United States v. Dehlinger

• Decision Date: 23 January 2014
• Docket Number: No. 12–7121.,12–7121.
• Citation: 740 F.3d 315
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Erik DEHLINGER, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

740 F.3d 315

UNITED STATES of America, Plaintiff–Appellee,

v.Erik DEHLINGER, Defendant–Appellant.

No. 12–7121.

United States Court of Appeals, Fourth Circuit.

Argued: Oct. 30, 2013.

Decided: Jan. 23, 2014.

ARGUED:Michael Louis Minns, The Minns Law Firm, Houston, Texas, for Appellant. Kevin C. Lombardi, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF:Ashley Blair Arnett, The Minns Law Firm, Houston, Texas; Jack Bruce Swerling, Jack Swerling Law Office, Columbia, South Carolina, for Appellant. William N. Nettles, United States Attorney, Office of the United States Attorney, Columbia, South Carolina; Kathryn Keneally, Assistant Attorney General, Frank P. Cihlar, Gregory Victor Davis, Tax Division, United States Department of Justice, Washington, D.C., for Appellee.

Before MOTZ, GREGORY, and DAVIS, Circuit Judges.

Affirmed by published opinion. Judge MOTZ wrote the opinion, in which Judge DAVIS joined. Judge GREGORY wrote a separate opinion concurring in the judgment.

DIANA GRIBBON MOTZ, Circuit Judge:

A jury convicted Dr. Erik Dehlinger of three counts of filing false income tax returns. He received a sentence of forty-two months imprisonment and one year of supervised release and was ordered to pay $363,207 in restitution and a fine of $5,000. Dehlinger appealed his conviction and sentence, and we affirmed. Dehlinger then moved for habeas relief, asserting that his trial counsel had labored under a prejudicial conflict of interest in violation of Dehlinger's Sixth Amendment rights. Following an extensive evidentiary hearing, in which Dehlinger, his trial counsel, and other witnesses testified, the district court, in a thorough and well-reasoned opinion, denied Dehlinger habeas relief. The court did, however, grant Dehlinger a certificate of appealability pursuant to 28 U.S.C. § 2253. For the reasons below, we affirm the judgment of the district court.

I.

Dehlinger's Sixth Amendment challenge rests on his trial counsel's relationships with three individuals—Tara LaGrand, Gary Kuzel, and Collis Redd—who were involved in the same fraudulent scheme that gave rise to his convictions. Dehlingermaintains that these relationships produced conflicts of interest that prevented his trial counsel from calling these individuals as witnesses to provide exculpatory testimony at his trial.

A.

Dehlinger's convictions arose from his involvement with Anderson's Ark and Associates (“AAA”), which marketed programs enabling users to avoid current income tax liability and “recapture” taxes paid in the previous two years. Dehlinger began using the AAA tax programs in 1999. He first became involved with the AAA through George Benoit, an employee of an AAA affiliate called Guardian Management, and Richard Marks, an AAA “planner,” i.e., an AAA employee who prepared client tax returns and other documents that formed the basis of the fraudulent tax schemes. Benoit prepared Dehlinger's 1998, 1999, and 2000 tax returns using AAA's tax schemes. Tara LaGrand, another AAA planner, prepared Dehlinger's 2001 and amended 2000 tax returns. Use of the AAA programs resulted in a substantial benefit to Dehlinger. In the three years he used the programs, he avoided $363,207 in tax liability and obtained annual refunds on his income taxes despite earning, as an emergency room doctor, between $250,000 and $300,000 per year.

In 2002, the Government began its investigation of Dehlinger. The Government offered Dehlinger a plea agreement, in which he would plead guilty to one felony and cooperate with the Government. During plea negotiations, Robert Stientjes and other lawyers represented Dehlinger. When Dehlinger rejected the plea, the Government indicted him in August 2006. Then, Dehlinger, relying on a recommendation from one of Stientjes's partners, retained Scott Engelhard as his trial counsel to work along with Stientjes at trial.

Dehlinger retained Engelhard based largely on Engelhard's relative success as court-appointed counsel for AAA planner Tara LaGrand in her 2004 trial in Seattle, Washington.¹ The jury deadlocked over the charges against LaGrand in that trial. Subsequently, LaGrand (still represented by Engelhard) accepted a guilty plea and was sentenced to twenty-four months imprisonment and one year of supervised release. In LaGrand's plea agreement, she admitted that she knowingly prepared false loan statements and tax deductions. This directly contradicted her trial testimony, in which she had claimed that she did not know the AAA programs were illegal. LaGrand's plea agreement contained a waiver of the right to appeal. Thus, Engelhard's representation of LaGrand at her trial effectively ended with her sentencing in September 2005.

One year after that representation ceased, and before undertaking his representation of Dehlinger, Engelhard obtained a conflict waiver from LaGrand. In that waiver, LaGrand identified Engelhard as her “former attorney” and stated that “[t]o the extent that there might be any apparent conflict of interest, I do hereby waive that conflict of interest so that Mr. Engelhard can represent Mr. Dehlinger at trial.” Accordingly, when retained by Dehlinger in the autumn of 2006, Engelhard no longer represented LaGrand, and LaGrand had waived any continuing duties Engelhard might have owed her.

With Engelhard as his lead counsel, Dehlinger proceeded to trial in 2007. On October 15, 2007, after a four-day trial, the jury found Dehlinger guilty of tax fraud on his 1999, 2000, and 2001 tax returns.

A few weeks after Dehlinger's conviction, Engelhard contacted LaGrand to inform her that the lawyers for other AAA clients had written him asking for her contact information. Those lawyers ultimately subpoenaed LaGrand to testify before the district court in Seattle, Washington in the prosecution of other AAA clients. Engelhard was appointed to serve as LaGrand's counsel in this matter due to his familiarity with the AAA prosecutions. The district court in Seattle docketed Engelhard's re-appointment as LaGrand's counsel as of November 29, 2007—one and one half months following the conclusion of Dehlinger's trial. Engelhard filed a motion to quash the subpoena of LaGrand on Fifth Amendment grounds. In March 2008, Dehlinger fired Engelhard when he learned that Engelhard had filed this motion on behalf of LaGrand.

B.

After his unsuccessful appeal of his convictions and sentence, Engelhard moved for habeas relief pursuant to 28 U.S.C. § 2255. The district court held a two-day evidentiary hearing on Dehlinger's § 2255 motion. During that hearing, the court considered substantial documentary evidence and heard the testimony of several witnesses, including Dehlinger, Engelhard, Stientjes, and LaGrand.

Dehlinger testified that his sole defense at trial was his good faith reliance on the assurances of AAA planners that the AAA tax plans were legal. He asserted that he wanted Engelhard to call AAA planners LaGrand, Kuzel, and Redd to testify as to these assurances, but that Engelhard repeatedly advised him that their testimony would be harmful rather than helpful. Dehlinger contended that Engelhard's decision not to call LaGrand, Kuzel, or Redd as witnesses was driven by a conflict of interest arising from Engelhard's prior representation of them.

Dehlinger also offered evidence that LaGrand had written a novel based on Engelhard's earlier representation of her, in which she depicted “Mr. Scott” (the character modeled after Engelhard) as a hero. LaGrand herself testified at the § 2255 hearing that she was “in awe of” Engelhard. In addition, she stated that she believed Dehlinger's tax returns were legal when she prepared them for Dehlinger and that she told him that. But LaGrand acknowledged that she had ultimately pled guilty to fraud in connection with her preparation of AAA returns, invoked her Fifth Amendment privilege and refused to testify at the trial of another AAA defendant, and had not appeared voluntarily at the § 2255 hearing. Although Dehlinger argued that Engelhard represented LaGrand during Dehlinger's trial, he provided no evidence to support this contention.²

Engelhard testified that he “felt pretty clear ... before [he] even started to represent Dr. Dehlinger” that calling AAA planners as witnesses would not be the best way to present Dehlinger's defense. In their preliminary discussions, Engelhard informed Dehlinger of this assessment. Nevertheless, Engelhard explored the option of calling AAA planners. He ultimately concluded that—given their status as convicted felons or affiliates of AAA, which a jury had found to be a fraudulent scheme—the risks inherent in their testimony outweighed any benefits.

As to Redd and Kuzel, Engelhard testified that Dehlinger said he had never interacted with them, and for this reason Engelhard concluded that they were not qualified to testify on Dehlinger's behalf. As to LaGrand, Engelhard testified that he believed she would make an especially poor witness for Dehlinger because she had testified at her trial “that she was completely innocent but then later entered a guilty plea” and so could be impeached on cross-examination. Engelhard also thought LaGrand's testimony would not aid Dehlinger because, since she lacked experience in corporate and offshore matters, “a good prosecutor could make her look like someone that nobody should believe as a planner in complicated matters like this.” Co-counsel Stientjes agreed with this assessment when Engelhard explained his reasoning to Stientjes and Dehlinger prior to undertaking Dehlinger's representation.

Engelhard also opted not to call as witnesses other AAA planners with whom he had no past relationship. Engelhard testified that he had considered including AAA affiliate Benoit as a witness. He believed that Benoit would make a better witness than LaGrand because the Government had not prosecuted Benoit, who had prepared two of the three tax returns that formed the basis of the charges against...