Good Opinion on Error in Not Giving Requested Good Faith Belief Instructions (3/29/14)

Tax practitioners and students cannot be reminded too often on the importance of Cheek's definition of willfulness - voluntary intentional violation of a known legal duty -- and Cheek's holding that a sincerely held even if objectively unreasonable belief that the conduct is lawful requires acquittal because the defendant did not knowingly violate the law.  Cheek v. United States, 498 U.S. 192 (1991), here.  In a case where the defendant claims the defense of good faith belief and it is supported in the record, the defendant is entitled to have the jury instructed that good faith belief even if objectively unreasonable requires acquittal.  I have previously reported the standard appellate dodge in cases where district courts have denied a Cheek good faith instruction but the instruction should have been given -- i.e., by holding that lack of good faith is subsumed in the otherwise adequate willfulness instructions.  See e.g., Fourth Circuit Reverses Tax Obstruction Conviction Because of Bad Instruction and Affirms Denial of Good Faith Instruction for False Claim Conviction (Federal Tax Crimes Blog 11/20/13), here.  (For a variance on that dodge, see First Circuit Rejects Tax Defier's Complaints About IRS Packing Heat and Improper Good Faith Defense Instructions (Federal Tax Crimes Blog 1/15/14), here.)

In United States v. Montgomery, 747 F.3d 303 (5th Cir. 2014), here, the Fifth Circuit held that it is error not to give the good faith instruction if properly presented in the record.  The Court, rightly I think, held that otherwise adequate willfulness instructions did not cure the problem.  But, the Court held, that the conviction should nevertheless be affirmed because, although error, the error was harmless in the case because the evidence of willfulness (and, presumably, lack of good faith) was  "so overwhelming that the error could not have contributed to the jury's decision to convict."

The majority and the concurring decisions are useful to practitioners and students, so I excerpt substantial portions below.  In considering the excerpts, a key fact is that both the prosecution and the defendant had each requested a good faith instruction with the concept that a good faith belief even if objectionably unreasonable required acquittal.  The district court judge thought the concept was included in the willfulness instruction.  Here are the excerpts, first from the majority decision (footnote omitted), then from the concurring opinion.

Although ignorance of the law or a mistake of law generally does not provide a defense to criminal prosecution, that is not so with regard to federal tax offenses. Cheek, 498 U.S. at 199-200. "[D]ue to the complexity of the tax laws," certain federal criminal tax offenses require, as an element of the offense, the establishment of a defendant's willfulness. Id. at 200. In United States v. Pomponio, 429 U.S. 10, 12 (1976), the Supreme Court defined willfulness in this context as "a voluntary, intentional violation of a known legal duty." 

Fifteen years later, in Cheek, 498 U.S. at 201, the Court clarified Pomponio's definition of willfulness. There, the district court instructed the jury that an "honest but unreasonable belief is not a defense and does not negate willfulness." Id. at 197. The Supreme Court held that the district court's instruction was incorrect. Id. at 202. It reasoned that the government cannot carry its burden to prove willfulness in a criminal tax prosecution if the jury believes that the defendant, in good faith, did not understand the law. Id. That is true regardless of "however unreasonable a court might deem such a belief." Id.; see also United States v. Simkanin, 420 F.3d 397, 410 (5th Cir. 2005) ("[A] defendant's good-faith belief that he is acting within the law negates the willfulness element."). 

Here, the Montgomerys argue that the district court's jury instruction did not comport with Cheek because it did not advise the jury that a defendant's good-faith misunderstanding of tax law may be objectively unreasonable. In response, the government argues that, despite the fact that its own proposed jury instruction included the unreasonableness language from Cheek, it was unnecessary in light of the Supreme Court's decision in Pomponio, 429 U.S. 10, and our own decision in Simkanin, 420 F.3d 397. They reason that, pursuant to those decisions, where a district court correctly instructs the jury as to willfulness an additional instruction on the good-faith defense is unnecessary. In any event, the government argues that the error was harmless due to the overwhelming evidence of the Montgomerys' guilt. 

We agree with the Montgomerys that the jury instruction was erroneous. The import of Cheek, as applied to this case, is clear: if the Montgomerys truly believed that they were not obligated to report their income, then the jury could acquit, however objectively unreasonable the Montgomerys' belief was. Both parties agreed to instruct the jury along those lines by explaining that the Montgomerys' beliefs regarding tax law could be "unreasonable or irrational." Yet the jury instruction, given sua sponte by the district court, did not explain that point. Rather, it only included a portion of Cheek's good-faith defense:

If you find that a defendant acted in good faith, you must acquit that defendant because his good faith is inconsistent with his having the intent to defraud or to violate the law. . . . If a defendant believed, in good faith, that what he was doing followed the tax law, he would not have had criminal intent. 

To be sure, defendants are not entitled to their exact choice of verbiage in a jury instruction. See United States v. Simmons, 374 F.3d 313, 319 (5th Cir. 2004). They are, however, entitled to a jury instruction that "correctly reflect[s] the issues and the law." See United States v. McKinney, 53 F.3d 664, 676 (5th Cir. 1995). The instruction here did not meet that standard—the jury was left to decide the case bereft of a legal rule announced by the Supreme Court in a case that altered the landscape of federal tax prosecutions. 

Moreover, by including but failing to explain the full breadth of Cheek's good-faith defense, the district court's jury instruction risked implying—in direct conflict with Cheek—that the Montgomerys could not be acquitted on the basis of good faith unless their views were objectively reasonable. See United States v. Morris, 20 F.3d 1111, 1118 (11th Cir. 1994) (holding that a jury instruction compromised the appellants' good-faith argument because it did not "make clear that a good-faith belief by the appellants that they were complying with the tax laws, whether or not objectively reasonable, negates the specific intent element"). That is because good faith is often equated with reasonableness. See, e.g., Messerschmidt v. Millender, 132 S. Ct. 1235, 1245 (2012) (explaining that the Supreme Court has referred to actions taken in an "objectively reasonable manner" as "objective good faith"); Newman v. Guedry, 703 F.3d 757, 764 (5th Cir. 2012), cert. denied, 134 S. Ct. 162 (2013) ("Because the officers' use of force was not objectively reasonable, it was not in good faith . . . ."); Mathis v. Exxon Corp., 302 F.3d 448, 455 (5th Cir. 2002) ("Good faith includes observance of reasonable commercial standards of fair dealing . . . ." (quoting Tex. Bus. & Com. Code § 2.305 cmt. 3)); Black's Law Dictionary (9th ed. 2009) (explaining that the phrase "good faith" excludes conduct that contravenes "community standards of decency, fairness or reasonableness" (emphasis added)). Like the jury instruction in Morris, 20 F.3d at 1118, the district court's instruction here did not clarify that the Montgomerys' good-faith belief need not be objectively reasonable. 

Indeed, for this reason, the cases cited by the government are factually distinct. In both Pomponio, 429 U.S. at 12, and Simkanin, 420 F.3d at 410, the issue was whether the district court should have instructed the jury on the good-faith defense in order to adequately explain the definition of willfulness, not the content of the good-faith defense itself, which is at issue here. When good faith is mentioned in a Cheek jury instruction, our sister circuits routinely explain that a defendant's good-faith belief need not be objectively reasonable. See, e.g., United States v. Mostler, 411 F. App'x 521, 523 (3d Cir. 2011) (unpublished); United States v. Boyd, 378 F. App'x 841, 849-50 (10th Cir. 2010) (unpublished); United States v. Dean, 487 F.3d 840, 850 (11th Cir. 2007); United States v. Hilgeford, 7 F.3d 1340, 1343 (7th Cir. 1993); see also Seventh Circuit Pattern Criminal Jury Instructions § 6:11; Pattern Criminal Jury Instructions for the District Courts of the First Circuit § 4.25; Third Circuit Model Criminal Jury Instructions § 6.26.7401-4 cmt.; Manual of Model Criminal Jury Instructions for the District Courts of the Ninth Circuit § 9.42. But see Morris, 20 F.3d at 1118. 

Nevertheless, the erroneous jury instruction in this case was harmless because the evidence showing that the Montgomerys intentionally underreported their income was "so overwhelming that the error could not have contributed to the jury's decision to convict." See Healy v. Maggio, 706 F.2d 698, 701 (5th Cir. 1983).  Over the course of three years, the Montgomerys underreported over $2.1 million of gross receipts from their business. Although they asserted at trial that they did not willfully do so, they repeatedly reported less income—never more income—to the IRS than they reported to other entities. Indeed, the Montgomerys did so using the same tax forms, only with different numbers. 

Moreover, the Montgomerys' accountant, Carrington, advised them that they were required by law to report all of the income and expenses from Montgomery's Contracting. Then, after Carrington told the Montgomerys she could no longer prepare their tax returns because they did not provide her with sufficient information, they continued to apply her name [to] their tax returns without her authorization. They frequently transferred funds among their numerous bank accounts, making it difficult to track their expenses, and they gave inconsistent answers to Agent Brown when questioned about their business's income and expenses. 

Finally, the Montgomerys have not shown that the district court's jury instruction prevented them in any way from presenting the full breadth of their good-faith defense to the jury. In fact, the Montgomerys' good-faith defense was central to defense counsel's closing argument.5 Thus, considering the entire record, we are convinced that the erroneous jury instruction had no bearing on the jury's decision. See Demmitt, 706 F.3d at 675.

Now, the excerpt from the concurring opinion (footnotes omitted):

Undoubtedly, the better part of valor for a district court faced with proposed jury instructions that are not inaccurate and that are requested by both sides is to give those instructions. But the failure to do so is not automatically an abuse of discretion. The district court was entitled to "broad discretion in framing the instructions to the jury," United States v. McKinney, 53 F.3d 664, 676 (5th Cir. 1995), and we are not supposed to conclude that the district court has abused that discretion unless the instructions, as a whole, create "substantial and ineradicable doubt whether the jury has been properly guided in its deliberations," United States v. Demmitt, 706 F.3d 665, 675 (5th Cir. 2013). Because I conclude this high hurdle has not been jumped by the Montgomerys, I cannot join in the entirety of the majority opinion. 

The majority opinion concludes that the district court erred because it did not advise the jury that a defendant's good-faith misunderstanding of tax law may be objectively unreasonable. See Cheek v. United States, 498 U.S. 192, 202 (1991). Cheek, however, did not mandate any particular language for conveying the general concept of good faith to the jury, and the district court did so convey that here, instructing the jury that it must acquit a defendant who believed in good faith that he was acting lawfully. The instructions stated: "If you find that a defendant acted in good faith, you must acquit that defendant because his good faith is inconsistent with his having the intent to defraud or to violate the law." The instructions therefore generally address any good-faith belief, even an unreasonable one, held by a defendant and, taken as a whole, do not misstate the issues or the law. See McKinney, 53 F.3d at 676. 

Moreover, we have previously held that a district court is not even required to include a specific instruction on good faith, where, as here, "it adequately instructed the jury on the meaning of willfulness." United States v. Simkanin, 420 F.3d 397, 411 (5th Cir. 2005); see also United States v. Pomponio, 429 U.S. 10, 13 (1976). Under Simkanin, the district court could therefore have declined to instruct the jury on a defendant's good-faith belief altogether and that decision would have been within its discretion. 420 F.3d at 411. I fail then to see how the district court's decision to instruct the jury on a defendant's good-faith belief generally, but not expressly address the "unreasonable" good-faith belief, could constitute an abuse of discretion. 

Relying in part on United States v. Morris, 20 F.3d 1111, 1118 (11th Cir. 1994), the majority opinion concludes that the district court's jury instructions "risked implying that the Montgomerys could not be acquitted on the basis of good faith unless their views were objectively reasonable." However, Morris simply addressed the same circumstances as those presented in Simkanin, where a district court instructed a jury on willfulness but not on good faith. Id. at 1117. Although the Eleventh Circuit in Morris held that the district court's instructions were inadequate because they did not "make clear that a good-faith belief . . . negates the specific intent element of the crime," id. at 1118, we are bound by our holding in Simkanin, 420 F.3d at 411. 

Moreover, the Eleventh Circuit in Morris acknowledged that "there is no requirement in this circuit that jury instructions specifically note that a good-faith defense need not be objectively reasonable." 20 F.3d at 1118. Yet, that is precisely what the majority opinion concludes is required here. The majority opinion's speculation on what the jury might have thought "good faith" means has no anchor in any relevant case law or the record here. Whatever the "risks," our task is to determine whether the district court's jury instructions, taken as a whole, incorrectly reflected the issues and the law. See McKinney, 53 F.3d at 676. They did not. Given that our review is for abuse of discretion, I cannot conclude that the district court's jury instructions constituted such an abuse. See United States v. Roussel, 705 F.3d 184, 190 (5th Cir. 2013).

I agree with the concurring judge that the message of the majority opinion is that, when requested by the parties the trial court should give the specific instruction where the trial record could support the good faith defense even if objectively unreasonable. The trial court should not take the risk that appellate courts will continue to be relaxed about refusing to give the instruction.

Of course, the key to getting the good faith defense instruction is to laying the foundation in the record.  The defense must make sure the trial record contains sufficient evidence to make sure good faith belief is a jury issue.  If there is no evidence for the good faith defense, the instruction is not appropriate and the general willfulness instruction only will be given.  In most cases, it will be hard to assert the good faith defense unless the defendant testifies which is generally not a good decision.  Still there may be other ways to lay the proper record foundation.  See Making a Cheek Good Faith "Defense" Without Testifying (Federal Tax Crimes Blog 11/24/11), here.