Most people do not realize it, but they do not own the money in their bank account. The bank owns the money and all the account holder has is a right to require the bank to return that money when they come to withdraw it. While this might seem like a hyper-technical distinction, in United States v. Rose, 17-689, slip. op. (2d Cir. May 30, 2018), it meant the difference between a defendant’s potential freedom and years in prison.
The defendant in Rose had pleaded guilty to robbery under the federal Hobbes Act when he forced a person to withdraw funds from their bank account using an ATM. Just over a month after making his plea, Rose wrote to the court seeking to withdraw that plea, arguing that he had been coerced into making it by his lawyer. After a hearing in which the lawyer testified, the court rejected Rose’s argument of coercion and sentenced him to sixty months in prison. Rose appealed.
On appeal, however, Rose changed his argument as to why he should have been allowed to withdraw his guilty plea. Rather than argue that he had been coerced, he now argued that he was legally innocent of the crime because the robbery did not have a sufficient effect on “interstate commerce.” Only crimes that had such an effect could be prosecuted under the federal statute. Here, Rose argued, he had only robbed an individual and that individual was not engaged in interstate commerce or targeted because he was engaged in such commerce. It was, according to Rose, simply a case of a street robbery of an ordinary individual and, if anything, it was up to the state to prosecute him and not the federal government.
The Second Circuit disagreed. As a threshold matter, the court relied on its earlier case law in which it had found that a person could be prosecuted under the federal Hobbes Act so long as it produced “any interference with or effect upon interstate commerce, whether slight, subtle or even potential”. And this is where the principle that banks, and not their customers, own the money in customer accounts came into play. In the Second Circuit’s view, the “target” of the robbery was not the individual but Citibank, which owned the money that Rose stole. Indeed, the court noted that Rose had agreed, as part of his guilty plea, to pay the money back to the bank and not the individual.
In making that finding, the court rejected Rose’s argument that the funds ceased to belong to the bank once the individual victim withdrew them. In its view, the target of the robbery remained the bank and the fact that the individual had withdrawn and handed the funds over to Rose was irrelevant. In this regard, the Second Circuit declined to follow a decision of the Fifth Circuit that appeared to be entirely at odds with the Second Circuit’s holding. In that Fifth Circuit case, United States v. Burton, 425 F.3d 1008 (5th Cir. 2005), the court held that where a robber forces someone to withdraw funds from a bank, the funds immediately cease to belong to the bank and became the property of the individual. A robbery of an individual did not impact interstate commerce and the Hobbes Act did not apply. In the Second Circuit’s view, however, that reasoning was wrong because it ignored the fact that even a slight impact on interstate commerce was enough to sustain a conviction under the Hobbes Act.
The difference in the approach taken by the Second and Fifth Circuits is not the first time that the issue of the “interstate commerce” aspect of the Hobbes Act has resulted in a circuit split. In Taylor v. United States, 136 S. Ct. 2074 (2016), the Supreme Court was asked to resolve a dispute between the circuits over whether robberies of drug dealers could be prosecuted under the Hobbes Act even where there was no evidence that the drugs were being taken over state lines or otherwise part of interstate commerce. The majority found that they could be prosecuted as a federal crime because “the production, possession, and distribution of controlled substances” necessarily implicated interstate commerce. Such a broad interpretation of the Hobbes Act is consistent with the approach taken by the Second Circuit inRose. The approach taken by the Fifth Circuit, by contrast, is more akin to the approach advocated by Justice Thomas in his dissent in Taylor. In his view, “[p]unishing a local robbery does not bear a ‘direct relation’ to the regulation of interstate commerce” and is, therefore, not necessary for the federal government to exercise its limited constitutional powers. He believed that punishing such robberies would interfere with the states’ traditional policing powers. Almost foreshadowing the Second Circuit’s decision in Rose, Justice Thomas warned that finding that the robbery of drug dealers always impacted interstate commerce, “allows for unbounded regulation.”
Although the Second Circuit did not reference Taylorin its opinion, its broad reading of the Hobbes Act seems consistent with the Supreme Court’s approach to that statute. But Rose has now created an intolerable situation. At the most basic level, a robber who forces a victim to withdraw funds from an ATM can be prosecuted under the Hobbes Act if the crime occurs in, for example, New York City, but could not be prosecuted under the Hobbes Act if the crime occurs in, for example, Houston. Rose, however, also raises the potential for an even larger problem: If followed to its logical conclusion, the ruling could transform a host of minor crimes (the amount stolen in Rose was $900) from simple matters that would normally be handled by state authorities into federal crimes. Such a result is bad for defendants who might find themselves facing the power of the federal government over relatively minor conduct, is bad for the federal courts that might see their caseload increase as traditionally state law crimes suddenly become federal matters, and bad for our constitutional system by giving the federal government the power to usurp states’ rights to regulate the conduct of their own citizens.
It is entirely possible that this is not the last time we hear about Rose. With the Second and Fifth Circuits now at odds with each other on the proper interpretation of a federal statute, the case seems to fit the very type of case that merits Supreme Court review. That is not to say, however, that the Supreme Court will necessarily side with the Second Circuit. Although Taylor does suggest that the Supreme Court takes a broad view of the Hobbes Act, the Court was also clear that the conduct at issue had to have a “substantial effect” on interstate commerce. This is arguably narrower than the “slight, subtle or even potential” effect that the Second Circuit believed justified the application of the Act. But that is all in the future, for now, Rose opens the door for the Hobbes Act to be much more broadly applied and only time will tell what that broad application might mean in practice.
If you have any questions about federal crimes or criminal appeals, please contact Andrew Horne at firstname.lastname@example.org or (212) 374-9791.
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