In the middle of all the historical Supreme Court decisions this week there was this interesting case that touches upon intangible assets: Sekhar v. United States. In this case, SCOTUS ruled that threatening a person to make a recommendation on an investment is not extortion because a recommendation is not “property” under the Hobbs Act. In that ruling, the Court overturned the Court of Appeals for the Second Circuit, which ruled that there was “a property right in rendering sound legal advice.” However, SCOTUS determined that “property” must meet the following test: “The property extorted must therefore be transferable–that is, capable of passing from one person to another. The alleged property here lacks that defining feature.” In this case, the Court was following on an earlier case Cleveland v. United States, 531 U. S. 12 (2000) that held that a application for a video poker license is not “property.”
Interestingly, the Justices split slightly in the reasoning. In his concurring opinion, Justice Alito argued that a recommendation is not property. In a note in the majority opinion, Justice Scalia stated:
The concurrence contends that the “right to make [a] recommendation” is not property. Post, at 4 (ALITO, J., concurring in judgment). We are not sure of that. If one defines property to include anything of value, surely some rights to make recommendations would qualify–for example, a member of the Pulitzer Prize Committee’s right to recommend the recipient of the prize. I suppose that a prominent journalist would not give up that right (he cannot, of course, transfer it) for a significant sum of money–so it must be valuable. But the point relevant to the present case is that it cannot be transferred, so it cannot be the object of extortion under the statute.
Justice Alito went on to state that “If Congress had wanted to classify internal recommendations pertaining to government decisions as property, I think it would have spoken more clearly than it did in the Hobbs Act.” Given that the Hobbs Act was passed in 1951, this supposed lack of clarity not surprise me. At that time, the importance of intangible assets was not recognized; property was clearly tangible, end of story.
The Court might be right in the technical legal definition of “property” in the 18th, 19th and 20th Century use of the term. But it make common sense that the purpose of the Hobbs Act in prosecuting extortion was to punish attempts to gain something of value through the coercion of others. And, as the note quoted above indicates, intangible assets – including recommendations at affect decisions — are something of value. But it was clear from the decision that the Court was not willing to go there. So, it’s up to the Congress to bring the laws into the 21st Century for the Intangible Economy.