Petition — Kay v. United States

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IN THE

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Supreme Court of the Unttted-Statel2

OCTOBER TERM, 1977

no. @6-1791

WILLIAM L. KAY,

Petitioner,

UNITED STATES OF AMERICA

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

RANDY TAYLOR

980 Main Bank Building

810 Main Street

Dallas, Texas 75202

Attorney for Petitioner

LASS ARENT ON IRENE PE APE RRES TS ACEIE SSAOEAE EY

THE CASILLAS PRESS, INC.—1717 K Street, NN. W.—Washington, 0. C.-223-1220

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ees

(i)

INDEX

OPINIONS BELOW .

JURISDICTION .

QUESTIONS PRESENTED

CONSTITUTION AND STATUTES INVOLVED .

STATEMENT OF THE CASE

REASONS FOR GRANTING THE WRIT

CONCLUSION

APPENDIX A — Opinion of the Court of Appeals

APPENDIX B — Judgment of the Court of Appeals .

APPENDIX C — Denial of Motion For Rehearing by

Court of Appeals . ,

APPENDIX D — Order Staying Mandate by Court of

Appeals . ee

Page

10a

(ii)

TABLE OF CASES

Bailey v. Alabama,

219 US. 219, 55 L.Ed. 191, 31 S.Ct. 145

Bouie v. City of Columbia,

378 U.S. 347 (1964)

Chapman v. California,

386 U.S. 18, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967)

Fahy v. Connecticut,

375 U.S. 85 (1963) .

Gaddis v. Calgon Corp., .

449 F.2d 1318 (Sth Cir. 1971)

Lambert v. California,

355 US. 225, 78 S.Ct. 240 (1957) .

Mann v. United States,

319 F.2d 404 (Sth Cir. 1963), cert. den.,

375 US. 986, 11 L.Ed.2d 474, 84 S.Ct. 520

Palmer v. City of Euclid,

402 U.S. 544,91 S.Ct. 1563 (1971)

Perez v. United States,

297 F.2d 12 (Sth Cir. 1961) .

Taylor v. State of Georgia,

315 US. 25, 86 L.Ed. 615,62S.Ct. 415 .

United Mine Workers v. Pennington,

381 U.S. 657, 14 L.Ed.2d 626, 855 S.Ct. 1585 .

United States v. McCorkle,

511 F.2d 477 (7th Cir. 1974) cert. den., 423 U.S. 826

13,14

14

13

15

10

14

19

13

15

(iii)

CONSIITUTION AND STATUTES

Page

Fifth Amendment to the Constitution of the

eS Me See 3,17

Thirteenth Amendment to the Constitution of

I ee 3

Title 15, United States Code, Section 1644,

Truth in Lending Act(1970). . . ....... 4,8,9

IN THE

Supreme Court of the United States

OCTOBER TERM, 1977

No.

WILLIAM L. KAY,

Petitioner,

UNITED STATES OF AMERICA

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

To the Honorable Chief Justice and Associate Justices of

the Supreme Court of the United States:

WILLIAM L. KAY, the. Petitioner herein, prays that a

Writ of Certiorari issue to review the opinion and judgment

of the Court of Appeals of the United States for the Fifth

Circuit entered in the above-entitled case on January 17,

1977.

2

OPINIONS BELOW

The opinion of the Fifth Circuit Court of Appeals is not

yet reported, but a copy of the slip opinion is printed in

Appendix A attached hereto, infra.

JURISDICTION

The judgment of the Fifth Circuit Court of Appeals (Ap-

pendix B, infra) was entered on January 17, 1977. A

timely filed Petition for Rehearing and Suggestion for a

Rehearing En Banc was denied on May 17, 1977, with-

out opinion (Appendix C). On May 25, 1977, an order

was entered staying the mandate until June 16, 1977 (Ap-

pendix D). The Jurisdiction of the Supreme Court is in-

voked under 28 United States Code Section 1254(1).

QUESTIONS PRESENTED

I.

Whether the statute in question violates due process by

failing, on its face, to give fair warning of what amounts

to fraudulently obtaining a credit card.

Il.

Whether the trial court denied Petitioner due process by

its instructions to the jury that the law in question was

violated if the Petitioner did not correctly anticipate that

the credit card companies in question would want infor-

mation not even asked of him on the application and that

failure to supply this unasked for information would be

fraud, if the information was material.

3

Il.

Whether Petitioner’s right of due process was violated

when the jury was given erroneous instructions, as to

what amounted to fraudulent obtainment, regardless of

the correct..ess of the rest of the Court’s charge.

IV.

Whether r not it violates due process for the trial court

to instruc. the jury in such a way that a finding of guilt

of fraudulent obtainment of a credit card can be made

when there was no duty on the part of the Petitioner to

volunteer information not asked for the credit card appli-

cations.

V.

Whether or not it violates the Thirteenth Amendment, or

alternatively, Due Process clause of the Fifth Amendment

to make it a criminal offense for the Petitioner to fail to

pay a debt, that he has previously agreed to pay, by al-

lowing a jury to make a finding that the original promise

to pay, coupled with the later failure to pay, was fraudu-

lent on the part of the Petitioner.

STATUTES INVOLVED

The Fifth Amendment to the Constitution of the United

States provides in pertinent part as follows:

“No person shall * * * be deprived of life, liberty,

or property, without due process of law * * *”

The Thirteenth Amendment to the Constitution of the

United States provides in pertinent part as follows:

4

“Neither slavery nor involuntary servitude, except

as a punishment for crime whereof the party shall

have been duly convicted, shall exist within the

United States * * *”

Title 15 U.S.C. Section 1644, the statute under which

the Petitioner was prosecuted:

“Whoever, in a transaction involving interstate or

foreign commerce, uses any counterfeit, fictitious,

altered, forged, lost, stolen, or fraudulently ob-

tained credit card to obtain goods or services, or

both, having a retail value aggregating $5,000 or

more, shall be fined not more thar. $10,000 or

imprisoned not more than five years, or both.”

Pub. L. 90-321, Title I, Section 134, as added

Pub. L. 91-508, Title V, Section 502(9), Oct.

26, 1970, 84 Stat. 1127.

STATEMENT OF THE CASE

Case History

On January 15, 1975, Petitioner William L. Kay was

convicted by a jury in the Federal District Court for the

Northern District of Texas, Dallas Division, of two counts

of violation of 15 U.S.C. 1644, Truth in Lending Act, for

using two fraudulently obtained credit cards in purchasing

retail goods and services in excess of $5,000 each. Peti-

tioner received two four-year sentences to run concurrently.

Petitioner appealed his convictions to the Fifth Circuit

Court of Appeals and, on January 15, 1977, his convic-

tion was affirmed with Roney, J., dissenting. On May

17, 1977, Petitioner’s Motion for a Rehearing was denied

without opinion and the mandate was stayed by an order

entered May 25, 1977, until June 16, 1977, pending this

Petition for a Writ of Certiorari.

Facts

On November 11, 1971, the Petitioner applied to Diners

Club, Inc. (hereinafter ““Diners”) for a Diners credit card.

This application, admitted as Government’s Exhibit Q-1

and set forth in its entirety in the Record at pages 30,

31, and 32, contained the following language:

“Each cardholder assumes joint and several re-

sponsibility with company applicant or family

head applicant, and agrees to be responsible

for all charges.” (R. 32).

After receiving this application, Diners mailed a finan-

cial statement, admitted as Government’s Exhibit A-3, to

New Era Printing, which Petitioner had indicated that he

owned on his original application, and it was returned.

(K. 34). If there was any fraud by Petitioner in obtain-

ing the Diners card, then it would have to be based on

the information contained in these two instruments, as

they were the only communications between Petitioner

and Diners prior to the card being issued. (R. 73).

On July 27, 1972, the Petitioner applied to AMOCO

Oil Company through one of its divisions, American Torch

Club (hereinafter ““Torch Club’’), for a credit card. This

application, which was admitted as Government’s Exhibit

B-2, was solicited by the Torch Club from the Petitioner,

because of previous satisfactory business dealings between

the Petitioner and AMOCO, and in fact, the Petitioner was

given a Funk and Wagnall Dictionary tor making the ap-

plication. (R. 105). The only fraud that the Petitioner

could have used in obtaining the Torch Club card is the

6

information on this application, as this is the only infor-

mation supplied by the Petitioner to the Torch Club prior

to the issuance of this card. (R. 146).

Each of the credit cards was issued shortly after the Pe-

titioner applied for them, and for approximately eight

months after the issuance of each card minimal charges

were made on the credit cards-and were paid promptly.

After this period of time, substantial charges, in excess

of 5,000 dollars, were made on each credit card, which

have not been paid by the Petitioner.

On the Diners Club application, the only minor devia-

tion from the truth (it is admitted by the Government

in its brief before the Fifth Circuit that this would not

be sufficient to show a fraudulent obtainment) was that

he was the owner of New Era Printing when, in fact, he

was Only owner of an undivided one-half interest. The

Director of Credit and Collections for Diners, Mr. Pad-

zik (R. 82), testified that this would not have made any

difference in Diners Club issuing its card, and had Diners

Club had the correct information, the card would have

been issued. (R. 363, 364).

The enly deviation from literal truth on the Torch Club

application was the Petitioner showing his home address

as the business address of New Era Printing, Inc. Again,

the Government concedes, in its brief before the Fifth

Circuit, that this would not amount to a fraudulent ob-

tainment and, again, the Torch Club representative testi-

fied that he was aware of the criterion that his company

would use in issuing the card, and that regardless of what

address was shown 4s being the address for New Era Print-

ing, Inc., that the card would have been issued. (R. 370,

371, 372).

7

The only factual representations shown by any of the

evidence before the jury to not have been literally true

were: 1) ownership of New Era Printing, and 2) the busi-

ness address of New Era Printing, as set forth above; no

evidence was put before the jury as to what Petitioner’s

annual income from sources other than New Era Printing

was. It was not proven that at the time that he made

the applications, that he did not make the $10,000.00 to

$13,000.00 claimed on the Diners Club application, and

over $9,500.00 claimed on the Torch Club application.

The applications, contrary to what was erroneously urged

by the Government in its brief before the Fifth Circuit,

do not represent that the Petitioner made these amounts

at New Era Printing, but rather, only that these amounts

are his annual income.

It is upon the above-set forth representations of the Pe-

titioner and the promise to be responsible for charges on

the Diners application (the Government, in its brief before

the Fifth Circuit, claims that there is a similar promise

contained on Government’s Exhibit B-2, the Torch Club

application; this promise does not appear in the Record,

and the Record, at pages 107 and 108, does not indicate

its existence) that the Government sought to prove that

the Petitioner was guilty of using two “fraudulently ob-

tained” credit cards.

The Court of Appeals Opinion

The Court of Appeals held, with Roney, J., dissenting

in a written opinion, that any error in the charge was

harmless beyond a reasonable doubt because of the major-

ity’s finding that both companies had requested a repre-

sentation as to Petitioner’s intention to pay the charges

incurred, thus reasoning that the jury must have found

that this intention was misrepresented.

Although the majority admitted that it was conceivable

that the charge broadened the scope of the statute “‘be-

yond permissible limits’ and that the charge should have

been limited to “‘misstatements, half-truths and omissions

of matters fairly raised in the application,” the majority

felt that the jury was entitled to find from the evidence

that, as a fact, Petitioner had misstated his intention to

pay for the charges at the time he applied for his credit

cards.

In his dissenting opinion, Judge Roney expressed the

opinion that a charge that permitted a jury to find guilt

on concealment of a fact, described as one that ‘a pru-

dent credit company would require,” was impermissibly

broad and “not harmless at all.”

REASONS FOR GRANTING THE WRIT

A. CERTIORARI SHOULD BE GRANTED IN THIS CASE TO

DETERMINE WHETHER PETITIONER’S ‘DUE PROCESS”

RIGHTS WERE VIOLATED BY THE DISTRICT COURT’S

INSTRUCTION [Germane to Questions, I, II, III, [V, & V].

Petitioner was charged with and convicted of two counts

of using a “fraudulently obtained” credit card to obtain

the retail value of goods and services in excess of 5,000

dollars, in violation of 15 U.S.C. 1644, Truth in Lending

Act.

The District Court instructed the jury that under the

law, they could convict Petitioner of the crimes charged

if they found that he had used credit cards that were

fraudulently obtained, and went on to define fraudulently

obtained as a card:

9

“* * * obtained by statements of half-truths or

the concealment of material facts as well as by

affirmative statements or acts. A fact is mate-

rial if it is a fact that a reasonably prudent credit

company would require before issuing a credit

card.”

By this language, the Court was telling the jury the fol-

lowing three things:

1) that not only what the applicant told the credit card

company, but also what he failed to tell the credit card

company, could be fraudulent;

2) that the applicant’s failure to tell the credit card

company facts that were not inquired about on the appli-

cation could be fraudulent if the jury deemed these facts

to be “material”’;

3) that they, the jury, were to look at not only what

the Defendant Kay told the credit card companies in this

case, but also, what he failed to tell them, and determine

if what he failed to tell them was “material,” as defined,

and therefore fraudulent.

Such jury instructions as were given in this case ren-

dered 15 U.S.C. 1644 unconstitutionally vague for several

reasons. The most obvious defect is that the charge left

the legal meaning of the statute to conjecture, and a pro-

scribed standard of conduct which ordinarily lends itself

to specificity was thrown open to jury speculation. Sec-

ondly, common sense would tell any person of ordinary

intelligence that all credit card applications are different;

that even the various credit companies request and value

different types of factual information pertaining to a per-

son’s credit rating. Thirdly, this charge broadened the

10

statute so that in this case, as well as in future cases to

come, individual juries can make their own determination

as to what information a credit company might require —

thus letting the crime vary from jury to jury.

Vague and indefinite legislation has always run afoul of

the Constitution. Our law requires fair notice contained

in the law itself of the type of conduct that is prohibited.

For example, in Palmer v. City of Euclid, 402 U.S. 544,

91 S. Ct. 1563 (1971), a municipal “suspicious person”

ordinance which subjected to fine and thirty-day jail sen-

tence any person “who wanders about the streets or other

public ways or who is found abroad at late or unusual

hours in the night without any visible or lawful business

and who does not give a satisfactory account of himself”

was held unconstitutionally vague in its application to the

appellant, since it failed to give him fair notice that the

particular conduct in which he had engaged came within

the ordinance.

There is no evidence whatsoever in this case that told

the jury about the requirements of that “reasonably pru-

dent” credit card company. The evidence simply does not

reveal what facts, if any, Petitioner omitted or concealed

that such a company would have required or want to

know.

Further, the Diners Club representative stated that it

was Only reasonable for an applicant to submit only the

information requested on the application and not to vol-

unteer anything else. (R. 369). The Torch Club repre-

sentative also admitted that their card was issued to Pe-

titioner because of his prior good record in holding an

American Oil Company (AMOCO) credit card. (R. 126-

127).

1]

Neither the statute itself nor the jury instruction gave

fair notice of the proscribed conduct. The interpretation

of the law as given in the District Court’s charge (and sub-

sequently upheld by the Fifth Circuit) was unconstitutional

because it allowed specuiation by the jury as to the legal

definition of “material fact.”” Thus, in the future, men

of ordinary intelligence like Petitioner must necessarily

guess at its meaning.

In the first place, the statute itself does not define

“fraudulently obtained.” In the second place, the charge

only made the statute more vague and indefinite by tell-

ing the jury to speculate, when no evidence was before

them on this point as to what facts a “reasonably pru-

dent” credit company would want to know before issuing

a credit card.

The most chilling aspect of the broadening effect of the

District Court’s charge is that even though all the facts

contained in a credit card application are materially true

and complete, credit card applicants in the future could

be convicted of “fraudulently obtaining’ credit cards.

Even though the company had not been defrauded in the

process of issuing the card by incorrect information, this

would allow the jury to convict because it found that the

applicant failed to volunteer certain information, and that

a reasonably prudent credit card company would have

wanted to know these facts.

If this conviction is allowed to stand, six months after

a card is obtained, or a year, or six years, if an applicant

charges retail goods and services in excess of the statutory

amount (now lowered to 1,000 dollars by the 1974 amend-

ments to the statute), and then failed to pay for such

charges, a jury could find that such applicant “fraudulently

12

obtained” his credit card. The jury can now infer, accord-

ing to the Fifth Circuit majority in this case, from an appli-

cant’s failure to pay subsequent to the issuance of credit

cards, that the applicant never intended to pay, and thus,

that the applicant obtained his credit card fraudulently,

in violation of the statute.

In Bouie v. City of Columbia, 378 U.S. 347, 352 (1964),

this Court said:

“There can be no doubt that a deprivation of the

right of fair warning can result not only from

vague statutory language but also from an un-

foreseeable and retroactive judicial expansion of

narrow and precise language. As the Court rec-

ognized in [citation omitted] * * *, the judi-

cial enlargement of a criminal act by interpre-

tation is at war with a fundamental concept of

the common law that the crimes must be de-

fined with appropriate definiteness.”’

In a closely analogous situation, Lambert v. California,

355 U.S. 225, 78 S.Ct. 240 (1957), where the defend-

ant had been convicted of failing to register as required

by a Los Angeles ordinance which made it unlawful for

any person convicted of a crime punishable as a felony

in California or of any offense in any place other than

the state of California which would have be. pi ‘*hable

as a felony in California, to be or remain © the ©?) for

a period of more than five days without :egisteri... with

the police, this Court held that the ordinance in its ap-

plication to a person who was not aware of the registra-

tion requirement was a denial of due process of law. Ac-

cording to Mr. Justice Douglas, who wrote the majority

opinion, “actual knowledge of the duty to register or proof

13

of the probability of such knowledge and subsequent fail-

ure to comply are necessary before a conviction under

the ordinance can stand.” P. 229.

Since the District Court’s instruction to the jury en-

larged the definition of the crime, it was therefore void

and incapable of consideration by the jury. The rewrit-

ing of statutes as opposed to statutory interpretation is

beyond the power of Courts. Gaddis v. Calgon Corp.,

449 F.2d .318 (Sth Cir. 1971). Therefore, because the

Court’s charge was void, as it defined “‘material fact,”

the entire instruction was improper as an inaccurate rep-

resentation of the law applying to the case. The inter-

pretation of the '!aw by the District Court contradicts

“due process” notions in that it allowed the jury to find

fraud outside of any representation which Petitioner ever

did make, or would ever make, to the credit company in

filling out his application.

Another side of the “due process’”’ questions involved is:

does an erroneous portion of an instruction to the jury,

given along with other correct instructions so prejudice a

defendant as to constitute constitutional error incapable

of being harmless?

If a case goes to the jury at all, it should go under

proper instructions correctly declaring the legal principles

involved. United Mine Workers v. Pennington, 381 U.S.

657, 14 L.Ed. 626, 85 S. Ct. 1585.

Before Constitutional error can be disregarded, it must

be found harmless beyond a reasonable doubt. Chapman

v. California, 386 U.S. 18, 87 S. Ct. 824, 17 L.Ed. 705

(1967).

14

The giving of the overly broad instruction on the law,

as was done in this case, allowed the jury to speculate as

to what was a “material fact’’ and therefore denied Peti-

tioner “‘due process.” The error was therefore not harm-

less beyond a reasonable doubt.

In deciding whether a constitutional right has been vio-

lated at all, this Court has held that the mere rational

possibility of an infringement is enough to justify reversal ©

of a trial in which the error is committed. Chapman y.

California, supra (Stewart, J., Concurring).

In Fahy v. Connecticut, 375 U.S. 85, 86 (1963), this

Court held that the test for determining whether an ap-

pellant’s Fourth Amendment rights had been violated at

trial was whether there was a reasonable possibility that

the illegally seized evidence was considered by the jury

notwithstanding the legal sufficiency of the remaining evi-

dence.

In Perez v. United States, 297 F.2d 12 (Sth Cir. 196i),

the ifth Circuit held that a rereading of the trial court’s

instructions requested by the jury after the charge had

once been given that was inconsistent with the previous

instructions was misleading and was confusing on its over-

all effect on the jury’s deliberations and therefore consti-

tuted reversible error. In Perez, the Court further observed

that the fact that one instruction is correct does not cure

the error in giving another that is inconsistent with it.

Therefore, looking at this case in the context of Perez, if

a conflicting instruction can be held to have misled the

jury to a defendant’s detriment, then certainly an admit-

tedly erroneous instruction can have the same effect or

have even a greater tendency to mislead and confuse the

jury and cause the rendition of an improper verdict of

“guilty : be]

15

In Mann vy. United States, 319 F.2d 404 (5th Cir. 1963),

cert. den., 375 U.S. 986, 11 L.Ed. 2d 474, 84 S. Ct. 520,

the Fifth Circuit held that error in an instruction on intent

in an income tax evasion prosecution where the defense

was lack of intent and willfulness, was plain error requir-

ing reversal (even in the absence of an objection at trial)

and that an erroneous instruction on intent could not be

cured by an accompanying accurate charge on necessity

of intent and on burden of proof. This case is directly

on point with the instant facts and law, and clearly gov-

erns the issue raised herein.

In the case of United States v. McCorkle, 511 F.2d 477

(7th Cir. 1974), cert. den., 423 U.S. 826, the Court of

Appeals for the Seventh Circuit held that erroneous trial

court instructions on the issue of willfulness in an income

tax case amounted to reversible error which was not cured

by other instructions which correctly described the ele-

ment of willfulness. In the McCorkle case, the Govern-

ment contended that certain of the other instructions

which were also given in the case correctly described the

element of willfulness and so the charge as a whole was

proper. The Seventh Circuit disagreed and, citing the

Mann case as authority, in clear and unequivocal fashion

stated the mle to be that:

It is not enough to say that the total charge

is rendered proper because the jury may choose

to follow the correct statement of the law rather

than the incorrect statement of the law. Hav-

ing offered the incorrect instructions on the

element of willfulness, no additional instruction

on willfulness, albeit correct, could neutralize

the misstatement. (511 F.2d at 477, empha-

sis added.)

16

In the general verdict of “guilty” rendered against Pe-

titioner Kay, it is not clear whether the jury chose to

follow, or did follow, the erroneously over-broad instruc-

tion, or whether the other statements of the law in the

charge were relied upon by the jury. The Fifth Circuit

held that evidently the jury here found that the Defend-

ant misstated his intention to pay. This is just not evi-

dent from the verdict. It is just as likely that the jury

followed the court’s instructions that the Petitioner’s con-

cealment of the fact that he liked to gamble in Las Vegas,

or travel to Hawaii, which the Government went to a great

deal of trouble to prove, was “material,” as defined by

the court, and therefore fraudulent.

There was no misstatement by Petitioner of a material

fact to either of the companies prior to his obtaining the

credit cards. If a proper definition of fraudulent obtain-

ment had been given by the trial judge to the jury, there

would have been no evidence before the jury to support

2 guilty verdict on either count in the indictment.

B. CERTIORARI SHOULD BE GRANTED IN THIS CASE TO

DETERMINE WHETHER THIS CONVICTION VIOLATES

PETITIONER’S CONSTITUTIONAL RIGHTS UNDER THE

THIRTEENTH AMENDMENT, OR ALTERNATIVELY THE

FIFTH AMENDMENT, TO THE CONSTITUTION OF THE

UNITED STATES.

The Government, in its brief before the Fifth Circuit,

concedes that there was no factual statement on either

of the applications that amounted to fraud. The major-

ity opinion in the Fifth Circuit accurately points out that

the Government’s theory, by which it sought to support

the findings of the jury of fraudulent conduct, was that

the Petitioner misstated his intention to pay for the charges

a ee

17

at the time he applied for the cards. Aside from the fact

that he did not promise to be “responsible” for these

charges on the Diners Club card, but only agreed to be

“responsible”’ for these charges (it not being clear from

the Record what, if any, promise was contained on the

Torch application), the majority below found that a mis-

statement of his intentions to pay would be sufficient to

support a guilty finding as being fraudulent. In effect,

the Governinent argues, and the majority below approves,

that a promise to pay in the future, coupled with a failure

to pay that debt in the future, can amount to a criminal!

offense of which a person can be prosecuted and convicted.

This position is contrary to the Thirteenth Amendment’s

prohibition against involuntary servitude, as well as the

Fifth Amendment’s requirement of Due Process, and, in

effect, subjects this Petitioner to a debtor’s prison.

Petitioner submits to the Court that if Congress passed

a statute making it a criminal offense to fail to pay debts

to credit card companies, that this would be patently un-

constitutional. The Government here argues for exactly

the same thing, if its interpretation of the statute in ques-

tion is to be followed, when it argues that the Petitioner

was guilty of a criminal offense when he failed to pay

. the charges incurred on his credit cards, as this failure re-

lated to an earlier promise to pay, and couid therefore

be determined to be fraudulent. Petitioner submits that

there is no real difference in a statute saying that a per-

son will be imprisoned for failure to pay a debt to a

credit card company, on the one hand, and on the other

hand, a statute saying that if the credit card company, on

its form application, incorporates a statement by the ap-

plicant that he would pay the charges incurred, can seek

imprisonment of one of its customers who owes it money

by simply proving the debt, and claim that the applicant

18

defrauded it when he promised to pay the charges incurred

long before they were actually incurred.

In Bailey v. Alabama, 219 U.S. 219, 55 L.Ed. 191, 31

St. Ct. 145, this Court considered whether or not a per-

son could be threatened with imprisonment because he

failed to complete an employment contract that he had

been advanced money on. The device used to imprison

for failure to complete the employment contract was al-

lowing the jury to find that the Defendant intended to

defraud his employer when he took the money, and sub-

sequently, did not complete the employment contract.

This is exactly what the Government is claiming in this

case (i.e., that the Defendant took Diners Club and Torch

Club services, and did not intend to honor his promise to

pay for them, and that this amounted to a fraud). In

striking down the conviction for fraud, this Court held

that the mere failure to pay a debt cannot be the basis

of a criminal conviction, even though it was argued there

that before such a conviction could be had, that there

must be a fraudulent intent found. The Court went on

to say as follows:

“The jury by their verdict cannot add to the

facts before them. If nothing be shown but

a mere breach of a contract of service and a

mere failure to pay a debt, the jury have noth-

ing else to go upon, and the evidence becomes

nothing more because of their finding.”

In the Bailey case, the Court went on to say:

“There is not a particle of evidence of any cir-

cumstance indicating that he (the Appellant)

made the contract or received the money with

any intent to injure or defraud his employer.

19

On the contrary, he actually worked for up-

wards of a month (just as the Petitioner here

paid his charges incurred for approximately eight

months on each card). His motive in leaving

does not appear, the only showing being that it

was without legal excuse and that he did not

pay the money received. .. To say that he

has been found guilty of an intent to injure or

defraud his employer, and not merely for break-

ing his contract and not paying his debt, is a

distinction without a difference to Bailey.”

In the remarkably similar case of Taylor v. State of

Georgia, 315 U.S. 25, 86 L.Ed. 615, 62 S.Ct. 415, the

Appellant there failed to do the work that money was

previously advanced for. Under the terms of the Georgia

statute, the Appellant had the option of doing the work

or returning the money advanced. In striking down a

conviction of the Appellant when he failed to do either,

this Court, at page 417, said:

“Since the subsequent breach of the contract by

the defendant, however capricious or reprehensi-

ble, does not establish a fraudulent intent at the

initial stage of the transaction, the content which

has been assigned to the phrase “without good

and sufficient cause”’ by the Georgia courts is

immaterial.”

and thereafter citing Bailey v. Alabama, supra. There, the

Appellee argued that the “without good and sufficient

cause”’ amounted to a requirement that the State show

proof of fraudulent intent before a conviction could be

had. This argument was not accepted by this Court.

20

By these decisions, this Court has consistently refused

to allow a failure to pay a debt to be the basis of a crim-

inal prosecution, even when the criminal prosecution was

couched in terms of the debt being incurred through fraud,

which is precisely the situation presented by Petitioner

in this case. It might be argued that the debt created in

the two above-referred cases were the debts of labor, and

therefore contrary to the anti-peonage statute, but in both

cases above cited, the Appellant had the right to repay

any funds previously advanced to him by the repayment

of money.

In summary, Petitioner respectfully submits that Certi-

orari must be granted in this case, and the conviction of

the Petitioner must be reversed, not only because Petitioner

has been denied Due Process, but also because allowing

the majority opinion in the Court below to stand will

mean that any time that any person incurs more than

1,000 dollars in charges with a credit card company, and

can’t pay these charges for whatever reason, that if that

person’s application contained a promise to pay the charges

incurred on the card, or be responsible for them, that this

person can be prosecuted, without proof of any cther facts,

and if a jury chooses to interpret his failure to pay, along

with a prior promise to pay, as fraudulent, then that per-

son’s conviction will stand because there is no constitu-

tional prohibition against it. This goes beyond permissi-

ble limits in a free society such as ours.

21

CONCLUSION

Petitioner prays that this Petition for a Writ of Certiorari

be granted or that alternatively, the Judgment of the Court

of Appeals and the District Court be vacated and reversed

without granting a Writ of Certiorari.

Respectfully submitted,

RANDY TAYLOR

908 Main Bank Building

810 Main Street

Dallas, Texas 75202

Attorney for Petitioner

la

APPENDIX A

UNITED STATES of America,

Plaintiff-Appellee,

Vv.

William Leonard KAY,

Defendant- Appellant.

No. 75-1677.

United States Court of Appeals,

Fifth Circuit.

Jan. 17, 1977.

Defendant was convicted in the United States District

Court for the Northern District of Texas, at Dallas, Sarah

Tilghman Hughes, J., on two counts of using a fraudulently

obtained credit card to obtain goods and services having

a retail value greater than $5,000 and he appealed. The

Court of Appeals, Allgood, District Judge, held that al-

though charge defining a material fact in application for

credit card as one which a reasonably prudent credit com-

pany would require before issuing a credit card might

broaden scope of statute beyond permissible limits, inas-

much as both credit card companies in fact requested a

representation as to defendant’s intention to pay the

charges incurred, and jury found this intention to have

been misrepresented, any error was harmless beyond a

reasonable doubt; and that it was 'nreasonable for jury

to conclude that defendant intended not to pay the charges

at the time he applied for the cards.

Affirmed.

Roney, Circuit Judge, filed dissenting opinion.

* * *

2a

Appeal from the United States District Court for the

Northern District of Texas.

Before AINSWORTH and RONEY, Circuit Judges, and

ALLGOOD, District Judge.

ALLGOOD, District Judge:

Appellant was convicted by a jury on two counts of

using a fraudulently obtained credit card to obtain goods

and services having a retail value greater than five thou-

sand dollars, in violation of 15 U.S.C. 8 1644. Kay re-

ceived concurrent sentences of four years on each count.

The issues raised on this appeal are whether there was suf-

ficient evidence to support the verdict on both counts and

whether the trial court’s instruction that a representation

made to a credit card company is material if a ‘“reason-

ably prudent credit company would require [the represen-

tation] before issuing a credit card’ renders the conduct

proscribed by the statute uncertain and the statute vague.

A brief account of the facts is necessary to consider these

contentions.

Count One related to the misuse of a Diner’s Club card.

In February of 1971, Diner’s Club, Inc., received an appli-

cation from the appellant, William L. Kay. The applica-

tion stated that Kay was the “‘owner” of New Era Printing

and that his yearly income was from $10,000 - $13,000.

Kay signed the application below a paragraph which stated,

among other things, that “[e]ach cardholder . . . agrees

to be responsible for all charges’ made on the card.

From April, 1971 through December 1971, charges on

this card were kept below $20.00 and were paid off reg-

ularly. Then in January, 1972, defendant charged $3,532.35;

in February, $13,277.71; the March, 1972 billing showed

an ending balance due of $19,248.46. Of this amount,

3a

approximately $14,250 represented charges for airline tick-

ets, with restaurant and other subsistence charges making

up the balance. The card was picked up on February 22,

1972.

Count Two concerns an American Oil Company Torch

Club credit card which Kay applied for in July of 1972.

The application stated that Kay’s business address was

9877 Brockbank, Suite 130, and his annual income was

in excess of $9,500. The application was signed by the

appellant under certain paragraphs which stated that the

“[b]uyer agrees to pay American .. .” either the bal-

ance owed within 25 days or the balance plus a finance

charge if not paid within 25 days.

Between August, 1972 and January, 1973, charges on

the card were nominal and regular payments were again

made. In February, 1973, defendant charged $7,919.53

on the card; in March, $35,338.32 was charged, bringing

the total balance owed to around $45,000.

Each of the representations made on the applications

relating to the appellant’s ownership interest in New Era,

income, and business address, were false in some respect.

Representatives of Diner’s Club and American Oil, how-

ever, testified that the cards would probably have been

issued had the true facts been known.

{1] Appellant argues that, because the companies would

have issued the cards in spite of the false statements, these

misrepresentations could not have been material, a neces-

sary element in proving fraud in the obtaining of the cards.

However, the Government’s theory, which was evidently

found as fact by the jury, was that appellant misstated

his intention to pay for the charges at the time he ap-

plied for the cards. Clearly, these companies would not

4a

have issued the cards had they known of appellant’s in-

tent not to pay and we therefore find the misrepresenta-

tions here material. United States v. Krause, 507 F.2d

113 (Sth Cir. 1975).

Appellant also complains of the charge which defines a

material fact as one which a “reasonably prudent credit

company would require before issuing a credit card.” It

is contended that this instruction allows the jury to con-

vict where no representation was in fact required by the

company or made by the applicant and would require the

applicant to guess at what information should be supplied.

The effect, appellant urges, is to make the standard of

criminal conduct unknown and therefore the statute vague

in violation of due process.

{2] It is conceivable that the charge may broaden the

scope of § 1644 beyond permissible limits and it should

have been limited to misstatements, half-truths and omis-

sions of matters fairly raised by the questions in the ap-

plications. In the instant case, however, both companies

in fact requested a representation as to the appellant’s in-

tention to pay the charges incurred, and the jury found

this intention to have been misrepresented. Any error,

therefore, was harmless beyond a reasonable doubt. See

Kotteakos v, United States, 328 U.S. 750, 764, 66 S.Ct.

1239, 90 L.Ed. 1557 (1946).

[3] Finally, appellant challenges the sufficiency of the

evidence that the cards were fraudulently obtained rather

than simply misused after having been properly obtained.

Viewing the evidence in a light most favorable to the Gov-

ernment, Glasser v. United States, 315 U.S. 60, 62 S. Ct.

457, 86 L.Ed. 680 (1940), we cannot say that it was un-

reasonable for the jury to conclude that Kay intended not

to pay the charges at the time he applied for the cards.

Sa

The evidence revealed a remarkable similarity in the pat-

tern on both cards of charging nominal amounts for sev-

eral months and then suddenly and grossly abusing the

credit extended to him. While the Government’s position

is somewhat stronger with respect to the abuse of the sec-

ond card, the intent not tc pay at the time of the first

application may reasonably be inferred from the appellant’s

subsequent course of conduct. United States v. Cochran,

499 F.2d 380 (Sth Cir. 1974), cert. denied 419 U.S. 1124,

95 S. Ct. 810, 42 L.Ed. 2d 825; United States v. Rodriquez,

474 F.2d 587 (Sth Cir. 1973); United States v. Goodwin,

470 F.2d 893 (Sth Cir. 1972), cert. denied 4!1 U.S. 969,

93 S. Ct. 2160, 36 L.Ed. 2d 691. The verdicts on both

counts are therefore supported by sufficient evidence and

these convictions must be affirmed.

RONEY, Circuit Judge, dissenting:

I respectfully dissent. The only substantial issue of fact

in this case is whether Kay “fraudulently obtained” the

two credit cards involved. The Court holds that the jury

could have found that when Kay obtained the cards, he

intended not to pay the substantial charges that he would

make against the cards several months after issuance. His

failure to disclose this intention amounted to fraud.

In convicting on this theory, the jury was charged that

the evidence would have to show that Kay obtained the

cards by misrepresentation or concealment of a material

fact. The court then made the charge to which the de-

fendant takes exception: “A fact is material if it is a

fact that a reasonably prudent credit company would re-

quire before issuing a credit card.”’ Although the major-

ity admits that such charge might impermissibly broaden

§ 1644, in my judgment it clearly does so. Although we

do not have to decide the issue here, I have little doubt

6a

that a statute which made it a crime to conceal from a

credit card company a “fact that a reasonably prudent credit

company would require before issuing a credit card” would

be unconstitutionally vague.

The defects are obvious. First, such a statute would

leave to conjecture a standard of conduct that lends itself

to specificity. Second, varied credit card application forms

clearly indicate that even credit companies do not agree

on what they should prudently require, even if Congress

might have some undisclosed specific standard in mind for

such a statute. Third, such a statute would leave the de-

termination to individual juries of what a prudent credit

company would require, thus letting the crime vary from

jury to jury. Fourth, the grand jury and the petit jury

could use different standards so that a defendant might

stand convicted by a petit jury of acts with which he had

not been charged by the grand jury.

Significantly, there is no evidence whatsoever in this case

about the requirements of prudent credit companies. Kay’s

jury received no evidence by which it could determine if

what he concealed was what a prudent credit company

would require. To the contrary there is positive evidence

that the minor misstatements Kay made on his application

would not have deterred these two companies from issuing

the cards.

The majority of this panel holds the charge to be harm-

less beyond a reasonable doubt. This cannot be so, how-

ever, because the Court posits its holding as to evidence

sufficiency on the fact that Kay intended not to pay the

charges. Neither company asked Kay whether he intended

to pay the charges. The Diners Club application states

that Kay “agrees to be responsible for all charges.” And

7a

he is, of course, responsible. He has never denied that.

The Torch Club application agrees that all purchases charged

under the card “is indebtedness of buyer.” The charges

are his indebtedness. He has never denied that. He agreed

to pay them in one of two ways. Kay has broken these

agreements. For that he is legally liable. But at no place

on either application is Kay asked to give his state of mind.

Hornbook contract law holds that where a contract is

clear, a state of mind is irrelevant to its enforcement. The

credit companies asked for, and obtained, legally enforce-

able agreements with Kay. The crucial act for which Kay

stands convicted, however, is failing to tell the companies

that in his mind he did not intend to fulfill his agreement.

A reasonably prudent company, even a reasonably imprudent

company, might not issue a card to an applicant who did

not intend to pay, unless it thought the applicant available,

solvent and legally responsible so that it could collect in

any event. The agreement after all does carry a generous

rate of interest on unpaid balances which are rather easily

collectible through legal process against substantial borrow-

ers.

In any event, on analysis, a charge that permits the jury

to find guilt on concealment of a fact that a prudent credit

company would require becomes the keystone to Kay’s

conviction. If the concealed fact is intent, this charge is

not harmless at all. I would hold that this charge miscon-

strues the statute under which Kay was charged and in-

jected reversible error into his trial.

8a

APPENDIX B

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 75-1677

D. C. Docket No. CR-3-74-362

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

WILLIAM LEONARD KAY,

Defendant-Appellant.

Appeal from the United States District Court for the

Northern District of Texas

Before AINSWORTH and RONEY, Circuit Judges, and

ALLGOOD, District Judge.

JUDGMENT

This cause came on to be heard on the transcript of the

record from the United States District Court for the North-

ern District of Texas, and was argued by counsel;

ON CONSIDERATION WHEREOF, It is now here ordered

and adjudged by this Court that the judgment of the said

District Court in this cause be, and the same is hereby, af-

firmed.

January 17, 1977

RONEY, Circuit Judge, dissenting.

Issued as Mandate:

9a

APPENDIX C

UNITED STATES COURT OF APPEALS

Fifth Circuit

EDWARD W. WADSWORTH TEL 504-589-6514

Clerk OFFICE OF THE CLERK 600 CAMP STREET

NEW ORLEANS, LA. 70130

May 17, 1977

TO ALL PARTIES LISTED BELOW:

NO. 75-1677 — USA v. William Leonard Kay

Dear Counsel:

This is to advise that an order has this day been entered

denying the petition(s) for rehearing, and no member of

the panel nor Judge in regular active service on the Court

having requested that the Court be polled on rehearing en

banc (Rule 35, Federal Rules of Appellate Procedure; Lo-

cal Fifth Circuit Rule 12) the petition( ) for rehearing en

banc has also been denied.

See Rule 41, Federal Rules of Appellate Procedure for is-

suance and stay of the mandate.

Very truly yours,

EDWARD W. WADSWORTH, Clerk

By /s/ Susan M. Gravois

Deputy Clerk

/smg

cc: Mr. Randy Taylor

Ms. Judith A. Shepherd

10a

APPENDIX D

[Filed May 25, 1977]

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

. * *

No. 75-1677

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

WILLIAM LEONARD KAY,

Defendant-Appellant.

Appeal from the United States District Court for the

Northern District of Texas

ORDER:

( ) The motion of

for stay of the issuance of the mandate pending peti-

tion for writ of certiorari is DENIED. See Fifth Cir-

cuit Local Rule 15, as amended January 11, 1972.

(X) The motion of appellant for stay of the issuance of

the mandate pending petition for writ of certiorari

is GRANTED to and including June 16, 1977, the

Stay to continue in force until the final disposition

of the case by the Supreme Court, provided that

within the period above mentioned there shall be

ee ee

lila

filed with the Clerk of this Court the certificate of

the Clerk of the Supreme Court that the certiorari

petition has been filed. The Clerk shall issue the

mandate upon the filing of a copy of an order of

the Supreme Court denying the writ, or upon the ex-

piration of the stay granted herein, unless the above

mentioned certificate shall be filed with the Clerk of

this Court within that time.

( ) The motion for a further stay of the issuance of the

mandate is GRANTED to and including ,

under the same conditions as set forth in the preced-

ing paragraph.

( )IT IS ORDERED that the motion for a further stay

of the issuance of the mandate is DENIED.

/s/ Robert Ainsworth, Jr.

UNITED STATES CIRCUIT JUDGE

ie

12a

UNITED STATES COURT OF APPEALS

Fifth Circuit

EDWARD W. WADSWORTH

Clerk OFFICE OF THE CLERK 600 CAMP STREET

NEW ORLEANS, LA. 70130

May 25, 1977

Mr. Randy Taylor

Attorney at Law

908 Main Bank Bldg.

Dallas, TX 75202

No. 75-1677 — USA v. William Leonard Kay

MANDATE STAYED TO AND INCLUDING

June 16, 1977

(SEE ORDER ENCLOSED)

Dear Counsel:

The court has this day granted a stay of the issuance of

the mandate to the date as shown above. If during the

period of the stay there is filed with the clerk of this

court a notice from the clerk of the Supreme Court that

the party who has obtained the stay has filed a petition

for the writ in that court, the stay shall continue until

final disposition by the Supreme Court. Upon the filing

of a copy of an order of the Supreme Court denying the

petition for writ of certiorari the mandate shall issue im-

mediately under Rule 41, FRAP.

Under revised Rule 21(1) of the Supreme Court effective

July 1, 1970, a record is no longer required in connection

with an application for writ of certiorari, and therefore

will not be routinely prepared by this office (38LW 3502).

l3a

A copy of the opinion, judgment and denial of rehearing

are still required by the Supreme Court to be incorporated

as an appendix to your petition. Enclosed are copies of

the said documents which have been entered in this cause.

Very truly yours,

EDWARD W. WADSWORTH, Clerk

By /s/ Susan M. Gravois

Deputy Clerk

enc:

cc and enclosure to:

Ms. Judith A. Shepherd