No. 98-852
In the Supreme Court of the United States
OCTOBER TERM, 1998
MIJA S. ROMER AND KHEM C. BATRA, PETITIONERS
v.
UNITED STATES OF AMERICA
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BRIEF FOR THE UNITED STATES IN OPPOSITION
SETH P. WAXMAN
Solicitor General
Counsel of Record
JOEL I. KLEIN
Assistant Attorney General
JOHN J. POWERS III
MARION L. JETTON
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
QUESTIONS PRESENTED
1. Whether the evidence at trial supported the jury's finding that petitioners'
bid-rigging conspiracy had the nexus to interstate commerce required by
the Sherman Act, 15 U.S.C. 1.
2. Whether petitioners adequately preserved their objections to the district
court's refusal to give two jury instructions.
In the Supreme Court of the United States
OCTOBER TERM, 1998
No. 98-852
MIJA S. ROMER AND KHEM C. BATRA, PETITIONERS
v.
UNITED STATES OF AMERICA
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BRIEF FOR THE UNITED STATES IN OPPOSITION
OPINIONS BELOW
The opinion of the court of appeals (Pet App. 1-23) is reported at 148 F.3d
359. The opinion of the district court denying petitioners' motions for
judgments of acquittal (C.A. App. 1391-1398) is unreported.
JURISDICTION
The judgment of the court of appeals was entered on June 24, 1998. A petition
for rehearing was denied on July 21, 1998 (Pet. App. 24-25). On October
8, 1998, the Chief Justice extended the time within which to file a petition
for a writ of certiorari to and including November 19, 1998. The petition
for a writ of certiorari was filed on that date. The jurisdiction of this
Court is invoked under 28 U.S.C. 1254(1).
STATUTE AND RULE INVOLVED
1. The Sherman Act, 15 U.S.C. 1, provides, in relevant part:
Every contract, combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States * * * is declared
to be illegal.
2. Rule 30 of the Federal Rules of Criminal Procedure provides, in relevant
part:
No party may assign as error any portion of the charge or omission therefrom
unless that party objects thereto before the jury retires to consider its
verdict, stating distinctly the matter to which that party objects and the
grounds of the objection.
STATEMENT
Following a jury trial in the United States District Court for the Eastern
District of Virginia, petitioners Mija S. Romer and Khem C. Batra were convicted
of various offenses stemming from their participation in a conspiracy to
rig bids at real-estate foreclosure auctions. Both were convicted of violating
Section 1 of the Sherman Act, 15 U.S.C. 1. In addition, Romer was convicted
of bank fraud, in violation of 18 U.S.C. 1344, and tax fraud, in violation
of 18 U.S.C. 371. Batra was sentenced to three years' probation, with a
special condition of 90 days' imprisonment to be followed by three months'
home detention. Romer was sentenced to concurrent terms of 18 months' imprisonment
on each count, followed by a total of three years' supervised release. Pet.
App. 2-3, 5; C.A. App. 1473-1474, 1482.1 The court of appeals affirmed.
Pet. App. 1-23.
1. Romer and Batra participated in a conspiracy to limit bidding competition
at public foreclosure auctions on residential property in Fairfax County,
Virginia. At the public auctions, a designated member of the conspiracy
bid on the property, while the other members refrained from bidding. If
the designated member won the bid, a second, private auction was held among
the conspirators. The difference between the sale price at the public auction
and the higher sale price at the secret auction was then divided among the
conspirators. The effect of the conspiracy was to lower artificially the
prices that lenders, lien holders, and homeowners received as a result of
the auctions and to divide among the conspirators the amount that would
otherwise have gone to those victims. Pet. App. 3; C.A. App. 95-96, 124-128,
198.
Under Virginia law, in order for property to be sold at foreclosure under
a deed of trust, a public auction must be conducted. Va. Code Ann. §
55-59(7) (Michie 1995). The sale generates funds to pay the lender who holds
a deed of trust on the property, to pay any other creditors who hold liens
on the property, and, if there are enough proceeds, to pay the former owner
of the property. The lender initiates the foreclosure, appointing the trustee
to conduct the sale by auction. After the sale, the trustee delivers a trustee's
deed to the successful buyer and disburses funds received from the buyer
to lenders, lien holders, and former owners. The parties stipulated that
foreclosure proceedings on 12 properties subject to the conspiracy were
initiated by lenders located outside Virginia and that the proceeds from
11 properties subject to the conspiracy were remitted out-of-state. Pet.
App. 3; C.A. App. 51-53, 78-80, 92.
2. After the jury found both petitioners guilty on the Sherman Act count,
the district court denied petitioners' motions for judgments of acquittal,
which contended that the evidence failed to establish the requisite nexus
between petitioners' bid-rigging conspiracy and interstate commerce. The
court ruled that there was sufficient evidence to support the jury's findings
that petitioners' activities either were in the flow of interstate commerce
or substantially affected interstate commerce. C.A. App. 1391-1398.
3. The court of appeals affirmed petitioners' convictions. Pet. App. 1-23.
a. The court of appeals rejected petitioners' contention that the government
had failed to prove the interstate commerce element of the Sherman Act offense.
The court explained that this Court has articulated two alternative tests
to guide in answering the "general question * * * whether the activities
under alleged restraint have a sufficient nexus with interstate commerce."
Pet. App. 7 (quoting United States v. Foley, 598 F.2d 1323, 1329 (4th Cir.
1979), cert. denied, 444 U.S. 1043 (1980)). The government thus may establish
that interstate commerce nexus by showing "either [1] that the defendants'
activity itself is in interstate commerce or, [2] if it is local in nature,
that it has an effect on some other appreciable activity demonstrably in
interstate commerce." Ibid. (quoting McLain v. Real Estate Bd. of New
Orleans, Inc., 444 U.S. 232, 242 (1980)).
The court of appeals concluded that the foreclosure auctions in which petitioners
participated "were interstate transactions of the most fundamental
sort," notwithstanding that the auctions occurred in Virginia, involved
Virginia real property, and were conducted by a Virginia trustee. Pet. App.
8. The court observed that "[t]he driving force behind each auction
was the financial interest of an out-of-state lender, who initiated the
auction to recover the balance of an outstanding debt." Ibid. The trustee
who conducted the auction, while himself local, was "a mere resident
agent, appointed by the [out-of-state] lender to conduct the auction on
the lender's terms." Ibid. It was thus the out-of-state "lender
who initiated the foreclosure, who directed the terms of the auction, and
who, at the close of each sale, received across state lines some portion
of the proceeds in satisfaction of its interest in the property." Ibid.
The court of appeals next rejected petitioners' alternative argument that,
even if the foreclosure auctions themselves were interstate in nature, petitioners'
participation was not "integral" to or "inseparable"
from the auctions, and thus not within the flow of interstate commerce under
Goldfarb v. Virginia State Bar, 421 U.S. 773, 784 (1975). The court explained
that petitioners "were not convicted of rigging bids at hypothetical
auctions they did not attend," but of rigging bids at particular auctions
that "they not only attended, but at which they were the successful
bidders." Pet. App. 9. Accordingly, said the court, petitioners "assumed
a role that was not only integral to but inseparable from the interstate
sale of property." Ibid.
The court of appeals further held that United States v. Lopez, 514 U.S.
549 (1995), does not cast doubt on whether the Sherman Act, as applied to
the sort of activity at issue in this case, is within Congress's regulatory
power under the Commerce Clause. The court noted that this Court stated
in Lopez that an Act of Congress is a valid exercise of the commerce power
if the law contains a "jurisdictional element which . . . ensure[s],
through case-by-case inquiry, that the [activity] in question affects interstate
commerce." Pet. App. 9 (quoting Lopez, 514 U.S. at 561). The court
observed that the Sherman Act contains such a jurisdictional element and
that the requisite inquiry had been conducted in this case into whether
a sufficient nexus existed between petitioners' activity and interstate
commerce. Ibid.
b. The court of appeals also rejected petitioners' claim that the district
court erred in declining to give two of their proposed jury instructions.
The court noted that petitioners had failed to object at trial to the district
court's refusal to give the requested instructions. Pet. App. 12. The court
therefore reviewed petitioners' challenges only for plain error. Ibid.;
see Fed. R. Crim. P. 30.
The court of appeals held that the district court did not err in refusing
to give petitioners' first requested instruction, a definition of the term
"joint venture" taken from Black's Law Dictionary. The court explained
that the instruction "threatened to confuse the jury's understanding
of applicable law." Pet. App. 12. The court also determined that petitioners'
point was adequately made by another instruction, which informed the jury
that "forming a partnership or an agreement to bid on a contract [is
not] necessarily a violation of the [Sherman A]ct." Ibid.
As for petitioners' second requested instruction, which would have informed
the jury that bid-rigging violates the Sherman Act only if it involves "an
agreement between competitors," the court of appeals suggested that
the district court's refusal to give the instruction "may have been
erroneous." Pet. App. 12-13. But the court found it unnecessary to
resolve the question. The court explained that petitioners could not meet
their burden of establishing actual prejudice, as is necessary for reversal
under the plain error standard, see United States v. Olano, 507 U.S. 725,
731-732 (1993), because "there was no evidence on which a properly
instructed jury could have concluded that [petitioners] and their cohorts
were anything but competitors." Pet. App. 13.2
ARGUMENT
1. Petitioners urge the Court to grant the petition for certiorari in order
to resolve "confusion among circuit court opinions concerning the line
of demarcation between intrastate and interstate commerce" in criminal
prosecutions under the Sherman Act. Pet. 8. But petitioners do not support
that assertion with any citation to any opinion of any other circuit that
even involves a prosecution under the Sherman Act, much less any opinion
that evinces any tension among the circuits over the application of the
Sherman Act's interstate commerce element in similar circumstances. Indeed,
in the only other reported opinion addressing the application of the interstate
commerce element of the Sherman Act in a prosecution for bid-rigging at
real-estate foreclosure sales, the district court held, on facts similar
to those here, that the interstate commerce element was satisfied. United
States v. Guthrie, 814 F. Supp. 942, 944-946 (E.D. Wash. 1993), aff'd, 17
F.3d 397 (9th Cir. 1994) (Table). This Court denied a petition for certiorari,
513 U.S. 823 (1994), which raised the interstate commerce issue. See Petition
in Guthrie v. United States, No. 93-2047.
Nor does this case disregard "any distinction between interstate and
intrastate commerce." Pet. 8. The jury, the district court, and the
court of appeals all carefully considered whether, under the alternative
tests articulated by this Court, see McLain v. Real Estate Board of New
Orleans, Inc., 444 U.S. 232 (1980), petitioners' bid-rigging conspiracy
had the nexus to interstate commerce that the Sherman Act requires. See
Pet. App. 6-9; C.A. App. 1391-1398 (district court opinion); see also C.A.
App. 1294-1310, 1312-1321 (proceedings relating to jury's deliberations
on interstate commerce issue). There is no reason for this Court to review
that application of settled law to the particular facts of this case. See
Sup. Ct. R. 10.
In any event, the evidence at trial was more than sufficient to establish,
beyond a reasonable doubt, that the foreclosure auctions, which were the
subject of petitioners' bid-rigging conspiracy, both were in the flow of
interstate commerce and substantially affected interstate commerce under
McLain.3
The "Flow of Commerce" Test: This Court has explained that an
activity is in the flow of interstate commerce if it is "an integral
part of an interstate transaction." Goldfarb v. Virginia State Bar,
421 U.S. 773, 784-785 (1975); see also McLain, 444 U.S. at 244 (describing
Goldfarb as a flow of commerce case). Activities in the flow of commerce
"need have but minimal impact upon the commerce to 'affect' it, since
by definition they are a very part of the stream." United States v.
Foley, 598 F.2d 1323, 1329 (4th Cir. 1979), cert. denied, 444 U.S. 1043
(1980); see also Goldfarb, 421 U.S. at 785 ("once an effect is shown,
no specific magnitude need be proved"). The evidence presented at trial
amply satisfied that standard.4
The foreclosure sales that were subject to petitioners' conspiracy were,
as the court of appeals put it, "interstate transactions of the most
fundamental sort." Pet. App. 8. The parties stipulated that the lenders
that initiated 12 of those foreclosure sales were located outside Virginia.
C.A. App. 51-53. The trustees who conducted the foreclosure auctions were
selected by the out-of-state lenders and acted pursuant to instructions
from those lenders, including bidding instructions. Id. at 79-80, 82, 113-116.
Some of the auctions were advertised outside Virginia, and some of the prospective
bidders came from outside Virginia. Id. at 81-82, 100. The trustee disbursed
the proceeds of each sale to the out-of-state lender for whom the trustee
foreclosed; the parties stipulated that proceeds from 11 of the sales subject
to the conspiracy were remitted out-of-state. Id. at 51-53. Any surplus
proceeds were paid first to lien holders and then to former owners, whether
located in Virginia or elsewhere. Id. at 92. This case is thus analogous
to Goldfarb, which recognized that purchases of homes in Fairfax County,
Virginia, were interstate transactions, principally because such purchases
were often financed by out-of-state lenders. 421 U.S. at 783-784; cf. United
States v. Robertson, 514 U.S. 669, 671-672 (1995) (per curiam) (activities
of a gold mine were in interstate commerce where, inter alia, some of the
gold from the mine was transferred out-of-state).
The petitioners' bidding at the auctions was, moreover, an "integral
part" of the interstate foreclosure sales. Pet. App. 9. Without such
bidding at public auction, which is required by Virginia law (Va. Code Ann.
§ 55-59(7) (Michie 1995)), the foreclosure process could not have proceeded.
See Goldfarb, 421 U.S. at 784-785 (attorneys' services in conducting title
searches, which were a necessary prerequisite to obtaining financing for
home purchases, were an integral part of those interstate transactions);
Guthrie, 814 F. Supp. at 946 (defendant's rigged bids at real-estate foreclosure
sales were part of the flow of interstate commerce, because "the funds
[defendant] tendered to the trustees at the foreclosure sales eventually
made their way across state lines to the out of state banks").
The "Affecting Commerce" Test: This Court has held that the Sherman
Act extends to activity, although not itself in interstate commerce, that
nonetheless has "a substantial effect on interstate commerce."
McLain, 444 U.S. at 242. That standard may be satisfied by demonstrating
that the underlying commercial activity subject to the anti-competitive
restraint actually or potentially had a substantial effect on interstate
commerce. Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 330-332 (1991); McLain,
444 U.S. at 242-243. In McLain, for example, the Court recognized that the
activities of residential real-estate brokers in New Orleans, Louisiana,
could have the requisite effect on interstate commerce. The Court explained
that the brokers' activities "necessarily affect both the frequency
and the terms of residential sales transactions," which could, in turn,
affect the demand for financing and title insurance provided by interstate
corporations. 444 U.S. at 245-246.
The evidence at trial was sufficient to establish that the foreclosure auctions
in this case met the "affecting commerce" standard. The district
court found that "[t]he nine auctions in which [petitioners] participated
generated over one million dollars of proceeds to satisfy debts held by
out-of-state lenders." C.A. App. 1397. The district court further found
that petitioners' conspiracy itself had a potentially substantial impact
on interstate commerce by "threaten[ing] the ability of lenders, creditors
and former homeowners," some of whom were outside Virginia, "to
fully recoup their losses." Ibid.
Finally, the court of appeals' decision affirming petitioners' Sherman Act
convictions is not, as petitioners claim (Pet. 12-14), inconsistent with
United States v. Lopez, 514 U.S. 549 (1995), which held that the Gun-Free
School Zones Act of 1990 exceeded Congress's authority under the Commerce
Clause. In Lopez, the Court distinguished statutes, such as the Sherman
Act, that contain a "jurisdictional element which would ensure, through
case-by-case inquiry," the requisite nexus with interstate commerce,
from the statute at issue in that case, which contained no such jurisdictional
element. 514 U.S. at 561. As the court of appeals concluded, Lopez provides
no basis for petitioners to escape liability under the Sherman Act. Pet.
App. 9.
2. Petitioners further contend (Pet. 14) that this case implicates a conflict
among the courts of appeals "as to what constitutes a preservation
of an objection to a jury instruction" under Rule 30 of the Federal
Rules of Criminal Procedure. No such circuit conflict exists.
Rule 30 requires that a party make a specific and timely objection to the
district court's refusal to give a jury instruction:
No party may assign as error any portion of the charge or omission therefrom
unless that party objects thereto before the jury retires to consider its
verdict, stating distinctly the matter to which that party objects and the
grounds of the objection.
Fed. R. Crim. P. 30. As the First Circuit has explained, Rule 30 "means
what it says," i.e., that "[a] party may not claim error in the
judge's charge to the jury unless that party 'objects' after the judge gives
the charge but before the 'jury retires,' and, when objecting the party
must 'stat[e] . . . distinctly the matter to which that party objects and
the grounds of that objection.'" United States v. Wilkinson, 926 F.2d
22, 26 (1st Cir.) (Breyer, J.), cert. denied, 501 U.S. 1211 (1991).
The colloquy on which petitioners rely (Pet. 6 n. 8) to demonstrate their
objection to the district court's failure to give their requested instructions
does not satisfy Rule 30. Petitioners merely made a general request for
a jury instruction on "the defense's theory of the case." C.A.
App. 1232-1233. They did not "distinctly" object to the district
court's failure to give their requested instructions on "the need to
prove that Petitioners were competitors" or on "the law on partnership
and joint bidding" (Pet. 15). Nor did they articulate any "grounds"
to explain why the absence of those instructions was error. In these circumstances,
the court of appeals correctly held that petitioners had "failed to
object to the district court's denial of those requests," and accordingly
reviewed petitioners' challenges to the district court's refusal to give
the requested instructions only for plain error. Pet. App. 12-13.
Petitioners contend (Pet. 14-16) that the Fourth Circuit in this case "require[d]
a strict, formalistic approach in determining the sufficiency of a properly
lodged objection to a jury instruction."5 They assert that cases from
the Second and Ninth Circuits apply a more liberal standard. Pet. 16 (citing
cases). But none of those cases involves circumstances similar to those
here.
The Ninth Circuit recognizes "'a sole exception to the requirement
of a formal, timely, and distinctly stated objection' when a proper objection
would be a 'pointless formality.'" United States v. Klinger, 128 F.3d
705, 711 (1997) (quoting United States v. Kessi, 868 F.2d 1097, 1102 (9th
Cir. 1989)). The court of appeals did not, however, find that the "pointless
formality" exception was satisfied in either Kessi or Klinger, the
two assertedly conflicting cases from the Ninth Circuit on which petitioners
rely. Petitioners do not even attempt to demonstrate how that exception
might be satisfied in this case.
Nor do the Second Circuit decisions relied on by petitioners demonstrate
any circuit conflict. In United States v. Masotto, 73 F.3d 1233, 1237-1238
(2d Cir.), cert. denied, 519 U.S. 810 (1996), the court of appeals found
that the defendant in a RICO prosecution had adequately preserved an objection
to the district court's failure to give a jury instruction that contained
certain "operation or management" language from Reves v. Ernst
& Young, 507 U.S. 170 (1993). The court noted that defense counsel's
objection, after the jury instructions had been given, did not specifically
mention the Reves "operation or management" language. But the
court held that defense counsel's references to his proposed instruction,
which had contained the Reves "operation or management" language,
combined with his objection to the absence of "an instruction based
on the [Reves] decision," were "sufficient to direct the district
court to his contention." 73 F.3d at 1238; see also Ostrowski v. Atlantic
Mut. Ins. Cos., 968 F.2d 171, 177-178 (2d Cir. 1992) (noting counsel's specific
objection, after the jury was charged, to the district court's failure to
give a "burden-shifting" instruction in accordance with Price
Waterhouse v. Hopkins, 490 U.S. 228 (1989)). No similarly precise objection
was made here.
Finally, even under the standard of review that petitioners urge, the court
of appeals still would not have reversed their convictions, because the
district court's failure to give the proposed instructions was not error
at all or was merely harmless error. As for the proposed instruction defining
"joint ventures," the instruction could properly have been rejected
as potentially "confus[ing]" (Pet. App. 12), since no witness
had used that term at trial to refer to petitioners' activities. And, as
the court of appeals explained, that proposed instruction was unnecessary,
because the district court instructed the jury that "forming a partnership
or an agreement to bid on a contract [is not] necessarily a violation"
of the Sherman Act, an instruction that encompassed one-time arrangements
such as joint ventures. Ibid. (emphasis added). As for the proposed instruction
that the government must prove that petitioners were competitors, the instruction
was not an accurate statement of the law, because potential competitors,
as well as actual competitors, may violate the Sherman Act by rigging bids.
See, e.g., United States v. Sargent Elec. Co., 785 F.2d 1123, 1127 (3d Cir.)
("actual or potential competitors"), cert. denied, 479 U.S. 819
(1986).6 In any event, the court of appeals recognized that petitioners
would not have been helped even if the proposed instruction had been given,
"since there was no evidence on which a properly instructed jury could
have concluded that [petitioners] and their cohorts were anything but competitors."
Pet. App. 13.
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
JOEL I. KLEIN
Assistant Attorney General
JOHN J. POWERS III
MARION L. JETTON
Attorneys
JANUARY 1999
1 Both defendants were also ordered to pay restitution, and Romer was ordered
to pay a fine. The district court found that Batra was unable to pay a fine.
Pet. App. 5; C.A. App. 1437-1439, 1476-1477, 1484-1485.
2 Petitioners raised several other arguments in the court of appeals, including
an argument that the district court had erred in admitting certain evidence.
The court rejected those arguments (Pet. App. 10-11, 13-23), which petitioners
have not raised again in this Court.
3 Petitioners suggest (Pet. 8-9) that the interstate commerce analysis varies
in civil and criminal antitrust cases. While the quantum of proof is different,
the interstate commerce inquiry is the same. See, e.g., United States v.
Aquafredda, 834 F.2d 915, 917-918 (11th Cir. 1987) (criminal antitrust case
applying McLain standards), cert. denied, 485 U.S. 980 (1988); United States
v. Fischbach & Moore, Inc., 750 F.2d 1183, 1191-1192 (3d Cir. 1984)
(same), cert. denied, 470 U.S. 1029 (1985).
4 Petitioners argue (Pet. 8, 10) that the court of appeals cast its net
too broadly when it stated that it was appropriate to "consider * *
* all other conceivable links with interstate commerce" (Pet. App.
8). But the court, in fact, considered only the parties directly linked
to the foreclosure process, such as the foreclosing out-of-state lenders.
See ibid.
5 Petitioners contend that the First Circuit has taken a similar approach
in cases such as United States v. O'Connor, 28 F.3d 218, 221 (1994), and
Wilkinson, 926 F.2d at 26.
6 The district court gave a correct definition of bid-rigging (C.A. App.
1205-1206), which closely followed the ABA Antitrust Section's Sample Jury
Instructions in Criminal Antitrust Cases 19 (J.P. Kennedy et al. eds., 1984).