Amicus Curiae Brief — Brendlin v. California
Supreme Court brief2007
Ask Donna
What actually matters in this document.
Text
W\ mee 75% O FILED |
06-8120 MAR 5 - 2007
OFFICE OF THE CLERK |
SUPREME COURT US. |
IN THE
Supreme Court of the United States
> -S -
BRUCE EDWARD BRENDLIN.
Petitioner.
CALIFORNIA.
Respondent
ON WRIT OF CERTIORARI TO THE SUPREME COURT OF CA] IFORNIA
BRIEF AMICUS CURIAE OF THE AMERICAN CIVIL LIBER-
TIES UNION, THE ACLU OF NORTHERN CALIFORNIA, THE
ASIAN AMERICAN LEGAL DEFENSE AND EDUCATION FUND,
AND THE NATIONAL ASSOCIATION FOR THE ADVANCE.
MENT OF COLORED PEOPLE IN SUPPORT OF PETITIONER
MICHAEL T. RISHER STEVEN R. SHAPIRO
ACLU of Northern California Counsel of Record
39 Drum Street EMILY CHIANG
San Francisco, California 9411] REGINALD T. SHUFORD
(415) 621-2493 ALEXIS AGATHOCLEOUS
DENNIS D. PARKER
American Civil Liberties
SUSAN N. HERMAN
250 Joralemon Street
Brooklyn, New York 1120] l nion | oundation
New York, New York 10004
(212) 549.9500
(Additional counsel continued on inside cover)
DENNIS COURTLAND HAYES
VICTOR L. GOODE
National Association for the
Advancement of Colored People
4805 Mt. Hope Drive
Baltimore, Maryland 21215
(410) 580-5790
KENNETH KIMERLING
Asian American Legal Defense
and Education Fund
99 Hudson Street
New York, New York 10013
(212) 966-5932
Attorneys for Amici Curiae
TABLE OF CONTENTS
TABLE OF CITED AUTHORITIES ............
INTEREST OF AMICI CURIAE ...............
SUMMARY OF ARGUMENT .................
PEED 5+ nuke doa seb ic cbeeensecds reennci
I.
II.
IIT.
IV.
Vi.
The PSLRA’s Plain Language Requiring “A
Strong Inference” Of Scienter Was Intended
To Adopt The Second Circuit’s Pleading
EE. 6654-5545 KeucrdeeerbeRe deen ws
Legislative History Confirms That Congress
Intended To Adopt The Second Circuit's
Strong Inference Standard ...............
The PSLRA Has Successfully Achieved Its
Goals Of Deterring Frivolous Litigation While
Allowing Meritorious Cases To Proceed ...
Petitioners And Their Amici Inappropriately
Seek To Re-Write The PSLRA ...........
The “Strong Inference” Requirement Should
Be Read In The Context Of The PSLRA’s
Integrated Provisions Designed Both To
Discourage Frivolous Lawsuits And To
Encourage Meritorious Lawsuits .........
Permitting Plaintiffs Only “The Most Plausible
Of Competing Inferences” Would Violate The
ED SHINN <6 6 ws 0s SaNeadrndeds
1]
13
16
il
Contents
Page
A. Courts May Not Weigh Evidence And
Assess Witness Credibility .......... 19
B. A Pleading Standard May Not Authorize
A Court To Exercise Powers It May Not
Constitutionally Exercise On Summary
Judgment Or At Trial ............... 22
VII. The SEC Correctly Argued In Twelve Prior
Cases That The PSLRA Adopted The Second
Circuit’s “A Strong Inference” Pleading
a Cee eee Teer ee 26
WPI, 0s ccecccncndecsivtxrevsncess 29
iil
TABLE OF CITED AUTHORITIES
CASES
Abrams v. Baker Hughes,
Be C6 SEO GOCE. BOUE) once cccsscccens
Acito v. IMCERA Group, Inc.,
De Pavey GEG CUUED se ncvcdccvrevseses
In re Advanta Corp. Securities Litigation,
Se Fe SES CPO GA UPEPD ccc ccccccceerees
In re Alpharma Inc. Securities Litigation,
FP Pe CPE GHG GOD c ceerceccccsssce
Anderson vy. Liberty Lobby, Inc.,
Pe CA ED ov ease a xencoesvevesses
Baltimore & Carolina Line, Inc. v. Redman,
SP EEE 26.08 bac cdeoebeovescons
Blue Chip Stamps v. Manor Drug Stores,
ee TA CRP ENO TEE bocce rch eeccesecsccees
Bourjaily v. United States,
oe , PPPS T TET TTT TET Tee
Brady v. Southern Railway Co.,
PIPED 66 0:6 6004090 00000800s0%
Byrd v. Blue Ridge Rural Electric Cooperative,
Py PP ERED vec ccccsecssvevecconne
Page
15
23
21
iv
Cited Authorities
Page
In re Cabletron Systems Inc.,
Ee * Fie) ot 2 : ere sy 8
Central Bank of Denver
v, First Interstate Bank of Denver,
ie eS Pee eee 12
City of Monroe Employees Retirement System
v. Bridgestone Corp.,
399 F.3d 651 (6th Cir.), cert. denied,
Soe BGR GP Ge «6 v's oc cavcacessanavenl 8, 18
City of Monterey v. Del Monte Dunes
at Monterey, Lid.,
LE Peer ete 21
City of Philadelphia v. Fleming Cos.,
264 F.3d 1245 (10th Cir. 2001) .............. 8
Conley v. Gibson,
Fae Bak GE CRUED ei ctecsis eae 21
Connecticut National Bank v. Germain,
Dae Uh Sa CUO vo cs'nbesevkeseeseaeneee u
Curtis v. Loether,
ee Gs CE ocd caceee cusses 18
Dasho v. Susquehanna Corp.,
461 F.2d 11 (7th Cir.), cert. denied,
oS eee ee er 18
Daubert v. Merrell Dow Pharmaceuticals, Inc.,
BOS Ck SPP COED i os vos tn 6senseeneeee 25
Cited Authorities
Page
Dimick v. Schiedt,
i 6 ed oan cee e ee ene e% 19, 20
Dolan v. United States Postal Service,
546 U.S. 481, 126 S. Ct. 1252 (2006) ......... 16
Edmonson v. Leesville Concrete Co.,
een ewekeeieenee se 21
Elkins v. Richardson-Merrell, Inc.,
8 F.3d 1068 (6th Cir. 1993) ................. 25
Feltner v. Columbia Pictures Television, Inc.,
i er ee bce sense eeeeees 19
Florida State Board of Administration
v. Green Tree Financial Corp.,
270 F.3d 645 (8th Cir. 2001) ................ 8
Galloway v. United States,
Ee 23,24
Immigration & Naturalization Service
v. Cardoza-Fonseca,
Cee en nn dc ek baae dues 28
International Brotherhood of Teamsters, a
Chauffeurs, Warehousemen & Helpers of America
v. Daniel,
ED onc cdceiteeccccccecenes 28
John Hancock Mutual Life Insurance Co.
v. Harris Trust & Savings Bank,
ee ee eis ence cencees 16
vi
Cited Authorities
Page
In re K-Tel International, Inc. Securities Litigation,
SED F396 GEE GUC. BOGE) cc cc ccccccccccss 17
Kelly v. United States,
og» >» (| i¢ 3 rer 20
Lytle v. Household Manufacturing, Inc.,
ee es EE hoods aeeetuscweadencas 23
Markman vy. Westview Instruments, Inc.,
54 0 & er re 21
Matsushita Electric Industrial Co.
v. Zenith Radio Corp.,
Se ED so: c.0ccanuuceuaubeds uae 24, 25
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit,
547U.S. _, 126 S. Ct. 1503 (2006) ......... 5, 16
Monsanto Co. v. Spray-Rite Service Corp.,
GP Ws CU EUEETD Cees cactntcccseedsecees 25
Myzel v. Fields,
386 F.2d 718 (8th Cir. 1967), cert. denied,
Pr ree 18
Neely v. Martin K. Eby Construction Co.,
es 68 ccs anuancaseaseosees 24
Novak v. Kasaks,
ZUG F.36 SEO C26 Ck. BOG) occ ccccccccccess passim
vil
Cited Authorities
Page
Pease v. Rathbun-Jones Engineering Co.,
ED vcnukcdecdedewsnen sensei 23
In re Peterson,
Ey ED 665.600 ceckdeeeeesecuneus 24
Reeves v. Sanderson Plumbing Products, Inc.,
SE a cecandeceneaeenteseee 23
Reid v. Maryland Casualty Co..,
fs Foo. os 2 ere 26
Rombach v. Chang,
oP a le ee ee 17
Scheuer v. Rhodes,
EY £46 one weegeaseueiaeoues 20
Thompson v. Mahre,
110 F.3d 716 (9th Cir. 1997) ................ 23
United States v. Delaware & Hudson Co.,
ST os ccneeeunsauusseees ees 19
United States v. Johnson,
Pe ees Pe BUD cc ccc cnccedecesess 7
Walker v. New Mexico & S.PR. Co.,
I ae 21
vill
Cited Authorities
Page
Watt v. Alaska,
Se Os SUED bone etepesosesecceseces 28
Wilkerson v. MeCarthy,
es PE UEED oath kd ane enseccdceesess, 23
CONSTITUTION, STATUTES, AND RULES
Ss GAD, GENIN GEE ccc cen ccntvcccsevceces passim
Pc te SEED 0 vb oe dcccvevesseusvataes 16
15 U.S.C. § 78u-4(aX(3)(BYvi) ...........---5-- 3
SP PEED pcb cuwetssevissecdenast 16
PN ee SEED ccwenedseccanscnsevess 17
SP ee PEED Kk Reseed dvecdevewess 6
SP as PEED vc ccocccescesessecs 17
15 U.S.C. § 78u-4(b)(4) .......... puancewhen es 18
PR TEED 6.466500 petceecccersenaes 17
i i i g PPPPUPTT TT ET TT TTT TET TTL 25
SP EEE cédneaancceteuvevecessace 18
PULA. 0 PORMEEEAD cccccccersececcccecess 17
Rs PD cc ccccccesnececeeseseeeesese 18
ix
Cited Authorities
Page
. 8 ee 2 eee ae 20
Pe OU, ono 'bc ccs wowedecuusccun 17
Fed. R. Civ. P. S0(a) ... 2... eee. - 23
Advisory Committee Notes to 199]
Amendment to Fed. R. Civ. P. 50(a) 2.0.2... 23
LEGISLATIVE HISTORY
H.R. Conf. Rep. 104-369,
a Re Sd oe 8 ie: ee 3
H.R. Conf. Rep. 105-803,
available at 1998 WL 703964 ............... 10
S. Rep. 104-98, 1995 US. C.C_A.N.679 ...... | 3,7
141 Cong. Rec. (1995) 2.00.00... 10,11
SECURITIES AND EXCHANGE COMMISSION
AMICUS BRIEFS
Bryant vy. Avado Brands, Inc...
No. 98-9253, 1999 WL 33631523
(lith Cir. Feb. 16,1999) ....0.0.0000......., passim
Caprin v. Simon Transportation Services.
No. 01-4049, 2001 WL 34664973
(10th Cir. July 2, 2001) .................... 27
Cited Authorities
In re Comshare, Inc. Securities Litigation,
No. 97-2098, 1997 WL 34039763
eR a ee
Greebel v. FTP Software, Inc.,
No. 98-2194, 1999 WL 339] 1562
SOUS Gals OU DUD io ocnccweuevanucesececves
Helwig v. Vencor, Inc.,
No. 99-5153, 2000 WL 34432856
(6th Cir. Aug. 18,2000) ....................
In re K-Tel International, Inc. Securities Litigation,
No. 00-3210 MN, 2000 WL 35483737
Pere ae DO. BIG UD ons voce us caccesenns
Lone Star Ladies Investment Club v. Schlotzsky's, Inc.
No. 99-50958, 1999 WL 33620099
(5@ Cit. Dec. 26, 1999) 2... ccc cc cece ene
Nathenson v. Zonagen Inc.,
No. 99-20449, 1999 WL 33613893
(Sth Cir. Sept. 30, 1999)... cece eee
Novak v. Kasaks,
No. 98-9641 (2d Cir. Mar. 16,1999) _.........
In re Siticon Graphics, Inc. Securities Litigation,
No. 97-16240, 1997 WL 33551249
eee
27
>
27
27
xi
Cited Authorities
Weld v. Stage Stores, Inc.,
No. 00-20230, 2000 WL 34032458
I ee Fn 8
Zeid v. Kimberley,
No. 97-16070, 1997 WL 33555504
SO Dn vb ec ncc bun ccdevsckes'vs
OTHER AUTHORITIES
Janet Cooper Alexander, Do the Merits Matter? A
Study of Settlements in Securities Class Actions,
43 Stan. L. Rev. 497(1991) .................
Gary W. Anderson & Keith Brainard, Profitable
Prudence: The Case for Public Employer Defined
Benefit Pension Plans, Pension Research Council
Working Paper 2004-6, The Wharton School,
University of Pennsylvania, Attp://rider.wharton.
upenn.edu/~prc/PRC/WP/WP2004-6.pdf (2004)
73 Creo Fea @Ceeoeeeseseseeee eee ee O@te e086 86 8 8 @ 6 6 & 6
Cornerstone Research, “Securities Class Action Case
Filings: 2006: A Year In Review,” http://securities.
stanford.edu/clearinghouse research/2006_YIR/
ER Pe PS Ee
National Association of State Retirement
Administrators, “Key Facts Regarding State and
Local Government Defined Benefit Retirement
Plans,” hittp://www.nasra.org/news/article.asp?
nS eo ese ee ee on
Page
27
27
\]
4,12
xil
Cited Authorities
Page
NERA Economic Consulting, “Recent Trends in
Shareholder Class Action Litigation: Filings
Plummet, Settlements Soar,” Jan. 2, 2007, /ttp://
www.nera.com/publication.asp?p ID=3028 .. 4,12, 13
Joel Seligman, The Merits Do Matter, 108 Harv. L.
GE 36-6444 4c Kdeckueakeuneeuas ll
Suja A. Thomas, The PSLRA'’s Seventh Amendment
Problem, http://papers.ssrn.com/sol3/papers.cfm?
abstract_id=968893#PaperDownload (Mar. 7,
EE wien naan enwek e6kkasee tee eeise eek nt 19
Elliott J. Weiss & John S. Beckerman, Let the Money
Do the Menitoring: How Institutional Investors
Can Reduce Agency Costs in Securities Class
Actions, 104 Yate L.J. 2053 (1995) ........... 4, 11
RANDOM House UNABRIDGED DICTIONARY
a nS rere : )
“Securities Lawsuits — Classier Actions,”
The Economist, Feb. 15,2007 ............... 5
United States v. Ebbers,
No. $4 02 Cr. 1144 (BSJ),
Charge to the Jury (S.D.N.Y.),
available as 1492 PLI/Corp 477 ............. 15
INTEREST OF AMICI CURIAE
This brief is filed by public pension systems that invest
billions of dollars in U.S. capital markets to fund obligations to
their beneficiaries and, therefore, have a strong interest in the
proper interpretation of the Private Securities Litigation Reform
Act of 1995 (“PSLRA” or “Reform Act”).
The New York State Common Retirement Fund
(“NYSCRF’) is the third largest public pension fund in the U.S.,
with over 980,000 members and benefictaries and assets of
approximately $140 billion. The California State Teachers’
Retirement System is the largest teachers’ retirement system in
the U.S., with over 775,000 members and assets of more than
$142 billion. The State of Wisconsin Investment Board invests
over $75 billion in assets of the Wisconsin Retirement System
(which has over 530,000 participants), the Wisconsin State
Investment Fund, and other Wisconsin state trust funds. The
Los Angeles County Employees Retirement Association is the
largest county retirement system in the U.S., with 147,000
members and $35 billion in assets. The Teachers’ Retirement
System of Louisiana is the largest public retirement system in
Louisiana, with 100,000 members and more than $11.9 billion
in assets. The Arkansas Teacher Retirement System invests $1 |
billion in assets for the benefit of 112,000 members and
beneficiaries. The Sacramento County Employees’ Retirement
System is a $6.2 billion pension plan for employees of
Sacramento County, California. The Government -of Guam
Retirement Fund is a $3.94 billion pension plan for employees
of the Government of Guam. The Louisiana Sheriffs Pension &
Relief Fund is a $1.4 billion defined benefit pension plan for
Louisiana shenffs and deputies. The Jacksonville Police and
Fire Pension Fund is an $886 million defined benefit pension
' This brief was not authored, in whole or in part, by counsel for
either party, and no person or entity other than amici and their counsel
contributed monetarily to the preparation or submission of the brief.
The parties have consented to the filing of this brief and copies of their
consent have been lodged with the Clerk of the Court.
+
plan for the police officers and firefighters of Jacksonville,
Florida. The Anchorage Police and Fire Retirement System ts a
$400 million defined benefit pension plan for the police officers
and firefighters of Anchorage, Alaska. In the aggregate, U.S.
public pension plans cover more than 14 million workers and 6
million retirees and other beneficiaries and have assets of more
than $2 tnillion.”
The amici’s overriding responsibility is to invest for the
long-term secunty of their active and retired members. As major
investors with long-term outlooks, the amici are vitally
concerned with the proper and efficient functioning of U.S.
capital markets, and are particularly concerned that investors
not be harmed by fraudulent conduct of issuers of publicly traded
securities and others. Many state and local governments are
constitutionally obligated to guarantee defined benefit retirement
plans. Therefore, investment losses due to securities fraud fall
directly on state and local governments and ultimately on
taxpayers. If public pension funds are prevented from recovering
money lost to securities fraud, the public will suffer.’
In recent years, public pension funds have become
increasingly concerned about the integrity of the U.S. securities
markets. Scandals at Enron, WorldCom, Global Crossing, Tyco,
Xerox, Delphi, McKesson-HBO, and numerous others have
caused hundreds of billions in losses to innocent investors. As
investors who have been materially harmed by corporate fraud,
amici have a strong interest that the law allow injured investors
to recover from perpetrators of fraud.
> See Gary W. Anderson & Keith Brainard, Profitable Prudence:
The Case for Public Employer Defined Benefit Pension Plans, Pension
Research Council Working Paper 2004-6, The Wharton School,
University of Pennsylvania, Attp://rider wharton.upenn.edu/~prc/PRC/
WP/WP2004-6.pdf (2004).
* In 2005, investment earnings accounted for 74 percent of all
public pension plan revenue and employer (i.e., taxpayer) contributions
for only 17 percent. See National Association of State Retirement
Administrators, “Key Facts Regarding State and Local Government
Defined Benefit Retirement Plans,” Aftp://www.nasra.org/news/
article.asp?newsid= 112 (Jan. 2007).
3
The amici believe that investors’ ability to redress corporate
wrongdoing through private actions under the Securities
Exchange Act of 1934 is essential to deter improper conduct
and to recoup damages. Indeed, with the PSLRA, Congress
sought “to increase the likelihood that institutional investors
will serve as lead plaintiffs,” based on its belief “that increasing
the role of institutional investors in class actions will ultimately
benefit shareholders and assist courts by improving the quality
of representation in securities class actions.” H.R. Conf. Rep.
104-369, 1995 U.S.C.C.A.N. 730, 732. Following the passage
of the Reform Act, the amici have served as lead plaintiffs in
numerous cases resulting in substantial recoveries, including
In re WorldCom, Inc. Securities Litigation (S.D.N-Y.), in which
lead plaintiff NYSCRF secured a settlement of more than $6
billion from investment banks, auditors, officers and directors,
and Jn re Cendant Corp. Securities Litigation (D.N.J.), in which
co-lead plaintiff NYSCRF secured a $3.2 billion settlement.‘
Before 1995, settlements for more than $20 million were
unusual, and settlements of $100 million or more were
exceedingly rare. Since 1995, seven cases have settled for $1
billion or more, and more than 20 cases have settled for more
than $100 million. Recoveries have reached unprecedented
levels because of the cases’ merit and institutional investor
leadership.° At the same time, a much larger percentage of suits
* The amici, as long-term investors, also have an interest in
preventing meritless, lawyer-driven litigation. As one of many ways the
PSLRA discourages meritless cases, the statute’s “professional plaintiff”
provision bars a plaintiff from serving as lead plaintiff in more than
five actions filed within three years, except as permitted by the court.
See 15 U.S.C. § 78u-4(a)(3)(B)(vi). Notably, Congress gave courts
discretion to allow “[i]nstitutional investors seeking to serve as lead
plaintiff . . . to exceed this limitation [because they] do not represent
the type of professional plaintiff this legislation seeks to restrict.”
H.R. Conf. Rep. 104-369, 1995 U.S.C.C.A.N. 730, 734.
* In the article that inspired the lead plaintiff provisions of the
PSLRA, see S. Rep. 104-98, 1995 U.S.C.C.A.N. 679, 690 n.32,
(Cont'd)
4
filed since enactment of the PSLRA has been dismissed under
the PSLRA’s pleading standards.° Reflecting the PSLRA’s
deterrence of meritless cases, securities class action filings
“plunged to a record low in 2006.” ’ That decline has been most
pronounced in the Seventh Circuit, where the number of
‘securities class actions filed declined from an average of ten
per year in 1996-2005, to two in 2006.* This drop demonstrates
that the decision below has not encouraged frivolous shareholder
suits.
SUMMARY OF ARGUMENT
The PSLRA’s requirement that securities complaints allege
facts giving rise to “a strong inference” that defendants acted
with the required mental state should be construed in accordance
with the plain language of the statute. Second Circuit cases
decided after the PSLRA correctly construe the statute in light
of its text and legislative history, and the approach of most other
Circuits is consistent with that of the Second Circuit. Despite
this, Petitioners and their amici ask this Court to rewrite the
(Cont'd)
Professors Weiss and Beckerman predicted that “[t]he largest benefit
of institutional supervision of class actions is likely to be settlement
terms that are more favorable to ine plaintiff class, on average, than
those now negotiated by essentially unsupervised plaintiffs’ attorneys.”
Elliott J. Weiss & John §. Beckerman, Let the Money Do the Monitoring:
How Institutional Investors Can Reduce Agency Costs in Securities Class
Actions, 104 Yate L.J. 2053, 2121 (1995). Their prediction has been
fulfilled, exactly as Congress intended.
* See NERA Economic Consulting, “Recent Trends in
Shareholder Class Action Litigation: Filings Plummet, Settlements Soar,”
Jan. 2, 2007, http://www.nera.com/publication.asp?p_ID~ 3028.
” Comerstone Research, “Securities Class Action Case Filings:
2006: A Year In Review,” at 1, Attp://securities.stanford.edu/
clearinghouse_research/2006_Y1IR/20070102-01.pdf (2007).
* “Recent Trends in Shareholder Class Action Litigation,” supra
n.6, at 15. The Seventh Circuit’s decision was handed down on January
25, 2006. See Appendix at la.
5
statute, proposing standards that contradict both the PSLRA’s
plain language and Congress’s intent. Petitioners’ and their
amici interpretations of the PSLRA also raise unnecessary
constitutional questions, because they would require courts, in
deciding motions to dismiss, to weigh competing evidence,
assess the credibility of witnesses who are referred to in
pleadings, and make ultimate findings of fact, thereby invading
the province of the jury under the Seventh Amendment. This
Court should avoid these constitutional issues by Gockning these
invitations to rewrite the statute.
As Congress, courts, and the Securities and Exchange
Commission (“SEC”) have long recognized, private securities
litigation is an invaluable part of the overall enforcement regime
that compensates defrauded investors, deters fraud, protects
investor confidence, and promotes fair and efficient capital
markets. “The magnitude of the federal interest in protecting
the integrity and efficient operation of the market for nationally
traded securities cannot be overstated.” Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Dabit, 547 U.S. _, 1268. Ct. 1503,
1509 (2006).
Contrary to Petitioners’ claims, further reform of securities
litigation is not necessary. Fewer securities class actions are
filed now than in the past, and more of the actions are terminated
on motions to dismiss. Institutional investors are appointed as
lead plaintiffs in more than half of the cases, and achieve
settlements one-third larger than individual plaintiffs.
See “Securities Lawsuits — Classier Actions,” The Economist,
Feb. 15, 2007, at 76. Institutional plaintiffs also carefully choose
and closely monitor counsel, press for substantial settlements,
and negotiate lower attorneys’ fees. See id. The PSLRA is
working the way that Congress intended and no reason exists
to raise the scienter pleading bar higher than required by the
statute. Rewriting the PSLRA as Petitioners propose would
weaken the securities laws’ deterrent effect and violate
Congress's intent to maintain honest, fair, and efficient capital
markets.
6
Amici urge the Court to uphold the scienter pleading
standard adopted by the Second Circuit and most other Circuits
under the PSLRA. This standard, based on the statute’s plain
language, protects innocent companies and their investors by
strongly discouraging frivolous litigation, as shown by the
increasing dismissal rates and decreasing number of cases filed
since 1995. Raising the pleading standard further — as proposed
by Petitioners and their amici — would prevent meritorious cases
from proceeding, deny recovery to investors injured by fraud,
and weaken the deterrence of corporate malfeasance.
ARGUMENT
I. The PSLRA’s Plain Language Requiring “A Strong
Inference” Of Scienter Was Intended To Adopt The
Second Circuit’s Pleading Standard
The PSLRA requires a plaintiff to “state with particularity
facts giving rise to a strong inference that the defendant acted
with the required state of mind.” 15 U.S.C. 78u-4(b)(2). To
determine the meaning of this language, this Court should use
the well-established principle of looking first to the statute’s
text and turning to legislative history only if the text is
ambiguous. See Connecticut Nat'l Bank v. Germain, 503 U.S.
249, 254 (1992). The Second Circuit followed exactly this
approach in Novak v. Kasaks, 216 F.3d 300, 310 (2d Cir. 2000)
(emphasis added):
[O]ur interpretive task begins and ends with the text
of the statute. \n drafting paragraph (b)(2), Congress
specifically incorporated this circuit’s “strong
inference” language to define the pleading standard
for securities fraud cases. Compare 15 U.S.C.
78u-4(b)(2) (requiring plaintiffs to “state with
particularity facts giving rise to a strong inference
that the defendant acted with the required state of
mind”), with Acito [v. IMCERA Group, Inc.], 47 F.3d
[47,] 52 [(2d Cir. 1995)] (“[P]laintiffs must allege
facts that give rise to a strong inference of fraudulent
>
intent.”). We agree with the Third Circuit that this
“use of the Second Circuit's language compels the
conclusion that the Reform Act establishes a
pleading standard approximately equal in stringency
to that of the Second Circuit.” /n re Advanta Corp.
[Sec. Litig.], 180 F.3d [525,] 534 [(3d Cir. 1999)}.
Cf. United States v. Johnson, 14 F.3d 766, 770 (2d
Cir. 1994) (finding that Congress’s use of
“substantially identical language” to that of an earlier
statute “bespeaks an intention to import” judicial
interpretations of that language into the new statute).
The Second Circuit’s “strong inference” standard was
“(rjegarded as the most stringent pleading standard” before the
PSLRA was enacted. S. Rep. No. 104-98, 1995 U.S.C.C.A.N.
679, 694. Congress raised the bar nationally by adopting the
Second Circuit’s exact language.
Because the PSLRA unambiguously adepted the Second
Circuit's “strong inference” standard, “no resort to the legislative
history or the purposes of the PSLRA is required.” Novak, 216
F.3d at 310. Rather, the meaning of a “strong inference” of
scienter was already defined by well-developed case law that
provides guidance as to what a securities fraud complaint must
contain to satisfy this standard. In its most comprehensive
decision addressing the pleading standards under the PSLRA,
the Second Circuit held that the requisite “strong inference”
may arise from particularized facts that defendants
(1) benefited in a concrete and personal way from the purported
fraud . . . (2) engaged in deliberately illegal behavior . . .
(3) knew facts or had access to information suggesting that their
public statements were not accurate . . . or (4) failed to check
information they had a duty to monitor.” Novak, 216 F.3d at
311. The Second Circuit emphasized that courts “need not and
should not rely on magic words such as motive and opportunity.”
Id. Thus, Petitioners mischaracterize the Second Circuit's
\
8
appropriately flexible reading of the statute, which considers
all relevant facts im each case. See Petitioners’ Br. at 36 n.16.°
Moreover, the claimed differences between the circuits’
interpretations of the strong inference standard are overstated.
While some courts cite purported distinctions in the application
of the standard — for example, either generally disavowing or
embracing motive and opportunity in the abstract as sufficient
to plead a strong inference of scienter — in practice, virtually all
courts require a showing of scienter based on a review of the
totality of the facts. “Taken as a whole, the cases simply do not
substantiate the fear that courts applying the motive and
opportunity formulation will permit pleadings to go forward
without facts strongly suggesting wrongdoing.” Florida State
Bd. of Admin. v. Green Tree Fin. Corp., 270 F.3d 645, 659 (8th
Cir. 2001).
In fact, circuits that Petitioners claim are “split” consistently
hold that a claim should be dismissed unless the totality of the
facts alleged supports a strong inference of scienter. See, e.g.,
In re Cabletron Sys. Inc., 31\ F.3d 11, 27, 33 (ist Cir. 2002);
Novak v. Kasaks, 216 F.3d at 311; In re Alpharma Inc. Sec.
Litig., 372 F.3d 137, 148-49 (3d Cir. 2004); Abrams v. Baker
Hughes, 292 F.3d 424, 430 (Sth Cir. 2002); City of Monroe
Employees Ret. Sys. v. Bridgestone Corp., 399 F.3d 651, 683
(6th Cir.), cert. denied, 126 S. Ct. 423 (2005); City of
Philadelphia v. Fleming Cos., 264 F.3d 1245, 1261-62 (10th
Cir. 2001). Thus, Petitioners’ claim that confusion among the
circuits requires this Court to adopt a wholly new pleading
standard is ill-founded.
* Amici concur with the United States that “[t}his case presents
no question concerning the proper role of motive-and-opportunity
allegations under the PSLRA, because respondents have not alleged
that petitioner Notebaert had a motive and opportunity to defraud...”
U.S. Br. at 18, n.S. Thus, the Court should decline the invitation by
certain amici supporting Petitioners to eliminate motive and opportunity
allegations as a way to plead scienter because the question is not properly
before the Court.
9
Contrary to Petitioners’ arguments, the PSLRA’s use of “a
strong inference” also demonstrates that Congress did not intend
to require that the alleged facts support the strongest possible
inference, the most plausible inference, or an inference that
excludes all possible competing inferences. The statutory text
requires particularized allegations giving rise to a “strong”
inference of scienter. The dictionary definitions of “strong” that
best fit this provision are “solid” or “persuasive.” Ranpom House
UNABRIDGED Dictionary 1886 (2d ed. 1993). If Congress meant
to require a compelling or exclusive inference or the strongest
or most plausible inference, it would have said so.
Ii. Legislative History Confirms That Congress Intended
To Adopt The Second Circuit’s Strong Inference
Standard
Because the statute’s text is unambiguously based on the
Second Circuit’s “strong inference” test, no examination of
legislative history is necessary. See Novak, 216 F.3d at 310.
However, if the Court wishes to consider legislative history,
the SEC’s previous examination of that history is compelling.
The SEC’s examination of the legislative history, which is
contained in the SEC’s amicus brief in Bryant v. Avado Brands,
Inc., No. 98-9253, 1999 WL 33631523 (11th Cir. Feb. 16, 1999)
(referred to herein as “SEC’s Novak Br.”),"° led the SEC to
conclude that:
The correctness of the district court’s holding that
the Reform Act adopts the Second Circuit standard
[not only] is established by the Act’s language. It is
confirmed by authoritative statements by Congress
in the legislative history of the Act and by Congress
and the President in the legislative history of the
related, recently enacted Securities Litigation
Uniform Standards Act of 1998 .. . [T]he
Commission submits this brief to urge the Court to
'© The SEC’s amicus brief filed with the Second Circuit in Novak
v. Kasaks included its.amicus brief from Bryant v. Avado Brands, Inc.
as an attachment.
10
adopt this dominant and correct interpretation of the
Reform Act.
1999 WL 33631523, at *5. In Novak, the SEC argued that the
PSLRA'’s legislative history inexorably leads to the conclusion
that Congress enacted the Second Circuit’s pleading standard.
See id. at *12-13 (citing floor comments by Conference
Committee Managers). The SEC further explained that the
legislative history following President Clinton’s veto of the
PSLRA reconfirmed Congress’s intent to adopt the Second
Circuit standard. See id. at *13-14 (Senator Domenici said that
the pleading standard “is the Second Circuit’s pleading
standard”); see also 141 Cong. Rec. $19,067-068 (1995).
In 1998, Congress reaffirmed that it had adopted the Second
Circuit’s pleading standard when it passed the Securities
Litigation Uniform Standards Act (“SLUSA”):
The [PSLRA] established a heightened uniform
Federal standard on pleading requirements based
upon the pleading standard applied by the Second
Circuit Court of Appeals. Indeed, the express
language of the Reform Act itself carefully provides
that plaintiffs must “state with particularity facts
giving rise to a strong inference that the defendant
acted with the required state of mind.”
H.R. Conf. Rep. 105-803, available at 1998 WL 703964, at
*15 (emphasis added). Thus, legislative history demonstrates
that when Congress enacted the “strong inference” requirement,
it intended to adopt the Second Circuit standard."
'' The SEC’s Novak Brief convincingly refutes the contention by
Petitioners and certain amici that a single footnote in the PSLRA
Conference Committee Report, which states that the Reform Act “does
not intend to codify the Second Circuit’s case law,” means that the Act
was intended to raise the standard above the Second Circuit. As the
SEC explained, “(t]he Conference Committce did not intend to codify
each and every word of the Second Circuit’s case law because of the
(Cont'd)
1]
itl. The PSLRA Has Successfully Achieved Its Goals Of
Deterring Frivolous Litigation While Allowing
Meritorious Cases To Proceed
The PSLRA has already achieved Congress’s intent under
the prevailing interpretation of the statute. Since 1995, the
dynamics of securities class actions, especially cases involving
large investor losses, have changed radically. Institutional
investors have come to the fore in most such cases. They have
sought appointment as lead plaintiffs, pressed counsel to
prosecute class members’ claims vigorously, and negotiated
lower attorney fees, as a percentage of recoveries, than was
typical before the PSLRA.
Despite this, Petitioners and several of their amici claim
that securities fraud litigation is still mfe with abuse. Yet the
sources on which Petitioners and their amici rely predate the
PSLRA." As a consequence of the elimination of aiding and
(Cont'd)
view that some cases did not apply the Second Circuit pleading standard
in a sufficiently stringent manner .. .. [T]his does not mean that
Congress did not adopt the Second Circuit standard.” 1999 WL
33631523, at *18-19 (emphasis added); see also 14) Cong. Rec. $17,960
(1995) (Senator Dodd said that “we are trying to hold to that [standard
that] came out of the second circuit, not on a case-by-case basis where
they differed in some degree in interpretation”).
'2 For example, Petitioners and virtually all their amici quote, as
if it described the current litigation environment, this Court’s discussion
in 1975 of problems then posed by potentially abusive securities fraud
claims. See, e.g., Petitioners’ Br. at 28 (quoting Blue Chip Stamps v.
Manor Drug Stores, 42\ U.S. 723 (1975)). Petitioners and several amici
also cite Janet Cooper Alexander, Do the Merits Matter? A Study of
Settlements in Securities Class Actions, 43 Stan. L. Rev. 497 (1991).
But that study looked at class actions filed during the mid-1980s that
advanced claims based primarily on Section 11 of the Securities Act of
1933, which does not require scienter. It is irrelevant to cases under
Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5,
and has been thoroughly discredited by other scholars. See, e.g., Joel
Seligman, The Merits Do Matter, 108 Harv. L. Rev. 438, 453 (1994);
Weiss & Beckerman, 104 Yae L.J. at 2080-84.
12
abetting liability in private securities litigation in 1994" and
the enactment of the PSLRA in 1995 and SLUSA in 1998,
securities litigation today is vastly different. Potentially frivolous
cases no longer pose the problems described a decade ago, while
meritorious cases have gained prominence in response to recent
outbreaks of corporate wrongdoing. Based upon the most recent
evidence, under the PSLRA, recoveries have exponentially
increased, the number of lawsuits filed has substantially
declined, and the dismissal rate has jumped.'*
The most recent study by NERA Economic Consulting,
whose work was cited by Congress wher debating the PSLRA,
found that in 2006, class action filings dropped 36% from 2005,
and 44% from the overall post-PSLRA average. See NERA,
“Recent Trends in Shareholder Class Action Litigation,” supra
n.6, at 2. A similar study by Cornerstone Research found a 49%
decline from 2005, and a 66% decline from the historic average.
See “Securities Class Action Case Filings: 2006: A Year In
Review,” supra n.7, at 1.
Moreover, NERA reports that “the probability of a company
facing a suit that survives a motion to dismiss has fallen by
more than 30%.” “Recent Trends in Shareholder Class Action
Litigation,” supra n.6, at 3. The probability of a shareholder
class action being brought in the first place has dropped nearly
10% to 1.6%. See id. Dismissal rates have doubled since the
passage of the PSLRA. See id. at 4. On the other hand, with
regard to settlement value, NERA reports:
This year will stand out as one of record settlements.
There were more settlements over $100 million —
the so-called mega-settlements — in 2006 than in
2005, itself a record-breaking year.
'' See Central Bank of Denver v. First Interstate Bank of Denver,
511 U.S. 164 (1994).
'* Data reflecting dismissal rates undercut any claim that
differences in substantive standards have caused forum shopping.
See “Recent Trends in Shareholder Class Action Litigation,” supra n.6,
at 4.
13
Id. at |. Thus, contrary to Petitioners’ argument that “securities
fraud suits are particularly subject to meritless strike suits,”
Pet. Br. at 27 (citing law review articles from 1991), fewer cases
are being filed, and those that proceed to discovery are much
stronger, resulting in larger recoveries for plaintiffs. The current
regime is working and no policy reason exists to rewrite the
PSLRA.
IV. Petitioners And Their Amici Inappropriately Seek To
Re-Write The PSLRA
The Second Circuit’s standard for pleading “a strong
inference” of scienter has provided meaningful guidance, and
courts have applied that standard in a consistent fashion. In
contrast, the varied and confusing formulations proposed by
Petitioners and their amici, which would require this Court to
graft words onto the PSLRA, would defeat Congress’s intent.
Petitioners propose rewriting the PSLRA to “impose[] a
burden on the plaintiff to plead specific facts that, if proven to
be true, cogently demonstrate a substantial claim as to scienter
that meaningfully tends to exclude innocent possibilities.” Pet.
Br. at 16 (emphasis added). This formulation contains concepts
that—unlike the Second Circuit’s “strong inference”
requirement—have no grounding in judicial decisions handed
down before or after passage of the PSLRA. Neither the
PSLRA’s language nor case law provides any basis for
requirements such as “cogently demonstrate,” “substantial
claim,” or “meaningfully tends to exclude innocent
possibilities.” By importing these concepts, Petitioners ask this
Court to rewrite the PSLRA, inviting the constitutional issues
discussed below.
Petitioners’ amici similarly ask this Court to rewrite the
PSLRA, proposing that:
[A] court will necessarily have to consider whether
the facts alleged in the complaint leave open a range
of non-culpable explanations for the defendant's
conduct . . . [W Jhere there is a substantial possibility
14
that the defendant acted without scienter, the
inference of scienter will not be strong.
U.S. Br. at 8-9. Again, these concepts — “non-culpable
explanations” and “substantial possibility” — are found nowhere
in the PSLRA. The standards proposed by other Petitioners’
amici are similarly confusing, sharing only that: (1) with no
justification, they seek to apply more stringent pleading
standards than the Second Circuit formulation that Congress
adopted; and (2) they find no support in either the PSLRA’s
language, case law existing when the PSLRA was passed, or
legislative history.'®
Proving a defendant’s state of mind turns on facts that vary
with the circumstances. The Second Circuit recognizes this:
“[GJeneral standards offer little insight into precisely what
actions and behaviors constitute recklessness sufficient for §
10(b) liability. It is the actual facts of our securities fraud cases
that provide the most concrete guidance as to the types of
allegations required” to plead scienter. Novak v. Kasaks, 216
F.3d at 308. Even in criminal cases, where the government must
prove beyond a reasonable doubt that the defendant had the
'S The Securities Industry and Financial Markets Association and
the Chamber of Commerce of the USA propose that “plaintiffs alleging
claims for securities fraud must plead facts that strongly tend to exclude
innocent cxplanations for the challenged conduct.” SIFMA/Chamber
of Commerce Br. at 2; see also id. at 25 n.5 (“the recklessness standard
is ‘too amorphous’ and ‘belies the existence of a bright-line test’”). The
American Institute of Certified Public Accountants and six accounting
firms propose that “plaintiff must plead particularized facts that, if
proven, lead convincingly to the conclusion that the defendant acted
with scienter.” AICPA Br. at 2-3. The Washington Legal Foundation
proposes that “[u}nder the PSLRA, if the adverse inferences drawn from
the particularly pled facts in the complaint do not tend to exclude the
defendant's having acted with a non-culpable mental state, then
Congress’s ‘strong inference’ standard in the PSLRA should not be met
as a matter of law.” WLF Br. at 23. The Court should decline all of
these invit«’ions to rewrite the statute.
15
requisite criminal intent, it need not disprove every alternative
theory regarding defendant’s state of mind. See, e.g., United
States v. Ebbers, No. $4 02 Cr. 1144 (BSJ), Charge to the
Jury (S.D.N.Y.), available as 1492 PLI/Corp 477, at *518-
20 (“It is not necessary for the Government to show that the
defendant was fully informed as to all the details of the
conspiracy” or that the defendant “receive[d] any monetary
benefit.”’).
Petitioners nonetheless argue that plaintiffs’ allegations
must “meaningfully tend[{] to exclude innocent possibilities.”
Pet. Br. at 16 (emphasis added). By requiring plaintiffs to
negate all innocent inferences, Petitioners seek to
dramatically heighten the pleading standard. The PSLRA
requires that the complaint support “a strong inference” of
scienter, not eliminate every possible negative inference.
Possible negative inferences can be overcome, even at trial,
by a review of the “total mix” of information, as is true in
criminal law. Bourjaily v. United States, 483 U.S. 171, 180
(1987) (“[T]he sum of an evidentiary presentation may well
be greater than its constituent parts . . . a piece of evidence,
unreliable in isolation, may become quite probative when
corroborated by other evidence.”).
Further, requiring complaints to eliminate every possible
innocent inference would enable corporate insiders who
commit securities fraud to insulate themselves from liability
by taking steps designed to create the illusion of innocent
conduct. By fabricating innocent explanations for their
actions, perpetrators of fraud could create very weak, but
facially plausible, innocent inferences that would lead to
dismissal of meritorious cases before any discovery under
Petitioners’ reading of the PSLRA. Congress did not intend
to immunize fraud in that way.
16
V. The “Strong Inference” Requirement Should Be Read
In The Context Of The PSLRA’s Integrated
Provisions Designed Both To Discourage Frivolous
Lawsuits And To Encourage Meritorious Lawsuits
Petitioners and their amici present the scienter pleading
standard as their sole defense against meritless cases, but in
fact it is only one of the PSLRA’s many provisions designed
to protect innocent defendants. The PSLRA: is a carefully
balanced statute that erected numerous hurdles to frivolous
securities fraud claims, along with provisions designed to
strengthen the prosecution of meritorious cases.’
To filter meritorious from frivolous cases, Congress
enacted provisions relating not only to pleading sctenter, but
also requiring court appointment of lead plaintiffs and lead
counsel, raising the pleading standard for false and
misleading statements, imposing a discovery stay, sanctioning
abusive litigation, limiting damages and attorneys’ fees, and
creating a safe harbor for forward-looking statements, among
other provisions. See generally Merrill Lynch, Pierce, Fenner
& Smith, Inc. v. Dabit, 126 S. Ct. at 1511."
'¢ In interpreting the statute, the Court should be “guided not by
‘a single sentence or member of a sentence, but [should] look[] to the
provisions of the whole law, and to its object and policy.’ John Hancock
Mut. Life Ins. Co. v. Harris Trust & Savings Bank, 510 U.S. 86, 94-95
(1993) (internal citation omitted); see also Dolan v. United States Postal
Serv., 546 U.S. 481, 126 S. Ct. 1252, 1257 (2006) (“Interpretation of a
word or phrase depends upon reading the whole statutory text,
considering the purpose and context of the statute, and consulting any
precedents or authorities that inform the analysis.”).
'" The PSLRA further ensures against lawyer-driven litigation by
limiting the lead plaintiffs’ share of any final judgment or settlement to
their pro rata share of the class’s recovery, plus any reasonable costs
and expenses approved by the court. See 15 U.S.C. § 78u-4(a)(4). The
PSLRA also prohibits referral fees to any broker or dealer for assisting
an attorney in obtaining clients for any securities class action. See 15
U.S.C. § 780(c)(8). Thus, the PSLRA ended perceived abuses in the
relationship between certain plaintiffs’ lawyers and their clients.
17
Under these provisions, lead plaintiffs are appointed after
court scrutiny of their economic interest and adequacy as
class representatives. Their complaint must “specify each
statement alleged to have been misleading, the reason or
reasons why the statement is misleading, and, if an allegation
regarding the statement or omission is made on information
and belief, the complaint [must] state with particularity all
facts on which that belief is formed.” 15 U.S.C. § 78u-4(b)(1).
Courts rigorously enforce these standards. See, e.g., Rombach
v. Chang, 355 F.3d 164, 170 (2d Cir. 2004); Jn re K-Tel Int'l,
Inc. Sec. Litig., 300 F.3d 881, 892-93 (8th Cir. 2002). The
PSLRA also imposes a discovery stay, which eliminates the
cost and burden of complying with discovery requests that
could coerce defendants into settling meritless cases, and
the possibility that plaintiffs could use discovery to support
a complaint. 15 U.S.C. § 78u-4(b)(3)(B).
Further, the PSLRA requires the court to make “specific
findings” upon final adjudication of every securities class
action regarding compliance by each party and attorney with
Federal Rule of Civil Procedure 11(b). 15 U.S.C. § 78u-4(c).
Unlike other civil actions in which a court may consider Rule
11 sanctions only after the challenged party has notice and
an opportunity to withdraw the challenged pleading, in
securities class actions, the court-appointed lead plaintiff and
counsel must litigate knowing that the court will scrutinize
their conduct in every case under Rule 11. Together with the
pleading standards and the stay of discovery, these
requirements powerfully deter frivolous complaints.'*
'* Other barriers to meritless cases in the PSLRA include the
provision that each defendant’s liability for non-knowing misconduct
is proportionate to its jury-determined share of responsibility, and
liability is only joint and several in cases of knowing misconduct, see
15 U.S.C. § 78u-4(f)(2); that plaintiffs have the burden of proving that
their losses were caused by defendants’ misstatements or omissions,
(Cont'd)
18
VI. Permitting Plaintiffs Only “The Most Plausible Of
Competing Inferences” Would Violate The Seventh
Amendment
The Court should reject Petitioners’ proposed interpretation
of the PSLRA scienter pleading standard because it would
violate plaintiffs’ mght to a jury trial under the Seventh
Amendment.’ The Sixth and Seventh Circuits have correctly
noted that permitting plaintiffs only “‘the most plausible of
competing inferences’” is problematic under the Seventh
Amendment. See App. at 20a (quoting City of Monroe
Employees Ret. Sys. v. Bridgestone Corp. , 399 F.3d at 683 n.25).
Indeed, Petitioners’ reading of the PSLRA would
unconstitutionally transform the trial court into the ultimate
finder of fact for scienter. The statutory language and
Congressional intent require no such unconstitutional result. If
the Court considers Petitioners’ reading a possible alternative,
however, the doctrine of avoiding unnecessary constitutional
questions should weigh heavily against Petitioners’
interpretation of the statute. Indeed, a recent scholarly study
(Cont'd)
see 15 U.S.C. § 78u-4(b)(4); that damages are limited based on the
mean trading price of the securities during the 90 days after disclosure
of the truth about the misrepresentations or omissions, see 15 U.S.C.
§ 78u-4(e); and that forward-looking statements cannot form the basis
of liability if they comply with a safe harbor, see 15 U.S.C. § 78u-5.
'? The right to jury trial in suits for damages under the federal
securities laws is beyond question. See Curtis v. Loether, 415 U.S. 189,
195 (1974) (“when Congress provides for enforcement of statutory rights
in an ordinary civil action in the district courts . . . a jury trial must be
available if the action involves rights and remedies of the sort typically
enforced in an action at law”); Dasho v. Susquehanna Corp., 461 F.2d
11, 20-23 (7th Cir.) (recognizing right to jury trial in federal securities
law action for damages), cert. denied, 408 U.S. 925 (1972), Myzel v.
Fields, 386 F.2d 718, 740-42 (8th Cir. 1967) (same), cert. denied, 390
U.S. 951 (1968).
19 ‘
confirms that Petitioners’ position poses grave constitutional
concerns in light of the common-law right to jury trial.”
“Where a statute is susceptible of two constructions, by
one of which grave and doubtful constitutional questions
arise and by the other of which such questions are avoided,
our duty is to adopt the latter.” United States v. Delaware &
Hudson Co., 213 U.S. 366, 408 (1909). “The doctrine of
constitutional doubt does not require that the problem-
avoiding construction be the preferable one — the one the
Court would adopt in any event. . . . Rather, the doctrine of
constitutional doubt comes into play when the statute is
‘susceptible of the problem-avoiding interpretation — when
that interpretation is reasonable, though not necessarily the
best.” Feltner v. Columbia Pictures Television, Inc.,523 U.S.
340, 356, 358-59 (1998) (Scalia, J., dissenting) (emphasis
in original; internal citations omitted). The doctrine of
avoiding constitutional doubt has special force regarding the
Seventh Amendment. “Maintenance of the jury as a fact-
finding body 1s of such importance and occupies so firm a
place in our history and jurisprudence that any seeming
curtailment of the right to a jury trial should be scrutinized
with the utmost care.” Dimick v. Schiedt, 293 U.S. 474, 486
(1935).
A. Courts May Not Weigh Evidence And Assess
Witness Credibility
Petitioners’ proposed pleading standard would violate
the Seventh Amendment because it would require courts to
weigh competing facts, including assessing witnesses’
credibility, to determine, on motions to dismiss, whether
complaints “plead specific facts that, if proven to be true,
cogently demonstrate a substantial claim as to scienter that
20 See Suja A. Thomas, The PSLRA’ Seventh Amendment
Problem, http://papers.ssrn.com/sol3/papers.cfm?abstract id=968893
#PaperDownload (Mar. 7, 2007).
20
meaningfully tends to exclude innocent possibilities.” Pet.
Br. at 16. Petitioners emphasize that courts should “weigh .
. . facts that support an inference of innocence” against facts
that support an inference of scienter, and should “review[]
the complaint with an eye on the plaintiff's ultimate prospects
for success... .” /d. at 17, 23.
The Seventh Amendment, however, bars courts from
weighing competing facts to make the ultimate determination
of liability. “The controlling distinction between the power
of the court and that of the jury is that the former is the power
to determine the law and the latter to determine the facts.”
Dimick, 293 U.S. at 486. Dismissal at the pleading stage is
constitutionally permissible only when there are no “factual
issues to be resolved,” but only “questions of law for the
court to decide.” Kelly v. United States, 789 F.2d 94, 97-98
(Ist Cir. 1986).
This Court has cautioned on the narrow scope of the
judicial role on dismissal motions:
When a federal court reviews the sufficiency of a
complaint, before the reception of any evidence
either by affidavit or admissions, its task is
necessarily a limited one. The issue is not whether a
plaintiff will ultimately prevail but whether the
claimant is entitled to offer evidence to support the
claims.
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). Such a “limited”
scope of power to close the courthouse door to plaintiffs before
they even gain access to discovery is essential to preserve the
right to trial by jury.
Heightened pleading standards may be enacted through
rulemaking or legislation, as evidenced by Federal Rule of
Civil Procedure 9(b) and the PSLRA. However, pleading
standards may not render the trial judge the ultimate finder
of fact. This requirement is inherent in “the accepted rule
that a complaint should not be dismissed for failure to state
21
a claim unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of his claim which would
entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46
(1957).
A court deciding a motion to dismiss under the PSLRA
may measure plaintiff's allegations against the statutory
requirement of a strong inference of scienter, but the court
may not constitutionally weigh conflicting evidence or assess
the credibility of the witnesses quoted in the complaint. The
Constitution reserves to the jury the power to weigh
conflicting evidence and assess witnesses’ credibility:
In the federal system, the Constitution itself commits
the trial of facts in a civil cause to the jury. Should
either party to a cause invoke its Seventh
Amendment nght, the jury becomes the principal
factfinder, charged with weighing the evidence,
judging the credibility of witnesses, and reaching a
verdict. The jury’s factual determinations as a general
rule are final.
Edmonson v. Leesville Concrete Co., 500 U.S. 614, 624-25
(1991). The “substance of right” preserved by the Seventh
Amendment “requires that questions of fact in common-law
actions shall be settled by a jury, and that the court shall not
assume, directly or indirectly, to take from the jury or to itself
such prerogative.” Walker v. New Mexico & S.PR. Co., 165 U.S.
593, 596 (1897). See also City of Monterey v. Del Monte Dunes
at Monterey, Ltd., 526 U.S. 687, 720 (1999) (if a question is
“predominantly factual,” then “in actions at law otherwise within
the purview of the Seventh Amendment, this question is for the
jury”); Markman v. Westview Instruments, Inc., 517 U.S. 370,
378 (1996) (“the substance of the common-law right of trial by
jury” can be measured by “the distinction between substance
and procedure” and by “the line . . . between issues of fact and
law’’) (internal citation and quotation marks omitted); Byrd v.
Blue Ridge Rural Elec. Coop., 356 U.S. 525, 539 (1958) (“the
22
[factfinding]} function assigned to the jury is an essential factor
in the process for which the Federal Constitution provides”)
(internal citation and quotation marks omitted).
B. A Pleading Standard May Not Authorize A Court
To Exercise Powers It May Not Constitutionally
Exercise On Summary Judgment Or At Trial
The constitutional impropriety of Petitioners’ proposed
standard for PSLRA motions to dismiss is highlighted by
comparison with the established standards on summary
judgment and on motions for judgment as a matter of law.
“(Sjummary judgment will not lie if the dispute about a
material fact is ‘genuine,’ that is, if the evidence is such that
a reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). Summary judgment comports with the Seventh
Amendment because “at the summary judgment stage the
judge’s function is not himself to weigh the evidence and
determine the truth of the matter but to determine whether
there is a genuine issue for trial.” /d. at 249. This Court has
taken care to limit the judge’s role on summary judgment in
order to preserve the factfinding power of the jury:
[Summary judgment] by no means authorizes trial
on affidavits. Credibility determinations, the
weighing of the evidence, and the drawing of
legitimate inferences from the facts are jury
functions, not those of a judge, whether he is ruling
on a motion for summary judgment or for a directed
verdict. The evidence of the non-movant is to be
believed, and all justifiable inferences are to be
drawn in his favor.
477 US. at 255. In fact, even though summary judgment motions
are generally heard only after the completion of discovery, “there
is no such thing as a finding of fact on summary judgment.
What are sometimes loosely termed ‘findings’ are instead facts
23
__as to which there is no genuine issue.” Thompson v. Mahre, 110
F.3d 716, 719 (9th Cir. 1997).7'
The well-established standard for judgment as a matter
of law (which is substantially the same as the standard for
summary judgment, see Anderson, 477 U.S. at 251-52)
likewise supports rejection of Petitioners’ interpretation of
the PSLRA. The Court has upheld the practice of directing a
verdict for insufficiency of evidence, because such a directed
verdict was permitted under the common law. See Galloway
v. United States, 319 U.S. 372, 390-91 (1943). As the Court
has repeatedly held, such a directed verdict comports with
the Seventh Amendment because on a motion for judgment
as a matter of law (as a directed verdict is now styled under
Fed. R. Civ. P. 50(a)), a court must “give credence” only to
evidence favoring the nonmoving party, “must draw all
reasonable inferences in favor of the nonmoving party, and .
. . may not make credibility determinations or weigh the
evidence.” Reeves v. Sanderson Plumbing Prods., Inc., 530
U.S. 133, 150 (2000); see also Lytle v. Household Mfg., Inc.,
494 U.S. 545, 554 (1990) (“in considering a motion for a
directed verdict, the court does not weigh the evidence, but
draws all factual inferences in favor of the nonmoving
party”); Wilkerson v. McCarthy, 336 U.S. 53, 57 (1949)
(same); Brady v. Southern Ry. Co., 320 U.S. 476, 479-80
(1943) (same); Advisory Committee Notes to 1991
Amendment to Fed. R. Civ. P. 50(a) (“The expressed standard
{that ‘there is no legally sufficient evidentiary basis for a
reasonable jury to find for [the nonmoving] party’] makes
2! The United States (U.S. Br. at 28) cites Pease v. Rathbun-Jones
Engineering Co., 243 U.S. 273 (1917), which held that summary
judgment in an equity case to enforce a bond did not offend the Seventh
Amendment. 243 U.S. at 278-79. Pease’s reasoning was superseded by
the merger of law and cquity upon the adoption of the Federal Rules of
Civil Procedure in 1938. In any event, summary judgment does nor
empower judges to find facts.
24
clear that action taken under the rule . . . is not an intrusion
on any responsibility for factual determinations conferred
on the jury by the Seventh Amendment”).”
The Court’s decisions regarding summary judgment in
antitrust cases are consistent with these principles. In
Matsushita Electric Industrial Co. v. Zenith Radio Corp.,
475 U.S. 574 (1986), the Court held that “cutting prices in
order to increase business often is the very essence of
competition” and that “economic realities tend to make
predatory pricing conspiracies self-deterring.” Jd. at 594, 595.
Therefore, “petitioners had no motive to enter into the alleged
*2 Galloway affirmed a directed verdict, because this Court held
that plaintiff's case rested on “sheer speculation,” “with{held] crucial
facts,” suffered from “inherent vagueness,” and “omitted or withheld”
“essential elements.” 319 U.S. at 396. The Galloway Court’s statement
that “the Amendment was) designed to preserve the basic institution of
jury trial in only its most fundamental elements, not the great mass of
procedural forms and details, varying even [in 1791] so widely among
common-law jurisdictions,” is therefore fully consistent with the
principle that a court has no power to find the facts. 319 U.S. at 392.
Neely v. Martin K. Eby Construction Co., 386 U.S. 317 (1967), and
Baltimore & Carolina Line, Inc. v. Redman, 295 U.S. 654 (1935), cited
by the United States (U.S. Br. at 27-28), upheld the validity of directed
verdicts under the Seventh Amendment, but provide no support for
making the court the factfinder. “The aim of the amendment is to preserve
the substance of the common-law right of trial by jury, as distinguished
from mere matters of form and procedure, and particularly to retain
the common-law distinction between the province of the court and that
of the jury, whereby, in the absence of express or implied consent to the
contrary, issues of law are to be resolved by the court and issues of fact
are to be determined by the jury under appropriate instructions by the
court.” Baltimore & Carolina Line, Inc., 295 U.S. at 657 (emphasis
added). Similarly, Jn re Peterson, 253 U.S. 300 (1920), cited by the
United States (U.S. Br. at 27), permits the use of a court-appointed
auditor to report on the facts because “the parties will remain as free to
call, examine, and cross-cxamine witnesses [before the jury] as if the
report had not been made” and “[n]o incident of the jury trial is modified
or taken away” by the auditor’s role. 253 U.S. at 311.
25
conspiracy,” and summary judgment for defendants was
appropriate “where the evidence of conspiracy is speculative
or ambiguous.” /d. at 595. Matsushita turned on economic
analysis of objective market data, not assessment of
witnesses’ credibility and weighing of conflicting evidence.
See Elkins v. Richardson-Merrell, Inc., 8 F.3d 1068, 1073
(6th Cir. 1993) (Matsushita “does not require weighing
credibility”). This Court was careful to affirm in Matsushita
that even in antitrust conspiracy cases, “[o]n summary
judgment the inferences to be drawn from the underlying
facts . . . must be viewed in the light most favorable to the
party opposing the motion.” 475 U.S. at 587 (alterations in
original; internal citation omitted). Monsanto Co. v. Spray-
Rite Service Corp., 465 U.S. 752 (1984), which affirmed a
jury verdict finding a price-fixing conspiracy, defines the
“standard of proof” required in a jury trial but provides no
support for empowering the court to find facts on motions to
dismiss in violation of the Seventh Amendment. /d. at 755.*°
Congress recognized in the PSLRA that scienter in
securities cases remains a question of fact whose ultimate
determination is reserved to the jury; it expressly provided
that at defendants’ request, the court must “submit to the
jury a written interrogatory on the issue of each such
defendant’s state of mind at the time the alleged violation
occurred.” 15 U.S.C. § 78u-4(d). “District Judges ar>
pronouncing no mere rigmarole when, in law cases, they
charge jurors that they are the sole and exclusive judges of
the credibility of the witnesses, and the weight to be given
> Similarly, the “gatekeeping role for the judge” regarding
admission or exclusion of expert testimony under Daubert v. Merrell
Dow Pharmaceuticals, Inc., 509 U.S. $79, 597 (1993), neither offends
the Seventh Amendment nor supports the pleading standard proposed
by Petitioners. “The direction to take a ‘hard look’ at the basis of a
scientific opinion [under Daubert] does not require weighing credibility”
and therefore comports with the right to jury trial. E/kins, 8 F.3d at
1073.
26
to their testimony. They are setting forth the very substance
of a jury trial as guaranteed by the Seventh Amendment to
the Constitution.” Reid v. Maryland Cas. Co., 63 F.2d 10, 11
(Sth Cir. 1933).
Construing the PSLRA to require judges to assess
witnesses’ credibility, weigh the conflicting facts alleged by
plaintiffs and defendants, and determine whether a complaint
establishes “the most plausible of competing inferences” that
“tends to exclude” any innocent inference would obliterate
the Seventh Amendment lines between fact and law and
between substance and procedure that demarcate the
provinces of jury and judge.
Vil. The SEC Correctly Argued In Twelve Prior Cases That
The PSLRA Adopted The Second Circuit’s “A Strong
Inference” Pleading Standard
According to the SEC, “[i]n using the term ‘strong
inference’ Congress adopted the Second Circuit standard.”
SEC’s Novak Brief, 1999 WL 33631523, at *5 (emphasis
added).
{T]he Reform Act uses the “strong inference”
language, which the Second Circuit developed as a
pleading standard in a long line of securities cases.
It may be presumed, absent contrary evidence, that
Congress intended to adopt the judicial definition
of that pleading standard.
Id. at *10 (emphasis added). In its Novak Brief, the SEC further
stated:
This [Second Circuit] test is proven, sound, widely
used, and consistent with the Reform Act $ purposes.
Nothing in the language or history of the Act shows
that the Act deviates from this established means of
pleading a “strong inference.”
Id. at *5 (emphasis added). Based on this view, the SEC urged
the Novak court to “adopt this dominant and correct
27
interpretation of the Reform Act.” /d. The Novak court agreed
with the SEC (see 213 F.3d at 310-11), and its decision has
been generally followed.
Despite this position in twelve prior cases,” the SEC
now claims for the first time that Congress “bui/t upon the
Second Circuit’s ‘strong inference’ terminology and added
various other pleading requirements, resulting in a statute
that was intended to strengthen existing pleading
requirements.” U.S. Br. at 18 (emphasis added). This altered
position is erroneous and should be rejected. As the SEC
previously recognized and repeatedly argued, there is no basis
to contend that the plain meaning of the “strong inference”
requirement of the PSLRA means anything other than the
Second Circuit’s standard, whose exact language Congress
enacted into law. See also Novak, 216 F.3d at 310 (“we
conclude that the PSLRA effectively raised the nationwide
pleading standard to that previously existing in this circuit
24 The following SEC amicus briefs argue that the PSLRA adopted
the Second Circuit pleading standard: (1) Caprin v. Simon Transportation
Services, No. 01-4049, 2001 WL 34664973 (10th Cir. July 2, 2001); (2)
In re K-Tel Int'l, Inc. Sec. Litig., No. 00-3210 MN, 2000 WL 35483737
(8th Cir. Nov. 15, 2000); (3) Helwig v. Vencor, Inc., No. 99-5153, 2000
WL 34432856 (6th Cir. Aug. 18, 2000); (4) Weld v. Stage Stores, Inc.,
No. 00-20230, 2000 WL 34032458 (Sth Cir. June 2000); (5) Lone Star
Ladies Investment Club v. Schlotzsky's, Inc., No. 99-50958, 1999 WL
33620099 (Sth Cir. Dec. 28, 1999); (6) Nathenson v. Zonagen Inc., No.
99-20449, 1999 WL 33613893 (Sth Cir. Sept. 30, 1999); (7) Greebel v.
FTP Software, Inc., No. 98-2194, 1999 WL 33911562 (ist Cir. May
1999); (8) Novak v. Kasaks, No. 98-9641 (2d Cir. Mar. 16, 1999) (in
this case, the SEC filed a short statement to which its complete brief in
Bryant v. Avado Brands, Inc. ((9) below) was attached); (9) Bryant v.
Avado Brands, Inc., No. 98-9253, 1999 WL 33631523 (11th Cir. Feb.
16, 1999); (10) Jn re Comshare, Inc. Sec. Litig., No. 97-2098, 1997 WL
34039763 (6th Cir. Nov. 1997); (11) In re Silicon Graphics, Inc. Sec.
Litig., No. 97-16240, 1997 WL 33551249 (9th Cir. Nov. 1997); and
(12) Zeid v. Kimberley, No. 97-16070, 1997 WL 33555504 (9th Cir.
Oct. 1997).
28
and no higher (with the exception of the ‘with particularity’
requirement)”). *°
This Court has held that “[a]n agency interpretation of a
relevant provision which conflicts with the agency's earlier
interpretation is ‘entitled to considerably less deference’ than
a consistently held agency view.” /Jmmigration &
Naturalization Serv. v. Cardoza-Fonseca, 480 U.S. 421, 447
n.30 (1987) (quoting Watt v. Alaska, 451 U.S. 259, 273
(1981)). Moreover, an agency’s interpretation of legislation
that was contemporaneous with the legislation is entitled to
considerably more deference than the agency’s later,
inconsistent interpretation. See Watt v. Alaska, 451 U.S. at
272-73. “[T]he SEC’s present position is flatly contradicted
by its past actions” and deserves no deference. /nt’] Bhd. of
Teamsters, Chauffeurs, Warehousemen & Helpers of Am. v.
Daniel, 439 U.S. 551, 566 (1979). The SEC’s prior, consistent
position in twelve separate amicus briefs filed in circuit courts
across the country during the first six years after enactment
of the PSLRA is more persuasive and deserves greater weight
than its current, inconsistent view, announced for the first
time in its brief in this case.
ee —
25 In its Novak Brief, the SEC also stressed the importance of the
Reform Act’s intent to import the Second Circuit's standard that allowed
“recklessness” to be the basis for alleging a “strong inference” of
scienter, stating:
The Commission . . . believes that elimination of the
recklessness liability would encourage corporate directors
and officers to put their heads in the sand and would have
enormously counterproductive cffects on the integrity of
corporate disclosure and the quality of corporate
governance.
1999 WL 33631523, at *10.
29
CONCLUSION
The judgment of the court of appeals should be affirmed.
Jay W. EISENHOFER
Georrrey C. Jarvis
Lestey E. WEAVER
SHARAN NIRMUL
GRANT & EIseNHOrER P.A.
1201 North Market Street
Suite 2100
Wilmington, DE 19801
(302) 622-7000
ALAN P. Lepowi1z
General Counsel to
Tuomas P. DiNapott
Comptroller of the State of
New York and, as Such,
Trustee of the New York State
Common Retirement Fund
110 State Street
Albany, NY 12244
(866) 805-0990
Rosert VAN DER VOLGEN
Assistant Chief Counsel
CALIFORNIA STATE TEACHERS’
RETIREMENT SYSTEM
7919 Folsom Boulevard
Sacramento, CA 95826
(916) 229-3500
Respectfully submitted,
Max W. BERGER
Counsel of Record
SALVATORE J. GRAZIANO
Joun C. BROWNE
E.uiort J. Weiss
Jai K. CHANDRASEKHAR
BERNSTEIN LiTtowitz BERGER
& GROSSMANN LLP
1285 Avenue of the Americas
New York, NY 10019
(212) 554-1400
L. JANE HAMBLEN
Chief Legal Counsel
THE STATE OF WISCONSIN
INVESTMENT Boarp
121 East Wilton Street
P.O. Box 7842
Madison, WI 53707
(608) 266-2381
Davip L. Muir
Chief Counsel
Los ANGELES CouNTY EMPLOYEES
RETIREMENT ASSOCIATION
300 N. Lake Avenue
Suite 620
Pasadena, CA 91101
(626) 564-2348
30
Roy A. Monaaur, Jr. James G. Lint
General Counsel General Counsel
TEACHERS” RETIREMENT System SACRAMENTO County EmpLoyres’
OF LOUISIANA RETIREMENT SYSTEM
8401 United Plaza Boulevard 980 9th Street
Baton Rouge, LA 70809-7017 Suite 1800
(225) 925-6446 Sacramento, CA 95814
(916) 874-9119
Curista S. CLARK .
Legal Counsel Ropert D. KLAUSNER
ARKANSAS TEACHER KLAUSNER & KAUFMAN, PA.
RETIREMENT SYSTEM 10059 N.W. Ist Court
1400 W. 3rd Street Plantation, FL 33324
Little Rock, AR 72201 (954) 916-1202
(501) 682-1266
Counsel for Amici Curiae
AMICUS
D
06-8120
IN THE
Supreme Court of the United States
——---- 27> Po --—-.
BRUCE EDWARD BRENDLIN,
Petitioner,
—_—vVv—
CALIFORNIA,
Respondent.
ON WRIT OF CERTIORARI TO THE SUPREME COURT OF CALIFORNIA
BRIEF AMICUS CURIAE OF THE AMERICAN CIVIL LIBER-
TIES UNION, THE ACLU OF NORTHERN CALIFORNIA, THE
ASIAN AMERICAN LEGAL DEFENSE AND EDUCATION FUND,
AND THE NATIONAL ASSOCIATION FOR THE ADVANCE-
MENT OF COLORED PEOPLE IN SUPPORT OF PETITIONER
MICHAEL T. RISHER STEVEN R. SHAPIRO
ACLU of Northern California Counsel of Record
39 Drum Street EMILY CHIANG
San Francisco, California 9411} REGINALD T. SHUFORD
(415) 621-2493 ALEXIS AGATHOCLEOUS
DENNIS D. PARKER
SUSAN N. HERMAN ‘ “ ’ .
American Civil Liberties
250 Joralemon Street
Brooklyn, New York 11201 Union Foundation
125 Broad Street
718) 780-7945
(708) New York, New York 10004
(212) 549-2500
(Additional counsel continued on inside cover)
DENNIS COURTLAND HAYES
VICTOR L. GOODE
National Association for the
Advancement of Colored People
4805 Mt. Hope Drive
Baltimore, Maryland 21215
(410) 580-5790
KENNETH KIMERLING
Asian American Legal Defense
and Educatiua Fund
99 Hudson Street
New York, New York 10013
(212) 966-5932
Attorneys for Amici Curiae
INTEREST OF AMICI CURIAE
STATEMENT OF THE CASE
. TABLE OF CONTENTS
I]. The Standard Governing Seizure Used By The
Il.
California Supreme Court Is Inconsistent With
This Court’s Fourth Amendment
ee cccesinntcicieisiicicitaiciitiintaieiainnnianicin
A. Petitioner Was Seized By The
Traffic Stop Because A
Reasonable Person In His
Circumstances Would Not
Have Felt Free To Leave.............c..s0000-
B. The Lower Court Improperly
Relied On The Subjective
Intent Of The Officer To
Conclude That A Reasonable
Passenger Would Have Felt
Pe We I ccitonecianiaitinntncmeninentnnnin
Failing To Recognize That Passengers
Are Seized Will Permit The Use Of
Arbitrary And Discriminatory Stops
That Offend The Core Principles Of
The Fourth Amendment ................:cessesssereeenes
OPP ee eee eee eee eee ee eee eee ee
SOCORRO EEE E EOE EEE EEE EEE HEE EE OEE HERES T EET E HERE ED
A. The Lower Court’s Ruling
Would Permit Arbitrary And
Discriminatory Stops As To
ED cciscnscininciicsiipdiidesadonincensenssinoniene 12
B. The Lower Court Ruling And
The Incentives It Would Create
For Law Enforcement Would
Disproportionately Affect
EE ae nner 15
IID satinisstssaisennnsncnincelimuantibiias 16
a ee aD 18
FE aoa em ony 23
ETE PAPE oe are ened eer ae eM 27
ii
TABLE OF AUTHORITIES
Cases Page
Almeida-Sanchez v. United States, 413 U.S. 266 (1973)..... 13
Arnold y. Ariz. Dep't of Pub. Safety, No. 01-01463
ae anne ca nsssbcstatinieninitstaienssduninitniadiiteiniaenesinadinceneniatn 25
Brendlin v. California, 127 S. Ct. 1145 (2007).......eceseseereeees 4
Carroll y. United States, 267 U.S. 132 (1925)... eee 14
Chavez v. Ill. State Police, 251 F.3d 612 (7th Cir. 2001)... 15
Farm Labor Org. Comm. v. Ohio State Highway Patrol,
95 F. Supp. 2d 723 (N.D. Ohio 2000)... eee eeteeees 18
Florida v. Bostick, 501 U.S. 429 (1991) wc. eeccesceeeeseeceeesseeees 9
Hiibel v. Sixth Judicial Dist. Ct. of Nev.,
EE Fe ee eiincisicsitecrtediincenniiuindanininnvecatemmiananbeineiaens 7
Hudson v. Michigan, 126 S. Ct. 2159 (2006)................. 14, 26
ILN.S. v. Delgado, 466 U.S. 210 (1984) oo eccceeeeeeeeseeeee 9
Illinois v. Wardlow, 528 U.S. 119 (2000) .........cesccceeseeessereeeee 8
Martinez v. Mount Prospect, 92 F. Supp. 2d 780
SE SUN SUNN ctusansiceasiniiteniesithntnesitsidasdiigininnitammmninaicennionsnten 25
Maryland v. Pringle, 540 U.S. 366 (2003) .......cccesceseeeeees 8
Maryland v. Wilson, 519 U.S. 408 (1997) 0.0.0... ..ccccccesceceeeseeee 8
Ma. State Conference of NAACP Branches, et al. v.
Md. Dep’t of State Police, 72 F. Supp. 2d 560
SETI SHUI sadyaciiedcesisistantendionsedetehiembianeliaamncuueiaietibe 25
Michigan v. Chesternut, 486 U.S. 567 (1988) .0.....0..cccccceee 10
ill
People v. Brendlin, 38 Cal. 4th 1107 (Cal. 2006)......... passim
People v. Castellon, 76 Cal. App. 4th 1369
Seas Gee: AAI, Te vernnnsccntennopeetnisnnncinnsiiainiiiaiiniianiail Y
Rodriguez v. Cal. Highway Patrol et al.,
89 F. Supp. 2d 1131 (N.D. Cal 2000) 00... 25
United States v. Brignoni-Ponce,
Se Ses Fee Ge iicipicenrcncinssinsenncmnsiacssiitiinissittiliaaiiitiate 12,13
United States v. Martinez-Fuerte, 428 U.S. 543 (1976) ...... 12
United States v. Mendenhall, 446 U.S. 544 (1980).......... 7,10
United States v. New Jersey,
re ee POON cccccecctnentinntnnincitasitiniceianinnias 25, 26
Whren v. United States, 517 U.S. 806 (1996)..............+. 11, 14
Wilkins vy. Md. State Police, No. 93-468 (D. Md. 2003)......25
Wyoming v. Houghton, 526 U.S. 295 (1999) oo... ceccceseeseneeeeee 8
Other Authorities
ATTORNEY GEN. OF THE STATE OF MO., MISSOURI
VEHICLE STOPS 2005 ANNUAL REPORT .............0++ 17, 21, 24
BUREAU OF JUSTICE STATISTICS, U.S. DEP’T OF
JUSTICE, CHARACTERISTICS OF DRIVERS STOPPED
OF PE ee GO cectseictensstesetinniniatnicnaniaenainn 19, 23
COLORADO STATE PATROL, 2002 TRAFFIC STOP
I Ge cccencssnscscnccstuisuiideiiisdiiciinibaniipaiesaiiiaibaaiaga 20, 23
COMPTROLLER OF THE TN TREASURY, VEHICLE
STOPS AND RACE: A STUDY AND RESPONSE TO
PUBLIC CHAPTER 910 OF 2000 (2002).............cceseeeeeees 22, 25
iv
Dr. GARY CORDNER ET AL., VEHICLE STOPS IN
TE nee eae eee 20
ROBIN ENGEL ET AL., UNIV. OF CINCINNATI Div.
OF CRIMINAL JUSTICE, CLEVELAND DIVISION OF
POLICE TRAFFIC Stop Data STuDy:
eT TI scant dnreaienertesemerinnsnanentensensescnntie 21
AMY FARRELL & JACK McDevitt, INST. RACE &
JUSTICE, RHODE ISLAND TRAFFIC STOP STATISTICS
2004-2005 FINAL REPORT (2006) ............:cccccceceeeeeesees 22, 25
LORIE A. FRIDELL, POLICE EXECUTIVE RESEARCH
FORUM, BY THE NUMBERS: A GUIDE FOR ANALYZING
RACE DATA FROM VEHICLE STOPS (2004) .........cccccccceceeees 18
HOWARD P. GREENWALK, UNIV. OF S. CAL., POLICE
VEHICLE STOPS IN SACRAMENTO, CALIFORNIA
INST. RACE & POVERTY, MINNESOTA STATEWIDE
RACIAL PROFILING REPORT: ALL PARTICIPATING
TS eee 17, 24
INST. RACE & POVERTY, REPORT ON TRAFFIC
Stop DATA COLLECTED BY THE SAINT PAUL
POLICE DEPARTMENT APRIL 15 THROUGH
DECEMBER 15, 2000 (2001) ...........ceccccecseeeeeees see. 17, 21, 24
JOHN C. LAMBERTH, POLICE FOUND., A
MULTIJURISDICTIONAL ASSESSMENT OF TRAFFIC
ENFORCEMENT AND DATA COLLECTION IN
a 16
Mb. JUSTICE ANALYSIS CTR., REPORT TO THE
STATE OF MARYLAND ON LAW ELIGIBLE
eae 16, 20, 24
David Rudovsky, 7he /mpact of the War on Drugs on
Procedural Fairness and Racial Equality,
Be i SE, Bs re Et cccereccncnensnccnsnccsesssovmnes 16
Susan Sachs, Files Suggest Profiling of Latinos Led to
Immigration Raids, N.Y. TIMES, May 1, 2001, at B1....... 18
ALEXANDER WEISS & AVIVA GRUMET-MoRRIS,
NORTHWESTERN UNIV. CTR. PuB. SAFETY, ILL.NOIS
TRAFFIC STOPS STATISTICS STUDY, 2005 ANNUAL
Jim Yardley, Some Texans Say Border Patrol Singles
Out Too Many Blameless Hispanics, N.Y. TIMES,
ST, SR GT cccannicscntenesnstnntenetneninnntnnannioni 18
vi
INTEREST OF AMICI'
The American Civil Liberties Union (ACLU) is a
nationwide, nonprofit, nonpartisan organization with
approximately 550,000 members dedicated to the principles
of liberty and equality embodied in the Constitution and this
nation’s civil rights laws. The ACLU of Northern California
is one of its regional affiliates. Since its founding in 1920,
the ACLU has frequently appeared before this Court, both as
direct counsel and as amicus curiae. In particular, the ACLU
has participated in numerous cases addressing the proper
scope of the Fourth Amendment.
The Asian American Legal Defense and Education
Fund (“AALDEF”), founded in 1974, is a non-profit
organization based in New York City. AALDEF defends the
civil rights of Asian Americans nationwide through the
prosecution of lawsuits, legal advocacy and dissemination of
public information. AALDEF has throughout its long history
defended and protected the civil liberties of Asian Americans
and other minorities. The decision below creates the real
possibility that police who stop and search vehicles on the
basis of racial profiles will be able to circumvent the
protections of the Fourth Amendment.
The National Association for the Advancement of
Colored People (“NAACP”), established in 1909, is the
nation’s oldest civil rights organization. The fundamental
mission of the NAACP is the advancement and improvement
of the political, educational, social and economic status of
' Letters of consent to the filing of this brief have been lodged with the
Clerk of the Court pursuant to Rule 37.3. Pursuant to Rule 37.6, counsel
for amici states that no counsel for a party authored this brief in whole or
in part and no person, other than amici, its members or its counse! made a
monetary contribution to the preparation or submission of this brief.
|
minority groups; the elimination of racial prejudice; the
publicizing of adverse effects of discrimination; and the
initiation of lawful action to secure the elimination of racial
and ethnic bias. As part of that mission, the NAACP has
vigorously opposed the use of racial profiling by law
enforcement officials to target minority drivers and their
passengers. See, e.g., Dr. Dwight Steward & Dr. Douglas
Berg, TEXAS STATE CONFERENCE OF NAACP BRANCHES
RACIAL PROFILING STUDY: A STATISTICAL EXAMINATION OF
RACIAL PROFILING (2000), available at
http://www.texasnaacp.org/rp.doc. While eliminating racial
profiling will require a multi-faceted effort, obtaining
meaningful enforcement of the Fourth Amendment by the
courts is an essential component to protecting our rights as
citizens against unconstitutional stops, searches and seizures.
STATEMENT OF THE CASE
On November 27, 2001, at roughly 1:40 a.m., Sutter
County Sheriffs Deputy Robert Charles Brokenbrough
stopped a car being driven by Karen Simeroth. People v.
Brendlin, 38 Cal. 4th 1107, 1111 (Cal. 2006). Earlier that
evening, while in the parking lot of a Circle K raarket,
Brokenbrough had noticed that the registration tag on the
Buick was expired, but he was informed by dispatch that an
application for renewal was “in process” and did not attempt
to question the driver of the car or to effect a traffic stop at
that time. Jd. When he later saw the car on Franklin Road,
Brokenbrough noticed a temporary operating permit on the
car, consistent with the application for renewal, that did not
expire until the end of the month. /d He nevertheless pulled
the car over for a traffic stop to see whether the temporary
operating permit affixed to the rear window matched the
vehicle. /d.
In its brief before the California State Supreme Court,
the State conceded that Brokenbrough had no reasonable
articulable suspicion to stop the car, because “[a] vehicle with
an application for renewal of expired registration would be
expected to have a temporary operating permit.” /d. at 1114.
The traffic stop was thus unlawful. /d.
Bruce Brendlin was a passenger in Simeroth’s car.
Id. at 1111. After the vehicle was pulled over, both Simeroth
and Brendlin were asked to identify themselves. Jd. Because
Brokenbrough recognized Brendlin and believed him to be a
parolee at large, he contacted dispatch, which informed
Brokenbrough that a “no bail” warrant had been issued for
Brendlin’s arrest. Jd Brokenbrough immediately ordered
Brendlin out of the car at gunpoint and seized a syringe cap
during a search incident to arrest. /d at 1111-12. A
subsequent search of the car uncovered various items related
to the manufacture of methamphetamine. /d.
Brendlin was charged with multiple counts relating to
the possession and manufacture of methamphetamine. See
Petition for Writ of Certiorari at 4, Brendlin y. California,
‘No. 06-8120 (U.S. Nov. 28, 2006). The trial court denied his
motion to suppress, but the California Court of Appeal
reversed, finding that, because Brendlin had been detained by
the traffic stop within the meaning of the Fourth Amendment,
he was entitled to have the evidence against him suppressed
as the fruit of the unlawful stop. Brendlin, 38 Cal. 4th at
1112-13. The California Supreme Court disagreed. It held
that because Brendlin was a passenger in the car and not the
driver, he had not been seized by the traffic stop as a
constitutional matter because he was “free to ignore the
3
police presence and go about his . . . business.” /d. at 1117.
Thus, even though the evidence against Brendlin would not
have been uncovered but for the concededly illegal stop, and
even though it was inadmissible against the driver, the court
held that he was not entitled to suppression. /d. at 1123.
This Court granted certiorari to decide the following
question: Whether a passenger in a vehicle subject to a traffic
stop is thereby “detained” for purposes of the Fourth
Amendment, thus allowing the passenger to contest the
legality of the traffic stop. Brendlin v. California, 127 S. Ct.
1145 (2007).
SUMMARY OF ARGUMENT
The California Supreme Court’s ruling that Brendlin
was not seized by the traffic stop at issue is flawed in two
pivotal ways. First, the lower court erroneously assumed that
a reasonable person in Brendlin’s situation would have felt
free to leave the car when it was initially pulled over — a
holding that defies common sense, not least because the stop
had no reasonable or identifiable purpose. Second, contrary
to this Court’s unambiguous precedent, the
California Supreme Court improperly relied upon the police
officer's subjective intent in order to determine whether and
when the seizure occurred.
Because Petitioner’s Brief will discuss both of these
issues in detail, amici will address them only briefly. Instead,
this brief will focus upon the impact an affirmance of the
lower court’s ruling would have on arbitrary and illegal stops
and searches based on race, i.e., on the practice of racial
profiling. The California Court’s ruling threatens to leave
Fourth Amendment protections, but would have particularly
pernicious consequences for minority passengers.
ARGUMENT
1. THE STANDARD GOVERNING SEIZURE Usep By THE
CALIFORNIA SUPREME CourT IS INCONSISTENT WITH
THis COURT’S FOURTH AMENDMENT JURISPRUDENCE.
A. Petitioner Was Seized By The Traffic Stop Because
A Reasonable Person In His Circumstances Would
Not Have Felt Free To Leave.
The California Supreme Court’s premise that
Brendlin “knew he was free to ignore the police presence and
. go about his business . . . even if he was unable as a practical
matter to leave the scene until the car came to halt,” 38 Cal.
4th at 1121, is inconsistent with the facts of this case, this
Court’s precedent, and realistic assessments about a
reasonable passenger’s perception of what he is permitted to
do when subjected to a traffic stop.
According to the state supreme court, “[a]bsent some
directive from the police, and as long as the rules of the road
are Otherwise obeyed, the passenger is free to do what the
driver cannot — i.e., exit the vehicle . . . and thereby
terminate the encounter with the officer.” Brendlin, 38 Cal.
4th at 1120. Setting aside the myriad individual
circumstances under which this proposition is arguably
untrue — for example, when there is inclement weather, the
stop is conducted late at night (as was the case here), or the
stop is conducted on the side of a busy highway — it is plain
that a reasonable person would ordinarily not belicve that he
is simply free to leave a car that has been pulled over by law
6
enforcement until there is some indication that this is the
2
case.
That is especially true when, as here, the stop is
unsupported by any legitimate law enforcement purpose.
Because Simeroth had not in fact been violating any traffic
laws, neither Simeroth nor Brendlin had any reason to know
why the car had been pulled over, and thus no way of
knowing who or what the police were investigating. Under
the circumstances, it was entirely reasonable for both to
assume that they had been seized by the police and that
neither was free to leave the car. The objective
reasonableness of that perception was reinforced in this case
when Brendlin was asked to identify himself as soon as the
officer approached the car. Brendlin, 38 Cal. 4th at 111.
2 This Court’s decision in Mendenhall notes that her encounter with
DEA agents at the airport might “reasonably have appeared coercive to
the respondent, who was 22 years old and had not been graduated from
high school. It is additionally suggested that the respondent, a female and
a Negro, may have felt unusually threatened by the officers, who were
white males.” The Court goes on to acknowledge the relevance of those
factors but concludes that the totality of the evidence in the case
supported a finding of consent. United States v. Mendenhall, 446 U.S.
544, 558 (1980). It is difficult to imagine any conceivable traffic stop
under which any reasonable passenger — much less a person of color, or
a person without a college education, or a young woman pulled over by
two male law enforcement officers — would feel free simply to walk
away from the car without assurance from the police that doing so was
acce e.
Cf. Hiibel v. Sixth Judicial Dist. Ct. of Nev., 542 U.S. 177, 182-83
(2004) {identifying 21 states where a person may be subject to criminal
penalty for refusing to identify himself to a police officer after a lawful
stop).
This Court, moreover, has recently held that a
passenger can be arrested based on contraband found in a
stopped car, Maryland v. Pringle, 540 U.S. 366, 374 (2003),
and that a passenger’s personal effects are subject to search if
there is probable cause to search the car, Wyoming v.
Houghton, 526 U.S. 295, 307 (1999). The Court has justified
these rulings on the ground that “a car passenger . . . will
often be engaged in a common enterprise with the driver, and
have the same interest in concealing the fruits or evidence of
their wrongdoing.” Pringle, 540 U.S. at 373 (quoting
Houghton, 526 U.S. at 304-05). If the nexus of a car and its
occupants is close enough to support the arrest of a passenger
or search of a passenger’s effects, it is surely close enough
for a reasonable passenger to believe that he is not a mere
bystander who is free to leave once the car is stopped.
Additionally, a reasonable passenger who knows that
the officer can order him out of the car even if he does not
wish to exit, Maryland v. Wilson, 519 U.S. 408, 410 (1997),
may not only feel subject to the officer’s authority, but fear
the possible consequences of suddenly exiting the car without
permission in the event that his attempt to leave is
misconstrued by the police officer as a threat to the officer’s
or the public’s safety.
Finally, the claim that passengers have not been
seized also defies reality and common sense in another
typical traffic stop scenario, when the officer approaches the
car and asks for consent to search the vehicle. At that point,
a reasonable passenger is likely to know that any rapid exit
from the car — particularly if it is stopped in a high crime
area — may itself constitute a basis for reasonable suspicion
and hence further police action. See Jllinois v. Wardlow, 528
U.S. 119, 124 (2000). Passengers in California, like
8
Brendlin, have even more reason to believe this is the case.
The California Court of Appeal has explicitly stated that its
precedent does not “stand for the proposition that after a
traffic stop, the officer must stand by while the doors of the
vehicle fly open and passengers leave in all directions.”
People v. Castellon, 76 Cal. App. 4th 1369, 1376 n.2 (Cal.
Ct. App. 1999).
For all these reasons, it is entirely reasonable for
passengers like Brendlin to conclude that they are not
initially free to leave a car that has been pulled over by law
enforcement. In fact, the situation of a car passenger like
Brendlin is far different from that of petitioners in Florida v.
Bostick, 501 U.S. 429 (1991), or N.S. v. Delgado, 466 U.S.
210 (1984), whose “freedom of movement was restricted by a
factor independent of police conduct.” Bostick, 501 U.S. at
436. In Bostick, petitioner was on a bus about to depart on a
long distance trip and so would not have felt free to leave
even if the police had not boarded the bus. /d at 436.
Similarly, in Delgado, petitioners were at work during
normal working hours and were thus confined by virtue of
that fact. 466 U.S. at 218. In contrast, a passenger in a car
that has just been pulled over cannot be said to be free to go
about his business, for his business was to continue in his
travels in that car; instead, he has been brought to a halt
solely by police conduct. *
This analysis docs not mean that the initial seizure of a passenger
created by virtue of a traffic stop is per se unreasonable; when there is
reasonable suspicion to effect the traffic stop, i.e. the stop is lawful, the
initial seizure of the passenger will be just as lawful as that of the driver.
How long the seizure of a passenger may continue must depend on the
totality of the circumstances in each case.
9
This analysis comports with the common sense
assumptions reasonable people have regarding their rights
during a traffic stop by recognizing that passengers like
Brendlin are just as seized for Fourth Amendment purposes
as the driver of the stopped car. It thus also means that
passengers like Brendlin who have been subjected to an
unlawful stop can vindicate their Fourth Amendment right to
be free from unreasonable seizure in a court of law. Should
this Court disagree, and find that all passengers are indeed
initially free to leave a car as soon as it has been pulled over
for a traffic stop, it should announce that holding
unambiguously. Absent that clear holding, reasonable
passengers will continuc to believe that they are not free to
leave until the police indicate otherwise.
B. The Lower Court Improperly Relied On The
Subjective Intent Of The Officer To Conclude
That A Reasonable Passenger Would Have Felt
Free To Leave.
It is well settled that “a person has been ‘seized’
within the meaning of the Fourth Amendment if, in view of
all of the circumstances surrounding the incident, a
reasonable person would have believed that he was not free
to leave.” Mendenhall, 446 U.S. at 554; Michigan v.
Chesternut, 486 U.S. 567, 574 (1988) (“This ‘reasonable
person’ standard also” ensures that the scope of Fourth
Amendment protection does not vary with the state of mind
of the particular individual being approached.”). It is also
clear that the seizure determination ts to be made from the
point of vicw of the person who is the object of the oflicer’s
attentions, rather than from that of the officer. Mendenhall,
446 U.S. at 555 n.6 (“[T]he subjective intention of the DEA
agent in this case to detain the respondent, had she attempted
10
to leave, is irrelevant except insofar as that may have been
conveyed to the respondent.”); cf Whren v. United States,
517 U.S. 806, 813 (1996) (“Subjective intentions play no role
in ordinary, probable-cause Fourth Amendment analysis.”).
Although the lower court opinion begins with an
accurate recitation of the standard for determining whether a
seizure has taken place, the one the court actually applied
functionally eviscerates this Court’s holding in Mendenhall
by placing excessive emphasis on police officer intent. The
California Supreme Court’s inquiry referred throughout to
the subjective intent of the police officer despite the fact that
that intent was neither communicated to Brendlin nor would
have been apparent to a reasonable person in his position.
The court asserted, for example, that “Deputy
Brokenbrough’s flashing lights were directed at the driver,
Karen Simeroth, and not at defendant.” Brendlin, 38 Cal. 4th
at 1118. A _ reasonable passenger, however, has no
conceivable means of knowing at whom an officer’s flashing
lights are directed, particularly where, as here, there were no
lawful grounds for the stop. Indeed, the lower court went so
far as to state, “[w]Je think it more sensible to leave it up to
the officer, once cause for the vehicle stop has been
established, to decide who should be seized and when.” Jd. at
1121 nA.
The lower court’s logic would place the determination
of when a seizure has occurred squarely within the hands of
officers themselves, who would be free to testify to their
subjective intentions about whether and when a particular
person was seized, regardless of whether those intentions
were apparent. The protection afforded by the Fourth
Amendment against unreasonable seizures becomes
meaningless if police officers themselves are permitted to
11
provide post hoc determinations of whether and when a
particular person had been seized — and thereby functionally
to decide who is to be afforded Fourth Amendment
protection.
The incentive for law enforcement officers simply to
assert in all cases that the passengers at issue werc not seized
until after evidence was uncovered against them will be great,
and perfectly lawful, if the lower court’s rule is upheld. The
problem raised by this possibility is precisely the reason why
this Court has heretofore insisted upon an objective
reasonableness standard from the point of view of the person
« onfronted.
Il. FAILING TO RECOGNIZE THAT PASSENGERS ARE
SEIZED WILL PERMIT THE USE OF ARBITRARY AND
DISCRIMINATORY STOPS THAT OFFEND THE CORE
PRINCIPLES OF THE FOURTH AMENDMENT.
A. The Lower Court’s Ruling Would Permit
Arbitrary And Discriminatory Stops As To
Passengers.
Although the issue before this Court is whether
Brendlin was seized and not whether that seizure was in fact
reasonable, the per se unreasonableness of the stop to which
he was subjected is nevertheless relevant to this Court’s
inquiry.
The Fourth Amendment clearly prohibits both
arbitrary and discriminatory seizures. See, e.g., United States
v. Martinez-Fuerte, 428 U.S. 543, 554 (1976) (“The Fourth
Amendment imposes limits on search-and-seizure powers in
order to preve it arbitrary and oppressive interference by
enforcement o.ials with the privacy and personal security
of individuals. ’); United States v. Brignoni-Ponce, 422 U.S.
12
873, 878 (1975). Although the reasonableness of a seizure
depends upon “a balance between the public interest and the
individual’s right to personal security free from arbitrary
interference by law officers,” id, there is simply no
legitimate public interest in arbitrary or discriminatory stops,
and they are accordingly unlawful. Such stops are not, and
should not, be shielded from Fourth Amendment scrutiny.
It is axiomatic that the driver of a vehicle that was
arbitrarily or discriminatorily stopped may vindicate her
Fourth Amendment rights, for example, via a motion to
suppress evidence that would not have been gathered but for
the stop. Should this Court affirm the California court’s
ruling, however, any evidence gathered against passengers in
the very same car will be admissible even though it too was
the product of an unlawful stop. The lower court’s ruling
would create the incongruous situation in which the same
evidence gathered from the same concededly unlawful stop,
which affected both driver and passenger equally, could be
used against one person in the car but not another. It would
functionally permit baseless stops with respect to a whole
class of people: passengers.
The California Supreme Court’s ruling creates an
incentive for law enforcement to take advantage of that
incongruity. Because evidence uncovered as a result of an
arbitrary or discriminatory stop would still be admissible
against passengers, law enforcement officers will have little
reason to curtail such stops. This isnot an incentive structure
that the Fourth Amendment was designed to tolerate; an
increasc in arrests and convictions may fesult, but at a price
this Court has already repeatedly rejected. See, eg,
Almeida-Sanchez v. United States, 413 U.S. 266, 273 (1973)
(finding a roving Border Patrol stop and search without
13
probable cause or reasonable suspicion unconstitutional
under the Fourth Amendment); Carroll v. United States, 267
U.S. 132, 153-54 (1925) (“It would be intolerable and
unreasonable if a prohibition agent were authorized to stop
every automobile on the chance of finding liquor, and thus
subject all persons lawfully using the highways to the
inconvenience and indignity of such a search.”).
In Whren, this Court suggested that allegations of
racial profiling can be addressed through an Equal Protection
claim seeking damages and injunctive relief. 517 U.S. at
813. This Court did not suggest, however, -hat a Fourth
Amendment violation and an Equal Protection violation
represent the same constitutional injury, or that redress for
one provides satisfactory redress for the other. Rather, the
Court held in Whren that there had been no Fourth
Amendment violation to redress because the car stop at issue
there was lawful. /d Here, by contrast, the car stop was
concededly unlawful.
Unlike the knock-and-announce violation in Hudson
v. Michigan, 126 §. Ct. 2159 (2006), moreover, the unlawful
car stop in this case involved more than an issue of timing.
The entry into Hudson’s home would only have been delayed
for a few seconds had the officers properly knocked and
announced their presence. Brendlin, on the other hand,
would never have been seized as part of the car stop if the
police in this case had complied with the Fourth Amendment.
The increased threat to privacy creates a correspondingly
increased need for an effective deterrent against police
misconduct.
Furthermore, the fact that someone clse in the vehicle
may bring a constitutional claim to remedy systemic
deficiencies (i.e., the driver), does not mean that others who
14
have suffered from the same Fourth Amendment violation
should be unable to do so -—- particularly where, as here, the
two parties may have wholly different legal! interests.
Finally, the necessity of showing a pattern and
practice of racial discrimination can be _ nearly
insurmountable for individuals, much less a showing of
actual discriminatory intent. See, e.g., Chavez v. ll. State
Police, 251 F.3d 612 (7th Cir. 2001). There will also be
individuals who do not wish to file a civil action or do not
have a civil claim, but rather only seek to exclude evidence
that was gathered against them perhaps as the result of a
racially suspect stop and search.
B. The Lower Court Ruling And The Incentives It
Would Create For Law Enforcement Would
Disproportionately Affect Minorities.
The incentive the California court ruling creates for
police officers to engage in arbitrary stops would, of course,
affect all passengers. But the discriminatory stops and
attendant searches it would newly permit with respect to
passengers will have particular resonance for minority
motorists. Statistical evidence tells us that minority
passengers will be disproportionately affected by a ruling that
bars passengers in general from challenging unlawful stops
and by any increase in the number of unlawful stops that
result from such a ruling. Some data indicates that minority
motorists are stopped at higher rates than their white
counterparts. Much more data establishes that minority
motorists are disproportionately subjected to searches once
they have been stopped — even though searches of
minorities are not any more likely to uncover evidence of
criminal wrongdoing than searches of whites. A
disproportionate numbcr of minority passengers will
_ 45
accordingly be left without Fourth Amendment recourse
when subjected to discriminatory stops if this Court affirms
the lower court’s ruling.
i. Stop Rates
There is some evidence that cars with African
American occupaiits are more likely to be stopped, even
when there is no law enforcement incentive to engage in
arbitrary or discriminatory stops.’ For example:
e Kansas: In a multijurisdictional report on traffic stops, the
Police Foundation found that, of the seven Kansas police
departments assessed, “all are targeting either Blacks or
Hispanics and three of the six who were assessed for both
Blacks and Hispanics are targeting both.”®
e Maryland: in an official report to the State, the Maryland
Justice Analysis Center found that 36% of all stops in
Maryland were of African Americans. The report
concluded that “the fact that 36% of all the law eligible
stops involved a black driver does raise concerns given
that the population in Maryland is 28% black.”’
e Minnesota: A statewide survey found that all minority
populations, except Asians, were stopped at a higher rate
> See generally, David Rudovsky, The Impact of the War on Drugs on
Procedural Fairness and Racial Equality, 1994 U. Cui. LEGAL. F. 237,
250 (1994) (discussing evidence of racial disparity in traffic stops).
* Joun C. LAMBERTH, POLICE FOUND., A MULTUURISDICTIONAL
ASSESSMENT OF TRAFFIC ENFORCEMENT AND DATA COLLECTION IN
KANSAS 143 (2003), available at http://www.racialprofilinganalysis.
neu.edu/IRJ docs/KS_2003.pdf.
? MD. JusTICE ANALYSIS CTR., REPORT TO THE STATE OF MARYLAND
ON LAW ELGipLte TRAFFIC STOPS 8 (2004), available at
hitp://www.mdle.netv/traffic/2004report.pdf {hereinafter MARYLAND
REPORT].
16
than whites. African American motorists were stopped at
the highest rate — over three and a half times more often
than white motorists.*
e Minnesota (St. Paul): A 2001 study by the Institute on
Race & Poverty concluded that African Americans in St.
Paul, Minnesota, were stopped in disproportionately high
numbers compared to their proportion of the city’s adult
population. Whites, who represented 73.18% of the
population, accounted for only 57.67% of all stops
whereas African Americans, who represented 10.22% of
the population, accounted for 26.25% of all stops.”
e Missouri: The state Attorney General reported that
African Americans in Missouri represent 10.6% of the
adult population but 15.1% of all vehicle stops. In other
words, African Americans are stopped at a rate 42%
higher than expected based solely on their proportion of
the adult population. African Americans were 46% more
likely than whites to be stopped in 2005.'°
There is also evidence that, despite this Court’s
admonitions more than 30 years ago in Brignoni-Ponce and
Almeida-Sanchez, traffic stops are also being conducted on
§ INST. RACE & POVERTY, MINNESOTA STATEWIDE RACIAL PROFILING
REPORT: ALL PARTICIPATING JURISDICTIONS 10 (2003), available ar
http://www. irpumn.org/uls/resources/projects/ageregate/20report%2092
303.pdf [hereinafter MINNESOTA REPORT].
% INST. RACE & POVERTY, REPORT ON TRAFFIC STOP DATA
COLLECTED BY THE SAINT PAUL POLICE DEPARTMENT APRIL 15
THROUGH DECEMBER 15, 2000 4-6 (2001), available at
http://www | .umn.edu/irp/SPPD0522.pdf [hereinafter St. PAUL REPORT]
10 ATTORNEY GEN. OF THE STATE OF MO., MISSOURI VEHICLE STOPS
2005 ANNUAL REPORT, available at hittp://www.ago.mo.gov/
racialprofiling/2005/racialprofiling2005 .htm#findings [hereinafter
MISSOURI REPORT].
17
people suspected of being Mexican in order to check their
immigration status.’ |
Although other jurisdictions have not reported any
racial discrepancies in their stop rates, there is good reason to
believe that such discrepancies are underreported because of
the use of unadjusted census data. Many stop rate studies use
the proportion of minorities in the general population as a
baseline in order to assess racial discrepancies. As the Police
Executive Research Forum notes, however, stop rates
calculated using such data do not take into account the fact
that the proportion of minorities who own and use vehicles
may be smaller than the proportion of that minority group in
the population at large.’ Seemingly benign stop rates may
thus actually mask racially biased policing. In addition,
increased police discretion to engage in unlawful stops with
impunity with respect to passengers may well result in further
racial discrepancies in stop rates.
ii. Search Rates
Even if the rate at which minorities and whites are
stopped were identical, the evidence that race matters once a
car has been stopped is striking. In a national survey
published in 2006, the United States Department of Justice
found that African Americans were nearly three times as
'! See, e.g., Farm Labor Org. Comm. v. Ohio State Highway Patrol, 95
F. Supp. 2d 723, 737 (N.D. Ohio 2000); Jim Yardley, Some Texans Say
Border Patrol Singles Out Too Many Biameless Hispanics, N.Y. TIMES,
Jan. 26, 2000, at Al7; Susan Sachs, Files Suggest Profiling of Latinos
Led to Immigration Raids, N.Y. TIMES, May 1, 2001, at B1.
2 LORIE A. FRIDELL, POLICE EXECUTIVE RESEARCH FORUM, BY THE
NUMBERS: A GUIDE FOR ANALYZING RACE DATA FROM VEHICLE STOPS
75 (2004), available at http://www .justice.utah.gov/Research/Race/
PERF%20by%20the%20Numbers.pdf.
18
discretionary form of search. African American drivers
represented 16.1% of consent searches, “well above their
10.4% portion of vehicle stops.” Hispanic representation
in consent search rates was also disproportionate —
32.5% of consent searches compared to 27.7% of stops.
e Colorado: Of individuals stopped by the State Patro! in
2002, Hispanic drivers comprised 15% of those stopped,
but over 30% of those searched."
e lilinois: In 2006, a state-sponsored study of the prior
year’s traffic swons revealed that minority motorists were
more likely to be subjected to a consent search than white
motorists. The survey concluded that “in spite of the fact
that there are fewer consent searches [than in 2004],
application of consent searches by race has become more
problematic.”"*
e Maryland: A 2004 statewide survey of traffic stops in
Maryland established that the highest rate of searches was
for Hispanic males (9.9% stopped are searched) followed
by African American males (7.5%), and white males
(5.6%).’
e Minnesota (St. Paul): According to data gathered by the
St. Paul Police Department, after being stopped, Afncan
"© DR. GARY CORDNER ET AL., VEHICLE STOPS IN SAN DIEGO: 200! 8
(2002), available at http://www sandiego.gov/police/pdf/stoprpt.pdf.
'? COLORADO STATE PATROL, 2002 TRAFFIC STOP SUMMARY 8 (2004),
available at http://csp.state.co us/Upload/O3trafficstopdata pdf
[hereinafter COLORADO REPOR1].
'S ALEXANDER WelIss & AVIVA GRUMET-MORRIS, NORTHWESTERN
UNIV. CTR. Pus. SAFETY, ILLINOIS TRAFFIC STOPS STATISTICS STUDY,
2005 ANNUAL REPORT 7 (2006), available at http://www .dot.state.il.us/
trafficstop/200Sannualreport pdf.
'? MARYLAND REPORT, supra note 7, at 9.
20
Americans, Hispanics and Native Americans in St. Paul,
Minnesota, are subjected to pat down searches of their
persons and searches of their vehicles at rates higher than
the search rates for white drivers. For example, in
searches that produced no contraband whatsoever, 19.6%
of African Americans and 16.7% of Hispanics, but only
8.4% of whites, were patted down and had their vehicles
searched.”°
Missouri: The 2005 Annual Report of the Attorney
General’s Office found that, across the state of Missouri,
African Americans were 1.78 times more likely to be
searched than whites and Hispanics 1.98 times more
likeiv.”
Ohio (Cleveland): A 2006 University of Cincinnati report
found that, even after controlling for other relevant
factors, a driver’s race has a “significant influence over
whether or not searches are conducted [in Clevelan¢].
The odds of being searched are 1.3 times higher for Black
drivers compared to Caucasian drivers.” The report also
found that African American motorists were more likely
to be searched for discretionary reasons.”
Rhode Island: An official review of statewide traffic stops
in Rhode Island found that 2.9% of whites but 5.9% of
non-whites were subject to a discretionary search upon
being stopped by the police. In other words, “non-whites
are significantly more likely than whites to be subjected
20
2!
22
SAINT PAUL REPORT, supra note 9, at 4, IS.
MISSOURI REPORT, supra note 10.
ROBIN ENGEL ET AL., UNIV. OF CINCINNATI Div. OF CRIMINAL
JUSTICE, CLEVELAND DIVISION OF POLICE TRAFFIC Stop DATA Sruby:
FINAL REPORT xiii (2006), available at nttp://www.uc.edu/
criminaljustice/ProjectReports/Cleveland_Traffic_Stop_Study.pdf.
2)
to a discretionary search. Statewide, the odds of a non-
white motorists [sic] being searched are roughly twice
that of a white driver being searched.””?
e Tennessee: A_ statewide survey of traffic stops in
Tennessee found that police officers searched 16.8% of
Hispanics stopped, 8.1% of African Americans, and 5.8%
of whites. When stopping vehicles for moving violations,
officers searched 14.1% of Hispanics, 5.7% of African
Americans, and 4.4% of whites. When stopping vehicles
for vehicle equipment violations, officers searched 20.3%
of Hispanics, 12.7% of African Americans, and 8.3% of
whites.“
A rule that bars passengers from challenging the
unlawfulness of a stop (and the admissibility of the fruits of
that stop) would disproportionately affect minorities because
minority motorists are disproportionately searched. While
the rule announced by the California high court has troubling
implications for all passengers — particularly given the
incentive it provides to law enforcement to increase the
number of unreasonable stops in the hopes of gathering
otherwise inadmissible evidence — minorities will be
particularly affected given the reality of disproportionate
search rates.
23 AMY FARRELL & JACK MCDevirt, Inst. RACE & Justice, RHODE
ISLAND TRAFFIC STOP STATISTICS 2004-2005 FINAL REPORT 2 (2006),
available at http://www.rijustice.ri.gov/sac/Executive%20Summary%
202004-2005 pdf [hereinafter RHODE ISLAND REPORT].
** COMPTROLLER OF THE TN TREASURY, VEHICLE STOPS AND RACE: A
STUDY AND RESPONSE TO PUBLIC CIIAPTER 910 OF 2000 15-16 (2002),
available at http://www.comptroller.state.t.us/orea/reports/racial
profiling pdf [hereinafter TENNESSEE RFPORT!?.
22
iii. Hit Rates
Such an outcome might be justified by law
enforcement if the widespread disparity in scarch rates
between different racial groups reflected the rates at which
those populations violate the law. Studies over the last
several years, however, have consistently found no difference
in contraband discovery rate across race — clear cut proof
that racial profiling not only offends core constitutional
principles, but is also an ineffective law enforcement
strategy. The DOJ, for example, recently concluded that
despite the differences in search rates across race, “no
measurable differences were found in the likelihood of arrest
among white, black, and Hispanic male drivers.*° Again,
this pattern is consistently repeated throughout the United
States:
e California (Sacramento): Despite finding variation
among search rates across race, a University of Southern
California study of traffic stops in Sacramento,
California, established that contraband is found at similar
rates across race, with African Americans (22.4%) having
the lowest rate compared to Hispanics (27.9%) and
whites (26.4%).”*
e Colorado: \n 2002, whites were more likely to have a
seizure of contraband or property during traffic stops
when compared to the number of searches that took place.
Meanwhile, Hispanics were the /east likely group to have
contraband or property scized during a traffic stop,
despite being the group most likely to be searched.”
25
26
27
BUREAU OF JUSTICE STATISTICS, supra note 13, at 6.
SACRAMENTO REPORT, supra note 15, at 8, 34.
COLORADO REPORT, supra note 17, at 14.
23
Maryland: Despite disproportionate search rates
involving motorists of color in this state, nothing is seized
in 84% of searches of Afmcan Americans, 89% of
searches of Hispanics, and 83% of whites. There also
does not appear to be any meaningful difference in the
number of arrests subsequent to stops for blacks and
whites.**
Minnesota: While 12.61% of African American motorists
who were stopped were searched compared to 3.14% of
white motorists, contraband was discovered at a rate of
11.17% for African Americans and 23.53% for whites.
Similarly, Latinos accounted for 8.55% of searches, but
only 9.08% of contraband hits — far below the
contraband hit rate for white motorists.”°
Minnesota (St. Paul): Afncan Americans, Hispanics and
Native Americans were far more likely than whites to be
subject to pat down searches and vehicle searches in
which no contraband was found. No contraband was
found in 19.6% of searches involving African Americans,
16.7% of Hispanics, 16.6% of Native Americans, and
8.4% of whites.”
Missouri: In 2005, the contraband hit rate for whites was
23.6%, compared with 18.6% of African Americans and
14.5% for Hispanics. The Attomey General’s Office
concluded that “this means that on average, searches of
African Americans and Hispanics are less likely than
searches of whites to produce contraband.””'
30
Mu
MARYLAND REPORT, supra note 7, at 10-] 1.
MINNESOTA REPORT, supra note 8, at 22.
SAINT PAUL REPORT, supra note 9, at 15.
MISSOURI REPORT, supra note 10.
24
a ae
e Rhode Island: White contraband rates in this state are
26.5%, and non-white rates are 22.3%.“
e Tennessee: As a result of searches in Tennessee. officers
seized evidence from 1.8% of Hispanics, 1.6% of African
Americans, and 1.2% of whites.*?
This data establishes that there is no law enforcement
rationale to which this Court should defer in considering the
racial profiling implications of this case. This Court should
not affirm a rule that would leave minorities, who are
subjected to disproportionate search rates but do not
disproportionately offend, without any Fourth Amendment
protections 10 challenge flatly discriminatory stops and
searches.
The Fourth Amendment currently provides an avenue
of redress for those subjected to discriminatory stops and
searches, whether via a suppression motion or a civil claim
challenging racial profiling practices.** And, as this Court
32
RHODE ISLAND REPORT, supra note 23, at 3
TENNESSEE REPORT, supra note 24, at 18.
A number of suits contesting racial profiling practices have resulted
in consent decrees or judicial orders that require police departments to
collect relevant data, implement officer training programs, and prohibit
officers from pulling motorists over on the basis of race or skin color.
See, eg., Wilkins v. Md State Police, No. 93468 (D. Md. 2003),
available at http://www.mdsp.org/downloads/consent decree.pdf, Arnold
v. Ariz. Dep't of Pub. Safety, No. 01-01463 (D. Ariz. 2006), available at
http://www.azdps.gov/SettiementAgreement.pdf, Rodriguez v. Cal
Highway Patrol et ai, 89 F. Supp. 2d 1131 (N.D. Cal 2000); Martinez v
Mount Prospect, 92 F. Supp. 2d 780 (N.D. Ill. 2000); United States v
New — Jersey, No 99-5970 (D.NJ 1999), available at
http://www.usdoj.gov/crv/splivdocuments/jerseysa htm. Moreover, courts
have consistently approved of the use of the Fourth Amendment to
redress allegations of racial profiling See, eg, Md State Conference of
33
a4
25
has recognized, these court actions can have particular bite
when they are coupled with a § 1983 claim. See, eg,
Hudson v. Michigan, 126 S. Ct. at 2167-68 (“As far as we
know, civil liability is an effective deterrent here, as we have
assumed it is in other contexts.”). A ruling that forecloses a
legal remedy under the Fourth Amendment for passengers
would gut the primary deterrent to such behavior.
It would be unfortunate if after the great strides the
lower courts in this country have made to combat racial
profiling via the judicial system — and the great strides the
states have made to combat racial profiling via increased data
collection and reporting — this Court were inadvertently to
re-open a door that should properly be closed
NAACP Branches, et al. v. Md Dep't of State Police, 72 ¥. Supp. 2d 560
(D. Md. 1999)
CONCLUSION
For the reasons stated above, the judgment of the
California Supreme Court should be reversed.
Respectfully submitted,
Counsel of Record
EMILY CHIANG
REGINALD |. SHUFORD
ALEXIS AGATHOCLEOUS
DENNIS D. PARKER
AMERICAN CIVIL LIBERTIES UNION
FOUNDATION
|
|
|
|
STEVEN R. SHAPIRO
125 Broad Street, 18 Floor
New York, NY 10004
Telephone: (212) 549-2500
MICHAEL T. RISHER
AMERICAN CIVIL LIBERTIES UNION
OF NORTHERN CALIFORNIA
39 Drumm Street
San Francisco, CA 94111
Telephone: (415) 621-2493
SUSAN N. HERMAN
250 Joralemon Street
Brooklyn, NY 1120]
Telephone: (718) 780-7945
27
Dated: March 5, 2007
DENNIS COURTLAND HAYES
VicTOR L. GOODE
NATIONAL ASSOCIATION FOR THE
ADVANCEMENT OF COLORED PFOPLE
4805 Mt. Hope Drive
Baltimore, MD 21215
Telephone: (410) 580-5790
KENNETH KIMERLING
ASIAN AMERICAN LEGAL DEFENSE
AND EDUCATION FUND
99 Hudson Street
New York, NY 10013
Telephone: (212) 966-5932
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.