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UNITED STATES v. GINSBURG

January 10, 1989

UNITED STATES OF AMERICA, Plaintiff,
v.
RICHARD GINSBURG, Defendant



The opinion of the court was delivered by: SHADUR

 MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE

 In early 1984 Richard Ginsburg ("Ginsburg") was convicted of 19 counts of mail fraud under 18 U.S.C. § 1341 ("Section 1341") and one count of racketeering under 18 U.S.C. § 1962(c) ("RICO"), all stemming from Ginsburg's payments to fix cases during the course of his law practice before the Cook County Board of Appeals ("Board"). Ginsburg has joined the spate of defendants prompted by McNally v. United States, 483 U.S. 350, 107 S. Ct. 2875, 97 L. Ed. 2d 292 (1987) to seek retroactive relief: He has filed this 28 U.S.C. § 2255 ("Section 2255") habeas corpus petition to obtain an order vacating his convictions. For the reasons stated in this memorandum opinion and order, his petition is granted.

 Background

 Ginsburg's convictions flow from a scheme, beginning in 1975, in which he and his then law partner Theodore Schmidt made cash payments to Board employees to obtain reductions in real estate tax assessments on properties owned by the law firm's clients. Ginsburg was found guilty on all counts after a joint trial before a jury, and on April 26, 1984 this Court dealt with his sentence in these terms:

 
1. Imposition of sentence was suspended on all counts, and he was placed on concurrent probation for a five-year period.
 
2. In addition to his required compliance with all the regular terms and conditions of probation, he was ordered:
 
(a) to make restitution in the amount of $ 150,000; and
 
(b) to perform 1,000 hours of community service.
 
3. On the RICO count he was ordered to forfeit his $ 225,000 half interest in the firm's tainted legal fees, with the restitution payments to be credited against that forfeiture.

 Ginsburg took an appeal, in which he challenged only the forfeiture order. After an initial reversal in an unpublished opinion, our Court of Appeals ultimately affirmed this Court in an en banc decision ( United States v. Ginsburg, 773 F.2d 798 (7th Cir. 1985)).

 Ginsburg has completed his community service, has paid the full $ 150,000 in restitution and has begun to pay the balance due on his forfeiture. His probation runs through April 26, 1989.

 By now every defendant of any vintage convicted under the so-called "intangible rights" theory of mail fraud *fn1" is aware that McNally has construed Section 1341 to require that the fraud must have been intended to deprive the victim or victims of money or property. Our Court of Appeals has most recently described its post-McNally efforts in these terms ( United States v. Folak, 865 F.2d 110 (7th Cir. 1988)(emphasis in original, citations omitted except for cases referred to later in this opinion)):

 
We have expressly held that McNally applies retroactively on collateral attack of a conviction. United States v. Magnuson, 861 F.2d 166 (7th Cir. 1988) . . . . Although we have set aside a number of defendants' mail fraud convictions where they had been indicted for scheming to defraud victims solely of some intangible right, see Magnuson, supra; . . . United States v. Holzer, 840 F.2d 1343 (7th Cir.), cert. denied, [ 486 U.S. 1035], 108 S. Ct. 2022 [100 L. Ed. 2d 608] (1988) (" Holzer II "), the presence of some language referring to an intangible rights theory is not always fatal to the indictment. For example, where an indictment alleges multiple schemes, some of which serve to defraud victims of property and others that deprive them of some intangible right, we have treated as surplusage any intangible rights theory of fraud that was "easily separable" from allegations of a scheme to defraud of money or property. . . . We have also held that where a single set of facts establishes both a scheme to defraud a victim of money or property, as well as a deprivation of some intangible right, McNally does not require setting aside the conviction. . . . United States v. Wellman, 830 F.2d 1453, 1462-63 (7th Cir. 1987). In each of the above cases, we have looked beyond the language used to characterize the scheme in the indictment, to the underlying substance of the indictment, in order that we might determine if it ultimately alleges a scheme involving money or property. Under McNally, an indictment alleges a violation of the mail fraud statute if it charges a defendant with conduct that would normally result in some kind of "concrete economic harm." Wellman, 830 F.2d at 1462.

 Ginsburg now says his conviction was improperly obtained under the old "intangible rights" theory rather than in accordance with McNally.

 Section 2255 Analysis

 Section 2255 allows a federally-convicted prisoner who is "in custody" to attack his conviction collaterally. Ginsburg satisfies the "in custody" requirement because "he is under the legal restraints imposed by probation" ( Gill, 673 F. Supp. at 277 and cases cited therein). Government Mem. 2 concedes that.

 United States v. Frady, 456 U.S. 152, 167, 71 L. Ed. 2d 816, 102 S. Ct. 1584 (1982) teaches the normal standard of review of a Section 2255 motion "is the 'cause and actual prejudice' standard enunciated in Davis v. United States, 411 U.S. 233, [36 L. Ed. 2d 216, 93 S. Ct. 1577] (1973), and later confirmed and extended in Francis v. Henderson, 425 U.S. 536, [48 L. Ed. 2d 149, 96 S. Ct. 1708] (1976), and Wainwright v. Sykes, 433 U.S. 72, [53 L. Ed. 2d 594, 97 S. Ct. 2497] (1977)." Although the post-McNally decisions in our Court of Appeals have not expressly addressed this issue as to pre-McNally "intangible rights" convictions, under Frady, id. at 168 any defendant challenging a conviction on an objection not raised in the district court must show "both 'cause' excusing his double procedural default, and 'actual prejudice' resulting from the errors of which he complains."

 1. Cause

 Ginsburg Mem. 1 -- 3 *fn2" says he did object to the indictment's "intangible rights" theory. Ginsburg's motion to dismiss the indictment argued (Government Mem. Ex. A, at 12) (footnotes omitted):

 
Moreover, the theory must be rejected because it seeks further to expand liability under the mail fraud statute without any evidence of supporting legislative intent. The "intangible rights" theory already is the subject of severe criticism because of its present overly broad application. The present indictment represents but another step in this over-expansion.

 Government Mem. 3 says:

 
The defendant noted the scholarly criticism of the intangible rights doctrine, but did not urge the Court to dismiss the mail fraud counts on this basis.

 Whether or not that handling by Ginsburg's able counsel amounts to having preserved the issue before this Court as a procedural matter, Ginsburg Mem. 2 -- 6 admits he did not raise the issue on appeal. In Frady terms that is clearly a procedural default requiring Ginsburg to show "cause."

 Ginsburg Mem. 2 -- 6 to 7 then asserts he satisfies the "cause" requirement as expounded in Reed v. Ross, 468 U.S. 1, 82 L. Ed. 2d 1, 104 S. Ct. 2901 (1984). That contention poses a difficult question -- one that fortunately need not be resolved for current purposes.

 Reed dealt at some length with the relationship between the "cause" requirement and the "novelty" of the constitutional issue that counsel had failed to raise in the underlying proceedings. *fn3" Justice Brennan, writing for the Court, began by noting (468 U.S. at 13)(citations omitted):

 
Because of the broad range of potential reasons for an attorney's failure to comply with a procedural rule, and the virtually limitless array of contexts in which a procedural default can occur, this Court has not given the term "cause" precise content. . . . Nor do we attempt to do so here. Underlying the concept of cause, however, is at least the dual notion that, absent exceptional circumstances, a defendant is bound by the tactical decisions of competent counsel, . . . and that defense counsel may not flout state procedures and then turn around and seek refuge in federal court from the consequences of such conduct.

 Next Justice Brennan turned to the contrasting situation in which no intentional strategic decision can be inferred: counsel's failure "to raise a constitutional issue reasonably unknown to him" (id. at 14) because of its novelty (id. at 15-16). That led to the basic principle for which Ross is now recognized (id. at 16):

 
Accordingly, we hold that where a constitutional claim is so novel that its legal basis is not reasonably available to counsel, a defendant has cause for his failure to raise the claim in accordance with applicable state procedures.

 Then, drawing upon United States v. Johnson, 457 U.S. 537, 73 L. Ed. 2d 202, 102 S. Ct. 2579 (1982), Reed, id. at 17 (citations omitted) fleshed out the concept of "novelty" in terms of "three situations in which a 'new' constitutional rule, representing a 'clear break from the past,' might emerge from this Court":

 
First, a decision of this Court may explicitly overrule one of our precedents. . . . Second, a decision may "overtur[n] a longstanding and widespread practice to which this Court has not spoken, but which a near-unanimous body of lower court authority has expressly approved." . . . And, finally, a decision may "disapprov[e] a practice this Court arguably has sanctioned in prior cases." . . . By definition, when a case falling into one of the first two categories is given retroactive application, there will almost certainly have been no reasonable basis upon which an attorney previously could have urged a state court to adopt the position that this Court has ultimately adopted. Consequently, the failure of a defendant's attorney to have pressed such a claim before a state court is sufficiently excusable to satisfy the cause requirement.

 That analysis should logically translate with equal force into a situation in which (1) the underlying conviction was obtained in a federal rather than a state court and (2) the new rule of law involves statutory rather than constitutional interpretation. With those changes, Ginsburg seeks to qualify under the second of Reed's three "novel" situations. One part of that qualification is indisputable: Magnuson, 861 F.2d 166, 1988 U.S. App. LEXIS 14970, at 2 has now expressly held McNally is to be applied retroactively in a Collateral attack on a conviction. And as for the other Reed requirement, at the time Ginsburg was convicted the "intangible rights" doctrine was widely approved by the lower courts. It was consistently reaffirmed by our own Court of Appeals, where it had originally been announced (see, e.g., United States v. Holzer, 816 F.2d 304, 309-10 (7th Cir. 1987)(" Holzer I ")), and about half the other Courts of Appeals had also upheld and applied the doctrine (see cases listed in Justice Stevens' dissent in McNally, 107 S. Ct. at 2883 n.1).

 Despite that, this Court held in Gill (an early post-McNally decision) that a defendant in a legal position comparable to Ginsburg's did not satisfy the first ("cause") branch of the Frady analysis. *fn4" This Court's reasoning drew heavily not only on Reed but on how Smith v. Murray, 477 U.S. 527, 91 L. Ed. 2d 434, 106 S. Ct. 2661 (1986) had read and applied Reed. As Gill, 673 F. Supp. at 280 said of the defendant in that case:

 
He must rely on the idea that at the time of his conviction three years ago the idea that there could not be an intangible-rights fraud prosecution under Section 1341 was a "claim . . . so novel that its legal basis [was] not reasonably available to counsel . . ." ( Reed v. Ross, 468 U.S. 1, 16, 104 S. Ct. 2901, 2910, 82 L. Ed. 2d 1 (1984)). For that purpose Smith v. Murray, 477 U.S. 527, 106 S. Ct. 2661, 2667, 91 L. Ed. 2d 434 (1986) teaches "the question is not whether subsequent legal developments have made counsel's task easier, but whether at the time of the default the claim was 'available' at all." No claim can be said to be "unavailable" in that sense where that claim had previously been made in the lower courts ( id. 106 S. Ct. at 2667-68).

 This opinion will not repeat this Court's further analysis in Gill, id. at 280-81, which it continues to find persuasive -- though this Court also continues to recognize "there might perhaps be room for difference of opinion on that score" ( id. at 281). Indeed, since Gill the only two Courts of Appeals to have considered the issue have ruled otherwise, finding that defendants who had not disputed their "intangible rights" convictions before McNally did have "cause" under the Reed analysis for not having done so ( Dalton, 862 F.2d 1307; Shelton, 848 F.2d at 1490). Yet surprisingly neither of those courts even mentioned the post-Reed decision in Smith, although it seems plain to this Court that Smith must be recognized as at least equally definitive and as providing a limiting definition of what claims are "novel" and "unavailable" for purposes of analyzing whether a defendant had "cause" for not having asserted such claims.

 On the issue of "cause" Ginsburg stands in a particularly vulnerable position. There is no question his counsel were well aware of the arguments against "intangible rights" mail fraud prosecutions -- they asserted them before this Court. That hardly bespeaks "novelty" in the Reed-Smith sense. Nor is this a situation in which Ginsburg's able counsel would have had to take a bootless appeal just to preserve the "intangible rights" issue for the future contingency that McNally ultimately converted to reality. Counsel in fact took an appeal on Ginsberg's behalf, raising an issue (RICO forfeiture) that was not only a difficult one but was potentially "certworthy." *fn5" What that means is that counsel's raising of the "intangible rights" issue before the Court of Appeals (where Ginsburg was anyway) would have been entirely cost-free -- and, though this is not necessary to the analysis, it would have been equally cost-free to raise the issue even before the Supreme Court if certiorari had been sought on the forfeiture question.

 About the only answer this Court can conceive of is that Ginsburg's lawyers might have perceived that adding to their appellate brief an issue such as an attack on the "intangible rights" conviction (an issue on which our Court of Appeals had previously spoken several times) would be potentially dilutive of the force of the forfeiture argument. Everyone who has practiced before the appellate courts knows it is best to go with your strongest arguments, even if that means giving up others (whether simply to avoid clutter or to prevent your solid arguments from being tainted by contentions that the appellate court would be expected to dismiss out of hand).

 
In general, therefore, defense counsel may not make a tactical decision to forgo a procedural opportunity -- for instance, an opportunity to object at trial or to raise an issue on appeal -- and then, when he discovers that the tactic has been unsuccessful, pursue an alternative strategy in federal court. . . . Procedural defaults of this nature are, therefore, "inexcusable," . . . and cannot qualify as "cause" for purposes of federal habeas corpus review. *fn7"

 Accord, Smith, 477 U.S. at 534.

 All this would lead this Court to adhere to its Gill ruling on the absence of "cause," a ruling that would apply to Ginsburg on an even stronger -- an a fortiori -- basis. One factor alone has led this Court to a different result -- a factor identified by one of the Courts of Appeals that has reached the contrary outcome. Shelton, 848 F.2d at 1490 n.4 has said this:

 
In view of the Court's conclusion in Davis, 417 U.S. at 346-47, 94 S. Ct. at 2305, that conviction and punishment for conduct that is not criminal would undoubtedly result in a complete miscarriage of justice presenting exceptional circumstances, a compelling argument can be made that the claim raised in the instant proceedings is available in a section 2255 motion without regard for whether the petitioner had cause for any default.

 In partial support of that proposition Shelton refers to our Court of Appeals' dictum in United States v. Angelos, 763 ...


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