Thursday, March 24, 2005

Hobbs Act and Depletion of Assets

United States v. Randall Re and Anthony Calabrese, Case No. 03-2089 (03/22/2005): One of the defendants, Re, owned a warehouse next door to a warehouse owned by Leach. Re thought he had a buyer for his warehouse, but the prospective buyer, Daughtry, decided to lease from Leach rather than buy from Re. A thug so intimidated Daughtry that he backed away from the lease. The Court upheld a jury verdict finding that Re was behind the intimidation. The next question was whether there was enough effect on interstate commerce to ground this prosecution under the Hobbs Act. The Court found that there was barely enough evidence on interstate commerce.

The prosecution relied on the depletion of assets theory. "Under this theory, commerce is affected when an enterprise which customarily purchases items in interstate commerce has its assets depleted through extortion, which in turn limits the victim-enterprise’s potential as a purchaser of goods." The government argued that Daughtry was dissuaded from the lease, which meant that Leach had less money to pay expenses associated with the warehouse. It was a further part of the government’s argument that the Leach used out-of-state paint, tools (most notably, a weed-eater), and gasoline for these tools as part of his efforts to maintain the warehouse. The Court stressed that any out-of-state purchases must be made by the victim enterprise and they must be made customarily. The Court noted that the government never presented any direct evidence that these items had ever traveled in interstate commerce. Nor did it establish that any of these goods were customarily purchased. (For example, the purchase of a weed-eater 20 years ago would not establish that it was a customary purchase.) Nor did the government establish that these purchases were made by the business, as opposed to the owner of the business. Nonetheless, the Court held that a jury could legitimately infer that all these items had been customarily purchased by the business from out-of-state sources.

The Court gave no explanation for this conclusion. Is the Court saying that all common items can always be inferred to have traveled in interstate commerce? Perhaps it is true that there is nothing in today’s world that is entirely intrastate in a factual sense. But then is the jurisdictional component of interstate commerce a meaningful limitation? One would be hard pressed to conjure up a case in which the Court will not find that the jury had enough, just barely enough, evidence to conclude that there had been a depletion of assets.

This case is also troublesome for what the Court did not say. In this case there was no robbery or extortion, a core requirement of the Hobbs Act. The opinion assumes that violence not amounting to robbery or extortion can be the basis of a Hobbs Act prosecution, a difficult legal proposition noted but not resolved earlier this year in the Court’s opinion in National Organization for Women, Inc. v. Joseph M. Scheidler, Case No. 99-3076 (01/28/2005). (The NOW case was the subject of an earlier posting.) It cannot be told from the Re opinion whether this issue was raised by the parties, and of course the Court cannot be faulted for failing to take on a difficult issue not raised by the parties.

Perhaps more questionable is the assumption that violence could be directed at Daughtry and the depletion of assets could be felt by Leach. The depletion of assets theory is very broad, especially as administered in this case, but it becomes inconsequential, if not a fiction, when the victim of the violence and the victim of the depletion are different parties.