LEGAL TRENDS

The Supreme Court Offers Jeffrey Skilling a Mixed Result

By Jim Zucker

On November 1, 2010, attorneys for Jeffrey Skilling returned to the Houston federal courthouse and argued before the same Fifth Circuit Court of Appeals panel that heard Skilling's original appeal in 2008. The occasion for the appearance was to argue the effect of the Supreme Court's ruling in Skilling v. United States, No. 08-1394, 130 S. Ct. 2896 (2010). The Court delivered its opinion on June 24, 2010, addressing Skilling's claim that he was unable to receive a fair trial in Houston due to pretrial publicity and community prejudice and his argument that 18 U.S.C. § 1346, the honest-services fraud statute, is unconstitutionally vague.

The Court affirmed the Fifth Circuit's holding that Skilling received a fair trial despite negative pretrial publicity, but reversed the lower court's honest-services ruling. The Court's opinion is significant with respect to both the fair-trial standard and honest services, the former not having been addressed by the Court in the age of pervasive 24/7 media coverage and the latter restricting what had become a significant prosecutorial tool wielded against corporate titans.

Skilling Received A Fair Trial
Skilling argued before both the Fifth Circuit and the Supreme Court that the overwhelmingly negative pre-trial press coverage, the number of victims (those who directly or indirectly lost money in Enron's collapse) in Houston, and the guilty plea shortly before trial of Richard Causey, who was to be tried with Skilling and Ken Lay, meant that Skilling could not receive a fair trial in Houston and his trial should have been moved. The Fifth Circuit agreed that the volume and tone of the media coverage surrounding Enron's collapse (noting that even the pet featured in the Houston Chronicle's "Pethouse Pet of the Week" had "enjoyed watching those Enron jerks being led away in handcuffs"), the large number of victims (from Enron employees to Houstonians suffering collateral effects), and the Causey plea created a presumption of juror prejudice. The Fifth Circuit held, however, that the presumption was rebuttable and, after reviewing the district court's "proper and thorough" voir dire, concluded that the empanelled jury was actually impartial and the Government had overcome the presumption of prejudice.

The Court likewise concluded that Skilling's jury was actually impartial and that he was not prejudiced by being tried in Houston. The Court disagreed, however, that the atmosphere and events surrounding Enron's collapse and Skilling's trial warranted a presumption of prejudice in the first place. The Court distinguished Skilling's trial from cases where the Court previously applied a presumption of prejudice. To begin, the Court noted the difference between the size and characteristics of the community in which Skilling's alleged crimes occurred, namely that Houston is the fourth most populous city in the United States with more than 4.5 million people eligible for jury duty at the time of Skilling's trial. "Given this large, diverse pool of potential jurors, the suggestion that 12 impartial individuals could not be empanelled is hard to sustain."

Second, the Court found it significant that, though the media coverage was "not kind," there was no confession by Skilling. The Court explained that a juror may not reasonably be expected to ignore reports of a confession or purported confession, but could be expected to "shut from sight" merely negative news stories. Moreover, the Court opined that Houston's size and diversity ameliorated the impact of the negative news coverage. Third, the Court believed that the passage of time between the alleged commission of the crime and the trial—four years in Skilling's case—counseled against a presumption of prejudice.

Finally, and of greatest significance to the Court, the jury's acquittal of Skilling on nine insider-trading counts confirmed that it was impartial and that a presumption of prejudice was not warranted. Additionally, the acquittal of other Enron executives tried in Houston, e.g., the Enron Broadband executives, demonstrated that Enron defendants could receive a fair trial in Houston.

Honest-Services Fraud Is Limited To Bribes and Kickbacks
Before the Supreme Court, as before the Fifth Circuit, Skilling pressed his arguments that the honest-services fraud theory was unconstitutionally vague or, at the least, the statute did not encompass his conduct. Honest-services fraud initially appeared as a crime in the early 1940s when courts interpreted the mail- and wire-fraud statutes—specifically the phrase, "scheme or artifice to defraud"—to include the deprivation of intangible rights, as well as money or property. The crime targeted public corruption in which there was not necessarily an obvious victim, e.g., where a mayor accepted a bribe and awarded the bribing party a contract, but on the same terms as could have been negotiated at arm's length so that the City suffered no tangible loss, but did endure the intangible loss of the mayor's honest services. Most early honest-services cases involved bribery of public officials, but over time, courts recognized private-sector honest-services fraud as well.

In McNally v. United States, 483 U.S. 350 (1987), the Court considered the honest-services fraud theory of conspiracy for the first time and held that the mail- and wire-fraud statutes only applied to tangible rights, such as money and property, not intangible rights, such as honest services. The Court explained that the fraud statutes did not clearly include intangible rights and for courts to hold so rendered the statute too ambiguous. If Congress wanted the fraud statutes to apply to intangible rights, then it would have to "speak more clearly." The next year, Congress enacted 18 U.S.C. § 1346, a single sentence that defined "scheme or artifice," as used in the mail- and wire- fraud statutes, to include "a scheme or artifice to deprive another of the intangible right of honest services."

Skilling argued that Congress's single sentence was void for vagueness because it did not state a criminal offense with sufficient definiteness that ordinary people could understand the prohibited conduct, and that it encouraged arbitrary and discriminatory enforcement, both in violation of due process. The Court admitted that the vagueness argument had force—in fact, Justice Scalia wrote separately, with Justices Thomas and Kennedy joining, and agreed that the statute is unconstitutionally vague—but instead of invalidating the statute, the Court chose to limit its construction. For the limitations, the Court looked to the pre-McNally honest-services cases, which were, "in the main," limited to "schemes to deprive another of honest services through bribes or kickbacks supplied by a third party who had not been deceived." The Court held that "§ 1346 criminalizes only the bribe-and-kickback core of the pre-McNally case law."

In the end, although the Court rejected Skilling's constitutional argument, by limiting honest-services fraud to bribes and kickbacks, the Court adopted Skilling's alternative argument that his actions did not constitute honest-services fraud. Because the Government never alleged that Skilling received any side payments from third parties, the Court held that "Skilling did not commit honest-services fraud." The Court remanded the case to the Fifth Circuit because Skilling's indictment alleged three objects of the conspiracy—honest-services wire fraud, money-or-property wire fraud, and securities fraud—and his conspiracy conviction could still stand on either of the latter two objects. It is also an open question whether any of Skilling's other convictions would fall if the conspiracy conviction were overturned. Hence, Daniel Petrocelli's return to Houston on November 1 to argue before the Fifth Circuit. The Fifth Circuit has taken the case under submission and its ruling is forthcoming.

Jim Zucker is an associate at Yetter Coleman LLP, where his practice focuses on complex commercial litigation and appeals.

Texas Law's Interpretation on a Valid Marriage:
An Analysis of the Marriage of Nikki and Thomas Araguz in the State of Texas

By Lisa Brindle Talbot and David Arlington Talbot, III

The tragic death of a Wharton County firefighter has ignited a legal firestorm that has added a twist to the long-standing fight over same-sex marriages. Texas law provides that a marriage is between a man and a woman.1 But, a future ruling by the District Court of Wharton County could change how the terms "man" and "woman" are defined under Texas law.

On July 3, 2010, Thomas Trevino Araguz, III, 30 years old, died while battling a fire in Boling, Texas, approximately 55 miles southwest of Houston. Thomas was a captain and 11-year veteran of the Wharton Volunteer Fire Department.

Thomas' death has led to a heated legal battle over his death benefits, totaling an estimated $600,000. On July 12, 2010, eight days after Thomas' death, his mother, Simona Longoria, filed a lawsuit in Wharton County styled In the Estate of Thomas Trevino Araguz, III, Deceased, Cause No. 44575. Soon thereafter, Thomas' first wife, Heather Delgado, intervened on behalf of her two minor sons with Thomas.2

The heart of this lawsuit is centered on the gender of Thomas' wife, Nikki Araguz, a 35-year old woman who was born a man. Specifically, Simona's and Heather's lawsuit requests that the Court hold the marriage between Thomas and Nikki void because the couple were members of the same sex, and such unions are not recognized in Texas.3 As Thomas died without a will, a ruling holding the marriage void would prevent Nikki from receiving any insurance or death benefits the couple had, with these benefits only going to Thomas' sons.

The Life of Nikki Araguz
On June 4, 1975, Nikki was born as a male, Justin Graham Purdue, in Carmel, California. At birth, Nikki suffered from a rare defect called Partial Androgen Insensitivity Syndrome ("AIS"). Partial AIS causes an individual to be born with the physical traits of a female, but have ambiguous genitalia or male genitalia.4 AIS prevents the individual from responding to androgens (testosterone), causing their genitals not to develop any further after birth, puberty, or during adulthood.5

After living her life for over 20 years as Justin, she legally changed her name to Nikki Paige Purdue in February 1996. Two years later, Nikki married her first husband Emilio Mata, who was 18 years her senior. As a result of legal and financial problems, the marriage ended in divorce in 2007.

During that same year, Nikki met Thomas, who was separated from Heather. Thomas and Heather divorced, and Thomas married Nikki on August 23, 2008, in Needville, Texas. Less than two months later, Nikki underwent genital reconstructive surgery.

The Parties' Legal Arguments Before the Court
The issue before the Wharton County court is whether under Texas law, a marriage is void if one party is male and the other party is born a male but subsequently undergoes genital reconstructive surgery to acquire female genitalia.

Thomas' mother, Simona, asserts that the marriage between the couple was never legal and should be dissolved on the grounds that Nikki was a male at birth. She cites a Texas appeals court ruling in Littleton v. Prange6 as the controlling case law.

In Littleton, Christie Littleton, a former man and post-operative transsexual woman, filed a wrongful death suit arising from her husband's death due to complications after a medical procedure.7 As the surviving spouse, Christie filed a medical malpractice claim against her deceased husband's doctors.8 The doctors filed summary judgment motions challenging Christie's status as a valid wrongful death claimant.9 Specifically, the doctors argued that despite the sex reassignment surgery, Christie remained legally a man and could not be the surviving spouse of another man under Texas law.10

The Texas Court of Appeals found that Christie could not be the spouse of another man because Christie was "created and born a male" and noting that her birth certificate listed her as male.11 The fact that medical science could construct female anatomy and genitalia did not, in the Court's view, change Christie's status as a man. The court gave significant weight to the fact that the sex reassignment surgery did not create internal reproductive organs or alter Christie's male chromosomes. The court concluded "[t]here is no womb, cervix or ovaries in the post-operative transsexual female... [b]iologically, a post-operative transsexual female is still a male."12

During the pendency of the suit, Christie successfully amended her birth certificate to change her gender designation to female.13 Despite this attempt, the court still held that the amended birth certificate was not binding because the original certificate was a true and accurate reflection of her gender at the time of her birth.14 Thus, the core of the Littleton ruling has two facets: (1) a person's original birth certificate is immutable in Texas with regard to their sex designation; and (2) in Texas, biology determines one's legal sex status.

The Littleton court's heavy reliance on biology fails to adequately address the status of transgendered individuals born with chromosomal or anatomical anomalies, such as persons with both ovarian and testicular tissue or ambiguous genitalia. Individuals with these conditions, sometimes called intersex individuals, often suffer from chromosomal anomalies such as an extra x or y chromosome. It is unclear under Littleton how a Texas court would rule where the transgendered man or woman suffered from a chromosomal or anatomical anomaly. Given the foregoing, there is certainly room for multiple attacks to be placed on the Littleton ruling. One argument would be that the Littleton court's evaluation of genetics and sexual morphology is simply incorrect law. Another argument is that the Littleton ruling should not apply because Nikki could be deemed intersex and her AIS status at birth placed her in a completely separate category.

For now, Nikki maintains that she is female and that her marriage to Thomas was valid. She relies upon a new provision in the Texas Family Code, § 2.005, which took effect in 2009. Section 2.005 expanded a marriage license applicant's proof of identity to include "a court order relating to the applicant's name or sex change."15 Nikki argues that this legislation effectively overturns the Littleton decision because she can now rely upon proof of her sex change, rather than her birth certificate (as noted in Littleton) to prove her gender. Under this argument and her reliance upon § 2.005, Nikki claims that her marriage to Thomas is valid under Texas law. However, critics of this argument argue that § 2.005 does not conflict with the Littleton court's ruling that a person's sexuality is determined at birth. Therefore, in spite of what documents are used as proof of one's identity for obtaining a marriage license under § 2.005, the court can still rely upon the reasoning used in Littleton to hold that Nikki was born a man. Under these circumstances, the court could still hold that regardless of her proof of a sex change, her birth certificate lists her as a man—ultimately voiding her marriage to Thomas.

If nothing at all, § 2.005 may leave the door open for certain same-sex unions to be considered valid under Texas law, even after applying Littleton. In cases where the transgendered party at birth was of the opposite sex of his or her marriage partner, but later obtained a sex change, a court may hold that the marriage is valid even if the parties are now of the same sex. In May 2010, the Bexar County Clerk issued a marriage license to a male-to-female transgendered woman and her female fiancé. Relying on Littleton and the fact that the transgendered woman's birth certificate designated her as a man, the Bexar County Clerk reasoned that the seemingly gay marriage was valid because it was between a man and a woman.16 The Texas Attorney General, Greg Abbott, refused an earlier request by the El Paso County Clerk to rule on this issue when the couple initially applied for a marriage license in El Paso, Texas, stating that the court was the proper entity to make such a ruling.17

A Brief History of Decisions Addressing this Issue
Nikki may have a difficult road ahead of her. In one of the first cases dealing with the validity of a marriage involving a post-operative transsexual, Corbett v. Corbett,18 an English court held the marriage was void.19 In Corbett, a husband sought to dissolve his marriage to his transgendered wife on the basis that the wife was legally a man. The husband further alleged that due to the transgendered status, he was unable to engage sexually with his spouse and consummate the marriage.20

In finding for the husband, the court held that biology alone determines a person's sex, at least in the marriage context.21 According to the court, "the biological sexual constitution of an individual is fixed at birth (at the latest) and cannot be changed, either by natural development of organs of the opposite sex, or by medical or surgical means."22

Only a year after Corbett, a New York state court tackled the issue. In Anonymous v. Anonymous,23 a husband sought to annul his marriage to his pre-operative transgendered wife.24 In this case, the transgendered wife underwent sex-reassignment surgery after she married the husband. As a result, the court noted that at the time of the marriage, the wife was unquestionably still a man and had all male organs—a fact the husband allegedly first learned on his wedding night.25 The court held that the marriage was void because New York law stated that a marriage was a contract between a man and a woman.26

The court's decision in Anonymous highlights a hurdle Nikki may too face. Similar to the facts in Anonymous, Nikki also underwent sex re-assignment surgery two months after her union to Thomas.27 Based on this fact alone, the court may hold that the Araguz marriage is void because it was between two men at the time of the marriage.28

In 1976, New Jersey confronted the issue and unlike previous courts, upheld the marriage. In M.T. v. J.T.,29 a husband paid for his transsexual wife's sex re-assignment surgery prior to their wedding.30 Two years later, the marriage ended in divorce and the wife sought spousal support from her husband.31 In response to the husband's objections, the New Jersey court rejected the argument that the marriage was void because the wife was a man.32 In particular, the Court determined that sexual identity was based on more than simply biology and acknowledged the significant psychological aspects to one's perception of his or her gender.33 The court reasoned that if sex reassignment harmonizes a person's genitalia or organs with their psychological sexual identity and they are able to perform sexually as their chosen gender, then the law must recognize their chosen sexual identity for the purposes of marriage.34 This ruling is unlike many others that have routinely held that an individual's sex is determined at birth and is based on anatomy. Should the Araguz court hold similarly, it would certainly change Texas' marriage laws as we now know it.

Conclusion
Given the complexity of the issue and the implications a ruling may have on same-sex marriages in Texas, it is impossible to predict how the court will rule. Any decision by the court with respect to Thomas and Nikki's marriage will have a far-reaching influence on society, especially as we grapple with issues surrounding the status of transgendered individuals and what it means to be a man or a woman.

Lisa Brindle Talbot is a member of The Houston Lawyer Editorial Board and an attorney in Houston, Texas. Her practice areas include commercial litigation, insurance defense and environmental tort matters.
David Arlington Talbot, III is an attorney at Mills Shirley's Houston, Texas office. His practice areas also include commercial litigation, insurance defense, and environmental tort cases.

Endnotes

1. See Tex. Fam. Code Ann. § 2.001.
   
2. The National Union Fire Insurance Company of Pittsburg also intervened on September 10, 2010.
   
3. See Tex. Fam. Code Ann. § 2.001.
   
4. See http://en.wikipedia.org/wiki/Androgen_insensitivity_syndrome.
   
5. See id.
   
6. 9 S.W.3d 223, 225 (Tex. App.—San Antonio 1999).
   
7. See id.
   
8. Id.
   
9. Id.
   
10. Id.
    
11. Id. at 223.
    
12. Id. at 230.
    
13. Id.
    
14. Id.
    
15. See Tex. Fam. Code Ann. § 2.005.
    
16. Chuck Lindell, "AG declines to issue opinion on same-sex marriage," Austin American Statesman, Aug. 10, 2010.
    
17. See id.; see also 2010 Tex. AG Lexis 37 (El Paso Aug. 6, 2010).
    
18. 2 W.L.R. 1306, 2 All E.R. 33 (P.D.A. 1970).
    
19. Id.
    
20. Id.
    
21. Id. at 1323.
    
22. Id.
    
23. 325 N.Y.S.2d 499 (N.Y. Sup. Ct. 1971).
    
24. Id.
    
25. Id.
    
26. Id. at 501.
    
27. Id. at 499.
    
28. Id. at 500.
    
29. 355 A.2d 204, 205 (N.J. Super. Ct. App. Div. 1976).
    
30. Id.
    
31. Id.
    
32. Id.
    
33. 355 A.2d at 207.
    
34. Id. at 211.

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