The Ambiguous Trailing Modifier

A number of courts, including a 2016 decision by the U.S. Supreme Court, apply the grammatical "doctrine of the last antecedent." This comment briefly provides two judicial examples. Always consult an experienced attorney in specific situations.

The U.S. Supreme Court recently considered the following statutory provision:

Defendants convicted of possessing child pornography are subject to an increased sentence if they have a prior conviction for crimes "relating to aggravated sexual abuse, sexual abuse, or abusive sexual conduct involving a minor or ward." (18 U.S.C. Sec 2252(b)(2)).

The defendant argued that the phrase "involving a minor or ward" applied to all three specifically mentioned crimes. That is, each of his prior convictions would have to involve a minor or ward in order for sentence enhancement to occur.

The U.S. Supreme Court in a divided 6:2 decision determined that the phrase "involving a minor or ward" only modified "abusive sexual conduct" (Lockhart v. United States).

The majority opinion applied "the rule of the last antecedent." The rule provides that "a limiting clause or phrase... should ordinary be read as modifying only the noun or phrase that it immediately follows."

The Supreme Court provided the following explanation:

"The rule reflects the basic intuition that when a modifier appears at the end of a list, it is easier to apply that modifier only to the item directly before it. That is particularly true where it takes more than a little mental energy to process the individual entries in the list, making it a heavy lift to carry the modifier across them all. For example, imagine you are the general manager of the Yankees and you are rounding out your 2016 roster. You tell your scouts to find a defensive catcher, a quick-footed shortstop, or a pitcher from last year's World Champion Kansas City Royals. It would be natural for your scouts to confine their search for a pitcher to last year's championship team, but to look more broadly for catchers and shortstops."

The majority opinion acknowledged that "of course, as with any canon of statutory interpretation, the rule of the last antecedent is not an absolute and can assuredly be overcome by other indicia of meaning [Citation omitted]." Here, however, Congress followed the structure and language of other statutory provisions, giving weight to the majority's understanding of the phrase.

The Supreme Court's dissenting opinion began with these examples:

"Imagine a friend told you that she hoped to meet "an actor, director, or producer involved with the new Star Wars movie." You would know immediately that she wanted to meet an actor from the Star Wars cast--not an actor in, for example, the latest Zoolander. Suppose a real estate agent promised to find a client "a house, condo, or apartment in New York." Wouldn't the potential buyer be annoyed if the agent sent him information about condos in Maryland or California? And consider a law imposing a penalty for the "violation of any statute, rule, or regulation relating to insider trading." Surely a person would have cause to protest if punished under that provision for violating a traffic statute. The reason in all three cases is the same: Everyone understands that the modifying phrase--"involved with the new Star Wars movie," "in New York," "relating to insider trading"--applies to each term in the preceding list, not just the last."

The dissent continued with a critique of the Majority opinion, referring to prior judicial decisions, and the legislative history of the statute in question.

The dissent concluded:

"Suppose, for a moment, that this case is not as clear as I've suggested. Assume there is no way to know whether to apply the last-antecedent or the series-qualifier rule. Imagine, too, that the legislative history is not quite so compelling and the majority's "template" argument not quite so strained. Who, then, should prevail? This Court has a rule for how to resolve genuine ambiguity in criminal statutes: in favor of the criminal defendant. As the majority puts the point, the rule of lenity insists that courts side with the defendant "when the ordinary canons of statutory construction have revealed no satisfactory construction.[Citations omitted]"

In the interest of brevity, I provide only one more example from a bank's sale of securities.

The Delaware Supreme Court in a 2013 decision (The Bank of New York Mellon v. CommerzBank Capital Funding Trust II) had to interpret contractual language, among other provisions in a complex case.

The question was if "payments on the acquired bank's securities, which were a "Parity Security," triggered a contractual obligation by the bank to make comparable payments on the Trust Preferred Securities."

An agreement in dispute defined Parity Securities as:

"(ii) preference shares or other instruments qualifying as consolidated Tier I regulatory capital of the Bank or any other instrument of any Affiliate of the Bank subject to any guarantee or support agreement of the Bank ranking pari passu with the obligations of the Bank under the Support Undertaking . . . ."

The Delaware Supreme Court explained:

"To better understand the parties' differing interpretations of the quoted definition, the definition is broken down into separate elements represented by bracketed formula language. Thus, the Parity Securities definition may be parsed as follows:

(ii) preference shares ["Term 1"] or other instruments ["Term 2"] qualifying as consolidated Tier I regulatory capital of the Bank ["Internal Modifier"] or any other instrument of any Affiliate of the Bank ["Term 3"] subject to any guarantee or support agreement of the Bank ranking pari passu with the obligations of the Bank under the Support Undertaking ["Trailing Modifier"]. . . .
Using these formulaic terms, the Parity Securities definition may be expressed as follows:
[Term 1] or [Term 2] + [Internal Modifier] or [Term 3] + [Trailing Modifier] . . . ."

The Delaware Supreme Court noted that "The dispute thus turns on whether the definitional phrase "subject to any guarantee or support agreement of the Bank" (i.e., the Trailing Modifier) should be read to modify the preceding phrase "other instruments qualifying as consolidated Tier I regulatory capital of the Bank" (i.e., Term 2 plus the Internal Modifier). All parties agree that the DresCap Trust Certificates were not, on a standalone basis, "subject to any guarantee or support agreement of the Bank" (i.e., the Trailing Modifier). Thus if, as Defendants argue, the Trailing Modifier modifies all the Terms that precede it, then the DresCap Trust Certificates are not Parity Securities."

After a discussion of contractual ambiguity rules and the reasonable expectation of public investors, the Delaware Supreme Court concluded:

"We accordingly construe the Parity Securities definition in the LLC Agreement consistent with the position of the Trustee. Specifically, we conclude that the Trailing Modifier ("subject to any guarantee or support agreement of the Bank") modifies only Term 3 ("any other instrument of any Affiliate of the Bank"), and not Term 1 ("preference shares") or Term 2 ("other instruments") of that definition. We further conclude--and this the parties do not dispute--that the Internal Modifier ("qualifying as consolidated Tier I regulatory capital of the Bank") modifies both Term 1 ("preference shares") and Term 2 ("other instruments"). Here, the DresCap Trust Certificates fall within the category of "other instruments qualifying as consolidated Tier I regulatory capital of the Bank" (i.e., Term 2 plus the Internal Modifier). As such, they are Parity Securities under the LLC Agreement."

If this summary of a 50 page Delaware Supreme Court decision leaves your head swimming, you now understand the need for absolute clarity when utilizing trailing modifiers. Most simply, just add a sentence or two in the agreement indicating precisely what provisions are subject to the modifier or, alternatively, write the provision without trailing modifiers.

This comment provides a brief and incomplete introduction to a complex topic and is not intended to provide legal advice. Always consult an experienced attorney in specific situations.