April 25, 2015

Tenth Circuit: Automatic Bankruptcy Stay Deprives Tenth Circuit of Appellate Jurisdiction

The Tenth Circuit Court of Appeals issued its opinion in Eastom v. City of Tulsa on Monday, April 20, 2015.

Dustin Eastom filed § 1983 claims for malicious prosecution against the City of Tulsa, a Tulsa police officer (Mr. Henderson), and an ATF agent (Mr. McFaddon). Mr. Eastom also filed a negligence claim against the city under Oklahoma’s Governmental Tort Claims Act. After Mr. Eastom filed suit, Mr. McFaddon filed for bankruptcy, and Mr. Eastom’s claim against him was automatically stayed by 11 U.S.C. § 362. The district court entered summary judgment for the City and Mr. Henderson, dismissing Mr. Eastom’s claims with prejudice. It declined to exercise jurisdiction over Mr. Eastom’s state law claims against the City and also dismissed them with prejudice.

Mr. Eastom appealed the summary judgment order, and the Tenth Circuit issued an order to show cause why the appeal should not be dismissed because there was no final judgment as to all parties. Mr. Eastom voluntarily dismissed his district court claim against Mr. McFaddon without prejudice and responded to the show cause order that his appeal was now final because he was time-barred from refiling the claim. However, under Oklahoma’s savings statute, Mr. Eastom had an additional year to re-file his voluntarily withdrawn claims against Mr. McFaddon despite the time bar.

Mr. Eastom waited a year and again appealed to the Tenth Circuit. However, the § 362 stay was still in place, and the Tenth Circuit again ordered Mr. Eastom to show cause why his appeal should not be dismissed for lack of jurisdiction. Mr. Eastom contended the district court’s summary judgment was final because the time for refiling under the savings statute had elapsed.

The Tenth Circuit examined the interplay between the applicable statute of limitations, the savings statute, and the bankruptcy stay, and found that Mr. Eastom’s claims were still not final because the bankruptcy stay was still in place, tolling the statute of limitations. Because the automatic stay prevented Mr. Eastom from exercising legal remedies against the debtor, Oklahoma law prevents the running of the savings statute while the stay is in place.

The Tenth Circuit dismissed the appeal for lack of jurisdiction.

Application Period Open for Bankruptcy Judge Vacancy in District of Colorado

The United States Court of Appeals for the Tenth Circuit seeks applicants for a bankruptcy judgeship in the District of Colorado. The position will be created effective January 4, 2016, and will be in Denver, Colorado.

Eligible applicants must be a member in good standing of the bar of the highest court of any state, DC, or Puerto Rico, and must be in good standing in every other bar in which he or she is admitted. Applicants must be committed to equal justice under the law, have good character, possess and have demonstrated outstanding legal ability, exhibit judicial temperament, and be of sound mental and physical health. Applicants may not be related by blood or marriage to any other judge of the Tenth Circuit or District of Colorado or any member of the Judicial Council of the Tenth Circuit. Finally, applicants must have been admitted to practice law for at least five years.

Application forms are available from the Tenth Circuit website, and must be received no later than May 22, 2015. For more information about the vacancy, or to obtain an application form, click here.

Frederick Skillern: Real Estate Case Law — Titles and Title Insurance (2)

Editor’s note: This is Part 17 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick B. Skillern

Egelhoff v. Taylor
Colorado Court of Appeals, August 15, 2013
2013 COA 137,
312 P.3d 270

Spurious lien statute; phony lien against judge.

Lest anyone be confused about why the legislature passed the spurious lien statute in 1998, we give you the case of Denver District Judge Egelhoff. In 2008, the judge sentenced Taylor to prison on a felony conviction. After he was sentenced, Taylor began mailing the judge various documents, claiming that Judge Egelhoff was indebted to him. The judge understandably did not respond. Taylor filed suit, claiming that the judge’s failure to respond created liability to Taylor under a terrific doctrine called the “commercial affidavit process.” Robin Hood could not have done better.

Taylor contends that the “commercial affidavit process” permits an individual to send an affidavit to a purported debtor, claiming the recipient owes the sender a debt, and if the recipient does not specifically rebut the alleged debt, he is deemed to have agreed to the debt and its collection by any means. At our social gathering tonight, perhaps someone can advise us from whence this legal doctrine derives. According to Taylor, a recipient’s silence results in a “self-executing contract,” binding the recipient to pay the amount of the alleged debt. Thus, Taylor argues that, because the judge did not respond to his affidavit, his honor “agreed” that the five hundred million dollar debt was valid.

The panel of the court of appeals, seemingly lacking any sense of humor, goes on for several pages as to why this procedure does not form a contract between judge and convict. An opportunity was missed. It is interesting that this case was selected for publication, when many other real estate cases of considerable substance are passed over.

Ute Mesa Lot 1, LLC v. First-Citizens Bank & Trust Co. (In re Ute Mesa Lot 1, LLC)
United States District Court, District of Colorado, November 25, 2013
No. 12-1134

Bankruptcy; lis pendens; preferential transfer.

Ute Mesa Lot 1, LLC (Ute Mesa) borrowed $12 million from United Western Bank to finance the construction of a home in Aspen. The deed of trust incorrectly named the property’s owner, so the deed of trust was ineffective in giving the Bank a lien on the property. Later, the Bank filed suit to reform the deed of trust and give it a first priority lien on the property. The Bank then recorded a notice of lis pendens with the county real property records. Two months later, Ute Mesa filed for bankruptcy and sought to avoid the lis pendens as a preferential transfer. The bankruptcy court and district court dismissed Ute Mesa’s claim. Ute Mesa appealed, arguing that the lis pendens would prevent a bona fide purchaser from acquiring an interest in the property superior to the Bank’s. Therefore, it was a “transfer of an interest in property” and an avoidable preferential transfer.

The Tenth Circuit holds that a lis pendens is merely a notice and does not constitute a lien, despite the fact that under Colorado law, a lis pendens renders title unmarketable. The lis pendens is not a transfer, so it was not subject to the bankruptcy provision allowing a debtor-in-possession to avoid a transfer of an interest in property that occurs within ninety days before the filing of the bankruptcy petition. The judgment is affirmed.

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

Hon. Thomas B. McNamara Appointed to Bankruptcy Bench for U.S. District Court

On Monday, March 23, 2015, the United States Court of Appeals for the Tenth Circuit appointed Thomas B. McNamara to the bankruptcy bench in the U.S. District Court for the District of Colorado. McNamara was appointed to replace Hon. A. Bruce Campbell, who retired.

Prior to his appointment, McNamara was a partner at Davis Graham & Stubbs LLP, where he litigated international cases and advised clients on regulatory matters and compliance with foreign law. He received his law degree from Yale Law School and his undergraduate degree, summa cum laude, from the University of Minnesota.

Judge McNamara will take over all of Judge Campbell’s active cases. For more information about the appointment, click here.

 

Tenth Circuit: Form 1040s Filed After IRS Tax Assessments Not “Returns” for Bankruptcy Dischargeability Purposes

The Tenth Circuit Court of Appeals issued its opinion in In re Mallo: Mallo v. Internal Revenue Service on Monday, December 29, 2014.

In these consolidated appeals, the debtors did not file tax returns timely and the IRS issued statutory notices of deficiency. The debtors in both cases eventually filed tax returns for the years at issue, changing their tax liabilities. The debtors in both cases later were subject to bankruptcy court orders discharging their debts but excluding their tax liabilities. They filed adversary proceedings against the IRS, seeking determinations that their tax debts had been discharged, and the IRS answered, denying that the debts had been discharged. The parties filed cross-motions for summary judgment on the legal question of whether the debtors’ tax debts were excepted from discharge under 11 U.S.C. § 523(a)(1)(B). In the Mallo case, the bankruptcy court granted the IRS’s motion for summary judgment based on the court’s conclusion that the Mallos had not filed a return and therefore their debt was not dischargeable. In the Martin case, the bankruptcy court reached the opposite conclusion. Both cases were appealed to the U.S. District Court for the District of Colorado, where they were consolidated. The district court concluded the late-filed returns were not “returns” for purposes of § 523(a)(1)(B) because they served no tax purpose. The debtors then appealed, and the appeals were consolidated.

The Tenth Circuit found the plain language of § 523(a) unambiguous, and found that the late-filed returns were not returns for purposes of § 523(a) and therefore their tax liabilities were excepted from the bankruptcy courts’ general orders of discharge. The Tenth Circuit noted that the district court in this case utilized the long-established Beard test to determine whether a filing is a return, focusing on the third prong of the test, i.e., whether a Form 1040 filed after the IRS assesses tax penalties evinces “an honest and reasonable attempt” to comply with tax law. The district court in this case adopted the reasoning of several other courts to consider the issue and determined that because the IRS has no use for the Form 1040 after it has calculated tax liability, the late-filed returns have no valid purpose and therefore are not “honest and reasonable attempts” to follow tax law. The Tenth Circuit took a different approach, instead applying a plain language analysis to § 523(a). The Tenth Circuit found the phrase “applicable filing requirements” to include time limits for filing. Because the debtors did not file their returns by the deadline, an applicable filing requirement, they were not “returns” as required by the Bankruptcy Code.

The Commissioner of the Internal Revenue Service proposed a different approach, instead relying on the official IRS position, which is that “a debt assessed prior to the filing of a Form 1040 is a debt for which [a] return was not ‘filed.’” In essence, the Commissioner argued that focusing on the meaning of the word “return” was not necessary, and would impermissibly work a “major change” in bankruptcy practice. The Tenth Circuit rejected this approach, relying instead on the plain and unambiguous statutory language and finding that Congress intended the result achieved by the Tenth Circuit because the language it chose was unambiguous. It would not create a “major change” in bankruptcy practice because the language the Tenth Circuit interpreted was part of the Bankruptcy Code.

The district court’s rulings were affirmed.

F.R.A.P. 6 and Tenth Circuit Local Rules Amended

Rule 6 of the Federal Rules of Appellate Procedure, “Bankruptcy Appeals,” was amended, effective December 1, 2014. The changes to the rule incorporates the most recent numeric amendments to the bankruptcy rules, language was incorporated to include reference to electronic records, and the rule has been updated to include references to discretionary bankruptcy appeals in the Tenth Circuit per 28 U.S.C. § 158(d)(2).

The Tenth Circuit Local Rules were also amended, effective January 1, 2015. The changes to the Tenth Circuit Local Rules include changing references to accommodate electronic filing, moving all specific requirement for appendices to a single rule (Rule 30), adding a requirement that agency petitions include a list of parties to be served by the circuit clerk, outlining procedures for obtaining exemptions from electronic filing requirements, clarifications regarding citations to the record on appeal, and, most significantly, adding a rule that delineates requirements for appendices. The goal in adding Rule 30 was to move all requirements for appendices into one unified rule. Rule 30 requires electronic appendices for all retained counsel cases after January 1, 2015, except that one hard copy must be filed in the clerk’s office. Requirements for content and time of filing are delineated in the new rule, as well as options for seeking exemptions from the electronic filing requirement.

A memorandum issued by the Tenth Circuit explaining the changes to F.R.A.P. 6 and the Local Rules is available here. For a redline of the changes, click here.

Tenth Circuit Announces Bankruptcy Judge Vacancy in District of Wyoming

The Tenth Circuit Court of Appeals announced a vacancy for a bankruptcy judge in the District of Wyoming. This position will open after February 28, 2015, and it will be officially located in Cheyenne, Wyoming. Bankruptcy judges are appointed to 14-year terms. The District of Wyoming has a relatively low bankruptcy caseload, so the selected judge will be expected to carry a partial caseload in the District of Colorado as well.

To qualify for appointment, applicants must be a member in good standing of the highest court in at least one state or the District of Columbia, and be a member in good standing of every other bar in which the applicant is a member; possess and demonstrate various qualifications of fitness for duty, including outstanding legal ability and competence, a commitment to equal justice under the law, judicial temperament, and sound physical and mental health; not be related by blood or marriage to any other judge on the Tenth Circuit, a member of the Judicial Council of the Tenth Circuit, or a judge of the District of Wyoming; and must have been engaged in the practice of law or similarly suitable occupation for five years.

Applications are available on the Tenth Circuit’s website, and may also be obtained by calling the Office of the Circuit Executive at (303) 844-2067 and requesting to speak to a member of the Judicial Resources team. Applications must be received on or before December 19, 2014, and should be submitted via email to hr@ca10.uscourts.gov or by mail to Office of the Circuit Executive, Byron White U.S. Courthouse, 1823 Stout St., Denver, CO 80257. For more information about the vacancy and required qualifications of applicants, click here.

 

Comment Period Open for Proposed Changes to Bankruptcy Court Local Rules

Significant changes to the Federal Rules of Bankruptcy Procedure will take effect December 1, 2014. The changes are to the 8000 series of rules, which govern appeals. Correspondingly, the Bankruptcy Appellate Panel of the 10th Circuit has amended its local rules, effective December 1, 2014.

The comment period for the proposed changes to the local bankruptcy rules is open until October 15, 2014. Comments may be submitted via email to 10th_Circuit_BAP@ca10.uscourts.gov. A redline of the proposed changes is available here, and a summary of the revisions is available here.

Colorado Court of Appeals: Dismissal Prior to Completion of Bankruptcy Case Re-Vests Claims in Debtors

The Colorado Court of Appeals issued its opinion in Mackall v. JPMorgan Chase Bank, N.A. on Thursday, September 11, 2014.

Bankruptcy—Dismissal—Standing—Issue Preclusion—Failure to State a Claim.

Plaintiffs purchased a home and subsequently refinanced it. After the court issued a written order authorizing JPMorgan Chase Bank (Chase), the assigned lender, to sell the house, plaintiffs filed a Chapter 13 petition for bankruptcy. The bankruptcy court dismissed the bankruptcy proceeding before confirmation of a plan or discharge. Plaintiffs thereafter filed a civil complaint against Chase, alleging that Chase’s note was fraudulent and that Chase was not the proper party to enforce it. The district court granted Chase’s motion to dismiss some of plaintiffs’ claims.

On appeal, Chase contended that plaintiffs lacked standing to assert any claims against it because (1) all of the claims were actionable when plaintiffs filed for bankruptcy, and (2) plaintiffs failed to disclose the claims to the bankruptcy court. When a bankruptcy case is dismissed, the debtor is granted standing to assert any claim that it possessed before it filed for bankruptcy, regardless of whether it disclosed the claim to the bankruptcy court during the bankruptcy proceedings. Here, the dismissal of the bankruptcy petition re-vested the claims in plaintiffs, and they had standing to bring those claims against Chase after the dismissal.

Plaintiffs argued that the district court erred in dismissing some of their claims based on issue preclusion. The district court held that both the CRCP 120 order authorizing sale and the bankruptcy court order allowing Chase’s proof of claim precluded some of plaintiffs’ claims. Because the bankruptcy court ruling had preclusive effect on these issues, plaintiffs were barred from re-litigating the issues that were dismissed based on issue preclusion.

Plaintiffs also argued that the district court erred by dismissing several of their claims for failure to state a claim. Because the complaint failed to allege that Chase filed the CRCP 120 actions for any purpose other than to obtain an order authorizing sale, the district court properly dismissed plaintiffs’ abuse of process claim. Plaintiffs’ complaint failed to allege that their property was on the market for sale and, therefore, the district court properly dismissed plaintiffs’ slander of title claim. Additionally, plaintiffs claims for breach of contract, implied covenant of good faith and fair dealing, and promissory estoppel were properly dismissed because the statute of frauds barred any unwritten modification of the loan agreement. Finally, because Chase had the right to seek enforcement of the promissory note against plaintiffs, plaintiffs’ claim for intentional infliction of emotional distress failed. The judgment was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Tenth Circuit: Debtor’s Participation in Tax Evasion Scheme was Willful

The Tenth Circuit Court of Appeals issued its opinion in In re Vaughn: Vaughn v. United States on Tuesday, August 26, 2014.

In the mid-1990s, James Charles Vaughn was the CEO of FrontierVision Partners, L.P., a cable television acquisitions company. In 1999, Vaughn sold FrontierVision for roughly $2.1 billion. He received approximately $20 million cash and $11 million in the purchasing company’s stock from this transaction. Vaughn contacted KPMG LLP regarding tax planning and learned of a tax strategy called Bond Linked Issue Premium Structure (“BLIPS”), in which relatively small cash contributions were made to an investment fund with a non-recourse loan and loan premium in order to facilitate a high tax loss without a corresponding economic loss. Vaughn utilized the BLIPS strategy for his 1999 taxes. In September 2000, the IRS issued Revenue Bulletin Notice 2000-44, which specifically disclaimed BLIPS-type practices, although not naming BLIPS. Vaughn was notified of the IRS’s position by KPMG in 2000. In 2001, another BLIPS participant was audited by the IRS, and contacted Vaughn to inform him of the audit. KPMG was audited in 2002, and at that time informed Vaughn that he likely would face an audit as well. KPMG representatives suggested to Vaughn that he participate in an IRS voluntary disclosure program.

Meanwhile, Vaughn divorced his first wife, Cindy Vaughn, in 2001, and the couple’s assets were divided. Vaughn married Kathy St. Onge shortly thereafter and made large purchases with her. In 2002, three weeks before filing his voluntary disclosure with the IRS, Vaughn created an irrevocable trust for his stepdaughter and transferred $1.5 million to the trust. Vaughn and St. Onge spent large amounts of money from 2001 through 2003. When the couple divorced in 2003, St. Onge received many of the remaining assets.

The IRS notified Vaughn in 2003 that Cindy had requested innocent spouse relief for her 1999 tax return. Vaughn requested the same relief, stating that the divorces had depleted his assets but neglecting to mention the trust for the stepdaughter or the unequal division of assets in his divorce from St. Onge. In June 2004, the IRS notified Vaughn of an approximately $8.6 million tax deficiency relating to the BLIPS transaction, and notified him of a further $200,000 deficiency regarding carryover from 2000.

Vaughn filed his Chapter 11 bankruptcy petition in November 2006. The IRS subsequently filed a proof of claim in that action for the 1999 and 2000 tax deficiencies for approximately $14.3 million. Vaughn initiated an adversary proceeding, seeking to have the taxes declared dischargeable. The bankruptcy court found that Vaughn had both filed a fraudulent tax return and willfully evaded his taxes, and his tax liabilities were non-dischargeable. Vaughn appealed to the federal district court, which affirmed the bankruptcy court. Vaughn then appealed to the Tenth Circuit, arguing that the district court erroneously employed a “holistic” review to support the bankruptcy court’s determination of willful evasion of taxes, and also arguing that the bankruptcy court’s finding of willful evasion was based on conduct that was negligent, not willful.

The Tenth Circuit first addressed the “holistic” review argument, and noted that the bankruptcy court made no mention of employing a “holistic” review, instead applying a two-pronged approach. Turning next to the argument that Vaughn’s conduct was negligent, not willful, the Tenth Circuit found that the bankruptcy court made specific findings regarding Vaughn’s intentions in participating in the BLIPS scheme. The Tenth Circuit rejected Vaughn’s argument that his conduct was negligent because he did not know the exact amount of taxes due, finding instead that the assessment of tax is not required for debtor’s conduct to be willful.

The Tenth Circuit affirmed the district court and the bankruptcy court.

Comment Period Open for Proposed Changes to 10th Circuit Local Rules

The Tenth Circuit Court of Appeals has proposed changes to its local rules, effective January 1, 2015. From August 22 through October 20, the comment period for these proposed changes will be open to all interested parties. Comments are welcome on all rules, but practitioners are encouraged to carefully review the appendix requirement in counseled civil cases and criminal cases where there is retained counsel.

In addition to the changes to the 10th Circuit Local Rules, a change to Rule 6 of the Federal Rules of Appellate Procedure regarding bankruptcy appeals will take effect December 1, 2014. The change addresses three areas: (1) it has been updated to include the latest numeric revisions to the bankruptcy rules; (2) language has been changed to address electronic records; and (3) references have been added to discretionary bankruptcy appeals.

The changes to Fed. R. App. P. 6 and the 10th Circuit Local Rules are available in a clean version and a redline. Comments may be submitted to the clerk of the 10th Circuit via email at 10th_Circuit_Clerk@ca10.uscourts.gov. Interested parties are welcome to call the clerk’s office with questions at (303) 844-3157.

Tenth Circuit: Fundamentally Ambiguous Questioning Required Plain Error Reversal

The Tenth Circuit Court of Appeals issued its opinion in United States v. Hale on Tuesday, August 12, 2014.

Thomas Hale filed a voluntary Chapter 13 bankruptcy petition in 2005. He listed three pieces of property in Schedule A, including a Salt Lake City property he listed as valued at $190,000 despite a property tax assessment indicating the property was worth $268,900; he had challenged the property tax valuation. He moved to convert his Chapter 13 case to Chapter 7 in July 2006 and an order was entered to that effect. This transferred control of his non-exempt assets, including the Salt Lake City property, to a bankruptcy trustee, Elizabeth Loveridge. Loveridge questioned Hale under oath at a creditors’ meeting on August 22, 2006, and Hale testified that the information he provided in his bankruptcy document was true, complete, and accurate. However, that same day, he advertised the Salt Lake City property in two newspapers for $396,075 or appraisal. A real estate agent contacted him and eventually found a buyer for the property who would pay $395,000 if Hale paid half the closing costs. Hale entered into a contract with the buyer and did not inform the buyer about the bankruptcy proceedings. Hale also signed an agreement with the buyer that Hale could continue to live on the property. He did not inform the trustee about the transaction.

When a title insurance representative contacted Loveridge, she instructed him to cancel the sale. Hale appeared at her office twice that day unannounced and appearing “agitated and angry.” At the second meeting, he gave Loveridge several documents, including an ex parte motion to approve the sale and a motion to revert to Chapter 13 status, both of which he had filed with the bankrutpcy court. He attached a letter to the ex parte motion dated ten days previous and an affidavit by his office manager that the letter was mailed on that previous date. However, the letter referenced the ex parte motion, which was filed ten days later and would not have been created if Loveridge had received the letter.

Loveridge hired a real estate agent to renegotiate the contract with the buyer. The renegotiated contract specified that all tenants would be evicted. The bankruptcy court approved the sale and Loveridge initiated eviction proceedings. Hale sent Loveridge several handwritten notes via fax, one of which advised her of a possible haz-mat problem in an orange package. When the orange package arrived, Loveridge called the police. After much inspection, the package was opened, and it contained a baggie with unidentified material and a note that said “Possible haz-mat? Termites or hanta virus [sic] from mice?” It was eventually determined to contain no hantavirus material.

After a jury trial, Hale was convicted of making a materially false statement under oath during the bankruptcy proceeding regarding the value of the Salt Lake City property, concealing the purchase contract from the trustee and creditors, and perpetrating a hoax regarding the transmission of a biological agent. Hale challenged his convictions.

The Tenth Circuit first addressed Hale’s challenge for knowingly and fraudulently making a false statement under oath. The government alleged that he knew well that his property was worth more than he listed in the bankruptcy documents at the time he made statements under oath that the documents were true and correct. Hale countered that the questions were fundamentally ambiguous. The Tenth Circuit conducted a plain error review and concluded that the statements were indeed ambiguous based on prior Tenth Circuit precedent involving similar questions. The Tenth Circuit reversed Hale’s conviction based on this charge and remanded for entry of judgment of acquittal on the false statement charge.

Next, the Tenth Circuit turned to Hale’s concealment of the purchase of the Salt Lake City property. Hale argued that the purchase agreement was void or, alternatively, that it did not meet the statutory definition of “property belonging to the estate of a debtor.” The Tenth Circuit did not support Hale’s argument that the contract was void ab initio, instead finding it was voidable. Hale conceded that the proceeds would be property of the bankruptcy estate but the contract was not. However, the purchase agreement created an interest in proceeds, so the Tenth Circuit affirmed Hale’s conviction on this count.

Finally, the Tenth Circuit addressed Hale’s conviction for perpetrating a hoax involving biological weapons. Hale had relied on the pending U.S. Supreme Court decision in Bond v. United States to render the error plain by holding an analogous statute unconstitutional. However, the Bond ruling did not reach the constitutional issue. Hale’s attack to the sufficiency of the evidence failed and the Tenth Circuit affirmed his conviction on this count.

The order of the district court was affirmed in part, reversed in part, and remanded for entry of acquittal on the false statement charge.