtilage of a house from an aircraft will be outside the scope of Fourth Amendment protection.525 The Supreme Court reasoned: [I]t is of obvious importance that the helicopter in this case was not violating the law, and there is nothing in the record or before us to suggest that helicopters flying at 400 feet are sufficiently rare in this country to lend substance to respondent's claim that he reasonably anticipated that his greenhouse would not be subject to observation from that altitude. Neither is there any intimation here that the helicopter interfered with respondent's normal use of the greenhouse or of other parts of the curtilage.526

521

Id. Id. 523 Id. at 451.

524 Id. at 450 (“[i]n an age where private and commercial flight in the public airways is routine, it is unreasonable for respondent to expect that his marijuana plants were constitutionally protected from being observed with the naked eye … the Fourth Amendment simply does not require the police traveling in the public airways at this altitude (1,000 feet) to obtain a warrant in order to observe what is visible to the naked eye”).

525 Id. at 451.

526 Id. 522

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The concurring and dissenting opinions seemed to suggest that the frequency of public flights was a major consideration in analyzing if the respondent had a legitimate expectation of privacy. However, Justice O’Connor’s concurring opinion thought the frequency of flights was a key consideration of the majority, and Mr. Riley missed a key argument.527 Justice O’Connor stated, “[i]f the public rarely, if ever, travels overhead at such altitudes, the observation cannot be said to be from a vantage point generally used by the public and Riley cannot be said to have ‘knowingly expose[d] his greenhouse to public view.”528 Furthermore, the dissenting opinion, which made very similar points to the concurring opinion, highlighted the absence of facts that Mr. Riley was able to submit to show that intimate details were connected with the use of the home or curtilage observed.529 The dissent posed many questions on the meaning of “intimate details” and warned the court against finding the curtilage outside of the Fourth Amendment protection merely because of the distasteful use of growing drugs.530 The dissent stated: It is difficult to avoid the conclusion that the plurality has allowed its analysis of Riley's expectation of privacy to be colored by its distaste for the activity in which he was engaged. It is indeed easy to forget, especially in view of current concern over drug trafficking, that the scope of the Fourth Amendment's protection does not turn on whether the activity disclosed by a search is illegal or innocuous.531 These cases are important in governing the first inquiry under the Fourth Amendment analysis—can an aerial vehicle be used to conduct searches absent a warrant? The short answer is yes. While the Supreme Court has not yet ruled on this issue, prior rulings suggest that the sole issue of using an aerial vehicle does not per se result in a Fourth Amendment violation. Obviously, there may be particularized 527

Id. at 455.

Id. 529 Id. at 462-64.

530 Id. at 463.

531 Id. 528

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circumstances that could create such an issue; however, the notion that a UAV could not be used at all is folly.

B. What types of technology, if used on the aerial UAVS, would run afoul of the Fourth Amendment?

The second issue should lead to a more restrained use of UAVs that conduct searches. Importantly, many different types of surveillance devices can be mounted on a UAV. For example, military drones have been outfitted with visual cameras, thermal imaging systems, radar, and other devices. There have also been reports that easily movable devices that can attack a person’s smartphone are currently in use within the boundaries of the United States.532 These devices, known as interceptors, impersonate cell towers and can manipulate a smartphone in all sorts of ways: from GPS tracking to installing spyware to listening in on conversations occurring in real-time.533 Fortunately, the Court appears reluctant to allow devices that go beyond the capabilities of human perception. In 2001, the Supreme Court did just that in Kyllo v. United States. In Kyllo, a government search was not done with the “naked eye,” but was instead done by using a thermal-imaging device.534 Kyllo was another close 5-4 split vote, with the Supreme Court holding that the use of a thermal-imaging device aimed at a private home from a public street in order to detect relative amounts of heat within that home constituted a “search” falling within the protections of the Fourth Amendment.535 The inquiry then became whether or not that search was reasonable.

In Kyllo, the government officer obtained a thermal imager to scan the home of Mr. Kyllo.536 The officer desired to check the amount of heat that was emanating from the home to see if it would be consistent with the amount of heat generated by lamps needed to grow marijuana

532

Andrew Rosenblum, Mysterious Phony Cell Towers Could be Intercepting Your Calls, POPULAR SCIENCE (August 27, 2014), http://www.popsci.com/article/technology/mysterious-phony-cell-towers-could-beintercepting-your-calls.

533 Id. 534 Kyllo v. U.S., 533 U.S. 27, 40 (2001).

535 Id. 536 Id.

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plants that may be hidden inside.537 The officer did a quick scan of Mr. Kyllo’s home, only lasting a few minutes, while he sat in the passenger seat of a vehicle across the street from the house.538 The scan showed that the home was substantially warmer than others in the neighborhood.539 Based upon the thermal image of the house, an informant tip, and utility bills, the officer obtained a search warrant.540 While carrying out the search warrant, the officer found an indoor growing operation with more than 100 marijuana plants.541 The Court first contrasted Kyllo, which involved a residential home, to an earlier case decision, Dow Chemical Co. v. United States, which involved an industrial plant complex.542 In Dow Chemical Co. v. US, the Court held that the taking of aerial photographs of an industrial plant complex from navigable airspace was not a search, even though the camera they used was “the finest precision aerial camera available.”543 Even though this camera let police capture a lot more than the naked eye could see, the court reasoned that the open area of an industrial plant complex spread over 2,000 acres was not similar to the “curtilage” of a dwelling for the purpose of the analysis, but was instead susceptible to the open fields doctrine.544 The Kyllo Court noted that in Dow Chemical the area searched was “not immediately adjacent to a private home, where privacy expectations are most heightened.”545 The Kyllo Court went on to acknowledge the advancements in technology and how those advancements implicate the Fourth Amendment.546 The Supreme Court stated “[i]t would be foolish to contend that the degree of privacy secured to citizens by the Fourth Amendment has been entirely unaffected by the advance of 537

Id. at 29-30 (“[t]hermal imagers detect infrared radiation, which virtually all objects emit but which is not visible to the naked eye. The imager converts radiation into images based on relative warmth-black is cool, white is hot, shades of gray connote relative differences; in that respect, it operates somewhat like a video camera showing heat images.”).

538 Id. 539 Id. 540 Id. 541 Id. 542 Id. at 32-33.

543 Dow Chemical Co. v. United States, 476 U.S. 227, 231 (1986).

544 Id. at n.4.

545 Kyllo, 533 U.S. at 33.

546 Id at 33-35.

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technology. . . [t]he question we confront today is what limits there are upon this power of technology to shrink the realm of guaranteed privacy.”547 The Court also acknowledged that while the Katz test may be subjective and unpredictable when applied to certain situations, this was not one of those situations.548 The Supreme Court emphasized that dating back to common law there is always some expectation of privacy that exists in the interior of one’s home, and that this expectation of privacy is “acknowledged to be reasonable.”549 The Court reasoned that because the information regarding the inside of the home could not have been observed without the sense-enhancing technology—importantly technology that is not in use by the general public—the search is analogous to one that was a physical intrusion into a constitutionally protected area.550 Thus, the Court held, “as here, the Government uses a device that is not in general public use, to explore details of the home that would previously have been unknowable without physical intrusion, the surveillance is a ‘search’ and is presumptively unreasonable without a warrant.”551 Allowing law enforcement to use technology that collects and stores vast amounts of an individual’s personal information without obtaining a warrant raises red flags. In United States v. Jones, a nightclub owner was suspected of trafficking narcotics.552 While traditional investigative tactics were employed, the officers went a step further by placing a GPS device on the undercarriage of the nightclub owner’s Jeep after the authorizing warrant expired and in a different jurisdiction.553 This device was able to pinpoint the Jeep’s location within 100 feet, and relay that information via a cellular phone to a Government computer, which generated over 2000 pages in only four days.554 This information was used to obtain an indictment charging the nightclub owner with conspiracy to distribute and possess with intent to distribute cocaine and cocaine base.555

547

Id. at 33-34.

Id. at 39.

549 Id. at 34.

550 Id. at 40.

551 Id. 552 United States v. Jones, 565 U.S. 400 (2012).

553 Id. at 402-04.

554 Id. 555 Id. 548

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While the Court found that the evidence obtained via the GPS device should have been suppressed on the trespass basis, it is Justice Sotomayor’s concurrence that is the most illuminating.556 Justice Sotomayor recognizes that the Government could just as easily track a person without use of its own GPS system by using the GPS found in a person’s smartphone.557 In that situation the trespass rule would not apply, and the Court would have to look to Katz.558 In applying the Katz analysis, there exists unique characteristics of GPS surveillance that must be given proper attention: “GPS monitoring generates a precise, comprehensive record of a person's public movements that reflects a wealth of detail about her familial, political, professional, religious, and sexual associations.”559 The danger exists in allowing the Government to store such data for distantfuture mining coupled with the GPS’s ability to evade the “ordinary checks that constrain abusive law enforcement practices.”560 Because GPS use is so low cost, while generating massive amounts of personal data, it has the power to change the dynamic between citizens and their government in a way that defeats the democratic ideals of the United States.561 Justice Sotomayor goes even further by stating that the Court may have to reassess the idea that there exists no reasonable expectation of privacy in information voluntarily given to third parties.562 In an uncanny foreshadowing, Justice Sotomayor leaves us with what her position would be if that reassessment ever came: “I for one doubt that people would accept without complaint the warrantless disclosure to the Government of a list of every website they had visited in the last week, month, or year.”563 Recently, the Court weighed in on a smartphone owner’s expectation of privacy. In Riley v. California, the driver’s car was properly impounded and the resulting inventory search revealed two handguns under the hood.564 The driver was arrested for the possession of concealed and loaded firearms, and his “smartphone” was seized after 556

Id. at 413-14.

Id. at 414-15.

558 Id. 559 Id. 560 Id. 561 Id. 562 Id. at 957.

563 Id. 564 Riley v. California, 573 U.S. 373 (2014).

557

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the search incident to lawful arrest (SILA).565 Because SILA also revealed items associated with the “Bloods” street-gang, the searching officer, and later a detective, accessed the phone looking for further evidence of gang association without first securing a warrant.566 Because of that warrantless search, driver was further charged with firing at an occupied vehicle, assault with a semiautomatic firearm, and attempted murder.567 The driver moved to suppress the evidence seized from the smartphone that led to the later charges.568 The Court defined a smartphone as “a cell phone with a broad range of other functions based on advanced computing capability, large storage capacity, and internet connectivity.”569 The Court found that in order to determine whether a warrant exception exists, a balancing test is necessary to weigh the degree of intrusion against legitimate government interests.570 In refusing to apply the rule of Robinson,571 the Court distinguished the physical content that the smartphone, as an item, falls into from the digital content found within the smartphone.572 The Court also held the rationales guiding the SILA from Chimel573 inapplicable because once the smartphone is seized—which the government may do in conjunction with a valid SILA—there is minimal risk of it being destroyed or being used as a weapon, so a search of the smartphone’s contents without an authorizing warrant is unjustified.574 Therefore, the search violated the Fourth Amendment, and the information seized from the smartphone should have been suppressed.

The majority opinion by Justice Roberts leans heavily on Justice Sotomayor’s concurrence in Jones575 by acknowledging the extensive amount of personal data that can be found on a smartphone, both in quantity and quality. This author posits that Kyllo, Jones, and Riley form the foundation for this new arena of Fourth Amendment 565

Id. at 378-79.

Id. at 378-81.

567 Id. at 379.

568 Id. 569 Id. 570 Id. at 374 (citing Wyoming v. Houghton, 526 U.S. 295 (1999)).

571 United States v. Robinson, 414 U.S. 218 (1973).

572 Riley, 573 U.S. at 386.

573 Chimel v. California, 395 U.S. 752 (1969).

574 Riley, 573 U.S. at 386.

575 Jones, 565 U.S. at 413 (2012) (Justice Sotomayor, concurring).

566

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jurisprudence. Adhering to this trifecta, the Court will, absent exigent circumstances, want to limit the use of these new invasive technologies in the day-to-day functions of law enforcement agencies. Kyllo makes it clear that law enforcement must seek a warrant before they use equipment that invades a citizen’s privacy from a distance. Jones suggests that there are certain types of equipment only allowable in the most extreme circumstances, subject to judicial oversight due to the high-level of data—data that may exceed the constraints of a warrant—and the deep intrusion of privacy they entail. Riley is the Court’s way of acknowledging that the prevalence of the newer technology of smartphones, and all the personal data that citizens actively put in them, as well as the amount of personal data that is involuntarily stored within them, changes the traditional Fourth Amendment analysis. The Court cannot rely on police restraint to protect the delicate balance between maintaining the privacy of a citizen and the government interest in intruding on that privacy.

So what types of technology are problematic to the Fourth Amendment’s protection against unreasonable searches including searches outside the judicial process? Kyllo clearly does not allow the thermal imaging device that was at the center of that controversy. But Kyllo also teaches us that any technology that unreasonably enhances human perception is out. This includes thermal imaging, and any type of equipment that can pass through physical barriers. This technology exists, and is becoming more advanced every day. MIT has been working on a portable, hand-held device that can track people behind walls using Wi-Fi signals, if they have a receiver.576 MIT also has successfully developed similar technology that uses radio signals to do the same, but without the use of a receiver.577 These types of technologies must not be allowed to be used outside of emergency situations or without judicial oversight.

576

Helen Knight, New System Uses Low-Power Wi-Fi Signal to Track Moving Humans — Even Behind Walls, MIT News, (June 28, 2013), http://newsoffice.mit.edu/2013/new-system-uses-low-power-wi-fi -signal-to-track-moving-humans-0628.

577 Nick Barber, MIT's 'Kinect of the Future' Looks Through Walls With X-Ray Like Vision, IDG News Service, (October 13, 2013), http://www.itworld.com/hardware/378242/mits-kinect-future-looks-through-wallsx-ray-vision.

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Currently available technology must also be restricted. Jones suggests that police use of GPS technology must be closely scrutinized by the court. This means that a warrant must be sought if the police wish to make use of GPS devices to track citizens. Riley pushes this line of thought even further, and by banning police searches of smartphones without a warrant, the Court has strengthened our privacy interests.

Analogous to the reasoning in Riley, is the idea that the use of the new interceptor technology without a warrant must also be prohibited. The interceptor allows police to surreptitiously search a smartphone without having to first gain physical access to the smartphone. This includes the ability to monitor calls and texts in real-time, to manipulate the phone to send text messages written by the police, and even to turn the phone into a microphone that the police can monitor.578 Because these technologies allow police to perform acts remotely that they would be barred from doing in person, the need for judicial oversight becomes more imperative.

V. Some Final Thoughts.

This author does not suggest that UAVs cannot serve legitimate government interests. UAVs can fly and hover in places where our first responders are unable to physically go. Law enforcement officers and firefighters have used UAVs in many situations to preserve life and property. With eyes looking down from above covering a much larger search grid than could ever be seen from ground level with the naked eye, UAVs have been used to locate lost or missing children in heavily wooded areas. UAVs have aided police in determining the exact location of a barricaded gunman to keep law enforcement as safe as possible. Firefighters have used UAVs to determine the direction of travel and how widespread a wildfire is.579 Clearly, UAVs have increased the effectiveness of police to react to emergency situations.

Going forward, the Government will only continue to rely on this new technology.

578

Andrew Rosenblum, Mysterious Phony Cell Towers Could be Intercepting Your Calls, POPULAR SCIENCE (August 27, 2014), http://www.popsci.com/article/technology/mysterious-phony-cell-towers-could-beintercepting-your-calls.

579 American Civil Liberties Union, Protecting Privacy from Aerial Surveillance: Recommendations for Government Use of Drone Aircraft, (December 2011).

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With the Government’s inevitably increased use of UAV technology in conducting criminal and non-criminal investigations, this article focuses on the use of UAVs where exigent circumstances do not exist.

As this article points out, the Constitution may be implicated because of criminal investigations conducted by law enforcement authorities.

With working groups being formed at the various levels of state and federal government to determine the legal issues related to UAVs entry into the civilian population for criminal investigations, and with legislation in its infancy stages of drafting, it's inevitable that UAV use by federal and local law enforcement agencies throughout the country will become more prevalent. As UAV usage increases, the United States Supreme Court must ultimately decide the constraints of their usage against citizens in non-emergency situations. This author posits that most of the invasive technology available for use will be effectively constrained.

Comment on Limitations Periods and ReturnPreparer Fraud PETER J. MANCINI, ESQ.580 TABLE OF CONTENTS PETER J. MANCINI, ESQ. ...................................................................... 95

ISSUE ............................................................................................... 96 SUMMARY ANSWER.................................................................... 97 TAX CODE AND CASELAW ON THE THREE-YEAR LIMITATIONS PERIOD FOR TAX ASSESSMENT..................... 99 HISTORICAL CONTEXT: CASELAW AND IRS OPINIONS ON LIMITATIONS PERIODS BEING HELD OPEN BY RETURNPREPARER FRAUD...................................................................... 101 A.

Courts Pre-Allen on Limitations Periods and Return-preparer Fraud ..... 101 Tinkoff v. United States, 86 F.2d 868 (7th Cir. 1936)— .............................. 101 United States v. Gordon, 242 F.2d 122 (3d Cir. 1957)— ............................ 102 United States v. Baldwin, 307 F.2d 577 (7th Cir. 1962)— .......................... 102 United States v. Whyte, 699 F.2d 375 (7th Cir. 1983)— ............................. 103 United States v. Stadtmauer, 620 F.3d 238 (3d Cir. 2010)— ...................... 103

B. Office of Chief Counsel on Limitations Periods and Return-Preparer Fraud Pre-Allen .................................................................................................... 104 2000 F.S.A. LEXIS 207 (Sept. 15, 2000)— .................................................. 104 C.

Tax Court on Limitations Periods and Return-Preparer Fraud .............. 109 Allen v. Comm’r, 128 T.C. 37 (2007)—....................................................... 109 City Wide Transit, Inc. v. Comm’r, 2011 T.C. Memo 2011-279 (2011)—... 113 Eriksen v. Comm’r, 2012 T.C. Memo 2012-194 (2012)—........................... 113 Finnegan v. Comm’r, T.C. Memo 2016-118 (2016)—................................. 117

D. Office of Chief Counsel Post-Allen on Limitations Periods and ReturnPreparer Fraud............................................................................................ 120 2012 IRS C.C.A. LEXIS 137, (June 4, 2012)—............................................ 120

580

The author is a practicing attorney in Michigan. His main focus is in international disclosures to the I.R.S., federal and Michigan tax resolution, and civil appeals before the I.R.S.'s Office of Appeals. He has been admitted to the U.S. Tax Court. He has a LL.M. in Taxation and a J.D. from W.M.U. Cooley Law School. He also has an M.B.A. from Eastern Michigan University and Bachelor degrees from the University of Michigan.

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E. Federal Appeals Courts Post-Allen on Limitations Periods and ReturnPreparer Fraud............................................................................................ 121 City Wide Transit, Inc. v. Comm’r, 709 F.3d 102 (2d Cir. 2013).— ........... 121 Finnegan v. Comm’r, 926 F.3d 126 (11th Cir. 2019)— .............................. 123 F.

Court of Federal Claims on Limitations Periods and Return-Preparer Fraud 125 BASR P’ship v. United States, 113 Fed. Cl. 181 (2013)— .......................... 125

G. Court of Appeals for the Federal Circuit on Limitations Periods and Return-Preparer Fraud ................................................................................ 129 BASR P’ship v. United States, 795 F.3d 1138 (Fed. Cir. 2015)—............... 129 H.

BASR Partnership as a Substantially Prevailing Party.......................... 131 BASR P'ship v. United States, 130 Fed. Cl. 286 (2017)—........................... 131

ANALYSIS SUPPORTING THAT ONLY TAXPAYER INTENT SHOULD BE CONSIDERED:....................................................... 132 A. How the Tax Court got it wrong in Allen because it is all about taxpayer intent.......................................................................................................... 132

I.

B.

So for the court to impute intent, it must be all about agency, right? ..... 137

C.

And isn’t it really about taxpayer intent? ............................................. 142

D.

Might this interpretation lead to abuse? ............................................... 143

E.

Conclusion......................................................................................... 146

ISSUE Under the Tax Code, the Internal Revenue Service (“IRS”) is limited as to how far back it may go to examine a taxpayer’s returns.

Generally, there is a three-year limitations period, but there are some exceptions. One exception is if the taxpayer makes a substantial understatement in income resulting in a substantial understatement in income taxes, then the limitation period can be extended to six years.

However, where a taxpayer intends to defraud or misrepresent his or her position, the IRS will hold open the limitations period indefinitely.

What happens if the taxpayer uses a return-preparer instead?

Whose intent to defraud or misrepresent a taxpayer’s position then determines if the limitations period may be held open indefinitely? Is it the return-preparer or the taxpayer? The Tax Code is unclear. And caselaw is conflicting. So should the IRS be time-barred from collecting civil penalties from a taxpayer by the Tax Code’s three-year limitations period in Internal Revenue Code (“IRC”) § 6501(a) when

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the taxpayer’s return-preparer willfully took a return position that represented fraud or misrepresented facts and the taxpayer had no knowledge of the fraud or misrepresentation nor intended to evade taxes?

II.

SUMMARY ANSWER For civil actions, the government should not be able to hold open the three-year limitations period indefinitely due to the fraud exception in IRC § 6501(c)(1) unless the taxpayer knows of a return-preparer’s intent to evade taxes for the taxpayer and provides any approval. When this issue was posed to the Office of Chief Counsel in 2000, it agreed and indicated that where a return-preparer has the intent to evade taxes, but the taxpayer does not, the three-year limitations period cannot be held open on the fraud exception. The Office of Chief Counsel concluded that this position was most consistent with the Tax Code and prior caselaw going back more than 80 years. As such, actions more than three years past a return’s filing date were time-barred until the issue was taken up in Tax Court when the government changed its position.

In 2007 in Allen, the government argued that the fraudmisrepresentation exception applied to an innocent taxpayer when a return-preparer willfully misrepresented the taxpayer’s position or committed fraud. In effect, the government argued that the returnpreparer’s intent to defraud or misrepresent could be imputed onto the taxpayer. The Tax Court held that the limitations period was held open indefinitely under the fraud exception in § 6501(c). This holding controlled for a decade. Then, the Court of Appeals for the Federal Circuit, in BASR P’ship, held that Allen and its progeny were incorrect.

For the fraud exception to apply, the Federal Circuit Court of Appeals held that the taxpayer must have the requisite intent to evade taxes or willfulness to have the limitations period held open indefinitely. After that decision was made and after considering BASR P’ship, the Eleventh Circuit upheld a Tax Court decision (Finnegan) stating that Allen and its progeny still govern limitations periods for taxpayers who use return-preparers.

As a result, there is a split among the circuits. For the Federal Court of Claims and the Court of Appeals for the Federal Circuit, that circuit’s caselaw supports that a taxpayer must have the requisite intent to evade

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taxes to hold open the three-year limitations period, and returnpreparer intent does not factor into the matter. Whereas, the Eleventh Circuit and the Tax Court support that the three-year limitations period can be held open indefinitely where there is return-preparer fraud regardless of taxpayer intent.

I contend that the Office of Chief Counsel, the Federal Court of Claims, and the Court of Appeals for the Federal Circuit have properly interpreted the Tax Code and caselaw by requiring that taxpayer intent – not preparer intent – determines if the three-year limitations period may be held open indefinitely under the fraud or misrepresentation exceptions under § 6501(c)(1). Although the Office of Chief Counsel’s guidance is persuasive, and not binding, and a decision made in the Court of Appeals for the Federal Circuit does not bind the Tax Court by statute, I argue that the Tax Court and all other federal circuits addressing this matter should adopt this position.

My reasoning is based on prior Supreme Court holdings, avoiding forum shopping, and avoiding costs incurred by the government when taxpayers substantially prevail on their claims. The Supreme Court in Cheek held that a taxpayer must be willful to be a tax evader; that is, the taxpayer must intend to evade taxes to be held accountable for evasion.581 Using this reasoning, the Federal Court of Claims came to the same conclusion: only a willful taxpayer who defrauds the government can have the limitations period held open on a tax return.

Thus, after holding that an innocent taxpayer cannot be deemed willful when only its return-preparer intended to defraud the government, the Federal Court of Claims barred government actions to assess and collect taxes beyond the three-year limitations period then awarded significant cost reimbursements to taxpayers who substantially prevailed (i.e. BASR P’ship). Because the Federal Court of Claims has jurisdiction over federal tax matters, its holdings now conflict with the Tax Court and other Circuits. Until this matter is resolved, forum shopping will be an issue because taxpayers will leverage these cases by bringing actions in the Federal Court of Claims, after paying their taxes, to seek a refund, instead of Tax Court or a Federal District Court.

If a taxpayer substantially prevails, the government will be compelled to reimburse taxpayers all taxes, interest, penalties, and reasonable costs in defending their positions. This seems like a losing proposition 581

Cheek v. United States, 498 U.S. 193 (1991).

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for the IRS, which could be avoided by the Tax Court unifying its holdings with the Federal Court of Claims and the Court of Appeals for the Federal Circuit.

TAX CODE AND CASELAW ON THE THREE-YEAR LIMITATIONS PERIOD FOR TAX ASSESSMENT III.

In civil matters, the IRS may assess federal taxes, penalties, and interest on a taxpayer within three years of the return being filed. This is called the limitations period.582 Generally, this period starts from when the taxpayer’s return is filed, when filed timely, or when the IRS receives the return when filed late.583 A taxpayer has the burden to show that the limitations period does not apply.584 There is, however, an exception that will toll the three-year limitations period indefinitely: the false-return exception.585 For the false-return exception to apply, the IRS must show that there was a false or fraudulent return that was filed or there was a willful intent to evade taxes.586 Then, the burden shifts to the government to show fraud.587 The burden is set at clear and convincing evidence that at least some portion of the underpayment is due to fraud.588 Where the government is successful at showing fraud at this heightened threshold, the entire underpayment will be attributable to fraud.589 However, when the burden shifts back to the taxpayer to defend his or her position, the taxpayer needs only show that there is no fraud “by the preponderance of the evidence,” then the IRS may not rely on the fraud exception to hold open the three-year limitations period.590 Although I am addressing civil tax law, if this were put in criminallaw context, for the government to show civil fraud, there must be both 582

See IRC §6501(a) (2018).

IRC §§6501(a) (2018), 6503(a); Treas. Reg. §301.6501(a)-1—(c)-1; and Payne v. Comm’r, 224 F.3d 415, 420-421 (5th Cir. 2000).

584 Feldman v. Comm’r, 20 F.3d 1128, 1132 (11th Cir. 1994).

585 IRC §6501(c) and Payne, 224 F.3d at 420.

586 IRC §§6501(c)(1),(2), 6503(a) (2018); Treas. Reg. §301.6501(a)-1—(c)-1; and Payne, 224 F.3d at 420.

587 Payne, 224 F.3d at 420.

588 Id., IRC §7454 (2018), and Tax Ct. R. 142(b).

589 Payne, 224 F.3d at 420.

590 Id. 583

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intent to evade taxes (mens rea)591 coupled with the action to defraud or misrepresent a taxpayer’s position to the government (actus rea).592 And where there is tax-evasion intent to be shown, the burden shifts to the government to prove that the accused acted with knowledge that his or her conduct was unlawful.593 Then, the trier of fact (usually a jury) must find that the accused was aware of specific Tax Code provisions.594 However, without both the intent to evade taxes or defraud the government and action to do either fraud or misrepresentation (showing of both mens rea and actus rea), there can be no fraud or misrepresentation.595 This is because the United States Supreme Court has carved out an exception to the general rule, that ignorance of the law is no excuse, for tax law.596 Under Cheek, ignorance of tax law is a reasonable cause that overcomes willfulness (intent) that is required under the Tax Code.597 So, under Cheek, the government must show that a taxpayer subjectively had knowledge – was willful – to be convicted of tax-law violations or tax evasion.598 When it fails to show willfulness, the government cannot assess taxes or penalize the taxpayer.599 Yet, some caselaw supports that where a tax return-preparer willfully takes a return position that is fraudulent or misrepresentative and the taxpayer has no knowledge of the return-preparer’s intent to defraud or misrepresent, the limitations period remains open indefinitely under IRC § 6501 allowing for penalties to be assessed under IRC § 6662.600 591

Bryan v. United States, 524 U.S. 184, 191-200 (1998).

Payne, 224 F.3d at 415.

593 Bryan, 524 U.S. 184, 191-200 (1998) (citing Ratzlaf v. United States, 510 U.S. 135, 137 (1993)).

594 Id. (citing Cheek v. United States, 498 U.S. 192 (1991)).

595 Id. and Cheek, 498 U.S. 192.

596 Cheek, 498 U.S. at 200.

597 Id. 598 Cheek, 498 U.S. at 203.

599 Cheek, 498 U.S. at 192.

600 IRC §6501(c)(1) (2018) and Allen v. Comm’r, 128 T.C. 37 (2007)(stating preparer fraud will hold open the limitations period even where there is no taxpayer intent); Eriksen v. Comm’r, T.C. Memo 2012-194 (2012)(stating where a taxpayer stipulates to fraud or §taxpayer fraud is shown through clear and convincing evidence, the limitations period is held open by preparer fraud); City Wide Transit, Inc. v. Comm’r, 709 F.3d 102 (2nd Cir. 2013)(stating preparer fraud will hold open the limitations period); and Finnegan v. Comm’r, T.C. Memo 2016-118 (2016)(same) but see 2000 592

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So a “rogue” tax preparer who acts without taxpayer knowledge may not be an exception to the three-year limitations period under caselaw that clarifies § 6501.601 HISTORICAL CONTEXT: CASELAW AND IRS OPINIONS ON LIMITATIONS PERIODS BEING HELD OPEN BY RETURN-PREPARER FRAUD A. Courts Pre-Allen on Limitations Periods and Return-preparer Fraud Tinkoff v. United States, 86 F.2d 868 (7th Cir. 1936)— In a case from over eight decades ago, the court considered the actions of a return-preparer and how his actions impacted his taxpayer client.

Tinkoff was a former revenue agent, a certified public accountant, and a lawyer.602 He had been charged with and convicted of “willful attempt to defeat and evade income taxes” and was to serve time in federal detention.603 In this case, he was appealing his criminal conviction.604 Tinkoff had been contracted to and was paid to prepare tax returns for another taxpayer (a corporation).605 The corporate returns were completed but contained misrepresentations making them

F.S.A. LEXIS 207, FSA 200104006 (I.R.S. Sept. 15, 2000)(stating that where an experienced return preparer who took a misrepresentative or fraudulent return position that the taxpayer did not know about, the IRS would be time-barred in collecting taxes) and Eriksen, T.C. Memo 2012-194(stating where fraud is not shown through clear and convincing evidence or by stipulation, the limitations period is not held open by preparer fraud) and BASR P’ship v. United States, 113 Fed. Cl. 181 (2013) aff’d BASR P’ship v. United States, 795 F.3d 1138 (Fed. Cir. 2015)(holding that where a partnership’s outside counsel acted independently to evade taxes for the partnership in filing fraudulent or misrepresentative returns, the three-year limitations period barred the IRS from assessing taxes) and BASR P’ship v. United States, 130 Fed. Cl. 286 (2017)(awarding the partnership, as a prevailing party because the IRS was time-barred for assessing taxes, reasonable litigation costs, which were substantial, under IRC § 7430(b)).

601 Allen, 128 T.C. 37.

602 Tinkoff v. United States, 86 F.2d 868, 873 (7th Cir. 1936).

603 Id. 604 Id. 605 Id. at 876.

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fraudulent.606 He alone knew of the fraud and was being held accountable for the fraudulent positions that he had taken.607 Corporate agents signed and filed by the taxpayer who did not know about the misrepresentations.608 Tinkoff argued that his prosecution was time-barred by the limitations period, but his argument failed.609 He argued that, as the returnpreparer, he had no knowledge of the transactions that were claimed to be fraudulent, but the court found sufficient evidence to the contrary.610 So the court held that Tinkoff – as a return-preparer – was accountable and criminally liable for the fraudulently prepared returns that misrepresented his client’s tax positions.611 However, the client was not.612 United States v. Gordon, 242 F.2d 122 (3d Cir. 1957)— Three decades later, the court revisited the issue and concluded the same in Gordon. Gordon was an accountant who was charged with and convicted of being part of a conspiracy “to attempt willfully to evade and defeat . . . income taxes due . . . .”613 He and two others, one of which was an IRS agent, conspired to defraud the government.614 The court held that an accountant—as the return-preparer—could be held liable and criminally convicted for tax evasion even though the evaded tax was not their own tax.615 United States v. Baldwin, 307 F.2d 577 (7th Cir. 1962)— A short time later, in a criminal tax-evasion case, the appeals court held that where a taxpayer acts in good faith after making full disclosure to a return-preparer, no willfulness may be shown when the 606

Id. at 878 (stating that records were being attacked for validity and to show tax evasion).

607 Id. at 879.

608 Tinkoff, 86 F.2d 868.

609 Id. at 877.

610 Id. at 879.

611 Tinkoff, 86 F.2d at 868.

612 Id. 613 United States v. Gordon, 242 F.2d 122, 123 (3d Cir. 1957) (internal quotes omitted).

614 Id. 615 Id. at 125.

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taxpayer did not report income at the return-preparer’s advice.616 Thus, the taxpayer cannot be held accountable for a tax crime because there is no taxpayer intent to defraud or misrepresent.617 United States v. Whyte, 699 F.2d 375 (7th Cir. 1983)— Then, in another criminal tax-evasion case, the appeals court referred to the “reliance defense” as a valid defense to a tax crime when a taxpayer provides full disclosure regarding income and expenses to a qualified accountant (return-preparer), and the taxpayer adopts and files the prepared return without believing it is incorrect.618 Again, the taxpayer cannot be held accountable for a tax crime because there is no taxpayer intent to defraud or misrepresent.619 United States v. Stadtmauer, 620 F.3d 238 (3d Cir. 2010)— In a third criminal tax-evasion case, the appeals court stated that a taxpayer’s claim that he relied on his accountant’s advice, in good faith, is a valid defense to show that there was no willfulness until the government negated that claim.620 And again, the taxpayer cannot be held accountable for a tax crime because there is no taxpayer intent to defraud or misrepresent.621 So time-and-time again, caselaw supports that a taxpayer cannot be held accountable for a return-preparer who had the requisite intent and acted to evade taxes on behalf of a taxpayer when the taxpayer was not willfully misrepresenting his or her return position. Thus, the returnpreparer’s intent—not the taxpayer’s intent—determined who should be criminally punished for tax evasion through fraud or misrepresentation.

616

United States v. Baldwin, 307 F.2d 577, 579 (7th Cir. 1962) cert. den’d 371 U.S. 947 (1962).

617 Id. 618 United States v. Whyte, 699 F.2d 375, 379 (7th Cir. 1983) (citing United States v. Mitchell, 495 F.2d 285, 287-88 (4th Cir. 1974) and United States v. Baldwin, 307 F.2d 577, 579 (7th Cir. 1962)).

619 Whyte, 699 F.2d at 379-380.

620 United States v. Stadtmauer, 620 F.3d 238, 257 n.22 (3d Cir. 2009).

621 Id.

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B. Office of Chief Counsel on Limitations Periods and ReturnPreparer Fraud Pre-Allen 2000 F.S.A. LEXIS 207 (Sept. 15, 2000)— In 2000, the IRS issued a non-binding field-service-advice memorandum based on a specific fact set that can be applied in other, similar situations.622 In this memorandum, the Chief Counsel provided guidance to IRS staff that, under certain circumstances, the three-year limitations period should not be held open for the actions of a tax preparer who intentionally prepared a tax return that was fraudulent or misrepresented taxpayer facts where the taxpayer did not have the requisite intent to evade taxes.623 In this memorandum, the Office of Chief Counsel provided a fact summary: The taxpayer was a truck driver who had conferred with a fellow truck driver about tax issues that related to substantial excisetax credits for diesel fuel.624 The fellow driver referred the taxpayer to a specific return-preparer at a firm for tax help over several years.625 The tax preparer was an experienced preparer who knew that the taxpayer was not entitled to receive diesel-fuel-excise-tax credits for the tax years the taxpayer was claiming.626 However, the returnpreparer took that position anyway for this taxpayer.627 Eventually, the return-preparer was prosecuted for preparing false returns for the taxpayer and several other truck drivers because the positions taken on the excise-tax credits for diesel fuel were fraudulent.628 In the taxpayer’s examination, the IRS agent who contacted the Office of Chief Counsel for guidance proposed that fraud penalties should be assessed under IRC § 6663.629 As a defense to the penalties, the taxpayer argued that the penalty assessment was time-barred by the statute of limitations; thus, the penalties could not be assessed against the taxpayer.630 622

2000 F.S.A. LEXIS 207, FSA 2000104006 (I.R.S. Sept. 15, 2000).

Id. at *2-3.

624 Id. at *2-3.

625 Id. at *3.

626 Id. at *3.

627 2000 F.S.A. LEXIS 207 at *3.

628 Id. 629 Id. 630 Id. at *3-4.

623

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The Office of Chief Counsel began with considering IRC § 6501.631 Under § 6501, taxes must be assessed by the IRS within three years after the return was filed unless an exception applied.632 An exception to the general rule provides that where there is fraud or misrepresentation coupled with the intent to evade taxation, the IRS may keep open the limitations period indefinitely.633 The Office of Chief Counsel considered other cases that involve limiting governmental powers, such as collecting taxes through limitation periods, and saw that the U.S. Supreme Court has held that “[s]tatutes of limitation[,] sought to be applied to bar rights of the Government, must receive a strict construction in favor of the Government.”634 And limitations periods for tax collections are no exception.635 The Office of Chief Counsel concluded that in order to apply the Tax Code, Treasury Regulations, and related caselaw to the taxpayer’s situation to determine if § 6501(c)(1) applies, fraud must be defined and understood.636 However, neither the Tax Code nor the Treasury Regulations provide a definition of “fraud” for the IRS to use.637 Thus, the Office of Chief Counsel relied upon caselaw to define “fraud.”638 The definition it followed came from the Fifth Circuit Court of Appeals. In Payne v. Comm’r, fraud implies bad-faith actions, “intentional wrongdoing, and a sinister motive.”639 It is never presumed or imputed.640 A court should never sustain fraud findings that only create suspicion.641 The IRS bears the burden to show that the taxpayer committed fraud through clear and convincing

631

Id. IRC § 6501 (2018).

633 Id. at (c)(2).

634 2000 F.S.A. LEXIS 207 at *4 (quoting Badaracco v. Comm’r, 464 U.S. 386, 391 (1984)).

635 Id. (quoting Lucia v. United States, 474 F.2d 565, 570(5th Cir. 1973).

636 Id. *4-5.

637 Id. at *5.

638 Id. 639 2000 F.S.A. LEXIS 207 at *5 (citing Payne, 224 F.3d 415).

640 Id. (citing Payne, 244 F.3d at 420, which was quoting Webb v. Comm’r, 394 F.2d 366, 377 (5th Cir. 1968)).

641 Id. 632

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evidence.642 As such, “[t]here must be additional evidence, independent of the general presumption of correctness, from which fraudulent intent on the part of the taxpayer can be properly inferred.”643 Additionally, the Office of Chief Counsel found that the Ninth Circuit Court of Appeals had created a checklist in Bradford v. Comm’r that indicated “‘badges of fraud’” for a court to consider:644 understating income, inadequate records kept, failure to file tax returns, implausible or inconsistent explanations of taxpayer behavior, concealing taxpayer assets, or “failure to cooperate with taxing authorities.”645 Courts have applied these “‘badges of fraud’” to the taxpayer’s facts and circumstances to determine the taxpayer’s mindset.646 The Office of Chief Counsel noted that in Kaissy v. Comm’r, the IRS focused on proving fraudulent intent “on the part of the taxpayer.”647 And the Tax Court concluded that “fraud by its very nature is a question of a taxpayer’s intent.”648 In other caselaw, the Office of Chief Counsel indicated the IRS must provide evidence, which may include circumstantial evidence, to prove fraud.649 The Office of Chief Counsel went on to show that the IRC has more than one section that addresses fraud.650 So it looked at IRC § 6663, which imposes fraud penalties on a taxpayer for underpayment where fraud can be shown in the position the taxpayer took in a return.651 And because “fraud” is not defined in the Tax Code, the Office of Chief Counsel looked to caselaw for long-standing definitions used by the courts.652 642

Id. (citing IRC §7454 and Goldberg v. Comm’r, 239 F.2d 316, 320 (5th Cir. 1956)).

643 Id. (citing Drieborg v. Comm’r, 225 F.2d 216, 218 (6th Cir. 1955)).

644 Id. at *5-6 (citing Bradford v. Comm’r, 796 F.2d 303, 307 (9th Cir. 1986)).

645 2000 F.S.A. LEXIS 207 at *6.

646 Id. (citing, as examples, Bacon v. Comm’r, T.C. Memo 2000-257 (2000) and Kaissy v. Comm’r, T.C. Memo 1995-474 (1995)).

647 Id. (citing Kaissy, T.C. Memo 1995-474)(emphasis added).

648 Id. (citing Kaissy, T.C. Memo 1995-474)(emphasis added).

649 Id. (citing Rowlee v. Comm’r, 80 T.C. 1111, 1123 (1983) and Stone v. Comm’r, 56 T.C. 213, 223-24 (1971), acq. in result, 1972-2 C.B. 3).

650 Id. at *6-7.

651 2000 F.S.A. LEXIS 207 at *7.

652 Id.

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Additional caselaw considered by the Office of Chief Counsel held that “fraud . . . is actual, intentional wrongdoing, and the intent required is the specific purpose to evade a tax believed to be owing.”653 Further, fraud with the intent to evade taxes is not negligence—no matter how great or little.654 The Office of Chief Counsel concluded that although “fraud” is not defined within the context of fraud penalty, there is “ample support to indicate the same definition should apply for . . . § 6501(c)(1).”655 Thus, the Office of Chief Counsel, following the Tax Court, concluded that “fraud” in § 6501(c) is “identical to the definition of ‘fraud’ under § 6653(b) [now § 6663].”656 In doing so, the Office of Chief Counsel concluded that “[a]pplying the same definition of fraud for statute of limitations and fraud for penalty purposes is logical in view of the history of these provisions.”657 And it concluded that it was not aware of any legislative history or caselaw showing that fraud was defined differently in regards to IRC §§ 6501(c)(1) and 6663.658 The Office of Chief Counsel then went on to determine if an income tax return-preparer’s intent to defraud would be sufficient for imposing a fraud penalty under IRC § 6663.659 The Office of Chief Counsel concluded “that the imposition of a fraud penalty requires proof of fraudulent intent on the part of a taxpayer . . . .”660 And that “proof of a return-preparer’s fraudulent intent is insufficient” to assess penalties against the taxpayer.661 Further, the Office of Chief Counsel concluded “that proof of a return-preparer’s fraudulent intent is insufficient to make § 6501(c)(1) applicable” where a return-preparer had fraudulent intent but the taxpayer did not.662 Supporting its position, the Office of Chief Counsel looked to past policies that underlie IRC § 6663.663 It flushed out that penalties were put in place to protect governmental revenue and compensate the 653

Id.(quoting Mitchell v. Comm’r, 118 F.2d 308, 310 (5th Cir. 1941)).

Id. (citing Mitchell, 118 F.2d at 310).

655 Id. 656 Id. at *7-8 (citing Murphy v. Comm’r, T.C. Memo 1995-76).

657 2000 F.S.A. LEXIS 207 at *8.

658 Id. 659 Id. 660 Id. at *9 (emphasis added).

661 Id. 662 Id. 663 2000 F.S.A. LEXIS 207 at *9.

654

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government for its costs to investigate taxpayer fraud and losses related to taxpayer fraud.664 It also determined that penalties were meant to “‘punish and deter wrongful conduct’” made by taxpayers.665 And from this, the Office of Chief Counsel concluded that “[g]iven the policy of punishing and deterring wrongful conduct, it would be improper to impose the fraud penalty based solely on the preparer’s misconduct; [thus,] the wrongful conduct of the preparer should not have an adverse affect on an innocent taxpayer.”666 The Office of Chief Counsel also came to this conclusion because the IRC has specific provisions that are in place to deter return-preparer fraud and other misconduct.667 Specifically, it cited four IRC sections: 6694, 6695, 7206, and 7216.668 “Thus, . . . proof of the returnpreparer’s fraudulent intent in preparing the tax return is insufficient to make [IRC] § 6501(c)(1) applicable to Taxpayer.”669 Finally, the Office of Chief Counsel considers caselaw that held that the statute of limitations period should be held open in cases of returnpreparer fraud.670 First, it looked to caselaw that showed how one spouse’s actions would impute fraud on both making them subject to § 6501(c)(1) penalties, and how this could be applied to a tax returnpreparer. 671 The Office of Chief Counsel was not persuaded by this argument.672 It reasoned that the tax return-preparer “is not a party to the return[,] and the return-preparer is not jointly liable with [the] [t]axpayer.”673 Next, it looked at caselaw that tried to show that corporate agents (officers and employees) may impute fraud on the corporation.674 It was not persuaded because a corporation is not a real person; instead, it acts through its agents (employees, officers, and 664

Id. (citing Helvering v. Mitchell, 303 U.S. 391 (1938) and McGee v. Comm’r, 61 T.C. 249 (1973) aff’d, 519 F.2d 1121 (5th Cir. 1975)).

665 Id. (quoting Asphalt Indus., Inc. v. Comm’r, 384 F.2d 229, 234-35 (3d Cir. 1967)).

666 Id. at *9 (emphasis added).

667 Id. at *10.

668 Id. 669 2000 F.S.A. LEXIS 207 at *10 (emphasis added).

670 Id. 671 Id. (citing examples Vannaman v. Comm’r, 54 T.C. 1011(1970); Estate of Upshaw v. Comm’r, 416 F.2d 737 (7th Cir. 1969); and Howell v. Comm’r, 175 F.2d 240 (6th Cir. 1949)).

672 Id. at *10-11.

673 Id. at *11.

674 Id. (citing Ruidoso Racing Ass’n, Inc. v. Comm’r, 476 F.2d 502 (10th Cir. 1973), aff’g T.C. Memo. 1971-194).

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directors).675 “Thus, in order to prove that a corporate return was fraudulent, the intent of the corporation’s officers and employees must necessarily be considered.”676 As such, to prove fraud, the IRS’s focus shifts to “the individual’s intent, rather than the preparer’s intent.”677 And this applies to fraud penalties or the fraud exception to the threeyear limitations period.678 From its investigations, the Office of Chief Counsel concluded that IRC § 6501(c)(1) requires that there be an “‘intent to evade tax’” as the taxpayer’s intent.679 As such, the Office of Chief Counsel concluded: “that the fraudulent intent of the return-preparer is insufficient to make § 6501(c)(1) applicable.”680 So without taxpayer intent, limitations period should not be held open.681 In sum, the IRS’s legal arm gave it counsel that for a taxpayer’s limitations period to be held open indefinitely, the taxpayer—not a return-preparer—must have the intent to defraud or misrepresent his or her tax position.

C. Tax Court on Limitations Periods and Return-Preparer Fraud Allen v. Comm’r, 128 T.C. 37 (2007)— In Allen v. Comm’r, the Tax Court addressed the issue for the first time when it considered whether fraudulent or misrepresentation made by a tax return-preparer could hold open the three-year limitations period under IRC § 6501(c)(1).682 In this case, the parties stipulated to all facts in evidence under Tax Court Rule 122.683 In doing so, the government and the taxpayer agreed that the return-preparer had the intent to defraud the IRS by taking false tax positions.684

675

2000 F.S.A. LEXIS 207 at *11 (citing Grant v. Comm’r, T.C. Memo. 1994-161).

Id. 677 Id. 678 Id. at *11-12.

679 Id. at *12.

680 Id. (emphasis added).

681 2000 F.S.A. LEXIS 207 at *12.

682 Allen v. Comm’r, 128 T.C. 37, 37 (2007).

683 Id. 684 Id. at 38.

676

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In this case, the petitioner (taxpayer) was a truck driver for United Parcel Service.685 He timely filed his returns that were at issue, which were completed by a return-preparer.686 The taxpayer gave his financial information to a tax preparer who prepared his returns for the years in question and filed them with the IRS687 The return-preparer prepared the taxpayer’s returns fraudulently and claimed false deductions in Schedule A.688 The taxpayer received complete return copies after they were filed and did not file any amended returns.689 The taxpayer’s return-preparer was later investigated for these and other actions.690 IRS agents successfully showed that the tax returnpreparer had violated IRC § 7206(2) (willfully aiding and assisting a false-and-fraudulent return preparation) in 2006.691 He was later convicted of 30 violations under that Code section.692 The IRS issued a deficiency notice to the taxpayer which stated that it had disallowed numerous Schedule A deductions that were claimed.693 The deficiency notice did not assess any fraud penalties under IRC § 6663 against the taxpayer.694 Because the three-year limitations period had expired years previously, the taxpayer claimed the assessment was time-barred and timely filed a petition for relief in the Tax Court.695 Both the taxpayer and the IRS stipulated to the fact that the taxpayer did not have the intent to evade taxes.696 Both stipulated that the returnpreparer made false claims for deductions.697 And both stipulated that only the return-preparer intended to evade taxes in making these false claims for deductions.698 In its analysis, the Tax Court addressed the issue that was in contention: whether the return-preparer’s fraudulent intent kept open 685

Id. at 37.

Id. at 37-38.

687 Id. 688 Allen, 128 T.C. at 38.

689 Id. 690 Id. 691 Id. 692 Id. 693 Id. 694 Allen, 128 T.C. at 38.

695 Id. 696 Id. 697 Id. 698 Id. 686

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the limitations period indefinitely?699 The court then looked to the Code and saw that “intent to evade tax” is a requirement.700 The Code noted that there was no express provision requiring “that the fraud be the taxpayer’s.”701 Then the court determined that there was “[n]othing in the plain meaning of the statute [that] suggests the limitations period is extended only in the case of the taxpayer’s fraud.”702 The court concluded that the statute’s focus is on the return’s fraudulent nature and not the fraud perpetrator’s identity.703 Oddly though, this court concluded that taxpayer intent to defraud or evade taxes was not present in this Code section when prior caselaw supported that other courts have held that intent was required.704 The Tax Court then considered and agreed with the government’s position that where a limitations period is being considered, it should be strictly construed in favor of the government.705 The court reasoned that “an extended limitations period is warranted in the case of false or fraudulent return[s] because of the special disadvantage to the Commissioner in investigating these types of returns.”706 This court concluded that three years may not be sufficient for the IRS to investigate or prove fraudulent intent.707 In sum, this court’s concern was with the possibility that there is not enough time for the IRS to investigate intent and determine if tax evasion by way of fraud was meant.708 The taxpayer, relying on caselaw, argued that a limitations period should only be extended if there was taxpayer intent to defraud and

699

Allen, 128 T.C. at 39.

Id. (citing IRC § 6501(c)(1) (2018)).

701 Id. (analyzing Congressional intent present in the historical record in n.3).

702 Id. 703 Id. 704 Id. But see n.4 (citing United States v. Gordon, 242 F.2d 122, 125 (3d Cir. 1957) and Tinkoff v. United States, 86 F.2d 868, 875-875 (7th Cir. 1936) as prior cases where accountants were held accountable for tax evasion after preparing their innocent client’s returns).

705 Allen, 128 T.C. at 40 (citing Badaracco v. Comm’r, 464 U.S. 386, 391 (1984) and Lucia v. United States, 474 F.2d 565, 570 (5th Cir. 1973)).

706 Id. (quoting Badaracco, 464 U.S. at 398).

707 Id. (emphasis added).

708 Id. 700

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evade taxes.709 710 This court was not persuaded because the cases the taxpayer cited were defining fraud regarding taxpayer’s actions when the taxpayer committed the fraud.711 These cases failed to show that IRC § 6501(c)(1) exceptions were limited to only taxpayer fraud and that the fraud’s cause must be the taxpayer’s.712 The taxpayer further argued that extending the limitations period based on a preparer’s fraudulent intent was burdensome.713 However, the court disagreed citing caselaw as its basis.714 The court’s reasoning was based on the fact that a taxpayer has the ultimate burden and duty to file and pay his or her income taxes,715 and this duty cannot be delegated to an agent.716 Further, this court reasoned that a taxpayer is not unduly burdened to review a return for “obvious false or incorrect” items.717 The court held that a taxpayer “cannot hide behind an agent’s fraudulent preparation of his returns and escape paying tax if the Government is unable to investigate fully the fraud within the limitations period.”718 The court justified this position by stating that “[t]o find otherwise would allow a taxpayer to receive the benefit of a fraudulent return by hiding behind the preparer.”719 Therefore, the court concluded “that the limitations period for assessment is extended under § 6501(c)(1) if the return is fraudulent, even though it was the preparer rather than [the taxpayer] who had the intent to evade tax[es].”720 Thus, the limitations period was extended indefinitely in this case.721 709

Id. at 40-41.

Id. (citing Phone-Poulenc Surfactants & Specialties, L.P. v. Comm’r, 114 T.C. 533, 548 (2000), which cited Chin v. Comm’r, T.C. Memo 1994-54; Williamson v.

Comm’r, T.C. Memo 1993-246; Richman v. Comm’r, T.C. Memo 1993-32; Callahan v. Comm’r, T.C. Memo 1992-132).

711 Allen, 128 T.C. at 40-41.

712 Id. at 41.

713 Id. 714 Id. (citing Magill v. Comm’r, 70 T.C. 465, 479-80 (1978) aff’d 651 F.2d 1233 (6th Cir. 1981) and Teschner v. Comm’r, T.C. Memo 1997-498).

715 Id. (citing Kooyers v. Comm’r, T.C. Memo 2004-281).

716 Id. at 41.(citing Estate of Clause v. Comm’r, 122 T.C. 115, 123-24 (2004) and Am. Prop’s, Inc. v. Comm’r, 28 T.C. 1100, 1116-17 (1957) aff’d 262 F.2d 150 (9th Cir. 1958)).

717 Allen, 128 T.C. at 41(emphasis added).

718 Id. 719 Id. at 42.

720 Id. 721 Id. 710

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City Wide Transit, Inc. v. Comm’r, 2011 T.C. Memo 2011-279 (2011)— In 2011, the Tax Court considered whether actions by a taxpayer’s accountant, who filed false claims for the taxpayer as part of an embezzlement scheme, constituted fraud when the accountant’s intent was to embezzle and not evade taxes.722 The taxpayer challenged the IRS’s assessment claiming that it was time-barred.723 The taxpayer argued that Allen did not apply, so the limitations period could not be held open past three years.724 The Tax Court held that the IRS failed to show that the taxpayer’s accountant had the requisite intent to willfully evade taxes when the false returns were prepared and filed.725 The court also held that the taxpayer was not accountable for the accountant’s actions.726 The court reasoned that the accountant’s conduct did not establish tax evasion as the intent; rather, the accountant’s intent was to embezzle the funds meant to pay taxes and cover up the embezzlement.727 The court based some of its reasoning on the accountant’s criminal trial where the criminal court accepted pleas for knowingly and willfully signing false returns and knowingly and willingly preparing and filing false returns with the IRS.728 So, going against Allen, the court held for the taxpayer believing the IRS actions were time-barred.729 However, this decision was reversed on appeal.730 Eriksen v. Comm’r, 2012 T.C. Memo 2012-194 (2012)— The Tax Court revisited this issue once again in Eriksen. In this case, the IRS assessed penalties and interest on Eriksen, an Oakland County (Michigan) Sheriff’s deputy, along with other Oakland County deputies, when their tax returns included misrepresented and fraudulent return positions on business expenses that they had 722

City Wide Transit, Inc. v. Comm’r, 2011 T.C. Memo 2011-279 (2011).

Id. at 13.

724 Id. at 16-19.

725 Id. at 22-23.

726 Id. 727 Id. 728 City Wide Transit, Inc., 2011 T.C. Memo 2011-279 at 11.

729 Id. at 23.

730 City Wide Transit, Inc. v. Comm’r, 709 F.3d 102 (2d Cir. 2013).

723

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deducted related to ammunition expenses.731 Some taxpayers argued that the three-year limitations period barred assessment and collections.732 The IRS argued that Allen controlled here, and the threeyear limitations period was held open because there was fraud and misrepresentation made by their return-preparer.733 At issue was whether the IRS had shown if there was clear and convincing evidence that there was fraud or misrepresentation.734 The IRS was successful at showing that at least one taxpayer had committed fraud based on stipulated facts, so her limitations period remained open.735 However, the other taxpayers were successful at showing that the IRS was time-barred because they lacked intent and the government failed to show otherwise.736 Thus, the court rendered two differing decisions based on whether the taxpayer’s intent was to defraud or misrepresent to evade taxes.

Based on stipulated facts, there were two return-preparers involved: Mr. Kern and Mr. Redinger.737 Mr. Kern was an enrolled agent with a bachelor of science in accounting and taxation who specialized in preparing returns for law-enforcement employees.738 Kern also often claimed for his clients—including deputies—deductions that were not supported by receipts or other proper documentation.739 He knew that this was not proper because he boasted about this to his partners and their staff that it was “not wrong until you get caught.”740 Kern did prepare returns for some of the taxpayers, though at trial he could not recall.741 Mr. Redinger was a certified public accountant (in good standing at the time of the trial).742 He purchased Kern’s practice when he wanted to go into business for himself preparing tax returns.743 During the 731

Eriksen v. Comm’r, T.C. Memo 2012-194, 1-2 (2012).

Id. 733 Id. 734 Id. 735 Id. at 33-40.

736 Id. at 33.

737 Eriksen, T.C. Memo 2012-194 at 3-4.

738 Id. 739 Id. at 6.

740 Id. (with internal quotes omitted).

741 Id. at 6-7.

742 Id. at 7.

743 Eriksen, T.C. Memo 2012-194 at 7.

732

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transition, Kern was retained as a contracted employee for two years and prepared returns for clients after Redinger took over.744 Kern prepared most, but not all, individual returns in the first year.745 For the most part, Redinger adopted Kern’s practices by merely confirming that expenses were “about the same” as the prior year.746 To help in the return-preparation process, Kern provided Redinger with a list of deductible expenses that he believed taxpayers were entitled to based on a taxpayer’s occupation.747 However, Redinger failed to investigate if reimbursements were being made for expenses incurred by the deputies.748 Redinger’s staff was directed to use prior-year itemizations and provide a flat 1.5% charitable deduction for police.749 And at one point, Kern encouraged a deputy to claim costs for a firearm that the deputy did not purchase.750 Then, based on these actions, the IRS was able to show that Kern and Redinger had prepared false returns and got them to plead guilty.751 As part of his agreement, Redinger turned over hundreds of returns to the criminal investigators.752 From this return pool, the IRS examined about 140 (give or take 10) returns, which included the petitioning deputies.753 The court turned to Allen to determine if the limitations period should remain open.754 First, the court looked at similarities between Allen and the facts at hand.755 The similarities include: 1) the returnpreparers were convicted of violating IRC § 7206(2); 2) the returns in question in this case were not identified in the criminal cases; 3) notices of deficiency were sent out after the three-year limitations period; and 4) the issues relate to itemized deductions.756 However, the court concluded that the similarities ended there.757 744

Id. Id. 746 Id. at 8.

747 Id. 748 Id. at 8-9.

749 Eriksen, T.C. Memo 2012-194 at 9.

750 Id. at 10.

751 Id. at 11.

752 Id. at 13.

753 Id. 754 Id. at 19.

755 Eriksen, T.C. Memo 2012-194 at 19.

756 Id. at 20.

757 Id. at 21-22.

745

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The Eriksen court concluded that unlike Allen, these cases were determined through a trial and not through stipulated facts noting that in the stipulated fact in Allen, the parties agreed that the returns filed

by Allen were false and fraudulent.758 Further, the parties stipulated that the return-preparer had the intent to evade tax when he prepared falsified returns.759 This court distinguished this case from Allen, in which the parties stipulated that the returns were prepared by a returnpreparer who intended defraud.760 This was key to this court because with that stipulation, the issue shifted from a factual one—whether the returns were fraudulent—to a legal one—whether IRC § 6501(c) held open the limitations period.761 Thus, the stipulated evidence in Allen became the clear and convincing evidence required to show fraud.762 However, the parties in Eriksen made no such concessions.763 Instead, the parties made a deep challenge to the allegation that there was clear and convincing evidence to show fraud.764 The court’s opinion reflects two differing results based on taxpayer intent. First, for the three taxpayers who did not stipulate their intent was to evade taxes, the government failed to show clear and convincing evidence that they were willful.765 As a result, the court held that the assessments against these taxpayers were time-barred.766 However, for the taxpayer who stipulated to the facts and who provided testimony that she had not made the purchases that she claims as legitimate business expenses, the court held that the government had provided clear and convincing evidence that she made fraudulent claims for business deductions.767 Consequently, for the stipulating taxpayer, her limitations period was held open indefinitely allowing the IRS to assess penalties late.768

758

Id. at 22.

Id. at 21.

760 Id. 761 Eriksen, T.C. Memo 2012-194 at 21.

762 Id. 763 Id. 764 Id. 765 Id. at 33.

766 Id. 767 Eriksen, T.C. Memo 2012-194 at 35.

768 Id. 759

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In the end, the Tax Court held differently as determined by taxpayer facts and circumstances. For taxpayers where the government could not show fraud through clear and convincing evidence or stipulations, the court time-barred the IRS’s actions.769 The same court also held that IRC § 6501(c) tolls the limitations period for false returns prepared by another where there is clear and convincing evidence that fraud exists and the taxpayer stipulates to those facts.770 It reasoned that “[f]raud is the intentional commission of an act or acts for the specific purpose of evading tax believed to be due and owing.”771 Further, fraud cannot be imputed or presumed and “must always be established by independent evidence of fraudulent intent to evade tax.”772 And fraud’s existence is determined by facts “gleaned from the entire record.”773 In sum, Eriksen both supports Allen and refutes Allen: A returnpreparer’s intent can hold open a return based when the taxpayer stipulates to misrepresentation or fraud made by a return-preparer; however, where clear and convincing evidence is not present that the taxpayer was willfully fraudulent or misrepresentative, the government cannot hold open the limitations period when only the return-preparer intended to file a false return.

Finnegan v. Comm’r, T.C. Memo 2016-118 (2016)— Many years later, the Tax Court revisited this same issue again in Finnegan. The Finnegans owned a rental condominium (“condo”) in Daytona Beach, Florida.774 By all accounts, they did not use the condominium as their primary or secondary residence because in the first 10 years they owned it, they had not visited the condo.775 Instead, it was an income property that they rented out through an agency, to which they paid fees for this service.776 After their accountant moved away, they sought out a new one and retained a new return-preparer.777 Their new return-preparer incorrectly advised the Finnegans to form a 769

Id. at 34.

Id. at 21.

771 Id. at 23(citing Petzoldt v. Comm’r, 92 T.C. 661, 698 (1989)).

772 Id. (citing Petzoldt, 92 T.C. at 699).

773 Eriksen, T..C. Memo 2012-194 at 24 (citing Gajewski v. Comm’r, 67 T.C. 181, 199 (1976)).

774 Finnegan v. Comm’r, T.C. Memo 2016-118, 7 (2016).

775 Id. 776 Id. 777 Id. at 8.

770

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partnership, to report their rental income, then use their contributed money to fund a self-employment retirement fund.778 They did and called the partnership “Jomarjen.”779 The Finnegans did not draft a partnership agreement, and the filing address on the partnership’s returns changed yearly.780 Jomarjen did not communicate with tenants directly; the Finnegans did.781 They did not change the title for the condominium from the individuals to Jomarjen.782 And their other actions clearly showed that the condominium was not really a partnership asset, nor did they treat the partnership as a distinct, separate business entity.783 Following their return-preparer’s advice, they contributed money to a retirement account.784 Each year, for five years, their new returnpreparer prepared their tax returns under a different name.785 During the trial, the reasons for the name changes became clear.786 Their return-preparer was committing fraud, and he did not want his clients nor the IRS to figure this out.787 The Finnegans’ return-preparer had been a C.P.A. but had been convicted of preparing false returns previously.788 During a different criminal trial,789 the return-preparer had admitted that every return he prepared included fraudulent entries.790 And the IRS found evidence that he was doing the same things here.791 At trial, the Finnegans argued that the three-year limitations period was not held open because their return-preparer had committed the fraud and because they did not have the requisite intent to commit tax 778

Id. Finnegan, T.C. Memo 2016-118 at 8.

780 Id. at 9.

781 Id. 782 Id. 783 Id. at 8-9.

784 Id. 785 Finnegan, T.C. Memo 2016-118 at 9.

786 Id. at 10.

787 Id. at 12-16.

788 Id. at 14-15.

789 Id. at 12 (citing United States v. Mitts, 2012 U.S. App. LEXIS 26911 (2012) aff’d United States v. Mitts, 396 Fed. Appx. 296 (6th Cir. 2010)).

790 Id. (citing Mitts, 2012 U.S. App. LEXIS 26911 at 2).

791 Finnegan, T.C. Memo 2016-118 at 16.

779

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evasion.792 The Tax Court focused its attention on Allen and BASR P’ship while also looking to Eriksen.793 The court held that the government had shown that the underpayment was attributable to fraud.794 So it then looked at whether Allen or another case controlled here.795 It concluded that only Allen controlled.796 In its analysis, the court reasoned that it should not revisit Allen.797The court came to this conclusion because BASR P’ship, a case being considered in the Federal Court of Claims at the time, had addressed this issue in its appeal to the Federal Circuit Court of Appeals.798 The court determined that the Federal Circuit would have struggled to determine which interpretation of IRC § 6501(c)(1) would have prevailed absent the application of IRC § 6229. Thus, because IRC § 6229 did not apply to this case, relying upon BASR P’ship was not proper here.799 And, most importantly, this court pointed out that a Federal Circuit appeals decision on a Federal Court of Claims appeal does not bind the Tax Court; thus, the Federal Circuit’s decision was not precedential here.800 So, at best, BASP P’ship was merely persuasive. And, nearly as important, the Finnegans had not cited to BASR P’ship and did not contend that this court should revisit Allen.801 So the Finnegan court upheld Allen as the controlling case and concluded that the government could hold open the taxpayers’ limitations period for return-preparer fraud.

792

Id. at 1-2.

Id. at 19.

794 Id. at 30.

795 Id. at 18-19.

796 Id. 797 Finnegan, T.C. Memo 2016-118 at 18 n.6.

798 Id. 799 Id. 800 Id. (citing IRC 7482(a)(1) (2018)).

801 Id. 793

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D. Office of Chief Counsel Post-Allen on Limitations Periods and Return-Preparer Fraud 2012 IRS C.C.A. LEXIS 137, (June 4, 2012)— In 2012, prior to Finnegan, the Office of Chief Counsel issued an advice memorandum that touched on this issue again.802 In this instance, a business owner who held a 50.0% stake in a closely-held S-Corporation prepared the corporation’s tax returns and misrepresented expenses that were claimed by the business.803 Ultimately, the return-preparer, who was an owner of this business, was convicted of several federal crimes, which included tax evasion, filing false personal returns, and filing false corporate returns.804 The other shareholder was not involved in the return preparation nor signed the return.805 Nor was the other shareholder aware that the returnpreparer had filed these returns or that the other shareholder participated in any way.806 The IRS sought to assess penalties on both owners’ personal returns.

However, ten years had passed since the Forms 1040 had been filed.807 So the Office of Chief Counsel was providing guidance on whether penalties could be assessed past the three-year limitations period due to the fraud exception.808 The Office of Chief Counsel reviewed the relevant Code section (IRC § 6501).809 Then it considered the IRS’s position that “the limitations period may be held open indefinitely” for the taxpayer’s return “based on the fraudulent Form 1120S filed” by the return-preparer who was the only one who knew of the fraud.810 Thus, the Office of Chief Counsel addressed the question: What part does the taxpayer’s intent to evade taxes play in determining if the limitations period should remain open indefinitely?811 802

2012 IRS C.C.A. LEXIS 137 (2012).

Id. at *1-4.

804 Id. at *3-4.

805 Id. at *3.

806 Id. 807 Id. ( emphasis added).

808 2012 I.R.S. C.C.A. LEXIS 137 at *3.

809 Id. at *3-4.

810 Id. at *4.

811 Id. 803

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The Office of Chief Counsel concluded that there must be evidence present showing the taxpayer intent to evade taxes.812 And, in doing so, it directly addressed Allen and its impact on this decision.813 The Office of Chief Counsel concluded that it was doubtful that Allen’s holding could be applied here to allow the limitations period to be extended indefinitely.814 To do so, a court would need to “to focus on the fraud of a third party” who prepared a return, which was not the case here.815 The Office of Chief Counsel distinguished this case with Allen: 816 First, the return-preparer who perpetrated the fraud in this situation was one of the shareholders, and that person was solely responsible for the Form 1120S preparation and the fraud that was presented in it.817 And second, when the innocent shareholder prepared his returns (Form 1040), using information from the fraudulently prepared corporate returns (Form 1120S) and the related schedules (K-1s), he was not relying on a return-preparer who sought to evade taxes or defraud the government on his personal returns as was present in Allen.818 E. Federal Appeals Courts Post-Allen on Limitations Periods and Return-Preparer Fraud City Wide Transit, Inc. v. Comm’r, 709 F.3d 102 (2d Cir. 2013).— The appeals court was asked by the IRS to determine “whether an accountant that filed fraudulent tax returns on behalf of a company . . . intentionally evaded that company’s taxes within the meaning of [IRC] § 6501(c)(1)?”819 In reviewing the Tax Court’s earlier holding, the appeals court treated the taxpayer’s intent “as a question of fact subject to clear error review.”820 Based on the entire record, the appeals court will reverse 812

Id. at *11-12 (emphasis added).

Id. 814 2012 I.R.S. C.C.A. LEXIS 137 at *11-12.

815 Id. 816 Id. 817 Id. 818 Id. 819 City Wide Transit, Inc. v. Comm’r, 709 F.3d 102, 103 (2d Cir. 2013).

820 Id. at 106.

813

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the Tax Court only if it finds that a “definite and firm conviction that a mistake has been committed.”821 The IRS conceded that it assessed penalties and interest outside the three-year limitations period.822 And the taxpayer concedes that its return-preparer filed false or fraudulent tax returns and amendments for it.823 Further, the taxpayer agreed that if there was return-preparer intent to defraud or evade taxes, that the limitations period would not apply allowing the IRS to assess penalties and interest on it.824 So the appeals court looked closely at the preparer’s intent to determine if the three-year limitations period barred the IRS’s actions.825 The appeals court relied on prior caselaw that held that where tax evasion played any part in a return-preparer’s conduct, an “affirmative willful attempt to evade taxes may be inferred.”826 Thus, the IRS had only to prove that the return-preparer intended to underpay the IRS for the taxpayer when he filed a fraudulent return.827 Further, the appeals court concluded that the return-preparer primarily intended to defraud the government and evade taxes.828 It determined that the taxpayer intended to avoid paying taxes to the government that were otherwise due and that the embezzlement scheme proves the returns were fraudulent.829 The appeals court conceded that had the return-preparer falsely recorded personal expenses in the taxpayer’s ledger that caused the taxpayer’s returns to be fraudulent As a result, the taxpayer’s actions would have caused the taxpayer to file false returns; thus, the taxpayer did not intend to defraud the government.830 From this, the appeals court overturned the Tax Court’s decision, and held that there was clear and convincing evidence provided by the IRS

821

Id. Id. at 107.

823 Id. 824 Id. 825 City Wide Transit, Inc., 709 F3d at 107-108.

826 Id. at 107-108 (quoting United States v. Klausner, 80 F. 3d 55, 63 (2d Cir. 1996)).

827 Id. at 108.

828 Id. 829 Id. 830 Id. 822

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that the return-preparer intended to evade taxes by filing the false returns for the taxpayer.831 Finnegan v. Comm’r, 926 F.3d 126 (11th Cir. 2019)— After the Tax Court rejected the claim that the limitations period should not remain open indefinitely when their return-preparer committed the fraud, the Finnegans appealed for reconsideration. 832 After considering the taxpayers’ claims, the appellate court disagreed with their position.833 The court rejected their arguments and in its holding, affirmed the Tax Court’s decision directly and Allen indirectly for the Eleventh Circuit.834 The appellate court looked at Allen after considering the facts because it was at the core of the government’s arguments.835 It saw that the government had used Allen to trigger the fraud exception and extend the limitations period beyond three years.836 The court also indicated that Allen was the crux of the government’s argument by pointing to how many times it was cited throughout this case.837 However, the taxpayers’ argument failed to address Allen.838 Instead, the taxpayers focused on Eriksen, which the appellate court concluded fell short because Eriksen was not the “appropriate hook for triggering the fraud exception.”839 Further, the appellate court reasoned that the taxpayers “never challenged Allen or its logic at all.”840 Instead, the taxpayer stipulated to Allen controlling this case, and later—when asked directly by the Court—admitted that Allen was the controlling case.841 So, in short, the appellate court held the taxpayers to their stipulations and admissions, which became their death knell.842 831

City Wide Transit, Inc., 709 F3d at 108-109.

Finnegan v. Comm’r, 926 F.3d 1261, 1265 (11th Cir. 2019).

833 Id. 834 Id. 835 Id. 836 Id. 837 Id. 838 Finnegan, 926 F.3d at 1265.

839 Id. at 1266.

840 Id. 841 Id. 842 Id. 832

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The appellate court even pointed out and considered that the IRS sent the Tax Court a letter and copied the taxpayers on the BASR P’ship decision.843 And even after its decision was rendered, the taxpayers failed to ask the Tax Court to reconsider Allen and failed to make any Allen-related arguments.844 In doing so, the appellate court pointed out that the taxpayers failed to argue Allen’s impact on their case, as it could have.845 Taking up the Allen issue, the appellate court saw that the Tax Court, in a single, brief paragraph, held that the fraud exception applied “because Allen held that the return-preparer’s fraud was enough to trigger the exception.”846 It also saw that the Tax Court acknowledged the Court of Federal Claims decision failed to follow Allen in BASR P’ship, so it had to consider its impact.847 And in the related appeal, it also saw that the Tax Court acknowledged the Court of Appeals for the Federal Circuit’s decision to uphold the BASR P’ship decision but chose not to revisit the issue.848 After considering the new arguments, the appellate court concluded that the taxpayers waived their rights to argue that Allen did not control because of the BASR P’ship appellate court decision.849 It reasoned that the taxpayers knew the IRS was relying upon Allen but failed to challenge it when it had the chance.850 Instead, the appellate court pointed to the taxpayers’ express admission that Allen controlled their case.851 As such, the appellate court found this to be an obvious waiver to this defense.852 Thus, the taxpayers cannot raise the decision in BASR P’ship as an argument that Allen did not control their case.853 The appellate court further reasoned that in the taxpayer argument, they contended that the fraud exception was never triggered; thus, the

843

Id. at 1267-68.

Finnegan, 926 F.3d at 1267-68.

845 Id. 846 Id. at 1268 (citing Finnegan, T. C. Memo 2016-118 at 2).

847 Id. (citing BASR P’ship v. United States, 113 Fed. Cl. 181 (2013)).

848 Id. (citing Finnegan, T.C. Memo 2016-118 at 6 n.6.).

849 Id. at 1270.

850 Finnegan, 926 F.3d at 270.

851 Id. 852 Id. 853 Id. 844

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limitations period had run out.854 This, the appellate court concluded, was a wholly different argument.855 In the end, the taxpayer failed to persuade the Eleventh Circuit Court of Appeals to overturn the Tax Court decision, so the lower court’s decision was affirmed.856 F. Court of Federal Claims on Limitations Periods and ReturnPreparer Fraud BASR P’ship v. United States, 113 Fed. Cl. 181 (2013)— Prior to Finnegan and after City Wide Transit, the Court of Federal Claims held that penalties and related interest that were assessed by the IRS against a partnership were barred under IRC §§ 6229(a) and 6501 because the partnership’s tax return, which was fraudulent when it was filed, was prepared by others who intended to evade taxes.857 This court differentiated this case from City Wide Transit based on its reading of the legislative history that established Congress’s intent and the facts at hand.858 A law-firm partner advised the partnership’s accountants that they could avoid taxation by structuring the sale of a business (Page Printing Co.).859 To do so, a general partnership had to be formed (BASR Partnership) in Texas governed by its law, which was later terminated and reformed as a new BASR Partnership.860 The new partnership members were four sole-member limited liability companies.861 A certified public accountant, Mr. Malone a partner of Malone & Bailey PLLC, prepared the partnership returns and its partners’ returns.862 The partnership’s tax-matter partner filed a complaint with the Court of Federal Claims seeking a refund for taxes and interest paid based on 854

Id. at 1271.

Id. 856 Finnegan, 926 F.3d at 1275.

857 BASR P’ship v. United States, 113 Fed. Cl. 181, 192 (2013).

858 Id. at 192-195.

859 Id. at 183.

860 Id. 861 Id. 862 Id. at 184-85.

855

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the IRS’s final partnership administrative adjustment that resulted from an examination.863 BASR argued that the assessed taxes and related interest had been time-barred under IRC § 6501.864 BASR also argued that no penalties may be assessed under IRC § 6662 because the tax benefits that were disallowed were not attributed to valuation misstatements. 865 The court then considered the root arguments that IRC § 6501(c)(1) governs. It considered that if it were to do that, the court had first to determine if a return-preparer’s intent to evade taxes does not keep open the limitations period indefinitely under the fraud exception.866 To do so, the court first had to determine if IRC § 6229 displaces IRC § 6501(c)(1).

The court looked to the government’s support for its claims that IRC § 6229(c)(1) may extend the limitations period under § 6501.867 It saw that the government was relying on City Wide Transit, Inc. and Allen.868 From these cases, the government argued that the limitations period was held open indefinitely under the fraud exception because a BASR partner prepared the partnership return with the intent to evade taxes, and the taxpayer (the partnership as a whole) was held liable for its agent’s (the evading partner) actions.869 The court also noted that the government’s secondary argument, that Allen applied, tied back to the belief that “fraud cases ordinarily are more difficult to investigate than cases marked for routine audits.”870 The BASR Court resolved the issue as follows: From other caselaw, the U.S. Court of Appeals for the Federal Circuit held that IRC § 6501 and § 6229(a) should be read together.871 The appeals court concluded that IRC § 6229(a) establishes the minimum tax-assessment period for partnerships.872 Further, the appeals court concluded that this 863

BASR P’ship, 113 Fed. Cl. at 185.

Id. 865 Id. 866 Id. at 189.

867 Id. at 190.

868 Id. at 190-91.

869 BASR P’ship, 113 Fed. Cl. at 191.

870 Id. (quoting Badaracco, 464 U.S. at 398).

871 Id. (citing AD Glob. Fund, LLC v. United States, 481 F.3d 1351, 1354 (Fed. Cir. 2007)).

872 Id. 864

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minimum tax-assessment period may or may not end before or after the three-year limitations period that is set out in § 6501.873 The appeals court looked to other cases and held that IRC §§ 6229 and 6501 work in tandem.874 It saw that the BASR P’ship Court looked closely at § 6501.875 It concluded that the IRS could assess taxes, penalties, and interest against the partnership within three years of the partnership’s return being filed.876 And it concluded that there must be an “intent to evade tax” present to hold open the limitations period.877 Further, the BASR P’ship Court focused its attention on definitions within the Tax Code and the definitions under § 6501(a) to support its conclusion.878 There it found that a tax return is defined as “the return to be filed by the taxpayer (and does not include a return of any person from whom the taxpayer received an item of income gain, loss, deduction, or credit).”879 From this, the BASR P’ship Court held that “the fraudulent intent . . . is by implication limited to fraud by the taxpayer.”880 This court reasoned that “[b]ecause the language of [IRC §] 6501(a) is expressly limited to a return filed by a taxpayer.”881 As such, the BASR P’ship Court held that the “IRS [sic.] is bound by the standard three-year limitations period in IRC § 6501(a), unless the taxpayer possesses fraudulent intent, or unless IRC § 6229 applies.”882 And IRC § 6229(a) also has a three-year limitations period for partnership returns and “and includes a ‘special rule in case of fraud.’”883 Under IRC § 6229(c), the Tax Code uses “false return” and defines it “as one where ‘any partner has, with the intent to evade tax, signed or participated directly or indirectly in the preparation of a partnership return[,] which includes a false or fraudulent item.’”884 873

Id. Id. (citing Prati v. United States, 603 F.3d 1301, 1037 (Fed. Cir. 2010) and Irvine v. United States, 729 F.3d 455, 461–62 (5th Cir. 2013), which stated the “reasoning” in Prati was “logical and persuasive” reinforcing Prati as the proper interpretation).

875 BASR P’ship, 113 Fed. Cl. at 192.

876 Id. 877 Id. (citing IRC § 6501(c)(1) (2018)).

878 Id. 879 Id. (quoting IRC § 6501(a) (2018)).

880 Id. (emphasis added).

881 BASR P’ship, 113 Fed. Cl. at 192 (emphasis added).

882 Id. 883 Id. (citing IRC § 6629(c) (2018)).

884 Id. (quoting IRC § 6229(c) (2018)).

874

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The BASR P’ship Court further supported its position by looking at the legislative history behind IRC § 6501(c)(1).885 Looking there, the court found that a taxpayer must have “the intent to evade tax” contained within IRC § 6501(c)(1), because the same language was used in the processor Tax Code “in the Revenue Act of 1918, § 250(b), (d), 40 Stat. 1057, 1083 (1919).”886 Thus, this court held that “‘false or fraudulent with intent to evade tax’ had the same meaning in Revenue Act § 250(d)” as it does now.887 Further, it concluded that the statute’s plain language supported this interpretation and meant that § 6501 could only be applied to a taxpayer who had the intent to evade taxes.888 But that was not the case here. So, “[t]herefore, the court has determined that the meaning of ‘intent to evade tax,’ as . . . used in IRC § 6501(c), is limited to instances in which the taxpayer has the requisite intent to commit fraud.”889 And, in this case, the government conceded that the taxpayers did not have the requisite intent, so the government could not hold the taxpayers accountable for their innocent actions because it was time-barred.890 This court next looked at City Wide Transit, Inc.891 It concluded that this case did not bind this court.892 City Wide Transit, Inc. was not followed here because the question that the court addressed was framed differently.893 The City Wide Transit, Inc. Court made factual inquiries into “whether a tax attorney’s fraud is ‘secondary or remote to the fraudulent returns.’”894 However, that court applied the fraud exception because the wrongdoer was not an unrelated, third party who

885

Id. at 193.

Id. 887 BASR P’ship, 113 Fed. Cl. at 192.

888 Id. 889 Id. (citing in n.11 Gillsepie v. United States, 231 Ct. Cl. 851, 852 (1982) (per curiam) (emphasis added), which states “fraud . . . means intentional wrongdoing on the part of a taxpayer, motivated by a specific purpose to evade a tax known or believed to be owing.”).

890 Id. 891 Id. at 193-94.

892 Id. 893 BASR P’ship, 113 Fed. Cl. at 193.

894 Id. (citing City Wide Transit, 709 F.3d at 108).

886

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prepared the returns.895 And, finally, it considered Allen.896 It determined that the Tax Court “relied on a failed legislative proposal as evidence that Congress considered and rejected requiring the taxpayer to have the requisite intent to evade paying federal taxes.”897 Thus, neither City Wide Transport, Inc. nor Allen was binding on this court and would not be followed.898 This court also considered other persuasive arguments, which included Badaracco v. Comm’r, 464 U.S. 386, 398 (1984), that proposed that IRC § 6501(c)(1) should be amended but concluded this was neither the time or place to provide judicial insight or amend the Tax Code by the courts.899 So, in the end, this court held that the three-year limitations period does apply when the return-preparer misrepresents or defrauds the government and when taxpayers have no knowledge of their returnpreparer’s actions.900 G. Court of Appeals for the Federal Circuit on Limitations Periods and Return-Preparer Fraud BASR P’ship v. United States, 795 F.3d 1138 (Fed. Cir. 2015)— Prior to Finnegan, the IRS appealed the prior decision arguing that the three-year limitations period did not time bar its actions to assess penalties when a return-preparer intended to file a false or fraudulent return.901 It argued that the partnership’s outside counsel, an attorney who helped structure financial transactions that were reported on the partnership’s return, acted with the “intent to evade tax” from IRC § 6501(c)(1).902 Thus, according to the IRS, this attorney’s actions suspended the three-year limitations period allowing it to assess taxes, penalties, and interest on the partnership under IRC § 6501(c)(1).903 The appeals court held that the prior decision to disagree with the IRS 895

Id. Id. at 193 n.12.

897 Id. 898 Id. at 194.

899 BASR P’ship, 113 Fed. Cl. at 194.

900 Id. 901 BASR P’ship v. United States, 795 F.3d 1338, 1339 (Fed. Cir. 2015).

902 Id. 903 Id. 896

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and hold that the government’s actions were time-barred was correct, so it affirmed the Court of Federal Claims’s decision.904 It reasoned that the three-year limitations period can be extended indefinitely “only when the taxpayer—and not a third party—acts with the requisite ‘intent to evade tax.’ ”905 In considering its position, the appeals court looked to the statute’s wording.906 The court looked for “‘plain and unambiguous meaning’” in the statutory language.907 It found that only when the statute’s language ceases to be unambiguous resulting in a statutory scheme that is no longer coherent or consistent would a court not look to a law’s plain language.908 And this court found that IRC § 6501(c)(1)’s plain language states that “when the IRS [sic.] establishes that the taxpayer acted with the intent to evade tax,” the three-year limitations period is suspended indefinitely.909 So because the government conceded “that it cannot show that either the partnership or any of its partners acted with the intent to evade tax, summary judgment in favor of BASR was proper.”910 The appeals court then considered Allen and how it could impact this decision.911 The appeals court saw that the government was using Allen to bolster their position.912 However, the appeals court concluded that the U.S. Supreme Court’s decision in Badaracco did not require it to interpret IRC § 6501(c)(1) in the government’s favor.913 The appeals court finally considered City Wide Transit, Inc.914 The appeals court determined that the government’s reliance on this case was misplaced as well.915 It concluded that the City Wide Transit, Inc. court only confronted “the issue of whether the person who prepared 904

Id. Id. 906 Id. at 1342 (citing Barhart v. Sigmon Coal Co., Inc., 534 U.S. 438, 450 (2002)) .

907 BASR P’ship, 795 F.3d at 1342 (citing Barhart v. Sigmon Coal Co., Inc., 534 U.S. 438, 450 (2002)).

908 Id. 909 Id. 910 Id. at 1342-43.

911 Id. at 1346.

912 Id. 913 BASR P’ship, 795 F.3d at 1346 (citing Badaracco v. Comm’r, 464 U.S. 386 (1984)).

914 Id. at 1347.

915 Id. 905

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the tax returns acted with the intent to evade taxes.”916 So this court determined that the City Wide Transit, Inc. court “did not address the question of whether the tax preparer’s intent was sufficient to trigger § 6501(c)(1).”917 As such, this court held that that case “had no bearing on the interpretation of § 6501(c)(1).”918 The appeals court bolstered its position that, “based on the statutory scheme and the absence of persuasive case law,” the appeals court could not agree with the government that IRC “§ 6501(c)(1) unambiguously permits the suspension of the limitations period when the taxpayer lacked fraudulent intent”919 when it looked to 2000 F.S.A. LEXIS 207, noting that the IRS apparently changed its position on this matter.920 And given that Congress had not altered IRC § 6501(c)(1), the appeals court could not determine why the government changed its position.921 Thus, statutory history for this Code section “confirms and further supports the interpretation that limits to the taxpayer the fraudulent intent required to trigger suspending the three[-]year statute of limitations.”922 So, in conclusion, the Court of Appeals for the Federal Circuit chose not to follow both controlling cases to date—Allen and City Wide Transit, Inc.—and held that for the three-year limitations period to be suspended, the taxpayer had to have willfulness or intent to evade taxes.923 However, this precedent only applies to cases in the Court of Federal Claims and the Court of Appeals for the Federal Circuit.924 H. BASR Partnership as a Substantially Prevailing Party BASR P'ship v. United States, 130 Fed. Cl. 286 (2017)— After prevailing in the Federal Court of Appeals for the Federal Circuit, making BASR Partnership the prevailing party, the 916

Id. Id. 918 Id. 919 BASR P’ship, 795 F.3d at 1347-48.

920 Id. at 1348.

921 Id. (citing Revenue Act of 1921 §250(d), Pub. L. No. 67-98, 42 Stat. 227 and Internal Revenue Code of 1954 §6501(c)(1), Pub. L. No. 83-591, 68A Stat. 803).

922 Id. at 1349-50.

923 Id. at 1350.

924 IRC § 7482(a)(1) (2018).

917

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partnership sought reimbursement for its costs to defend its position under IRC § 7430.925 The Court of Federal Claims concluded that the partnership was a party that was the prevailing party under § 7430.926 It concluded that the partnership made a qualified offer, that was not a sham, and was within the qualified-offer period.927 It incurred fees and expenses to defend the position that it prevailed in that were reasonable and recoverable.928 It incurred supplemental fees that were recoverable, too.929 So the court awarded the partnership $314,710.69 in fees and expenses because it substantially prevailed over the government when it took an unreasonable position on extending the three-year limitations period under IRC § 6501(c)(1).930 ANALYSIS SUPPORTING THAT ONLY TAXPAYER INTENT SHOULD BE CONSIDERED: A. How the Tax Court got it wrong in Allen because it is all about taxpayer intent.

The statutory language is clear. By statute, a false or fraudulent return must be filed with the intent to evade taxes, or there must be taxpayer intent to defraud, misrepresent, or evade taxes for penalties to be assessed. And in both instances, the intent is that of the taxpayer and no other. Seems pretty clear, right? Apparently not because the Allen court did not come to the same conclusions and muddied the waters with its holding. Subsequent courts concluded that taxpayer intent is the crux of any case involving fraud or misrepresentation, but their decisions have split the circuits.

First, Congress has the power to change the Tax Code to address this issue. And it has used this power for things like substantial underreporting, where the limitations period is extended from three to six years. However, it has not made changes for instances like this.

Not carving out an exception for the return-preparer fraud clearly speaks to Congress’s feelings on this matter. It feels that where there is taxpayer intent to defraud, the limitations periods should be held 925

BASR P’ship v. United States, 130 Fed. Cl. 286 (2017).

Id. at 306.

927 Id. 928 Id. 929 Id. at 313.

930 Id. at 313-14.

926

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open indefinitely. Where there is no taxpayer intent, the limitations period will generally be three years.

Second, the Allen court’s plain-language analysis seems faulty. The Allen court argued that there was nothing in the plain language of IRC § 6501(c)(1) that extends only to taxpayer fraud. However, that is not what other courts found. The BASR P’ship court concluded that nothing in that section indicates that a return-preparer cannot be held solely accountable for fraud where the taxpayer is unknowing and without intent, which was consistent with past holdings too (e.g.

Gordon and Tinkoff). Thus, absent congressional change or Supreme Court interpretation to the contrary, the plain language in the Code should prevail. As such, the Tax Court should not be making these interpretations.

Third, the Tax Court ignored case precedent dating back decades because intended return-preparer fraud happened only occasionally.

Going back over eight decades to Tinkoff, the IRS through the Office of Chief Counsel determined that a very well-versed tax expert and return-preparer intended to evade taxes for his client, a corporation.

Then, once this was shown, the return-preparer—and not the taxpayer—was convicted of federal tax crimes and served time in a federal penitentiary. Because the preparer was convicted of a tax crime, the government also had to meet a higher burden of proof: beyond a reasonable doubt. Thus, even with the heightened burden of proof, the Tinkoff court did not struggle to determine Tinkoff's intent to commit tax crimes and conclude his client did not share this intent.

Rather, the Tinkoff court concluded that this return-preparer alone should be held accountable for tax evasion. So this court felt there was no need to establish public policy to deter a taxpayer because the law, as it was written, worked here. This was also seen in Gordon, Baldwin, Whyte, and Stadtmauer, which all preceded Allen, where that court came to the same conclusions. For that matter, after Allen, other courts came to this same conclusion too (e.g. Eriksen and BASR P’ship), showing there is a lot of consistency over time in this train of thought.

However, by the Allen court’s determination, prior preparer cases happened only occasionally. And apparently, the Allen court concluded these cases were not on point, so they were merely persuasive. However, the Office of Chief Counsel saw them as more than persuasive when it wrote its guidance for the IRS.

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Fourth, the Office of Chief Counsel investigated the same issue prior to Allen and concluded that where there is no taxpayer intent, there can be no taxpayer willfulness, so there can be no taxpayer fraud; thus, the limitations period cannot be held open. It supported this position through its interpretation of the Tax Code and what it saw in past cases.

Then it concluded that return-preparer sins should not be imputed to the taxpayer when there is no intent to evade taxes nor any actions taken to evade taxes and gave the IRS that counsel to follow. The Office of Chief Counsel saw that where a return-preparer acted alone, there was no taxpayer willfulness. The return-preparer had the intent to defraud and evade taxes. The return-preparer also took actions to defraud or evade taxes. Therefore, the taxpayer did not intend to defraud or misrepresent or intend to evade taxes. Put another way, only the return-preparer had the requisite intent and took action to misrepresent or defraud the government, which is needed to commit a tax crime or a civil infraction. The taxpayer did not. It revisited the same issue after Allen, and it did not change its position. So the Office of Chief Counsel reasonably concluded that the return-preparer’s sins should not be imputed on the taxpayer. With the Office of Chief Counseling being the IRS’s legal arm, why then would the government (the IRS) change its position? And why would the courts determine that the IRS’s Office of Chief Counsel was wrong when it had provided sound reasoning on this exact topic? This is unclear and may not be answered. However, I would speculate that the inconsistency came about as an internal-policy change that the IRS was implementing through the courts, and not through Congress or through regulation. I believe it needed more time to investigate cases like this, and saw this as a way to extend the limitations period in these cases, so it has more time to assess penalties and collect them.

Fifth, clearly the Allen court agrees with the government’s argument that it needs more time to assess and collect taxes, penalties, and interest. Then, there are follow-up questions that should be addressed.

If the government wishes the IRS to have more time to collect taxes, interest, and penalties, why has Congress not provided additional funding to support IRS collection efforts nor the IRS promulgated regulations to administratively fix this issue?

I propose that the administrative parts of the government—including the IRS—believe more time is needed, but Congress does not. In the past, the IRS has been successful in doing its job. During the time when

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the IRS did not have extensive databases and powerful computers to comb through taxpayer data to find false or fraudulent returns, it was successful at finding fraud and tax evasion (as in Gordon and Tinkoff), and then prosecuting the offenders. So what has changed since then?

The IRS now has automated collections that identifies under reporting issues without human investigations, issues collection letters, and tracks balances as they change. Arguably, this has led to fewer IRS agents working case files. Is more time needed because the IRS is underfunded, which results in staffing shortages and fewer examinations? 931 I argue that it is.

Because Congress determines the IRS’s budget and restricts the agent count based on funding it provides, Congress could choose to provide more funding to the IRS and its collection activities. This would result in more taxes, penalties, and interest being collected from intentional tax evaders. However, Congress has decided not to. In fact, in recent years, the IRS’s budget has been reduced.932 Through budget allocations, Congress has shown it does not want more agents collecting taxes, penalties, and interest on money owed to the government because it has concluded that its funding levels provide adequate tax collections, during the time it permits, under current law.

Absent getting Congressional approval, the IRS can, and does, promulgate its own regulations and enforces them as if they had been issued by Congress. Where the Treasury Department uses the

931

See James Thorne, Years of Budget Cuts Shrink the IRS, and Corporations are the Big Winners, CNBC.COM TAXES (May 12, 2018), http://www.cnbc.com/2018/05/11/budget-cuts-shrink-the-irs-andcorporations-are-the-big-winners.html (looking at $533 million less in spending on the IRS from 2012 to 2018 and a 14% drop in staffing for the same period) and see Maureen Groppe, Report: US Government Losing Billions in Corporate Tax Revenue from IRS Budget Cuts, USATODAY.COM POLITICS (Aug. 15, 2019), http://www.usatoday.com/story/news/politics/2019/08/15/irs-cuts-cause-usgovernment-lose-billions-taxes-report-says /2009894001/(looking at the decline in corporate taxation from 2002 to 2014 and what could have been collected from 2000 to 2014); Irina Ivanova, IRS Budgets Cuts Costing the Feds Billions of Dollars, CBSNEWS.COM NEWS (Aug. 16, 2019), http://www.cbsnews.com/news/irs-budgets-cuts-costing-the-feds-billions-ofdollars/(looking at examinations going back to 2010).

932 Id.

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Administrative Procedure Act933 to promulgate its regulations, it will receive Chevron deference, which means courts will treat the Treasury Regulation as if Congress has given its full authority to enforce them.934 Yet, the IRS has not gone through that process to get exceptions for the limitations period through Treasury Regulations where there is preparer fraud.

Sixth, the Tax Court found that keeping open the limitations period for tax-preparer fraud was not burdensome for the taxpayers. The Tax Court holds that it is not a burden for a taxpayer to review their returns for obvious misstatement. However, this is a bit counterintuitive given the circumstances. In these cases, a taxpayer has gone to a returnpreparer to have tax returns completed for them for many reasons. One common reason is that the taxpayer does not know the Tax Code, so they do not have the appropriate skills or education to be able to complete returns properly, and, thus, they rely on a professional to do it for them. So to say that a naïve and innocent taxpayer can review a prepared return and identify misstatements, errors, or fraud is unreasonable. These taxpayers are already conceding that this work is not for them and pay another to complete this task. Because these taxpayers do not have the requisite knowledge, background, or education, they are also not able to review returns completed by a tax professional and determine whether the return was properly prepared.

So reviewing returns would be burdensome. After all, how can a taxpayer know what he or she does not know?

Last, the courts have established two disparate treatments for an innocent taxpayer involved with a return-preparer who commits fraud.

Criminal caselaw consistently punishes only the return-preparer who had the requisite mens rea and actus rea needed to show tax evasion or fraud (e.g. Gordon and Tinkoff). Whereas, under Allen, the taxpayer assumes the return-preparer’s intent to defraud or evade taxes even when the taxpayer is innocent because the taxpayer has no intent or willfulness. And this dichotomy punishes taxpayers through civil penalties that can be assessed indefinitely, while, under the exact same facts and circumstances, a criminal court would not be able to hold

933

Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication, 84 Fed. Reg. 55,239, 55,239 (October 9, 2019).

934 Chevron, U.S.., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).

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open the limitations period indefinitely or try to convict an innocent taxpayer of a tax crime. That is absurd!

B. So for the court to impute intent, it must be all about agency, right?

Well, that depends. In an agency relationship, to begin with, we must forget about equality.935 The master gives the directives and the servant executes them.936 In doing so, to protect the servant, agency law imputes that an agent’s937 action is that of the principal; however, it does not permit an agent to operate outside of permissions granted, to operate in the agent’s best interest, or to defraud another by binding a party without the agent taking responsibility for his or her actions.938 Thus, for one person (the principal or master) to be liable for another’s actions (the agent’s or servant’s actions), an agency relationship must first be shown.939 Then the agent’s actions must be shown to be within the relationship’s scope when the agent acted for the principal.940 Generally, “when one person authorizes another to act on his behalf subject to his control, and the other consents to do so” agency is shown.941 To determine if an agency relationship exists in a given situation depends upon facts and circumstances.942 The determinative factor is “whether the employer (principal or master) has the right to control and direct the servant in the performance of his work and the manner in which the work is to be done.”943 So a court will look to see if “the right to control, rather than its actual exercise, is usually dispositive of whether there is an agency relationship.”944 And a court “will look both to the terms of any contract that may exist and to the 935

Depeche Mode, Master and Servant, on Some Great Reward (Mute 1984).

RESTATEMENT (THIRD) OF AGENCY, § 1.01(C) (AM. LAW INST. 2006).

937 I am using servant and agent interchangeably, and I will be using master and principal interchangeably as well.

938 Id. 939 Judah v. Reiner, 744 A.2d 1037, 1039 (D.C. Cir. 2000).

940 Id. at 1039-40.

941 Id. (quoting Smith v. Jenkins, 452 A.2d 333, 335 (D.C. Cir. 1982) with internal quotes omitted).

942 Id. 943 Id. (quoting LeGrand v. Ins. Co. of N.A., 241 A.2d 734, 735 (D.C. Cir. 1968) with internal quotes omitted).

944 Judah, 744 A.2d at 1040 (referring to Safeway Stores, Inc. v. Kelly, 448 A.2d 856, 860 (D.C. Cir. 1982)).

936

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actual course of dealings between the parties.”945 Thus, the conduct or oral directive given by the principal or master to the servant or agent, indicating the servant is to act for the principal and is subject to the principal’s control, is sufficient to show authority.946 Under common law, the taxpayer-preparer relationship would result in the taxpayer being the principal or master and the return-preparer being the taxpayer’s agent or servant, presuming that there is a proper contractual relationship established where the return-preparer is paid for providing services and the taxpayer’s returns are prepared and filed. Therefore, the return-preparer is authorized by the taxpayer to prepare a tax return for the taxpayer, and they often file the return for the taxpayer as well. The taxpayer usually has the ability to discharge the return-preparer for just about any reason.

Under the agency relationship established by contract, the returnpreparer is subject to the taxpayer’s control because the taxpayer is giving the return-preparer their return information with the expectation that it will be used to accurately prepare the taxpayer’s return and determines what returns (e.g. federal, state, or local) are completed and filed and because the taxpayer will determine if the prepared returns are filed by signing a Form 8879 for electronic filing or mailing the returns. Generally, the taxpayer will expect the returns to be completed in compliance with law and regulations so that the taxpayer will not be subject to examination. Further, the taxpayer can elect not to sign or file the return that was prepared, which is the ultimate control over the return-preparer’s work. And, generally, return-preparers prepare tax returns for others as part of a regular business, which is shown where the return-preparer has a preparer tax identification number (“PTIN”), which is required by the IRS for third-parties to prepare and file returns for taxpayers.947 Thus, agency appears to govern this relationship. However, to be clear, this relationship does not apply for the return-preparer practicing before the IRS for the taxpayer.

945

Id. (referring to Giles, v. Shell Oil Corp., 487 A.2d 610, 613 (D.C. Cir. 1985)).

Id. (quoting Smith, 452 A.2d at 335 (citing the RESTATEMENT (SECOND) OF AGENCY § 26 (AM. LAW INST. 1957)).

947 PTIN Requirements for Tax Return Preparers, irs.gov (http://www.irs.gov/taxprofessionals/ptin-requirements-for-tax-return-preparers, last updated Jan. 6, 2021)(last visited May 13, 2021).

946

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The Federal Court of Appeals addressed the taxpayer-preparer agency issue in Loving.948 In Loving, the District of Columbia Court of Appeals held that a “tax-return preparer does not represent the taxpayer [before the IRS].”949 This court reasoned that a returnpreparer was not “practicing” before the IRS as an attorney, a certified public accountant, or an enrolled agent would.950 It concluded this because preparing a tax return does not constitute representing a case for the IRS to consider.951 However, Loving falls short of stating that there is no agency relationship between a taxpayer and a returnpreparer.952 So does agency apply? I argue it does, but not in the sense that Loving was contemplating: an agent practicing before the IRS. Rather, in this relationship, the return-preparer is contracting with a taxpayer to provide a service (return preparation) with the expectation that the return will be prepared accurately and correctly (complying with the Tax Code, Treasury Regulations, and other IRS guidance). This would be no different than a taxpayer contracting with a C.P.A. or an attorney to get tax advice (e.g. estate planning to minimize gift taxation, legitimacy of a tax shelter, converting an individual retirement account to a Roth individual retirement account, etc.) after sharing the taxpayer’s facts and circumstances. In these circumstances, the taxpayer is not relying on or asking a Circular 230 agent (i.e. a C.P.A., an attorney, or an enrolled agent) to represent them before the IRS. Instead, the taxpayer is consulting with someone versed in return preparation to determine a course of action (e.g. which tax forms to be completed and completing them), and then acting on that plan. So Loving would not control here.

In a taxpayer-preparer relationship, I contend that agency is present and roles are clear. The taxpayer is the master with one intent: to have tax returns prepared (and filed) by another for personal reasons (e.g. too complex, no time, does not understand, etc.). And the returnpreparer is the servant: the return-preparer completes tax forms with the taxpayer’s information and may file it with the IRS, too. And, generally, the return-preparer accepts compensation for rendering 948

Loving v. IRS, 742 F.3d 1013, 1015 (D.C. Cir. 2013).

Id. at 1017-18.

950 Id. 951 Id. at 1017-18.

952 Id. at 1020-22.

949

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these services for which the taxpayer receives a completed tax return that may also be filed with the IRS and other taxing authorities.

So where an agency relationship can be shown, the master’s intent is what is key versus the servant’s intent when acting for the master.

Where the servant fully represents a master’s wishes, the master is bound.953 Whereas, where the servant represents only his or her own wishes, the master is not bound; rather, the servant is.954 Thus, a servant cannot impute his or her intent upon a master that did not authorize the servant’s actions.955 In the context where tax returns are prepared, the taxpayer’s intent and expectations are that returns are prepared correctly, and when this is done, the taxpayer should be held accountable by the IRS for the tax position taken. However, where the return-preparer’s intent to defraud or misrepresent overrides the taxpayer’s intent, the taxpayer cannot be held accountable by the IRS, because the servant is not representing the master’s wishes; this destroys the agency relationship, leaving the servant on his or her own. Under this premise, the IRS must recognize that only the three-year limitations period applies when a returnpreparer misrepresents a taxpayer position in a prepared tax return because there is no taxpayer intent to defraud or misrepresent in an agency relationship described in Allen, Eriksen, BASR P’ship, or the like. Instead, there is only a servant or return-preparer intent to defraud or misrepresent.

Consequently, if it is all about agency, then, somehow, some courts got it wrong when they extended the limitations period. I believe the simplest explanation is that the IRS was looking for an efficient and easy way to penalize tax evaders, and some courts allowed it.

Imputing willfulness is more efficient for the IRS because the government need only show that one return-preparer was willful then that willfulness could be applied to many taxpayers (e.g. Allen and Eriksen). It is easier because the IRS did not need to show every taxpayer was willful; rather, the government could impute willfulness onto a taxpayer based on their return-preparer’s intent being shown elsewhere (usually a criminal trial) as willful (e.g. Allen). Whereas, 953

RESTATEMENT (THIRD) OF AGENCY, §§ 8.01—8.12. (Am. Law Inst. 2006).

Id. 955 Id. 954

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under agency law, the prosecution’s job would be both less efficient and more difficult.

Under agency theory, the process would be less efficient because the prosecution must show that each taxpayer was willful. Put in agency terms, each master (the taxpayer) must be shown to be willful not the servant (the return-preparer). That means no more lumping many taxpayers into one group and prosecuting them all at once (e.g. Allen, where the return-preparer was found guilty of willfully misrepresenting at least 30 times, or Eriksen, where the deputies were lumped together in one group). Separate assessments and trials for each will be needed, which costs time and money. Then, the government must show that each taxpayer knew his or her returns were being misrepresented by a return-preparer, or the taxpayer directed the return-preparer to misrepresent or defraud the government. Under the Cheek decision, which carved out an exception for ignorance of the law, that is difficult because the taxpayer need only show ignorance.

The Cheek court held that the government has a higher burden to show willfulness (clear and convincing); whereas, the taxpayer has a lowered burden (preponderance of the evidence) to defeat the government’s contentions.

This is more difficult for the government to show for a few reasons.

From caselaw, taxpayers do not always stipulate to their willfulness nor are willing to self-incriminate, so willfulness must be shown through evidence. Consider the two groups of deputies in Eriksen.

There was one deputy who did stipulate to misrepresenting her business expenses, and the Eriksen court held open her return position.

However, for the other deputies, they did not stipulate to misrepresenting or defrauding the government. Rather, they contended that only their return-preparer had. The prosecution spent a lot of time trying to prove its case against this second group. But, in the end, the government was not able to overcome the taxpayer’s argument because the evidence available was not supportive, was tenuous, or did not exist. So the Eriksen court refused to extend their limitations periods for this group. I cannot criticize the government for seeking efficient and easier ways to penalize tax evaders, and I do not fault the courts for enabling this; the ends justify the means.956 However, it is time for change. If the government wants to ignore agency and hold open returns under the fraud exception for return-preparer actions, 956

NICCOLÒ MACHIAVELLI, THE PRINCE CH. XVIII (1532).

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Congress needs to change the Tax Code, or the IRS needs to promulgate regulations that would receive Chevron deference and allow this. Otherwise, courts must recognize that only taxpayer willfulness will hold open tax returns under the false-return exception.

C. And isn’t it really about taxpayer intent?

In short, it is. The taxpayer’s intent is the crux of all tax-evasion and tax-fraud issues and should be the only determining factor for the limitations period to be held open. I have concluded this because it is consistent with the Tax Code’s focus on willfulness that, when shown, is the intent required for a tax crime or for penalization. In case after case, where no willfulness is shown, the IRS cannot seek criminal punishment nor civil penalties (e.g. Cheek). So why would a taxpayer who uses a return-preparer expect to be treated any different? That taxpayer should not.

My reasoning is simple. The Tax Code turns on willfulness, or at least that is what the Supreme Court and Congress have said on the matter.

After holding in Cheek that an ignorant or innocent taxpayer—one with no willfulness or intent to defraud—cannot be held accountable for violating an unknown legal duty or obligation, the Supreme Court never looked back and has not overruled that decision.957 And since that holding decades ago, Congress has not intervened to change the Cheek ruling by modifying the Tax Code. Thus, taxpayer intent is the primary determining factor as to whether the limitations period should be held open due to fraud or misrepresentation. Cheek is unique in that it allows for ignorance of the law to bar the government from punishing or penalizing a taxpayer. So where an ignorant taxpayer relies, in good faith, on a return-preparer, why should the results be any different? Where there is no intent to defraud or misrepresent because of ignorance, the U.S. Supreme Court has spoken: Where a taxpayer was not acting willfully to misrepresent or defraud the government, the taxpayer cannot be punished or penalized, which would include extending the limitations period indefinitely. The Office of Chief Counsel came to the same conclusion, as did the Court of Claims as well as the Federal Court of Appeals in BASR P’ship, and some Circuits concur with this assessment, too (e.g. Eriksen).

957

Cheek v. United States, 498 U.S. 192 (1991).

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D. Might this interpretation lead to abuse?

Where return-preparers see opportunities to make money off unsuspecting taxpayers, they will. Some will be inclined to misrepresent a taxpayer’s expenses to reduce taxable income (as seen in Eriksen or Allen) or to garner more business (Eriksen). While others may prepare wholly fraudulent returns that benefit an innocent taxpayer, as seen in BSAR P’ship, City Wide Transit, or Finnegan, because the taxpayer did not know any better. Either way, the IRS has been successful at identifying these abusers in the past, and it continues to do so now.958 When it does, it has two ways to deal with returnpreparers: penalties and court actions.

The IRC has a civil-penalty section devoted to return-preparers.959 Return-preparers who are not diligent in determining tax-credit availability will face penalties of $500.00 per occurrence.960 However, civil penalties for aiding and abetting tax understatements are stiffer.961 Civil aiding and abetting is shown where a return-preparer aids or advises a taxpayer in return preparation and knows, or should know, that at least part of the prepared return will be filed and knows that the prepared return will result in an understatement.962 Where shown, the penalty will be $1,000 for individual returns and $10,000 for business returns.963 The taxpayer need not know that the return-preparer is misrepresenting the taxpayer’s position.964 This extends to subordinates under the return-preparer’s control.965 But it does not apply to a person who types, reproduces, or provides other mechanical

958

United States v. Senat, No. 20-10777, ___ F. App’x ___, 2021 U.S. App. LEXIS 17654, *1 (11th Cir. June 14, 2021)(holding for the government in an appeal in a criminal conviction for “aiding and assisting the preparation of false tax returns, in violation of 26 U.S.C. § 7206(2)”); United States v. Hairston, 825 F. App’x 327, 328 (6th Cir. 2020)(holding for the government in an appeal in a criminal conviction for “twenty-five counts of assisting in the preparation of false tax returns. . .”); and United States v. Manlapaz, 825 F. App’x 109, 111 (4th Cir. 2020)(holding for the government in an appeal in a criminal conviction for commiting “27 counts of assisting in the preparation of false tax returns. . .”).

959 IRC § 6695 (2018); IRC § 6701 (2018).

960 IRC § 6695(g) (2018).

961 IRC § 6701 (2018).

962 IRC § 6701(a) (2018).

963 IRC § 6701(b) (2018).

964 IRC § 6701(d) (2018).

965 IRC § 6701(c) (2018).

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assistance.966 And these penalties can be in addition to other coordinated penalties.967 When civil penalties are not suffice to deter fraudulent return preparation, the government can take action in court.

As an example, in United States v. ITS Fin., LLC, 2013 U.S. Dist.

LEXIS 160171 (2013), the nation’s fourth largest return-preparer business (Instant Tax Service or ITS Financial) was found to be using fake Form W-2s in preparing tax returns for low-income clients.968 This tax preparation firm also used unsupported mileage deductions to lower taxable income for its clients.969 The IRS used field audits and electronic-return monitoring to determine that ITS Financial was not complying with the Tax Code.970 The government sought out injunctive relief and received it.971 The government was able to show that this business, through its return-preparers, was substantially interfering with internal-revenue laws,972 eventually shut down the franchise, and permanently enjoined the company’s agents from being involved in tax preparation services again.973 So, clearly, the IRS, in conjunction with other governmental agencies, can determine when return-preparers are violating the law, and, where necessary, shut them down and enjoin them from working within this industry ever again.

974

966

IRC § 6701(e) (2018).

IRC § 6701(f) (2018).

968 United States v. ITS Fin., LLC, 2013 U.S. Dist. LEXIS 160171, at *11-12 (S.D. Ohio Nov. 6, 2013).

969 Id. at *11.

970 Id. at *21.

971 Id. at *29.

972 Id. 973 United States v. ITS Fin., LLC, 2013 U.S. Dist. LEXIS 177200, at *2 (S.D. Ohio Nov. 6, 2013).

974 Aysha Bagchi, Liberty Tax Settles with DOJ Over Fraudulent Returns, BLOOMBERG LAW (Dec. 3, 2019), . http://www.bloomberglaw.com/product/tax/document/X3SMBISG000000?emc=B LTX%3A273154791%3A6&link=ewogICAgImN0eHQiOiAiRE9DIiwKICAgICJp ZCI6ICJYM1NNQklTRzAwMDAwMD9yZXNvdXJjZV9pZD02YTcxZjkzMzk4 MzI3NzI2MDA5ZmIzNTQwYTNiOTRhOSIsCiAgICAic2lnIjogInBpKzBCWU83 azlFK05FZlhFcUJTRGhcLzI4RWc9IiwKICAgICJ0aW1lIjogIjE1NzU0NzE2OTci LAogICAgInV1aWQiOiAiV2Q4N1RPcHNvaXozbmpXVlJRM3A1UT09UVJJa2 hwcFBIbW5BdVF2eWFQbEFSQT09IiwKICAgICJ2IjogIjEiCn0K&resource_id=6 a71f93398327726009fb3540a3b94a9&search32= (referring to United States v.

Franchise Group Intermediate L1, LLC, Docket No. 2:19-cv-00653 (E.D. Va. Dec. 3, 2019) where the government and Liberty Tax Service are settling their issues related to earned-income tax credits, fabricated expenses, false or improper 967

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Without a doubt, some taxpayers will abuse this by claiming innocence when the taxpayer was willful, as was seen in Eriksen with the deputy that stipulated to misrepresenting her position and later challenged it.

There will always be tax cheats. . .that is a foregone conclusion. But the present system works, which was shown in Eriksen. The IRS can identify return-preparers who are cheating the system for their clients.

“Badges of fraud” routinely flag returns for examination by IRS agents. And where the taxpayer intent does not rise to criminal willfulness, because there are fewer indications that fraud or misrepresentation is present, the IRS has been effective in using civil penalties to change taxpayer behavior.

The unspoken issue pervading these cases is that the IRS does not have the resources to adequately examine taxpayer returns, investigate return-preparer fraud, and assess penalties on those who defraud or misrepresent.975 The courts see this, and they are using their powers to assist the government to collect taxes, interest, and penalties when Congress is unwilling or unable to provide adequate funding to the IRS. Under this reasoning, Allen makes sense. The Allen court used its power to establish a case precedent that strictly favored the IRS by holding open the limitations period so the IRS could eventually examine returns and penalize beyond the three-year limitations period.

In this way, the IRS, with limited resources, can assess taxes when it has agents available. So, although it does not provide the government with a fix (more funding), it does provide a remedy (more time), but is inequitable and not consistent with punishing willful offenders. dependents, and fraudulent claims for education credits at numerous Liberty Tax franchises making it subject to penalties under IRC §§ 6694, 6695, or 6701), see also Department of Justice, Dallas Tax Return Preparer Pleads Guilty to Preparing False Tax Returns, JUSTICE NEWS, http://www.justice.gov/opa/pr/dallas-tax-returnpreparer-pleads-guilty-preparing-false-tax-returns (last visited November 24, 2019); Department of Justice, North Carolina Tax Return Preparer Pleads Guilty to Conspiracy to Defraud the IRS, JUSTICE NEWS http://www.justice.gov/opa/pr/northcarolina-tax-return-preparer-pleads-guilty-conspiracy-defraud-irs (last visited November 24, 2019); Department of Justice, Brooklyn Tax Preparer Pleads Guilty to Preparing Fraudulent Tax Returns for Clients and Himself, JUSTICE NEWS http://www.justice.gov/usao-edny/pr/brooklyn-tax-preparer-pleads-guiltypreparing-fraudulent-tax-returns-clients-and (last visited November 24, 2019); and Department of Justice, Tax Preparer Pleads Guilty to Filing False Returns, JUSTICE NEWS, http://www.justice.gov/usao-wdmo/pr/tax-preparer-pleads-guilty-filingfalse-returns (last visited November 24, 2019).

975 See note 352, supra.

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The fix should come from Congress through adequate funding for U.S. Treasury operations and specifically the IRS’s tax collection activities.

When Congress decides that collecting taxes that are due and owing is a high priority, it will increase the IRS’s funding to collect what is already owed. That would result in more automated exams, more automated collections, more manual exams, more manual collections, more agents collecting on already-assessed taxes, more agents being hired to examine returns, and more civil collection actions being brought to court. Put simply, Congress must conclude that tax collection is worth funding adequately so the time needed to collect on taxes due and owing is no longer an issue. Then, the limitations period will not need to be extended through the courts because the IRS will be able to adequately do its job promptly.

E. Conclusion The IRS should not be able to hold open the limitations period indefinitely when an innocent taxpayer uses a return-preparer who commits fraud or misrepresents the taxpayer’s position, as determined by the Office of Chief Counsel in its guidance and as held in Eriksen and BASR P’ship. The IRS should not look to impute intent onto another to extend limitations periods, so it can collect taxes due and owing later. Rather, only when there is taxpayer intent to defraud the government or misrepresent a tax position should a taxpayer be held accountable for his or her actions. And for a taxpayer who commits fraud or misrepresents a tax position, the limitations period should be held open indefinitely by the IRS to allow it to thoroughly examine and assess taxes, penalties, and interest on a willful taxpayer. Whereas, if there is no taxpayer intent to defraud the government or misrepresent a tax position—based on clear and convincing facts and circumstances—and the taxpayer used a return-preparer who was willful in evading taxes or misrepresenting the taxpayer’s position, only the return-preparer should be held accountable because only the return-preparer had the requisite intent and acted on that intent by creating a false return. And when the return-preparer is solely the cause for misrepresentation or fraud, the taxpayer’s limitations period should be no more than three years.

If this position is adopted, I would posit that Congress might want to pass legislation to be assured that return-preparers will comply.

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Congress can choose to impute the taxes, interest, and penalties from the innocent taxpayer to the willful return-preparer in cases where the return-preparer committed fraud or misrepresentation, which parallels what is in place currently for trust-fund fraud or fraud related to withholding taxes being absconded by a responsible person. Congress could even hold open the limitations period against defrauding returnpreparers longer to allow the IRS to adequately investigate and bring actions against these people, which would be akin to what is in place for substantial under-reporting cases where the limitations period is extended to six years. I suggest this because the IRS would still be able to collect the taxes, interest, and penalties it would have assessed on the taxpayer, so the government can still collect what it is due. And this would create a very strong deterrence for the IRS. It would have a tool to compel return-preparers not to defraud or misrepresent a taxpayer’s position. Deterrence would be especially strong if the taxes, interest, and penalties were treated as non-dischargeable tax debt in bankruptcy much like trust-fund cases and excise taxes are treated now.

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DISTINGUISHED BRIEFS The Distinguished Brief Award is given in recognition ofthe most scholarly briefs filed before the Michigan Supreme Court, as determined by a panel of imminent jurists. Two briefs are chosen each year and printed in the Western Michigan University Thomas M. Cooley Law Review. To preserve the author's style, the brief has been reprinted in its entirety, exactly as submitted to the Michigan Supreme Court INTRODUCTION PEOPLE OF THE STATE OF MICHIGAN, v KELLY WARREN,

Plaintiffs-Appellee,

Defendant-Appellant.

BRIEF ON APPEAL OF DEFENDANTS-APPELLANTS ABSTRACT The People’s brief in People v Warren addressed whether trial courts are required—either by our court rules or the Due Process Clause— to inform defendants about the possibility of consecutive sentences before accepting guilty pleas. Michigan’s court rule on the acceptance of guilty pleas, the People’s brief pointed out, was notably silent on this point, despite several attempts over the years to write in this requirement. That history, coupled with the rule’s plain language, compelled the conclusion that the court rule does not require this information. As for the Due Process Clause, its role in this area is quite limited, requiring only that trial courts inform defendants about the “definite, immediate, and largely automatic” consequences of their plea. Citing the consensus of courts on this question, the People argued that the possibility of discretionary consecutive sentencing did not fit that narrow category of information. The People encouraged the Court to address this perceived blind spot in the guilty-plea procedure using its constitutional rule-making authority, not via a

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strained reading of the pre-existing court-rule or constitutional doctrine.

BIOGRAPHICAL STATEMENT DAVID PORTER David Porter practices as an appellate specialist at Kienbaum Hardy Viviano Pelton & Forrest, an employment and commercial litigation boutique in Metro Detroit. Before that, David practiced at the Michigan Attorney General’s Office, briefing and arguing dozens of state and federal appeals, including People v Warren. David also served as law clerk to Judge Richard A. Griffin of the U.S. Court of Appeals for the Sixth Circuit and Justice David F. Viviano of the Michigan Supreme Court.

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PEOPLE OF THE STATE OF MICHIGAN, Supreme Court No. 158065 Plaintiff-Appellee,

Court of Appeals No. 333997

v

Mecosta Circuit Court Nos. 14-8297FH; 15-8431-FH

KELLY WARREN, Defendant-Appellant.

/

SUPPLEMENTAL BRIEF OF APPELLEE PEOPLE OF THE STATE OF MICHIGAN ORAL ARGUMENT REQUESTED

B. Eric Restuccia Deputy Solicitor General Department of Attorney General

Dated: June 18, 2019

David Porter (P76785) Assistant Attorney General Attorney for the People Plaintiff–Appellee Criminal Appellate Division P.O. Box 30217 Lansing, MI 48909 (517) 335-7650

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STATE OF MICHIGAN IN THE SUPREME COURT Appeal from the Michigan Court of Appeals GLEICHER, P.J., and M.J. KELLY and CAMERON, J.J.

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Page Index of Authorities .......................................................................................................ii Statement of Jurisdiction ............................................................................................ vii Counter-Statement of Questions Presented ..............................................................viii Court Rule Involved...................................................................................................... ix Introduction ................................................................................................................... 1 Counter-Statement of Facts and Proceedings .............................................................. 3 Argument ....................................................................................................................... 5 I.

II.

Rule 6.302 does not require trial courts to inform defendants about the possibility of consecutive sentences before accepting their guilty pleas........... 5 A.

The plain language of Rule 6.302 does not require trial court to inform defendants about the possibility of consecutive sentences......... 6

B.

Warren’s contrary argument asks this Court read into the rule language that it has twice rejected.......................................................... 8

Due process does not require defendants to know about the possibility of consecutive sentencing in order to enter a knowing guilty plea. ................ 11 A.

The possibility of consecutive sentencing is not a “direct consequence” of pleading guilty. ............................................................ 13

B.

The contrary constitutional analysis either misapplies accepted law or relies on a new standard that bears little resemblance to the Supreme Court’s due process jurisprudence................................... 18

Conclusion and Relief Requested ................................................................................ 30

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TABLE OF CONTENTS

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Cases AFT Mich v Michigan, 497 Mich 197 (2015) ................................................................................................. 11 Boykin v Alabama, 395 US 238 (1969) .................................................................................................... 23 Bozeman v State, 686 So. 2d 556 (Ala. Crim. App. 1996) ................................................................... 10 Brady v United States, 397 US 742 (1970) ............................................................................................. 12, 15 Clemmons v United States, 721 F2d 235 (CA 8, 1983)......................................................................................... 14 Cuthrell v Patuxent Institution Director, 475 F2d 1364 (CA 4, 1973)............................................................................... passim Faulisi v Daggett, 527 F2d 305 (CA 7, 1975)......................................................................................... 14 Haliw v City of Sterling Heights, 471 Mich 700 (2005) ................................................................................................... 6 In re Certified Question from US Court of Appeals for Sixth Circuit, 468 Mich 109 n 5 (2003)........................................................................................... 10 In re Estate of Rasmer, 501 Mich 18 (2017) ................................................................................................... 11 Kercheval v United States, 274 US 220 (1927) .................................................................................................... 12 Lewis v United States, 601 F2d 1100 (CA 9, 1979)....................................................................................... 25 McCarthy v United States, 394 US 459 (1969) .................................................................................................... 12 McGrew v State, 286 SW3d 387 (Tex App, 2008).......................................................................... 13, 14

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INDEX OF AUTHORITIES

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Morrissey v Brewer, 408 US 471 (1972) .................................................................................................... 16 North Carolina v Alford, 400 US 25 (1970) ...................................................................................................... 12 Oregon v Elstad, 470 US 298 (1985) .............................................................................................. 15, 26 Padilla v Kentucky, 559 US 356 (2010) .................................................................................................... 28 Paradiso v United States, 482 F2d 409 (CA 3, 1973)......................................................................................... 14 Patterson v Illinois, 487 US 285 (1988) .................................................................................................... 15 People v Babcock, 469 Mich 247 n 7 (2003)............................................................................................. 6 People v Bennett, 76 Mich App 264 (1977) ............................................................................................. 9 People v Bonner, 49 Mich App 153 (1973) ............................................................................................. 7 People v Cole, 491 Mich 325 (2012) ......................................................................................... passim People v Cummings, 84 Mich App 509 (1978) ............................................................................................. 9 People v Garska, 303 Mich 313 (1942) ................................................................................................. 24 People v Gloster, 499 Mich 199 (2016) ................................................................................................. 11 People v Harden, 434 Mich 196 (1990) ................................................................................................... 7 People v Johnson, 57 Mich App 117 (1974) ............................................................................................. 7 iii

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Mitschke v State, 129 SW3d 130 (Tex Crim App, 2004) ................................................................ 19, 20

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People v Larkins, 59 Mich App 199 (1975) ............................................................................................. 9 People v Peters, 738 P2d 395 (Colo Ct App, 1987) ............................................................................. 10 People v Taylor, 383 Mich 338 (1970) ....................................................................................... 8, 27, 28 People v Warren, unpublished order of the Michigan Court of Appeals, entered Nov 1, 2016 (Docket No. 333997) ................................................................................................... 4 People v Williams, 386 Mich 277 (1971) ....................................................................................... 8, 27, 28 Rosemond v State, 756 P2d 1180 (Nev, 1988) ........................................................................................ 14 Smith v Doe, 538 US 84 (2003) ...................................................................................................... 21 Smith v O’Grady, 312 US 329 (1941) .................................................................................................... 12 Snyder v Charlotte Pub Sch Dist, Eaton Cty, 421 Mich 517 (1984) ................................................................................................... 5 State v Cutler, 590 P2d 444 (Ariz, 1979).......................................................................................... 25 State v Irish, 394 NW2d 879 (Neb, 1986) ...................................................................................... 14 State v Wesley, 640 P2d 177 (Ariz, 1982).......................................................................................... 14 United States v DeFusco, 949 F2d 114 (CA 4, 1991)......................................................................................... 25 United States v Fentress, 792 F2d 461 (CA 4, 1986)......................................................................................... 14

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People v Jones, 459 Mich 902 (1998), order vacated on reconsideration, 459 Mich 959 (1999) ........................................................................................................................ 24

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United States v Humphrey, 164 F3d 585 (CA 11, 1999)....................................................................................... 14 United States v Hurlich, 293 F3d 1223 (CA 10, 2002)..................................................................................... 14 United States v Kikuyama, 109 F3d 536 (CA 9, 1997)................................................................................... 13, 14 United States v Neely, 38 F.3d 458 (CA 9, 1994).......................................................................................... 14 United States v Ocasio-Cancel, 727 F3d 85 (CA 1, 2013)........................................................................................... 14 United States v Rubalcaba, 811 F2d 491 (CA 9, 1987)......................................................................................... 14 United States v Ruiz, 536 US 622 (2002) ................................................................................. 15, 16, 18, 26 United States v Saldana, 505 F2d 628 (CA 5, 1974)......................................................................................... 14 West v State, 480 NE2d 221 (Ind, 1985) ........................................................................................ 10 Wilson v McGinnis, 413 F3d 196 (CA 2, 2005)......................................................................................... 14 Statutes MCL 750.520b.............................................................................................................. 22 MCL 768.7b........................................................................................................ 3, 16, 17 MCL 769.1...................................................................................................................... 7 MCL 769.8...................................................................................................................... 7 Other Authorities 5 LaFave, Criminal Procedure, § 21.4(d) (4th ed) .................................... 13, 17, 20, 29

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United States v Gaskin, 587 F App’x 290 (CA 6, 2014) .................................................................................. 14

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FR Crim P 11 advisory committee note (1975)........................................................... 16 Ignorance Is Effectively Bliss: Collateral Consequences, Silence, and Misinformation in the Guilty-Plea Process, 95 Iowa L. Rev. 119 (2009)................ 13 In the Matter of the Amendment of GCR 1963, 785, unpublished order of the Michigan Supreme Court, entered May 15, 1972 ..................................................... 9 Justice Robert P Young, Jr, A Judicial Traditionalist Confronts Justice Brennan’s School of Judicial Philosophy, 33 Okla City U L Rev 263 (2008)......................................................... 26 Proposed amendment to GCR 1963, 785, unpublished order of the Michigan Supreme Court, entered Nov 4, 1981 ...................................................................... 10 Roberts, The mythical divide between collateral and direct consequences of criminal convictions: Involuntary commitment of “sexually violent predators,” 93 Minn LR 670 (2008) ......................................................................... 19 Section 1.4(c)(i) of the ABA Standards Relating to Pleas of Guilty............................. 8 Rules Ga Uniform Superior Court Rule 33.8 ........................................................................ 10 IL CS S Ct. Rule 402.................................................................................................... 10 MCR 6.302............................................................................................................ passim MCR 6.425.................................................................................................................... 17 Constitutional Provisions Mich Const 1963, art 1, § 17........................................................................................ 11 US Const, Am XIV ....................................................................................................... 11

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Criminal Procedure – New Standards and Procedures for Accepting Guilty Pleas, 22 Wayne L Rev 1463 (1976) .......................................................................... 8

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The People agree that this Court has jurisdiction. See MCR 7.303(B)(1).

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STATEMENT OF JURISDICTION

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1.

2.

Does MCR 6.302 require trial courts to inform defendants about the possibility of discretionary consecutive sentences even though this Court has twice rejected language that would expressly require it?

Appellant’s answer:

Yes.

Appellee’s answer:

No.

Trial court’s answer:

No.

Court of Appeals’ answer:

No.

Does the constitutional baseline of information necessary to make an informed guilty-plea decision include information about the possibility of consecutive sentence—a prospect that the trial court may not be aware of at the time of the plea and which is uncertain to occur in the future?

Appellant’s answer:

Yes.

Appellee’s answer:

No.

Trial court’s answer:

No.

Court of Appeals’ answer:

No.

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COUNTER-STATEMENT OF QUESTIONS PRESENTED

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Michigan’s court rule on guilty pleas, Rule 6.302, provides in pertinent part: (A) Plea Requirements. The court may not accept a plea of guilty or nolo contendere unless it is convinced that the plea is understanding, voluntary, and accurate. Before accepting a plea of guilty or nolo contendere, the court must place the defendant or defendants under oath and personally carry out subrules (B)-(E).

(B) An Understanding Plea. Speaking directly to the defendant or defendants, the court must advise the defendant or defendants of the following and determine that each defendant understands: *** (2) the maximum possible prison sentence for the offense and any mandatory minimum sentence required by law, including a requirement for mandatory lifetime electronic monitoring under MCL 750.520b or 750.520c[.] [MCR 6.302.]

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COURT RULE INVOLVED

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This is a case about process. On the surface, it is about the process by which trial courts accept guilty pleas consistent with our court rules and constitutions.

More specifically, whether that process must include advice by the trial court about the possibility of discretionary consecutive sentences.

But a second and perhaps more significant question of process lurks just below the surface. It deals with the process by which this Court regulates the administration of its criminal justice system. This Court can, of course, decide legal questions presented to it through the adversarial process. But its constitutional authority does not end there. This Court has the authority to promulgate and amend Michigan’s court rules, a power that it has drawn on many times to resolve perceived constitutional concerns in the guilty-plea setting.

This underlying question of process is especially pertinent here because, while everyone may agree that defendant should have information about possible consecutive sentences, neither Michigan’s court rules nor due process require it.

The plain language of the court rule governing the acceptance of guilty pleas does not cover it. In fact, this Court has twice considered including language in its court rule requiring advice about consecutive sentences, but it declined both times.

Nor does due process require defendants have this information to enter a constitutionally compliant plea. Due process requires only the information necessary to make an informed choice among available options. Information about potential and indefinite contingencies do not make the defendant any more informed about the consequences of his plea. The contrary analysis offered by 1

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INTRODUCTION

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litmus test for best practices.

There is no need to stretch the court rule or due process because there is another process tailored-made for this circumstance: the rule-making process. If this Court has identified a potential blind spot in the plea-taking process, it can study the issue through the rule-making process and rely on the collective perspective of the members of the bench and bar who can advise this Court on both the benefits and the consequences of requiring trial courts to give this kind of information as part of the plea colloquy.

And if this Court concludes that a constitutional solution is necessary, the better place to find it is in the Sixth Amendment and the right to effective assistance of counsel. Counsel, after all, is the constitutional actor best positioned to ensure that defendants have all the information they need to make a fully informed decision based on their individual circumstances—including the possibility of consecutive sentencing.

Because neither the court rule (as presently written) nor due process require a defendant be informed about the possibility of consecutive sentencing, the People ask this Court to deny defendant’s application for leave to appeal and, if it believes it is warranted, address this issue using its constitutional rule-making authority.

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defendant and the dissenting judge below threaten to convert due process into a

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In late 2014, Kelly Warren was charged with operating a motor vehicle while intoxicated, third offense, and operating with a suspended license, second offense.

(Joint Appendix [JA], at 43a.) Sixth months later, while he was free on bond awaiting trial, Warren picked up another set of the same charges. (JA, at 49a.)

Warren agreed to plead guilty to both drunk-driving charges in exchange for the dismissal of the other charges. (JA, at 3a.) At Warren’s plea hearing, the trial court informed him of the maximum sentence for each offense (five years), but it did not explicitly mention that it had the discretionary authority to stack the sentences.

(Id.) After determining that Warren was voluntarily pleading guilty and eliciting a factual basis for both charges, the trial court accepted Warren’s pleas. (JA, at 3a– 10a.)

In the lead-up to Warren’s sentencing, the probation department prepared a presentence investigation report. In it, the probation department informed the trial court that it had the discretionary authority to impose consecutive sentences because Warren committed the second offense while on bond for the first. (PSIR, at 2.) See MCL 768.7b. Following the probation department’s recommendation, the trial court exercised its discretion in favor of consecutive sentences of 24-to-60 months, citing Warren’s lengthy criminal history and proclivity for alcohol-related offenses documented in his presentence investigation report. (JA, at 19a–21a.)

Several months later, with the help of new counsel, Warren changed his mind. He moved to withdraw his plea, arguing that the plea-taking process was constitutionally defective because he was not specifically advised that the trial court 3

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The trial court denied the motion (JA, at 29a), and the Court of Appeals denied the ensuing application for leave to appeal. People v Warren, unpublished order of the Michigan Court of Appeals, entered Nov 1, 2016 (Docket No. 333997). On appeal from that decision, this Court remanded the case for consideration as on leave granted. (JA, at 30a.)

The Court of Appeals, in a split decision, rejected Warren’s claim that the trial court had a duty to inform him of the possibility of consecutive sentencing before accepting his plea. People v Warren, unpublished opinion per curiam of the Court of Appeals, issued May 17, 2018 (Docket No. 333997), unpub op at 1; (see also JA, at 31a.) The majority (M.J. KELLY and CAMERON, J.J.) held that the plain language of Rule 6.302 did not require advice about the possibility of discretionary consecutive sentencing. (JA, at 34a–35a.) The majority also concluded that due process did not require advice about discretionary consecutive sentencing because it was not a “direct consequence” of pleading guilty. (JA, at 35a.)

One judge (GLEICHER, J.) dissented, contending that both Rule 6.302 and due process required trial courts to inform defendants about the possibility of consecutive sentences because, like habitual offender enhancements, consecutive sentences affect a defendant’s “true potential maximum sentence.” (JA, at 39a– 40a.)

Warren appealed, and this Court ordered argument on the application. It asked the parties to file supplemental briefs on “whether, when a defendant’s plea

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had the discretionary authority to impose consecutive sentences. (See JA, at 28a.)

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consecutive sentences, the court must advise the defendant of that possibility before the court may accept the plea,” directing the parties’ attention to the Due Process Clauses of the Michigan and United States Constitutions and Michigan’s court rule on acceptance of guilty pleas, Rule 6.302. (JA, at 42a.) Consistent with this Court’s usual approach of avoiding constitutional questions if possible, see Snyder v Charlotte Pub Sch Dist, Eaton Cty, 421 Mich 517, 533 (1984), the People begin with the court rule.

ARGUMENT I.

Rule 6.302 does not require trial courts to inform defendants about the possibility of consecutive sentences before accepting their guilty pleas.

Rule 6.302 governs the procedure by which a trial court may accept a

criminal defendant’s plea of guilty or nolo contendere. As it presently stands (and as it stood at the time Warren pleaded guilty), it provides that “[t]he court may not accept a plea of guilty or nolo contendere unless it is convinced that the plea is understanding, voluntary, and accurate”—three defining criteria of a constitutionally valid guilty plea. MCR 6.302(A). The subrules that follow, Rule 6.302(B) through (D), prescribe detailed requirements for satisfying each of those three constitutional requirements.

Rule 6.302(B) sets out the requirements for establishing that a plea is understanding. Relevant here, the Rule requires courts to advise defendants of:

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of guilty or no contest will subject him to the court’s discretion to impose

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The question is whether this provision, and the emphasized language in particular, requires the trial court to inform a defendant about the possibility of discretionary consecutive sentences. That question is answered first and foremost by the plain language, followed by some informative history that all but settles the matter.

A.

The plain language of Rule 6.302 does not require trial court to inform defendants about the possibility of consecutive sentences.

First things first: the plain language. See Haliw v City of Sterling Heights, 471 Mich 700, 705 (2005) (“When called upon to interpret and apply a court rule, . . . this Court begins with the language of the court rule.”).

Two features of the text stand out. First, the court rule refers not just to any “maximum possible prison sentence,” but to “the maximum possible prison sentence for the offense.” MCR 6.302(B)(2) (emphasis added). The rule, in other words, is offense-specific, referring to the maximum sentence for each offense to which the defendant is pleading guilty. Second, the phrase “maximum possible prison sentence” is a variation on a term well known in Michigan sentencing law, “maximum sentence,” that refers to the maximum amount of time the defendant could possibly serve in prison, as defined by the statute of offense. See People v Babcock, 469 Mich 247, 256 n 7 (2003). Taking these textual features together, Rule 6.302(B)(2) requires trial courts to inform defendants about the statutory

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the maximum possible prison sentence for the offense and any mandatory minimum sentence required by law, including a requirement for mandatory lifetime electronic monitoring under MCL 750.520b or 750.520c[.] [MCR 6.302(B)(2) (emphasis added).]

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happened here. (See JA, at 3a.)

Warren offers a different reading. He contends that the rule refers to the aggregate or effective sentence that a defendant must serve as a result of multiple offenses. (Def’s Supp Br, at 5.) That reading not only ignores the textual clues cited above, it is out of sync with Michigan sentencing law more generally. Defendants in Michigan do not serve one sentence for every case file (or in this case, two files).

They serve a separate sentence for every offense of conviction. See MCL 769.1(1); MCL 769.8(1). (JA, at 24a, 26a.) Interpreting “maximum possible prison sentence” as Warren does would introduce a novelty into Michigan law. There is no reason to endorse such an inventive reading when a much more sensible reading is readily available.

Warren’s reading also wrongly assumes that consecutive sentencing increases a defendant’s “maximum sentence,” as that term is known in Michigan law. It doesn’t. The Court of Appeals in People v Bonner, put it best: “The effect of consecutive sentencing is not to increase the maximum punishment prescribed for the second offense but merely postpones the time at which the second sentence will commence.” 49 Mich App 153, 160 (1973); see also People v Johnson, 57 Mich App 117, 120 (1974). This Court, too, has recognized the same: “The essence of consecutive sentencing is that two or more sentences, each not exceeding the maximum punishment allowable by law, are placed end to end.” People v Harden, 434 Mich 196, 202 (1990) (emphasis added).

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maximum sentence for each offense to which he is pleading guilty—precisely what

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Warren’s contrary argument asks this Court read into the rule language that it has twice rejected.

If there is any doubt about the correct interpretation of Rule 6.302(B)(2), a little history (and case law) should dissolve it. The history picks up in the early 1970s, when this Court was in the midst of a nearly decade-long process of revising its guilty-plea rule. See Note, Criminal Procedure – New Standards and Procedures for Accepting Guilty Pleas, 22 Wayne L Rev 1463, 1470–1476 (1976) (recounting the process). By 1971, with mounting confusion around guilty pleas despite “dozens of individual cases” aimed at bringing clarity to the area, People v Taylor, 383 Mich 338, 354 (1970), this Court concluded that the best way to tackle the problem was “the development of an effective rule” through the rule-making process, People v Williams, 386 Mich 277, 293 (1971).

To that end, this Court created the Supreme Court Guilty Plea Standards Committee and offered Suggested Guilty Plea Guidelines as a starting point for the committee’s work. Id. at 296–304. Relevant here, this Court suggested that the new rule require the trial court to “personally inform defendant of the maximum sentence prescribed by law, and, if there is a mandatory minimum sentence, the minimum sentence prescribed by law . . . [.]” Id. at 303. In a footnote attached to that suggested rule, this Court drew the committee’s attention to Section 1.4(c)(i) of the ABA Standards Relating to Pleas of Guilty, which provided that the trial court must inform the defendant “of the maximum possible sentence on the charge including that possible from consecutive sentences[.]” Id. at 303 n 9 (emphasis added).

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proposed rule—which this Court later adopted without change—required the trial court to inform the defendant of “the maximum sentence and the mandatory minimum sentence, if any, for the offense to which the plea is offered.” In the Matter of the Amendment of GCR 1963, 785, unpublished order of the Michigan Supreme Court, entered May 15, 1972, p 3 (publishing proposal for public comment) (Exhibit 1 to People’s Supp Br); see also 389 Mich lv (promulgating revised court rule). Missing from the committee’s proposal and this Court’s final rule was the ABA’s consecutive sentence language that this Court highlighted for the committee.

The absence did not go unnoticed. In People v Larkins, the Court of Appeals was confronted with whether the new court rule required trial courts to advise defendants about possible consecutive sentencing. 59 Mich App 199, 200 (1975).

The court observed that “[w]hile this rule was in the process of development the Supreme Court considered and rejected language in the ABA Standards Relating to Pleas of Guilty which required the court to inform the defendant of the possible effect on the maximum sentence resulting from the imposition of consecutive sentences.” Id. at 201. Larkins therefore rejected the defendant’s claim, “declin[ing] . . . to add by judicial construction what the Supreme Court omitted in drafting.” Id. at 202; see also People v Bennett, 76 Mich App 264, 267 (1977) (following Larkins and stating that “such a requirement must come from the Supreme Court either by way of amendment to GCR 1963, 885.7, or by case law”); People v Cummings, 84 Mich App 509, 514 (1978).

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The committee finished its work several months later. Relevant here, the

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plea rule did not require advice about possible consecutive sentencing. On November 4, 1981, this Court issued a proposed amendment to GCR 785 to require trial courts inform defendants of “the maximum possible prison sentence for the offense, including that possible from consecutive sentences[.]” Proposed amendment to GCR 1963, 785, unpublished order of the Michigan Supreme Court, entered Nov 4, 1981, p 1 (emphasis in original to denote proposed language) (Exhibit 2 to People’s Supp Br). The proposal went nowhere. The reasons why are unclear,1 but what is clear is that this Court never adopted the proposed additional language.

This bit of history, which is appropriate to consider if this Court has any reservations about the correct interpretation of the text, puts Warren’s textual argument in a whole new light.2 Cf. In re Certified Question from US Court of Appeals for Sixth Circuit, 468 Mich 109, 115 n 5 (2003) (“[L]egitimate legislative history include[s] . . . actions of the Legislature in considering various alternatives

Inquiries with this Court’s Administrative Counsel’s Office and the State of Michigan Archives indicate that the records pertaining this proposed rule change (ADM No. 498, aka ADM No. 81-48) are likely located in this Court’s off-site storage location in box RC# 671040.

1

It also drives home why so many of the cases that Warren claims support his position, in fact, support the State’s. Five of the ten states Warren cites have court rules that, unlike Michigan’s, explicitly require information about the possibility of consecutive sentences. See People v Peters, 738 P2d 395 (Colo Ct App, 1987) (observing that state court rule explicitly requires advice about possibility of consecutive sentencing); West v State, 480 NE2d 221 (Ind, 1985) (same); Bozeman v State, 686 So 2d 556, 558 (Ala Crim App, 1996) (same); IL CS S Ct Rule 402(a)(2) (explicitly requiring advice about consecutive sentencing); Ga Uniform Superior Court Rule 33.8(C)(3) (same). These prove the People’s point: this Court could have written a court rule that required this information, but it chose not to—twice.

2

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Several years later, this Court itself acknowledged that Michigan’s guilty-

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enacted.”). Warren’s argument essentially invites this Court to read into Rule 6.302(B)(2) language that it has twice declined to write in. The refrain heard often in the statutory construction context provides the answer to that invitation: “[T]his Court [as decision-maker] will not read words into a [court rule] that [this Court as rule-maker] has excluded.” People v Gloster, 499 Mich 199, 201 (2016).

In light of this history, and the plain-language interpretation set out above showing that “maximum possible prison sentence” refers only to the statutory maximum for each individual offense, this Court should hold that Rule 6.302(B)(2) does not require trial courts to inform defendants about the possibility of consecutive sentencing (that is, if it does not deny leave to appeal).

II.

Due process does not require defendants to know about the possibility of consecutive sentencing in order to enter a knowing guilty plea.

Both the Michigan Constitution and the United States Constitution preclude

the government from depriving a person of life, liberty, or property without due process of law. US Const, Am XIV; Const 1963, art 1, § 17.3 Due process requires that a criminal defendant pleading guilty do so (1) competently, (2) voluntarily, (3) Although Michigan’s Due Process Clause “may, in particular circumstances, afford protections greater than or distinct from” its federal counterpart, AFT Mich v Michigan, 497 Mich 197, 245 (2015), Warren has not argued that it does in this setting. Thus, this Court should assume for purposes of this case that the protections are coextensive. See In re Estate of Rasmer, 501 Mich 18, 43 (2017) (stating that proponent of constitutional error did not “urge separate interpretations, so we will not seek to determine otherwise” (quotation marks omitted)).

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in language in statutory provisions before settling on the language actually

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Kercheval v United States, 274 US 220, 223 (1927) (“Out of just consideration for persons accused of crime, courts are careful that a plea of guilty shall not be accepted unless made voluntarily after proper advice and with full understanding of the consequences.”).

At issue here is the third requirement—that the defendant enter his plea knowingly (or intelligently). To satisfy this requirement, the trial court must give the defendant sufficient information to ensure that his decision is an “intelligent choice among the alternative courses of action open to [him].” North Carolina v Alford, 400 US 25, 31 (1970). That means, first, that the defendant must have some understanding of what he is giving up. For instance, the defendant must understand the constitutional rights that would have been guaranteed to him had he proceeded to trial. McCarthy v United States, 394 US 459, 466 (1969). Second, the defendant must also have some understanding of the option is he choosing. The defendant must be aware of “the true nature of the charge against him,” Smith v O’Grady, 312 US 329, 334 (1941), as well as “the direct consequences” of entering a guilty plea, Brady v United States, 397 US 742, 755 (1970). The question here, then, is whether the possibility of discretionary consecutive sentences is a “direct consequence” of entering a guilty plea.

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knowingly, and (4) with the benefit of effective assistance of counsel. See, e.g.,

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The possibility of consecutive sentencing is not a “direct consequence” of pleading guilty.

The Supreme Court never elaborated on what it means to be a “direct consequence” of a guilty plea, leaving lower courts to add meat to the bare-bones standard. The prevailing standard used by most courts, including this one, asks “whether the result represents a definite, immediate and largely automatic effect on the range of the defendant’s punishment.” Cuthrell v Patuxent Institution Director, 475 F2d 1364, 1366 (CA 4, 1973); see also People v Cole, 491 Mich 325, 333–334 (2012); Jenny Roberts, Ignorance Is Effectively Bliss: Collateral Consequences, Silence, and Misinformation in the Guilty-Plea Process, 95 Iowa L. Rev. 119, 131 (2009) (“Almost all jurisdictions follow the collateral-consequences rule.”); 5 LaFave, Criminal Procedure, § 21.4(d) (4th ed) (describing it as “conventional wisdom”). Those consequences that do not meet this definition are considered “collateral” and are not required to be part of the plea colloquy.

Here, the constitutional analysis under the traditional direct/collateral framework is relatively straightforward: The discretionary authority to impose consecutive sentences does not represent a definite, immediate, or automatic effect because it depends on the trial court’s later exercise of discretion. United States v Kikuyama, 109 F3d 536, 537 (CA 9, 1997) (stating that the constitutional analysis “turns on whether the district court had discretion to impose a consecutive sentence.”); McGrew v State, 286 SW3d 387, 391 (Tex App, 2008) (“A consequence has been defined as collateral, rather than direct, where it lies within the discretion of the court whether to impose it[.]” (quotation marks omitted)).

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court’s) whether the court will exercise its discretion to impose consecutive sentences. That exercise of discretion depends on facts developed after the defendant pleads guilty that are not known with any certainty until sentencing.

Because discretionary consecutive sentencing is an unfixed, indeterminate consequence that may or may not come to pass, under the controlling direct/collateral dichotomy endorsed by this Court in Cole, it is not a “direct consequence” that a defendant must be told before pleading guilty.

That, at any rate, is what appears to be the universal wisdom of the federal courts of appeals,4 as well as a number of state courts.5 The rationale behind these cases and the consensus position of drawing the constitutional line at definite and automatic consequences is sound.

See, e.g., United States v Ocasio-Cancel, 727 F3d 85, 90 (CA 1, 2013); Wilson v McGinnis, 413 F3d 196 (CA 2, 2005); Paradiso v United States, 482 F2d 409, 415 (CA 3, 1973); United States v Fentress, 792 F2d 461, 465 (CA 4, 1986); United States v Saldana, 505 F2d 628, 629 (CA 5, 1974) (per curiam); United States v Gaskin, 587 F App’x 290, 297 (CA 6, 2014); Faulisi v Daggett, 527 F2d 305, 309 (CA 7, 1975); Clemmons v United States, 721 F2d 235, 238 (CA 8, 1983); United States v Rubalcaba, 811 F2d 491, 494 (CA 9, 1987); United States v Hurlich, 293 F3d 1223, 1231 (CA 10, 2002); United States v Humphrey, 164 F3d 585, 587 (CA 11, 1999).

4

To the extent there is contrary federal authority, it involves mandatory consecutive sentencing. See United States v Neely, 38 F3d 458, 460 (CA 9, 1994) (defendant must be told that his federal sentence must run consecutively to state sentence); but see Kikuyama, 109 F3d at 538 n 3 (distinguishing Neely as involving mandatory consecutive sentencings).

5 See, e.g., State v Wesley, 640 P2d 177, 179 (Ariz, 1982); State v Irish, 394 NW2d 879, 883 (Neb, 1986); Rosemond v State, 756 P2d 1180, 1181 (Nev, 1988); McGrew, 286 SW3d at 391.

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At the time a defendant pleads guilty, it is anyone’s guess (including the trial

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basic information necessary to make an intelligent choice, and no more. Patterson v Illinois, 487 US 285, 294 (1988) (holding that waiver is knowing upon “the State’s showing that the information it provided to him satisfied the constitutional minimum”). “Of course, the more information the defendant has, the more aware he is of the likely consequences of a plea, waiver, or decision, and the wiser that decision will likely be.” United States v Ruiz, 536 US 622, 629 (2002). But the Supreme Court “has never embraced the theory that a defendant’s ignorance of the full consequences of his decisions vitiates their voluntariness.” Oregon v Elstad, 470 US 298, 316 (1985); Ruiz, 536 US at 629 (holding that due process does not require “complete knowledge of the relevant circumstances”).

In ensuring that defendants have the minimum information necessary for an informed decision between available alternatives, the Constitution draws the line at indefinite and unknowable consequences because, by their very nature, they do not meaningfully enhance a defendant’s ability to make an intelligent decision. Indeed, the Supreme Court has consistently rejected the view that a guilty plea is invalid if the defendant did not know a fact that later proved to be consequential, including misapprehension of “the likely penalties.” See Brady, 397 US at 757; Ruiz, 536 US at 630–631 (citing cases). Having knowledge about those consequences, like the possibility of discretionary consecutive sentencing, may provide the defendant with “more information” and perhaps make the decision “wiser,” Ruiz, 536 US at 629, but

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Due process, after all, is concerned with ensuring that defendants have the

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guilty—only what might happen.

And, like everything else in the due process arena, the constitutional calculus is a balancing act. See Morrissey v Brewer, 408 US 471, 481 (1972) (“[D]ue process is flexible and calls for such procedural protections as the particular situation demands.”). In the guilty-plea context, the Supreme Court has been careful not to impose due process requirements at the cost of unreasonable burdens on the administration of justice. See Ruiz, 536 US at 632 (rejecting the proposition that due process requires defendants know the government’s impeachment evidence because it would “demand[ ] so radical a change in the criminal justice process in order to achieve so comparatively small a constitutional benefit.”).

Trial courts are called on to inform defendants about determinate, known consequences like the nature of the charges and the maximum sentence for each offense because that information is easily ascertainable and known to the trial court. See, e.g., FR Crim P 11 advisory committee note (1975) (“This information is usually readily ascertainable from the face of the statute defining the crime, and thus it is feasible for the judge to know specifically what to tell the defendant.”).

That cannot be said for discretionary consecutive sentencing under MCL 768.7b, which authorizes consecutive sentencing for a second offense that a defendant commits while out on bond for a pending offense. If that second offense occurs in a different county, or the first case has not progressed far enough to be on the trial court’s radar, the trial court may not know that consecutive sentencing is a

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they are not concrete information about what will happen as a result of pleading

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common thread among the cases is that “it is simply impracticable for a trial judge to advise the defendant of all possible consequences, especially because often the judge will not be aware at the time of the plea of the special circumstances which would make some of those consequences possible”).

This Court has recognized as much in its role as rule-maker. This Court has promulgated only one court rule requiring the provision of information regarding the possibility of consecutive sentences. It is not in Rule 6.302, but Rule 6.425—a court rule dedicated to the trial court receiving information, not giving it. See MCR 6.425(A)(1) (requiring the probation officer to “report” certain information “to the court”). More specifically, it requires the probation department to include in its presentence investigation report “a statement prepared by the prosecutor on the applicability of any consecutive sentencing provision.” MCR 6.425(A)(1)(i). With this rule, this Court tacitly recognized the practical reality that trial courts are not well positioned at the time of a guilty plea to know whether consecutive sentencing under MCL 768.7b is available.

Requiring as a matter of due process that trial courts determine before every guilty plea hearing whether discretionary consecutive sentencing is possible would impose a significant burden on trial courts and prosecutor offices, a burden that, in many cases, would not produce a meaningful benefit because information about discretionary sentencing may not be reliably available at such an early stage in the proceedings. The kind of dramatic change called for by Warren’s argument should

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possibility. Cf. 5 LaFave, Criminal Procedure, § 21.4(d) (4th ed) (observing that a

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the plea colloquy. See Ruiz, 536 US at 632.

In sum, due process represents the constitutional floor. It requires the bare minimum of information that a defendant must have to make an informed choice: (1) the constitutional rights being waived, (2) the nature of the offenses at issue, and (3) the direct consequences of the plea. Under the prevailing definition, direct consequences do not include those things that are merely a “possibility” that “might” happen in the future. Cuthrell, 475 F2d at 1366. Because the discretionary consecutive sentencing at issue here is merely a “possibility” that only “might” happen in the future, it is not a definite or largely automatic effect of pleading guilty. The Constitution does not require that it be told to the defendant before he pleads guilty.

B.

The contrary constitutional analysis either misapplies accepted law or relies on a new standard that bears little resemblance to the Supreme Court’s due process jurisprudence.

Warren’s Constitutional Analysis. Warren largely avoids analyzing the issue under the prevailing framework, arguing instead that discretionary consecutive sentencing is a direct consequence because it is “punitive.” (Def’s Supp Br, at 7–8.)

In support, he cites this Court’s decision in Cole, which, in the process of holding that mandatory lifetime electronic monitoring is a “direct consequence,” found that it constituted “punishment” using the “intent-effects” test. 491 Mich at 334–336.

Warren’s argument is based on the (incorrect) premise that the punishment inquiry

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give this Court considerable pause before it solidifies it as a permanent fixture of

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question in this context. (Cf. Def’s Supp Br, at 7.) Correcting the premise reveals that Warren’s reading of Cole (and his reliance on it) is misplaced.

Start with the premise. It is true, as this Court observed in Cole, that the basic direct/collateral inquiry applied above is not the only inquiry courts use to decide whether a consequence must be part of the guilty plea colloquy. 491 Mich at 333–334, citing Jenny Roberts, The mythical divide between collateral and direct consequences of criminal convictions: Involuntary commitment of “sexually violent predators,” 93 Minn LR 670, 689–693 (2008). But a close reading of the cases applying those different tests reveals that they are not alternative, stand-alone inquiries courts use to conclude that due process requires certain information.

Rather, they are additional inquiries that courts use to conclude that “definite, immediate, and largely automatic” consequences are nonetheless not “direct consequences” and, thus, need not be part of the colloquy.

The leading case involving the punishment inquiry that Warren asks this Court to apply, Mitschke v State, 129 SW3d 130 (Tex Crim App, 2004), is a good example of the analysis in action. In that case, the court found that mandatory sex offender registration was a definite and automatic consequence of a guilty plea. Id. at 135. Under the basic direct/collateral inquiry, that would end the inquiry and due process would require trial courts to provide that information. But, the court added a caveat: “Even if the consequence is direct,” Mitschke added, “imposition of it without admonishment might still be justified as remedial and civil rather than

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serves as an independent, alternative framework for answering the due process

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not punitive, the failure to advise about it did not violate due process. Id. Thus, the punishment inquiry, properly understood, is not a sufficient basis to find that something is direct consequence that trial courts must advise defendants about before pleading guilty. See also 5 LaFave, Criminal Procedure, § 21.4(d) (4th ed.) (“Sometimes, however, the characterization of the impediment as other than ‘punishment,’ no matter how certain it was as a consequence of the guilty plea, is deemed conclusive.”). Stated another way, the fact that a consequence is punitive is necessary, but not sufficient, for finding that due process requires trial courts to provide advice about it. Mitschke, 129 SW3d at 135; see also id. at 136–137 (KELLER, P.J., concurring) (synthesizing the court’s analysis into a two-step inquiry: Is it punitive? If so, is it definite and automatic?).

Cole applied the “punishment” inquiry in precisely this way, albeit to a different end than Mitschke. There, the question was whether mandatory lifetime electronic monitoring was a direct consequence of a guilty plea. Cole, 491 Mich at 333. This Court stated that “the prevailing distinction [between direct and collateral consequences] relied on by a majority of courts ‘turns on whether the result represents a definite, immediate and largely automatic effect on the range of the defendant’s punishment.’ ” Id. at 334, quoting Cuthrell, 475 F2d at 1366.

The decisive issue in Cole was not whether lifetime electronic monitoring was “definite, immediate and largely automatic”—the usual the area of disagreement in these cases. See e.g., id. at 333–334. Rather, the critical issue was whether it was

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punitive.” Id. Mitschke went on to hold that, because sex offender registration was

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(citing the intent-effects test from Smith v Doe, 538 US 84, 92 (2003) as the framework for “determining whether a statute imposes punishment or is nonpunitive”). Applying that test, Cole concluded that lifetime electronic monitoring was punishment because the Legislature intended it to be. Id. at 335– 336.

But that was not the end of the due process analysis. This Court took one additional step, albeit a short one, to reach its conclusion. Implicitly relying on its earlier finding that lifetime electronic monitoring is mandatory, see id. at 335–336 (quoting statute’s mandatory language), this Court said, “[T]he sentence of mandatory lifetime electronic monitoring constitutes a result of the plea that has ‘a definite, immediate and largely automatic effect on the range of the defendant’s punishment.’ ” Cole, 491 Mich at 337, quoting Cuthrell, 475 F2d at 1366.

Thus, Cole’s holding was the product of two distinct findings: (1) it was “punishment,” and (2) it was “definite, immediate and largely automatic.” The second finding was just as crucial to its holding as the first, as evidenced by Cole’s later statements that “the defendant must be aware of the immediate consequences that will flow directly from his or her decision” and that “when the governing criminal statute mandates that a trial court sentence a defendant to lifetime

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“punishment”—hence, the application of the intent-effects test. See id. at 334

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of that fact. Id.6 In Cole, the mandatory nature of lifetime electronic monitoring, coupled with the fact that the consequence qualified as punishment, added up to the definition of “direct consequence”: “a [1] definite, immediate and largely automatic effect on the range of [2] the defendant’s punishment.’ ” Id., quoting Cuthrell, 475 F2d at 1366.

Here, Warren is missing that crucial first variable of the equation. Without it, he cannot say, as he does in his brief, that the consecutive sentencing is “part of the sentence itself.” (Def’s Supp Br, at 7.) Cole was able to say that only because the consequence there was punitive and mandatory. The same is not true here. At the time of the plea hearing, it was entirely unclear whether consecutive sentences would be “part of the sentence.” In that uncertain and indefinite posture, the trial court is not constitutionally required to advise the defendant about a possible consequence that does not automatically flow from pleading guilty.

Amicus CDAM’s Constitutional Analysis. In addition to echoing his Cole argument, Warren’s supporting amicus makes an additional point that warrants a brief response. CDAM suggests that the default sentencing posture—that is,

Warren’s supporting amicus overlooks this important facet of Cole when it asserts that “According to the Cole decision, when the legislature intends punishment, includes the additional punishment in the penalty section of the statute and directs or authorizes the additional punishment as part of the sentence, the punishment (in that case lifetime electronic monitoring) becomes a direct consequence of the plea.”

(CDAM Br, at 3 (emphasis added).) The Legislature didn’t just “direct or authorize” the punishment in Cole. It mandated it. See MCL 750.520b(2)(d) (“[T]he court shall sentence the defendant to lifetime electronic monitoring . . . .”).

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electronic monitoring, due process requires the trial court to inform the defendant”

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constitutional analysis. (CDAM Br, at 8.) CDAM contends that the bulk of authority rejecting Warren’s argument can be explained by the fact that, unlike Michigan, there is no default in favor of concurrent sentencing in those jurisdictions. (Id. at 8–11.) Because Michigan has a presumption in favor of concurrent sentencing, CDAM says, “there can be no implicit understanding that consecutive sentencing rests within the trial court’s sentencing discretion when sentencing for multiple convictions.” (Id. at 11.)

First, there is no support in the Supreme Court’s guilty-plea due process jurisprudence for the proposition that the components of a “knowing” guilty plea depend on such vagaries as the default sentencing position of the trial court. In fact, due process assumes that the accused does not know the pertinent information unless he is informed by the trial court on the record. See Boykin v Alabama, 395 US 238, 243 (1969) (“We cannot presume a waiver of these three important federal rights from a silent record.”); id. at 244 (agreeing “there was reversible error because the record does not disclose that the defendant voluntarily and understandingly entered his pleas of guilty” (quotation marks omitted)). Thus, if information about the possibility of consecutive sentencing were a required component of a knowing guilty plea, the “implicit” understanding defendants have from the court’s unspoken practice would not—indeed, could not—validate the plea colloquy under the Supreme Court’s due process jurisprudence.

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whether concurrent or consecutive sentencing is the norm—is relevant to the

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In that case, CDAM’s argument is self-defeating. CDAM contends that defendants in Michigan assume they are facing concurrent sentencing unless they are told otherwise. (CDAM Br, at 11–12.) The quiet premise there is the fiction that defendants are presumed to know the law. See People v Garska, 303 Mich 313, 322 (1942) (“[The defendant] is presumed to have known the law.”). But we cannot indulge the fiction selectively. If defendants are presumed to know that concurrent sentencing is the norm, then they are also presumed to know that consecutive sentencing is a possibility when they commit a second crime while on bond for another one. See People v Jones, 459 Mich 902 (1998) (Boyle, J., dissenting statement), order vacated on reconsideration, 459 Mich 959 (1999) (“Defendants are presumed to know the law, and are thus presumed to know that under § 7b subsequent offenses may be punished consecutively.”). CDAM imputes just enough knowledge to make its point but stops short of imputing the kind of knowledge that would defeat it. Amicus cannot have it both ways.

The Michigan Court of Appeals Dissent’s Constitutional Analysis. Unsatisfied with the direct/collateral framework and associated inquiries altogether, the dissenting judge below offered a competing constitutional standard that would require trial courts to inform defendants about “sentencing choices available to the court that likely would factor prominently in a defendant’s guilty plea decision process.” (JA, at 40a.) Warren does not ask this Court to adopt that approach, and for good reason. It expands due process’s coverage to all sorts of conceivable

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But assume the Constitution tolerates imputing knowledge to the accused.

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principled limitation.

A few examples should suffice to make the point. A trial court’s sentencing guidelines scoring decisions, which are unknown at the time of pleading guilty, have a substantial influence on a defendant’s ultimate sentence and, thus, decisional calculus. Yet, due process has never required trial courts to inform a defendant of his guidelines range. See, e.g., United States v DeFusco, 949 F2d 114, 118 (CA 4, 1991) (collecting cases). The same goes for the trial court’s exercise of discretion in choosing a defendant’s sentence, which is certainly something that would “factor prominently” into a defendant’s decision to plead guilty. Due process has never required information about that decision. See, e.g., Lewis v United States, 601 F2d 1100, 1101 (CA 9, 1979) (“[T]he court [need not] inform the defendant of the probability of his receiving one sentence or another. Indeed, it is improper to do so.”). So, too, for defendants eligible for probation. No doubt, those defendants are keen to know what kind of probation lay in store for them. But courts “cannot and do not require a trial judge to be clairvoyant and inform the defendant, when accepting his plea, of all potential conditions of probation that may later be imposed.” State v Cutler, 590 P2d 444, 446 (Ariz, 1979).

These discretionary consequences have just as much potential for increasing the severity of punishment as consecutive sentences and may, in a given case, “factor prominently” in a defendant’s guilty plea calculus. (Cf. JA, at 40a.) Nothing in the standard offered by the dissenting judge below would limit its application

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consequences that a defendant may consider important with hindsight, without any

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Michigan and elsewhere, are not currently required to inform defendants about.

More important, the standard bears little resemblance to the Supreme Court’s cautious approach to constitutionalizing this area of the criminal justice system through due process. See Elstad, 470 US at 316 (noting that the Supreme Court “has never embraced the theory that a defendant’s ignorance of the full consequences of his decisions vitiates their voluntariness.”); Ruiz, 536 US at 629 (holding that due process does not require “complete knowledge of the relevant circumstances”). In stark contrast to that cautious approach, which values stability and consistency in application, the “factor prominently” standard is largely subjective. Apparently recognizing this, the dissenting judge quickly qualified the standard as capturing only those consequences that “reasonably” factor into the decisional calculus. (JA, at 40a.) But even that qualification is not enough: what may reasonably factor into one defendant’s decision may not for another, leaving courts with nothing more than a “Rorschach ink blot[]” for a constitutional standard. Cf. Justice Robert P Young, Jr, A Judicial Traditionalist Confronts Justice Brennan’s School of Judicial Philosophy, 33 Okla City U L Rev 263, 264 (2008) (advocating against “treat[ing] constitutional provisions or laws like Rorschach ink blots”).

In sum, the alternative constitutional analyses offered by the defense and dissenting judge either misapply settled law or rely on an unprecedented standard that threatens to resurrect the confusion and uncertainty that plagued our guilty

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from reaching these and other discretionary punitive sanctions that trial courts, in

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293. This Court should reject those approaches and hold, consistent with the vast majority of courts addressing these issues, that due process requires a consequence be explained to a defendant only if it is a “definite, immediate, and largely automatic” consequence of pleading guilty. Because the possibility of discretionary consecutive sentencing does not meet that definition, it is not a constitutionally required component of the plea colloquy. *** Naturally, the focus of the discussion in this case is the process that Rule 6.302 (as presently written) and the Constitution require trial courts to undertake before accepting guilty pleas and whether it must include advice about the possibility of discretionary sentencing. The answer to that question, for the reasons discussed so far, is “no.” But it is important to emphasize what that answer does not mean. The People are not arguing that defendants should be deprived of this information; we agree in principle that it is beneficial for defendants to have this information. Nor do we dispute that best practice is to provide defendants as much as information as possible under the circumstances. But due process and best practices are not synonymous, which leads the second question of process lying just below the surface of this case: the process by which this Court solves perceived problems in the administration of its criminal justice system.

This Court, of course, can address issues like this one through the judicial process—the most prominent and perhaps most frequently used approach. But not

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plea process in the early 1970s. See Taylor, 383 Mich at 354; Williams, 386 Mich at

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toolkit. There is another process available to the Court to address this issue, one that can produce a far better result: the administrative rule-making process.

That process, which invites input from all interested stakeholders, will yield a more fully informed and vetted rule that accounts not just for the “easy” cases, but the unique and infrequent cases that the Court might not be considering during the judicial process. The administrative process also gives this Court elbowroom to reshape the rule more easily if problems arise with its application. The same is not true of a constitutional standard established in the adjudicative setting, where finding the right case to address a solution requires a fisherman’s patience, and where holdings are quickly hardened by stare decisis principles. Simply put, the Court can easily redline its court rules; it cannot redline the Michigan Reports. It is for this very reason that this Court resorted to the rule-making process to solve problems in the plea-taking process that proved unsolvable through the judicial process. See Taylor, 383 Mich at 354; Williams, 386 Mich at 293.

Thus, if there is a deficiency in the current plea-taking process, the better course is to dust off ADM No. 81-48, republicize it for public comment, and consider incorporating some form of the proposed language into Rule 6.302.

If, however, this Court believes that a constitutional solution is necessary, the more sensible place to find it is under the Sixth Amendment and the right to effective assistance of counsel. See generally, Padilla v Kentucky, 559 US 356 (2010) (requiring counsel to inform defendants of mandatory deportation

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every problem need be a nail when you have more than just a hammer in your

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that a common thread among the cases rejecting due process challenges “is that defense counsel should be expected to discuss with his client the range of risks attendant his plea”). Counsel, after all, is the constitutional actor with the closest relationship with the criminal defendant. That close relationship means two things: first, as a fiduciary, counsel is best positioned to advise the accused on all the important issues in a given case; and second, as a constituent of the attorney-client privilege, counsel will often know more facts about the defendant’s legal circumstances and, thus, whether consecutive sentencing is a possibility. And the established procedure for litigating ineffective-assistance claims (Ginther remands and hearings) will also provide a more efficient process for ascertaining whether the defendant knew about the possibility for consecutive sentencing—a procedure that is lacking if the issue is considered under the due process rubric.

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consequences of pleading guilty); 5 LaFave, Criminal Procedure, § 21.4(d) (noting

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For these reasons, the People respectfully ask this Court to deny Warren’s application for leave to appeal and, if necessary, address any deficiencies in the guilty plea process in its administrative rule-making capacity.

Respectfully submitted, B. Eric Restuccia Deputy Solicitor General /s/

David Porter

Assistant Attorney General Attorneys for the People Plaintiff–Appellee Criminal Appellate Division P.O. Box 30217 Lansing, MI 48909 (517) 335-7650 P76785 Dated: June 18, 2019

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CONCLUSION AND RELIEF REQUESTED

INTRODUCTION PEOPLE OF THE STATE OF MICHIGAN, v GARY GILMORE,

Plaintiffs-Appellee,

Defendant-Appellant.

BRIEF ON APPEAL OF DEFENDANTS-APPELANTS ABSTRACT In People v Gary Gilmore, the issue before the Michigan Supreme Court was whether the defendant, who had pleaded guilty to the charges of organized retail crime and using a computer to commit a crime, had waived appellate review of the trial court’s order that he pay $18,000 in restitution to Home Depot. In their brief, the People reviewed the history and purpose of restitution payable by defendants to crime victims in the State of Michigan, the long-standing legal concepts of waiver and forfeiture of errors committed in the trial court, and defendant’s actions in this case. The People argued that defendant’s failure to object at sentencing to the trial court’s restitution order, coupled with defense counsel’s affirmation as to the accuracy of the presentence report—which indicated that defendant must pay $18,000 in restitution to Home Depot—constituted a waiver extinguishing any error.

BIOGRAPHICAL STATEMENT AMANDA MORRIS SMITH Amanda Morris Smith is an assistant prosecuting attorney with the Wayne County Prosecutor’s Office. A 2009 cum laude graduate of Wayne State University Law School, Amanda has spent her entire career in public service, first as a staff attorney with Lakeshore Legal Aid, then as a judicial attorney to the Hon. Megan Maher Brennan in

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the Third Circuit Court. In 2016, Amanda joined the Appellate Division of the Wayne County Prosecutor’s Office. In 2019, she argued four cases before the Michigan Supreme Court, obtaining a favorable decision as the appellant in the full grant case of People v Joel Davis. Amanda is honored to receive her first Distinguished Brief Award for her work in People v Gary Gilmore, a case in which she advocated for the full, complete, and maximal restitution to a crime victim following a defendant’s guilty plea.

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______________________________________ PEOPLE OF THE STATE OF MICHIGAN, Plaintiff-Appellee, vs

Michigan Supreme Court No. 158716

GARY GILMORE, Defendant-Appellant. ______________________________________ Court of Appeals No. 334205 Circuit Court No. 16-003006-01-FH ______________________________________ On Appeal from the Court of Appeals M.J. Kelly, P.J., and Markey and Fort Hood, JJ.

PLAINTIFF-APPELLEE'S SUPPLEMENTAL BRIEF ORAL ARGUMENT REQUESTED

KYM WORTHY Prosecuting Attorney County of Wayne JASON W. WILLIAMS Chief of Research, Training, and Appeals

AMANDA MORRIS SMITH (P73127) Assistant Prosecuting Attorney 1441 St. Antoine, 11th Floor Detroit, Michigan 48226 (313) 224-5787

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STATE OF MICHIGAN IN THE MICHIGAN SUPREME COURT

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Counterstatement of Questions Presented ................................................................................... viii Counterstatement of Facts............................................................................................................... 1 Argument ...................................................................................................................................... 10 I.

Defendant—through his affirmative conduct—may waive an error for appellate review. Here, defendant agreed that the restitution amount listed in the presentence investigation report was accurate and then did not object or ask for an evidentiary hearing when the court ordered him to pay that same amount of restitution to the victim. Defendant has waived appellate review of the restitution order. ......................................................................................................................10 Standard of Review................................................................................... 10 Discussion ................................................................................................. 10 A. Crime victims in Michigan are constitutionally and statutorily entitled to receive full and complete restitution from defendants. ..................................................11 B. Appellate Courts have long recognized the importance of preserving, for appeal, an alleged error by objecting in the trial court.....................................................................14 C. Depending on the particular facts and circumstances of the case, an appellate court may find that a defendant either waived or forfeited an error in the trial court. ............16 D. For more than 20 years, this Court has held that a defendant, through his actions, can waive his opportunity for an evidentiary hearing regarding a trial court’s restitution order, and this Court’s opinions in Carines and Carter do not undercut this holding. ................17 E. The record in this case supports a finding that defendant’s affirmative conduct waived any error with respect to the trial court’s June 15, 2016 restitution order. .....................................................................................20 F. Defendant’s contention—that he did not waive review of the restitution order and, instead, adequately preserved his objection to the order—is not supported in the record or in our case law.............................................23 G. If defendant did not waive the question of his entitlement to an evidentiary hearing regarding restitution, the error was forfeited because defendant cannot establish plain error affecting his substantial rights. ....................................................................................26 -i-

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TABLE OF CONTENTS Index of Authorities ....................................................................................................................... iii

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A trial court judge necessarily abuses his discretion if he modifies the prosecutor’s plea and sentence agreement; moreover, if an actual controversy does not exist, this Court will not decide it, because the issue is moot. Here, on May 18, 2016, the People offered defendant a plea and sentence agreement that required him to pay $18,000.80 in restitution and the court refused to order that the restitution amount be established at an evidentiary hearing; weeks later, that agreement was stricken and defendant entered into a different plea. Not only did the trial court not abuse its discretion when it refused to modify the People’s plea agreement, this entire issue is moot because the May 18, 2016 plea and sentence agreement was stricken. ..........................................................................29 Standard of Review................................................................................... 29 Discussion ................................................................................................. 29 A. The trial court would have necessarily abused its discretion if it had inserted a term in the People’s May 18, 2016 plea offer and sentencing agreement—which specifically stated that defendant would pay $18,000.80 in restitution—and required, instead, that the amount of restitution be determined at an evidentiary hearing..............30 B. Because the trial court ultimately rejected the May 18, 2016 negotiated plea offer and sentence agreement, defendant’s request—that this Court rule on the legality of such agreements—is moot and should not be decided. .................................................................................33

Relief............................................................................................................................................. 39

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II.

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Case

Federal Court Cases

Page

Freytag v C.I.R., 501 US 868; 111 SCt 2631; 115 LEd2d 764 (1991).......................................................... 15, 26 Johnson v Zerbst, 304 US 458; 58 SCt 1019; 82 LEd2d 1461 (1938)............................................................ 16, 36 New York v Hill, 528 US 110; 120 SCt 659; 145 LEd2d 560 (2000)............................................................ 16, 24 Puckett v United States, 556 US 129; 129 SCt 1423; 173 LEd2d 266 (2009).......................................................... 15, 16 United States v Olano, 507 US 725; 133 SCt 1770; 123 LEd2d 508 (1993).......................................................... 16, 36 Yakus v United States, 321 US 414; 64 SCt 660; 88 LEd2d 834 (1944)...................................................................... 17 State Court Cases Anway v Grand Rapids R. Co., 211 Mich 592; 179 NW2d 350 (1920)............................................................................... 35, 36 Dearborn Twp Clerk v Jones, 335 Mich 658; 57 NW2d 40 (1953)............................................................................. 13, 17, 19 Dora v Lesinski, 351 Mich 579; 88 NW2d 592 (1958)....................................................................................... 27 Federated Publications, Inc. v City of Lansing, 467 Mich 98; 649 NW2d 383 (2002)....................................................................................... 35 G.C. Timmis & Co. v Guardian Alarm Co., 468 Mich 416; 662 NW2d 710 (2003)..................................................................................... 13 Gildemeister v Lindsay, 212 Mich 299; 180 NW2d 633 (1920)..................................................................................... 34 Herald Co. Inc v Eastern Michigan University Bd of Regents, 475 Mich 463; 719 NW2d 19 (2006)....................................................................................... 35 Hurd v People, 25 Mich 405 (1872) ................................................................................................................. 37 - iii -

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INDEX OF AUTHORITIES

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People v Allen, 295 Mich App 277; 813 NW2d 806 (2011)............................................................................. 11 People v Brocato, 17 Mich App 277; 169 NW2d 483 (1969)............................................................................... 15 People v Carines, 460 Mich 750; 597 NW2d 130 (1999).............................................................................. passim People v Carter, 462 Mich 206; 612 NW2d 144 (2000).............................................................................. passim People v Cobbs, 443 Mich 276; 505 NW2d 208 (1993)..................................................................................... 34 People v Crigler, 244 Mich App 420; 625 NW2d 424 (2001)............................................................................. 12 People v Duncan, 494 Mich 713; 835 NW2d 399 (2013)............................................................................... 29, 31 People v Fawaz, 299 Mich App 55; 829 NW2d 259 (2012)............................................................................... 12 People v Foster, 501 Mich 985; 907 NW2d 577 (2018)..................................................................................... 36 People v Franklin, 500 Mich 92; 894 NW2d 561 (2017)....................................................................................... 29 People v Gahan, 456 Mich 264; 571 NW2d 503 (1997).............................................................................. passim People v Garrison, 495 Mich 362; 852 NW2d 45 (2014)..................................................................... 11, 12, 13, 25 People v Grant, 445 Mich 535; 520 NW2d 123 (1994)............................................................................... 14, 26 People v Grant, 455 Mich 221; 565 NW2d 389 (1997).............................................................................. passim People v Hardin, 421 Mich 296; 365 NW2d 101 (1984)..................................................................................... 15 - iv -

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Mitcham v City of Detroit, 355 Mich 182; 94 NW2d 388 (1959)....................................................................................... 36

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People v Hemphill, 439 Mich 576; 487 NW2d 152 (1992)............................................................................... 23, 35 People v Killebrew, 416 Mich 189; 330 NW2d 834 (1982)............................................................................... 31, 36 People v Koonce, 466 Mich 515; 648 NW2d 153 (2002)..................................................................................... 37 People v Kowalski, 489 Mich 488; 803 NW2d 200 (2011)............................................................................... 21, 23 People v McKinley, 496 Mich 410; 852 NW2d 770 (2014).............................................................................. passim People v New, 427 Mich 482; 398 NW2d 358 (1986)..................................................................................... 24 People v Peters, 449 Mich 515; 537 NW2d 160 (1995)..................................................................................... 11 People v Pipes, 475 Mich 267; 715 NW2d 290 (2006)..................................................................................... 27 People v Richmond, 486 Mich 29; 782 NW2d 187 (2010)........................................................................... 34, 35, 36 People v Siebert, 450 Mich 500; 537 NW2d 891 (1995)............................................................................... 31, 32 People v Smith, 502 Mich 624; 918 NW2d 718 (2018)................................................................... 29, 31, 35, 36 People v Wiley, 472 Mich 153; 693 NW2d 800 (2005)..................................................................................... 34 Statutory Authorities MCL 750.157p................................................................................................................................ 1 MCL 750.248a ................................................................................................................................ 1 MCL 750.535(4)(a)......................................................................................................................... 1 MCL 752.796(1) ............................................................................................................................. 1 -v-

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People v Hart, 211 Mich App 703; 536 NW2d 605 (1995)................................................................. 14, 26, 35

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MCL 752.1084................................................................................................................................ 1 MCL 769.1a .................................................................................................................................. 11 MCL 769.12.................................................................................................................................... 1 MCL 769.34(10) ........................................................................................................................... 22 MCL 771.14(6) ............................................................................................................................. 14 MCL 780.751.......................................................................................................................... 11, 13 MCL 780.766.............................................................................................................. 11, 13, 17, 26 MCL 780.766(2) .................................................................................................................... passim MCL 780.766(8) ........................................................................................................................... 12 MCL 780.767.................................................................................................................... 11, 18, 26 MCL 780.767(1) ............................................................................................................... 12, 13, 26 MCL 780.767(2) ........................................................................................................................... 13 MCL 780.767(3) ........................................................................................................................... 13 MCL 780.767(4) .................................................................................................................... passim MCL 780.775................................................................................................................................ 11 State Rules and Regulations MCR 6.302.............................................................................................................................. 4, 6, 7 MCR 6.425(E)(1)(b) ..................................................................................................................... 14 MCR 6.425(E)(1)(f)...................................................................................................................... 12 MCR 7.212(C)(7).................................................................................................................... 10, 29 MCR 7.310(A) .............................................................................................................................. 27 MCR 7.312(A) ........................................................................................................................ 10, 29 MCR 7.312(D)(3) ........................................................................................................................... 9 MRPC 1.0 ..................................................................................................................................... 37 - vi -

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MCL 752.1083(c) ........................................................................................................................... 1

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MRPC 3.3 ..................................................................................................................................... 37 MRPC 3.8 ..................................................................................................................................... 37 Constitutions Const. 1963, art. 1, §24 ................................................................................................................. 11 Other Authorities LaFave & Israel, 7 Criminal Procedure (4th ed. 2018) ......................................................... 20, 26

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MRPC 3.1 ..................................................................................................................................... 37

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I Defendant—through his affirmative conduct—may waive an error for appellate review. Here, defendant agreed that the restitution amount listed in the presentence investigation report was accurate and then did not object or ask for an evidentiary hearing when the court ordered him to pay that same amount of restitution to the victim. Has defendant waived appellate review of the restitution order?

The trial court did not answer this question.

The Court of Appeals answered, “Yes.” The People answer, “Yes.” Defendant would answer, “No.”

II A trial court judge necessarily abuses his discretion if he modifies the prosecutor’s plea and sentence agreement; moreover, if an actual controversy does not exist, this Court will not decide it, because the issue is moot. Here, on May 18, 2016, the People offered defendant a plea and sentence agreement that required him to pay $18,000.80 in restitution and the court refused to order that the restitution amount be established at an evidentiary hearing; weeks later, that agreement was stricken and defendant entered into a different plea. Did the trial court properly exercise its discretion and is this issue moot?

The trial court did not answer these questions.

The Court of Appeals did not answer these questions.

The People answer, “Yes.” Defendant would answer, “No.”

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COUNTERSTATEMENT OF QUESTIONS PRESENTED

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On March 24, 2016, defendant Gary Gilmore stood mute at the arraignment on the warrant on the charges of count 1: organized retail crime;1 count 2: using a computer to commit a crime;2 count 3: possession of a financial transaction device;3 count 4: uttering and publishing a financial transaction device;4 and count 5: receiving and concealing stolen property $200.00 or more but less than $1,000.00.5 The district court entered a not guilty plea on defendant’s behalf. 8b-9b.

On April 8, 2016, defendant waived his right to a preliminary examination and was bound over, as charged, for trial. 9b.

On April 15, 2016, defendant appeared with counsel before Third Circuit Court Judge James Callahan for the arraignment on the information and stood mute. 3b; 1a-2a. The court entered a not guilty plea on defendant’s behalf and defense counsel addressed defendant’s bond. 3b-4b.

The People did not object to a reduction in defendant’s bond as long as he was given a GPS tether, noting that defendant had “an extensive history” and that the crimes charged involved “fairly substantial restitution…owed to Home Depot, for approximately 52 transactions that…occurred at different locations, through the fraud and retail organized crime.” 5b.

On April 29, 2016, defendant appeared with counsel for calendar conference and the People placed their initial offer on the record: plead guilty to counts 1 and 3, dismiss counts 2, 4, 5 and the habitual fourth offender notice, with a sentence agreement of three-and-a-half years of probation (first year in the Wayne County Jail), with defendant further ordered to pay restitution

1

MCL 752.1084; see also MCL 752.1083(c) (defining organized retail crime).

MCL 752.796(1).

3 MCL 750.157p.

4 MCL 750.248a.

5 MCL 750.535(4)(a). Defendant was also charged as a habitual fourth offender under MCL 769.12.

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COUNTERSTATEMENT OF FACTS

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defense counsel remarked that the offer was “very good” and that the “only point of contention” was with respect to the amount of restitution. 7a.

On May 18, 2016, defendant appeared with counsel for final conference and the People placed a new offer on the record: plead guilty to counts 1 and 2, dismissal of the remaining counts and the habitual offender notice, with a sentence agreement of three-and-a-half years of probation (first year in the Wayne County Jail), with defendant further ordered to pay restitution in the amount of $18,000.80. 13a. The following exchange then took place on the record: THE COURT: What was that restitution amount?

MR. GLYNNE: $18, 000.80, your Honor.

THE COURT: All right. Going once, going twice.

MR. PARKER: Your Honor?

THE COURT: Yes. MR. PARKER: I have a question for the Court as well as for the People.

THE COURT: No, I wouldn’t allow him any access to computers.

MR. PARKER: That is not the question, sir.

THE COURT: Oh, okay.

MR. PARKER: But the question would be that if we were to avail ourselves of the People’s offer, would we be entitled to a restitution hearing based on the fact that they’re arguing that my client is part of a larger ring and that other people are involved in it and— THE COURT: So he wants to add further undue expense to the community and to— what’s the name of the financial, not the financial but the retail— MR. PARKER: Home Depot.

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in the amount of $18,000.00. 7a-8a. Although defendant did not accept the offer on that day,

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MR. PARKER: I would like to also state that—to request that on behalf of my client that we add some discussions about that and we’ll put it on the record.

THE COURT: Well, I guess it’s up to the prosecuting attorney in that regard.

MR. GLYNNE: I mean. Judge, in terms of restitution, we have something like 50 different receipts that all total up to $18,000—I mean, that’s what the proofs would show, and that’s what we would be arguing with the restitution. But, I mean, I’m also more than willing to go talk to my supervisor about that and we can set restitution. But I know Home Depot’s position as well as this, you know, hundred page binder with their investigation too shows that restitution is around that number, if not that number.

THE COURT: If someone isn’t guilty of a crime though they shouldn’t plead guilty to it.

MR. GLYNNE: Agree.

THE COURT: I mean, if they aren’t guilty of a crime they shouldn’t plead guilty to it, they should go to trial and have a trial by their peers.

MR. GLYNNE: Well, I think though, your Honor, we could have a situation where a person feels that they have a certain level of guilt but not necessarily guilty for the whole thing. And I know we always like to make the argument is he in for a penny in for a whole pound and that type of analogy, but still, I mean, we are talking about, you know, a certain number of people, we are talking about exact, you know, figure.

THE COURT: Yes, but if someone’s unjustly accused then they should just go to trial.

If the complaining witness is lying about what was taken from them let them prove it, it’s up to them, they’ve got to prove it. Baloney. I don’t need to establish my innocence, they have to prove my guilt.

DEFENDANT GILMORE: May I speak, your Honor?

THE COURT: Why sure.

DEFENDANT GILMORE: I do have a certain amount of guilt, as you— THE COURT: Oh, no, no, don’t start telling me about your guilt. I don’t want to hear that. Either you take advantage of this plea offer that’s been extended to you or you go to trial, one or the other. I’m not going to hear a cockamamie bull story from you.

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THE COURT: Home Depot. So he wants to add further expense to Home Depot and the community in establishing proofs that they would have to otherwise establish during the course of a trial. So, let’s see, what would be the benefit to the community to allow such a thing? I guess nothing. And the only person who’d derive a benefit from that would be the defendant. What kind of negotiation is that? It’s bullshit to me. How’s that?

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THE COURT: Okay. Well, then, you’ve got to fish or cut bait today, my man. My dad used to use another expression.

MR. PARKER: Your Honor, my client would like to avail himself of the People’s offer.

MR. GLYNNE: Just give me a second. Judge, and I’ll— THE COURT: He’s a lot smarter than what I thought. Put the man over there.6 After a brief recess, the court placed defendant under oath and proceeded with the plea colloquy, at which time defendant agreed to plead guilty to counts 1 and 2, with a sentence agreement of three-and-a-half years of probation (first year in the Wayne County Jail), plus pay restitution in the amount of $18,000.80 to Home Depot. In exchange for his plea, defendant acknowledged that the People would withdraw the habitual fourth offender notice, along with counts 3-5. Defendant also agreed that he had signed a written form evidencing the plea and sentence agreement. 10a, 17a-18a. While under oath, defendant waived all of his constitutional trial rights, his automatic right of appeal, any defects in the charges that had been filed against him, and affirmed that he was entering into the plea agreement “freely, voluntarily and understandingly[.]” 19a-25a. After defendant gave a full factual basis for these crimes, the court accepted the plea. 25a-29a. Both defense counsel and the prosecutor agreed that the court had complied with the plea-taking requirements found in MCR 6.302. 30a.

On June 13, 2016, defendant appeared before the court for sentencing. Defense counsel affirmed that he and defendant had had the opportunity to review the presentence investigation report (PSIR) and that they had no additions or corrections to the report. 34a. With respect to defendant’s obligation to pay restitution, the PSIR included the following language:

6

13a-17a.

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DEFENDANT GILMORE: I wouldn’t give you one, your Honor.

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At page 1: Sentence Agreement: No charge reduction; 3 ½ years probation; 1st year WCJ; restitution $18,000.00; People agree to withdraw Notice to Enhance Sentence Habitual 4th Offense; dismiss counts 3-5 At page 3, line 13: You must pay restitution in the amount of $18,000.00 payable to Home Depot as follows: You must execute a wage assignment to pay restitution if you are employed and miss two regularly scheduled payments.

At page 1, under Evaluation and Plan: Per the Sentence Agreement, it is respectfully requested restitution be set in the amount of $18,000.00, payable to Home Depot in the instant offense.

At pages 2-3, under Agent’s Description of the Offense: In December, 2015 Home Depot located at 47725 Five Mile, Plymouth Twp., Michigan Loss Prevention department noticed a pattern of sales and returns and began an investigation dubbed, “Operation Barn Door”. Defendant Gary Gilmore would purchase sliding doors valued between $169 and $199 at the U Scan. While at the U Scan, the defendant would affix a different UPC seal to the item for the amount of $13.99, to the higher price item. The defendant would return the item without a receipt and receive a store credit for the original higher price.

The noted activity took place at least 52 times at various Wayne County Home Depot locations, with an estimated loss of approximately $18,000.7

The parties then discussed the prior record variables and offense variables and, after corrections were made to the sentencing information report, defendant’s guidelines were determined to be 19 months to 38 months. 34a-36a. Judge Callahan noted that the sentence agreement was below the guidelines and, based upon defendant’s 12 prior felonies, told the parties that he could not “in good conscience” follow the sentence agreement, because defendant needed “to have serious [prison] time.” 37a-38a.

On June 15, 2016, the parties returned to court “for sentencing”8 and Judge Callahan stated again that the original sentence agreement of three-and-a-half years of probation was “out of the question.” 42a. The assistant prosecuting attorney asked that defendant be sentenced at “the bare minimum of the bottom of the guidelines for prison.” 43a. The People further asked

7

PSIR, filed by defendant with the Court of Appeals on November 7, 2017. References to the PSIR made here follow the page numbers utilized by the author of the report and, thus, reflect the repeated use of some page numbers.

8 Both defense counsel and the trial court stated on the record that the June 15, 2016 hearing was “for [t]he sentencing of Mr. Gilmore.” 42a.

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agreement ha[d] been stricken,” which meant that it did “not apply[.]” Id. The court told defendant that if he wished to maintain his plea on counts 1 and 2, he would receive a sentence within the guidelines range. The court asked defendant what he wanted to do, because the court would “allow [defendant] to withdraw [his] plea and…go to trial.”9 44a. The court told defendant that it did not want defendant “making a snap decision[,]” so if he wanted more time, the court would “put the matter over until maybe Monday or something.” 45a. Defendant told the court that he wanted to “take [c]are of this today” and defense counsel told the court that defendant “would like to accept the offer.” 45a. To that, the court clarified that there was “no actual offer, the only thing that’s on the table right now are guidelines except for the fact that the People are desirous of withdrawing the habitual fourth and dismissing Counts 3, 4 and 5 at the time of sentencing, that’s it.” Id. Defendant accepted the new plea and both he and his attorney confirmed that they wanted to immediately proceed with sentencing. Id. The trial court then asked if the People had anything to add to the record—the assistant prosecuting attorney answered in the negative. On behalf of defendant, defense counsel stated that defendant was accepting responsibility in this case and asked that he receive a sentence at the low-end of the guidelines. 46a. When offered the opportunity for allocution, defendant told the court that he would “just like to get on with [his] life[.]” Id. The court then sentenced defendant to serve five years of probation on count 1, concurrent with a sentence of 30 months to 7 years of imprisonment on count 2. The court also dismissed counts 3, 4, 5, and the fourth habitual offender notice, and ordered defendant to pay costs, fees, and $18.000.00 in restitution.

9

A few minutes later, the court clarified that, as part of the revised plea, the People would move to dismiss counts 3, 4, and 5, as well as withdraw the habitual fourth offender notice. 44a-45a.

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“that restitution be ordered as well.” Id. The court then told defendant “that the original

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appellate rights. 48a.

On August 2, 2016, defendant, through counsel, filed a delayed application for leave to appeal, claiming that he had objected to the restitution ordered in this case and that he was entitled to a restitution hearing.10 The People did not file a response to defendant’s application.

On September 13, 2016, the Court of Appeals denied defendant’s delayed application for lack of merit in the grounds presented, although Judge Cynthia Diane Stephens would have granted the application. 51a.

On October 7, 2016, defendant filed an in pro per application for leave to appeal to the Michigan Supreme Court. In the application, defendant once again asserted that he was entitled to a restitution hearing because he had made a timely objection to the restitution amount. On May 2, 2017, the Court directed the Wayne County Prosecuting Attorney to file an answer to defendant’s application, which undersigned counsel did on May 18, 2017. On June 27, 2017, the Court issued an order remanding the case back to the Court of Appeals “for consideration, as on leave granted, of: (1) whether the defendant waived the question of his entitlement to an evidentiary hearing regarding the amount of restitution; and, if not, (2) whether the Wayne Circuit Court erred in denying him such a hearing.” 52a.

On July 6, 2017, the Court of Appeals remanded this case to the Wayne County Third Circuit Court for a determination as to defendant’s indigency and, if necessary, to appoint counsel to represent defendant for this appeal. On July 26, 2017, attorney Mary Blaney was

10

Prior to this, defendant never filed a motion contesting his sentence or the court’s restitution order in the trial court. 11b-12b.

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47a. At the end of the sentencing hearing, defendant stated on the record that he understood his

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on October 10, 2017.

On November 7, 2017, defendant filed his brief on appeal addressing the two issues described above. On December 6, 2017, the People filed their brief on appeal. On September 25, 2018, the Court of Appeals issued an unpublished per curiam opinion finding that defendant had waived his right to an evidentiary hearing regarding restitution. 53a-55a.

On November 19, 2018, defendant filed an application for leave to appeal in the Michigan Supreme Court. On November 27, 2018, the People filed an answer opposing the application. On May 24, 2019, this Court entered an order directing the Clerk to schedule oral argument on the application. The order further directed the parties to file supplemental briefs addressing: (1) whether the defendant waived the question of his entitlement to an evidentiary hearing regarding the amount of restitution, compare People v Gahan, 456 Mich 264, 276 (1997), overruled in part by People v McKinley, 496 Mich 410, 413 (2014) (stating that the failure to affirmatively request an evidentiary hearing regarding restitution is a waiver of a defendant’s due process claim on appeal) with People v Carter, 462 Mich 206, 215 (2006) [sic] (defining waiver as “the intentional relinquishment or abandonment of a known right” and distinguishing waiver from forfeiture, which has been defined as “the failure to make the timely assertion of a right.”) and if not, (2) whether the Wayne Circuit Court erred in denying defendant such a hearing. See McKinley, 496 Mich 410.11 On August 15, 2019, defendant filed his supplemental brief in accordance with this Court’s order. On August 27, 2019, the People filed a motion requesting an extension of time within which to file their supplemental brief, which this Court granted on September 3, 2019.

The People’s supplemental brief is timely-submitted in accordance with this Court’s order of September 3, 2019. The People stipulate to the use of the appendix filed by defendantappellant on August 15, 2019, although the People have also submitted, as an appendix, 11

56a.

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appointed to represent defendant on appeal; she was substituted out for attorney Steven Helton

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7.312(D)(3)-(4). Additional facts are presented infra.

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additional portions of the record that were not covered by defendant’s appendix. See MCR

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I. Defendant—through his affirmative conduct—may waive an error for appellate review. Here, defendant agreed that the restitution amount listed in the presentence investigation report was accurate and then did not object or ask for an evidentiary hearing when the court ordered him to pay that same amount of restitution to the victim. Defendant has waived appellate review of the restitution order.

Standard of Review Defendant’s supplemental brief does not include the required statement of the applicable standard of review. See MCR 7.312(A), MCR 7.212(C)(7). When preserved, interpretation of the statutes authorizing the assessment of restitution at sentencing is a matter of statutory interpretation which this Court reviews de novo. McKinley, 496 Mich at 414-415. Unpreserved errors, however, are reviewed under the plain error rule. See People v Carines, 460 Mich 750, 763; 597 NW2d 130 (1999). “This Court disfavors consideration of unpreserved claims of error.” Id. at 762. The full standard of review for plain error is given infra at pages 16-17.

Waiver—the intentional relinquishment or abandonment of a known right—extinguishes an alleged error and forecloses appellate review. People v Carter, 462 Mich 206, 214-216; 612 NW2d 144 (2000).

Discussion This Court first asks whether “defendant waived the question of his entitlement to an evidentiary hearing regarding the amount of restitution, compare” Gahan, 456 Mich at 276 with Carter, 462 Mich at 215. 56a. In order to answer this question, the People will first engage in a review of the statutory scheme underpinning the payment of restitution by criminal defendants in

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ARGUMENT

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facts of this case.

A.

Crime victims in Michigan are constitutionally and statutorily entitled to receive full and complete restitution from defendants.

Michigan’s “Crime Victim’s Rights Act [CVRA, MCL 780.751 et seq,] was enacted in 1985 in response to growing recognition of the concerns of crime victims.”12 People v Peters, 449 Mich 515, 523; 537 NW2d 160 (1995). In 1988, the Michigan Constitution “was amended to further enumerate the rights of crime victims.” Id.; see Const. 1963, art. 1, § 24(1) (“Crime victims, as defined by law, shall have the following rights, as provided by law: […] The right to restitution.”). “One aim of these laws was ‘to enable victims to be compensated fairly for their suffering at the hands of convicted offenders.’” Garrison, 495 Mich at 365, quoting Peters, 449 Mich at 526.

The CVRA is divided into three articles, only the first of which is pertinent to the issues presented in this appeal. See id. at 367 n 11 (observing that “Article 1, MCL 780.751 through MCL 780.775, [of the CVRA] addresses felony convictions[.]”). Originally, MCL 780.766 codified a victim’s right to restitution, but left the granting of restitution to the discretion of the sentencing judge. See Peters, 449 Mich at 523. In 1994, the statue was amended to make restitution mandatory. See People v Allen, 295 Mich App 277, 281; 813 NW2d 806 (2011) (“A 12

Michigan also has a general restitution statute, MCL 769.1a, which is not mentioned in either defendant’s August 15, 2019 supplemental brief or in the September 25, 2018 unpublished opinion of the Court of Appeals. When the trial court ordered defendant, on June 15, 2016, to pay restitution in this case, the court did not specify the applicable statute. 47a. Both MCL 769.1a and MCL 780.766 “impose a duty on sentencing courts to order defendants to pay restitution that is maximal and complete.” People v Garrison, 495 Mich 362, 368; 852 NW2d 45 (2014). MCL 769.1a, however, does not include a provision regarding the settlement of disputes if the parties cannot agree to the proper amount or type of restitution. Compare MCL 769.1a with MCL 780.767(4). The People therefore have focused their discussion on the language contained in MCL 780.766 and MCL 780.767.

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Michigan, then address the legal concepts of waiver and forfeiture, before applying the law to the

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the defendant to pay restitution and the amount must fully compensate the defendant’s victims.”), citing Gahan, 456 Mich at 270 n 6; see also MCR 6.425(E)(1)(f) (requiring a trial court, at sentencing, to “order that the defendant make full restitution as required by law[.]”). An additional amendment in 1997 stripped out the requirement that a trial court evaluate a defendant’s ability to pay before ordering him to make full, complete, and maximal restitution.

See People v Crigler, 244 Mich App 420, 428; 625 NW2d 424 (2001). The statute now provides, in pertinent part: Except as provided in subsection (8),13 when sentencing a defendant convicted of a crime, the court shall order, in addition to or in lieu of any other penalty authorized by law or in addition to any other penalty required by law, that the defendant make full restitution to any victim of the defendant’s course of conduct that gives rise to the conviction or to the victim’s estate. [….]14 From the language contained in MCL 780.766(2), this Court has said that“[t]he Legislature’s statutory direction to order defendants to pay complete, entire, and maximum restitution effectuates this goal of fair compensation.” Garrison, 495 Mich at 368. A trial court’s restitution order may not, however, be based “solely on uncharged conduct[,]” that is, conduct “that the defendant allegedly engaged in that was not relied on as a basis for any criminal charge and therefore was not proved beyond a reasonable doubt to a trier of fact.” McKinley, 496 Mich at 413 n 1.

13

MCL 780.766(8) directs the sentencing court to, in part, “order restitution to the crime victim services commission or to any individuals, partnerships, corporations…or other legal entities that have compensated the victim or the victim’s estate for a loss incurred by the victim to the extent of the compensation paid for that loss.”

14 MCL 780.766(2). As set forth in MCL 780.766(1), “victim” includes, for purposes of MCL 780.766(2), a corporation “that suffers direct…financial harm as a result of a crime.”

Accordingly, the complainant in this case, Home Depot, is a victim under the CVRA for purposes of restitution. See, e.g., People v Fawaz, 299 Mich App 55, 64; 829 NW2d 259 (2012).

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trial court does not have discretion to order a convicted defendant to pay restitution; it must order

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MCL 780.766(2), the trial court is directed to “consider the amount of the loss sustained by any victim as a result of the offense.” MCL 780.767(1). “The court may order the probation officer to obtain information pertaining to the amounts of loss described in [MCL 780.767(1)]. The probation officer shall include the information collected in the presentence investigation report or in a separate report, as the court directs.” MCL 780.767(2). This information “shall” be disclosed to counsel for both parties. MCL 780.767(3). If there is any “dispute as to the proper amount or type of restitution[,]” the court shall resolve it “by a preponderance of the evidence.

The burden of demonstrating the amount of the loss sustained by a victim as a result of the offense shall be on the prosecuting attorney.” MCL 780.767(4).

When reading the foregoing statutory provisions in context,15 this Court has held that the proper time for a defendant to raise a dispute as to the amount of restitution is at the sentencing hearing. See People v Grant, 455 Mich 221, 234; 565 NW2d 389 (1997) (“Only an actual dispute, properly raised at the sentencing hearing in respect to the type or amount of restitution, triggers the need to resolve the dispute by a preponderance of the evidence.”) (citing reference omitted); McKinley, 496 Mich at 414-415 (addressing “MCL 780.766(2) and other statutes authorizing the assessment of restitution at sentencing”) (emphasis added); Gahan, 456 Mich at 15

See Garrison, 495 Mich at 379 (emphasizing that “all statutory language must be read within its particular context. G.C. Timmis & Co. v Guardian Alarm Co., 468 Mich 416, 421; 662 NW2d 710 (2003) (“Although a phrase or a statement may mean one thing when read in isolation, it may mean something substantially different when read in context. ‘In seeking meaning, words and clauses will not be divorced from those which precede and those which follow.’”) (citations omitted)); see also McKinley, 496 Mich at 420 (reading MCL 780.766 “in pari materia with other provisions in the Crime Victim’s Rights Act, MCL 780.751 et seq.”); Id. at 420 n 11 (quoting Dearborn Twp Clerk v Jones, 335 Mich 658, 662; 57 NW2d 40 (1953) as follows: “[S]tatutes in pari materia are to be taken together in ascertaining the intention of the legislature, and…courts will regard all statutes upon the same general subject matter as part of 1 system.”).

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At sentencing, when it comes to setting the amount of restitution that is required under

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sentencing, the trial court “is not required to order, sua sponte, an evidentiary proceeding to determine the proper amount of restitution due.” Id. at 276 n 17, citing Grant, 455 Mich at 231232 and People v Hart, 211 Mich App 703, 705; 536 NW2d 605 (1995). “Instead, the court is entitled to rely on the amount recommended in the presentence investigation report ‘which is presumed to be accurate unless the defendant effectively challenges the accuracy of the factual information.’” Gahan, 456 Mich at 276 n 17, quoting Grant, 455 Mich at 233-234; see also MCR 6.425(E)(1)(b) (requiring trial courts to, at sentencing, “give each party an opportunity to explain, or challenge the accuracy or relevancy of, any information in the presentence report, and resolve any challenges in accordance with the procedure set forth in subrule (E)(2).”); MCL 771.14(6) (allowing the parties to challenge the contents of the PSIR at sentencing).

B.

Appellate Courts have long recognized the importance of preserving, for appeal, an alleged error by objecting in the trial court.

In this case, defendant did not, at the June 15, 2016 sentencing hearing, object to the court’s restitution order. 47a-48a. “[T]he United States Supreme Court has recognized the importance of an incentive for criminal defendants to raise objections at a time when the trial court has an opportunity to correct the error, which could thereby obviate the necessity of further legal proceedings and would be by far the best time to address a defendant’s constitutional and nonconstitutional rights.” People v Grant, 445 Mich 535, 551; 520 NW2d 123 (1994); see also Carines, 460 Mich at 764-765. Not only does voicing an objection allow for the trial court to take immediate steps to address and possibly correct the alleged error, this practice prevents attorneys from harboring “error as an appellate parachute.” Carter, 462 Mich at 214 (citing references omitted); see also People v Hardin, 421 Mich 296, 322; 365 NW2d 101 (1984) (explaining that the Court did “not approve a procedure whereby counsel may ‘sit back and - 14 -

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276 n 16. If defendant does not “make a proper objection and request an evidentiary hearing” at

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Brocato, 17 Mich App 277, 305; 169 NW2d 483 (1969) (additional citing reference omitted). In Freytag v C.I.R., 501 US 868, 895; 111 SCt 2631; 115 LEd2d 764 (1991), Justice Scalia explained that this understanding “reflect[s] the principle that a trial on the merits, whether in a civil or criminal case, is the ‘main event,’ and not simply a ‘tryout on the road’ to appellate review.” Id. (Scalia, J., concurring in part and concurring in the judgment). Indeed, Justice Scalia observed that “[t]he very word ‘review’ presupposes that a litigant’s arguments have been raised and considered in the tribunal of first instance. To abandon that principle is to encourage the practice of ‘sandbagging’: suggesting or permitting, for strategic reasons, that the trial court pursue a certain course, and later—if the outcome is unfavorable—claiming that the course followed was reversible error.” Id. Defendants are therefore encouraged to preserve issues for appeal “by notation of objection” in the trial court. Carter, 462 Mich at 214.

It often happens, however, that a defendant will either expressly agree or fail to object to a course of action undertaken by the trial court. In either case, the defendant will attempt to raise the court’s action on appeal and claim that it constituted reversible error. An appellate court must then determine whether defendant waived or merely forfeited the alleged error. But see Freytag, 501 US at 895 (Scalia, J. recognizing that the case law in this area has often used these terms interchangeably and that “it may be too late to introduce precision.”). In this circumstance, a reviewing court’s “authority to remedy the error (by reversing the judgment, for example, or ordering a new trial) is strictly circumscribed[,]” as set forth infra. Puckett v United States, 556 US 129, 134; 129 SCt 1423; 173 LEd2d 266 (2009).

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harbor error to be used as an appellate parachute in the event of jury failure.’”), quoting People v

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Depending on the particular facts and circumstances of the case, an appellate court may find that a defendant either waived or forfeited an error in the trial court.

“Deviation from a legal rule is ‘error’ unless the rule has been waived.” United States v Olano, 507 US 725, 732-733; 133 SCt 1770; 123 LEd2d 508 (1993). Waiver is defined as the “intentional relinquishment or abandonment of a known right.” Id. at 733 (internal quotation and citing references omitted); Johnson v Zerbst, 304 US 458, 464; 58 SCt 1019; 82 LEd2d 1461 (1938) (stating that “[a] waiver is ordinarily an intentional relinquishment or abandonment of a known right or privilege.”). “What suffices for waiver depends on the nature of the right at issue. Whether the defendant must participate personally in the waiver; whether certain procedures are required for waiver; and whether the defendant’s choice must be particularly informed or voluntary, all depend on the right at stake.” New York v Hill, 528 US 110, 114; 120 SCt 659; 145 LEd2d 560 (2000) (internal quotation and citing reference omitted). But for a very narrow class of certain fundamental rights (i.e. the right to counsel and the right to plead not guilty), “decisions by counsel are generally given effect as to what arguments to pursue, what evidentiary objections to raise, and what agreements to conclude regarding the admission of evidence. Absent a demonstration of ineffectiveness, counsel’s word on such matters is the last.”

Id. at 115 (internal citations omitted). Whether a waiver exists depends on the particular facts and circumstances of the case. See Johnson, 304 US at 464. “One who waives his rights under a rule may not then seek appellate review of a claimed deprivation of those rights, for his waiver has extinguished any error.” Carter, 462 Mich at 215 (internal quotation and citation omitted).

Unlike waiver, forfeiture does not extinguish an error on appeal. See Carter, 462 Mich at 215. Forfeiture “is the failure to make the timely assertion of a right[.]” Olano, 507 US at 733; Puckett, 556 US at 134 (explaining that if a defendant believes that an error has occurred, to his detriment, “he must object in order to preserve the issue. If he fails to do so in a timely manner, - 16 -

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procedural principle is more familiar to this Court than that a constitutional right may be forfeited in criminal as well as civil cases by the failure to make timely assertion of the right before a tribunal having jurisdiction to determine it.” Yakus v United States, 321 US 414, 444; 64 SCt 660; 88 LEd2d 834 (1944) (citing references omitted). “To avoid forfeiture under the plain error rule, three requirements must be met: 1) error must have occurred, 2) the error was plain, i.e. clear or obvious, 3) and the plain error affected substantial rights.” Id. (citing reference omitted). “The third requirement generally requires a showing of prejudice, i.e. that the error affected the outcome of the lower court proceedings.” Id. (citing reference omitted). “[O]nce a defendant satisfies these three requirements, an appellate court must exercise its discretion in deciding whether to reverse. Reversal is warranted only when the plain, forfeited error resulted in the conviction of an actually innocent defendant or when the error seriously affected the fairness, integrity or public reputation of judicial proceedings independent of the defendant’s innocence.” Id. at 763-764 (internal quotation and citing reference omitted).

D.

For more than 20 years, this Court has held that a defendant, through his actions, can waive his opportunity for an evidentiary hearing regarding a trial court’s restitution order, and this Court’s opinions in Carines and Carter do not undercut this holding.

The above-described case law on waiver has been applied with equal force to restitution orders. In Gahan, 456 Mich 264, this Court examined whether MCL 780.766 of the CVRA allowed sentencing courts to “order a defendant to pay restitution to compensate all victims who were defrauded by” a defendant’s criminal course of conduct, “even though the specific criminal acts committed against some of these victims were not the basis of the defendant’s conviction.”

Id. at 265. The Court first held “that the Legislature authorized restitution to any victim of the

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his claim for relief from the error is forfeited.”); see also Carines, 460 Mich at 763. “No

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statutory scheme violate[d] the 5th and 14th Amendments of the United States Constitution.”

Gahan, 456 Mich at 273. After reviewing MCL 780.767 of the CVRA, the Court determined that the statute afforded criminal defendants adequate process and therefore passed “constitutional muster.” Id. at 275. Specifically, the Court noted that MCL 780.767(4) provided that “‘[a]ny dispute as to the proper amount or type of restitution shall be resolved by the court by a preponderance of the evidence.’” Id. at 276, quoting MCL 780.767(4). The Court further observed that the subsection afforded defendants an evidentiary hearing when the amount of restitution was contested and that, at the hearing, the burden of demonstrating the amount of the loss sustained by the victim as a result of the offense was on the prosecuting attorney. See id.; see also MCL 780.767(4).

The Gahan Court ultimately determined that, while the defendant had not received an evidentiary hearing, he had not requested one in the trial court. See Gahan, 456 Mich at 276.

Instead, at sentencing, the attorney representing the defendant told the trial court that, upon review of the PSIR, “the restitution amount should be reduced to reflect the amount truly owed to that person. In response, the trial court reduced the restitution amount recommended in the presentence report to reflect this correction.” Id. at 276 n 16. “Other than this, [the] defendant did not offer any evidence or specific argument to demonstrate that the amount of restitution recommended in the presentence report was inaccurate.” Id. The Court therefore found that,

16

Gahan, 456 Mich at 273. In McKinley, 496 Mich 410, this Court overruled Gahan, but only “to the extent that it held that MCL 780.766(2) ‘authorizes the sentencing court to order criminal defendants to pay restitution to all victims, even if those specific losses were not the factual predicate for the conviction.’” Id. at 424, quoting Gahan, 456 Mich at 270.

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defendant’s criminal course of conduct,”16 and then turned to “defendant’s argument that this

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could not claim that he was denied due process. Id. at 276.

In his supplemental brief of August 15, 2019, defendant claims that this Court used “imprecise language” when it wrote in Gahan that the defendant waived his opportunity for an evidentiary hearing, because the defendant in that case only failed to object to the restitution order.17 Defendant asserts that, due to confusion and misapplication of Gahan in the Court of Appeals, it is now necessary for this Court to “clarify that a defendant does not waive entitlement to a restitution hearing or to a due process claim related to restitution by failing to object and request such a hearing at sentencing.”18 Defendant’s argument is misplaced.

As set forth supra, the defendant in Gahan did not merely fail to object to the trial court’s restitution order. Instead, the defendant’s attorney—when presented with the restitution amount set forth in the PSIR—specifically requested that the trial court reduce the amount, which the court did. See Gahan, 456 Mich at 276 n 16. The defendant made no other objection to the restitution amount, nor did he raise any other factual inaccuracy with respect to the restitution listed in the PSIR. The trial court was therefore entitled to rely upon the accuracy of the restitution amount listed in the PSIR. See Gahan, 456 Mich at 276 n 17; Grant, 455 Mich at 233-234. The defendant’s affirmative conduct—specifically requesting an adjustment to the restitution amount, which resulted in the defendant receiving the relief he requested—coupled with the defendant’s failure to request a restitution hearing, thereby intentionally relinquishing or abandoning a known right or privilege available to him under MCL 780.767(4), constituted a waiver foreclosing further review of the trial court’s restitution order. See Carines, 460 Mich at

17 18

Defendant’s brief, 11.

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because “[t]his was a waiver of [the defendant’s] opportunity for an evidentiary hearing[,]” he

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ed. 2018) (explaining that, “[a]lthough not doing or saying anything to object or bring the trial court’s attention to an issue will generally be forfeiture subject to plain error review, actions ‘inviting’ error should amount to ‘waiver’ when those actions clearly indicate a conscious choice on the part of the defense to forego an objection.”) (citing reference omitted). Because this Court’s use of the term “waiver” to describe the defendant’s conduct in Gahan was accurate, the Court should decline defendant’s invitation to “clarify” this language.

E.

The record in this case supports a finding that defendant’s affirmative conduct waived any error with respect to the trial court’s June 15, 2016 restitution order.

Review of the record shows that defendant never, at any point, demanded a restitution hearing in the lower court. Indeed, the record shows that the only time that restitution was discussed, at any length, was at the May 18, 2016 plea hearing.19 At that time, after the People placed their offer on the record—which included a specific provision that restitution would be set at $18,000.80—defense counsel asked the court the following question: if defendant were to avail himself of the People’s offer, would he be entitled to a restitution hearing? 14a. The court answered in the negative, telling defendant that he either had to accept the People’s plea offer or forfeit the offer and go to trial, which would require the People to establish defendant’s guilt

19

Prior to this date, there were only two restitution-related comments made at two separate hearings. The first was at the April 15, 2016 arraignment on the information, at which time the assistant prosecuting attorney noted for the record that this case involved “fairly substantial restitution” that was owed to Home Depot “for approximately 52 transactions that…occurred at different locations, through the fraud and retail organized crime.” 5b. At the April 29, 2016 calendar conference, defense counsel—in response to the People’s plea offer, which included a provision that defendant pay $18,000 in restitution to Home Depot—replied that the offer was “very good” and clarified that the “only point of contention” was with respect to the amount of restitution. 7a.

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762 n 7; Carter, 462 Mich at 215; see also LaFave & Israel, 7 Criminal Procedure, §27.5(d) (4th

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“avail himself of the People’s offer.” 17a.

Defendant was then placed under oath and affirmed that he wished to plead guilty to count 1: organized retail crime and count 2: using a computer to commit a crime with a sentence agreement of three-and-a-half years of probation, with the first year in the Wayne County Jail.

Defendant further agreed to pay restitution in the amount of $18,000.80. In exchange for the plea and sentence agreement, the People agreed to dismiss three pending charges, along with the habitual fourth offense notice (which would have exposed defendant to up to life imprisonment).

10a, 18a. Defendant affirmed on the record that he was entering into the plea agreement freely, voluntarily, and understandingly and that he had not been threatened into pleading guilty. 25a.

That defendant did not actually contest the restitution amount and, instead, expressly agreed to pay $18,000.80 is also reflected in the signed settlement offer and notice of acceptance which includes this requirement.20 The May 18, 2016 plea and sentence agreement, however, was later rejected by the trial court. On June 13, 2016, when the parties appeared for sentencing and reviewed the PSIR (the accuracy of which defense counsel confirmed)21 and sentencing guidelines on the record, the

20

See 10a (defendant’s signature appearing at the bottom of the plea form which includes, under the section titled “Sentence Agreement”, the following: “Restitution: $18,000.80.”); see also 18a-19a (defendant affirming on the record that the signature appearing on the plea form belonged to him).

21 See supra at page 5; 34a (defense counsel replying, when asked if the PSIR was factually accurate, “We wish to make no additions or corrections to the report.”). In People v Kowalski, 489 Mich 488, 504-505; 803 NW2d 200 (2011), this Court held that the distinction between an attorney stating that he approved the jury instructions versus counsel stating that he had no objections to the instructions, was unavailing, as either statement was an “express and unequivocal indication[] that he approved of the instructions. To hold otherwise would allow counsel to harbor error at trial and then use that error as an appellate parachute[.]” (internal quotation and citing reference omitted).

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beyond a reasonable doubt. 14a-16a. Instead of refusing to accept the deal, defendant chose to

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sentence was below the guidelines. 34a-38a. When defendant returned to court on June 15, 2016, he affirmed on the record his understanding that the May 18, 2016 plea and sentence agreement no longer applied. 43a. At that same hearing, defendant told the trial court that he wanted to accept the new plea, which was to counts 1 and 2 with a sentence in the guidelines range—unlike the plea agreement of May 18, 2016, this plea did not include the express requirement that defendant pay a specified amount of restitution. 43a-45a. Defendant accepted the plea and both he and his attorney requested that the court immediately proceed to sentencing.

45a. After hearing argument from both attorneys, as well as allocution from defendant, the court sentenced defendant to serve five years of probation for count 1: organized retail crime concurrently with a sentence of 30 months to 7 years of imprisonment on count 2: use of a computer in committing a crime. 46a-47a. The People moved to dismiss counts 3-5, along with the habitual fourth offender notice. 47a. The court further ordered defendant to pay various costs and fees, as well as $18,000 in restitution. Id. Defendant did not object to the court’s restitution order. 48a. Following the sentencing hearing, defendant did not file a motion challenging the accuracy of the information relied upon by the trial court, nor did he file a motion to remand in the Court of Appeals. See MCL 769.34(10) (stating that “[a] party shall not raise on appeal an issue….challenging the accuracy of the information relied upon in determining a sentence that is within the appropriate guidelines sentence range unless the party has raised the issue at sentencing, in a proper motion for resentencing, or in a proper motion to remand filed in the court of appeals.”).

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explanation justifying the amount),22 coupled with defendant’s failure to specifically object to the court’s restitution order and his failure request an evidentiary hearing, constituted the intentional relinquishment of a known right, thereby extinguishing any error. See Carines, 460 Mich at 762 n 7; Carter, 462 Mich at 215; see also Kowalski, 489 Mich at 504-505.

F.

Defendant’s contention—that he did not waive review of the restitution order and, instead, adequately preserved his objection to the order—is not supported in the record or in our case law.

Defendant’s argument—that his attorney’s question on May 18, 2016 about whether the trial court would conduct a restitution hearing if defendant accepted the People’s plea offer somehow acted to preserve, for future appellate review, the issue of whether he was entitled to such a hearing—is meritless for several reasons. First, in order for defendant to succeed in this argument, this Court would have to find that defense counsel’s initial question on May 18, 2016 about the possibility of a future restitution hearing (should defendant accept the People’s offer) 22

On page 15 of defendant’s supplemental brief, he argues (for the first time in this case) that the general rule—that trial courts are entitled to rely upon the accuracy of the PSIR when the parties do not dispute its contents—is inapplicable here, because defendant’s PSIR was not updated after the June 13, 2016 hearing, the court did not refer to the PSIR at the June 15, 2016 sentencing hearing, and the court did not ask the parties at the June 15, 2016 sentencing hearing if they wished to challenge the PSIR. Defendant, however, does not fully acknowledge the fact that the PSIR was generated for the June 13, 2016 sentencing hearing, that defense counsel stated on the record on that day that he had reviewed the report with defendant and had no changes, and that the trial court proceeded to sentencing on June 15, 2016 (a mere two days later) at defendant and his attorney’s express request. 45a. There is no suggestion on the record that the trial court failed to utilize the PSIR at defendant’s June 15, 2016 sentencing hearing and neither defendant nor his attorney requested an updated report at that time. See People v Hemphill, 439 Mich 576, 579; 487 NW2d 152 (1992) (explaining that “[a] sentencing judge must use a presentence report” and that a defendant may waive the production of an updated report) (citing references omitted).

Moreover, defendant states in his brief that while he does not contest the fact that Home Depot lost $18,000 over 52 fraudulent transactions, he now disputes “his responsibility for all of it.”

Defendant’s brief, 15. Defense counsel, however, accepted the accuracy of this information on the record on June 13, 2016. See supra at page 5 (detailing the relevant portions of the PSIR, including an excerpt from the police report which explains that defendant’s actions, which took place 52 times, caused the loss to Home Depot).

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(which specifically sought restitution in the amount of $18,000, as well as provided an

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that defendant was freely, voluntarily, and accurately entering into an unconditional plea and sentence agreement, which carried with it a set amount of restitution and no requirement that the amount be established at a restitution hearing. See People v New, 427 Mich 482, 489; 398 NW2d 358 (1986) (explaining that, “as a general rule…a plea of guilty waives all nonjurisdictional defects in the proceedings.”) (internal quotation and citing reference omitted).

These actions by defendant, not his attorney, constituted a waiver cancelling out any prior “objection” his attorney may have made. See Hill, 528 US at 114-115.

Likewise, defendants’ argument—that the trial court was on “notice” that he disputed the restitution amount and was therefore required to conduct an evidentiary hearing—erroneously clings to the initial record made on May 18, 2016 (i.e. his attorney’s question to the trial court) and ignores everything that came after (defendant’s personal acceptance of the People’s plea and sentence agreement with payment of $18,000.80 in restitution an enumerated term; counsel’s acceptance as to the accuracy of the PSIR with this same amount; and, later, the trial court’s rejection of this plea and sentence agreement; defendant’s entry into a plea with a different sentence; and defendant’s failure to object to the restitution order at sentencing). Thus, while the record shows that defendant initially struggled with accepting the idea that he would be required to pay substantial restitution to the victim in this case, the record also shows that defendant changed his mind and agreed, on May 18, 2016, to pay $18,000.80 in restitution to the victim.

Compare 16a with 17a-19a. That defendant ceased disputing his obligation to pay this amount of restitution to the victim and accepted responsibility is further evidenced by the fact that counsel agreed to the accuracy of the PSIR, which detailed this requirement, and the fact that

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trumps his own client’s written and oral sworn statements—made less than 15 minutes later—

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restitution as a part of his sentence.23 Moreover, for the reasons set forth infra at issue II, the trial court had no legal authority to interject a term into the People’s May 18, 2016 plea and sentence agreement and, thus, was prohibited from answering defense counsel’s question (about both accepting the People’s offer and obtaining an evidentiary hearing) in the affirmative. The People also flatly disagree with defendant’s interpretation of MCL 780.767(4). According to defendant, a party can raise a dispute regarding restitution at any time the case is proceeding through the trial court and, if he does, the court is required by law to conduct a restitution hearing.24 Defendant argues that this is so because MCL 780.767(4) does not specifically state that the dispute as to the amount of restitution must be raised at sentencing. Defendant is wrong for the reasons set forth supra at pages 13-14, as MCL 780.767(4) must be read in light of the statutory provisions which precede it, all of which expressly discuss the fact that the court’s determination as to the amount of restitution to order in a particular case occurs at sentencing. To read the statute in the manner suggested by defendant would lead to absurd results. For example, a defendant could state on the record at the arraignment on the information that he disputes restitution then, months later, sit silently through sentencing, only to appeal based on a “preserved” claim that the trial court abused its discretion when it failed to hold an evidentiary hearing regarding restitution.25 This “sandbagging” of the prosecutor and the trial court cannot be said to be sanctioned by MCL

23

34a; 47a-48a.

See defendant’s brief, 14.

This is functionally what occurred in this case, as defendant maintained through his initial application for leave to appeal that his “objection” in the trial court on May 18, 2016 preserved his claim of error with regard to the court’s restitution order, which was not entered until defendant was sentenced 28 days later.

24 25

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defendant did not object when the trial court ordered him, on June 15, 2016, to pay $18,000 in

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an intention by the Legislature to have restitution-related discussions occur at the sentencing hearing, the time and place the trial court is most equipped to address such concerns. See Grant, 445 Mich at 551; see also MCL 780.766(2) and MCL 780.767(1).

G.

If defendant did not waive the question of his entitlement to an evidentiary hearing regarding restitution, the error was forfeited because defendant cannot establish plain error affecting his substantial rights.

If this Court determines that defendant did not waive his evidentiary challenge to the trial court’s restitution order, this issue may only be reviewed for plain error affecting defendant’s substantial rights. Carines, 460 Mich at 763. In order to succeed here, defendant must show the existence of a plain error, as well as prejudice. Id.; see also supra at pages 16-17. In order to be ‘plain,’ an error must be worse than simply wrong; it must be clearly or obviously wrong.

LaFave & Israel, 7 Criminal Procedure, §27.5(d) (4th ed. 2018).

Defendant claims that the trial court plainly erred when it ordered him to pay restitution without first holding an evidentiary hearing. But, as discussed supra, the trial court’s duty to order this hearing was not triggered, because defendant, at the sentencing hearing, did not object to the court’s restitution order, nor did he request an evidentiary hearing at that time. See MCL 780.767(4); Grant, 455 Mich at 234 (“Only an actual dispute, properly raised at the sentencing hearing in respect to the type or amount of restitution, triggers the need to resolve the dispute by a preponderance of the evidence.”) (citing reference omitted); Gahan, 456 Mich at 276 n 16.

Because defendant did not “make a proper objection and request an evidentiary hearing” at sentencing, the trial court was “not required to order, sua sponte, an evidentiary proceeding to determine the proper amount of restitution due.” Id. at 276 n 17, citing Grant, 455 Mich at 231232 and Hart, 211 Mich App at 705. Instead, the trial court was entitled to rely upon the amount recommended in the PSIR, which defendant had, just two days earlier, confirmed was accurate.

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780.767. See Freytag, 501 US at 895. Instead, review of MCL 780.766 and MCL 780.767 show

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restitution order of June 15, 2016 ($18,000.00) was functionally identical to the restitution amount that defendant, on May 18, 2016, agreed under oath that he would pay in exchange for the People’s plea and sentence agreement ($18,000.80). For these reasons, defendant cannot show that the trial court’s restitution order of June 15, 2016 was clearly or obviously wrong, nor can he show that defendant was prejudiced by the order. Defendant’s “failure to establish a plain error that affected a substantial right precludes a reviewing court from acting on such an error.”

People v Pipes, 475 Mich 267, 279; 715 NW2d 290 (2006).

Finally, the People refute the argument made at page 19 of defendant’s brief, in which he assumes that he has met his burden of demonstrating plain error affecting substantial rights, leaving this Court to decide whether to exercise its discretion and grant relief. See Carines, 460 Mich at 763-764 (“Reversal is warranted only when the plain, forfeited error resulted in the conviction of an actually innocent defendant or when an error seriously affected the fairness, integrity or public reputation of judicial proceedings independent of the defendant’s innocence.”) (internal quotation and citing reference omitted). The People are somewhat constrained in their ability to refute defendant’s first allegation—that he is “actually innocent of causing $18,000 in damages to Home Depot, and is currently being required to pay for damages caused to Home Depot caused by others who engaged in the same general crime scheme that he pled guilty to engaging in”26—because the extensive and detailed police reports that were utilized by the charging prosecutor in this case (which contain receipts, transaction history, a 42-page report by the Home Depot loss prevention department, along with numerous references to defendant’s criminal activity being captured on CCTV) are not part of the lower court record. See MCR 26

Defendant’s brief, 19.

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See Gahan, 456 Mich at 276 n 17; quoting Grant, 455 Mich at 233-234. Moreover, the court’s

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the Court is “bound to review the trial court’s actions on the record as certified to us.”).

Nonetheless, defendant’s assertion here is contradicted by the uncontested content of the PSIR.27 Moreover, there is no support in the record for defendant’s assertion that the trial court judge “indicated to him that [the court] had predetermined his guilt before he had submitted his plea and repeatedly threatened him with a harsh prison sentence.”28 In making this argument, defendant cites to 6a-9a and 38a, neither of which support defendant’s allegations. First, when the People stated their offer on the record on May 18, 2016 and defendant expressed reluctance in accepting the deal, the court firmly told him that if he was not guilty, he should not plead guilty. 15a; 16a (“Yes, but if someone’s unjustly accused then they should just go to trial. If the complaining witness is lying about what was taken from them let them prove it, it’s up to them, they’ve got to prove it. Baloney. I don’t need to establish my innocence, they have to prove my guilt.”). Second, at the initial sentencing hearing, June 13, 2016, the court said only that, due to defendant’s extensive criminal history, it could not accept the parties’ below-the-guidelines plea and sentence agreement. 36a-37a. The court stated on the record that it would accept a plea and sentence agreement if the term was for a minimum of 19 months, which was at the very bottom of defendant’s sentencing guidelines. 37a. Defendant went on to later accept a plea and sentence agreement that required him to serve a sentence within the guidelines. 43a-45a. For all of these reasons, even if this Court reached this portion of plain error review, the Court should exercise its discretion and decline to reverse.

27 See supra at page 5; see also PSIR, page 2 (defendant stating, in part about the instant case, “There is no excuse. I did it. I made some bad decisions.”).

28 Defendant’s brief, 19.

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7.310(A); see also Dora v Lesinski, 351 Mich 579, 581; 88 NW2d 592 (1958) (explaining that

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A trial court judge necessarily abuses his discretion if he modifies the prosecutor’s plea and sentence agreement; moreover, if an actual controversy does not exist, this Court will not decide it, because the issue is moot. Here, on May 18, 2016, the People offered defendant a plea and sentence agreement that required him to pay $18,000.80 in restitution and the court refused to order that the restitution amount be established at an evidentiary hearing; weeks later, that agreement was stricken and defendant entered into a different plea. Not only did the trial court not abuse its discretion when it refused to modify the People’s plea agreement, this entire issue is moot because the May 18, 2016 plea and sentence agreement was stricken.

Standard of Review Defendant’s supplemental brief does not include the required statement of the applicable standard of review. See MCR 7.312(A), MCR 7.212(C)(7). Questions of law are reviewed de novo. People v Smith, 502 Mich 624, 647; 918 NW2d 718 (2018). “A trial court’s decision to hold an evidentiary hearing is generally reviewed for an abuse of discretion.” People v Franklin, 500 Mich 92, 100; 894 NW2d 561 (2017) (internal quotation and citing reference omitted). “A trial court necessarily abuses its discretion when it makes an error of law.” People v Duncan, 494 Mich 713, 723; 835 NW2d 399 (2013) (citing references omitted).

Discussion In its order of May 24, 2019, this Court directed the parties to brief the following question: if defendant did not waive the question of his entitlement to an evidentiary hearing regarding the amount of restitution, did “the Wayne County Circuit Court err[] in denying the defendant such a hearing. See McKinley, 496 Mich 410.” 56a. For the reasons set forth infra, because the trial court had no legal authority to modify the terms of the People’s plea offer and sentence agreement by adding a term requiring that restitution be proven at an evidentiary - 29 -

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II.

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such a hearing.

A.

The trial court would have necessarily abused its discretion if it had inserted a term in the People’s May 18, 2016 plea offer and sentencing agreement—which specifically stated that defendant would pay $18,000.80 in restitution—and required, instead, that the amount of restitution be determined at an evidentiary hearing.

As discussed supra at pages 20-21, the only time defendant expressed any reservations regarding the amount of restitution he would be required to pay came at the initial plea hearing on May 18, 2016. At that hearing, defense counsel asked a question: if defendant were to avail himself of the People’s plea and sentence agreement, would he be entitled to a restitution hearing? 14a. The trial court answered in the negative and, later in the hearing, defendant went on to sign a written plea agreement, which stated that he would pay $18,000.80 in restitution.

10a; 14a-16a. Defendant also affirmed his obligation to pay restitution in this amount while under oath and further affirmed that the plea was not the product of any undisclosed promises or threats. 17a-29a. Because the May 18, June 13, and June 15, 2016 records are all completely silent regarding defendant making a declarative statement demanding a restitution hearing, the People read the Court’s order as asking the parties to answer the following question: did the trial court err when it, on May 18, 2016, answered defendant’s question—whether he was entitled to a restitution hearing challenging the restitution contained in the People’s plea offer—in the negative. The answer to this question is no.29 The People’s initial plea offer and sentence agreement required, in part, that defendant pay $18,000.80 in restitution. 10a. The record of May 18, 2016 is silent regarding the People’s agreement to change this express term and, instead, determine the amount of restitution owed at 29

Although the People have briefed the question posed here by the Court, the People submit that, for the reasons set forth infra in subsection B, that the issue discussed here is moot.

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hearing, the court did not abuse its discretion when it told defense counsel that it would not order

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limited. The court must either accept or reject the entire agreement or defer action until it has had the opportunity to consider the PSIR. See People v Killebrew, 416 Mich 189, 207; 330 NW2d 834 (1982). This is because “the trial court’s exclusive authority to impose sentence does not allow it to enforce only parts of a bargain.” People v Siebert, 450 Mich 500, 510-511; 537 NW2d 891 (1995). Thus, had the trial court accepted the May 18, 2016 plea and sentence agreement, and then inserted the requirement that the restitution amount be subject to a later evidentiary hearing, the court would have imposed a different plea bargain on the prosecutor than what he had agreed to. See Smith, 502 Mich at 647. “In such circumstances, the trial court infringes on the prosecutor’s charging discretion.” Id. Accordingly, had the trial court informed the assistant prosecuting attorney that it would require the amount of restitution payable by defendant to be established at a restitution hearing, the People would have been entitled to withdraw from the agreement. See id. (explaining that the defendant had cited no “authority for the proposition that a trial court may unilaterally modify the terms of a plea bargain in order to serve the court’s notions of justice.”) (citing references omitted). If the trial court had refused to allow the People to withdraw from the agreement, the court would have necessarily abused its discretion. See id.; Duncan, 494 Mich at 723. For these reasons, the trial court did not err when it told defendant that, if he accepted the People’s plea offer, the court would not conduct a 30

The People therefore vigorously contest defendant’s assertion—made for the first time in this case—that the People “assented” to defendant’s request to set restitution after an evidentiary hearing. See defendant’s brief, 20-21. The record of May 18, 2016 shows only that the People justified the amount of restitution by making an offer of proof on the record. 15a. While the assistant prosecuting attorney told the court that he would be willing to talk to a supervisor about defendant’s hearing request, the record does not show that the People actually agreed to change their offer to make restitution payable after a determination by the trial court, nor is that language included in the written plea offer signed by defendant, his attorney, and the assistant prosecuting attorney. 10a; 15a-30a.

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an evidentiary hearing.30 When it comes to plea and sentence bargains, the trial court’s role is

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offer as it was or reject the offer entirely and go to trial. 16a.

The People must also briefly address McKinley, as it was specifically cited by the Court in its order of May 24, 2019.31 In McKinley, the defendant was convicted by jury of several felonies. “Following a hearing, and over defense counsel’s objection to the amount of the restitution assessed, the trial court entered an amended judgment of sentence to reflect the imposition of” over $150,000 in restitution against defendant. Id. at 413-414. Of that total, defendant was ordered to pay over $60,000 “to the four victims of the offenses of which he was convicted” and over $90,000 “to the victims of uncharged thefts attributed to the defendant by his accomplice.” Id. at 414. On appeal, the question for this Court was whether “an order of restitution is equivalent to a criminal penalty” and “whether Michigan’s statutory restitution scheme is unconstitutional insofar as it permits the trial court to order restitution based on uncharged conduct[.]” Id. The Court—without deciding the constitutional question—held that MCL 780.766(2) “does not authorize trial courts to impose restitution based solely on uncharged conduct[,]” and, therefore, overruled Gahan “to the extent that it held to the contrary.” Id. at 424. The Court vacated the restitution order and remanded the case so that the trial court could enter an order requiring defendant to pay restitution only to the four victims of the offenses to which he was convicted. See id.

With respect to the narrow question posed here by this Court in its order of May 24, 2019—whether the trial court erred when it stated that it would not hold an evidentiary hearing if defendant accepted the People’s May 18, 2016 plea and sentence agreement—McKinley is 31

56a. Although the Court’s order clearly asks the parties to address McKinley in the context of this second question, the pertinent portion of defendant’s brief does not discuss McKinley at all.

See defendant’s brief, 20-26.

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restitution hearing. The court, instead, correctly told defendant that he could either accept the

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convicted by way of a guilty plea, the trial court did not preside over an evidentiary hearing on restitution, and defendant never objected at sentencing to the court’s restitution order, which was based on the undisputed contents of the PSIR. Further, defendant was charged with, pleaded guilty to, and was sentenced for committing the felony offenses of organized retail crime and using a computer to commit a crime and the victim for all of defendant’s crimes was Home Depot. No co-defendant was ever charged in this case.32 B.

Because the trial court ultimately rejected the May 18, 2016 negotiated plea offer and sentence agreement, defendant’s request—that this Court rule on the legality of such agreements—is moot and should not be decided.

Defendant also asks the Court to make a series of rulings regarding the propriety of plea offers and sentence agreements that include restitution set at a fixed amount.33 Defendant claims, for various reasons, that these agreements may be void and asserts that a defendant should not be able to “waive review of an invalid restitution award by pleading guilty pursuant to a sentence agreement that specifies a clearly invalid amount of restitution.”34 The People first note that defendant’s argument—that the restitution award in this case was “clearly” invalid—is not supported by the record in this case. The restitution amount contained in defendant’s original plea and sentence agreement was supported by an offer of proof by the People and defendant affirmed the accuracy of the information justifying this amount in the PSIR. Because the restitution requested by the People was not “clearly invalid,” defendant’s argument is in conflict 32

See defendant’s brief, 25 (defendant complaining that the trial court did not order him to pay restitution joint and severally with any co-defendants).

33 See Issue II, subsection B of defendant’s supplemental brief.

34 Defendant’s brief, 22; see also defendant’s brief, 23 (claiming that a sentence agreement that contains a restitution award that is “clearly greater than what the defendant could be required to pay if he were to be convicted at trial are unconscionable, and should be deemed unenforceable as a matter of public policy and Due Process.”).

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factually and legally inapposite. Unlike the defendant in McKinley, defendant in this case was

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defendant waives appellate review of a sentence “by understandingly and voluntarily entering into a plea agreement to accept that specific sentence.” Id. at 154. In support of this holding, Wiley cited to People v Cobbs, 443 Mich 276, 285; 505 NW2d 208 (1993), which held “that a defendant who pleads guilty with knowledge of the sentence will not be entitled to appellate relief on the basis that his sentence is disproportionate” and Carter, 462, Mich at 215-216 (stating that waiver is “the intentional relinquishment or abandonment of a known right.”) (internal quotation and citing references omitted).

More importantly, the issue defendant attempts to raise here—the legality of plea bargains in Michigan that contain a set amount of restitution as an express term—is moot, as it “presents ‘nothing but abstract questions of law which do not rest upon existing facts or rights.’”

People v Richmond, 486 Mich 29, 35; 782 NW2d 187 (2010), quoting Gildemeister v Lindsay, 212 Mich 299, 302; 180 NW2d 633 (1920); see also id. at 34 (“It is universally understood…that a moot case is one which seeks to get a judgment on a pretend controversy, when in reality there is none, …or a judgment upon some matter which, when rendered, for any reason, cannot have any practical legal effect upon a then existing controversy.”) (internal quotation and citing references omitted). This is because the May 18, 2016 plea and sentence agreement that contained this term was rejected on the record by the trial court on June 13, 2016. 37a. On June 15, 2016, defendant affirmed that he understood that the May 18, 2016 agreement had “been stricken[.]” 43a. Defendant then went on to accept a new plea and sentencing recommendation that did not include a set amount of restitution as an enumerated term. 44a-47a.

“It is well established that a court will not decide moot issues…because it is the ‘principal duty of this Court…to decide actual cases and controversies.’” Richmond, 486 Mich - 34 -

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with People v Wiley, 472 Mich 153; 693 NW2d 800 (2005), in which this Court held that a

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(2002) (additional citing reference omitted).35 “That is, ‘[t]he judicial power…is the right to determine actual controversies arising between adverse litigants, duly instituted in courts of proper jurisdiction.’” Id., quoting Anway v Grand Rapids R. Co., 211 Mich 592, 610; 179 NW2d 350 (1920). “As a result, ‘this Court does not reach moot questions or declare principles or rules of law that have no practical legal effect in the case before” it. Id., quoting Federated Publications, 467 Mich at 112; see also Anway, 211 Mich at 606 (“‘Any attempt by a mere colorable dispute to obtain the opinion of a court upon a question of law, when there is no real controversy, is an abuse which courts have always reprehended and treated as a punishable contempt of court.’”), quoting 2 Bouvier’s Law Dict. 2245. The Court can, however, reach a moot question “if ‘the issue is one of public significance that is likely to recur, yet evade judicial review.’” Richmond, 486 Mich at 34, quoting Federated Publications, 649 Mich at 390.

Here, because the People’s May 18, 2016 plea offer—which contained a specific amount of restitution as an express term of the agreement—was stricken, any declaration by this Court regarding the propriety of such agreements would have no practical effect on defendant. See Smith, 502 Mich at 632 (finding that the resignation provision in a plea deal was moot because the defendant had already resigned from office, so Court’s decision on the issue would lack practical legal effect in that case). This issue is therefore moot. See Richmond, 486 Mich at 34.

Further, there is no evidence that the issues raised in Issue II, subsection B of defendant’s supplemental brief are likely to evade judicial review. For example, the question of the legality and propriety of a plea and sentence agreement that contains a provision requiring a defendant to 35

The Court’s decision in Federated Publications was later modified, on other grounds, by Herald Co. Inc v Eastern Michigan University Bd of Regents, 475 Mich 463; 719 NW2d 19 (2006).

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at 34, quoting Federated Publications, Inc. v City of Lansing, 467 Mich 98, 112; 649 NW2d 383

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two years ago in Foster, 319 Mich App 365. The Court of Appeals in that case distinguished McKinley and found that a defendant’s due process rights are not “implicated when the defendant expressly agrees to pay restitution to receive the benefit of a bargain struck with the prosecution.” Id. at 382. Describing these plea bargains as an “act of self-conviction by the defendant in exchange for various official concessions,’” the Court of Appeals explained that “[w]hen a conviction is exchanged for restitution, a defendant intentionally relinquishes his right to have the prosecution prove every element of the charge beyond a reasonable doubt.” Id., quoting Killebrew, 416 Mich at 199 and citing Olano, 507 US at 733 and Johnson, 304 US at 464. Although the defendant in Foster applied for leave, his application to this Court was denied on March 7, 2018. See People v Foster, 501 Mich 985; 907 NW2d 577 (2018). Thus, the issue presented here by defendant is not one that is likely to evade judicial review. For all of these reasons, the Court should not decide this moot issue. See Smith, 502 Mich at 632.

Finally, although the issue discussed in pages 21-26 of defendant’s supplemental brief is moot, the People are compelled to refute the specious allegation made at page 26 of defendant’s brief, in which he claims that resolution of this legal question is necessary because “[c]ommon sense would indicate [that] prosecutors mainly extend plea offers that include an inflated restitution term to defendants whom they believe have the ability to pay the amount specified.”

Defendant offers zero factual or legal support for this assertion36 and undersigned counsel will not sit back idly and allow defense counsel to broadly and falsely attribute malfeasance upon her fellow prosecutors in this state.

36

See Mitcham v City of Detroit, 355 Mich 182, 203; 94 NW2d 388 (1959) (finding that the failure to properly brief a question on appeal is tantamount to abandoning it).

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pay a specific, enumerated amount of restitution as part of the plea bargain was addressed just

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comply with the ethical rules set forth in the Michigan Rules of Professional Conduct (MRPC).37 Among other professional obligations, prosecutors have a duty of candor toward the tribunal38 and any action undertaken by the prosecutor must not rest upon a frivolous basis.39 The MRPC also impose special responsibilities upon prosecutors40 because “[a] prosecutor has the responsibility of a minister of justice and not simply that of an advocate. This responsibility carries with it specific obligations to see that the defendant is accorded procedural justice and that guilt is decided upon the basis of sufficient evidence.”41 See also Hurd v People, 25 Mich 405, 412 (1872), superseded by statute on other grounds as recognized in People v Koonce, 466 Mich 515, 518-521; 648 NW2d 153 (2002) (explaining that “[t]he prosecuting officer represents the public interest, which can never be promoted by the conviction of the innocent. His object like that of the court, should be simply justice; and he has no right to sacrifice this to any pride of professional success.”).

In light of these ethical duties and special responsibilities required of prosecutors, not only is the notion that prosecutors in Michigan are willfully requiring defendants to pay “inflated” amounts of restitution to crime victims baseless, it is antithetical to the prosecutor’s function in our legal system. And, to the extent that anything argued here by defendant may be read as alleging that the $18,000.80 restitution amount originally requested by the assistant prosecuting attorney at the May 18, 2016 plea hearing was impermissibly “inflated,” the record 37

See MRPC 1.0; Preamble: A Lawyer’s Responsibilities.

See MRPC 3.3: Candor Toward the Tribunal.

MRPC 3.1, Meritorious Claims and Contentions, provides, in part, that “[a] lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that is not frivolous.”

40 See MRPC 3.8: Special Responsibilities of a Prosecutor.

41 MRPC 3.8, Comment.

38 39

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Prosecutors in Michigan, along with all other licensed attorneys in this state, must

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evidence supporting defendant’s direct participation in an organized retail crime scheme that resulted, over the course of at least 52 transactions, in $18,000 in losses to Home Depot.42 15a.

Some of the details of this scheme—including defendant’s role and the total losses suffered by Home Depot—were included in the PSIR, the accuracy of which defendant did not dispute when presented with the opportunity to do so on June 13, 2016. 34a. Defendant’s arguments are baseless and must be rejected by the Court.

42

As an officer of the court, undersigned counsel avers that she has reviewed the file utilized by the trial prosecutor in 2016 and has read and reviewed the police reports contained in that file, along with the 42-page report (with supporting documentation) generated by a Home Depot corporate investigator, which was referred to by the assistant prosecuting attorney on the record at the May 18, 2016 hearing. 15a.

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does not support this claim. The People, by way of an offer of proof, maintained that they had

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THEREFORE, the People request that this Honorable Court deny defendant’s application for leave to appeal.

Respectfully submitted,

KYM WORTHY Prosecuting Attorney County of Wayne JASON W. WILLIAMS Chief of Research, Training, and Appeals /s/ Amanda Morris Smith AMANDA MORRIS SMITH (P73127) Assistant Prosecuting Attorney 1441 St. Antoine, 11th Floor Detroit, Michigan 48226 (313) 224-5787 Dated: October 3, 2019

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