Broad v. Sealaska Corp.

KLEINFELD, Circuit Judge,

dissenting:

I respectfully dissent.

Sealaska, organized as a business corporation, decided to give each shareholder a $2,000 birthday present at age 65. That discriminates by age, because at the time of the decision, not all the shareholders were 65. Several directors would immediately or soon receive this substantial gift. Many shareholders would not receive the gift for decades. The present value of the gift, assuming a 5% interest rate, is $2,000 to a 65 year old director, $284 to a 25 year old shareholder.

This discriminatory cash gift to shareholders, as the majority acknowledges, would violate Aaska corporation law, if federal law does not provide otherwise. Under the Aaska Corporations Code, all Aaska corporations must treat all shares in the same class equally with respect to dividends and other rights. Aaska Stat. §§ 10.06.542, 10.06.305(b).

The preemption analysis used in the majority opinion is mistaken, because any preemption is illusory. There cannot be federal preemption of state law in this case, because there cannot be any conflict between the two laws. The state law says that a native corporation can do anything ANCSA permits. AS 10.06.960(f). That means there can be nothing which ANCSA permits but state law prohibits, so there can be no conflicting state law to preempt. ANCSA says that a conveyance to a settlement trust should be in accord with Aaska law except to the extent that state law is inconsistent with ANCSA 43 U.S.C. § 1629e(a)(l)(A). That means that there can be no preemption of the field. If federal law permits the particular discriminatory cash transfer through the settlement trust, state law does too, and if not, not.

The majority opinion says that “Recording to its plain language, then, ANCSA prohibits settlement trusts that discriminate in favor of corporate insiders, but does not prohibit trusts that discriminate in favor of other groups of shareholders.” Maj. op. at 426. The “plain language” consists only of the prohibition. The non-prohibition described in that sentence is an inference from silence, not an expression by Congress in plain language. The provision which provides the basis for the majority’s conclusion states only what is prohibited, not what is permitted:

The purpose of a Settlement Trust shall be to promote the health, education, and welfare of its beneficiaries and preserve the heritage and culture of Natives. A Settlement Trust shall not—

(A) operate as a business;

(B) alienate land or any interest in land received from the settlor Native Corporation (except if the recipient of the land is the settlor corporation); or

(C) discriminate in favor of a group of individuals composed only or principally of employees, officers, or directors of the settlor Native Corporation.

An alienation of land or an interest in land in violation of this paragraph shall be void ab initio and shall not be given effect by any court.

43 U.S.C. § 1629e(b)(1) (emphasis added). The majority reasons that because the statute prohibits trusts that discriminate in favor of employees, officers, and directors, “but does not otherwise prohibit trusts that discriminate in favor of other groups of shareholders[,][t]his statutory section suggests that ANCSA anticipates that trusts may discriminate in favor of a particular class of shareholders.” Maj. op. at 426.

This method of reasoning, inferring from the explicit prohibition of one form of discrimination the implicit authorization of all other forms, is a traditional application of the maxim, expressio unius est exclusio alterius. Quoting the maxim is less fashionable than it used to be before Karl Llewellyn’s famous attack. See Karl N. Llewellyn, Remarks on the Theory of Appellate Decision and the Rules or Canons About How Statutes Are to Be Construed, 3 Vand.L.Rev. 395, 401-406 (1950), as reproduced in, Karl N. Llewellyn, The Common Law Tradition: Deciding Ap *433 peals App. C, 521-35 (1960). But the logic of the maxim, that listing several specific things implies an intention to exclude others, is the only way to get from a statutory prohibition of some conduct to implied permission for other conduct. This is how the majority gets from the “shall not” in the statute to the majority’s statement that “ANCSA anticipates that trusts may discriminate in favor of a particular class of shareholders.”

The expressio unius analysis is often correct, but not always. It does not make sense here. Anytime a statute contains a list, the question arises whether the list exhausts all the things the legislature intended to permit or prohibit. The inference that a list excludes things not on the list does not reheve us of our duty to make sense of the statute:

Most strongly put, the expressio unius, or inclusio unius principle is that ‘[w]hen a statute limits a things to be done in a particular mode, it includes a negative of any other mode.’ Raleigh & Gaston Ry. Co. v. Reid, 80 U.S. (13 Wall.) 269, 270 , 20 L.Ed 570 (1871). This is a rule of interpretation, not a rule of law. The maxim is ‘a product of logic and common sense,’ properly applied only when it makes sense as a matter of legislative purpose. Alcaraz v. Block, 746 F.2d 593, 607-08 (9th Cir.1984). Like the principle of construing a modifying clause to modify only the closer antecedent, the expressio unius principle describes what we usually mean by a particular manner of expression, but does not prescribe how we must interpret a phrase once written. Understood as a descriptive generalization about language rather than a prescriptive rule of construction, the maxim usefully describes a common syntactical implication. ‘My children are Jonathan, Rebecca and Seth’ means ‘none of my children are Samuel.’ Sometimes there is no negative pregnant: ‘get milk, bread, peanut butter and eggs at the grocery’ probably does not mean ‘do not get ice cream.’

Longview Fibre Co. v. Rasmussen, 980 F.2d 1307, 1312-13 (9th Cir.1992).

It does not make sense to suppose that Congress meant, by the list in § 1629e(b)(l), to permit any kind of discriminación], except “discrimination] in favor of ... employees, officers, or directors.” Consider, by analogy, that Congress in the Americans With Disabilities Act said “[n]o covered entity shall discriminate against a qualified individual with a disability.” 42 U.S.C. § 12112 . The ADA does not by that prohibition imply that discrimination by reason of age, sex, and race are permissible. The provision prohibits one kind of discrimination, and leaves it to other federal and state laws to prohibit others. That is the sensible way to read the prohibition in the statute before us.

This makes sense as a Congressional purpose. Congress might have felt that there were special risks to Native corporations that they would be taken advantage of by employees, officers and directors through the Settlement Trust mechanism, unique to Native Corporations, so more protection of shareholders from this device was needed than for ordinary business corporations, but felt that for other risks, state law protections were adequate. One of the virtues of the Alaska Native Claims Settlement Act was the creation of a large number of Alaska Native leaders experienced in business as well as politics, and employment opportunities in towns and villages where there had previously been little work for money wages. But this virtue could become a vice if the corporations were operated for the benefit of their employees, who might not be natives or shareholders, instead of for all the Natives who owned stock and would inherit stock.

Virtually any transfer of corporate assets could be provided for in a resolution which, in its preamble, said that the transfer was to “promote the ... welfare of its beneficiaries,” and, so long as the recipients were Alaska Natives, to “preserve the heritage and culture of Natives.” Unless someone thinks of a distinction in some future case, the majority holding implies that Congress meant to permit some bizarre transfers of Native corporation assets. For example, a Native corporation might decide that a particular candidate for office was likely to promote the health, education, and welfare of Alaska Natives better than competing candidates, and that Native culture would best be preserved by using a trust to pay $2,000 to *434 each Native who signed an affidavit that he or she had voted for the named candidate. Quite a few Alaska native villages have fewer than 100 people, and many have under 300. See The Alaska Almanac: Facts About Alaska 17th Edition 130-31, 147-53 (Carolyn Smith ed.) (1993). Village Corporations may create settlement trusts under ANCSA. 43 U.S.C. §§ 1602 (defines “Native Corporation” to include “Village Corporation”) & 1629e (permits any Native Corporation to create a settlement trust). Under the majority construction of the statute, a village corporation, a majority of whose shareholders were linked by blood or property to a large extended family, might decide that Native culture was best preserved by tunneling the assets through a settlement trust out to their family and not the other families in the village.

The majority says that “[jjudicial review of these trusts will prevent egregious violations of the settlement trust option, such as [these] ‘bizarre transfers.’” But it does not say how. The majority opinion establishes that the federal law preempts state law, and “does not otherwise prohibit trusts that discriminate in favor of other groups of shareholders,” and “trusts may discriminate in favor of a particular class of shareholders.” Maj. op. at 426. I hope that subsequent panels distinguish the case at bar if “bizarre transfers” through settlement trusts are made, but I do not see a basis, in the majority’s ratio decidendi, for making a distinction.

In any corporation, Native or not, people with more power than others may try to translate their power into money. It is unlikely that Congress meant to deprive Native corporation shareholders of all the protections state corporation law generally gives to shareholders against discriminatory distributions of corporate assets. Yet the hypothetical forms of discrimination described above would not be “in favor of a group of individuals composed only or principally of employees, officers, or directors,” so under the majority holding, any state law prohibiting such discrimination would be preempted. None of this seems likely to have been the intent of Congress, because it does not make any practical sense.

If we are to apply the expressio wtius principle to anything, it should be to the statutory provision speaking directly to how to enhance benefits to elders. There is a special provision for issuance of up to 100 additional shares of regional corporation stock to natives who have attained the age of 65:

A Regional Corporation may amend its articles of incorporation to authorize the issuance of additional shares of Settlement Common Stock to—

(III) Natives who have attained the age of 65, for no consideration or for such consideration and upon such terms and conditions as may be specified in such amendment or in a resolution approved by the board of directors pursuant to authority expressly vested in the board by the amendment. The amendment to the articles of incorporation may specify which class of Settlement Common Stock shall be issued to the various groups of Natives.

43 U.S.C. § 1606 (g)(l)(B)(i).

The expressio unius inference, as applied to this section, implies that Congress intended that discrimination in favor of elders would take place only through regional corporations, not village corporations, and exclusively through amendments to the articles of incorporation issuing more stock to elders (which may, in turn, yield more dividends). See 43 U.S.C. § 1606 (g)(l)(B)(iv) (common stock issued to elders as the result of a special amendments shall not have rights to certain distributions unless a majority of shareholders specially grant such rights). Accordingly, we could assume that Congress intended to leave in place state prohibitions against other forms of discrimination in favor of elders.

One use of settlement trusts is to preserve native corporation assets from creditors, see 43 U.S.C. § 1629e(c)(5), and from the consequences of accidental corporate dissolution. The statute states the purpose of settlement trusts, “to promote the health, education, and welfare of its beneficiaries and preserve the heritage and culture of Natives.” 43 U.S.C. § 1629e(b)(l). Most corporations cannot op *435 erate for such purposes, so excluding discriminatory dividends from the purposes does not strip the statute of practical effect. We need not decide whether the statements in the legislative history, such as that settlement trusts can be used to award scholarships to individuals, are correct. Perhaps such scholarship programs are permissible, so long as the criteria for the scholarship awards are nondiscriminatory. Or perhaps this snippet of legislative history was a consolation prize to someone who did not get what he or she wanted in the statute. We should not assume the answer to one difficult question not before us in order to resolve another.

The majority relies too heavily, in my view, on the “House Explanatory Statement.” Maj. op. at 428. We should construe the statute, not the legislative history. See Kenneth W. Starr, Observations About the Use of Legislative History, 1987 Duke L.J. 371 (1987). Reliance on legislative history is often the “equivalent of entering a crowded cocktail party and looking over the heads of the guests for one’s friends.” Conroy v. Aniskoff, 507 U.S. 511, 519 , 113 S.Ct. 1562, 1567 , 123 L.Ed.2d 229 (1993) (Sealia, J. concurring). The majority infers from the statement in the House Explanatory Statement that if scholarships are permissible, then so are birthday presents. A stronger inference would be that if “distributions of trust income may be made on an aeross-the board basis,” House Explanatory Statement, 133 Cong. Rec. H11,933, (daily ed. Dec. 21, 1987), reprinted in, 1987 U.S.C.C.A.N. 3299, 3308, then they cannot be made on a discriminatory basis.

In sum, the statute says some types of discrimination are prohibited, and also says that Native corporations can provide for issuance of additional shares of stock to elders. The majority reads a negative pregnant into the discrimination section but not the elders section. I do not see why the first inference is any stronger than the second, and see good reason for the contrary view. The majority infers from the statement about scholarships in the legislative history that discriminatory distributions are permitted, but draws no inference that they are prohibited from the “across-the-board” language about distributions in the same paragraph. We must necessarily exercise judgment on difficult questions to decide the extent to which the statute exposes Native shareholders to discriminatory distributions of corporate assets. I believe Congress left in place more of the state law protection generally applicable to corporate shareholders than the majority does.