SUPREME COURT OF THE UNITED STATES

No. 95–1228

UNITED STATES, PETITIONER v. JERRY E. WELLS and KENNETH R. STEELE

on writ of certiorari to the united states court of appeals for the eighth circuit

[February, 26 1997]

Justice Stevens, dissenting.

Violation of 18 U. S. C. §1014 is a crime punishable by up to 30 years in prison, a fine of up to $1,000,000, "or both." I am convinced that Congress did not intend this draconian statute to apply to immaterial falsehoods, even when made for the purpose of currying favor with a bank's loan officer. The Court's contrary conclusion relies heavily on three dubious assumptions: (1) that our decision in Kay v. United States, 303 U. S. 1 (1938), speaks to the issue in this case; (2) that the revisers of §1014 erred in advising us that their 1948 consolidation of 13 earlier statutes did not change the law; and (3) that flattery of bank officers is uncommon. I disagree with each of those assumptions.

Our opinion in Kay, on which the majority relies, does not address the issue in this case. It does, however, illuminate the problems with the Court's holding today. Ms. Kay was convicted of making false statements under the Home Owners' Loan Act, 12 U. S. C. §1467(a) and (e) (1940 ed.). 303 U. S., at 3–4. She had falsely stated that the amount of the claims she presented for settlement was two to four times their actual value. Id., at 5. Among the challenges that Kay pressed before this Court was an argument that she could not be convicted under §1467(a) because the Government produced no evidence that her false statement had any effect on the actions of the Loan Corporation. Ibid. In rightly rejecting this argument, this Court reasoned:

"Whether or not the Corporation would act favorably on the loan is not a matter which concerns one seeking to deceive by false information. The case is not one of an action for damages but of criminal liability, and actual damage is not an ingredient of the offense." Id., at 6.

There is a clear distinction between the concept of materiality—whether the information provided could have played a proper role in the loan approval process—and the concept of reliance—whether the information did play a role in the process. Kay could not plausibly have contended that her false statement was immaterial. Certainly a misrepresentation regarding the proposed amount of settlement was relevant and could have affected the Corporation's decision. Instead, she argued that the charge was insufficient because it did not allege that the application had been approved, i.e., that her material false statement had played a causal role. The Court, quite properly, rejected that argument because the crime was complete when the material false statement was made. Since the materiality of the statement was not disputed, the Court had no occasion to address the question presented by this case.

The difference between the issue in Kay and the issue in this case does, however, illustrate the importance of the Court's holding today. Conceivably a prohibition against making intentional false statements might encompass four different categories: (1) all lies, including idle conversation; (2) all lies intended to encourage a favorable response, including mere flattery; (3) all material misstatements; or (4) only those material misstatements that are relied upon by the deceived decisionmaker. Kay held that the coverage of one of the predecessor statutes that became §1014 is broader than the fourth category. In my opinion, §1014 embraces only the third category. The Court, however, concludes that it encompasses all of the second category, which I call the "flattery category" even though that label does not adequately describe its breadth. As now construed, §1014 covers false explanations for arriving late at a meeting, false assurances that an applicant does not mind if the loan officer lights up a cigar, false expressions of enthusiasm about the results of a football game or an election, as well as false compliments about the subject of a family photograph. So long as the false statement is made "for the purpose of influencing" a bank officer, it violates §1014. Ante, at 17.

The history of §1014 also refutes the Court's interpretation of that statute. Prior to the 1948 codification, three of the statutes that became a part of §1014 included an express materiality requirement. The others did not. The Reviser's Note states that the amalgamation of these 13 statutes made no "change of substance" in the law. The majority, today interpreting §1014 as making a substantial change in the law, concludes that the reviser was "simply wrong." Ante, at 15.

A more plausible explanation shows that the reviser was, in fact, correct. Prior to the 1948 codification, no federal court appears to have held that any of §1014's predecessor statutes encompassed immaterial statements. At least two cases, however, had held or assumed that the nonexplicit statutes did contain a materiality requirement. See McClanahan v. United States, 12 F. 2d 263, 264 (CA7 1926); United States v. Kreidler, 11 F. Supp. 402, 403 (SD Iowa 1935). Given these federal cases and the absence of any common-law precedent for punishing immaterial false statements, it is far more likely that the revisers assumed that all of these statutes included the common-law requirement of materiality than that congressional silence was intended to make a dramatic change in the law. In my judgment, the fact that the materiality element had been expressly included in some of the predecessor statutes, and only implicitly included in the others, explains why the Reviser's Note could accurately state that the omission of the express reference to materiality was not a "change of substance."

At least three additional reasons support the conclusion that the revisers correctly assumed that all of the federal statutes criminalizing false statements included a materiality requirement that was sometimes implicit and sometimes explicit. First, contrary to the Court's assertion, crimes involving "false statements" have a common-law heritage that includes an assumption of a materiality requirement. This conclusion is consistent with our prior holding that the term "misrepresentation" in §10 of the Displaced Persons Act of 1948, 62 Stat. 1013, implicitly contained a materiality requirement. See Federenko v. United States, 449 U. S. 490, 507–508, and n. 28 (1981). Today the Court discounts the significance of that holding because it assumes that at common law there was a critical difference between a "misrepresentation" and a "false statement." Ante, at 9, n. 10. However, Kungys v. United States, 485 U. S. 759 (1988), from which the Court draws this inference, made it perfectly clear that "false statements" share a common-law ancestry with "misrepresentations." At common law, neither term included immaterial falsehoods such as mere flattery.

Second, at least 100 federal false statement statutes may be found in the United States Code. About 42 of them contain an express materiality requirement; approximately 54 do not. The kinds of false statements found in the first category are, to my eyes at least, indistinguishable from those in the second category. Nor is there any obvious distinction between the range of punishments authorized by the two different groups of statutes. Moreover, some statutes, such as the one we construed in United States v. Gaudin, 515 U. S. ___ (1995), criminalize two equally culpable categories of false statements but include an explicit materiality requirement in one but not the other category. See id., ___ (slip op., at 2–3) (Rehnquist, C. J., concurring). It seems farfetched that Congress made a deliberate decision to include or to omit a materiality requirement every time it created a false statement offense. Far more likely, in my view, Congress simply assumed—as the government did in Gaudin—that the materiality requirement would be implied wherever it was not explicit.

Third, §1014 was revised at a time when a different view of statutory interpretation held sway. When Congress enacted the current version of the law in 1948, a period marked by a spirit of cooperation between Congress and the Federal Judiciary, Congress looked to the courts to play an important role in the lawmaking process by relying on common-law tradition and common sense to fill gaps in the law—even to imply causes of action and remedies that were not set forth in statutory text. It was only three years earlier that one of the greatest judges of the era—indeed, of any era—had admonished us "not to make a fortress out of the dictionary." Cabell v. Markham, 148 F. 2d 737, 739 (CA2 1945). The Court's approach to questions of statutory construction has changed significantly since that time. The textual lens through which the Court views the work product of the 1948 revisers is dramatically different from the contemporary legal context in which they labored. In 1948, it was entirely reasonable for Congress and the revisers to assume that the judiciary would imply a materiality requirement that was a routine aspect of common-law litigation about false statements.

Indeed, subsequent history confirms the reasonableness of such an assumption: the vast majority of judges who have confronted the question have found an implicit materiality requirement in §1014. As the Court recognizes, all but one of the Courts of Appeals have so held. Ante at 3–4, n. 3. Moreover, both in this case and in Gaudin the prosecutor initially proceeded on the assumption that a nonexplicit statute contained an implicit materiality requirement. Only after it failed to convince us in Gaudin that the materiality issue should be resolved by the judge rather than the jury did the Government switch its position and urge us to reject that assumption entirely.

Because precedent and statutory history refute the Court's position, its decision today must persuade, if at all, on the basis of its textual analysis. But congressional silence cannot be so convincing when the resulting interpretation is so unlikely. Even the Court's recent jurisprudence affirms that "[t]he purpose of Congress is the ultimate touchstone." Gade v. National Solid Wastes Management Assn., 505 U. S. 88, 96 (1992) (internal quotations omitted). Mindful of this dictate, the Court has routinely rejected literal statutory interpretations that would lead to anomalous results. See INS v. Cardoza-Fonseca, 480 U. S. 421, 454 (1987) (Scalia, J., concurring in judgment) (citing cases). We have been especially willing to reject a purely literal reading of a federal statute that would, as here, expand its coverage far beyond any common law antecedent. And, as the majority acknowledges, this would not be the first time that we have had to interpret §1014 so that it would not "`make a surprisingly broad range of unremarkable conduct a violation of federal law.'" Ante, at 17 (quoting Williams v. United States, 458 U. S. 279, 286–287 (1982)).

Congress, the Court seems to recognize, could not have intended that someone spend up to 30 years in prison for falsely flattering a bank officer for the purpose of obtaining favorable treatment. Yet the Court justifies its interpretation of the statute by positing that a literal reading of §1014 will not "normally" extend the statute "beyond the limit that a materiality requirement would impose." Ante, at 17. In making this assertion, the Court correctly avoids relying on prosecutors not to bring frivolous cases. Rather, it appears to have made an empirical judgment that false statements will not "usually" be about a trivial matter, and that the government will "`relatively rare[ly]'" be able to prove that nonmaterial statements were made for the purpose "of influencing a decision." Ibid. I am not at all sure, nor do I know how the Court determined, that attempted flattery is less common than false statements about material facts. Even if it were, the "unusual" nature of trivial statements provides scant justification for reaching the conclusion that Congress intended such peccadillos to constitute a felony.

Today the Court misconstrues §1014, its history, and our precedents in holding that the statute does not contain a basic materiality requirement. In doing so, the Court confidently asserts that almost every court to interpret §1014, the revisers of the statute, and the courts discussing Kay were all simply wrong. Unwarranted confidence in one's own ability to ascertain the truth has prompted many a victim of deception to make the false statement that "flattery will get you nowhere." It now appears that flattery may get you into a federal prison.

I respectfully dissent.