U.S. Supreme Court, Kousisis v. United States, Docket No. 23-909

Wire Fraud and Conspiracy to Commit the Same (18 U. S. C. §§1343, 1349)

 

Fraudulent-Inducement Theory

 

Circuit Split

 

 

 

 

The Government charged Alpha and Kousisis with wire fraud, asserting that they had fraudulently induced PennDOT to award them the painting contracts. See 18 U. S. C. §1343. Under the fraudulent-inducement theory, a defendant commits federal fraud whenever he uses a material misstatement to trick a victim into a contract that requires handing over her money or property—regardless of whether the fraudster, who often provides something in return, seeks to cause the victim net pecuniary loss. We must decide whether this theory is consistent with §1343, which reaches only those schemes that target traditional money or property interests. See Ciminelli v. United States, 598 U. S. 306, 316 (2023). It is, so we affirm.

 

The circuits are divided over the validity of a federal fraud conviction when the defendant did not seek to cause the victim net pecuniary loss. Several circuits, now including the Third, hold that such convictions may stand. See, e.g., id., at 240–244; United States v. Leahy, 464 F. 3d 773, 787–789 (CA7 2006); United States v. Granberry, 908 F. 2d 278, 280 (CA8 1990); United States v. Richter, 796 F. 3d 1173, 1192 (CA10 2015). Others disagree. See, e.g., United States v. Shellef, 507 F. 3d 82, 108–109 (CA2 2007); United States v. Sadlar, 750 F. 3d 585, 590–592 (CA6 2014); United States v. Bruchhausen, 977 F. 2d 464, 467–468 (CA9 1992); United States v. Takhalov, 827 F. 3d 1307, 1312–1314 (CA11 2016); United States v. Guertin, 67 F. 4th 445, 450–452 (CADC 2023). We granted certiorari to resolve the split. 602 U. S. ___ (2024).

 

(…) The money-or-property requirement lies at the heart of this dispute. Although the lower courts once interpreted the phrase “money or property” as something of a catchall, we recently reiterated that the federal fraud statutes reach only “traditional property interests.” Ciminelli, 598 U. S., at 316. Schemes that target the exercise of the Government’s regulatory power, for example, do not count. See Kelly, 590 U. S., at 400; see also Cleveland v. United States, 531 U. S. 12, 23–24 (2000). Nor do schemes that seek to deprive another of “intangible interests unconnected to property.” Ciminelli, 598 U. S., at 315; see also McNally, 483 U. S., at 356. And in all cases, because money or property must be an object of the defendant’s fraud, the traditional property interest at issue “must play more than some bit part in a scheme.” Kelly, 590 U. S., at 402. Obtaining the victim’s money or property must have been the “aim,” not an “incidental byproduct,” of the defendant’s fraud. Id., at 402, 404.

 

 

 

 

(U.S. Supreme Court, May 22, 2025, Kousisis v. United States, Docket No. 23-909, J. Barrett)

U.S. Supreme Court, Kousisis v. United States, Docket No. 23-909

Fraud

 

Rescission of Contract

 

Common Law

 

 

 

When Congress uses a term with origins in the common law, we generally presume that the term “‘brings the old soil with it.’” Sekhar v. United States, 570 U. S. 729, 733 (2013). As petitioners note, we have long interpreted the statutory term “fraud” (and its variations) this way—that is, by reference to its common-law pedigree. See Neder v. United States, 527 U. S. 1, 21–22 (1999); Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U. S. 176, 187 (2016) (“The term ‘fraudulent’ is a paradigmatic example of a statutory term that incorporates the common-law meaning of fraud”).

 

This old-soil principle applies, however, only to the extent that a common-law term has “‘accumulated a settled meaning.’” Neder, 527 U. S., at 21; Kemp v. United States, 596 U. S. 528, 539 (2022). So to show that economic loss is necessary to securing a federal fraud conviction, Alpha and Kousisis must show that such loss was “widely accepted” as a component of common-law fraud. Morissette v. United States, 342 U. S. 246, 263 (1952). They cannot.

 

At common law, “fraud” was a term with expansive reach. Rather than settle on a single form of liability, courts recognized at least three, and the particular elements and remedies turned on the nature of the plaintiff ’s alleged injury. To appreciate how the three forms differed, it may help to consider a variation of the facts here. Imagine that PennDOT discovered petitioners’ scheme soon after Alpha and Kousisis had begun work on the Girard Point and 30th Street projects. In such a circumstance, law and equity provided at least three avenues for relief: PennDOT could (1) seek to rescind the contracts; (2) refer the matter for indictment under the crime of false pretenses; or (3) bring a tort action against the fraudsters for the damages incurred. If PennDOT had wanted to rescind the fraud-infected contracts, most courts would historically have permitted it to do so even without a showing of economic loss. To obtain a rescission, PennDOT would have needed to establish only that it had “received property of a different character or condition than it was promised” (“although of equal value”) or, more relevant here, that the transaction had “proved to be less advantageous than as represented” (“although there was no actual loss”). W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts §110, p. 766 (5th ed. 1984) (Prosser & Keeton). Put differently, many courts would have awarded the equitable remedy of rescission simply because Alpha and Kousisis had tricked PennDOT into a bargain materially different from the one they had promised. See Hirschman v. Healy, 162 Minn. 328, 331, 202 N. W. 734, 735 (1925) (“It is to be noted that it was not indispensable to prove damages in dollars and cents to have cancellation or rescission of the contract and note for misrepresentations”); Williams v. Kerr, 152 Pa. 560, 565, 25 A. 618, 619 (1893); Spreckels v. Gorrill, 152 Cal. 383, 391, 92 P. 1011, 1015 (1907). To borrow a summary from Black (of Black’s Law Dictionary fame) many “decisions repudiated altogether a rule requiring a showing of actual damage.” 1 H. Black, Rescission of Contracts and Cancellation of Written Instruments §112, p. 314 (1916).

 

 

 

(U.S. Supreme Court, May 22, 2025, Kousisis v. United States, Docket No. 23-909, J. Barrett)