Kousisis v. United States

Justice Gorsuch , concurring in part and concurring in the judgment.¶verify

This case touches on an old question: What is the difference between a lie and a criminal fraud? Consider an easy hypothetical. In a phone interview, a couple asks a prospective babysitter if she has a criminal record. The babysitter says no, but that's not right. While she has sought to turn her life around, a burglary conviction lurks in her past, one she is too embarrassed to mention. Relying on her misrepresentation, the parents hire the babysitter. Her work proves exemplary and the couple pays her well. Later, though, the parents discover the babysitter's lie. They might be upset and refuse to hire her again. But should¶verify

might have been able to rely on the DBE provisions' unconstitutionality to support an argument that the provisions were not “material” to their contracts.¶verify

the babysitter face federal fraud charges? Of course not. While “intentional deceit for purposes of gain ought sometimes to be punished,” if all misrepresentations amounted to criminal fraud, “thousands of buyers and sellers” would be felons. T. Macaulay, J. Macleod, G. Anderson, & F. Millet, Notes on the Indian Penal Code (1837), in 7 The Life and Works of Lord Macaulay 527–528 (1897).¶verify

How do courts police the line between mere lies and criminal frauds warranting the law's attention? One important tool is fraud's injury requirement. To prove a criminal fraud, a prosecutor must show that the victim did not receive what the defendant promised. It is a rule that shields people like our babysitter from the prosecutor's sights. And it is a rule that keeps judges from becoming arbiters of good morals. A fraud conviction can mean years, even decades, in prison. Before a prosecutor may seek, and a court may authorize, that kind of punishment, the law demands more than a victimless lie.¶verify

While right about much else, the Court's decision today contains a footnote that appears to spurn fraud's historic injury rule. Under the federal wire-fraud statute, the Court suggests, it does not matter if the putative victim receives all he was promised. So long as he parts with any money or property because of the defendant's misrepresentation, the Court seems to say, that is injury enough to sustain a federal wire-fraud conviction. Ante , at 127, n. 5. It is a startling suggestion, one with no mooring in the common law of fraud or the wire-fraud statute, and one that risks turning victimless lies like our babysitter's into federal felonies. Respectfully, that cannot be the law.¶verify

I¶verify

The question presented in this case is a narrow one. The parties ask us to resolve whether the federal wire-fraud statute, 18 U. S. C. § 1343, requires the government to plead and prove that the defendant caused his victim a “net pecuniary loss.” Brief for United States (I) (reciting the question presented); ante , at 118. Today, the Court holds that the answer is no. Congress, the Court explains, enacted the federal wire-fraud statute against the backdrop of the common law. Ante , at 124. And, at common law, fraud required proof that the victim was injured. Ante , at 127. 1 But that injury requirement never demanded proof that the victim suffered a “net pecuniary loss.” So, the Court concludes, neither does the federal wire-fraud statute. On each of those points, the Court and I agree.¶verify

But having dispatched the question presented, the Court does not stop there. Instead, the Court proceeds to assert that the wire-fraud statute's injury requirement is satisfied whenever a defendant “obtain[s] . . . property” that a victim “would not otherwise have parted with” by means of a material misrepresentation. Ibid. , n. 5. The Court's commentary on this score might be easy to miss. It comes only in a brief footnote deep in the Court's opinion. And on first glance, the Court's remarks might seem innocuous enough. After all, one might wonder, if a fraud causes a victim to part with money or property, isn't that necessarily an injury?¶verify

I worry, though, that initial appearances may deceive and the Court's stray footnote could portend trouble. Start with this difficulty: What the Court says in its footnote does not¶verify

1 Countless cases and treatises support the Court's conclusion that each of those common-law doctrines had an injury requirement. For the crime of false pretenses, see State v. Palmer , 50 Kan. 318, 323–324, 32 P. 29, 30 (1893); State v. Matthews , 44 Kan. 596, 602–603, 25 P. 36, 38 (1890); United States v. Rush , 196 F. 579 (ED Wash. 1912); 2 Bishop on Criminal Law §§ 415–417 (J. Zane & C. Zollman eds., 9th ed. 1923); 2 H. Brill, Cyclopedia of Criminal Law § 1271 (1923). For the remedy of contractual rescission, see Williams v. Kerr , 152 Pa. 560, 565, 25 A. 618, 619 (1893); Spreckels v. Gorrill , 152 Cal. 383, 388, 92 P. 1011, 1015 (1907); 1 H. Black, Rescission of Contracts and Cancellation of Written Instruments § 37, p. 90 (1916); 2 T. Parsons, Law of Contracts *268–*269 (4th ed. 1860). And for the tort of deceit, see Dura Pharmaceuticals, Inc. v. Broudo , 544 U. S. 336, 343–344 (2005).¶verify

square with its reasoning above the line. Throughout the rest of its opinion, the Court recognizes that the wire-fraud statute's references to a “scheme or artifice to defraud ” and “false or fraudulent pretenses,” § 1343 (emphasis added), bring with them the “old soil” of common-law fraud, ante , at 124. As a result, the common-law doctrines governing the crime of false pretenses, the tort of deceit, and the remedy of contractual rescission all inform, to one degree or another, the meaning of the wire-fraud statute. Ante , at 124–129. Yet, contrary to what the Court suggests in its footnote, at common law “[t]he mere obtaining of money [or property] under false pretenses [did] not alone” satisfy fraud's injury requirement. State v. Palmer , 50 Kan. 318, 324, 32 P. 29, 30 (1893); accord, State v. Casperson , 71 Utah 68, 75, 262 P. 294, 296 (1927). Instead, common-law courts usually demanded proof that a defendant deprived his victim of “what he bargained for.” State v. Asher , 50 Ark. 427, 430–431, 8 S. W. 177, 178 (1888). By the time Congress enacted the wirefraud statute in 1952, it seems that “every American jurisdiction except Texas” had adopted a similar rule. Comment, Injury as an Element of Criminal Fraud, 23 U. Chi. L. Rev. 509, 511, and n. 7 (1956) (Injury as an Element).¶verify

Nor is the difference between the Court's formulation of fraud's injury requirement and the common-law rule a negligible one. To be sure, obtaining money or property by means of a material misrepresentation will usually injure the victim. But not always. To appreciate why, some examples help. Start with some from the common law. In Rex v. Williams , 7 Car. & P. 354, 173 Eng. Rep. 158 (N. P. 1836) (Coleridge, J.), a creditor seeking to satisfy a debt ordered his servant to induce the debtor to hand over “two sacks of malt” by falsely representing that “his master had bought [them].” Ibid . Even though the servant “knowingly stated that which was false,” and his false statement was clearly material, his actions were not criminal because he merely intended to satisfy the debt, not to “defraud” the debtor.¶verify

Id. , at 355, 173 Eng. Rep., at 158. When facing similar facts, a New York court later remarked that “it is difficult to see” how a victim “would be injured” when he is merely “cheated” into paying what he owed. People v. Thomas , 3 Hill 169, 170 (N. Y. Sup. Ct. 1842); accord, People v. Baker , 96 N. Y . 340, 347–348 (1884); People v. Wakely , 62 Mich. 297, 300–303, 28 N. W. 871, 872–873 (1886).¶verify

Contemporary examples under the federal wire-fraud statute illustrate the point, too. Imagine a bulk-mail company promises that it will use a “high-rate” service to deliver its customers' products, but the company actually makes the deliveries “to the appropriate destination in a timely fashion” using a cheaper service. United States v. Starr , 816 F. 2d 94, 99–100 (CA2 1987). Doubtless, the company's misrepresentations cause its customers to part with their money. Even so, as the Second Circuit has recognized, the company's lies do not produce an injury because no “discrepancy [exists] between benefits `reasonably anticipated' and actual benefits received.” Id ., at 99; accord, United States v. Regent Office Supply Co ., 421 F. 2d 1174, 1179–1180 (1970). Or suppose an applicant fbs on his resume about satisfying a condition of employment. He lands the job and he completes the work exactly as promised. The employee's lie induces the company to part with money (his wages). But, as the D. C. Circuit has held, the employee's lies do not injure the employer, because his “untruths do not deprive the employer of the benefit of its bargain.” United States v. Guertin , 67 F. 4th 445, 451 (2023); accord, United States v. Takhalov , 827 F. 3d 1307, 1313–1319 (CA11 2016); United States v. Shellef , 507 F. 3d 82, 108 (CA2 2007). 2¶verify

2 Of course, the federal wire-fraud statute prohibits a “ `scheme to defraud,' rather than [a] completed fraud,” so a defendant need not follow through on his plan to commit an offense. Neder v. United States , 527 U. S. 1, 25 (1999). But, as the cases above recognize, the injury element matters all the same. Modeled as it is after a common-law attempt offense, the wire-fraud statute requires proof of a “specific intent to commit¶verify

As all these examples highlight, the traditional benefit-ofthe-bargain injury rule is not some vestigial limb. It plays an important role in separating mere lies from criminal frauds and, in that way, reducing the risk of frivolous prosecutions. Just ask yourself, if a “putative victim of wire fraud got exactly what he paid for, how exactly is he a victim at all?” United States v. Porat , 76 F. 4th 213, 227 (CA3 2023) (Krause, J., concurring). And what business is it of the government's to punish victimless lies with prison time anyway?¶verify

The Court's footnote commentary thus is no small thing. By defying the traditional common-law rule, it risks turning prosecutors and courts into morality police with a commission to prosecute and punish harmless lies. Indeed, under the Court's novel approach, it is hard to see what would save our babysitter from a federal wire-fraud conviction. Just consider: She intentionally lied. She did so using the wires. Her lie is material because it would matter to reasonable parents that someone working in their home with their children has a felony burglary conviction. The parents reasonably relied on the babysitter's insistence that her record was clean. And they parted with money because of her lie. On the Court's account, all the elements of the offense seem to be satisfied, and the babysitter's fleeting misstatement may¶verify

the unlawful act.” Braxton v. United States , 500 U. S. 344, 351, n. (1991); see United States v. Coffman , 94 F. 3d 330, 333 (CA7 1996) (wire fraud “punishes . . . the attempt to defraud”). So the government must prove that a defendant's intended scheme, if completed, would have left the victim without the benefit of the parties' bargain, for “it is not a criminal attempt to try to do what the criminal law does not forbid you to do.” Id. , at 333. The same goes for other elements of traditional fraud, like reasonable reliance and causation. Though the government need not prove actual reliance or causation to secure a wire-fraud conviction, Neder , 527 U. S., at 25, it must prove that the defendant intended those results, see ALI, Model Penal Code § 5.01, Comment 2, p. 303 (1985) (attempt requires that a “defendant manifests a purpose . . . to cause the type of result that is forbidden by the criminal law”).¶verify

cost her up to 20 years in prison. The only way to ensure cases like our babysitter's don't become the domain of federal prosecutors and courts is to recognize what the common law has long recognized: Lies without injury are not criminal frauds.¶verify

The Court's footnote grapples with none of these difficulties. Instead, to support its suggestion that the loss of money or property is always enough to establish an injury, the Court relies primarily on a decision from the Supreme Court of Pennsylvania. Ante , at 127, n. 5 (citing Williams v. Kerr , 152 Pa. 560, 565, 25 A. 618, 619 (1893)) . But even that case does not stand for anything like the rule the Court imagines.¶verify

In truth, Williams had no occasion to depart from the traditional injury rule. There, the defendant induced his victims to sell half their land by misrepresenting his plans to improve the lot—plans that (if true) would have “greatly enhance[d] the value” of the victims' remaining share. Id ., at 564, 25 A., at 619. Because the planned improvements turned out to be a fiction, the defendant failed to deliver what the sellers bargained for. Notably, too, Williams 's articulation of the injury rule is consistent with the traditional test. The court did not say that obtaining money or property by means of a material misrepresentation is always enough. Instead, the court suggested, it would be an injury to obtain money or property upon “ terms ” that the victim would not otherwise “accept.” Ibid . (emphasis added). And lying to get more favorable terms will often involve depriving a victim of “what was pretended and what he bargained for.” Casperson , 71 Utah, at 75, 262 P., at 296.¶verify

The Court's remaining common-law authorities are no more helpful to its cause. Neither MacLaren v. Cochran , 44 Minn. 255, 258, 46 N. W. 408, 409 (1890), nor Carlisle v. State , 76 Ala. 75, 77 (1884), mentions the money-or-property injury requirement the Court adopts. Meanwhile, the Court's treatise supports a discussion of fraud's injury element by citing a case endorsing the traditional rule that those who “obtai[n] all . . . they expected to obtain” are “not cheated or defrauded.” State v. Matthews , 44 Kan. 596, 606, 25 P. 36, 40 (1890) (cited in 1 E. McClain, Criminal Law § 680, p. 686 (1897)). 3¶verify

Not only do the Court's common-law authorities fail to support its view about the nature of fraud's injury requirement. Nothing in the text of the wire-fraud statute does either. That statute prohibits using the wires to carry out “any scheme or artifice to defraud . . . for obtaining money or property.” 18 U. S. C. § 1343. As this Court has recognized, that language means a prosecutor must prove (1) the defendant “engage[d] in a `scheme or artifice to defraud,' ” and (2) the “ `object of the fraud [was] “money or property” in the victim's hands.' ” Pasquantino v. United States , 544 U. S. 349, 355 (2005) (quoting Cleveland v. United States , 531 U. S. 12, 26 (2000) (alteration omitted)). So even when a prosecutor is able to show that the defendant sought to obtain money or property, he must still make the further showing that the defendant intended a “scheme or artifice to defraud”—a phrase that everyone agrees imports the traditional elements of common-law fraud. See ante , at 124, 127. And, as we have seen, those elements include an injury¶verify

3 Without common-law authority to support its view, the Court resorts to disparaging contrary authority on the ground that some common-law cases discuss the benefit-of-the-bargain rule as a product of fraud's intent or falsity elements, not its injury element. See ante , at 129–130, n. 6. But what does that prove? Only that common-law courts relied on various elements to enforce the benefit-of-the-bargain rule—not that courts rejected the requirement. It is unsurprising, too, that some courts considered injury in connection with the defendant's “intent to defraud.” Ibid . After all, fraud can be prosecuted as an inchoate offense. So the government may secure a conviction by showing that a defendant intended all the elements of the completed crime, including injury and its beneftof-the-bargain rule. Supra , at 150–151, n. 2; Injury as an Element 511, and n. 7.¶verify

requirement that is not satisfied when a putative victim receives the benefit of his bargain.¶verify

Left without common-law authority or statutory text to support its view, the Court seems to suggest that discarding the traditional injury rule at least might make for good policy. Though common-law courts have long asked whether the defendant “ `delivered something different from what was promised,' ” the argument appears to go, that test may be just too hard for today's judges. Ante , at 130. Instead, we are told, fraud's “materiality” element supplies a more “principled” and equally satisfactory way to distinguish mere lies from criminal fraud. Ante , at 131.¶verify

But that is no answer at all. A judicial preference for “principled” rules cannot displace what is and has long been the law. When we look to the old soil of the common law for guidance, we have no license to plow over what we find there. Nor is the Court correct that fraud's materiality element can shoulder all the work traditionally performed by its injury requirement. As this Court describes it, fraud's materiality element usually asks “if a reasonable person would attach importance to [the defendant's lie] in deciding how to proceed.” Ibid . (citing Universal Health Services, Inc . v. United States ex rel. Escobar , 579 U. S. 176, 193 (2016)). And, as the examples above illustrate, our fallen world is filled with lies, even material ones, that do not warrant the attention of criminal authorities: creditors who lie to recover their debts from evasive debtors, employees who fb about their credentials to get jobs, and even babysitters who misrepresent their pasts. In all of those cases, a reasonable person would attach significance to the defendant's lie in deciding whether and how to proceed. In all of those cases, too, the lie is intentional, induces reasonable reliance, and causes someone to part with their money or property. Without the traditional injury requirement, every one of those cases gets swept into the prosecutor's dragnet.¶verify

Even taken on its own terms, the Court's argument is misguided. The common-law materiality element is no more “principled” than the traditional injury rule. Ante , at 131. Yes, the traditional injury rule may require courts to assess whether the defendant delivered what he promised, and answering that question will not always be simple. See ibid . But the same holds true when it comes to the materiality element, where courts must decide whether a defendant misrepresented a “minor” (immaterial) term or an “essen[tial]” (material) one. Universal Health Services, Inc ., 579 U. S., at 193–194, and n. 5.¶verify

Take a prominent example in the Court's opinion. Suppose a defendant promises to deliver a “ `horse called the Charley.' ” Ante , at 130 (quoting State v. Mills , 17 Me. 211, 212 (1840)). That representation would be material if the parties' dealings reveal that a reasonable person in the buyer's shoes would care about the specific identity of the horse. But if those dealings indicate that, in the circumstances of a particular industry or transaction, a buyer would have been interested only in a horse of a particular kind and quality, the representation would not be material. When it comes to fraud's materiality element, no less than when it comes to fraud's injury element, details can matter, sometimes difficult lines must be drawn, and in drawing them courts may have to attend carefully to the circumstances surrounding the parties' dealing. 4¶verify

4 Nor, contrary to the Court's suggestion, is materiality a better option because it offers an “objective” standard. Ante , at 131, n. 7. The traditional test for injury, too, is an objective inquiry, asking whether “there exists a `discrepancy between benefits reasonably anticipated' ” based on all the parties dealings and the “actual benefits which the defendant delivered, or intended to deliver.” United States v. Starr , 816 F. 2d 94, 98 (CA2 1987) (quoting United States v. Regent Office Supply Co. , 421 F. 2d 1174, 1182 (CA2 1970); emphasis added). Interestingly, the Court's proposal to cast aside fraud's traditional injury rule and to rely instead on fraud's materiality requirement is just the opposite of a proposal offered¶verify

If there is any good news when it comes to the Court's footnote, it may be this: That digression is dicta addressing a question well “beyond the case.” Cohens v. Virginia , 6 Wheat. 264, 399–400 (1821). Exactly nothing before us today turns on whether wire fraud's injury requirement demands proof that the victim did not receive the benefit of his bargain or, instead, proof only that he parted with money or property. Nor is adopting one rule over another a necessary step toward the Court's holding that “pecuniary loss” is not an “element of fraud.” Ante , at 128, n. 5.¶verify

Just ask yourself: If the Court deleted its footnote, or reversed its position and endorsed the traditional injury rule, would its conclusion on economic loss be any different? Of course not. Under either view, Mr. Kousisis loses. He loses because his lies induced the Pennsylvania Department of Transportation to part with money when it paid him for the building projects in question. And he loses because the department did not receive what it bargained for in return: projects completed using “ `socially and economically disadvantaged' ” firms. Ante , at 118–119; see also ante , at 120. Because Mr. Kousisis committed wire fraud under both the traditional injury rule and the Court's novel one, the Court's “throwaway footnot[e]” makes no difference. Royal Canin U. S. A., Inc. v. Wullschleger , 604 U. S. 22, 42–43 (2025).¶verify

Try as it might, the Court cannot “transmute dictum into decision by waving a wand and uttering the word `hold.' ” United States v. Rubin , 609 F. 2d 51, 69, n. 2 (CA2 1979) (Friendly, J., concurring). And nothing in today's decision can bind this Court in a future case where the difference between the two rules actually matters. See Seminole¶verify

by the drafters of the Model Penal Code. They suggested abandoning the common-law materiality requirement altogether, even as they hewed to the traditional injury rule that it is not a criminal fraud to give a defendant “exactly what he bargained for.” ALI, Model Penal Code § 223.3, Comments 1, 3(d), pp. 181, 194 (1980). The Court's footnote does not pause to address why it would have us do exactly the reverse.¶verify

Tribe of Fla. v. Florida , 517 U. S. 44, 66 (1996); Loper Bright Enterprises v. Raimondo , 603 U. S. 369, 426 (2024) ( Gorsuch, J., concurring).¶verify

*¶verify

Over centuries of experience, common-law courts developed a variety of tools to sort venial lies from criminal frauds. In a brief and unfortunate diversion in an otherwise sound opinion, the Court casts doubt on whether one of those tools still applies under the federal wire-fraud statute. In the process, the Court needlessly risks turning the federal wire-fraud statute into a weapon for punishing victimless crimes. I can only trust that future courts will recognize that aside for what it is—unsound dicta.¶verify