The US Supreme Court ruled [text, PDF] Tuesday in Lagos v. US [SCOTUSblog materials] that the Mandatory Victims Restitution Act of 1996 (MVRA) [materials] applies only to government investigations and criminal proceedings, and not to a victim’s own private investigation or expenses incurred during civil or bankruptcy proceedings.

In this case, the petitioner refused [JURIST report] to pay $5 million to GE Capital, the respondent, for expenses it incurred in investigating the alleged fraud and those resultant of the civil and bankruptcy proceedings, saying those costs reflect expenses are not related to the governments investigation or the criminal proceedings. The US argued that Congress intended the statute to compensate victims for monies spent on internal investigations, especially in cases of fraud, since most fraud is detected through internal investigations.

The relevant portion of the MVRA requires defendants convicted of certain offenses—such as crimes of violence, fraud, deceit, etc.—to, “reimburse the victim for lost income and necessary child care, transportation, and other expenses incurred during participation in the investigation or prosecution of the offense or attendance at proceedings related to the offense.”

The question before the court was “whether the words ‘investigation’ and ‘proceedings’ are limited to government investigations and criminal proceedings, or whether they include private investigations and civil proceedings.” The court granted certiorari to resolve this dispute, which has divided the federal district and circuit courts.

The court held that “investigation” and “proceeding” are limited to “government investigations and criminal proceedings.” In so holding, the court relied primarily on the MVRA’s text, stating:

The individual words suggest (though they do not demand) our limited interpretation. The word “investigation” is directly linked by the word “or” to the word “prosecution,” with which it shares the article “the.” This suggests that the “investigation[s]” and “prosecution[s]” that the statute refers to are of the same general type. And the word “prosecution” must refer to a government’s criminal prosecution, which suggests that the word “investigation” may refer to a government’s criminal investigation. A similar line of reasoning suggests that the immediately following reference to “proceedings” also refers to criminal proceedings in particular, rather than to “proceedings” of any sort.

The court reversed the US Court of Appeals for the Fifth Circuit’s holding, and determined the petitioner did not owe GE Capital the $5 million in expenses.