Thursday, January 26, 2017

Hudson v. Superior Court (Cal. Ct. App. - Jan. 26, 2017)

It's difficult for me to figure out who's right in this one.  And that's unusual for me.  Every member of the panel has good arguments.  Seriously.  It's a toughie.

It's clear (at least to me) that Blake Hudson's probably guilty of something.  He didn't file state tax returns for several years, and he was allegedly one of California's largest 500 tax delinquents.  No small feat, I'd imagine.  Seems to me that we pretty much definitely want to punish that.

But we've got a statute that says that failing to file a tax return is a misdemeanor.  The question here is whether it's also a felony offense.

The relevant statute would, facially, indeed seem to cover Mr. Hudson's conduct.  It says:  "Any person . . . who, within the time required by or under the provisions of this part, willfully fails to file any return . . . with intent to evade any tax imposed . . . , is punishable by imprisonment in the county jail not to exceed one year, or in the state prison."

Well, geeze.  The evidence is surely sufficient to potentially establish that he "willfully fail[ed] to file any return."  And I'd think it equally plausible that he did so "with intent to evade any tax imposed," since a rational factfinder could conclude on these facts that the reason he didn't file a return (after having been repeatedly reminded of his duty to do so) is because he was trying to evade the taxes that he owed.

So, if you just read the statute, it seems like he's (potentially) guilty.  And the procedural posture of this case is a motion to quash the indictment.

Seems clear.

The wrinkle is that there's a federal decision that says that, for federal taxes, something more is required in order to create a federal felony.  And that decision's from no schlub of a court:  it's from the United States Supreme Court.  That decision says that in order to be guilty of a felony on the analogous federal statute, there needs to be something more than a failure to file:  something like keeping double books, etc.  And Mr. Hudson didn't do any of that.

That's the best argument for quashing the indictment.  And there's not only something to that position, but, in this case, the California Supreme Court granted Hudson's petition for review and sent the case back to the Court of Appeal for an examination of this claims.  (That doesn't necessarily express a view on the merits, but it is a hint that his argument is more than insubstantial.  Which indeed it is.)

Now, sure, that's a federal decision, and this is a state case.  But the state statutes are patterned on the federal statutes.  And we've also got a principle that we generally follow analogous federal decisions in this area.  Plus, the statutes are pretty near (though not perfectly) identical.  The federal statute says that if you try to evade taxes in any manner you're guilty of a felony.  The state statute says that if you try to evade taxes by not filing a return you're guilty of a felony.  Seems to me like the former pretty much definitionally includes the latter.  So if the former requires double books (or whatever), so would the latter.

The majority finds the federal statute (and hence the Supreme Court decision) distinguishable.  The dissent doesn't.  Both sides have good arguments.  Seriously.

The struggle for me is this.  On the one hand, I don't think that the federal decision is very easily distinguishable.  Seems to me that its reasoning may well be equally applicable here.  (I understand the alleged difference, but I'm not sure it's dispositive.)  On the other hand, having read the Supreme Court's decision, I'm not sure it entirely persuades me.  Even though it was unanimous.  It's a 1943 opinion.  I get it.  Sort of.  We don't want to make felonies out of everything.  But I think we may well have wanted to make a felony (at least in California) out of this.  I'm simply not persuaded that it makes sense, as a rational manner, to apply this particular Supreme Court's decision beyond its facts or scope (e.g., as applicable to federal rather than state tax returns).

Now, if I was persuaded by the Supreme Court's reasoning, that'd be different.  But I'm not.

As I said, all the opinions here make very good arguments for their respective sides.  The only thing that's lacking, in my view, is an assessment on its own terms of the Supreme Court's reasoning.  My quick review of the literature tells me that at least one state (New Mexico) has expressly declined to extend the Supreme Court's decision to its own (state) taxes, presumably because it didn't find the decision persuasive.  So that's an option, and perhaps one worth considering.  Sure, we can argue that the decision is distinguishable.  And maybe it is (or isn't).

But maybe one way to distinguish the case is also to simply say it's wrong.  Something we have the power to do.  Because the Supreme Court is supreme on federal issues.  But not on state law.