U.S. v. Sherburne

• Decision Date: 06 November 2007
• Docket Number: No. 06-30534.,06-30534.
• Citation: 506 F.3d 1187
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. Scott F. SHERBURNE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

506 F.3d 1187

UNITED STATES of America, Plaintiff-Appellant, v. Scott F. SHERBURNE, Defendant-Appellee.

No. 06-30534.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 16, 2007.

Filed November 6, 2007.

Eric B. Wolff, Assistant United States Attorney, Billings, MT, for the plaintiff-appellant.

Patrick F. Flaherty, Attorney at Law, Great Falls, MT, for the defendant-appellee.

Appeal from the United States District Court for the District of Montana; Donald W. Molloy, District Judge, Presiding. D.C. No. CR-98-00011-DWM.

Before: B. FLETCHER, ARLEN C. BEAM,^* and PAMELA ANN RYMER, Circuit Judges.

BETTY B. FLETCHER, Circuit Judge:

This appeal by the government is from the district court's grant of attorney's fees to Scott Sherburne under the Hyde Amendment, Pub.L. 105-119, Title VII § 617, 111 Stat. 2519 (codified at 18 U.S.C. § 3006A Note). We reverse.

Blaze Construction ("Blaze") submitted an application for federal grant funds under a Department of Housing and Urban Development ("HUD") program designed to fund the construction of private homes for low income Native Americans. Blaze's project to build homes on the Blackfeet Indian Reservation of Montana ("the Blaze project") was plagued with difficulty and controversy from beginning to end. As part of an investigation into the Blaze project, Federal Bureau of Investigation agents in February 1998 interviewed Scott Sherburne, manager of Lodge Builder Management, a company associated with Blaze. During the interview, Sherburne made an incriminating statement while represented by counsel.

The United States brought criminal charges against thirteen defendants including Sherburne. The charges against Sherburne were for conspiracy and wire fraud, based on alleged abuses in the funding and construction of the Blaze project. At trial, the district court excluded Sherburne's incriminating statement upon which the United States had relied in deciding to bring charges against him in the first place. Without the excluded evidence, the United States could not prove its wire fraud allegations and therefore recommended that the court acquit all defendants on the wire fraud charge after the defendants had moved for an acquittal under Federal Rule of Criminal Procedure 29 at the close of government's case. Ultimately, Sherburne was acquitted on all charges and dismissed from the case.

Following the trial, Blaze, Sherburne, and others moved for attorney fees under the Hyde Amendment, which permits a criminal defendant to recover fees when the government's "position" was "vexatious, frivolous, or in bad faith." 18 U.S.C. § 3006A Note. The district court adopted the standard set forth by a Virginia district court in United States v. Holland, which framed the proper inquiry under the "vexatiousness" prong of the Hyde Amendment as "whether a reasonable prosecutor should have concluded that the applicable law and the available evidence were insufficient to prove the defendants' guilt beyond a reasonable doubt and, if so, was the continuation of the prosecution vexatious." 34 F.Supp.2d 346, 364 (E.D.Va.1999). Applying this standard, the court awarded fees to Sherburne, holding that a reasonable prosecutor should have concluded that the applicable law and the available evidence were insufficient to establish Sherburne's specific guilt beyond a reasonable doubt.

In United States v. Sherburne, 249 F.3d 1121 (9th Cir.2001) ("Sherburne I") we reviewed the district court's award of fees under the "vexatious" element of the Hyde Amendment for abuse of discretion and remanded, holding that the standard employed by the district court in the fees award "differs markedly from our interpretation of the statute." Id. at 1127. We concluded that fees should not be awarded whenever a "reasonable prosecutor" should have concluded that the government would lose the case but rather "when the prosecution was unwarranted because it was intended to harass and without sufficient foundation." Id. We found the pure reasonableness standard to be prone to judicial second-guessing and also noted that it would permit fees to be awarded even more often, under an even more relaxed standard, than the "substantially justified" standard employed in the Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1), which had been rejected in Hyde Amendment jurisprudence as being too permissive. Id. at 1128 (citing United States v. Lindberg, 220 F.3d 1120, 1124 (9th Cir.2000)). We therefore concluded that the pure reasonableness standard was incorrect as a matter of law, and thus that the district court had abused its discretion by employing it. Sherburne I, 249 F.3d at 1128. We vacated the award of fees to Sherburne and Blaze, and remanded to the district court with the instruction to apply the following "vexatiousness" standard: a defendant is entitled to attorney fees under the Hyde Amendment only when the prosecution was (1) unwarranted because it was intended to harass (the subjective element) and (2) without sufficient foundation (the objective element). Id.

On remand, the district court substituted Sherburne's estate for Sherburne because he had died, concluded that both the subjective and objective elements of "vexatiousness" were present, and reinstated fees. Regarding the subjective element, the district court concluded that the prosecution was subjectively "malicious and based upon an intent to harass." The court found that the United States "did not understand the complexities of the investigated financing arrangements," "distorted the record," failed "to properly consider or portray exculpatory or mitigating information," and unfairly characterized Sherburne's statement as a confession rather than speculation. The court also held a subjective intent to harass could be fairly inferred from the facts that the United States had only charged Sherburne late in the investigation, had not challenged his Rule 29 motion, and had not objectively assessed its proof against Sherburne.

The United States appeals the district court's second order granting Sherburne's motion for attorney fees under the Hyde Amendment. The United States argues that its position during prosecution exhibited neither the subjective intent to harass nor objective deficiency. This court has jurisdiction to hear the instant appeal under 28 U.S.C. § 1291. An award of attorney fees...