Supplemental Brief — W.R. Grace & Co. v. United States (No. 07-1287)

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FILED

a" 0) JUN 40 2008

OFFICE OF THE CLERK

No. 0721286 OE COURT. U.S.

INTHE

Supreme Court of the United States

W.R. GRACE & Co.,

Petitioner,

UNITED STATES OF AMERICA,

Respondent.

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit |

SUPPLEMENTAL BRIEF OF PETITIONER

LAURENCE A. URGENSON

CHRISTOPHER LANDAU, P.C.

Counsel of Record

TYLER D. MACE

MICHAEL D. SHUMSKY

KIRKLAND & ELLIS LLP

655 Fifteenth St., N.W.

Washington, DC 20005

(202) 879-5000

June 10, 2008

ARE EES I VT

2 a AS SL Seas

WALSON-EPES PRINTING Co., INC. — (202) 789-0006 - WASHINGTON, D. C. 20002

This Court’s fractured decision in United Staies v.

Santos, No. 06-1005 (Slip op. June 2, 2008)—

announced on the very day that petitioners in this

case and a companion case, Eschenbach v. United

States, No. 07-1287, filed their reply briefs—

- underscores that this Court’s review is warranted

here. Santos unsettled the law on the rule of lenity,

and this case, in which the Ninth Circuit interpreted

the word “Asbestos” in 42 U.S.C. § 7412(b) to sweep

far more broadly in the criminal context than the

EPA has interpreted that word in the regulatory

context, provides this Court with a perfect vehicle to

restore clarity to this important area.

Santos preseuted the question whether the term

“proceeds” in the federal money-laundering statute,

18 U.S.C. § 1956(a)(1), means “receipts” or “profits.”

Applying the rule of lenity, a majority of this Court

held that it means “profits,” and accordingly affirmed

the decisions below vacating the Santos respondents’

convictions. See Slip op. 16-17 (Scalia, J., joined by

Souter, Thomas, and Ginsburg, JJ.); id. at 5

(Stevens, J., concurring in the judgment).

This Court splintered, however, on the reasons

that the rule of lenity applied, and the scope of its

application. The plurality concluded that the

undefined statutory term “proceeds” could mean

either “receipts” or “profits,” and hence “[u]nder a

long line of our decisions, the tie must go to the

defendant.” Slip op. 6 (plurality); see also id. (“The

rule of lenity requires ambiguous criminal laws to be

interpreted in favor of the defendants subjected to

them.”); id. (“This venerable r-le not only vindicates

the fundamental principle that no citizen should be

held accountable for a violation of a statute whose

commands are uncertain, or subjected to punishment

that is not clearly r:escribed. It also places the

weight of inertia upon the party that can best induce

Congress to speak more clearly and keeps courts

from making criminai law in Congress's stead.”).

According to the p!urality (in a part of its opinion not

joined by Justice Thomas), if the term “proceeds” in

§ 1956(a)(1) is ambiguous, then it is ambiguous in all

applications, ana the more defendant-friendly

interpretation must be applied in every context. See

id. at 14-16.

Justice Stevens agreed with the plurality that the

rule of lenity applied in Santos, but for different

reasons and to a different extent. According to

Justice Stevens, the rule of lenity applied given “both

a lack of legislative history speaking to the definition

of ‘proceeds’ when operating a gambling business is

the ‘specified unlawful activity’ and my conviction

that Congress could not have intended the perverse

result that would obtain in this case under [the

principal dissenting] opinion.” Jd. at 5 (Stevens, J.,

concurring in judgment); see also id. at 5 n.7 (“[Mly

conclusion rests on my conviction that Congress

could not have intended the perverse result that the

dissent’s rule would produce if its definition of

‘proceeds’ were applied to the operation of an

unlicensed gambling business.”). Thus, according to

Justice Stevens, the more defendant-friendly

interpretation of the term “proceeds” applied in

Santos need not be applied in every factual context.

See id. at 3n.3, 5 & n.7.

Justice Stevens’ opinion drew a spirited response

from the plurality. According to the plurality,

“JUSTICE STEVENS’ position is original with him;

neither the United States nor any amicus suggested

it; it has no precedent in our cases.” Id. at 15

(plurality). According to the plurality, “the same

word, in the same statutory provision,” cannot have

“different meanings in different factual contexts.” Id.

(emphasis in original). That approach, the plurality

insisted, could not be squared with Clark uv.

Martinez, 543 U.S. 371 (2005), in which the Court

stated that “our cases often ‘give a_ statute's

ambiguous language a limiting construction called

for by one of the statute’s applications, even though

other of the statute’s applications, standing alone,

would not support the same limitation. The lowest

common denominator, as it were, must govern.” Id.

(quoting Martinez, 543 U.S. at 380) (emphasis added

by Santos plurality).

Justice Stevens, however, gave Martinez a far

narrower interpretation, stating that “[iJn Martinez

there was no compelling reason—in stark contrast to

the situation here—to believe that Congress

intended the result for which the Government

argued.” Id. at 5-6 n.7 (Stevens, J., concurring).

Accordingly, Justice Stevens insisted that applying

the rule of a lenity to a particular statutory term in

one context did not necessarily compel applying the

rule of lenity to that term in every context. See id. .

The plurality then went out of its way tc address

“the stare decisis effect of JUSTICE STEVENS’ opinion.”

Id. at 16 (plurality). According to the plurality, the

effect of Justice Stevens’ opinion was to limit the

holding in Santos to the proposition “that ‘proceeds’

means ‘profits’ when there is no legislative history to

the contrary,” but not to “hold that the outcome is

different when contrary legislative history does

exist.” Jd. Under this view, the state of the law post-

Santos is that “counsel remain free to argue JUSTICE

STEVENS view (and to explain why it does not

overrule Clark v. Martinez, supra),” but “should be

warned, ... [that] [nJot only do the Justices joining

this opinion reject that view, but so also (apparently)

do the Justices joining the principal dissent.” Jd.

Indeed, the principal dissent was explicit on this

score: “I cannot agree with JUSTICE STEVENS’s

approach insofar as it holds that the meaning of the

term ‘proceeds’ varies depending on the nature of the

illegal activity that produces the laundered funds.”

Id. at 2 (Alito, J., joined by Roberts, C.J., and

Kennedy and Breyer, JJ., dissenting)); id. at 17

(“[Clontrary to the approach taken by JUSTICE

STEVENS, I do not see how the meaning of the term

‘proceeds’ can vary depending on the nature of the

illegal activity that produced the laundered funds.”).

Justice Stevens, in turn, rejected the plurality’s

discussion of the stare decisis effect of his

concurrence as “the ‘purest of dicta.” Jd. at 5 n.7

(Stevens, J., concurring in the judgment) (quoting id.

at 16 (plurality)).

This case gives the Court an opportunity to clarify

the rule of lenity issues that are now unsettled in the

wake of Santos. This case, like Santos, involves the

meaning of an undefined statutory term—the term

“Asbestos” in 42 U.S.C. § 7412(b). As the Ninth

Circuit explained, “[t]he government contends that a

statute may have two definitions for one term, one

definition civil! and one criminal.” Pet. App. 16a.

But because the criminal “knowing endangerment”

provision of the Clean Air Act expressly cross-

references the list of hazardous air pollutants subject

to regulation by the EPA, see 42 U.S.C.

§ 7413(c)(5)(A), it follows under Martinez that the

term “Asbestos” should have the same meaning in

§ 7412(b) as in § 7413(c)(5)(A).

Indeed, petitioners cited Martinez for just this

proposition in the Ninth Circuit: “It is axiomatic ...

that a single word or phrase in a statute with both

civil and criminal applications has the same meaning

in both contexts. See, e.g., Clark v. Martinez, 543

U.S. 371, 380-81 (2005).” Appellees’ Joint Resp. Br.,

CA9 Nos. 06-30472, 06-30524 (filed 3/21/07), at 34

(emphasis in original); see also id. at 35 (“[T]he single

cross-referenced word “asbestos” in § 7412 of the

Clean Air Act cannot have a different meaning in the

civil context and the criminal context.”). In its reply

brief, the Government tried to distinguish Martinez

on the ground that “[t]hat case involved two different

constructions of a single ambiguous statutory

provision,” whereas “(t]he instant case involves two

different provisions from a statute and a regulation.”

Reply Br. of the United States, CA9 Nos. 06-30472,

06-30524 (filed 4/3/07), at 7 (emphasis modified).

But that is simply not true: both the EPA’s

regulation and the criminal “knowing

endangerment” provision involve the single word

“Asbestos” in § 7412(b); that term appears just once,

not twice, in the statute.

The Ninth Circuit, however, turned the

Government's argument into a _ holding that

“Congress validly may create multiple enforcement

mechanisms that each draw on different definitions

for the same term or phrase.” Pet. App. 18a

(emphasis added); see also id. at 19a (“We defer to

Congress’s decision tc create two enforcement

structures and hold the district court’s conflation of

eA, POD ce CO he EP LTT OE ER RRM Ae Mee A ER Rt A SR Rh A I _ ~ .

the two to be error.”). As explained in the petition,

that holding turns the rule of lenity upside down,

holding that a single statutory term may be given a

more prosecution-friendly meaning in the criminal

context than in the civil context. See Pet. 9-14.

This case thus presents this Court with a chance

to clarify whether its fractured decision in Santos

marks a change in the law, or whether Martinez

remains good law. Martinez firmly rejected “the

dangerous principle that judges can give the same

statutory text different meanings in different cases,”

543 U.S. at 386, which is precisely what the Ninth

Circuit did here. Statutory terms are not

“chameleon[s],” id. at 382, to be given different

meanings in different contexts, and the word

“Asbestos” cannot mean one thing in § 7412(b) and

something else when incorporated by cross-reference

into § 7413(c)(5)(A). “If anything,” as the Santos

plurality explained, “the rule of lenity is an

additional reason to remain consistent, lest those

subject to the criminal law be misled.” Santos, Slip

op. at 16 (plurality). This case proves that point in

the starkest of terms: individuals and businesses

subject to the Clean Air Act are entitled to conclude

that “Asbestos” within the meaning of § 7412(b)

means what the EPA says it means, and not face

criminal prosecution for releasing substances that

the EPA has excluded from the definition of

“Asbestos” under § 7412(b). Given the debate

between the plurality and the concurrence in Santos

on that decision’s precedential effect, and the

meaning of Martinez, this Court should grant review

here to clarify those issues.

And wholly apart from those issues, not a single

Justice in Santos concluded, as the Ninth Circuit did

here, that a particular defendant’s subjective

knowledge renders the rule of lenity inapplicable.

See Pet. App. 17a (“[D]efendants had actual notice in

this case of the risks from the fibrous content of the

asbestiform materials in their products. Defendants

are an industrial chemical company and seven of its

top executives. They are all familiar with

asbestos.”). Indeed, at least seven Justices in Santos

expressly rejected the proposition that a particular

statutory term could have one meaning when applied

to one set of defendants and another meaning when

applied to another set of defendants. See Santos,

Slip op. at 14-16 (Scalia, J., joined by Souter and

Ginsburg, JJ.); id. at 2, 17 (Alito, J., joined by

Roberts, C.J., and Kennedy and Breyer, Ju.,

dissenting). And even under Justice Stevens’ view,

the rule of lenity should apply here, because nothing

in the legislative history supports the Ninth Circuit’s

interpretation of the statute, and it is absurd to

think that Congress intended the Clean Air Act’s

criminal “knowing endangerment” provision to sweep

more broadly than the Act’s regulatory provisions

when Congress explicitly defined the former by cross-

reference to the latter. See 42 U.S.C. § 7413(c)(5)(A).

If anything, thus, Santos underscores that the Ninth

Circuit’s opinion below cannot stand.

For these reasons, and those stated in the

Petition for Certiorari and Reply to Brief in

Opposition, this Court should either summarily

reverse the decision below or set the case for plenary

review.