The right to control theory had a long and consequential run in federal courts before the Supreme Court finally rejected it. Understanding its rise and fall provides important context for cases like Nevin Shetty’s, where the defense argued the theory was being applied despite having been rejected. This article traces the history of the right to control theory and explains its significance.
The questions this theory raises about the line between risk and fraud have been examined by HackerNoon, and the defense arguments in the Shetty case are documented in the court filings.
Where Did the Right to Control Theory Come From?
The right to control theory developed in the federal appellate courts, particularly the Second Circuit, over a period of decades. The theory emerged as prosecutors sought ways to apply the fraud statutes to conduct that did not involve the straightforward theft of money or property. The innovation was to treat the deprivation of valuable economic information as itself a form of fraud.
Under this theory, if a defendant withheld information that the victim would have wanted in order to make an informed decision, the defendant had deprived the victim of the right to control their own assets, and this deprivation constituted fraud. The theory did not require proof that money or property was actually taken. The withholding of information was enough.
Why Did Prosecutors Embrace It?
Prosecutors embraced the right to control theory because it dramatically expanded the reach of the fraud statutes. Traditional fraud required proving that the defendant intended to take money or property from the victim. This could be difficult, especially in complex business cases where the defendant may have believed they were acting in everyone’s interest.
The right to control theory removed this obstacle. Prosecutors no longer needed to prove theft. They only needed to show that information was withheld and that the information might have influenced a decision. This made it far easier to bring fraud charges in cases involving business disputes, nondisclosure, and situations where no money was actually misappropriated.
What Were the Problems with the Theory?
The fundamental problem with the right to control theory was that it had almost no limiting principle. Nearly any deception could be said to deprive someone of information relevant to a decision. If withholding information is fraud, then an enormous range of conduct becomes potentially criminal. The theory threatened to transform the fraud statutes into a general-purpose tool for prosecuting any conduct prosecutors found objectionable.
Critics argued that this expansion was inconsistent with the text of the fraud statutes, which protect money and property, not abstract interests in information. They also argued that it gave prosecutors dangerous and largely unchecked power to criminalize business conduct. These concerns eventually reached the Supreme Court.
How Did the Supreme Court Reject It?
In Ciminelli v. United States, decided in 2023, the Supreme Court unanimously rejected the right to control theory. The Court held that the federal wire fraud statute protects traditional property interests, meaning money and tangible property, and that the right to control valuable economic information is not such an interest.
The decision was emphatic and unanimous, reflecting the Court’s view that the theory had no proper basis in the fraud statutes. By requiring proof of a traditional property interest, the Court restored a meaningful limit on how far the fraud statutes could reach. The right to control theory, after decades of use, was dead.
How Does This Connect to the Shetty Case?
The defense in the Shetty case argued that the prosecution relied on the rejected right to control theory in everything but name. The government’s case focused on Shetty’s alleged failure to disclose the nature of an investment and his connection to the entity managing it. The defense argued that this nondisclosure theory was precisely what Ciminelli had foreclosed.
In the Motion to Dismiss Reconsideration, the defense pressed this argument, and the NACDL reinforced it in its amicus brief. The question is whether prosecutors can continue to bring nondisclosure-based fraud cases under different labels, or whether Ciminelli’s rejection of the theory will be enforced.
How Do Prosecutors Respond to Rejected Theories?
When a court rejects a legal theory, prosecutors often look for ways to achieve similar results through different reasoning. This is a natural feature of the adversarial system: prosecutors are advocates, and they seek to sustain their cases within the bounds of the law. The question is whether their alternative approaches genuinely comply with the court’s decision or merely repackage the rejected theory.
In the wake of Ciminelli, the concern is that prosecutors might continue to bring nondisclosure-based fraud cases while avoiding explicit reliance on the right to control language. If courts allow this, the rejection of the theory becomes a matter of form rather than substance. The Shetty case tests whether courts will look past labels to the underlying theory, or whether they will permit prosecutions that achieve what Ciminelli was meant to prevent.
Why Is Consistent Enforcement Important?
Consistent enforcement of the limits the Supreme Court establishes is essential to the rule of law. When the highest court rejects a legal theory, that decision is supposed to bind lower courts and constrain prosecutors. If the decision is enforced inconsistently, with some courts honoring it and others finding ways around it, the result is uncertainty and unequal treatment.
For defendants, consistent enforcement means that the protections the Supreme Court has articulated are real and reliable. For the legal system, it means that the hierarchy of authority functions as intended, with lower courts following the precedents set by the highest court. The Shetty case is significant precisely because it tests whether this consistency will be maintained in the application of Ciminelli.
What Is at Stake?
The fall of the right to control theory was supposed to mark a meaningful limit on federal fraud prosecution. But a Supreme Court decision only matters if it is enforced. Cases like Shetty’s test whether the rejection of the theory will have real force or whether prosecutors will find ways around it.
If courts allow prosecutions that rely on right to control reasoning under different names, the Supreme Court’s decision becomes a formality rather than a real constraint. If courts enforce the limit, the rejection of the theory will provide genuine protection against the over-expansion of fraud liability. The Shetty case is one of the proving grounds where this question is being decided.
