This opinion or order relates to an opinion or order originally issued on October 27, 2015.
In the United States Court of Appeals For the Seventh Circuit ____________________ No. 13 3327 PAYSUN LONG, Petitioner Appellant, v. RANDY PFISTER, Warden, Stateville Correctional Center, Respondent Appellee. ____________________ Appeal from the United States District Court for the Central District of Illinois. No. 11 CV 1265 — Michael M. Mihm, Judge. ____________________ ARGUED SEPTEMBER 7, 2016 — DECIDED OCTOBER 20, 2017 ____________________ Before WOOD, Chief Judge, and BAUER, EASTERBROOK, KANNE, ROVNER, WILLIAMS, SYKES, and HAMILTON, Circuit Judges.* EASTERBROOK, Circuit Judge. Larriec Sherman was shot to death in June 2001. Four witnesses identified Paysun Long as * Circuit Judge Flaum heard argument in this appeal but later recused himself and has not participated in its decision. 2 No. 13 3327 the gunman; their statements were recorded on video. Two of the four recanted before Long’s trial. The other two— Keyonna Edwards and Brooklyn Irby—testified, while the video statements of the two recanting witnesses were intro duced. Irby, too, had recanted before trial, telling Frank Wal ter, an investigator for the State’s Attorney, that police offic ers had coerced her to name Long as the shooter. But Irby testified consistently with her video statement. On cross examination she conceded recanting but told the jury that her original statement was true and her recantation false. The jury believed the testimony that Irby and Edwards gave in open court, convicting Long of murder. A state court vacated this conviction because the prosecu tor had argued, without support in the record, that the re canting witnesses feared Long and his friends. At Long’s second trial the evidence proceeded as at the first. Edwards and Irby identified Long in court as the killer; the other wit nesses’ video statements were introduced. But this time, when asked on cross examination about her recantation, Ir by denied telling Walter that she had been coerced to identi fy Long. The defense called Walter, who testified that Irby had indeed told him that her identification had been co erced. The prosecutor did not contest Walter’s testimony ei ther on cross examination or during closing argument. The jury convicted Long a second time, and he was sentenced to 51 years in prison. The state’s appellate court affirmed on di rect appeal and affirmed again after a judge denied Long’s application for collateral relief. 409 Ill. App. 3d 1178 (2011). A district court denied Long’s application for relief under 28 U.S.C. §2254, but a panel of this court reversed. 809 F.3d 299 (7th Cir. 2015). The panel concluded that, by not sponta No. 13 3327 3 neously correcting Irby’s testimony, the prosecutor violated the rule of Napue v. Illinois, 360 U.S. 264 (1959), and succes sors such as Giglio v. United States, 405 U.S. 150 (1972). The panel understood these cases to establish that, whenever any witness makes a statement that the prosecutor knows is un true, the Due Process Clause of the Fourteenth Amendment requires the prosecutor to correct that statement immediate ly. That was not done in Long’s second trial, and the panel held that Long therefore is entitled to collateral relief. To reach this conclusion the panel also had to address Long’s procedural default in state court, which it did by holding that Long’s appellate lawyer had rendered ineffective assis tance by not making a Napue argument on direct appeal. Because this case entails federal collateral review of a state conviction, we start with 28 U.S.C. §2254(d), which as amended in 1996 by the Antiterrorism and Effective Death Penalty Act (AEDPA) provides: An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim—(1) resulted in a decision that was contrary to, or in volved an unreasonable application of, clearly established Fed eral law, as determined by the Supreme Court of the United States[.] The Appellate Court of Illinois ruled that any error was harmless in light of the other evidence inculpating Long. Davis v. Ayala, 135 S. Ct. 2187 (2015), holds that a harmless error decision is one “on the merits” as §2254(d) uses that phrase. The state court concluded that Long had a good po sition as a matter of state law, because People v. Lucas, 203 Ill. 2d 410, 424 (2002), holds that a prosecutor must correct false 4 No. 13 3327 testimony that the defense elicits. Given the harmless error ruling, however, that conclusion did not benefit Long. The panel of our court, by contrast, went straight to federal law under Napue and its successors, and after holding that the prosecutor had violated the rule of Napue stated that Long is entitled to a new trial. The panel did not mention the doc trine of harmless error or apply the standard of Brecht v. Abrahamson, 507 U.S. 619 (1993). Our order setting this case for rehearing en banc vacated the panel’s decision. Long contends that the state courts rendered decisions “contrary to” Napue and similar decisions. Of course the state judges didn’t disparage or contradict Napue; by citing Lucas the Appellate Court ruled in Long’s favor, though as a matter of state law. The state court did not analyze Napue at all. (It was cited once but not elaborated on, given Lucas.) But we know from Harrington v. Richter, 562 U.S. 86, 97–100 (2011), that it does not matter whether a state court discusses federal precedent; §2254(d)(1) applies whenever the state court makes a decision on the merits, no matter what the state judiciary says. See also Johnson v. Williams, 568 U.S. 289 (2013). So we start with the merits—and because we con clude that the Supreme Court has not “clearly established” that the doctrine of Lucas is a rule of federal constitutional law, we need not address harmless error (or for that matter the procedural default issue). Long understands Napue and its successors to establish that the prosecutor must immediately correct any false tes timony—and that it does not matter whether the defense al ready knows the truth, or whether the jury learns the truth before deliberating. It is not hard to find statements that, taken at a high level of generality, could be so understood. No. 13 3327 5 The Court summarized the Napue principle this way in California v. Trombetta, 467 U.S. 479, 485 (1984): “The most rudimentary of the access to evidence cases impose upon the prosecution a constitutional obligation to report to the defendant and to the trial court whenever government wit nesses lie under oath.” This statement does not contain ex ceptions for testimony elicited by the defense, or testimony known by the defense to be false, or testimony corrected be fore the jury deliberates. But then the Supreme Court has never considered any of those possible qualifications. All Napue itself holds is that perjury known to the prosecution must be corrected before the jury retires. The Court did not say when or by whom. And Giglio identifies as the constitu tional problem a prosecutor’s deliberate deception of the ju rors, which can’t occur when the truth comes out at trial and the prosecutor does not rely on the falsehood. In Napue and its successors: (a) the false testimony was elicited by the prosecutor (we discuss an exception shortly); (b) the truth was unknown to the defense; (c) the prosecutor asked the jury to rely on the false testimony; and (d) the jury never learned the truth. In this case, by contrast, the false tes timony was elicited by the defense, which knew the truth, and the prosecutor, instead of relying on the false testimony, accepted Walter’s testimony about Irby’s recantation but ar gued that her in court identification was nonetheless correct. One passage in Napue, 360 U.S. at 269, could be read to imply that a prosecutor must correct testimony no matter who solicited it. The Court wrote: “The same result obtains when the State, although not soliciting false evidence, allows it to go uncorrected”. This language must be understood in light of the citation the Court gave: Alcorta v. Texas, 355 U.S. 6 No. 13 3327 28 (1957). In Alcorta the prosecutor had told the witness not to be forthcoming and deliberately elicited a misleading statement; the defense and the jury never learned the truth, something Alcorta stressed. Read in context, the passage in Napue implies that a prosecutor must furnish the truth whether a falsehood had been elicited deliberately (in bad faith) or inadvertently. This is how Brady v. Maryland, 373 U.S. 83, 87 (1963), understood it, remarking that when the prosecution withholds exculpatory evidence there is a con stitutional problem “irrespective of the good faith or bad faith of the prosecution.” It is accordingly not proper to read this passage of Napue as establishing that it is irrelevant who elicits the false testimony, whether the defense knows the truth, and whether the truth is presented to the jury. Those issues were not before the Court or expressly decided. It is similarly inappropriate to understand Giglio as hold ing anything about these matters. There the false testimony was elicited by defense counsel, but the Court made nothing of that fact, whose significance the parties had not briefed; instead it ruled for the defense because the prosecutor em braced the witness’s false statement and argued it to the jury as a basis of conviction, even though at least one of the pros ecutors understood that the truth was exculpatory and un known to the defense. The witness testified that no promises had been made; one prosecutor (who made them) knew oth erwise, yet at trial the prosecution told the jury that the ab sence of a promise made the witness’s testimony especially credible. The Justices concluded that Brady required the truth’s disclosure and forbade the prosecutor from arguing that the witness had not been promised favorable treatment. No. 13 3327 7 This case therefore entails four questions that have never been expressly decided by the Supreme Court: • Do Napue and its successors apply when the defense rather than the prosecutor elicits the false testimo ny? • Must the prosecutor correct false testimony when defense counsel already knows the truth? • Does the Constitution forbid a conviction obtained when the prosecutor does not correct but also does not rely on the falsehood? • Does the Constitution forbid a conviction obtained when all material evidence is presented to the jury before it deliberates? Long believes that all four of these questions should be an swered yes but does not contend that any of them has been answered in the defendant’s favor by the Supreme Court. Instead he believes that, once a general principle has been established, a court of appeals can resolve subsidiary issues such as these. That’s a possibility the Supreme Court has re jected as inconsistent with the statutory rule that, to support collateral relief, a principle must be “clearly established … by the Supreme Court of the United States” rather than by an intermediate federal court. The Justices insist that a prin ciple be made concretely applicable to the problem at hand before it may be used on collateral review. A recent example in this sequence said, when summarily reversing an appel late decision: 8 No. 13 3327 The Ninth Circuit pointed to no case of ours holding [that the prosecutor must specify in advance of trial the precise theory of liability on which it would rely]. Instead, the Court of Appeals cited three older cases that stand for nothing more than the gen eral proposition that a defendant must have adequate notice of the charges against him. … This proposition is far too abstract to establish clearly the specific rule respondent needs. We have be fore cautioned the lower courts … against “framing our prece dents at such a high level of generality.” Nevada v. Jackson, 133 S. Ct. 1990, 1994 (2013). Lopez v. Smith, 135 S. Ct. 1, 4 (2014). See also, e.g., Woods v. Donald, 135 S. Ct. 1372 (2015). We appreciate that, if a general proposition inevitably en tails some concrete application, then there’s no need to wait for the Justices to apply the principle in the inevitable way. But it is not obvious to us that the Napue principle requires a new trial when the prosecutor fails to correct a falsehood, but the defense knows about that falsehood and corrects it. To the contrary, this court held in United States v. Saadeh, 61 F.3d 510, 523 (7th Cir. 1995), that there is no constitutional violation in that situation. See also United States v. Adcox, 19 F.3d 290, 296 (7th Cir. 1994). The proposition that defense counsel’s knowledge of the truth is irrelevant therefore can not be taken as clearly established by the Napue principle it self. Nor does the Napue principle establish that it is irrele vant whether the truth is presented in open court before the jury deliberates. Another way to ask whether the application of Napue when the defense knows the truth is so obvious that it must be taken as already established is to examine how the Justic es have handled a related subject. The Napue Giglio rule is a cousin to the Brady doctrine, which requires the prosecution to reveal material exculpatory evidence. The Justices them No. 13 3327 9 selves treat Napue and Brady as two manifestations of a prin ciple that prosecutors must expose material weaknesses in their positions. See, e.g., Strickler v. Greene, 527 U.S. 263, 298– 99 (1999). The Supreme Court has considered whether Brady re quires the prosecution to disclose (or put before the jury) ex culpatory or impeaching information known to the defense. The answer is no. See, e.g., United States v. Agurs, 427 U.S. 97, 103 (1976) (Brady applies only to information “unknown to the defense”). Our circuit has made the same point and add ed that there is no disclosure obligation under Brady if the defense easily could have found the information, even if it didn’t find it in fact. See, e.g., United States v. Morris, 80 F.3d 1151, 1170 (7th Cir. 1996). Other circuits agree. See, e.g., Unit ed States v. Wilson, 901 F.2d 378, 380 (4th Cir. 1990). Given how Brady is understood, an intermediate appellate court could not confidently predict that Napue and Giglio will be treated differently—let alone so confident that we could de clare (as §2254(d) requires) that this has already been clearly established by the Supreme Court. In this case what occurred may well have helped the de fense rather than the prosecutor. Irby’s false testimony ena bled the defense to depict her either as a perjurer (if she re membered what had happened) or as having a faulty memory (if she had forgotten); this could have helped the defense diminish the force of Irby’s identification. It is awful ly hard to see why events that may have helped the defense should lead to collateral relief in the absence of any clearly established legal transgression. When presented with the four open issues we have iden tified, the Supreme Court may resolve some or all of them in 10 No. 13 3327 favor of a defendant in Long’s position. But it has not done so to date, and §2254(d)(1) accordingly prohibits a grant of collateral relief. We do not attempt to determine how those questions would or should be resolved. Long presents other contentions that the panel resolved against him. 809 F.3d at 313–16 (quotation from Gone with the Wind; prosecutor’s anecdote; prosecutor’s reference to a let ter not in evidence; ineffective assistance of trial counsel). We agree with the panel’s resolution of those issues and reinstate that portion of its opinion without reproducing the discus sion here. AFFIRMED No. 13 3327 11 HAMILTON, Circuit Judge, joined by ROVNER and WILLIAMS, Circuit Judges, dissenting. The bar for federal habeas relief is high, requiring the petitioner to show the state courts unrea sonably applied controlling Supreme Court precedent. 28 U.S.C. § 2254(d)(1). Petitioner Long has cleared that high bar. I respectfully dissent. Nearly sixty years ago, the Supreme Court held that a State deprives a person of liberty without due process of law if it convicts him by knowingly using false testimony, and it imposed on the prosecutor the duty to see that perjured testi mony is corrected. Napue v. Illinois, 360 U.S. 264, 269 (1959). In this case, a key prosecution witness lied about a point critical to her credibility. She swore to the jury, repeatedly, that she had been consistent in identifying petitioner Long as the per son who murdered Sherman. Those were lies, and the prose cutors knew they were lies. Yet the prosecutors did nothing to see that the lies were corrected. The state courts actually recognized the due process vio lation but erred, as our panel explained, by excusing the vio lation as harmless. The majority affirms the results in the state court by first rejecting the state courts’ actual reasoning and then hypothesizing possible distinctions that might be drawn between this case and the Napue line of cases. Yet Napue itself considered and rejected the grounds the majority relies upon to excuse the Illinois courts’ failure to fol low it. It does not matter, the Supreme Court said, which side elicited the false testimony. Id. at 269. Nor does it matter whether the defense knew of the false testimony or whether the jury heard evidence contradicting the false testimony. See id. at 269–70. What this jury never heard was a prosecutor or judge saying that the witness had lied to the jury. Moreover, 12 No. 13 3327 the case against Long was so fragile that the Napue violation cannot reasonably be deemed harmless. The state courts’ de nial of post conviction relief to Long was contrary to Napue, so federal habeas relief is necessary under 28 U.S.C. § 2254. Part I of this dissent lays out the facts of the witness’s per jury during Long’s trial. Part II summarizes the Supreme Court’s decision in Napue. Part III rejects the majority’s efforts to limit Napue to excuse the state courts’ failure to follow it. I. The Perjury in Long’s Trial We review here the conviction of Paysun Long for the murder of Sherman in Long’s second trial. (The second trial was needed because of prosecutorial misconduct in closing argument in the first trial.) No physical evidence tied Long to the murder. The prosecution relied heavily on two witnesses—Keyonna Edwards and Brooklyn Irby—who testified that they had seen Long shoot Sherman. Edwards had her own credibility issues, since some details of her account were not corroborated by anyone else present, but our focus here is on Irby.1 Irby testified that she was walking through the Taft Homes housing development in Peoria on June 11, 2001 when she saw Long shoot Sherman. On cross examination, defense counsel asked Irby whether she had previously told the pros ecutor herself and an investigator that she had lied when she first told investigators in June 2001 that she had seen Long shoot Sherman. Supp. App. 132–36. Irby repeatedly denied that she had done so. Those sworn answers were lies, and the 1 Two other prosecution witnesses testified that Long was not the shooter, but the prosecution was allowed to put into evidence earlier rec orded statements by those witnesses saying that he was. No. 13 3327 13 prosecutor knew it. Yet the prosecutor did nothing to correct Irby’s false denials of having changed her story, even in redi rect examination of Irby. Long’s attorney did what he could to attack Irby’s lies and thus her credibility. After the State had finished presenting its case, the defense called Frank Walter, the prosecution’s investigator who had talked with Irby. Walter testified that Irby had recanted her identification of Long. App. Dkt. 13–12 at 330–34. That’s how the evidence closed: Irby said she had never changed her story, and Walter said she had. During closing arguments, the prosecution did not even acknowledge Irby’s lies, let alone correct them. The prosecu tion first tried to finesse the problem, saying that the defense counsel would argue that Brooklyn Irby came to the State’s At torney’s Office and said on an earlier occasion prior to her testifying and said I wasn’t telling the police the truth. Well, she came in here and raised her hand and told you what happened and you saw her testimony. Maybe she thought if she told the State’s Attorney’s Office she wasn’t telling the truth she wouldn’t have to testify. But when she came in here and was under oath, she told you what she saw and that was consistent with what Keyonna [Edwards] told you and that was consistent with what she has told you and that was consistent with what Shawanda [Walker] told you and that was consistent with the phys ical evidence. 14 No. 13 3327 Supp. App. 149–50 (emphases added). Missing from that care ful dance around Irby’s perjury is any acknowledgment that Irby had lied under oath to the jury. The prosecutors’ handling of Irby contrasts with their sharp attacks on other witnesses, including prosecution witnesses, for being untruthful. See App. Dkt. 13–12 at 349–51. The prosecutors knew how to tell the jury that other witnesses had lied to them, but they never admitted to the jury that Irby had lied to the jury. During the defense closing argument, the defense pointed out Irby’s lies and reminded the jury that Walter, the prosecu tion’s investigator, had testified that Irby had changed her story: she had told him and the prosecutor that she had lied in June 2001 about seeing Long shoot Sherman. Yet in her trial testimony she lied by denying that. During the rebuttal argument, the prosecutor soft pedaled the perjury. She said that Irby had recanted her story back in November 2001 when she was served with a subpoena, but immediately emphasized that Irby had (supposedly) told the truth when she was under oath. Supp. App. 171. The prosecu tor still never acknowledged that Irby had lied to the jury in her trial testimony. To sum up, then, a key prosecution witness lied about a point critical to her credibility, and the prosecution knew she was lying. Yet the prosecution took no steps to correct the per jury. II. Napue v. Illinois Under the Antiterrorism and Effective Death Penalty Act of 1996, known as AEDPA, federal courts must accept a state court’s decision on the merits of a habeas petitioner’s claim No. 13 3327 15 unless the state court decision was contrary to or an unrea sonable application of clearly established law under Supreme Court authority, or based on an unreasonable finding of fact. 28 U.S.C. § 2254(d). Petitioner Long is not asking the federal courts to make new law on his behalf. He asks us only to en force the Supreme Court’s 1959 decision in Napue v. Illinois. Napue was, like this case, a murder prosecution in Illinois. A police officer had been fatally shot in a robbery attempted by several men. The principal State’s witness was a man named Hamer who was already serving a prison sentence for the same murder. Hamer testified that Napue had been one of the robbers. During Napue’s trial, the prosecutor asked Hamer whether he had received any promises of leniency in return for his testimony. Hamer said no. But that was false, and the prosecutor did nothing to correct that lie. The jury was told, however, that a public defender had promised “to do what he could” for Hamer. The prosecution later asked to have Hamer’s sentence re duced based on the promise that Hamer had denied receiving in Napue’s trial. When Napue heard of the effort to reduce Hamer’s sentence, he sought relief from his own conviction. The state courts denied relief, but the Supreme Court reversed in a unanimous opinion by Chief Justice Warren. The Court began from the foundation that “a conviction obtained through use of false evidence, known to be such by represent atives of the State, must fall under the Fourteenth Amend ment.” 360 U.S. at 269, citing Mooney v. Holohan, 294 U.S. 103 (1935), and other cases. The next sentence in the opinion addresses the problem here: “The same result obtains when the State, although not so 16 No. 13 3327 liciting false evidence, allows it to go uncorrected when it ap pears.” Id. (emphasis added), citing Alcorta v. Texas, 355 U.S. 28 (1957), and other cases. (The Court later explained that this holding in Napue was a deliberate extension of the older rul ing in Mooney. Brady v. Maryland, 373 U.S. 83, 87 (1963).) Napue then rejected other attempts to excuse the use of the false testimony. First, it made no difference that the false tes timony addressed Hamer’s credibility rather than his sub stantive testimony. 360 U.S. at 269. “A lie is a lie, no matter what its subject, and, if it is in any way relevant to the case, the district attorney has the responsibility and duty to correct what he knows to be false and elicit the truth.” Id. at 269–70, quoting People v. Savvides, 136 N.E.2d 853, 854 (N.Y. 1956). Then the Court rejected another theory for avoiding the perjury, that merely contradictory evidence would correct the problem: “we do not believe that the fact that the jury was apprised of other grounds for believing that the witness Hamer may have had an interest in testifying against petitioner [Napue] turned what was otherwise a tainted trial into a fair one.” Id. at 270. The Court finally rejected the state court’s conclusion that the false testimony would not have affected the verdict, id. at 271–72, since the conviction of Napue depended so heavily on whether the jury believed Hamer. See also Wearry v. Cain, 577 U.S. —, —, 136 S. Ct. 1002, 1006 (2016) (noting that Napue harmless error standard also applies to Brady claims). III. The Majority’s Efforts to Limit Napue Since 1959, Napue has been understood to impose on pros ecutors an obligation to correct prosecution evidence that they know is false. In this case, the prosecution failed to fulfill that No. 13 3327 17 obligation. The state appellate court actually acknowledged the Napue violation, but refused, over a powerful dissent, to correct the error on the theory that the violation was harmless. People v. Long, 2011 WL 10457885, at *3, *4 (Ill. App. Jan. 21, 2011) (citing state cases that applied Napue).2 The majority does not try to excuse the Napue due process violation as harmless, as the state court did. Instead, the ma jority offers four supposed distinctions that might allow some other hypothetical state court to deny relief to Long and thus to avoid federal habeas relief in light of 28 U.S.C. § 2254(d)(1). On examination, however, it becomes clear that Napue re jected the most important of them. The last distinction evapo rates when we ask what it means to present “the truth” in an adversarial trial and what counts as “correcting” perjury un der Napue. The majority first asks whether “Napue and its successors apply when the defense rather than the prosecutor elicits the 2 The majority cites Harrington v. Richter and Johnson v. Williams, ante at 4, for the idea that AEDPA deference under § 2254(d)(1) applies “when ever the state court makes a decision on the merits, no matter what the state judiciary says.” Both cases dealt with summary, unexplained orders issued by busy state courts. In such cases, considering possible explana tions for a state court’s unexplained denial of a federal constitutional claim helps preserve comity between federal state courts. Here, however, the Illinois court actually acknowledged the constitutional problem. It found a due process violation but concluded that the violation did not matter. In a case such as this, “where the state court’s real reasons can be ascer tained,” we should look to the “actual arguments or theories that sup ported the state court’s decision” and not to secondary or hypothetical ra tionales. Hittson v. Chatman, 576 U.S. —, —, 135 S. Ct. 2126, 2127–28 (2015) (Ginsburg, J. concurring in denial of certiorari) (internal quotations and ellipses omitted). 18 No. 13 3327 false testimony?” Ante at 8. Napue itself answered that ques tion: “The same result obtains when the State, although not soliciting false evidence, allows it to go uncorrected when it appears.” 360 U.S. at 269. Nothing in the Napue opinion sug gests that the prosecution’s constitutional duty of candor de pends on which lawyer asked the question that drew the lie. See Brady, 373 U.S. at 87 (noting that this holding in Napue ex tended prior rule in Mooney that prohibited prosecutors from offering knowingly perjured testimony). The majority tries to explain away the broad phrasing of the Napue opinion by pointing to the citation to Alcorta v. Texas, 355 U.S. 28 (1957), and reads the teaching of Napue on this point as if it were con fined to the facts of Alcorta. The better course is to assume that the Supreme Court noticed whether it was phrasing its teach ing in Napue broadly or narrowly. We should not strain so hard to narrow it. In fact, the Supreme Court has already confronted a case in which the prosecution violated Napue without itself offer ing the perjured testimony. In Giglio v. United States, 405 U.S. 150, 151–52 (1972), a key prosecution witness lied on cross examination by denying he had received any promise of leni ency. The prosecution did nothing to correct the lie because the trial prosecutor did not know of the promise. The Su preme Court reversed and remanded for a trial because of the perjury brought out by defendant’s cross examination. The majority next asks, “Must the prosecutor correct false testimony when defense counsel already knows the truth?” Ante at 7. This is a red herring that simply misses the point of Napue. The majority bases this supposed distinction on the theory that the Napue rule is a “cousin to the Brady doctrine.” No. 13 3327 19 Ante at 8, citing Brady, 373 U.S. 83. Brady requires the prose cution to disclose to the defense evidence that tends to excul pate the accused, including evidence relevant to witness cred ibility. The doctrines are in fact linked. In Giglio, the Supreme Court explained that Mooney had held that deliberately de ceiving a court and jury by presenting evidence known to be false is incompatible with “rudimentary demands of justice,” and that Napue had extended that rule to cases where “the State, although not soliciting false evidence, allows it to go uncorrected when it appears.” 405 U.S. at 153, quoting Napue, 360 U.S. at 269. While the doctrines are linked, they are not identical. Gig lio held that Brady applies even where the government’s fail ure to disclose exculpatory evidence was inadvertent, id. at 154, and disclosure to the defense is sufficient to comply with Brady. E.g., United States v. Walter, 870 F.3d 622, 629 (7th Cir. 2017); Holland v. City of Chicago, 643 F.3d 248, 255 (7th Cir. 2011). That’s why Brady does not apply to information already known to the defense. United States v. Agurs, 427 U.S. 97, 103 (1976); Walter, 870 F.3d at 629 But when the prosecution knows that a prosecution witness has lied to the court and jury, which everyone agrees happened in this case, Napue applies. It im poses a duty on the prosecution not merely to inform the de fense but to ensure that the perjury is corrected. 360 U.S. at 269. If mere disclosure of the perjury to the defense were enough, as it is under Brady and as the majority suggests here, the logic of the rule would allow the prosecution to disclose the perjury and just stand aside while the defense tries to re but it. That is simply not a reasonable reading of Napue, which again instructs that the prosecution may not allow the perjury “to go uncorrected when it appears.” 360 U.S. at 269. In fact, 20 No. 13 3327 the majority cites no case that actually interprets Napue as it suggests, allowing the prosecution merely to disclose the per jury to the defense without actually correcting the perjury. Napue addresses not what the defense knows but the in tegrity of the evidence before the jury. Napue teaches that the prosecution has an obligation to ensure that false testimony is corrected. Nothing in the opinion suggests that the obligation is removed if the defense knows the truth and has the oppor tunity to offer contradictory evidence. What matters is the risk that the jury will use the false evidence to convict. The Napue Court put the obligation squarely on the prosecution to see that the false evidence is corrected, without the majority’s pro posed qualification. The majority next asks: “Does the Constitution forbid a conviction obtained when the prosecutor does not correct but also does not rely on the falsehood?” Ante at 7. Again, the Na pue opinion answers this question: “The same result obtains when the State, although not soliciting false evidence, allows it to go uncorrected when it appears.” 360 U.S. at 269. The key phrase is “allows it to go uncorrected.” That flatly contradicts the majority’s suggestion that Napue left the prosecution room to avoid its obligation to correct false evidence by merely re fraining from asking the jury specifically to rely upon the per jured testimony. Finally, the majority asks: “Does the Constitution forbid a conviction obtained when all material evidence is presented to the jury before it deliberates?” Ante at 7. That proposed dis tinction might have a superficial plausibility, but it is also plainly contrary to Napue. It also ignores the reality of a jury trial in our adversarial system. Under the majority’s theory, Napue might allow prosecutors to respond to known perjury No. 13 3327 21 by merely allowing the defense to contradict the perjury. It does not. Napue made clear that the prosecution has a duty to correct the perjury. A jury that hears evidence merely contradicting the per jury cannot be said to know the truth. Nor can mere contradic tion reasonably be deemed to be a “correction.” The prosecu tion here never admitted to the jury that Irby lied to them. The jurors heard Irby repeatedly claim under oath that she had told a consistent story, and they heard investigator Walter tes tify that she had not been consistent. The judge instructed the jurors that it was up to them to evaluate the credibility of the witnesses and that the lawyers’ arguments were just argu ment, not evidence. In the post conviction proceedings, and with the benefit of hindsight, the lawyers and judges know that Irby lied to the jury. That fact is “as clear and certain as a piece of crystal or a small diamond.” See Nix v. Whiteside, 475 U.S. 157, 190 (1986) (Stevens, J., concurring). But the jurors just heard conflicting testimony from Irby and Walter. The prosecution even told them in closing argument that a witness’s prior inconsistent statements should not affect her credibility! To the jury, whether Irby had lied to them was not a certain fact but only a possibility. It was one of those “mixtures of sand and clay” more familiar to trial lawyers and judges. See id. As Justice McDade explained in her dissent in the Illinois Appellate Court, due process and Napue are violated if the prosecutor can leave “jurors to somehow discern what he had the legal obligation to tell them—that Irby had lied under oath.” Long, 2011 WL 10457885, at *8 (McDade, J., dissenting) (emphasis in original). The Supreme Court made the same point more re cently. The Court explained that due process of law usually 22 No. 13 3327 relies on the presentation of contradictory evidence, but noted the exception for perjury by prosecution witnesses, where due process calls for much stronger medicine. Perry v. New Hampshire, 565 U.S. 228, 237 (2012). In short, the majority’s suggestions that Napue leaves the state courts room to avoid following it on the facts of this case are without support. Napue expressly rejected several of the suggestions, and its logic clearly rejects the last. IV. Remaining Issues The panel explained why Long’s due process claim under Napue was not procedurally defaulted. 809 F.3d at 308–09. And the Napue due process violation cannot reasonably be dismissed as harmless or non prejudicial under any available standard, whether under Napue itself, 360 U.S. 272 (false testi mony “may have had an effect on the outcome of the trial”), Brecht v. Abrahamson, 507 U.S. 619, 622 (1993) (whether error “had substantial and injurious effect or influence”), or Chap man v. California, 386 U.S. 18, 24 (1967) (“harmless beyond a reasonable doubt”). The Illinois Appellate Court acknowledged in three differ ent appeals, and this court’s panel explained, that the case against Long was weak. See Long, 2011 WL 10457885, at *3 (“not overwhelming”); Supp. App. 63 (affirming second ver dict: evidence in second trial was “closely balanced”); Supp. App. 49 (reversing original verdict: evidence in first trial was “closely balanced”); Long, 809 F.3d at 311 (noting that case against Long was “weak”). No physical evidence tied Long to the murder. All four of the State’s eyewitnesses posed prob lems. Two testified that they did not see Long shoot Sherman. Edwards had her own credibility problems. And Irby lied to No. 13 3327 23 the jury. The State’s failure to correct Irby’s perjury likely in fluenced the jury. It was not reasonable of the state court to find that merely offering contradictory evidence (from inves tigator Walter) was sufficient to cure the Napue due process violation. See Long, 809 F.3d at 311. In evaluating and rejecting the possibility of harmless er ror, we consider the trial record as a whole. Napue, 360 U.S. at 272; see also Giglio, 405 U.S. at 154 (reversing where perjured testimony was key to prosecution’s case); Long, 809 F.3d at 311. We should not close our eyes to other instances of prosecuto rial overreach, including two outrages from the rebuttal clos ing argument, when the defense could not respond. First, the prosecution pulled a blatantly racist stunt, com paring those present when the police arrived to the slave char acters in Gone with the Wind, quoting from the scene where Scarlett O’Hara tells the slave Prissy to help her deliver Mela nie Wilkes’s baby. Prissy famously tells “Miss Scarlett” that she “don’t know nothin’ ’bout birthin’ babies,” and is promptly slapped. See Supp. App. 168; see also Supp. App. 70–71 (McDade, J., dissenting from affirmance on direct ap peal) (prosecutor’s use of Gone with the Wind passage was “blatant appeal to racism” that worked). And a few moments later, the prosecutor went so far as to describe a letter Irby had written that was not even in evidence. The judge had to inter rupt and told the jury to disregard that blatant attempt by the experienced lead prosecutor to put unadmitted hearsay in front of the jury, Supp. App. 171, but she got the jury’s atten tion. During deliberations, the jury asked to see that letter. In short, Long was not convicted in a fair trial. We should order that he receive a new trial.
Seventh Circuit affirms a denial of habeas relief in a case where the prosecutor did not correct witness testimony that she had not previously stated that her identification of the defendant was coerced.


In Error to the District Court of the United States for the Southern Division of the Northern District of California; John S. Partridge, Judge.
Paul Alvarado was convicted of forging and uttering forged government checks, and he brings error. Affirmed.
Plaintiff in error, hereinafter called the defendant, was convicted of forging obligations of the United States and uttering these forged instruments. He brings error.
William J. Gloria and Robert L. Levy, both of San Francisco, Cal., for plaintiff in error.
Geo. J. Hatfield, U.S. Atty., and T.J. Sheridan, Asst. U.S. Atty., both of San Francisco, Cal.
Before HUNT, RUDKIN, and McCAMANT, Circuit Judges.
Defendant was convicted on four counts. Counts 1 and 3 charge him with forging checks on the Treasurer of the United States by writing the names of the payees on the backs thereof. Counts 2 and 4 charge him with uttering and selling these forged checks with intent to defraud the United States and others named in the indictment.
The first assignment of error challenges the sufficiency of the indictment. The fourth count charges that the defendant did "willfully, knowingly, and feloniously pass, utter, publish, and sell to some person, whose exact name is to the grand jurors unknown, a certain genuine obligation and security of the United States," etc. Defendant cites Durland v. U.S., 161 U.S. 306, 314, 16 S. Ct. 508, 40 L. Ed. 709, U.S. v. Riley (C.C.) 74 F. 210, 212, and Naftzger v. U.S., 200 F. 494, 501, 502, 118 C.C.A. 598, to the effect that the name should have been set forth in the indictment, if it was known to the grand jury. There is no bill of exceptions, and nothing in the record to show that the grand jury was advised of the name of the person to whom the check was sold. In the absence of such showing, the count is good.
It is also contended that the forgery of an indorsement on a check of the United States is not a crime under the federal statute. Section 148 of the Criminal Code (R.S. § 5414; Barnes' Code, § 9845; Comp. St. § 10318) is as follows: "Whoever, with intent to defraud, shall falsely make, forge, counterfeit, or alter any obligation or other security of the United States shall be fined," etc. Section 147 of the Criminal Code (R. St. § 5413; Barnes' Code, § 9844; Comp. St. 10317) expressly declares that "cheeks, or drafts for money, drawn by or upon authorized officers of the United States" are obligations or other securities of the United States. The Circuit Court of Appeals for the Fifth Circuit has recently held that the forgery of the indorsement on such a check is a crime under the statute above quoted. Hamil v. U.S. (C.C.A.) 298 F. 369, 371. This conclusion is supported by U.S. v. Jolly (D.C.) 37 F. 108, and De Lemos v. U.S., 91 F. 497, 33 C.C.A. 655. We believe it to be the law.
Error is also assigned on the denial of defendant's motion for a new trial. This court has repeatedly held that it will not review the happenings at the trial under an assignment of error based on the denial of a motion for a new trial. McDonough v. U.S., 299 F. 30, 35.
It is contended that the sentence is jurisdictionally defective. The sentence is in the following form: "Ordered that defendant, Paul Alvarado, for offense of which he stands convicted, as to counts 1 and 2 be imprisoned for period of three years and pay a fine in sum of $1,000, and as to counts 3 and 4 to be imprisoned for period of three years and pay a fine in sum of $1,000, said judgments of imprisonment to run consecutively." This sentence is in substantially the form approved by this court in Rice v. U.S., 7 F.2d 319.
There are other matters discussed in the briefs, having to do with the evidence and the charge of the court. There is nothing to show that these rulings were excepted to. In the absence of suitable objections and exceptions, we cannot review the action of the trial court. Boland v. Great Northern, 202 F. 485, 487, 488, 120 C.C.A. 624. If the unauthenticated transcript of evidence attached to the record is a true history of the trial, no injustice was done when the defendant was convicted.


text:
Complainant is Windsmoor (London) Limited, London, United Kingdom of Great Britain and Northern Ireland.
Respondent is Balata Inc, Tel Aviv, Israel.
The disputed Domain Name <windsmoor.com> is registered with eNom.
The Complaint was filed with the WIPO Arbitration and Mediation Center (the “Center”) on March 2, 2006. On March 2, 2006, the Center transmitted by email to eNom a request for registrar verification in connection with the domain name at issue. On March 3, 2006, eNom transmitted by email to the Center its verification response confirming that Respondent is listed as the registrant and providing the contact details for the administrative, billing, and technical contact. The Center verified that the Complaint satisfied the formal requirements of the Uniform Domain Name Dispute Resolution Policy (the “Policy”), the Rules for Uniform Domain Name Dispute Resolution Policy (the “Rules”), and the WIPO Supplemental Rules for Uniform Domain Name Dispute Resolution Policy (the “Supplemental Rules”).
In accordance with the Rules, paragraphs 2(a) and 4(a), the Center formally notified Respondent of the Complaint, and the proceedings commenced on March 8, 2006. In accordance with the Rules, paragraph 5(a), the due date for Response was March�28,�2006. Respondent sent an email with short comments on March�8,�2006. On March 15, 2006, the Center acknowledged Respondent’s comments inviting the same to forward its Response to the Complaint. The Center notified Respondent’s default on March 29, 2006. Respondent on the same date informed the Center that he had already responded to the Complaint with its email of March 8, 2006.
The Center appointed Fabrizio Bedarida as the sole panelist in this matter on April�4,�2006. The Panel finds that it was properly constituted. The Panel has submitted the Statement of Acceptance and Declaration of Impartiality and Independence, as required by the Center to ensure compliance with the Rules, paragraph 7.
Complainant has been registered in England and Wales under the name Windsmoor (London) Limited since January 1, 1946. Complainant is a company within the Jacques Vert Group, which designs, manufactures and sells ladies clothing and accessories under the name Windsmoor as evidenced by the brochures and labels provided and by its website at <windsmoor.co.uk>. Complainant holds, either directly or via its fellow subsidiary, Baird Textile Holdings Limited, registrations of the Windsmoor trade mark around the world in respect of clothing and accessories, including the following: European Community Trade Mark No. E547257 filed in May�1997, UK Trade Mark No. 2218158 filed in December 1999 and UK Trade Mark No.�576500.
Complainant registered the Domain Name <windsmoor.co.uk> on April 1997.
Respondent registered the disputed Domain Name <windsmoor.com> on September�21, 2004.
9) It is one of a series of registrations that Respondent has made, which because of their number, type and pattern, prove that Respondent is in the habit of making registrations of domain names which correspond to trade marks or other well known names in which Respondent has no apparent interest.
10) Respondent has already been involved in several proceedings: i.e. Marionnaud Parfumeries v. Balata, Inc., WIPO Case Nos. D2005-0291 and Boscolo Tours S.p.A. v. Balata Inc., D2005-0970 and Nominet UK DRS Nos. 02370, 02863,02455 and 02462, all disputes against Respondent on similar grounds to the above in which the respective domain names were transferred to Complainant.
11) Respondent has also registered the domain name <jacquesvert.co.uk> another trade mark of the Jacques Vert Group and <phaseeight.co.uk>, another well known clothing business in the UK, both of which lead to the same portal. This series of registrations must render the Domain Name registration automatically abusive.
The disputed domain name <windsmoor.com> is identical to Complainant’s trademark WINDSMOOR, the only difference being the gTLD .com. As was affirmed in Busy Body, Inc. v. Fitness Outlet Inc., WIPO Case No. D2000-0127 “the addition of the generic top-level domain (gTLD) name ‘.com’ is … without legal significance since use of a gTLD is required of domain name registrants”).
Respondent did not deny that Complainant owns trademark registrations for WINDSMOOR, but submits that Respondent registered (“bought”) the domain name because it is combined of two generic words: Winds & Moor.
“This Panel believes that the Registered Trademarks for CYBERBINGO are prima facie evidence of validity and the proper forum for considering if the trademark CYBERBINGO lacks distinctiveness is cancellation or invalidity proceedings”.
With respect to Paragraph 4(a)(i) of Policy, the Panel finds that Complainant has rights in the trademark WINDSMOOR and that the domain name <windsmoor.com> is identical to a registered trademark in which Complainant has established rights.
c) that respondent intends to make a legitimate, non-commercial or fair use of the domain name without intent for commercial gain to misleadingly divert consumers or to tarnish the trademark.
Respondent has no connection or affiliation with Complainant, who has not licensed or otherwise authorised Respondent to use or apply for any domain name incorporating Complainant’s trademark. Respondent has not given any facts or elements to justify prior rights and/or legitimate interest in the disputed domain name. Respondent does not appear to make any legitimate use of the domain name for non-commercial activities. On the contrary, Respondent is, for his own commercial gain, diverting internet users looking for Complainant’s services to the website associated with the disputed domain name, where competing products similar to those of Complainant (i.e. clothing) are offered.
iv) by using the domain name, the holder has intentionally attempted to attract, for commercial gain, Internet users to the holder’s web site or other online location, by creating a likelihood of confusion with Complainant’s mark as to the source, sponsorship, affiliation, or endorsement of the holder’s web site or location or of a product or service on the holder’s web site or location.
As regards Respondent’s use of the domain name, it appears that, before the start of the present proceeding, Respondent’s domain name was used to present to Internet users a webpage on which several hyperlinks were displayed. By clicking on these hyperlinks, users were directed to competing third parties commercial websites. While, actually presented on the website “www.windsmoor.com” are several hyperlinks related to various items: travel, business, shopping etc.
By deflecting users, Respondent has shown bad faith use of the domain name that clearly falls within the example given in paragraph�4(a)(iv) of the Policy: “by using the domain name, you have intentionally attempted to attract, for commercial gain, Internet users to your web site or other on-line location, by creating a likelihood of confusion with complainant’s mark as to the source, sponsorship, affiliation, or endorsement of your web site or location or of a product or service on your web site or location”.
The fact that Respondent registered several domain names corresponding to third parties registered trademarks among which there is also the domain name <jacquesvert.co.uk>, corresponding to another of Complainant’s registered trademarks, is further inference that Respondent had actual knowledge of Complainant’s activity and trademarks.
In view of the above and in the absence of contrary evidence, the Panel finds that there are good reasons to believe that Respondent had actual knowledge of Complainant’s trademarks when it registered the disputed domain name. The Panel, in accordance with previous decisions issued under the UDRP, is of the opinion that actual knowledge of Complainant’s trademark and activities at the time of the registration of the disputed domain may be considered an inference of bad faith (See�Parfums Christian Dior v. Javier Garcia Quintas and Christiandior.net, WIPO Case No.�D2000-0226 and Sony Kabushiki Kaisha (also trading as Sony Corporation) v. Inja, Kil, WIPO Case No.�D2000-1409, “It is inconceivable that the Respondent could make any active use of the disputed domain name without creating a false impression of association with the Complainant. The Respondent was not authorised by the Complainant to use neither its mark nor any of the disputed domain names”.
The advertisement “this domain name is for sale”, placed on the website “www.windsmoor.com”, suggests that Respondent intended to sell the disputed domain name.
In view of the above, the Panel finds that Respondent’s activities create a pattern of conduct, since Respondent appears to be engaged in the registration of a series of third parties trademarks.
It is the Panel’s opinion that Respondent’s activities demonstrate bad faith registration and use pursuant to Policy paragraph 4(b)(ii). See, Lowen Corporation d/b/a Lowen Sign Company v. Henry Chan, WIPO Case No.D2004-0430, where the Panel affirmed that the fact that respondent has been involved in a large number of cases under the UDRP proves that respondent’s use and registration of the disputed domain names fall within the concept of bad faith.
For all the foregoing reasons, in accordance with paragraphs 4(i) of the Policy and 15 of the Rules, the Panel orders that the domain name <windsmoor.com> be transferred to Complainant.

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text:
PHILIPPINE AIRLINES, INC., Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION (4th Division), and RAUL G. DIAMANTE, Respondents.
"All other claims are hereby dismissed for lack of sufficient basis.
"WHEREFORE, premises considered, the decision in question is hereby SET ASIDE as regards complainant Alfonso Araneta only, whose appeal is hereby reopened to give the respondent-appellee the opportunity to answer the same in accordance with our above discussion. Except for this modification, the rest of the decision stays.
On June 30, 1975, Philippine Airlines hired respondent Raul Diamante as Integrated Ticket Representative for Bacolod City station.
On April 8, 1988, Edgardo Pineda, Rizalino Cabarloc, Ernesto Subia and Rolando Velasco went to Bacolod Airport to have their tickets booked for their flight to Manila on April 9 and 10, 1988. Romeo Vista, a former officemate of Edgardo Pineda, was their contact person. At the airport, Leticia Vista, wife of Romeo Vista, introduced Raul Diamante to Edgardo Pineda as the person who could help in the booking of his ticket. Pineda requested Diamante if he could book their tickets for the April 8, 1988 flight, particularly Subia, who had to attend an important meeting in Manila. Diamante answered that all flights for the week were fully booked. He suggested that he leave with him their tickets. Pineda gave four (4) tickets to Diamante together with the amount of One Thousand Pesos (P1,000.00) then Diamante assured them that they will be accommodated. Subia was booked for the April 8, 1988 flight to Manila while Pineda, Velasco and Cabarloc were booked for the April 10, 1988 flight. When Subia failed to take the flight due to illness, Diamante returned Subia’s ticket to Vista the following day since it was Diamante’s day off. In order to facilitate Subia’s re-booking, Vista asked for the help of her friend Nelia Cawaling, a neighbor of PAL Station Agent Rodolfo Puentebella. With the help of Cawaling and Puentebella, Subia was able to take the April 9, 1988 flight to Manila.
Upon their arrival in Manila, on June 20, 1988, Pineda executed an affidavit charging Diamante with bribery/corruption. On July 08, 1988 petitioner’s Bacolod Branch Manager required Diamante to comment on the affidavit. On July 13, 1988, Diamante submitted his sworn statement denying the allegations against him.
On December 14, 1988, Diamante received a notice of his dismissal from the service by an office memorandum, dated November 29, 1988.
On January 17, 1989, Diamante filed with the National Labor Relations Commission, Regional Arbitration Branch No. VI, Bacolod City, a complaint 4 against Philippine Airlines, Inc. for illegal dismissal, reinstatement with backwages and damages.
On October 28, 1992, Labor Arbiter Merlin Deloria rendered a decision 5 declaring the dismissal legal and valid.
On November 26, 1992, Diamante appealed the decision to the National Labor Relations Commission (NLRC).
On March 18, 1994, the NLRC rendered a decision granting Diamante’s appeal and setting aside the Labor Arbiter’s decision and ordering the reinstatement of Diamante with three years backwages.
The principal issue before us is whether respondent was illegally dismissed which would entitle him to reinstatement with backwages. Petitioner alleges that the National Labor Relations Commission committed a grave error in ruling that private respondent was not accorded his full constitutional right to due process of law.
Regarding the legality of respondent’s dismissal, we note that respondent was found to have violated the Company Code of Discipline. We recognize the right of an employer to regulate all aspects of employment. This right, aptly called management prerogative, gives employers the freedom to regulate, according to their discretion and best judgment, all aspects of employment, including work assignment, working methods, processes to be followed, working regulations transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. 9 In general, management has the prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant to company rules and regulations.
Since private respondent’s dismissal was for just and valid cause, the order of public respondent for the reinstatement of private respondent with award of backwages has no factual and legal basis.
WHEREFORE, the petition is hereby GRANTED. The challenged decision and resolution of the National Labor Relations Commission are SET ASIDE. In lieu thereof, the decision of the Labor Arbiter dated October 28, 1992, is AFFIRMED.
1.	In NLRC Case No. V-0008-93.
2.	Rollo, pp. 29-44, Annex "A" of the petition.
3.	Rollo, pp. 45-49, Annex "B" of the petition.
4.	Rollo, pp. 71-76, Annex "D" of the petition.
5.	Rollo, pp. 50-70, Annex "C" of the petition.
6.	Petition, filed on June 28, 1994, Rollo, pp. 2-28. On February 28, 1996, we gave due course to the petition (Rollo, p. 327).
7.	Philippine Airlines v. NLRC, G. R. No. 126805, March 16, 2000, citing Industrial Timber Corporation v. NLRC, 273 SCRA 200 (1997).
8.	Arboleda v. NLRC, 303 SCRA 38, 44 (1999).
9.	Tierra International Construction Corp. v. NLRC, 256 SCRA 36, 42 (1996), citing San Miguel Brewery v. Ople, 170 SCRA 25 (1989).
10.	National Semiconductor Distribution, Inc. v. NLRC, 291 SCRA 348, 355 (1998), citing Llora Motors, Inc. v. Drilon, 179 SCRA 175 (1989).

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Trusts, like individuals, must live somewhere – maybe not in a house, but at least in a state. State residency can subject a trust to a particular state’s income tax, if the state imposes one. In addition, a trust may have ties to other states through the location of its grantors, trustees, assets, managers, and sometimes beneficiaries, all or some of which may also subject the trust to a particular state’s income tax regime. The result can be different jurisdictions competing to tax a trust’s income, or competing states claiming the trust as a resident in order to tax all of its income.
Reading through a few recent decisions by state courts, it becomes clear that the states can vary radically in whom they tax, how they define whom they tax, what they tax, and how they calculate the tax. The variety of requirements for taxation means that each trust must navigate a different set of criteria to determine whether the trust, or part of its income, is subject to that state’s tax. Recent budgetary constraints and legislation mean that states need to produce revenue from sources already available to them. However, many attempts to use existing statutes have conflicted with both the U.S. and state constitutions. Each state must meet the Due Process requirements under that state’s or the United States Constitution. The criteria courts use to evaluate the constitutionality of a state statute include: (i) some definite link, some minimum connection, between a state and a trust, property, or transaction it seeks to tax, generally by looking to see if the connections are substantial enough to justify the state’s exercise of power over the trust (generally by the trust availing itself of the forum state’s benefits of an economic market; and (ii) an evaluation of whether the income attributed to the state for tax purposes is rationally related to assets connected with the taxing state (generally by examining whether the taxing power exerted by the state bears a fiscal relationship to protection, opportunities, and benefits the state provides).
In affirming lower court decisions, the North Carolina Supreme Court held that the statute was unconstitutional as applied to the Kaestner trust because the revenue office conflated the beneficiary and the trust. The court also clearly set the limits to its ruling, stating “[n]either the Code nor Chapter 105 conflates the income of the trust with the income of a beneficiary.” Thus N.C. Gen. Stat. §105-160.2 still stands, but with case law limiting its reach. Trusts similar situated can now claim refunds.
In Linn v. Department of Revenue, the Illinois Appellate Court, Fourth District, determined that Illinois’ attempt to tax a Texas trust through an Illinois statute was unconstitutional as applied. In Linn, an Illinois resident created an Illinois trust, with an Illinois trustee, and Illinois situated assets. The trust was created to benefit the settlor’s granddaughter. After the grantor passed away as an Illinois resident, the trustee distributed the trust’s assets to a Texas trust to be administered in Texas. All of the beneficiaries of the Texas trust, including the granddaughter, resided in Texas. The Illinois Department of Revenue relied on 35 ILCS/1501(A)(2)(D), which defines a resident, in pertinent part, as “an irrevocable trust the grantor of which was domiciled in this State at the time such trust became irrevocable.” [Emphasis added] The court in this case cited Connecticut case law to note the difference between an inter vivos trust and a testamentary trust. According to the court, an inter vivos trust is not created through probate of a decedent’s will in state court. Further, an irrevocable inter vivos trust “does not owe its existence to the laws and courts of the state of the grantor” as does a testamentary trust. In addition, the court noted that Michigan and New York courts have found that the grantor’s state residency was insufficient to establish the minimum connections needed to satisfy the Due Process requirements.
The court also noted that the Texas trust resulted from the exercise of a limited power of appointment that was exercised under the terms of the Illinois irrevocable trust, i.e., the Texas trust did not owe its existence to Illinois law. Further, according to the court, income taxation is examined for the tax year in question. Thus, the court concluded, “what happened historically with the trust in Illinois courts and under Illinois law has no bearing on the 2006 tax year.” The plaintiff asserted that the Illinois income tax on the Texas trust was unconstitutional as applied. Thus, 35 ILCS/1501(A)(2)(D) still stands, but is now limited by the Linn holding.
Neither of these cases address unusual facts – trusts are formed, funded, decanted, and moved all the time; grantors, trustees, beneficiaries, and assets move around as well. These trusts requested relief from income taxation under Due Process provisions (both state and federal), as applied to the facts of that particular case, rather than requesting that the court declare unconstitutional on its face the underlying statute. This is an important distinction because of the standard of proof required. A trust/taxpayer asking for relief based upon its own particular set of facts need only show that the statute, as applied to the particular trust, is unconstitutional beyond a reasonable doubt. Alternatively, a trust seeking to invalidate the statute as a whole on constitutional grounds must show that no set of circumstances exists under which the act would be valid. While the occasional challenge by protesting trusts may have outweighed the additional revenue in the past, continuous challenges are expensive for both the trusts and the states. Most of these statutes were drafted and adopted at a time where there was less movement of trusts, people, and assets. States should consider whether the potential additional revenue outweighs the litigation cost, especially in light of the fact that more and more state courts are ruling against the requisite state nexus for taxation. Perhaps states should further evaluate the criteria a particular statute applies and evaluate it against holdings in other states on similar statutory criteria. This is particularly relevant as trust stakeholders become more informed and may look to form or move the trusts to tax-friendly jurisdictions.
For everything necessary to research, plan, and implement strategies for maximizing your clients’ control while minimizing taxes, take a free trial to the Estates, Gifts and Trusts Portfolios Library .
 Linn v. Dep’t of Revenue, 2 N.E.3d 1203 (Ill. App. Ct. 2013); Fielding v. Comm’r of Revenue, No. 8911-R, 2017 BL 194423 (Minn. Tax Ct. May 31, 2017); The Kimberley Rice Kaestner 1992 Family Tr. v. North Carolina Dep’t of Revenue, No. 307PA15-2, 2018 BL 202913 (N.C. June 8, 2018); T. Ryan Legg Irrevocable Tr. v. Testa, 75 N.E. 3d 184 (Ohio 2016).
 The statute has since been amended twice, but only to cross-references that were changed.
 Fielding v. Comm’r of Revenue, No. A17-1177 (Minn. filed July 28, 2017), pending before the Minnesota Supreme Court, should address a similar question, applying Minnesota law.
 Chase Manhattan Bank v. Gavin, 733 A.2d 783 (Conn. 1999), cited by both sides, and by the North Carolina Department of Revenue in Kaestner.