The Rule Of Lenity: Should Courts Defer To Agency Interpretations Of RESPA § 8?

On November 10, 2014, the U.S. Supreme Court denied a petition for a writ of certiorari in a case entitled Douglas F. Whitman v. United States.1 Whitman was seeking to have the Supreme Court review (and, hopefully, overturn) his criminal conviction under section 10(b) of the Securities Exchange Act of 1934 (the "Securities Act"),2 which had been affirmed by the Second Circuit Court of Appeals. Section 10(b) makes it unlawful to "use or employ, in connection with the purchase or sale of any security ..., any manipulative or deceptive device or contrivance in contravention of such rules or regulations as the [Securities and Exchange] Commission [the "SEC"] may prescribe as necessary or appropriate in the public interest or for the protection of investors."3

One may well ask what this has to do with section 8 of the Real Estate Settlement Procedures Act ("RESPA").4 The answer is, potentially a whole lot. Recall that section 8 prohibits, among other things, the payment or receipt of referral fees in connection with federally related mortgage loans, and attaches both civil and criminal penalties to violations of its provisions.

Justice Scalia's Statement Respecting Denial of Certiorari In a statement respecting the denial of certiorari in Whitman, Justice Scalia, joined by Justice Thomas, raised the following question: "Does a court owe deference to an executive agency's interpretation of a law that contemplates both criminal and administrative enforcement?" In affirming Whitman's criminal conviction, the Second Circuit had deferred to the SEC's interpretation of section 10(b).

Justice Scalia stated in no uncertain terms that this was error. His chief contention on this point is that "only the legislature may define crimes and fix punishments," and that "Congress cannot, through ambiguity, effectively leave that function to the courts - much less to the administrative bureaucracy." He reasoned that:

With deference to agency interpretations of statutory provisions to which criminal prohibitions are attached, federal administrators can in effect create (and uncreate) new crimes at will, so long as they do not roam beyond ambiguities that the laws contain. Undoubtedly Congress may make it a crime to violate a regulation, see United States v. Grimaud, 220 U.S. 506, 519 (1911) but it is quite a different matter for Congress to give agencies - let alone for us to presume that Congress gave agencies - power to resolve ambiguities in criminal...