G THE B IN EN V C R H E S A N 8 8 D 8 B 1 AR SINCE WWW. NYLJ.COM VOLUME 246—NO. 9 THURSDAY, JULY 14, 2011 TAX LITIGATION ISSUES Expert Analysis ‘Conscious Avoidance’ and Government’s Burden of Proving Willfulness ost criminal statutes require that the constituted patent infringement.9 While agreeing government establish that the defendant with the defendant “that deliberate indifference to acted with a defined mental state, or By a known risk” is not the applicable legal standard, mens rea. In light of the general rule that Jeremy H. the Court affirmed the Federal Circuit’s judgment ignorance of the law is no defense, mens Temkin because the evidence supported a finding of the Mrea requirements commonly focus on the defendant’s defendant’s knowledge under the doctrine of willful knowledge regarding the circumstances surrounding blindness. his actions. For example, to prove a defendant Recognizing that it had never specifically approved guilty of a narcotics offense, the government must argues that he was unaware of a specific fact and reliance on willful blindness to justify a finding of prove he knew he was in possession of an illegal there is evidence supporting the instruction, the knowledge, the Court noted that the concept had substance.1 conscious avoidance charge permits a jury to find been invoked by prosecutors after its 1899 decision Frequently, jurors in criminal cases are instructed the defendant acted with the requisite mental state if in Spurr v. United States,10 in which a bank officer that they can find a defendant had the requisite (1) he “was aware of a high probability” that the fact was found to have acted “willfully” in certifying a mental state if he acted with “conscious avoidance” existed and (2) he “acted with deliberate disregard of check drawn against insufficient funds where he or “willful blindness” to a particular fact. Thus, in a the facts,” unless (3) it finds the defendant “actually purposely kept himself “ignorant” of whether there drug case, assuming there is a factual predicate,2 the believed” that the fact did not exist.7 Thus, in a drug was sufficient money in the drawer’s account. In jury may be instructed that it can find the defendant case, the government may argue (and the jury may addition, the Court observed it previously had acted with the requisite knowledge based on his find) that the defendant knew he was in possession of relied on the Model Penal Code’s definition of willful efforts to avoid learning the illegal nature of the narcotics based on evidence he accepted a container blindness “as a guide in analyzing whether certain substance in his possession. from an individual he knew was involved in narcotics statutory presumptions of knowledge comported The application of the conscious avoidance trafficking and that he stored the container in a with due process” and that the doctrine had been doctrine in criminal tax cases is complicated by hidden place.8 “embraced” by every federal circuit court of the requirement that the government prove that the appeals (with the possible exception of the District defendant voluntarily and intentionally violated a of Columbia Circuit) to apply to a wide range of known legal duty.3 This burden differs from general criminal statutes. intent crimes in that it requires the government to Two cases provide a framework for Although each circuit had articulated the willful prove the defendant knew his conduct was illegal. reevaluating the application of the blindness doctrine differently, the Supreme Court Two recent cases, one from the U.S. Supreme Court found two basic requirements: “(1) the defendant and one from the U.S. Court of Appeals for the Third conscious avoidance doctrine in must subjectively believe there is a high probability Circuit, provide a framework for reevaluating the criminal tax cases. that a fact exists and (2) the defendant must take application of the conscious avoidance doctrine in deliberate actions to avoid learning that fact.”11 criminal tax cases. ‘Global-Tech’ Applying this standard, the Court found that the In Global-Tech Appliances Inc. v. SEB S.A.,4 the test applied by the Federal Circuit was insufficient Supreme Court adopted the willful blindness test While conscious avoidance has long been applied because it did not require “active efforts by an for the first time, albeit in a civil patent infringement by federal district and circuit courts in criminal cases, inducer to avoid knowing about the infringing nature case. And separately, in United States v. Stadtmauer,5 the Supreme Court first addressed the doctrine in of the activities.” the Third Circuit rejected a challenge to the willful Global-Tech, which it decided this past term. In In its opinion, the Court noted two rationales for blindness instruction based on the government’s Global-Tech, the jury found the defendant liable for the conscious avoidance doctrine. First, that willfully heightened burden in criminal tax cases. having induced the infringement of plaintiff’s patent. blind defendants are just as culpable as those with ‘Conscious Avoidance’ The trial court rejected the defendant’s post-trial actual knowledge; and second, that “persons who motion to set aside the verdict on the grounds that know enough to blind themselves to direct proof The doctrine of conscious avoidance has been there was insufficient evidence that it had actual of critical facts in effect have actual knowledge of applied by courts to “hold that defendants cannot knowledge of the plaintiff’s patent. On appeal, the those facts.”12 escape the reach of [criminal statutes that require U.S. Court of Appeals for the Federal Circuit also In a lone dissent, Justice Anthony M. Kennedy proof that they acted knowingly or willfully] by rejected the defendant’s argument, concluding opined that the majority’s conclusion that willful deliberately shielding themselves from clear that while there was no direct evidence that the blindness will suffice where knowledge is required evidence of critical facts that are strongly suggested defendant actually knew of the plaintiff’s patent, is “a mistaken step,” noting that “[w]illful blindness by the circumstances.”6 Thus, where a defendant there was adequate evidence that the defendant is not knowledge; and judges should not broaden a “deliberately disregarded a known risk” that plaintiff legislative proscription by analogy.” Justice Kennedy had a patent, which the court called “a form of actual took issue with the majority’s reliance on a “moral JEREMY H. TEMKIN is a principal in Morvillo, Abramowitz, knowledge” sufficient to satisfy the statute. theory,” explaining that even if a defendant who Grand, Iason, Anello & Bohrer. GRETCHAN R. OHLIG, an On certiorari, the Supreme Court held that liability acted with willful disregard can be characterized as associate of the firm, assisted in the preparation of this for inducing infringement of a patent requires proof “equally blameworthy” as a defendant who acted article. that the defendant knew that the induced acts with actual knowledge, the consequence for such THURSDAY, JULY 14, 2011 wrongdoing should be determined by the Legislature On appeal, Mr. Stadtmauer claimed that, Conclusion that drafted the statute requiring knowledge, rather under Cheek, the government is “categorically than by courts creating a moral equivalence. Finally, and unequivocally require[d]…to prove ‘actual In his Global-Tech dissent, Justice Kennedy focused Justice Kennedy expressed concern that the knowledge of the pertinent legal duty’” in tax on both the absence of congressional authority for majority’s decision effectively endorsed the willful cases and that the district court’s willful blindness substituting a defendant’s actual knowledge of his blindness doctrine for all federal criminal cases instruction improperly allowed the jury to treat legal obligations with evidence of other “equally involving knowledge without any input from the his “knowledge of the law (e.g., how the Tax Code blameworthy mental states,” and the danger of criminal defense bar, “which might have provided required a particular expenditure to be recorded on addressing criminal law issues in civil patent cases. important counsel on this difficult issue.” a tax return) the same as it treated his knowledge of While the Third Circuit in Stadtmauer concluded Willful Blindness in Tax Cases the facts (e.g., whether an expenditure reported on that the government can rely on willful blindness the return was [] fabricated).” Asserting that willful to satisfy its heightened burden of demonstrating The Supreme Court has held that, in light of the blindness falls short of the standard articulated the requisite mens rea in criminal tax cases, defense complexity of the criminal tax laws, in order to in Cheek, Mr. Stadtmauer argued, “[e]ither the counsel will almost certainly continue to challenge establish that the defendant acted “willfully,” the defendant knew of the relevant legal duty, or he the application of the conscious avoidance charge government must prove: (1) that the law imposed did not. To say that he remained unaware of the in criminal tax cases in the hopes that the Supreme a duty on the defendant; (2) that the defendant duty, even by conscious effort, is to say that he did Court addresses the issue. specifically knew of this duty; and (3) that he not know of the duty.”20 •••••••••••••• •••••••••••••• voluntarily and intentionally violated that duty.13 After finding that the defendant’s knowledge • In Cheek v. United States, the Court amplified this of the tax laws is a fact that the government must 1. United States v. Abreu, 342 F.3d 183, 187-88 (2d Cir. 2003). 21 2. See Elkan Abramowitz and Barry A. Bohrer, “Conscious requirement, holding that a defendant cannot be prove beyond a reasonable doubt, the Third Circuit Avoidance: A Substitute for Actual Knowledge?” New York Law convicted if he had a good-faith belief that he was rejected Mr.