An Outsider’s Guide to the Manafort Cases

court case
The Friday morning press congregation outside the Alexandria EDVa Courthouse will likely continue as United States v. Paul J. Manafort, Jr. moves towards its July 10, 2018 trial date in Judge Ellis’ courtroom. The Court heard arguments on Manafort’s Motion to Dismiss the Indictment on May 4, 2018. The parties will be back before Judge Ellis on May 25, 2018 for argument on the Motion to Suppress Residence Search Evidence. Motions in limine will be heard on June 29, 2018. The Alexandria Indictment Case (1:18cr0083-TSE) is intertwined with the original Manafort Indictment pending in the federal court in the District of Columbia (1:17cr0201-ABJ). The DC Criminal Case is scheduled for trial starting September 17, 2018. Manafort filed a related DC civil case (1:18cv011-ABJ) which was dismissed on a Rule 12(b)(6) motion. The Search Warrants Manafort appeared on the radar screen as early as 2014 in an underlying investigation. On July 25, 2017, Judge Buchanan approved a search warrant, supported by a 78-paragraph Affidavit, that authorized the FBI’s search of Manafort’s Alexandria condominium. The searches yielded a motherload of electronics, including an iMac and a MacBook, two iPads, four iPhones and seven iPods, and multiple thumb drives and additional storage devices. There possibly have been as many as seven Manafort-related warrants. The DC Criminal Case and Manafort’s Civil Case In late October 2017, the Special Counsel filed an Indictment in the D.C. federal court naming Manafort and his business associate, Richard Gates. A Superseding Indictment followed in late February 2018. The lead allegations in the superseding 5-count indictment against Manafort (co-defendant Gates had reached a plea deal) are Conspiracy against the USA and a Money Laundering Conspiracy. A week later, Judge Berman Jackson entered her Scheduling Order that sets the September 17, 2018 trial. Manafort has filed in the DC Criminal Case a Motion to Dismiss the Indictment. He also has filed Motions to Suppress the Search Evidence. Manafort’s Civil Case against the Department of Justice filed in the DC federal court claimed that (1) appointment of the Special Counsel was an ultra vires act, and (2) the Special Counsel’s conduct indicting Manafort is beyond his jurisdiction under the Appointment Order. This Civil Case was reassigned to Judge Berman Jackson. The Government filed a Rule 12(b)(6) Motion to Dismiss, which the Court granted on April 27, 2018. Judge Berman Jackson’s Opinion dismissing Manafort’s Civil Case rejects the use of a civil case to challenge a criminal indictment. She opines that Manafort has sufficient available options in the criminal matters to make his arguments. She is careful in her Opinion not to explore the merits of Manafort’s substantive arguments tied to the criminal case. The EDVa Indictment On February 22, 2018, an EDVa Grand Jury returned a 32-count indictment against Manafort and Gates (Gates has reached a plea agreement, which reduces the active counts to 18). The counts in this Indictment include multiple counts of tax evasion and bank fraud. The Special Counsel crossed the river to Alexandria because Manafort would not waive a venue objection to the added counts being brought in the DC federal court. The EDVa case is before Judge Ellis. Manafort filed in the EDVa Court essentially the same Motion to Dismiss the Indictment and Motions to Suppress as he filed in the DC Criminal Case. Judge Ellis heard arguments on the Motion to Dismiss on his Friday, May 4, 2018 docket. The judge has taken the motion under advisement and has ordered the Special Counsel to provide him on an ex parte basis an unredacted copy of the August 2 Scope Memorandum. Manafort’s Motions to Dismiss the Indictments Manafort’s current Motions take aim at the Department of Justice’s appointment of the Special Counsel and the scope of the Special Counsel’s jurisdiction under the Appointment Order, including supplements to the Order. The focus seems to have moved to the 4-page August 2 Scope Memorandum, a confidential memorandum from the Acting Attorney General to the Special Counsel. This memorandum is a supplement to the original Order. The Special Counsel’s brief describes the memorandum as “classified and contains confidential and sensitive law enforcement information that cannot be publicly disclosed.” Only a redacted copy was provided to the Court and Manafort’s counsel. Recall that in March of last year then-FBI Director James Comey testified before the House Intelligence Committee. In May 2017, Acting Attorney General Rod Rosenstein appointed the Special Counsel. Under the Appointment Order the Special Counsel “is authorized to conduct the investigation confirmed by then-FBI Director James B. Comey in testimony before the House Permanent Select Committee on Intelligence on March 20, 2017,” including: (i) any links and/or coordination between the Russian government and individuals associated with the campaign of President Donald Trump; and (ii) any matters that arose or may arise directly from the investigation; and (iii) any other matters within the scope of 28 C.F.R. § 600.4(a). Manafort contends that this Appointment Order exceeds the Attorney General’s powers; but if the Order is within the powers, the Special Counsel’s indictment of Manafort is nonetheless outside the boundaries of the Appointment Order. The catch-term in Manafort’s briefs is the “absence of political accountability.” The Special Counsel responds that once appointed, the Special Counsel has “the full power of a United States Attorney to investigate and prosecute cases within [the Special Counsel’s jurisdiction.]” The brief’s argument is that The Acting Attorney General appointed the Special Counsel, defined his jurisdiction, understands the scope of his investigation, and has specifically confirmed that the allegations that form the basis of this prosecution—i.e., that Manafort committed crimes “arising out of payments he received from the Ukrainian government before and during the tenure of President Viktor Yanukovych” (August 2 Scope Memorandum at 2)—are within the Special Counsel’s jurisdiction. In these circumstances, no serious question of political accountability can be raised. In the DC Criminal Case, Judge Berman Jackson heard 2½ hours of arguments on Manafort’s Motion to Dismiss on April 19, 2018. A Politico writer reported that the judge “raised doubts about the scope of order used to appoint special counsel Robert Mueller.” Judge Berman Jackson has not yet ruled. In the EDVa Indictment Case, Judge Ellis heard arguments on May 4, 2018, and he should rule on Manafort’s Motion to Dismiss shortly after he reviews an unredacted copy of the August 2 Scope Memorandum. News media reported that Judge Ellis “was skeptical over the ability of special counsel Robert Mueller to bring charges against … Manafort.” The specific counts in the two Indictments are quite different, so it would not be a great surprise if the rulings vary. For example, Judge Berman Jackson could rule that the 5 remaining counts against Manafort in the DC Criminal Case are within the scope the Special Counsel’s delegated authority, while Judge Ellis might place some or all of the 18 counts in the EDVa Indictment outside that authority. Remaining Roads to Trial Assuming at least some of the counts in both indictments survive Manafort’s Motions, the two matters then head to trial roughly two months apart. Judge Ellis will hear Manafort’s Motions to Suppress on May 25, 2018, and then consider motions in limine on June 25, 2018. Trial begins in his courtroom on July 10, 2018—this is an estimated 2-week trial. Judge Berman Jackson’s Scheduling Order identifies a hearing on pre-trial motions set for May 23-24, 2018. Briefing on in limine motions should be completed by July 30, 2018, with trial to commence on September 17, 2018.

Fourth Circuit Recognizes Limited Federal Common-Law Due Process Review of Accreditation Decisions

The Fourth Circuit recently recognized that higher-education accreditation agencies have a federal common-law duty to employ fair procedures when making accreditation decisions.  In reversing the U.S. District Court for the Eastern District of Virginia for its failure to show appropriate judicial deference to the accrediting agency’s denial of re-accreditation, the Fourth Circuit also emphasized the degree of judicial deference required when considering federal common-law challenges to such decisions and laid out a road map for what kinds of challenges might succeed in the future Although it did not reach the question whether the federal common law preempts state-law claims challenging accreditation decisions, the Fourth Circuit leaves little room for employing such claims to expand judicial review beyond the limited review afforded to federal common-law due-process claims.

In Professional Massage Training Center, Inc. v. Accreditation Alliance of Career Schools and Colleges, No. 14-1086, slip op. at 13 (4th Cir. Mar. 24, 2015) (“PTMC v. ACCSC”), the Fourth Circuit joined the D.C., Third, Fifth, Sixth, and Eighth Circuits in recognizing a federal common-law duty on the part of private accrediting agencies to “employ fair procedures when making decisions that affect their members.”   This duty derives from the quasi-public function played by these private agencies as gatekeepers to a school’s participation in various federal-funding programs and the enormous power that this function gives such agencies over their member schools.  Although these private organizations are neither state actors subject to constitutional due-process requirements nor subject to any express private right of action under the Higher Education Act, Congress has given accrediting agencies “life-and-death” power over these schools by delegating to them decision-making power that affects student access to federal funding.  The Fourth Circuit recognized that this power comes with a corresponding due-process-like duty to employ fair procedures in the exercise of this power to avoid “allowing such agencies free rein to pursue personal agendas or go off on some ideological toot.”  Id. at 14.

However, the federal common-law rights granted to higher-education institutions are severely circumscribed by the court’s emphasis on the limited nature of judicial review of accreditation decisions.  Based on principles of administrative law and judicial deference, the Fourth Circuit restricted judicial review of decisions by private accrediting agencies to whether the accrediting decision is “arbitrary and capricious” and is supported by “substantial evidence.”  Id. at 15-16.   The Fourth Circuit adopted this deferential standard based on the “quasi-public nature of accrediting institutions and their wide-ranging expertise in what may be highly technical and specialized fields of education.”  Id. at 16-17.  Because the accreditation process “operates as an instrument of quality control on educational institutions,” which Congress and the U.S. Department of Education have delegated to private accrediting agencies certified by the Department, the Fourth Circuit reasoned that generalist federal courts owed deference to the accrediting agency’s “expertise and knowledge” in not only the accreditation process and higher education, but also in the specialized fields under review.  Id. at 17-18 (citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837(1984)).  The court emphasized the relative importance of judicial deference by spending the greater weight of its opinion detailing the manner in which the district court was “remedially aggressive” and “conducted an impermissible de novo review” of the accreditation decision.  Id. at 20-40.

PMTC v. ACCSC is significant not only for its recognition of the federal common-law rights of higher-education institutions and the deference due to decisions by accrediting agencies, but also because it clarifies the nature of these rights and provides a detailed road map into what sorts of challenges, if any, might be successful.  First, the Court defined the contours of the federal common-law right by reference to cases involving constitutional due-process claims against state actors.

Second, the procedural opportunities that an accrediting agency provides an educational institution to “make its case” for accreditation is critically (if not conclusively) important to finding that these due-process standards have been satisfied.  Although the existence of discernible substantive standards used to measure performance is also important, the PMTC opinion makes it unlikely that any attack on the substantive adequacy of such standards would succeed in the Fourth Circuit, at least where the agency has provided the school with sufficient procedural opportunities to adequately respond to the agency’s reasons for denying or withdrawing accreditation.

Third, the Fourth Circuit sent a very clear signal that the “substantial evidence” standard is satisfied as soon as the federal court finds in the record “anything ‘more than a mere scintilla’ provided that a ‘reasonable mind might accept [the evidence] as adequate to support’” the agency’s decision.  Id. at 26 (internal citations omitted).  Indeed, the Fourth Circuit appears to leave no room for a court to consider record evidence that an agency’s accreditation decision was wrong, as long as this there is some evidence to support the agency’s decision.

Fourth, the court set a high bar for establishing “agency bias” that might justify a less deferential inquiry into the agency’s decision making.  Like their state-actor counterparts, private administrative decision makers are entitled to a presumption of honesty and integrity, absent a showing that a decision maker has a personal bias that “‘stem[s] from a source other than knowledge … acquire[d] from participating in a case.’”  Id. at 34 (internal citations omitted).  Absent evidence that the agency decision makers had this kind of personal bias or conflict of interest, the Fourth Circuit made it very difficult, if not impossible, for claims of agency bias to succeed.  The Fourth Circuit rejected the notion that agency staff expressions of frustration, or even dislike, anger, or dissatisfaction, regarding the school or its representatives was sufficient to support a claim that personal bias improperly influenced the creation of the agency record.  Absent evidence that information was improperly included in or omitted from the administrative record, evidence of what agency staff members may have thought or said about the school or its representatives appears to be irrelevant.

Finally, although the Fourth Circuit avoided deciding “a serious question of cognizability” regarding the preemption of state-law challenges to accreditation decisions, id. at 40 n.3, it left little room for state-law claims to expand judicial review of such decisions.  After clarifying that an accrediting agency’s standards of accreditation do not constitute a contract between the agency and the accredited educational institutions, and that negligence claims are foreclosed by the economic-loss doctrine, the court relied on its analysis of the federal common-law claims to reject the state tortious-interference claims on the ground that the accrediting agency’s accreditation decisions were legally justified.  Id. at 42-43.

Disclosure:  Redmon, Peyton & Braswell, LLP served as counsel of record for Defendant Accreditation Alliance of Career Schools and Colleges in the District Court.

Suing the Supreme Court of Virginia

At some point in their careers, most Virginia practitioners have argued petitions for appeal to the Supreme Court of Virginia and have lost. An appeal to the Virginia high court in a civil case is discretionary. Often, the denial of the appeal is a brief, unsatisfactory one-page order: “Upon review of the record in this case and consideration of the argument submitted in support of and in opposition to the granting of an appeal, the Court is of opinion there is no reversible error in the judgment complained of. Accordingly, the Court refuses the petition for appeal.” This has been a common practice of the Court for at least a generation, if not longer.

One thing most Virginia practitioners have not done is sue the Supreme Court over this one-page denial. The Leiser Law Firm, PLLC, however, took a more aggressive approach in Leiser Law Firm v. Supreme Court of Virginia, et al., Civil No. 1:14-cv-407 (E.D. Va.). The law firm initially filed suit against a former employee and his wife in the Fairfax County Circuit Court. After the circuit court granted a demurrer filed by the defendants which dismissed most of the law firm’s claims, the firm filed a routine motion for reconsideration. The circuit court judge eventually denied the motion for reconsideration without issuing a written opinion. The law firm then appealed to the Supreme Court of Virginia which denied the petition for appeal with a one-page order.

Undeterred, the law firm then filed a federal lawsuit in the U.S. District Court for the Eastern District of Virginia, naming as defendants the Supreme Court of Virginia, the Chief Justice, the Fairfax County Circuit Court, and the circuit court judge who decided the initial demurrer. The law firm claimed that its procedural due process rights were violated by the Virginia Supreme Court’s one-page denial, and that its substantive due process rights were violated by both Courts’ alleged failure to properly apply Virginia state law to the case.

The federal action was assigned to Judge Liam O’Grady in the Eastern District, and on April 28, 2015, he granted the defendants’ motion to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6). Judge O’Grady stated that the law firm’s procedural due process rights were satisfied by receiving “judicial hearings in the Virginia courts and Plaintiff appeared at the hearings through counsel.” The law firm argued that “because the Virginia Supreme Court’s denials of appeal petitions constitute decisions on the merits, that court must provide a detailed opinion explaining its decision whenever it denies an appeal petition.” Judge O’Grady rejected this argument, noting that the law firm “cite[d] no authority supporting the existence of a substantive due process right to detailed judicial opinions whenever a case is decided on the merits.”

Experienced Virginia practitioners are very familiar with the common practice of short orders to grant or deny motions in state court. This is a necessary compromise considering the high volume of cases in most circuit courts. If every motion required a written opinion from the judge, the litigation process in state court would grind to a halt. The default rule of a trial within one year of the filing of a complaint in Virginia circuit courts would be an unachievable pipe dream. Judge O’Grady implicitly recognized this reality and the consequences of the relief sought by the law firm: “Plaintiff asks the Court to declare that state courts in Virginia may not constitutionally issue decisions via short orders and must instead provide detailed opinions in order to satisfy due process. Such relief would be drastic and does not accord with the principle of separation of powers.”

Turning to the law firm’s substantive due process claims, Judge O’Grady interpreted those claims as collateral reviews of state court judgments, which are barred under the Rooker-Feldman Doctrine:

To the extent plaintiff argues that the Virginia courts dismissed its claims in violation of Virginia law, this action is effectively a collateral attack on the merits of the state court judgments. Leiser asks this Court to declare that the Virginia circuit court was wrong to dismiss Leiser’s claims as a matter of Virginia law and that the Virginia Supreme Court erred by affirming the circuit court . . . In other words, Plaintiff asks this Court to pass upon the merits of the Virginia Supreme Court’s ruling on substantive Virginia law. Such a ruling would violate the jurisdictional bar of Rooker-Feldman.

On May 27, 2015, the law firm filed a Notice of Appeal, and the Fourth Circuit will now consider this case. Most Virginia practitioners (including this author) have experienced one-page denials of motions and appeals, and it is understandably frustrating and unsatisfying. Now that the constitutionality of one-page orders has been tentatively answered, the next time it happens to this author, he’ll seek his world-class thrills in skydiving rather than in suing the Supreme Court of Virginia.