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The Statement and Account Clause and Caperton: Part I

JURIST Guest Columnist Joseph Marren of KStone Partners LLC says that, because no person is permitted to be a judge in their own case, Congress should not be able to unilaterally determine whether it is complying with the Statement and Account Clause...

On June 8, 2009, the US Supreme Court, in a 5-4 decision, found in Caperton v. A.T. Massey Coal Co., Inc. that campaign expenditures made in support of West Virginia Supreme Court Justice Brent Benjamin violated the Due Process Clause of the Fourteenth Amendment. Caperton, a case that inspired a best-selling novel and two editorials in the New York Times, started in 1998 when Caperton filed suit against A.T. Massey Coal Co., Inc. (Massey) in the circuit court of Boone County, West Virginia. After the jury found Massey liable for fraudulent misrepresentation, concealment and tortuous interference with existing contractual relations and awarded Caperton $50 million in damages, West Virginia held its 2004 judicial elections. Massey CEO Don Blankenship contributed $3 million to Benjamin's campaign knowing that the West Virginia Supreme Court would consider the appeal.

Before Massey filed its appeal, Caperton moved to disqualify Benjamin under the Due Process Clause and the state's Code of Judicial Conduct, based on the conflict caused by Blankenship's campaign contributions. Benjamin denied the motion, indicating that he found nothing showing bias for or against any litigant.

Ultimately, Benjamin cast the deciding vote to overturn the $50 million verdict. During the rehearing process, he refused twice more to recuse himself, and the court once again reversed the verdict. Benjamin filed a concurring opinion, defending the court's opinion and his recusal decision.

On appeal, the US Supreme Court found that the $3 million spent on Benjamin's behalf created a risk of actual bias sufficient to violate Caperton's Fourteenth Amendment right to an impartial adjudicator. In doing so, the Court recognized for the first time that campaign expenditures could create a due process violation.

Justice Anthony Kennedy, in his opinion for the Court, cited several cases including Tumey v. Ohio:

The Tumey Court concluded that the Due Process Clause incorporated the common law rule that a judge must recuse himself when he has "a direct, substantial and pecuniary interest" in the case. This rule reflects the maxim that "[n]o man is allowed to be a judge in his own cause; because his interest would certainly bias his judgment, and, not improbably, corrupt his integrity."
Further, Kennedy opined that:
[In Tumey], the mayor of a village had the authority to sit as a judge (with no jury) to try those accused of violating a state law prohibiting the possession of alcoholic beverages. Inherent in this structure were two potential conflicts. First, the mayor received a salary supplement for performing judicial duties, and the funds for that compensation derived from the fines assessed in a case. No fines were assessed upon acquittal. The mayor-judge thus received a salary supplement only if he convicted the defendant. Second, sums from the criminal fines were deposited in the village's general treasury fund for village improvements and repairs.
The Court in Tumey held that the Due Process Clause required disqualification "both because of [the mayor-judge's] direct pecuniary interest in the outcome, and because of his official motive to convict and to graduate the fine to help the financial needs of the village." The Court articulated the controlling principle:
Every procedure which would offer a possible temptation to the average man as a judge to forget the burden of proof required to convict the defendant, or which might lead him not to hold the balance nice, clear and true between the state and the accused, denies the latter due process of law.
The Statement and Account Clause of the US Constitution states that "a regular Statement and Account of the receipts and expenditures of all public Money shall be published from time to time." If we apply the Court's logic in Caperton and Tumey to Congress's responsibility to publish the "statement and account," several notions become obvious. First, while the Constitution is clear that Congress is responsible for publishing the "statement and account," it cannot unilaterally determine whether it is complying with the clause. This would violate the maxim cited by the Court that no person is allowed to be a judge in their own cause. James Madison in Federalist No. 10 extended this concept beyond a single judge: "With equal, nay with greater reason, a body of men are unfit to be both judges and parties at the same time." Second, it can be argued that Congress has "a direct, personal, substantial and pecuniary interest" in the determination of whether it is complying with Constitution as it is in their interest to under-report expenses in an effort to endear themselves with the electorate, protect incumbents and degrade the competitiveness of the electoral process.

If the Court were to determine that Congress did not have "a direct, personal, substantial and pecuniary interest," the Court would then proceed to its analysis of the more general concepts of bias. Kennedy stated that the Tumey Court was also concerned with a more general concept of interests that tempt adjudicators to disregard neutrality. As new problems have emerged that were not discussed at common law, the Court has identified additional instances which, as an objective matter, require recusal. There are circumstances "in which experience teaches that the probability of actual bias on the part of the judge or decisionmaker is too high to be constitutionally tolerable."

This concern was discussed in Ward v. Village of Monroeville, which invalidated a conviction handed down in a "mayor's court" (a court in which the mayor sits as the presiding judge) for violation of certain traffic offenses. In Ward the mayor received no money for the convictions. The fines the mayor assessed went to the town's general fund. The Court held that "[t]he fact that the mayor [in Tumey] shared directly in the fees and costs did not define the limits of the principle." The principle, instead, turned on the "possible temptation" the mayor might face; "the mayor's executive responsibilities for village finances might make him partisan to maintain a high level of contribution [to those finances] from the mayor's court." As the Court reiterated in Gibson v. Berryhill, another case that term, "the [judge's] financial stake need not be as direct or positive as it appeared to be in Tumey."

The Court in Caperton stated that the facts of the case were "exceptional," "extreme," "rare" and "extraordinary." If $3 million in campaign contributions to a state supreme court's judge's campaign is critical to the Court's analysis of whether due process has been violated, then what would the Court think of Congress keeping over $77 trillion of social insurance expenses and numerous multi-trillion enterprises that the federal government controls off the governments' books as its members seek re-election.

It is significant to note that the Court does not have to conclude that Congress intentionally published misleading or fraudulent financial statements. The Court merely has to conclude that there would be a possible temptation for the average Congress to not hold the balance nice, clear and true in determining the methodology of compiling the "statement and account" and its content. If it so concluded, the probability of actual bias on the part of Congress is too high to be constitutionally tolerable as the arbiter of whether it is complying with the Constitution.

Using the Court's analysis, it is impossible to conclude that Congress is the appropriate body to determine whether it is complying with the Statement and Account Clause. This conclusion flies in the face of Chief Justice Warren Burger's dictum in US v. Richardson that "it is clear that Congress has plenary power to exact any reporting and accounting it considers appropriate in the public interest." This is so unless one reads the chief justice's remarks to be targeted solely to the amount of detail that Congress must publish.

Given the explicit language of the Statement and Account Clause, the only reasonable interpretation is that citizens have a right to financial information. This private right must give the electorate standing in the courts to challenge the government if it believes that Congress is not providing the required financial information. Otherwise, there is no check on the annual congressional obligation to publish the "statement and account." It is noteworthy that in Richardson, both the majority concurrence and the dissent from the US Court of Appeals for the Third Circuit believed that the public was entitled to some form of accounting. Justice William Douglas focused on this fact in his dissent when the case reached the Supreme Court. He thought that Burger's interpretation effectively read the Statement and Account Clause out of the Constitution.

It is the duty of the judiciary to interpret the legal meaning of the Constitution. If the Court does not acknowledge the right to financial information, it is effectively saying that the Constitution does not permit anyone to challenge Congress with respect to its self-proclaimed adherence to a constitutional requirement. This is so even when Congress's non-adherence benefits its incumbents to the detriment of the electorate. The Court should not invoke the political question doctrine as this would nullify an important check on power that the framers explicitly made a part of the Constitution. Furthermore, as previously noted, the lack of an interpretation of the Statement and Account Clause has dire implications for the right to vote, freedom of speech and equal protection. Finally, if the Court refuses to interpret the Statement and Account Clause, it will remain susceptible to making errant decisions based on false and incomplete economic data as it did with its Patient Protection and Affordable Care Act decision last summer.

Joseph Marren is the President and Chief Executive Officer of KStone Partners, an SEC-registered investment advisor that specializes in managing funds of hedge funds. Previously he was Head of Business Development in the mergers and acquisitions departments at several firms including Sagent Advisors, Citigroup, Credit-Suisse and DLJ. He is the author of two books on mergers and acquisitions, taught at New York University Stern School of Business and is a graduate of Fordham University School of Law.

Suggested citation: Joseph Marren, The Statement and Account Clause and Caperton: Part I, JURIST - Sidebar, Apr. 8, 2013, http://jurist.org/sidebar/2013/04/joseph-marren-sa-caperton-part1.php

This article was prepared for publication by Stephen Krug, an associate editor for JURIST's professional commentary service. Please direct any questions or comments to him at professionalcommentary@jurist.org

Opinions expressed in JURIST Commentary are the sole responsibility of the author and do not necessarily reflect the views of JURIST's editors, staff, donors or the University of Pittsburgh.

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