Schmuck v. United States, 489 U.S. 705 (1989), is a United States Supreme Court decision on criminal law and procedure. By a 5–4 margin it upheld the mail fraud conviction of an Illinois man and resolved a conflict among the appellate circuits over which test to use to determine if a defendant was entitled to a jury instruction allowing conviction on a lesser included charge. Justice Harry Blackmun wrote for the majority; Antonin Scalia for the dissent.
The case had begun when Wayne Schmuck was prosecuted for having rolled back odometers for years on cars he sold to used-car dealers. He had been indicted for 12 counts of mail fraud, based on the vehicle title applications the dealers had then mailed to the state's Department of Transportation in order to resell the cars. Before his trial in the Western District of Wisconsin, he had been denied a motion to have the jury instructed that they could vote to convict him of tampering with the odometer, at the time a less serious offense, if they did not find him guilty of mail fraud.
He raised the issue after his conviction with the Seventh Circuit Court of Appeals, as well as the applicability of the mail-fraud statute to the dealers' applications. A panel rejected the latter argument but agreed that the jury should have been allowed to consider the lesser charge, reversing the conviction and remanding the case for a new trial. The government appealed that decision to an en banc panel of the circuit, which restored the conviction, holding that the odometer tampering was not "inherently related" to the mail fraud. Since other appellate circuits had preferred a different test for lesser included charges, Schmuck successfully petitioned the Supreme Court to hear the case.
Blackmun ruled for the government on both questions. Since Schmuck had enjoyed a continuing relationship with the dealers he sold to, and the cars could not be resold to a retail customer without titles obtained using false information, the dealers' applications were an essential element of his crime and thus constituted mail fraud. On the second question, Blackmun said the court should have considered whether the elements of odometer tampering were a subset of the elements of the mail fraud, and since that was not the case Schmuck had been properly denied the instruction. Scalia's dissent focused exclusively on the mail fraud issue. Since Schmuck had already received his payment for the altered vehicles, it did not matter what happened afterwards, a holding he found more consistent with the Court's earlier rulings on the subject.
Underlying prosecution
For 15 years, Wayne Schmuck of Harvard, Illinois, owner of Big Foot Auto Sales, had sold used cars he had bought in his state, where vehicle titles did not then require a statement on the title of the odometer reading at the time of the transaction, to dealers in Wisconsin, which did. Unbeknownst to the dealers, he had in some cases hired someone to roll back the odometers on them, making the vehicles appear to have less mileage than they actually did. Thus they commanded an artificially higher price, both when the dealer paid Schmuck and when they sold it to a customer. In order for the retail transaction to take place, the dealers needed to mail a title application, including the falsified odometer reading, to the state Department of Transportation.
Around 1981 his scheme was discovered when suspicious regulators wrote to the vehicles' previous owners, whose addresses were on the dealer's applications, and learned what the odometers had said at the time of sale. He was arrested by federal authorities and indicted on 12 counts of mail fraud, a felony, for cars he had sold to five different dealers, some as many as five timesUnited States v. Schmuck, hereafter Schmuck II, 840 F.2d 384, 386 (7th Cir., 1988) over a two-year period. At his trial, presided over by district judge Barbara Brandriff Crabb, he admitted that he had rolled back the odometers, but denied that he had committed mail fraud since the dealers had sent the applications after they had bought the cars from him, therefore it wasn't necessary that they do so for him to have realized the proceeds of the odometer tampering. Before his trial in United States District Court for the Western District of Wisconsin, his attorney, Peter Lewis Steinberg, moved that the jury be instructed that they could convict Schmuck on the lesser included charge of odometer tampering, at the time a misdemeanor, if they did not feel his actions constituted mail fraud.United States v. Schmuck, hereafter Schmuck I, 776 F.2d 1368 (7th Cir., 1985)
It was denied, and the jury convicted Schmuck on all 12 counts. In late 1983 he was sentenced to 90 days in jail and four years of probation. His lawyers appealed the conviction to the Seventh Circuit Court of Appeals.
Legal background
On appeal, Steinberg again raised the jury-instruction issue. He also challenged the conviction itself as an unreasonable, overbroad application of the statute, and called it a violation of due process since Schmuck could not have had control over the actions of his victims. Both arguments relied on unresolved issues of case law.
Scope of mail-fraud statute
Under the relevant federal statute, it is not necessary to prove that the accused personally made the mailing at issue. The law applies to one who "causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier" or "knowingly causes to be delivered by mail or such carrier according to the direction thereon" as much as to a perpetrator who makes the mailing themselves.. The extent to which a mailing may be considered part of a fraudulent scheme has been the subject of many appeals cases.
The most important precedent in the case was recent. Three years earlier, in United States v. Galloway, a panel of the Seventh Circuit had sustained a mail-fraud conviction in United States v. Galloway, another case involving odometer tampering. Crabb had also presided over that case's trial, and had directed a not-guilty verdict after the jury convicted.United States v. Galloway, 664 F.2d 161 (7th Cir., 1981)
The government appealed, and by a 2–1 margin the jury's verdict was restored. Robert Arthur Sprecher, following United States v. Shryock, an earlier case from the Fifth Circuit where the defendant had been the head of the leasing department at a new-car dealership,United States v. Shryock, 537 F.2d 207 (5th Cir., 1976) held that the ongoing nature of the scheme distinguished the case and supported the jury verdict.Galloway at 164–166. But concurring Judge Richard Dickson Cudahy, calling the statute "judicially hypertrophied" warned that "the present case takes us to what (for now) may be the outer limits".Galloway, at 166. Luther Merritt Swygert dissented. "The mailings did not conceal the fraud, produce profit for Galloway or contribute to the consumer's harm," he wrote. "The mailings resulted from a transaction to which Galloway was not a party and they were routine business mailings the purposes of which were immaterial to Galloway." He distinguished that case from Shryock by noting that Shryock had been a retail dealer, selling directly to consumers, instead of a wholesaler.Galloway, at 169.
Both Galloway and Shryock had departed from a line of Supreme Court cases in which inevitable mailings by other parties that took place after the perpetrators of the fraud had made their money had been held not to constitute mail fraud.United States v. Kann, ; Parr v. United States, and United States v. Maze, However, other cases had established that mail fraud had occurred even where the perpetrators had not explicitly intended use of the mails as part of their scheme,United States v. Young, was merely incident to itPereira v. United States, or if the mailing took place after the money had been collected but as part of an ongoing scheme involving a continuing relationship with the victims.United States v. Sampson, .
All of those cases had been narrowly decided. In his dissent in Kann v. United States, one of the former, where the mail-fraud charge arose from a check sent to a bank by the perpetrators, William O. Douglas argued that even though the deception was complete the perpetrators still needed the check to clear the bank for their scheme to be finalized. "[I]t is plain that these plans had a wider reach and that but for the use of the mails they would not have been finally consummated," he concluded.Kann, at 96, Douglas, J., dissenting. The Fifth Circuit used similar logic in Shryock,Shryock at 209. as did the Seventh in Galloway.
Lesser included offense
Federal Rule of Criminal Procedure 31(c) says that a lesser included offense must be "necessarily included" in the greater offense. What that means was and how thus to determine if a defendant was entitled to an instruction allowing the jury to consider it was, at the time, unsettled. Courts had traditionally used the elements test, by which a lesser charge was available only if all its elements were part of the greater offense. The test was purely theoretical, based on how both offenses were described in the statutes without regard to the actual circumstances.United States v. Whitaker, 447 F.2d 314, 318–19 (D.C. Cir., 1971)
In 1971, Judge Malcolm Richard Wilkey of the District of Columbia Circuit articulated some issues with Rule 31(c)'s wording:
He proposed instead that courts consider the actual facts of the case, to see if an inherent relationship existed between the charged offense and the proposed lesser offense. He called this "[a] more natural, realistic and sound interpretation" of Rule 31(c). At the time of Schmuck's appeal, two circuits had elected to stay with the traditional elements test, while others, including the Seventh, were using Wilkey's inherent-relationship test.Schmuck I, 1371.
Appeals
The Seventh Circuit heard the case twice. A three-judge panel reversed the conviction and ordered a new trial, but then the circuit en banc reinstated it.
Panel
Swgyert, Joel Flaum, Thomas E. Fairchild heard oral argument in the case in September 1984. They returned over a year later with a 2-1 decision reversing the conviction and remanding the case to district court for a new trial.
Swygert wrote for himself and Flaum. He rejected Schmuck's attack on the conviction, citing the circuit's recent holding in Galloway(a decision from which he himself had dissentedGalloway, 166–169.) and declining to overrule it. As for the alleged due-process violation, he continued, "[o]ne answer is that he can prevent the mailing by abstaining from the fraud." Galloway and the cases on which it rested had also found no due-process violation.Schmuck I, 1369–70.
However, applying the inherent-relationship test, which the circuit had adopted earlier that year,United States v. Cova, 755 F.2d 595, (7th Cir., 1985) he found that Schmuck was indeed entitled to a jury instruction allowing them to convict on odometer tampering:
In this specific case, a rational trier of fact such as the jurors could have decided the question of whether Schmuck's scheme constituted mail fraud either way, as indeed Galloway suggested, but that was for the jury to decide.Schmuck I, 1372–73.