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Saturday, April 03, 2010

Why Tax Cheats Love the AG Suits Challenging Health Care Reform

As I've detailed, the lawsuits challenging the constitutionality of the health care legislation have no chance of succeeding under current law.  I fully expect the lawyers who sign the briefs to face a motion for Rule 11 sanctions and, if they appeal to a federal court of appeals, for costs.  (Suggestion for hapless first-year DAG's working on the draft briefs: buy some professional insurance coverage this year.)  That prospect raises the interesting question whether the litigation can possibly represent a "nonfrivolous argument for...reversing existing law."   

Even the litigation's defenders agree that the suits have no chance of success without a "Bush v. Gore"-type decision: a decision that totally rejects existing precedent to do whatever the court feels like.  But, defenders say, that's always a possibility.  So perhaps the argument against sanctions would be the same: hey, you never know.  If that's going to be the AGs' argument (and if anyone has a better one, I'd be interested to hear it), they should feel pretty uncomfortable.  Because even if they win on that one, they're undermining their own role.  For one thing, I think AG's should be standing for the proposition that the law is predictable and principled, not the product of whim.  But there's a more pragmatic problem, and it deals with tax fraud. 

I happen to have thought about this question a lot in connection with the constitutionality of the tax laws, because it used to be my job to keep tax evaders in jail.  Now, to be guilty of a federal tax offense, you have to "wilfully" violate the law, which means you have to know what you did was unlawful.  But lots and lots of defendants argue that, though they knew their position had been rejected by the IRS and the Courts, there was always a chance that the Supreme Court could finally see the light.  Or maybe they'd just end up in front of a really anti-government circuit panel, and pull out an improbable victory.  Given that chance, how could the government argue that defendants knew their position was unlawful? 

In other words, the AG's (assuming they will defend themselves against Rule 11) and the tax evaders will be making the same arguments.  And, yes, states too have penalties for tax fraud.  So, uh, is that a wise litigating position for a state's chief law-enforcement official?

As for the merits, I think both sets of arguments ought to be sanctionable.  I accept that, as Charles Yablon has argued, this means that some small number of meritorious suits will occasionally be punished, just as I accept (painfully) that a "beyond a reasonable doubt" standard permits some unjust convictions.  Both are the price of a manageable justice system.  No court system could function, I think, if it continually invited private citizens to believe the courts might whirl on a dime at any moment and throw away hundreds of years of precedent --- or, to take the HCR example, precedent upon which the entire modern state is constructed.  And the tax system could be crippled by litigation if every taxpayer could constantly challenge every settled tax question. 

But that is not to say that we necessarily throw the book at a litigant as soon as their complaint is filed.  In court filings, we can give notice of prospective sanctions, and allow the party to withdraw the pleading and escape sanction.  This technique doesn't work as well with tax filers, but I'll spare you all that discussion. 

Posted by BDG on April 3, 2010 at 11:43 AM | Permalink

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Comments

Violating a law is different from challenging a law's constitutionality.

Posted by: Chris | Apr 3, 2010 5:29:37 PM

I have no idea whether HCR is constitutional, but the number of respected scholars (including a former appellate judge) who argue that it is unconstitutional suggests that the argument isn't sanctionable under Rule 11.

Sure, the fact that experts agree with an argument does not establish its validity. But is there any precedent for a lawyer facing a Rule 11 sanction when a significant number of experts agree with that lawyer's argument?


I seriously doubt that the state government attorneys will face Rule 11 motions, and if they do, then I think the attorneys filing those motions should themselves be sanctioned under Rule 11.

If this post was meant to be a late April Fool's Joke, then I've been had.

See:

http://volokh.com/2010/04/01/pretending-that-no-law-professors-question-obamacare/

Posted by: anon1 | Apr 3, 2010 7:57:19 PM

Anon1: I never disputed that some law professors think the HCR ought to be unconstitutional. Unfortunately, the fact that law professors think something ought to be true does not mean that it is. That was the point I was making about Bush v. Gore: even law professors who argue that the Court has gotten everything since 1937 wrong agree that there is little likelihood that anyone in robes (other than Justice Thomas) would agree with them. The point of Rule 11 is to avoid wasting social resources on disputes that have no chance of success. Until Prof. Barnett is Justice Barnett, and he's sitting next to Justice Thomas and three more sympathetic voters, that is the fate of constitutional challenges to health care reform: no chance of success.

Posted by: BDG | Apr 4, 2010 11:14:10 AM

hapless ... buy insurance ... ought to be sanctionable ... equivalent to arguments that criminal tax cheats make ... punishing some meritorious claims is the acceptable price we must pay ... but we'll permit them to recant and repent ...

c'mon. BDG, whoever that is, is sill kidding, right?

Posted by: Proffy McProfferton | Apr 4, 2010 2:51:24 PM

I'm sorry, but the equivalence between tax protestors and the AGs doesn't make any sense, whatever the merit of the AG's arguments. The AGs are arguing that the law is unconstitutional. But thinking the law is unconstitutional isn't a defense to willfulness under the tax code, see Cheek v. United States.

Posted by: Anonynon | Apr 4, 2010 2:58:04 PM

And yes, Chris above made my obvious point, but since BDG didn't respond I thought I'd flesh it out a bit.

Posted by: Anonynon | Apr 4, 2010 2:59:48 PM

"Unfortunately, the fact that law professors think something ought to be true does not mean that it is."

That's my exact point about your Rule 11 argument -- just because you think they will face Rule 11 sanctions hardly makes it true.

And returning to my original point, I didn't argue that law prof beliefs indicate that an argument will win (or be "true"), but only that it strongly suggests that a person making the argument won't face a Rule 11 sanction.

I agree with Proffy that your post is loaded with so much inflammatory language that it's hard to take seriously. Claiming that someone who disagrees with you deserves a Rule 11 sanction simply because he disagrees with you is the type of tactic reserved for desperate, misguided litigants. I can't help but think your Rule 11 argument is simply a way of expressing your outrage over a competing view. Again, I seriously doubt any judge will impose a Rule 11 sanction on an argument that will undoubtedly be made, in the coming years, in the pages of well-respected legal and nonlegal publications.

Again, has there ever been a case where a lawyer faced a Rule 11 sanction for making an argument advocated for by multiple legal experts?

Posted by: anon1 | Apr 4, 2010 4:39:33 PM

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