Opinion ID: 6105292
Heading Depth: 1
Heading Rank: 4

Heading: analysis

Text: I. Bajakajian holds that when the unlawful conduct is a failure to report, the Eighth Amendment bars the trial court from imposing a penalty that is grossly disproportionate to the failure to report—not to some other unadjudicated conduct 31 U.S.C. § 5316(a)(1)(A) requires a person to “report” when they are transporting more than $10,000 outside of the United States. Specifically, that reporting statute provides: (a) Except as provided in subsection (c) of this section, a person… shall file a report under subsection (b) of this section when the person, agent, or bailee knowingly— (1) transports, is about to transport, or has transported, monetary instruments of more than $10,000 at one time— (A) from a place in the United States to or through a place outside the United States . . . . 31 U.S.C. § 5316 (emphasis added). Under 31 U.S.C. § 5322(a), a “willful[]” violation of this “knowing” failure to report statute carries a fine of “not more than $250,000, or imprison[ment] for not more than five years, or both.” A separate 3 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) criminal statute requires the trial court to forfeit the entire amount “involved in such offense.” 18 U.S.C. § 982(a)(1). 1 Hosep Bajakajian attempted to board a plane leaving the United States. A customs inspector approached him and his wife and told them that they were required to report all money in excess of $10,000 in their possession or in their baggage. Bajakajian, 524 U.S.at 324. Bajakajian responded that he was carrying $8,000 and his wife had another $7,000, but that they had no other currency to declare. Id. at 324-25. The customs inspectors, however, found $357,144 in currency that Bajakajian was carrying, much of it in a false-bottomed piece of luggage. Id. at 325, 353 (Kennedy, J., dissenting) 2; United States v. Bajakajian, 84 F.3d 334, 335 (9th Cir. 1996), aff’d, 524 U.S. 321(1998). The government charged Bajakajian with three felonies: “willfully” failing to report that he was transporting more than $10,000 outside the United States in 1 “The court, in imposing sentence on a person convicted of an offense in violation of section . . . 5316, . . . shall order that the person forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property.” Former 18 U.S.C. § 982(a)(1) (1990). 2 The facts in that case were not in dispute, but their significance was. See Bajakajian, 524 U.S. at 353 (Kennedy, J., dissenting) (“The majority ratifies the District Court’s see-no-evil approach. The District Court ignored respondent’s lies in assessing a sentence.”). 4 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) violation of 31 U.S.C. §§ 5316(a)(1)(A) and 5322(a), 3 making a material false statement to the United States Customs Service in violation of 18 U.S.C. § 1001, and for criminal forfeiture of the entire $357,144 pursuant to 18 U.S.C. § 982(a)(1). Id. at 325. The federal district court convicted Bajakajian of failing to report, but it concluded that the statute at issue was a reporting statute and that full forfeiture of the nonreported currency would violate the excessive fines clause of the Eighth Amendment. Id. at 326. The Ninth Circuit Court of Appeals affirmed. Id. The United States Supreme Court agreed and held that forfeiture of the amount the government sought—that is, the entire amount that Bajakajian failed to report—would have violated the excessive fines clause because it was “grossly disproportional to the gravity of [the] defendant’s offense.” Id. at 334. The statute in this case is the same type of reporting statute as the statute at issue in Bajakajian. GMA violated the FCPA. 4 Specifically, the trial court ruled— 3 To violate section 5316(a)(1)(A) the person must have “knowledge” that they are transporting over $10,000 in currency out of the United States—but the statute does not require affirmative knowledge of the need to report. However, section 5322(a) creates higher penalties if the person “willfully” fails to report. Bajakajian was alerted to the need to report by the customs inspector and chose not to do so. Therefore, the government charged him with, and he pleaded guilty to, a willful violation. Bajakajian, 524 U.S. at 325. 4 The trial court found, and we affirmed, that GMA committed five violations of the FCPA, based on four separate provisions. State v. Grocery Mfrs. Ass’n, 195 Wn.2d 442, 451, 477, 461 P.3d 334 (2020). The violations were 5 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) and this Court affirmed—that GMA violated the mandatory reporting provision of the FCPA: (1) In addition to the information required under RCW 42.17A.205 and 42.17A.210, on the day the treasurer is designated, each candidate or political committee must file with the commission a report of all contributions received and expenditures made prior to that date, if any. Former RCW 42.17A.235(1) (2018) (emphasis added). The statute in this case also carries the same kind of severe penalties for intentional failures to report that the statutes in Bajakajian carried for willful failures to report. Former RCW 42.17A.765(5) (2010). And the trial court followed the FCPA statute: it determined GMA’s fine by starting with the amount that GMA failed to report—$11 million. 5 RCW 42.17A.750(1)(e); former RCW “a. Failing to timely register with the Public Disclosure Commission as a political committee in violation of RCW 42.17A.205; “b. Failing to timely identify a treasurer and [bank] account in violation of RCW 42.17A.205; “c. Failing to timely and regularly disclose contributions it received from its members in the Defense of Brands Account in violation of RCW 42.17A.235; “d. Failing to timely and regularly disclose expenditures it made from the Defense of Brands Account in violation of RCW 42.17A.240; and “e. Concealing the true sources of the contributions it received and expenditures it made in opposing Initiative 522[]” in violation of RCW 42.17A.435. Id. (footnote omitted). 5 The trial court based this fine specifically on GMA’s failure to report: 6 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) 42.17A.765(5); Majority at 6-7. The trial court then reduced that fine because it found significant mitigating factors—imposing a base penalty of $6 million. Clerk’s Papers (CP) at 4072. Finally, the trial court trebled that base penalty because it found that GMA acted intentionally. Id. The trial court ultimately fined GMA $18 million for its failure to report. Id.; former RCW 42.17A.765(5). The majority now affirms. This result stands in direct conflict with the result in Bajakajian. Bajakajian was criminally charged, and the United States Supreme Court held that forfeiture of the entire amount that he did not report would have been excessive under the Eighth Amendment—because he could be punished only for the crime of conviction, which was a failure to report. GMA violated a civil, regulatory statute and is being fined for the entirety of the amount that it failed to report, plus $7 1. Defendant Grocery Manufacturers Association shall pay the amount of $6,000,000.00 as a civil penalty for multiple violations of the state campaign finance disclosure law, RCW 42.17A[,] specifically for • concealing the amount accumulated in the Defense of Brands Account; • concealing the source of contributions to the Defense of Brands Account; • the 60 disclosure reports that were not timely or properly filed identifying the finance activity of the Defense of Brands Account; and • the number of days required reports were filed late. Clerk’s Papers at 4072. 7 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) million more. Bajakajian holds that when the unlawful conduct is a failure to report, the Eighth Amendment bars imposition of a penalty that is grossly disproportionate to the failure to report—no matter how knowing, willful, or criminal the failure to report is. II. The majority improperly weighs the Bajakajian factors by declining to treat the FCPA violation at issue as a reporting violation The Bajakajian Court noted that the main inquiry in an Eighth Amendment excessive fines clause case is proportionality. The Court ruled that the “amount of the forfeiture must bear some relationship to the gravity of the offense that it is designed to punish.” Bajakajian, 524 U.S. at 334 (emphasis added). Thus, the first question for an Eighth Amendment proportionality inquiry under the excessive fines clause asks, What is the nature “of the offense that [the fine] is designed to punish?” Id. We examine four factors to determine the answer to this question and to the related question of whether the penalty is grossly disproportionate to that “offense”: “‘(1) the nature and extent of the crime, (2) whether the violation was related to other illegal activities, (3) the other penalties that may be imposed for the violation, and (4) the extent of the harm caused.’” 6 The Bajakajian Court did not identify four distinct factors. But courts have 6 extrapolated factors based on the case. City of Seattle v. Long, 198 Wn.2d 136, 167, 493 P.3d 94 (2021). This court adopted the Ninth Circuit’s test to determine whether a fine is grossly disproportional. Id. The four factors above are not exhaustive because Bajakajian does not require the consideration of “any rigid set of factors in deciding 8 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) State v. Grocery Mfrs. Ass’n, 195 Wn.2d 442, 476, 461 P.3d 334 (2020) (quoting United States v. $100,348.00 in U.S. Currency, 354 F.3d 1110, 1122 (9th Cir. 2004)). In this case, the impermissible conduct was GMA’s failure to file a report. 7 This is the conduct that GMA should be fined for, not the amount of money that GMA otherwise lawfully received and spent on campaign speech.
To determine the nature and extent of the crime, we start as the United States Supreme Court did: with the elements of the statute that the entity violated. Bajakajian, 524 U.S. at 337. Bajakajian was convicted of “willfully” and “knowingly” failing to file a currency transportation report in violation of 31 U.S.C. §§ 5316(a)(1)(A) and 5322(a). Those are felony, criminal statutes. But those statutes did not make the currency transported illegal—they punished only the failure to report. That was critical to the Bajakajian Court’s decision. Id. (“It was permissible to transport the currency out of the country so whether a punitive fee is” proportional to the offense. United States v. Mackby, 339 F.3d 1013, 1016 (9th Cir. 2003). 7 See supra note 5; former RCW 42.17A.235(1) (“In addition to the information required under RCW 42.17A.205 and 42.17A.210, on the day the treasurer is designated, each candidate or political committee must file with the commission a report of all contributions received and expenditures made prior to that date, if any.”) 9 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) long as he reported it.”). The dissent accurately recited the legislative history and purpose of that currency reporting and forfeiture statutes: it was undisputed that the purpose of those statutes was to prevent money laundering, tax evasion, and drug trafficking, serious criminal problems that garnered national, federal concern. 8 But the reporting statute did not punish those crimes—separate criminal statutes did. So the Bajakajian majority ruled that the failure-to-report crime was the one to which the forfeiture must be compared, not the money laundering, tax evasion, and drug trafficking that the failure-to-report crime was designed to combat. Id. at 338. Here, the majority takes a different approach. It looks to the “declaration of policy” in the FCPA to find that GMA’s offense “was grave and the extent was broad.” Majority at 11-13. But the majority in Bajakajian did not look to the policy 8 The dissent in Bajakajian noted that smuggling or failing to report cash is more serious than the Court is willing to acknowledge. The drug trade, money laundering, and tax evasion all depend in part on smuggled and unreported cash. Congress enacted the reporting requirement because secret exports of money were being used in organized crime, drug trafficking, money laundering, and other crimes. See H. R. Rep. No. 91-975, pp. 12-13 (1970). Likewise, tax evaders were using cash exports to dodge hundreds of millions of dollars in taxes owed to the Government. 524 U.S. at 351 (Kennedy, J., dissenting). Additionally, the dissent noted that because money laundering and drug smuggling are so difficult to prove, and “[o]ne of the few reliable warning signs of some serious crimes is the use of large sums of cash,” Congress made a strategic decision to punish all cash smuggling or nonreporting with heavy fines, so long as the conduct was “willful.” Id. at 353-54. 10 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) provisions of 31 U.S.C. § 5316 to determine whether the fine was excessive. The majority looked to the elements of the crime that Bajakajian was convicted of and the specific conduct giving rise to that crime—failing to file a report. Bajakajian, 524 U.S. at 337 (despite differing facts emphasized by the majority and dissent, the majority held that “Respondent’s crime was solely a reporting offense”). It was the Bajakajian dissent that focused on the uncodified policy choices that convinced Congress to pass the reporting crime and forfeiture statutes. This court, of course, is bound by the Bajakajian majority. I therefore conclude that the nature and extent of the crime in this case was a failure to report, just like in Bajakajian. 9 This tends to show that the fine imposed in this case— which related primarily to the amount of money that GMA failed to report rather than to the failure to report itself—was excessive. 9 As the Supreme Court explained in Bajakajian, 524 U.S. at 334, under the Eighth Amendment, “The amount of the forfeiture must bear some relationship to the gravity of the offense that it is designed to punish. See Austin v. United States, 509 U.S. [602,] 622623[, 113 S.Ct. 2801, 2812 (noting Court of Appeals’ statement that “‘the government is exacting too high a penalty in relation to the offense committed’”); Alexander v. United States, 509 U.S. 544, 559[, 113 S. Ct. 2766, 2776, 125 L. Ed. 2d 441] (1993) (“It is in the light of the extensive criminal activities which petitioner apparently conducted . . . that the question whether the forfeiture was ‘excessive’ must be considered”)”. (Emphasis added and fourth alteration in original.) 11 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) B. Second factor: whether the violation was related to other illegal activities A federal grand jury indicted Bajakajian on three counts, including making false statements to a customs officer. Bajakajian, 524 U.S. at 325. In exchange for his guilty plea to failure to report, the government dismissed the false statements charge. Bajakajian, 84 F.3d at 335. The forfeiture count was then tried to the court. Id. at 336-37. So Bajakajian’s crimes of conviction (failure to report and criminal forfeiture) could be said to have been related to the false statements charge that the government dismissed. They could even be said to have been related to the problem of drug trafficking and money laundering, which the reporting statutes were designed to attack. But the majority of the Supreme Court did not say that. Instead, the majority said that there were really no other crimes directly related to the crime of conviction because it “was permissible to transport the currency out of the country so long as he reported it.” Bajakajian, 524 U.S. at 337. “Thus, the essence of respondent’s crime is a willful failure to report the removal of currency from the United States.” Id. The clear lesson of that decision is that courts risk Eighth Amendment violations if they compare huge fines to unadjudicated crimes and harms, rather than to the elements of the violation itself. 12 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) Here, GMA violated only the civil FCPA. Similar to Bajakajian, if GMA had filled out the reports, then all of its transactions and campaign activities would have been permissible. Additionally, the trial court found that GMA had no prior violations of the FCPA, that GMA is not a repeat violator, and that GMA cooperated with the Public Disclosure Commission. Majority at 6 (citing CP at 4069). The relationship to other related criminal activities in this case seems far more questionable than the relationship to related criminal activities in Bajakajian—especially since GMA’s campaign receipts, campaign expenditures, and campaign speech, like Bajakajian’s transport of currency, was otherwise totally lawful. This also tends to show that the fine imposed in this case was excessive. C. Third factor: the other penalties that may be imposed for the violation Our next question asks, What other penalties that might be imposed for the violation? That question is designed as another possible indicator of rough proportionality. Under the FCPA, the other penalties that might have been imposed on GMA are all tethered to the actual conduct of failing to report. Former RCW 42.17A.750(1) (2011) identifies a range of possible civil penalties for violations of 13 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) any provision of the FCPA. One section provides for the civil penalty of “not more than ten thousand dollars for each violation” of any provision of the FCPA. Former RCW 42.17A.750(1)(c). Another section provides the civil penalty of “ten dollars per day for each day” that a person fails to file a “properly completed statement or report.” Former RCW 42.17A.750(1)(d). And the court has the option to enjoin or compel performance of “any act required herein.” Former RCW 42.17A.750(1)(f). To be sure, subsection (e) provides that “[a] person who fails to report a contribution or expenditure as required by this chapter may be subject to a civil penalty equivalent to the amount not reported as required.” Former RCW 42.17A.750(1) (emphasis added). But when analyzing this factor, even the majority must acknowledge that the other penalties that the FCPA authorizes for the violation are all more modest, measured by more specific statutory amounts, and completely dependent on the conduct of failing to report. Lower federal courts applying the Bajakajian decision have noted the proportionality benefits that such definite statutory calculations produce. For example, the D.C. Circuit court held that Bajakajian “was primarily concerned that the potential penalty for illegal export of currency would be indefinite and unlimited—and disproportionate to the offense—if the government could seize whatever amount of currency the unwitting ‘exporter’ happened to be carrying 14 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) when caught.” Grid Radio v. Fed. Commc’ns Comm., 349 U.S. App. D.C. 365, 278 F.3d 1314, 1322 (2002). That problem is eliminated when a statute fixes fines and “incorporates statutorily required factors for computation of fines.” Combat Veterans for Cong. Political Action Comm. v. Fed. Election Comm’n, 983 F. Supp. 2d 1, 18-19 (D.D.C. 2013), aff’d, 417 U.S. App. D.C. 414, 795 F.3d 151 (2015). Here, the legislature provided a more definite fine that calculates the penalty based on the conduct itself, not just the amount that a violator failed to report. For example, if the trial court had instead used the “ten dollars per day for each violation” scheme, GMA would have received a $622,820 base fine that would be trebled to about $1.87 million. Suppl. Br. of Pet’r GMA at 14 (citing RCW 42.18A.750(1)(c), (d)). This would still have been the largest FCPA fine ever imposed in Washington State history. 10 In other words, the other penalties that might be imposed for the nonreporting violations in this case are far less than $18 million. In fact, they are far less than $6 million. Once again, this tends to show that the fine imposed in this case was excessive. 10 Enforcement of Campaign Finance Laws, https://www.atg.wa.gov/enforcementcampaign-finance-laws (last visited Jan. 13, 2022). 15 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) D. Factor four: the extent of the harm caused The majority asserts that the “harm was substantial and struck at the heart of the principles embodied in the FCPA.” Majority at 16 (citing RCW 42.17A.001). And the majority is certainly correct that undermining democracy, campaign fairness, and the integrity of the vote are “substantial” problems. But that is not what GMA was adjudicated to have done. The government alleged, and the trial court ruled, that GMA failed to report campaign contributions. Failure to report campaign contributions can certainly cause harm. But failure to report currency transport can also cause harm: the currency reporting statutes were enacted for the purpose of deterring and catching drug dealers and profiteers. But Bajakajian was not charged or convicted of money laundering or drug trafficking, and so Bajakajian could not be fined for those offenses. Bajakajian, 524 U.S. at 339, 353-55 (Kennedy, J., dissenting). Similarly, GMA was not found to have violated a law that punishes the undermining of democracy, so it cannot be fined for this alleged conduct. A reporting offense is a reporting offense. That means that the extent of the harm caused by the failure to report in this case is comparable to the extent of the harm caused by the failure to report in Bajakajian: depriving the government, and in this case the people, of information. If that harm did not meet the $357,144 16 State v. Grocery Mfrs. Ass’n, No. 99407-2 (Gordon McCloud, J., dissenting) threshold sought by the government in Bajakajian, it certainly does not meet the $18 million threshold imposed by the trial court here.