In Pursuit of Cheap Booze

Over at Slate, Dahlia Lithwick discusses an interesting case the Supreme Court heard yesterday that came out of the Fourth Circuit. The defendants in Pasquantino v. United States were convicted of wire fraud for using telephones to run a scheme to smuggle cheap booze into Canada. Apparently the tax rates on hooch in the Great White North are outrageous enough to make smuggling the stuff from the U.S. a profitable venture. A panel of the Fourth Circuit reversed their convictions because of the "common law revenue rule," which says that one nation's courts will not enforce the tax judgments or laws of another country. The idea is that tax laws are so bound up in nation-specific policy choices and are so complex that for a U.S. court to properly interpret or apply Canadian tax laws would be improper and impossible. Let the Canadians prosecute the smugglers.

Makes some sense, right? Well, the full Fourth Circuit reheard the case en banc and came to the opposite conclusion. The Government, in prosecuting the defendants, is not seeking to enforce Canadian tax laws, but only the use of wires in the United States to accomplish the smuggling scheme. So the revenue rule isn't implicated. According to Dahlia, the Supremes didn't seem to be buying that argument, particularly since the defendants' sentences were determined based on the amount of tax loss (to the Canadian government) caused by the scheme. Determining that amount would seem to require some application of Canadian tax law, no?

It will be interesting to see of the Supremes smack down the Fourth again (please please please) in this case. It's not a case likely to impact lots of everyday lives, but this is the kind of thing that legal wonks like me really get into.