UNITED STATES OF AMERICA, PETITIONER V. SOL C. SCHWARTZ AND RAYMOND F. LANE No. 85-2031 In the Supreme Court of the United States October Term, 1985 Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit The Solicitor General, on behalf of the United States, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Ninth Circuit in this case. PARTIES TO THE PROCEEDING In addition to the parties listed in the caption, Allen Dorfman, Frank Marolda, and Abe Chapman were named in the indictment. Dorfman died before trial. Marolda was dismissed from the case by the district court and did not appear in the court of appeals. Chapman was a party in the court of appeals, but the United States is not seeking review of the affirmance by the court of appeals of the district court's order dismissing Chapman. TABLE OF CONTENTS Question Presented Parties to the Proceeding Opinions below Jurisdiction Constitutional provision involved Statement Reasons for granting the petition Conclusion Appendix A Appendix B Appendix C Appendix D OPINIONS BELOW The opinion of the court of appeals denying in part and granting in part the government's petition for rehearing (App., infra, 1a-15a) is reported at 785 F.2d 673. The original opinion of the court of appeals dismissing the government's appeal on double jeopardy grounds (App., infra, 16a-29a) is reported at 763 F.2d 1054. The oral and written orders of the district court (App., infra, 30a-39a) are unreported. JURISDICTION The judgment of the court of appeals was entered on June 18, 1985. A petition for rehearing was denied in part and granted in part on March 14, 1986. On May 6, 1986, Justice Rehnquist extended the time within which to file a petition for a writ of certiorari to and including June 11, 1986. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). CONSTITUTIONAL PROVISION INVOLVED The Fifth Amendment provides that: No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. QUESTION PRESENTED Whether the Double Jeopardy Clause prohibits appeal when a district court determines that the government has failed to prove certain nonessential factual averments in the indictment, and then erroneously terminates the trial at the defendant's behest. STATEMENT An indictment returned in the United States District Court for the Northern District of California charged respondents and three others /1/ with 11 counts of wire fraud, in violation of 18 U.S.C. 1343, and conspiracy to commit wire fraud, in violation of 18 U.S.C. 371. /2/ The indictment alleged that respondents and their co-defendants conspired to defraud Locals 19 and 28 of the Hotel and Restaurant Employees Union (HREU) and six employee benefit plans of those locals. /3/ Before trial, respondents moved to dismiss the indictment on grounds of duplicity. They claimed that the indictment alleged several objects of the scheme to defraud and that each object should be charged as a separate scheme. C.A. App. 15-23. The district court denied the motion, ruling that the indictment alleged a single unified scheme to defraud. App., infra, 5a. 1. A jury was impaneled, and the government presented evidence relating to the charges. Briefly summarized, the evidence showed that respondent Lane was the secretary-treasurer of Local 28 of the HREU in Oakland and Contra Costa. /4/ He was also a trustee of his local's health and welfare pension benefit plans. Co-defendant Marolda was president of Local 19 of the HREU in San Jose. He too was a trustee of his union benefit plans. In 1978, Marolda was convicted and sentenced for embezzling union funds (App., infra, 2a). Lane and Marolda feared that they would lose their union offices as a result of their convictions. To ensure their financial security, they plotted to merge their locals. They agreed that if either of them obtained a reversal of his conviction on appeal, /5/ that person would run the merged locals and guarantee a lifetime income for the other man (GXs 101-1T, 101-3T, 101-10T, 102-13T; DXs B and C). A merger of the locals, however, had to be approved by the international president of the HREU. The international president, Edward Hanley, was reluctant to authorize the merger of Locals 19 and 28. Lane and Marolda therefore enlisted the help of respondent Schwartz and co-defendants Abe Chapman and Allen Dorfman, whom Lane described to Marolda as "synonymous with crime" (GX 102-13T), to persuade Hanley to allow the merger. Schwartz, Chapman, and Dorfman were executives in the Amalgamated Insurance Agency of Chicago, which was in the business of administering union benefit plans. In return for their help in arranging the merger, Lane and Marolda agreed to reopen the bidding on the contracts to administer their locals' benefit plans and to rig the bidding so that Amalgamated would submit the lowest bid and would be awarded the lucrative contracts (GXs 56, 101-1T, 101-2T, 101-3T, 101-6T, 101-20T). Lane thereafter discussed the merger with Hanley, but Hanley still did not agree to approve the merger. Schwartz then promised Lane that he would talk to Dorfman to see what could be done (GX 101-10T). On March 13, 1979, Lane and Schwartz discussed Amalgamated's takeover of the Oakland benefit plans. Lane told Schwartz that he would solicit a number of bids and "then when I get the bids in, I was going to mail them to you and let you know, so you can come in with the lowest one" (GX 101-13T). On April 18, 1979, Schwartz told Chapman that "the merger's been taken care of." He warned, however, that, unless everything went through with the benefit plans, the merger would be called off. On May 7, 1979, Lane called Schwartz to confirm that he was putting the Oakland plans out to bid. He promised to send Schwartz the bids (GXs 101-20T, 101-21T, 101-26T). Ultimately, however, the merger was not approved and Amalgamated did not get the contracts to administer the benefit plans (GXs 101-24T, 101-25T, 101-29T, 101-35T, 102-4T, 102-12T, 102-13T, 102-18T, 102-23T, 102-25T, 102-42T, 102-43T, 102-47T, 102-48T, 103-2T, 103-7T, 103-10T, 103-11T, 103-21T, 103-26T, 103-27T, 103-42T). 2. At the close of the government's case, respondents moved for a judgment of acquittal, alleging that there was a fatal variance between the scheme to defraud alleged in the indictment and the government's proof at trial. Specifically, respondents alleged that the government had failed to prove every object of the scheme alleged in the indictment. C.A. App. 53-56. The district court granted the motion. The court explained that under then-current circuit precedent, a conviction could not be based on a scheme that was narrower than the one alleged in the indictment. /6/ The court found that the government had failed to prove that respondents intended to defraud four of the six union benefit plans that were identified in the indictment. In particular, the court found that there was no evidence that respondents had conspired to deprive either the two Local 19 benefit plans or the two Local 28 Contra Costa plans of the services of Lane and Marolda as trustees. With respect to the two Local 28 Oakland benefit plans, however, the court did not make a finding of sufficiency. Because the government's evidence had failed to establish that all six benefit plans were intended victims of the fraudulent scheme, the court held that respondents could not be convicted of participating in a "unitary scheme to defraud as charged in the indictment" (App., infra, 36a-37a). In a subsequent written order (App., infra, 30a), the court explained, the government has not presented sufficient proof as to a number of the benefit plans as alleged in Counts 1-12. Accordingly, because the government has not proven all of the objects of the fraud scheme, there is a fatal variance. Although the court identified the legal error in the case as a "fatal variance," it denominated its ruling a "judgment of acquittal." 3. The government appealed pursuant to 18 U.S.C. 3731. The government argued that the district court's ruling was appealable because, despite its label, it was in fact an erroneous dismissal of the indictment rather than an acquittal. The government premised its argument on the undisputed fact that the district court never found that the government had failed to prove any of the essential elements of a wire fraud offense. Rather, the district court simply found that the government had failed to prove all the factual averments in the indictment, namely, that the defendants intended to defraud all six union benefit plans. The failure of proof as to four of the six benefit plans, the government argued, was not a failure to establish any essential element of the offense, either as set forth in the statute or as construed by the district court; it meant only that the scheme to defraud was narrower than was charged in the indictment. Since, as this Court made clear in United States v. Miller, No. 83-1750 (Apr. 1, 1985), the government may convict on proof that shows a scheme to defraud that is narrower than the scheme alleged in the indictment, the government argued that it should be permitted to try respondents on either an amended indictment or a new indictment charging the narrower scheme to defraud. The court of appeals held that the appeal was barred by the Double Jeopardy Clause. The court noted the government's argument that the trial court's action was in substance a dismissal of the indictment rather than an acquittal, and observed that "(i)n most cases, the government's argument would be well taken" (App., infra, 6a). According to the court of appeals, however, the district court had "acquitted" the defendants under the "peculiar rule" (App., infra, 7a) of the Ninth Circuit's earlier decisions in Miller and United States v. Mastelotto, 717 F.2d 1238 (9th Cir. 1983). The court reasoned that because the district court was applying this binding circuit precedent, which had held that the government was required to prove every object of the scheme to defraud that was alleged in the indictment, the district court did in fact "acquit" respondents for failure to prove some of the objects of the alleged scheme. In the view of the court of appeals, it was irrelevant that Miller had been reversed by this Court (App., infra, 7a-8a). Accordingly, the court of appeals dismissed the government's appeal. The court of appeals thereafter denied the government's rehearing petition to the extent that it addressed respondents' double jeopardy claim. /7/ REASONS FOR GRANTING THE PETITION This case involves an important question not previously decided by this Court. That question is whether the Double Jeopardy Clause prohibits the government from taking an appeal any time a district court determines that the government has failed to prove certain nonessential factual averments in the indictment, and then erroneously terminates the trial at the defendant's behest. In this case, the court of appeals determined that the Clause does prohibit appeal. The Third Circuit reached the opposite result in United States v. Maker, 751 F.2d 614 (1984), cert. denied, No. 84-1419 (June 17, 1985). The double jeopardy question turns on whether the district court's action was an "acquittal" or a dismissal of the indictment. Smalis v. Pennsylvania, No. 85-227 (May 5, 1986), slip op. 5; United States v. Scott, 437 U.S. 82, 91 (1978). An "acquittal" is defined by the trial court's actions, not the label it attaches to its ruling. "(A) defendant is acquitted only when 'the ruling of the judge, whatever its label, actually represents a resolution (in the defendant's favor), correct or not, of some or all of the factual elements of the offense charged.'" Id. at 97 (brackets in original) (quoting United States v. Martin Linen Supply Co., 430 U.S. 564, 571 (1977)). /8/ We submit that, when the district court resolved nonessential factual averments in the defendants' favor, it did not thereby resolve "some or all of the factual elements of the offense charged." Rather, it resolved factual questions that are not elements of the offenses of wire fraud and conspiracy and then reached the erroneous legal conclusion that this "fatal variance" (App., infra, 5a, 30a) required that the trial terminate. The courts below did not identify any element of the offense of wire fraud that the government did not prove. It must be emphasized that the district court did not find the government's proof wanting with respect to two of the six benefit plans. Thus, even as characterized by the courts below, the district court's ruling did not constitute a finding of insufficiency with respect to any element of the offense. The flaw that the district court perceived in the case was based on the Ninth Circuit's decisions in Miller and Mastelotto, which held that a defendant's Fifth Amendment right to be tried on indictment by a grand jury was violated when the proof at trial showed a narrower scheme to defraud than that contained in the indictment. See United States v. Miller, No. 83-1750 (Apr. 1, 1985), slip op. 4. Even before this Court's reversal of Miller, those decisions did not purport to change the "factual elements of the offense" of wire fraud or conspiracy; they simply interpreted the Grand Jury Clause to require that the scheme proved at trial be as broad as the scheme charged in the indictment (see App., infra, 7a). /9/ Therefore, when the district court terminated the trial in the present case on the authority of Miller and Mastelotto, it necessarily decided that the Grand Jury Clause precluded prosecution under the particular indictment before the court, not that the unproven averments in the indictment were "factual element(s) of the offense." The Grand Jury Clause holding represents "a legal judgment that a defendant, although criminally culpable, may not be punished because of a supposed constitutional violation." As such, it may be appealed. United States v. Scott, 437 U.S. 82, 98 (1978) (footnote omitted). /10/ When the necessary elements of a crime are proven at trial, but the indictment is dismissed at the defendant's behest because it fails to charge all the necessary elements, there is no double jeopardy bar to retrial under a new indictment. Lee v. United States, 432 U.S. 23 (1977); Illinois v. Somerville, 410 U.S. 458 (1973). If the dismissal of an indictment in those circumstances does not constitute an "acquittal," it is hard to see how there can be an "acquittal" when the necessary elements of a crime are proven at trial, but the indictment is dismissed at the defendant's behest because it charges more than all the necessary elements. To be sure, the averments that were not proved at trial may not be the subject of further proceedings. And, if the district court had found that the government had failed to prove any element of the crimes of wire fraud or conspiracy, we would agree that the court had "acquitted" respondents, and our appeal and an ensuing retial would be barred by the Double Jeopardy Clause. See Smalis v. Pennsylvania, supra. But that did not occur. The district court merely found that the government had failed to prove additional facts that the court mistakenly believed had to be proved in order to protect the defendants' rights under the Grand Jury Clause. The court's Grand Jury Clause ruling, like other midtrial dismissals, is appealable. A contrary result doesnot follow from Sanabria v. United States, 437 U.S. 54 (1978). In Sanabria, the defendant was charged with conducting an illegal gambling business that involved both horse betting and wagering on numbers. The government did not present any evidence at trial connecting Sanabria to horse betting, but relied entirely on Sanabria's involvement in the numbers branch of the business. During the government's case in chief, however, the district court suppressed all the government's proof pertaining to numbers betting. The district court then acquitted Sanabria on the overall gambling charge, because no evidence remained on which to convict him. This Court held that the government could not appeal the district court's suppression and acquittal orders, because a retrial of Sanabria on the gambling charge would violate the Double Jeopardy Clause. As the Court explained (437 U.S. at 71 (citation omitted)), Sanabria "was found not guilty for a failure of proof on a key 'factual element of the offense charged': that he was 'connected with' the illegal gambling business." In this case, by contrast, neither court below found found that the government had failed to prove an element of wire fraud or conspiracy; the district court merely found that the government's failure to prove averments in the indictment resulted in a violation of respondents' rights under the Grand Jury Clause. Consequently, respondents have not been "acquitted" of the charged offenses. In circumstances indistinguishable from the present case, the Third Circuit held that the Double Jeopardy Clause did not bar a retrial. United States v. Maker, supra. In Maker, the district court ruled in the middle of a mail fraud trial that the governm t had failed to prove that the defendant, when he conceived the scheme to defraud, intended to accomplish all the objectives of the scheme that were alleged in the indictment. Citing this failure of proof, the district court dismissed the indictment without submitting the case to the jury. The government appealed. Maker contested the Third Circuit's jurisdiction by arguing that he had been acquitted, rightly or wrongly, on the mail fraud charges, and that the Double Jeopardy Clause therefore barred a retrial. The court of appeals held that the government's appeal was not barred because "the district court's arguable factual finding did not actually determine in Maker's favor any of the essential elements of the crime with which he was charged" (751 F.2d at 523). The decision of the Ninth Circuit in this case squarely conflicts with the decision of the Third Circuit in Maker. Moreover, the ruling of the court of appeals in this case raises doubts about the double jeopardy consequences of every district court order granting relief to a defendant because of a fatal variance between the allegations in the indictment and the proof at trial. When a district court grants relief because of such a variance, the relief is granted because of a violation of the Grand Jury Clause or the requirement of notice, not because of the insufficiency of the evidence to prove an offense. See, e.g., Russell v. United States, 369 U.S. 749 (1962); Stirone v. United States, 361 U.S. 212 (1960). In such cases, the appropriate remedy should be to grant the defendant a new trial, not to exonerate him altogether. Under the Ninth Circuit's analysis in this case, however, it would appear that any order terminating a trial because of a fatal variance between the indictment and the proof would bar any further proceedings against the defendant, even though the proof at trial may have been amply sufficient to establish all the elements of the charged offense. A rule that offers such a windfall to defendants is an extravagant and significant extension of the Double Jeopardy Clause that warrants correction by this Court. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. CHARLES FRIED Solicitor General STEPHEN S. TROTT Assistant Attorney General WILLIAM C. BRYSON Deputy Solicitor General ROY T. ENGLERT, JR. Assistant to the Solicitor General PATTY MERKAMP STEMLER Attorney JUNE 1986 /1/ Co-defendant Allen Dorfman died before trial. Co-defendant Frank Marolda was tried with respondents and was granted the same mistrial relief as respondents. The government did not appeal as to Marolda. Before respondents' trial, co-defendant Abe Chapman pleaded guilty to the conspiracy count. After the district court terminated respondents' trial, the court permitted Chapman to withdraw his guilty plea and dismissed the charges against him. See App., infra, 8a. The government appealed this dismissal, and the court of appeals affirmed. See App., infra, 8a-9a. Although we believe that this affirmance was erroneous, we have not challenged the judgment with respect to Chapman in this petition. /2/ The indictment also charged respondent in two counts (Counts 13 and 14) with accepting or soliciting a thing of value with the intent to influence benefit plan trustees, in violation of 18 U.S.C. 1954. Those counts were dismissed before trial. The government appealed, and the court of appeals reversed, ordering that those counts be reinstated. App., infra, 9a-15a. Trial on the Section 1954 counts has been stayed pending the disposition of this petition. /3/ The six employee benefit plans are the Local 28 Oakland Welfare Fund; the Local 28 Oakland Pension Fund; the Local 28 Contra Costa Pension Fund; the Local 28 Contra Costa Welfare Fund; the Local 19 Welfare Fund; and the Local 19 Pension Fund (App., infra, 4a). /4/ Our statement of facts is taken principally from the appendix filed in the court of appeals. That appendix includes the transcripts of the tape-recorded conversations that constituted much of the evidence at trial. /5/ Marolda's conviction was in fact reversed by the court of appeals in 1980, United States v. Marolda, 615 F.2d 867 (9th Cir. 1980). /6/ The pertinent circuit authorities were United States v. Mastelotto, 717 F.2d 1238, 1250 (9th Cir. 1983), and United States v. Miller, 715 F.2d 1360 (1983), modified, 728 F.2d 1269 (9th Cir. 1984), rev'd, No. 83-1750 (Apr. 1, 1985). /7/ The court of appeals granted the petition to the extent that it challenged the dismissal of the government's appeal from the district court's order dismissing the indictment as to Chapman. The court acknowledged that because Chapman had pleaded guilty, the government's appeal from the withdrawal of his plea and the dismissal of the indictment was not barred by the Double Jeopardy Clause. Nevertheless, the court affirmed the dismissal of the charges against Chapman. In our view that portion of the court's opinion was plainly incorrect, but we have chosen not to challenge the affirmance of Chapman's dismissal here. /8/ Thus, the label applied by the district court to its ruling in this case -- "judgment of acquittal" -- is not dispositive of the question presented. See also Lee v. United States, 432 U.S. 23, 30 (1977); United States v. Martin Linen Supply Co., 430 U.S. 564, 571 (1977); Serfass v. United States, 420 U.S. 377, 392 (1975). /9/ The Ninth Circuit took some pains in Miller to explain that the necessary "element" of the offense of mail fraud is the existence of a scheme to defraud. The reversal of the conviction in Miller was not based on the government's failure to prove that "element," but on the variance between the scheme alleged in the indictment and the scheme proved at trial (728 F.2d at 1270): The existence of a scheme to defraud is an element of the crime of mail fraud. (Citation omitted.) The government must prove false statements or fraudulent acts in order to show the defendant's specific intent to defraud. (Citation omitted.) (Prior Ninth Circuit) cases simply hold that the government's proof of fraudulent intent may be sufficient even if it does not prove every fraudulent act alleged in the indictment. Nothing in them conflicts with the principle that the jury must find the existence of substantially the same fraudulent scheme as that charged by the grand jury. See also United States v. Miller, No. 83-1750 (Apr. 1, 1985), slip op. 5. In Mastelotto, the court could hardly have been asserting that its decision rested on the government's failure to prove an element of the offense charged, for the court of appeals ordered a new trial as the remedy for the alleged violation of the right to indictment by a grand jury. 717 F.2d at 1251. /10/ Because the "essential character" of the district court's ruling related to the Fifth Amendment's grand jury guarantee, not to guilt or innocence (see Scott, 437 U.S. at 98 & n.11; Smalis v. Pennsylvania, No. 85-227 (May 5, 1986), slip op. 5 & n.7), this case is not like Smalis, in which the trial court had found the evidence insufficient to satisfy what it regarded as an essential element of the offense. APPENDIX