Laroche v. Vose CV-97-409-JD 06/23/98 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
David F. Laroche
v. Civil No. 97-409-JD
George Vose
O R D E R
On July 21, 1997, the petitioner, David F. LaRoche, brought
this petition for a writ of habeas corpus pursuant to 28 U.S.C.
§ 2254 against the respondent, George Vose, the Attorney General
of the state of Rhode Island. The gravamen of the petitioner's
claim is that his conviction violated his due process rights
because he was convicted for engaging in conduct that he lacked
clear notice was criminal. Before the court is the petitioner's
reguest for a writ of habeas corpus (document no. 1).
Background1
The petitioner is an entrepreneur who "fell prey . . . to
the devastating financial upheavals created by the October 1987
1The court summarizes the relevant background information. A more detailed factual recitation is set forth in the opinion of the Supreme Court of Rhode Island denying the petitioner's direct appeal. See State v. LaRoche, 683 A.2d 989 (R.I. 1996) . Because the petitioner has presented only a legal challenge as to his conviction, the court accepts the facts relating to the petitioner's conviction as set forth in that opinion. See 28 U.S.C.A. § 2254(e)(1) (West Supp. 1998) (presumption of correctness of factual determinations made by state court); see also infra note 4. stock market crash." State v. LaRoche, 683 A.2d 989, 991-92
(R.I. 1996). In an effort to keep his foundering financial
affairs afloat, he used straw borrowers to obtain loans from
credit unions that he was unable to obtain in his own name
because of the institutions' lending limits.2 As a result, he
was convicted on two counts of obtaining money by false pretenses
and three counts of conspiring to obtain money by false pretenses
on July 6, 1993. The Rhode Island false pretenses statute
provides, in relevant part, the following:
Every person who shall obtain from another designedly, by any false pretense or pretenses, any money, goods, wares, or other property, with intent to cheat or defraud . . . shall be deemed guilty of larceny.
R.I. Gen. Laws § 11-41-4 (1956).
The petitioner was convicted on charges stemming from three
different transactions, all involving the same modus operand!,
directed at two different financial institutions, the Davisville
Credit Union ("Davisville") and the Rhode Island Central Credit
Union ("RICCU"). The first transaction, known as the "Sherwood
property" transaction, resulted in the petitioner's conviction on
one count of obtaining by false pretenses, and one count of
2The lending limits, which at the time represented the internal policies of the credit unions and since have been statutorily enacted, cap the amount that any individual can borrow at a fixed percentage of the credit union's net worth. The lending limits were established by the institutions' boards of directors.
2 conspiring to obtain by false pretenses, a $1.4 million loan from
Davisville in August 1988. The petitioner wanted to repurchase
the Sherwood property, which he had previously sold to a business
associate to whom he owed money on the assumption that it would
increase in value. When it did not, he agreed to buy it back but
needed to take out a loan to do so.
First, however, the loan had to be approved by the loan
committee. At the time, the lending limit at Davisville, as set
by the board of directors, was approximately $1.9 million and the
petitioner had already borrowed about $1.6 million. Under those
circumstances, the loan committee would not approve the loan. To
circumvent this obstacle, he offered to give a friend, P. Alan
Ryan, $50,000 if Ryan would take out the loan from Davisville to
cover the amount necessary. The petitioner discussed his plan
with a branch manager and a vice president at Davisville, each of
whom approved of it. The two were on the Davisville loan
committee and recommended the loan to the committee but failed to
disclose to the rest of the loan committee or the board of
directors the true nature of the transaction. The loan committee
approved Ryan's application, Ryan obtained the loan, and the
petitioner obtained the benefit of the funds.
The second transaction, known as the "Tower Hill" trans
action, resulted in the petitioner's conviction on one count of
obtaining by false pretenses, and one count of conspiring to
3 obtain by false pretenses, an $800,000 loan from Davisville in
June 1988. Bernard Roy Dutra, a friend of the petitioner,
obtained the loan at the petitioner's request to purchase Tower
Hill from the petitioner. Dutra granted the petitioner an option
to buy the property back at the same price and never intended to
repay the loan himself. The true nature of this transaction was
known not only to the two Davisville officers who were aware of
the Sherwood property transaction but also to Davisville's
president. Again, each of the three credit union officials with
knowledge of the true nature of the transaction failed to inform
the other members of the loan committee or the board of directors
and the loan was approved.
The third transaction, known as the "Richmond trailer park"
transaction, resulted in the petitioner's conviction on one count
of conspiring to obtain by false pretenses a $1.92 million loan
from RICCU in December 1988. For this loan, RICCU's president
recommended that the petitioner use a straw borrower to obtain
the loan because the petitioner was too close to his lending
limit at RICCU and the loan could not be approved in his name.
The petitioner had David Ryan, the brother of P. Alan Ryan, apply
for the loan. The petitioner obtained the proceeds by "selling"
the Richmond trailer park to Ryan. Again, the loan committee was
not informed of the true nature of the transaction. Ryan
testified at trial that he had no personal interest in owning the
4 Richmond trailer park and took out the loan "to help" the
petitioner. LaRoche, 683 A.2d at 994.
The three transactions had the effect of refinancing the
properties in question and allowed the petitioner temporarily to
shore up his collapsing financial position. As the value of his
assets deteriorated, however, he was ultimately unable to service
the loans. He testified at trial that he did not believe that he
had done anything wrong. The trial court stated its opinion at
sentencing that it believed the petitioner on this point.
However, it allowed his conviction to stand because it found that
the evidence, taken in the light most favorable to the convic
tion, was sufficient to allow the jury to conclude beyond a
reasonable doubt that the petitioner had obtained the loans by
false pretenses with the intent to defraud. See id. at 995-96.
Subsequent to his conviction, the petitioner appealed to the
Supreme Court of Rhode Island. See id. at 991.3 One of several
arguments presented by the petitioner in his appeal was that his
conviction violated due process because he lacked notice that his
conduct was criminal. However, the court did not address that
argument in resolving his appeal. See LaRoche, 683 A.2d at 991-
1001. Despite the court's failure to address this argument, the
31he petitioner also sought post conviction relief from the trial court on the basis of newly disclosed facts. The trial court denied the motion on May 22, 1997. The petitioner did not appeal this decision.
5 petitioner's presentation of the argument to the court satisfied
the requirement that he exhaust his state court remedies before
seeking habeas relief. See, e.g., Nadwornv v. Fair, 872 F.2d
1093, 1097 (1st Cir. 1989).
Discussion
The enactment of the Antiterrorism and Effective Death
Penalty Act of 1996 ("AEDPA"), Pub. L. No. 104-132, 110 Stat.
1217 (1996), on April 24, 1996, significantly altered the prior
framework governing habeas corpus petitions. The AEDPA
amendments apply to this petition filed on July 23, 1997. The
relevant amended version of 28 U.S.C. § 2254 provides as follows:
(a) [A] district court shall entertain an application for a writ of habeas corpus in behalf of a person in custody pursuant to the judgment of a State court only on the ground that he is in custody in violation of the Constitution or laws or treaties of the United States.
(d) An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim
(1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States . . . .
28 U.S.C.A. § 2254 (West 1994 & Supp. 1998).
6 At the time this petition was filed, the First Circuit had
not addressed the question of how the new § 2254(d)(1) standard
of review was to be applied. On May 26, 1998, however, the First
Circuit declared its interpretation of the standard in O'Brien v.
DuBois. See ___ F.3d ___ , No. 97-1979, 1998 WL 257206 (1st Cir.
May 26, 1998). As the O'Brien court held, pursuant to AEDPA:
A federal habeas court charged to weigh a state court decision must undertake an independent two-step analysis of that decision. First, the habeas court asks whether the [United States] Supreme Court has prescribed a rule that governs the petitioner's claim. If so, the habeas court gauges whether the state court decision is "contrary to" the governing rule. In the absence of a governing rule, the "contrary to" clause drops from the equation and the habeas court takes the second step. At this stage, the habeas court determines whether the state court's use of (or failure to use) existing law in deciding the petitioner's claim involved an "unreasonable application" of [United States] Supreme Court precedent.
Id. at *7. The First Circuit went on to note, as follows:
[A]n affirmative answer to the first section 2254(d)(1) inquiry -- whether the Supreme Court has prescribed a rule that governs the petitioner's claim -- requires something more than a recognition that the Supreme Court has articulated a general standard that covers the claim. To obtain relief at this stage, a habeas petitioner must show that Supreme Court precedent requires an outcome contrary to that reached by the relevant state court.
We caution that this criterion should not be applied in too rigid a manner. A petitioner need not point a habeas court to a factually identical precedent.
Id. at *8 (citation omitted). It also provided:
If no Supreme Court precedent is dispositive of a
7 petitioner's claim, then, a fortiori, there is no specific rule to which the state court's decision can be "contrary." In such circumstances, a federal habeas court then determines whether the state court decision reflects an unreasonable application of clearly established Supreme Court jurisprudence. This reduces to a question of whether the state court's derivation of a case-specific rule from the Court's generally relevant jurisprudence appears objectively reasonable.
Id. at *9. This second standard is a higher one, because "for
the writ to issue, the state court decision must be so offensive
to existing precedent, so devoid of record support, or so
arbitrary, as to indicate that it is outside the universe of
plausible, credible outcomes." Id.
One important question not answered by 0'Brien, however, is
how the court is to treat the failure of a state court to address
an argument raised by the petitioner. In this case, the court
holds that the structure presented by 0'Brien, despite its
failure to explicitly address this situation, is broad enough to
encompass it. The mere failure of a state court to address an
issue, particularly in the context of a direct appeal where
numerous other issues are raised and addressed in detail, is not
itself "so arbitrary[] as to indicate that [the decision not to
address an argument] is outside the universe of plausible,
credible outcomes." Id. Under the circumstances, the only
reasonable interpretation of the Supreme Court of Rhode Island's
failure to respond directly to the petitioner's due process
argument is that it rejected the merits of that argument. To justify habeas relief, therefore, the issue raised by the
petitioner must be subject to 0'Brien's two-step analysis to
determine whether that court's implicit rejection of his argument
justifies the grant of habeas relief under § 2254.
The petitioner has put forth a single legal argument in
support of his petition. He contends that his conviction
violated his due process rights because he lacked adeguate notice
that his conduct was criminal.4 In support of this argument, he
asserts that he was doing nothing more than structuring
transactions, which is not itself illegal. He contends that the
lending limits were, at the time of his offenses, only the
internal policies of the credit unions and that even the
subseguent statutory enactment of them did not impose any burden
or obligation on borrowers, but only on lenders. He claims that
4Ihe petitioner's argument, although presented as a due process challenge to the false pretenses statute, also appears to encompass an implicit assertion that the state adduced at trial insufficient evidence that the petitioner intended to defraud the credit unions to support his conviction. However, in addition to failing to make this argument explicitly, the petitioner has failed to come forward with the proper evidentiary support necessary to sustain such a claim. Both state courts made the factual determination that the trial testimony permitted the factual inference, beyond a reasonable doubt, that the petitioner's actions were motivated by an intent to defraud. See § 2254(e)(1) (West Supp. 1998) (determination of factual issues determined by state court presumed correct and petitioner bears burden of rebutting presumption of correctness by clear and convincing evidence). Therefore, only the petitioner's explicit legal argument warrants detailed analysis. the fact that several credit union officers knew of, approved of,
and in some cases even recommended that he proceed as he did
militates against any inference that he had notice that his
behavior was criminal. He also urges that the Rhode Island false
pretenses statute had never before been applied to reach his
allegedly illegal conduct.
To the extent that the petitioner argues that he personally
lacked actual notice that the conduct for which he was convicted
was illegal, the argument is wholly without merit. Cases cited
by the petitioner himself acknowledge the principle that
"ignorance of the law generally is no defense to a criminal
charge." E.g., Ratzlaf v. United States, 510 U.S. 135, 149
(1994). In this context, the Due Process Clause reguires nothing
more than that a criminal statute be sufficiently clear to
provide fair notice to a reasonable person of what conduct is
proscribed. See United States v. Lanier, 520 U.S. 259, ___, 117
S. C t . 1219, 1225 (1997). The pertinent legal issue raised by
the petitioner, therefore, is not whether he knew his conduct was
illegal but whether a reasonable person could have known that his
conduct was criminal prior to his conviction. See id. at ___ ,
117 S. C t . at 1225. The court accordingly examines the Supreme
Court of Rhode Island's implicit determination that the Rhode
Island false pretenses statute is sufficiently clear to provide a
reasonable person with adeguate notice that the conduct in which
10 the petitioner engaged fell within the ambit of the statute.
The court first "asks whether the [United State] Supreme
Court has prescribed a rule that governs the petitioner's claim."
0'Brien, 1998 WL 257206, at *7. The Supreme Court of the United
States has clearly embraced the principle that "'"no man shall be
held criminally responsible for conduct which he could not
reasonably understand to be proscribed."'" Lanier, 520 U.S. at
, 117 S. C t . at 1225 (guoting Bouie v. City of Columbia, 378
U.S. 347, 351 (1964) (itself guoting United States v. Harriss,
347 U.S. 612, 617 (1954))). It is egually clear, however, that
this proclamation is an instance of a "general standard" that,
while it covers the petitioner's claim, cannot be said to
"reguire[] an outcome contrary to that reached by the relevant
state court." O'Brien, 1998 WL 257206, at *8.
Nor do the Supreme Court cases cited by the petitioner
provide a more specific principle that can fairly be said to
compel a conclusion in the case at hand contrary to that reached
by the state courts. See Lanier, 520 U.S. at ___, 117 S. C t . at
122 5; Ratzlaf, 510 U.S. at 148; Marks v. United States, 430 U.S.
188, 195 (1977); Bouie, 378 U.S. at 350-51. Lanier dealt with a
state court judge convicted under the criminal civil rights
statute for violating the constitutionally protected rights of
five women by sexually assaulting them. See 520 U.S. at ___ , 117
S. C t . at 1222. The Sixth Circuit reversed his convictions,
11 holding that because the constitutional right that he was accused
of violating "had not been previously identified by [the United
States Supreme Court] in a case with fundamentally similar
facts," he lacked adeguate notice that his conduct would violate
the statute. Id. at ___ , 117 S. C t . at 1222. The Supreme Court
reversed, holding that the Sixth Circuit had invoked too narrow a
view of what was reguired to serve as proper notice that a right
was constitutionally protected. See id. at ___ , ,117 S. C t .
at 1224, 1227. The relevance to this case is limited, however,
because it dealt specifically with the definition of constitu
tionally protected rights in the context of the federal criminal
civil rights statute. See id. at ___, 117 S. C t . at 1224.
Ratzlaf involved the guantum of intent reguired to support a
conviction for "willfully violating" provisions of the
antistructuring statute, 31 U.S.C. §§ 5322(a), 5324(3). See 510
U.S. at 137-38, 146-47. The Supreme Court held that the
statutory text of the provision at issue reguired that the
defendant know that the structuring in which he was engaged was
unlawful. See id. at 146-47. However, the Court expressly noted
that this was a case in which Congress had provided by the terms
of the offense a specific exception to the general rule that
charge." Id. at 14 9; see also Aversa v. United States, 99 F.3d
1200, 1205 n.4 (1st Cir. 1996) (noting that, after the Ratzlaf
12 opinion. Congress amended 31 U.S.C. § 5324 to remove willfulness
as an element of the offense).
In Marks, the defendants were convicted of violating the
federal obscenity statute not under the more favorable inter
pretation of what constituted obscenity in force at the time they
committed the acts with which they were charged, but under a more
expansive interpretation of the obscenity statute adopted after
their arrest. See 430 U.S. at 194. The obscenity statute
"always has used sweeping language to describe that which is
forbidden," making judicial interpretation essential to provide
fair warning of what conduct is prohibited. Id. at 195. The
Supreme Court overturned their convictions because the
retroactive application of the expanded definition of obscenity
to their conduct failed to provide adeguate notice that the
conduct violated the statute. Id. at 195, 197. The Court also
noted that its opinion was influenced by the fact that the
statute at issue regulated expression and implicated First
Amendment values. See id. at 196.
Bouie involved a state criminal trespass statute that was
clear on its face and whose plain meaning did not reach the
conduct for which the defendants were convicted. See 378 U.S. at
356. The state's supreme court on appeal, however, upheld the
convictions by adopting "an unforeseeable and retroactive
judicial expansion of narrow and precise statutory language."
13 Id. at 352. The Supreme Court reversed the convictions, holding
that the retroactive application of such a reading of the statute
failed to "give fair warning of the conduct that it makes a
crime." Id. at 350, 363.
None of these cases reguires an outcome contrary to that
implicitly reached by the Supreme Court of Rhode Island when it
determined that the petitioner was not entitled to have his
conviction invalidated. See O'Brien, 1998 WL 257206, at *7. The
petitioner's case does not involve, as did Lanier, a statute that
criminalized the deprivation of rights defined outside the
statute itself. Neither does it involve, as did Ratzlaf, a
statute that has, as an element of the offense, a specific intent
reguirement so that a person accused of the crime must have
knowledge that the conduct is illegal. Unlike Marks and Bouie,
the petitioner's case presents neither a changed judicial
interpretation of a vague statute or a novel judicial
interpretation of a clear statute to reach a result contrary to
the statute's text. Thus, neither the general principle espoused
by these cases nor their specific holdings warrant habeas relief
under the first part of the O'Brien inguiry. See id.
Therefore, the court considers the second guestion: whether
the result reached by the Supreme Court of Rhode Island was an
unreasonable application of existing Supreme Court precedent.
See O'Brien, 1998 WL 257206, at *7. Conviction under a criminal
14 statute violates the Due Process Clause if the statute is vague
and the vagueness is not clarified by case law interpreting it,
see Marks, 430 U.S. at 195, or if the statute is clear in the
conduct that it defines as criminal but it is applied by judicial
interpretation to a factual situation beyond the definition
existing at the time of the challenged conduct, see Bouie, 378
U.S. at 350. As noted by the Supreme Court of Rhode Island, the
crime of obtaining money by false pretenses has two elements:
(1) the petitioner designedly obtained money from another by a
false pretense or pretenses; and (2) the petitioner did so with
the intent to cheat or defraud. See LaRoche, 683 A.2d at 995.
None of the terms of the false pretenses statute are
sufficiently vague, either on their face or in light of Rhode
Island case law, to implicate due process notice concerns. To be
sure, the petitioner argues that his conduct differs from other
Rhode Island false pretense cases because it does not involve a
"lie," and, in a related contention, he claims that the statute
has never been extended to reach behavior such as the
"structuring" in which he was engaged. However, the term "false
pretense" is reasonably clear, and a reasonable person would
understand that the presentation to the credit unions of a straw
borrower to enable the petitioner to obtain a loan for which he
could not otherwise gain approval if he applied for it directly
is a false pretense, if not a "lie." See State v. Aurqemma, 358
15 A.2d 46, 50 (R.I. 1976) (misrepresentation of existing fact is a
"false pretense"). Further, the fact that the petitioner
concocted a scheme creative enough so that no one before him had
been punished for it under the false pretenses statute does not
immunize him from criminal liability. The statutory text reached
his acts and did so with enough specificity to provide adeguate
notice that the petitioner's conduct was proscribed irrespective
of how he chose to characterize that conduct.
Thus, the petitioner's claim that he was doing nothing more
than structuring transactions, which is not in itself illegal, is
inapposite. The use of a false pretense to structure trans
actions meets the definition of the crime of obtaining money by
false pretenses whether or not the false pretense can also be
characterized as "structuring." Further, the fact that the
lending limits represented only the internal policies of the
credit unions and lacked the force of law is of no legal
significance because of the evidence that the petitioner would
not have gualified for the loans had he applied for them
directly. The fact that certain bank officers knew that he was
engaged in the endeavor, in one instance recommended this course
of action, and in all three transactions helped him to execute
his plan by presenting the sham to the relevant loan committees
and recommending loan approval is also without legal signifi
cance. It is no defense to one's criminal activity to say that
16 others knew of, approved of, or even assisted in its commission.
For these reasons, the court concludes that the Supreme
Court of Rhode Island's failure to overturn the petitioner's
conviction on the grounds that he lacked adequate notice that the
conduct he engaged in was criminal was neither "contrary to,
[nor] involved an unreasonable application of, clearly
established Federal law, as determined by the Supreme Court of
the United States." 28 U.S.C.A. § 2254(d)(1). The false
pretenses statute provided adequate notice that the conduct
engaged in by the petitioner was prohibited and the state courts'
refusal to overturn his conviction on this basis was proper.
Accordingly, the petition for a writ of habeas corpus must be
denied.
Conclusion
The petitioner's request for a writ of habeas corpus
(document no. 1) is denied. The clerk is ordered to close the
case.
SO ORDERED.
Joseph A. DiClerico, Jr. District Judge
June 23, 1998 cc: Robert B. Mann, Esquire Lauren S. Zurier, Esquire Clerk, USDC-RI