Whitman v. United States:  U.S. Supreme Court Considers Deference to Agencies’ Interpretations of Criminal Statutes; Two Justices Suggest That Agencies’ Interpretations Should Not Be Entitled To Deference When Considering Statutes With Criminal Penalties

Sullivan & Cromwell LLP - November 13, 2014

Earlier this week, the Supreme Court denied certiorari in Whitman v. United States, No. 14-29 (Nov. 10, 2014), a criminal prosecution for insider trading under Section 10(b) of the Securities Exchange Act. In Whitman, the Second Circuit deferred to the Securities and Exchange Commission’s interpretation of Section 10(b) in affirming the defendant’s conviction. Although Justices Scalia and Thomas agreed that further review was not warranted in Whitman, they wrote separately to question whether agencies’ interpretations should receive deference when considering statutes that have both criminal and administrative applications. They observed that “deference to agency interpretations of statutory provisions to which criminal prohibitions are attached” is inconsistent both with “[t]he rule of lenity” and “the principle that only the legislature may define crimes and fix punishments.” They expressed interest in considering that question in a future case. Companies and individuals accordingly should take care to preserve this issue for appellate review and consider raising it in legal presentations to regulators and prosecutors.