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Sample Memorandum re Willfulness and Good Faith
The opinion in this case is United States v. Walker, 26 F.3d
108 (11th Cir. 1994).|
STATEMENT OF THE ISSUES
1. Did the District Court abuse its discretion in declining to issue a separate instruction on good faith as a defense to fraud, when the court's instruction on intent to defraud adequately covered the good faith defense, and the defendants were free to--and did--present evidence and argument on good faith?
2. Did the District Court abuse its discretion by refusing to allow the testimony of two attorneys in support of a defense of good faith reliance on advice of counsel, and in refusing a requested instruction on that defense, when the attorneys' advice was not relevant to the charges; the advice was not legal advice of the sort the defendants could rely on in good faith; the attorneys' testimony could have confused the jury about the elements of the offenses; and the defendants were free to--and did--present other evidence and argument of their alleged good faith reliance on counsel's advice?
STATEMENT OF THE CASE
1. Course of Proceedings and Disposition of the Case
The defendants, XXXXXXX X. XXXXXX, XXXXXX X. XXXXXXX, and XXXXX XXXXXXX, were charged in a superseding indictment with one count of conspiracy (18 U.S.C. § 371), two counts of introducing adulterated food into interstate commerce (21 U.S.C. §§ 331(a) and 333(a)(2)), and one count of providing a false guaranty relating to food safety (21 U.S.C. §§ 331(h) and 333(a)(2)).[FN1] App. Tab 4. On December 10, 1992, following an eight-day trial, the defendants were convicted by a jury on all counts. R10:1218-1220. On February 18, 1993, the District Court sentenced each defendant to a term of probation and imposed fines of $5,000 each for defendants XXXXXXX XXXXX and XXXXXX XXXXXXX, and $10,000 for defendant XXXXXX XXXXXXX. App. Tabs 5-7.
FN1. At the time of defendants' offenses, in 1987, the penal provision for felony violations of the Federal Food, Drug, and Cosmetic Act appeared at 21 U.S.C. § 333(b). In July 1988, that provision was re-codified at 21 U.S.C. § 333(a)(2). Thus, while the superseding indictment refers to former section 333(b), references to the law in this brief will be to the current codification at section 333(a)(2).All defendants filed timely notices of appeal. R3:130, 131.
2. Statement of the Facts
a. The Charges
As already noted, the superseding indictment contained four counts. Count One charged the defendants with conspiring to commit felony violations of the Federal Food, Drug, and Cosmetic Act. Specifically, Count One alleged that between 1985 and 1987 the defendants conspired to introduce adulterated and misbranded food into interstate commerce, with the intent to defraud and mislead, in violation of 21 U.S.C. §§ 331(a) and 333(a)(2). The food referred to was a fatty acid product known alternately as 992-U and V-99. App. Tab 4 at 1-6.
Counts Two and Three charged the defendants with separate violations of 21 U.S.C. §§ 331(a) and 333(a)(2), for introducing adulterated 992-U/V-99 into interstate commerce with the intent to defraud and mislead on two occasions in early 1987. App. Tab 4 at 7-8. Count Four charged that in connection with those same shipments of 992-U/V-99, the defendants made a false guaranty asserting that the 992-U/V-99 did not contain any unsafe substances, in violation of 21 U.S.C. §§ 331(h) and 333(a)(2). App. Tab 4 at 8-9.
b. The Evidence
The evidence at trial established the following. Between 1985 and 1987, the defendants, acting through a company known alternately as Island International and Island Chemicals (hereinafter "Island"), purchased 992-U from its manufacturer, Ivory Chemicals [NOTE: names changed from original]. Ivory expressly conditioned these purchases on an understanding that the product would not be used in animal feed. With each of the defendants' approximately 80 purchases of 992-U during this period, the defendants received an invoice from Ivory stating that the product was "for industrial use only; not for feed use."[FN2] R4:113-17. Ivory officials also specifically advised the defendants on several occasions (both orally and in writing) that the product would be available to them only on the assurance that it not be used, or sold for use, in feed. R5:214-15, 277, 280-81, 284.
FN2. Industrial (non-feed) uses for 992-U included phosphate mining and soap manufacturing. R5:272.In response to these warnings, the defendants on several occasions gave Ivory written assurance that they would not use 992-U in feed, and that if they sold the product they would warn their customers that the product should not be used in feed. R4:110-12. Specifically, the defendants acknowledged letters, prepared by Ivory, stating as follows:
As we [Ivory] have pointed out in the past, we sell our products only on the express condition that they be used for industrial purposes only and in no event to be used in animal feed or food additives. We again must request that you agree to this condition with respect to all purchases of Ivory . . . 992-U . . . , and that you also agree, should you resell the material, that the purchaser and ultimate user will be expressly notified of the above condition which limits the use of this material.
We cannot emphasize enough the importance of this condition and its necessity to avoid any violation of the Food, Drug, Cosmetic Laws and any other laws or standards relating to animal or food additives. We appreciate the opportunity to continue business with you and your fine company and look forward to being of service to you. We would appreciate your formal acknowledgment to our conditions of sale by your signing a copy of this letter where indicated below and returning to us at your earliest convenience.R4:110-11.
Ivory officials testified that Ivory restricts 992-U from feed use because the conditions of the product's manufacture do not make it suitable for use as a food. Ivory's director of quality control, XXXXX XXXXXX, and its marketing manager, XXXXX XXXXXX, testified that 992-U is derived by skimming fats off an outdoor collection pond fed by an industrial sewer system running throughout Ivory's 100-acre manufacturing site. R4:49-50, 54, 97-99, 100-01. The Ivory officials testified that any manner of material might drain into the pond, including spilloffs and wastes from non-feed-grade products, as well as leaks or spillages of industrial chemicals used in plant equipment and machinery. R4:57-58, 101-02. Because 992-U comes from this "open system," and Ivory cannot control what might go into the system, Ivory restricts the product to non-feed uses.[FN3] R4:58, 107-08.
FN3. At times relevant to this case, Ivory's price for 992-U was about half the price it charged for a feed-grade fatty acid product. R4:118-19, R6:451, 472. The feed-grade product, 968, was obtained from a "closed system," and thus was not susceptible to contamination in the same manner as 992-U. R4:103-04.As already noted, the defendants on several occasions provided Ivory with written assurances that they would not sell 992-U for use in feed, and that they would notify their customers that 992-U should not be used in feed. The defendants made similar representations to Ivory officials orally. In 1985, Ivory's general manager for sales, XXXXXX XXXXX, confronted XXXXXX XXXXXX with rumors that the defendants were selling 992-U for use in feed. MX. XXXXX reminded MX. XXXXXXX that Island had previously been advised, and had agreed, not to sell 992-U for feed use. MX. XXXXXXX indicated he understood this obligation, and denied that Island was selling for feed use. R5:214-15.
XXXXXX XXXXXXX and XXX XXXXXX made similar assurances to Ivory. XXXXX XXXXXXX, the Ivory salesman in charge of sales to Island, testified that XXXXXX XXXXXXX and XXXX XXXXXX separately assured him that Island was not selling 992-U for use in feed. R5:277, 280-81, 284. XXXX XXX XXXXXXXX, another Ivory sales executive, corroborated Mr. XXXXXX.[FN4] R5:234-36. Both MX. XXXXXXX and MX. XXX XXXXXXXX also testified that they repeatedly explained to the defendants that 992-U was unsuitable for feed applications because it derived from an open system that was susceptible to contamination by non-feed-grade pollutants. R5:233-34, 275-76, 278-80.
FN4. This was further corroborated by Island's bookkeeper. R6:452-56.
FN5. Mid-South used the 992-U/V-99 as a component of a fat blend they marketed for use as an ingredient in poultry feed. R6:536-37, 571-73.
FN6. Island's bookkeeper, XXXXXXXXX XXXXXX, testified that HPDQ Resources "was formed to be a conduit or a buffer for the industrial material that Island was buying so you could sell it into the animal feed industry, and that way it would lose its original identity." R6:444; see also R6:474-75.
FN7. PCBs were found in the Mid-South shipments at levels that were several times the legal tolerance of two parts per million. R6:606, R7:633-36, 654, R10:1204.
The defendants were of course free to cross-examine all of the government's witnesses, and to present their own evidence. The defense case opened with testimony from each of the three defendants. Aside from one restriction that is not relevant to this appeal,[FN8] there were no limitations on the scope of the defendants' testimony.
FN8. At the onset of the trial, the District Court granted a government motion in limine to exclude evidence concerning the settlement of private civil litigation that had arisen out of the PCB contamination incident. R4:13-21.
FN9. Ivory's salesman, XXXXXX XXXXXXX, flatly denied this. R5:286-87. Interestingly, defendants' trial counsel neither cross-examined MX. XXXXXXX on this point, nor asked about his knowledge on direct examination of the defendants. Rather, defendants XXXX XXXXXX and XXXXXX XXXXXXX made this claim during the government's cross-examination of them.d. The Proffered Testimony Of The Two Attorneys
After the defendants had completed their testimony, the defense offered the testimony of two attorneys whom the defendants allegedly had consulted in this matter. The government at that time moved in limine to exclude the attorneys' testimony on the basis that the predicate for a defense of good faith reliance on advice of counsel had not been laid. The District Court granted the government's motion, but allowed a proffer of the attorneys' testimony outside the presence of the jury. R8:953-57, R9:958-1016.
The two attorneys whose testimony was proffered, and then excluded, were XXX XXXXX and XXXXX XXXXX. Their testimony merely repeated what the defendants themselves had already testified to: that the attorneys had advised the defendants they would face only potential civil liability if they falsely informed Ivory that they were not selling 992-U to feed. R9:978-79, 1008-09. Neither attorney had discussed with the defendants whether their conduct would have the effect of defrauding or misleading Ivory, Mid-South, or any other party. R8:804-05, 888, R9:999, 1014-15.
e. The District Court's Charge To The Jury
In addition to excluding the testimony of the two attorneys, the District Court refused a defense request for an instruction on the defense of good faith reliance on advice of counsel, and a separate request for a simple good faith instruction. R9:1083-84. The court expressly permitted the defense to argue good faith, however, advising defense counsel: "you can comment on any evidence that has been admitted in this case, which includes advice of counsel." R9:1084. Moreover, the court gave the jury a detailed instruction on intent to defraud and mislead, adapted from Eleventh Circuit Pattern Offense Instruction No. 5:
To act with the intent to defraud means to act with the specific intent to deceive or cheat ordinarily for the purpose of either causing some financial loss to another and bringing about some financial gain to ones self. To act with the intent to mislead means to act with the specific intent to omit information from a statement and thereby cause a portion of such statement to be misleading or to act with the specific intent to conceal a material fact and thereby create a false impression.
Proof that an individual acted with the intent to defraud or mislead does not depend on proof that another individual or entity was, in fact, defrauded or misled. The essential inquiry focuses on intent, not on the actual consequences of the actions taken. Because direct evidence of a person's intent is often unavailable, you may infer intent from the surrounding circumstances of an individual's conduct. You can find that the defendants acted with the intent to defraud or mislead if you find that they intended to defraud or mislead any person or entity with whom they were doing business or that they intended to defraud or mislead any other person who foreseeably would be affected by the defendants' actions.R10:1202-03. The court also gave the pattern instructions on knowingly and willfully. R10:1208-09.
3. Standard of Review
A District Court's decisions refusing requested instructions and excluding proffered testimony are reviewed for abuse of discretion. See United States v. Morales, 978 F.2d 650, 652 (11th Cir. 1992); United States v. Reyes-Vasquez, 905 F.2d 1497, 1499 (11th Cir. 1990), cert. denied, 111 S. Ct. 2869 (1991).
SUMMARY OF THE ARGUMENT
The District Court properly refused the requested instructions on good faith. Good faith was adequately covered in the court's instruction on intent to defraud. Additionally, because the defendants had full opportunity to present evidence and argument on good faith, the absence of a good faith instruction did not seriously impair their defense.
An instruction on good faith reliance on advice of counsel was not only unnecessary, it was also inappropriate, because the defendants failed to establish the predicates for that defense. Counsel's advice did not relate to the mens rea of the offenses of conviction--intent to defraud or mislead--but focused instead only on the consequences of defendants' actions, a matter irrelevant to the charges at issue. Moreover, defendants' reliance on counsel's advice was not a good faith reliance, because it required reliance on counsel's approval of fraudulent conduct.
For these same reasons, the District Court properly excluded the testimony of attorneys XXXX XXXXX and XXXXXX XXXXX. Their testimony not only would have been merely cumulative of the defendants' own testimony on good faith, but also would have confused the jury about the elements of the crimes charged by suggesting (incorrectly) that the crimes required a specific intent to violate the law.
I. THE DISTRICT COURT PROPERLY REFUSED TO INSTRUCT THE JURY ON GOOD FAITH AS A DEFENSE TO FRAUDThe analysis required for review of a trial court's refusal to give a requested defense instruction is well-settled. This Court will find reversible error in such a refusal only if all of the following three criteria are met:
(1) the instruction is substantially correct, (2) the instruction was not addressed in the charge actually given, and
(3) the failure to give the requested instruction seriously impaired the defendant's ability to present an effective defense.United States v. Morales, supra, 978 F.2d at 652; see also United States v. Gold, 743 F.2d 800, 819 (11th Cir. 1984), cert. denied, 469 U.S. 1217 (1985). As discussed below, neither the second nor the third of these criteria is satisfied in this case.
At issue here are defense requests for two sorts of good faith instructions. First, as part of their written Request to Charge, the defendants submitted a proposed instruction on good faith reliance on advice of counsel. R3:113 (Request No. 11) (reprinted at App. Tab 8). When the District Court determined not to give that instruction, R9:1071-72, XXXXXX's counsel orally suggested a simple good faith instruction (without reference to advice of counsel). R9:1083-84. The District Court declined to give that instruction as well, but explicitly allowed argument on good faith, including good faith related to advice of counsel. R9:1084.
The District Court properly refused the defense requests for instructions on good faith. The Court's charge to the jury on intent to defraud adequately addressed the concept of good faith, making an additional specific instruction unnecessary. Moreover, the defendants were allowed to--and did--present evidence and argument on their alleged good faith. In these circumstances, the absence of a specific good faith instruction--either in general form, or referring to advice of counsel in particular--was not error.
A. A Good Faith Instruction Was Not Necessary Because Good Faith Was Adequately Addressed In The Court's Instruction On Intent To DefraudIn fraud cases such as this one, where the trial court has specifically instructed the jury on how to determine fraudulent intent, the defendant is not ordinarily entitled to a separate instruction on good faith. See United States v. Chenault, 844 F.2d 1124, 1130 (5th Cir. 1988). A separate good faith instruction is viewed as unnecessary in these circumstances because "[a] finding of specific intent to deceive categorically excludes a finding of good faith. . . ." Id. (quoting United States v. Lavergne, 805 F.2d 517, 523 (5th Cir. 1986)). In terms of the three-part analysis set forth above, the refusal of a proposed instruction on good faith is not error because good faith is adequately addressed in the definition of intent to defraud.[FN10]
FN10. The Eleventh Circuit apparently has not had occasion to decide that a good faith instruction is unnecessary when intent to defraud is fully described. However, under the analysis this Court applies to refused defense instructions generally, that is the only logical result. See United States v. Gray, 751 F.2d 733, 735 (5th Cir. 1985); United States v. Hunt, 794 F.2d 1095, 1098 (5th Cir. 1986).
To act with the intent to defraud means to act with the specific intent to deceive or cheat ordinarily for the purpose of either causing some financial loss to another and bringing about some financial gain to ones self.R10:1202. As was noted by the Fifth Circuit with respect to an essentially identical charge, this instruction "functionally required consideration of the defense of good faith. . . ." United States v. Lavergne, supra, 805 F.2d at 517. Thus, as in Lavergne, "no reversible error could have occurred" from the absence of an additional instruction on good faith. Id.; see also United States v. Dockray, 943 F.2d 152, 155 (1st Cir. 1991) ("where the court properly instructs the jury on the element of intent to defraud--essentially the opposite of good faith--a separate instruction on good faith is not required").
Defendants' reliance on United States v. Opdahl, 930 F.2d 1530, 1535 (11th Cir. 1991), for the contention that a proposed defense instruction must be given if there is "any foundation" for the instruction is misplaced. In Opdahl, this Court ordered a new trial when the trial court had refused a requested defense instruction that was not adequately addressed in other parts of the court's charge to the jury. By contrast, as demonstrated above, the charge that was given in this case did adequately address the concept of good faith. Thus, the District Court in this case properly exercised its discretion in refusing defendants' proffered instructions on good faith.
B. The Defense Was Not Impaired By The District Court's Refusal To Instruct The Jury On Good FaithNot only was the concept of good faith adequately addressed in the court's charge on intent to defraud, but the defendants were free throughout the trial to present evidence and argument on good faith. Thus, it cannot be said that the District Court's refusal of the requested instructions on good faith "seriously impaired the defendant's ability to present an effective defense." United States v. Morales, supra, 978 F.2d at 652.
All three defendants testified at the trial of this case, and all three were free to assert that they acted in good faith, whether on advice of counsel or upon any other basis. The defendants also had full opportunity to cross-examine representatives of the defrauded parties--Ivory and Mid-South--to elicit evidence that these entities were not misled by defendants' dealings. And finally, as noted above, defense counsel were given full latitude to address good faith in closing arguments.[FN11]
FN11. Defense counsel fully availed themselves of this latitude, arguing variously that Ivory and Mid-South could not have been deceived by defendants' conduct, R10:1131-33, 1140, 1148, 1165, 1167-68; that the defendants had been advised the Ivory disclaimers were meaningless, R10:1140, 1163, 1167; that the defendants never knew the true nature of the Ivory product, R10:1128, 1161; and that the defendants reasonably relied on Mid-South's testing to determine the suitability of the product, R10:1131, 1146, 1163.
C. The Requested Advice-of-Counsel Instruction Was Inappropriate In Any EventAs already discussed, a separate instruction on good faith was unnecessary in this case because the District Court's instruction on intent to defraud adequately covered good faith, and further because the defendants had full opportunity to present a good faith defense through evidence and argument. This is true for both the general good faith instruction XXXXXX's attorney suggested orally during the charge conference, and for the more specific instruction on good faith reliance on advice of counsel that the defendants submitted in their written requests to charge. App. Tab 8.
The requested good-faith-reliance instruction was not only unnecessary, it was also inappropriate in light of the charges and the evidence in this case.
First, the advice the defendants received from counsel could not support a valid defense to the charges in the superseding indictment. The defendants were advised only about the consequences to them from their fraudulent conduct--i.e. that they would face civil but not criminal liability. R8:783, 887, R9:978-79, 1009. They received no advice, however, addressing the mens rea of their offenses: the intent to defraud or mislead. This is clear from the testimony of defendants XXXX XXXXXX and XXXXXX XXXXXXX:
Q [Prosecuting Attorney]: Did you tell [attorney XXXX XXXXX] you were going to lie to Ivory?
A [XXXXXX]: Yes; I told him I was going to sign [the Ivory letter stating the not-for-feed policy].
Q: Did you tell him you were not going to inform your customer of the "not for feed" restriction?
A: I think so.
Q: Did Mr. XXXX tell you that, if you lied to Ivory, that somehow that wouldn't be a lie?
A: I wasn't asking him whether it was a lie or not. I was asking him whether it was a crime.
Q: Did he tell you that it would not be a lie?
A: I didn't ask him that.
Q: You asked him, if you lied, what would be the consequences; is that right?
A: That's right.
Q: And what was his response?
A: "You might be subject to cancellation or violation of the contract in a civil matter if it ever became an issue."R8:804-05; see also R9:999 (Attorney XXXXX: "We never talked about lying or not lying").
Q [Prosecuting Attorney]: Did [attorney XXXXXX XXXXX] tell you that Ivory would not be misled even though you were signing these letters and assuring them you weren't selling the product to feed?
A [XXXXXX XXXXXXX]: I don't recall.R8:888; see also R9:1014-15 (Attorney XXXXX: "I don't know if he would be misleading Ivory. . . . It's not a deception issue in my advice or what we talked about").
FN12. As already noted, XXXX XXXXXX conceded that when seeking counsel from XXXX XXXXX he told MX. XXXXX he intended to lie to Ivory. R8:804. XXXXXX XXXXXXX similarly told attorney XXXXXX XXXXX that he "would be misleading . . . Mid-South by selling them a feed product that was not for feed[.]" R8:887.
II.THE DISTRICT COURT PROPERLY EXCLUDED CERTAIN TESTIMONY OFFERED IN SUPPORT OF A GOOD-FAITH-RELIANCE DEFENSE
Exclusion of the attorneys' testimony was appropriate for other reasons as well. First, the attorneys' testimony was merely cumulative of the defendants' own testimony concerning what they were advised by counsel.
Second, testimony that the defendants were advised by counsel that their scheme would not subject them to criminal penalties would have confused the jury into accepting a phantom mistake of law defense. The offenses at issue in this case did not require a specific intent to violate the law. See United States v. Hiland, 909 F.2d 1114, 1129 n.21 (8th Cir. 1990). Thus, testimony as to whether or not the defendants knew their conduct was criminal was not relevant to the charges. Especially because such testimony would have come from expert witnesses, it would have confused the jury concerning the mental state required to convict. To prevent such confusion, and to preserve the judge's province as the sole authority on questions of law at trial, the District Court properly excluded the proffered testimony of the two attorneys. See United States v. Daly, 756 F.2d 1076, 1083 (5th Cir.), cert. denied, 474 U.S. 1022 (1985); United States v. Hatchett, 918 F.2d 631, 640 (6th Cir. 1990), cert. denied, 111 S. Ct. 2839 (1991).
The District Court did not abuse its discretion when it refused the requested good faith instructions, or when it excluded testimony offered in support of an invalid advice-of- counsel defense. Thus, the defendants' convictions should be affirmed.
DATED: September 30, 1993
JOE D. WHITLEY United States Attorney
JEFFREY B. CHASNOW Attorney Department of Justice Office of Consumer Litigation P.O. Box 386 Washington, D.C. 20044 (202) 307-0101
BRYAN J. FARRELL Assistant U.S. Attorney 1800 United States Courthouse 75 Spring Street, S.W. Atlanta, Georgia 30335 (404) 331-5813