U.S. v. Lachman, 03-2274.

• Decision Date: 25 October 2004
• Docket Number: No. 03-2275.,No. 03-2274.,03-2274.,03-2275.
• Citation: 387 F.3d 42
• Parties: UNITED STATES of America, Appellant/Cross-Appellee, v. Walter L. LACHMAN, Maurice H. Subilia, Jr., Fiber Materials, Inc., Materials International, Inc., Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — First Circuit

387 F.3d 42

UNITED STATES of America, Appellant/Cross-Appellee, v. Walter L. LACHMAN, Maurice H. Subilia, Jr., Fiber Materials, Inc., Materials International, Inc., Defendants-Appellees/Cross-Appellants.

No. 03-2274.

No. 03-2275.

United States Court of Appeals, First Circuit.

Heard August 5, 2004.

Decided October 25, 2004.

Appeal from the United States District Court for the District of Massachusetts, Douglas P. Woodlock, J.

COPYRIGHT MATERIAL OMITTED

James D. Herbert, Assistant United States Attorney, with whom Michael J. Sullivan, United States Attorney, Despena F. Billings, Assistant United States Attorney, and Stephan E. Oestreicher were on brief for appellant/cross-appellee.

Michael R. Schneider with whom Andrew Good, Matthew Zisow, and Alan M. Dershowitz were on briefs for defendant-appellees/cross-appellants.

Before SELYA, DYK^*, and HOWARD, Circuit Judges.

DYK, Circuit Judge.

The issue on the government's appeal is whether the term "specially designed" as used in 15 C.F.R. § 399.1, Supp. 1 (1988) (now 15 C.F.R. § 774, Supp. 1 (2004)), is unconstitutionally vague.

Defendants Walter L. Lachman, Maurice H. Subilia, Jr., Fiber Materials, Inc. ("FMI"), and Materials International, Inc., were convicted in the United States District Court for the District of Massachusetts on charges of violating and conspiring to violate the Export Administration Act of 1979, Pub.L. 96-72, 93 Stat. 503 (codified at 50 U.S.C. app. §§ 2401-2420 (2000)) ("EAA"), and its implementing regulations.¹ The alleged violation consisted of exporting a control panel for a hot isostatic press ("HIP") without the necessary export license required by the EAA and its regulations. The question under the regulation was whether the control panel was "specially designed" for use with an embargoed HIP. See 15 C.F.R. § 399.1, Supp. 1 (1988).

After trial, the district court granted a motion for acquittal notwithstanding the verdict, pursuant to Federal Rule of Criminal Procedure 29(c), on the ground that the EAA regulation and, in particular, the term "specially designed" as used in the regulation, was unconstitutionally vague. United States v. Lachman, 278 F.Supp.2d 68 (D.Mass.2003). We hold that the applicable EAA regulation was not unconstitutionally vague and, accordingly, vacate the judgment of acquittal. With respect to the defendants' cross-appeal, we remand to the district court to rule on the defendants' conditional motion for a new trial in light of our construction of the statute and our decision on the vagueness issue.

I.

A.

The EAA is designed "to restrict the export of goods and technology which would make a significant contribution to the military potential of any other country... which would prove detrimental to the national security of the United States." 50 U.S.C. app. § 2402(2)(A). The EAA requires exporters to obtain a "validated license" before exporting commodities listed in the regulations promulgated by the Secretary of the Department of Commerce ("Commerce"). Id. § 2403(a). Commerce's regulations themselves include similar license requirements. See generally 15 C.F.R. § 372.1 (1988). It is a criminal offense to knowingly violate or conspire to violate the EAA or its regulations. 50 U.S.C. app. § 2410(a). Willful violations incur an even greater penalty. Id. § 2410(b).

Commerce has promulgated a "Control List" of all commodities subject to export controls under the EAA and requiring a valid license for export. Id. §§ 2403(b), 2404(c)(1).² Our concern is with the Control List as it existed in 1988. In the 1988 Control List³ each regulated commodity was assigned an Export Control Classification Number ("ECCN"), indicating the commodity's characteristics, its functions, the reasons for its control, and its export licensing requirements. Commodities not listed were not regulated by the EAA. Although each exporter was responsible for classifying its own goods, an exporter could request an advisory opinion from Commerce's Bureau of Industry and Security regarding whether a particular item was subject to regulation and, if so, its appropriate ECCN classification. 15 C.F.R. § 748.3(a) (2004).

B.

The defendants in this case were charged with "knowingly and willfully" violating and conspiring to violate the EAA and its regulations by exporting a HIP control panel to India "without having first obtained the required validated export license" from Commerce. (J.A. at 88-89.) The defendants admittedly did not request or secure an individual license. The question is whether they were required to secure one.⁴

A HIP is a piece of "equipment capable of pressurizing a closed cavity ... to create equal pressure in all directions within the cavity upon workpiece or material." 15 C.F.R. § 399.1, Supp. 1 (1988). Material exposed to this process densifies, and, in particular, carbon/carbon material "becomes suitable for use in rocket components, including ballistic missiles with nuclear capability." Lachman, 278 F.Supp.2d at 73. In 1988, HIPs "possessing a chamber cavity with an inside diameter of 127 mm (5 inches) or more" (a "larger HIP") were covered by the Control List and assigned an ECCN 1312A classification. 15 C.F.R. § 399.1, Supp. 1 (1988). A license was required for the export of larger HIPs and all "specially designed... components, accessories and controls therefor." Id. The reasons for control of such commodities were "[n]ational security [and] nuclear non-proliferation." Id.

C.

The EAA and its implementing regulations were adopted against the background of an international regime for the control of strategic materials administered by the Coordinating Committee on Multilateral Export Controls ("COCOM"). See 50 U.S.C. app. § 2404(i). COCOM was a "multilateral organization that cooperated in restricting strategic exports to controlled countries."⁵ 15 C.F.R. § 772.1 (2004). In particular, COCOM created "a list of strategic commodities which were to be embargoed for shipment to Communist Bloc countries" ("COCOM List"). Peter Swan, A Road Map to Understanding Export Controls: National Security in Changing Global Environment, 30 Am. Bus. L.J. 607, 619 (1992). "Recognizing the ineffectiveness of unilateral controls and the importance of uniform enforcement measures to the effectiveness of multilateral controls," the EAA mandated United States involvement in COCOM. See 50 U.S.C. app. § 2404(i). The EAA export control system was coordinated with the COCOM regime. For example, when the letter "A" appeared at the end of the ECCN for an item on the Control List, it indicated that the classification was "multilaterally controlled." 15 C.F.R. § 399.1(f)(2) (1988). The particular regulation involved here bore a letter designation "A," indicating that its source was the COCOM List.

D.

In 1985 the defendants first contracted with the government of India to supply a HIP of 18 inch cavity diameter and a control panel.⁶ This contract was amended in January 1987 such that defendants would instead supply the Indian government with a HIP of 4.9 inch cavity diameter, which was unregulated. On the same day as the amendment, however, defendant Subilia, President of FMI, signed a letter stating that the subsystems delivered with the 4.9 inch HIP, including the control panel, would have "added capacity... to provide for future expansion ... to larger vessel size." In April of 1988, the defendants shipped a HIP with a 4.9 inch diameter cavity and an accompanying control panel. Although the control panel could be used with a 4.9 inch HIP, it was designed so that it would also control a HIP with a diameter larger than 5 inches, i.e., one that was covered by the Control List. In April of 1991, the defendants' engineers connected the control panel to a HIP with a diameter larger than 5 inches. This larger HIP had been procured by the defendants from a third-party manufacturer in Switzerland. There is no contention that a license was required for this larger HIP because it originated from Switzerland.

In 1993 the government charged the defendants with "knowingly and willfully conspir[ing] and agree[ing] with each other... to export and cause to be exported from the United States" the control panel, without the required license. The government argued that the control panel required a validated license because it qualified as "specially designed ... accessories and controls" for an embargoed larger HIP.

At the trial, on the "specially designed" question, the government presented evidence that defendant Subilia had instructed FMI's engineers to base the control panel's design on that of a panel used to operate 20 inch HIPs. The government also presented evidence that the control panel which was exported had five heating zone controllers and that the 4.9 inch HIP defendants exported only had two heating zones. The government showed as well that the defendants had ordered a switch for the control panel, which permitted the disabling of three of the five heating zone controllers or alternatively the use of the panel with a unit with more than two heating zones.

There was also significant dispute regarding the legal meaning of the phrase "specially designed" in ECCN 1312A. This phrase appeared throughout the 1988 Control List, being used to describe the controlled items in more than 100 instances. The government contended that the term "specially designed" included all controls that were designed so that they could be used with regulated HIPs, whether or not such controls could also be used with non-regulated HIPs. See Lachman, 278 F.Supp.2d at 74-75. The defendants, on the other hand, argued that the term encompassed only those controls designed exclusively for use with an embargoed HIP.

"In reliance upon the ... pre-trial affidavits regarding the Commerce Department's understanding of the meaning of `specially designed' as used in ECCN 1312A (which ... was consistent with a plain meaning definition of the term), and in the absence of any then...