The Supreme Court is barreling toward the end of this year’s term, which likely wraps up next week. There are 21 decisions remaining (23 cases, but that includes two consolidated pairs that will almost certainly be decided together). Ten of those are big, high-profile cases, and maybe five others might be sleepers. But the Court is also busily building its docket for next year.
Today’s orders list granted certiorari in four cases, and they show where the Court is looking. One is Nvidia Corp. v. E. Ohman J:or Fonder AB, a case from my old area of practice (securities-fraud class actions) asking how particular the pleading standards should be for arguing that a public company’s public statements diverged from what it said in internal documents. A second case, E.M.D. Sales v. Carrera, involves Fair Labor Standards Act exemptions. The other two cases, Kousisis v. United States (a criminal mail- and wire-fraud case) and Wisconsin Bell v. United States ex rel. Heath (a civil False Claims Act case), involve when and how federal law is violated by government contractor submissions.
Kousisis may be the most interesting of these. A continuing issue in federal fraud prosecutions is when the Justice Department can prosecute people who didn’t defraud anybody out of money or property — the traditional categories of fraud. The issue comes up under the mail- and wire-fraud laws, the “conspiracy to defraud the United States” statute, the bank-fraud statute, and sometimes even in other areas such as insider trading. The Court has regularly and increasingly pushed back against efforts to expand the concept of fraud, while the Justice Department has continued to seek ways to argue that corruption amounts to defrauding government and business of the “honest services” of employees, and that various other sorts of falsehood deprive government and business of things like a right to information. This is not a new debate: the Court has been in a tug of war with creative federal prosecutors since at least Durland v. United States (1896) and Haas v. Henkel (1910) over whether and to what extent broadly worded federal fraud statutes track the traditional elements of common-law fraud. Congress, irritated at being asked to make laws, has done the bare minimum to clarify these various statutes when prodded by restrictive decisions of the Court, passing a revision of the mail-fraud statute in 1909 in response to Durland and adding an “honest services” statute in 1988 in response to McNally v. United States (1987) that does little to explain the concept.
At issue in Kousisis is the regulatory regime under which federal contractors and subcontractors have to detail how a portion of their work on construction jobs will be done by “Disadvantaged Business Enterprises” such as black-owned businesses. The defendants in Kousisis — a painting company and its project manager — won the low bid on a bridge-construction project funded by the Transportation Department, but lied about the extent to which its supposed DBE supplier was really just a pass-through taking a cut for being a DBE but not doing the work. In other words, the DBE was just paid for bringing the right demographics to the job, not for doing the job. This pleases our federal government, and it gets angry when it’s been had. But the defendants were the low bidder, they did the job well, they alone faced the financial risks if they had been required to hire a different DBE, and there was no theory under which the government had lost any money on account of the scheme. Is that fraud?
The case is a doubly interesting one because it not only raises questions about this sort of “pedigree fraud” case; it also collides with the popular progressive shibboleth that racial preferences don’t harm anyone. If that’s true, then how can there be fraud in giving them to the wrong people?