U.S. v. Rybicki

• Citation: 354 F.3d 124
• Decision Date: 29 December 2003
• Docket Number: No. 00-1052.,No. 00-1043.,No. 00-1044.,No. 00-1055.,00-1043.,00-1044.,00-1052.,00-1055.
• Parties: UNITED STATES of America, Appellee-Cross-Appellant, v. Thomas RYBICKI, Fredric Grae, Grae, Rybicki & Partners, P.C., Defendants-Appellants-Cross-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

354 F.3d 124

UNITED STATES of America, Appellee-Cross-Appellant, v. Thomas RYBICKI, Fredric Grae, Grae, Rybicki & Partners, P.C., Defendants-Appellants-Cross-Appellees.

No. 00-1043.

No. 00-1044.

No. 00-1052.

No. 00-1055.

United States Court of Appeals, Second Circuit.

Rehearing in banc: October 16, 2002.

Decided: December 29, 2003.

COPYRIGHT MATERIAL OMITTED

Barbara D. Underwood, Chief Assistant United States Attorney (Roslynn R. Mauskopf, United States Attorney for the Eastern District of New York; David C. James, Assistant United States Attorney, Daniel R. Alonso, Assistant United States Attorney, of counsel), Brooklyn, NY, for Appellee-Cross-Appellant.

Herald Price Fahringer, Lipsitz, Green, Fahringer, Roll, Salisbury & Cambria LLP (Erica T. Dubno, of counsel), New York, NY, for Defendants-Appellants-Cross-Appellees Thomas Rybicki, Fredric Grae, and Grae, Rybicki & Partners, P.C.

Barry E. Schulman, Brooklyn, NY, submitted a brief for Defendant-Appellant-Cross-Appellee Thomas Rybicki.

Ephraim Savitt, New York, NY, submitted a brief for Defendant-Appellant-Cross-Appellee Fredric Grae.

Richard A. Greenberg, Newman & Greenberg, New York, N.Y. (Karl E. Pflanz; Victor J. Rocco, New York Council of Defense Lawyers, New York, NY, of counsel) for Amicus Curiae New York Council of Defense Lawyers.

Ellen S. Podgor, Georgia State University College of Law, Atlanta, GA (Joshua L. Dratel, New York, NY, of counsel) for Amici Curiae National Association of Criminal Defense Lawyers and New York Association of Criminal Defense Lawyers.

Before: WALKER, Chief Judge, JACOBS, CALABRESI, CABRANES, F.I. PARKER,^* STRAUB, POOLER, SACK, SOTOMAYOR, KATZMANN, B.D. PARKER, and RAGGI, Circuit Judges.

SACK, J., filed an opinion in which CALABRESI, STRAUB, POOLER, and SOTOMAYOR, JJ., joined, and in which KATZMANN, J., joined except for parts II.A and V.E thereof, as to which he filed a separate opinion. RAGGI, J., filed an opinion concurring in the judgment.

JACOBS, J., filed a dissenting opinion in which JOHN M. WALKER, JR., C.J., and JOSÉ A. CABRANES and B.D. PARKER, JR., JJ., joined. JOHN M. WALKER, JR., C.J., and JOSÉ A. CABRANES, J., also filed an opinion concurring in the dissent.

SACK, Circuit Judge.

We agreed to rehear this case in banc in order to consider whether 18 U.S.C. § 1346, which provides that "[f]or the purposes of th[e] chapter [of the United States Code that prohibits, inter alia, mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C. § 1343], the term `scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services," is unconstitutionally vague. Based upon a review of the case law extant at the time that Congress enacted section 1346, we conclude that the statute clearly prohibits a scheme or artifice to use the mails or wires to enable an officer or employee of a private entity (or a person in a relationship that gives rise to a duty of loyalty comparable to that owed by employees to employers) purporting to act for and in the interests of his or her employer (or of the person to whom the duty of loyalty is owed) secretly to act in his or her or the defendant's own interests instead, accompanied by a material misrepresentation made or omission of information disclosed to the employer. Section 1346 is therefore not unconstitutionally vague as applied to the facts of this case, in which the defendants arranged for secret gratuities to be paid to claims adjusters employed by insurance companies against whom the defendants' clients asserted claims. Our analysis reveals that the statute's clear prohibition applies to a wide swath of behavior. We conclude that the statute is not unconstitutional on its face. Finally, we agree with the three-judge panel that first heard this appeal, see United States v. Rybicki, 287 F.3d 257, 266-67 (2d Cir.2002) ("Rybicki"), that during the course of the trial of this case in the United States District Court for the Eastern District of New York (Carol Bagley Amon, Judge), the jury was properly instructed on all of the elements of the crimes for which the defendants were convicted, and that a reasonable jury could have found on the evidence admitted at trial that the defendants had committed all the elements of those crimes. We therefore affirm the judgments of conviction and sentence of the district court.

BACKGROUND

The facts underlying this appeal are set forth in the opinion of the three-judge panel. Rybicki, 287 F.3d at 259-61. We rehearse them here only insofar as we think it necessary to explain our resolution of this appeal.

Thomas Rybicki and Fredric Grae, two of the three Defendants-Appellants, are lawyers with offices in New York City's Borough of Richmond. Specializing in personal injury cases, they are members of the third Defendant-Appellant, the law firm of Grae, Rybicki & Partners, P.C. The defendants, acting through intermediaries, arranged for payments to be made to claims adjusters employed by insurance companies that had insured against injuries sustained by the defendants' clients. The payments, designed to induce the adjusters to expedite the settlement of the clients' claims, were typically computed as a percentage of the total settlement amount. Each of the insurance companies maintained a written policy that prohibited the adjusters from accepting any gifts or fees and required them to report the offer of any such gratuities. The payments were nonetheless accepted by the adjusters and, not surprisingly, not reported to their employers. Between 1991 and 1994, the defendants caused such payments to be made to adjusters in at least twenty cases that settled for an aggregate of $3 million. The participants in the scheme, including Grae and Rybicki, took considerable steps to disguise and conceal the payments.

On June 3, 1998, the defendants were indicted for these actions. The superseding indictment charged the defendants with scheming to deprive the insurance companies of their intangible right of the honest services of their employees — the insurance adjusters — by the use of the mails and the wires, in violation of 18 U.S.C. § 1341 (mail fraud), 18 U.S.C. § 1343 (wire fraud), and 18 U.S.C. § 371 (conspiracy). As explained in further detail below, the mail- and wire-fraud statutes criminalize the use of the mails and wires in furtherance of "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses." 18 U.S.C. § 1341 (mail-fraud statute); 18 U.S.C. § 1343 (wire-fraud statute). 18 U.S.C. § 1346 defines "scheme or artifice to defraud" to include "a scheme or artifice to deprive another of the intangible right of honest services."

At the outset of the defendants' eight-week trial, the government acknowledged that it would not seek to prove that the amount of any of the settlements connected with a payment to an adjuster had been inflated above what would have been a reasonable range for that settlement.¹

The jury returned a verdict of guilty against each defendant on twenty counts of mail fraud, two counts of wire fraud, and one count of conspiracy to commit mail fraud. The defendants Grae and Rybicki were each sentenced by the district court to a term of imprisonment of one year and one day, three years of supervised release, a $20,000 fine, and a $1,150 special assessment. The district court stayed the defendants' surrender pending resolution of this appeal. The defendant Grae, Rybicki & Partners, P.C., was sentenced to three years' probation, an $80,000 fine, and a $4,600 special assessment.

On appeal, the defendants raised a host of legal and factual challenges to their convictions, most of which were disposed of by a summary order, United States v. Rybicki, Nos. 00-1043, 00-1055, 00-1044, 00-1052, 2002 WL 655214, 2002 U.S. App. LEXIS 7472, 38 Fed.Appx. 626 (2d Cir. Apr. 22, 2002), issued simultaneously with the published panel opinion. We confirm the resolution of those issues by the panel and do not revisit them here.

The published panel opinion, Rybicki, 287 F.3d at 263, addressed the defendants' argument that section 1346's expansion of the definition of "scheme or artifice to defraud" to include a scheme or artifice to deprive another of "the intangible right of honest services" is unconstitutionally vague. The panel rejected the argument that the statute was unconstitutionally vague as applied, while concluding that the Court could not consider its asserted facial unconstitutionality because the challenge was not based on the statute's impact on the exercise of First Amendment rights, and that that is the only basis upon which a facial challenge can be mounted under Circuit case law. Rybicki, 287 F.3d at 263-64. In evaluating the as-applied claim, the panel concluded that it was bound by this court's decisions in United States v. Sancho, 157 F.3d 918 (2d Cir. 1998) (per curiam), cert. denied, 525 U.S. 1162, 119 S.Ct. 1076, 143 L.Ed.2d 79 (1999), and United States v. Middlemiss, 217 F.3d 112 (2d Cir.2000), which upheld "convictions under § 1346 that involved schemes, like the one at issue here, in which the defendant breached or induced the breach of a duty owed by an employee or agent to his employer or principal that was enforceable by an action at tort." Rybicki, 287 F.3d at 264. The panel opinion concluded that the jury had been properly instructed on the elements of the crimes, and that the evidence supported such findings by the jury. Id. at 266-67. The panel therefore affirmed the defendants' convictions. Id. at 267.

The defendants petitioned for a rehearing in banc, which was granted. July 3, 2002, Order Granting Defendants' Petition for Rehearing in Banc, at 2.

DISCUSSION

I. "Plain Error" Analysis

Although defendant Rybicki objected to the vagueness of the language of the indictment when moving to dismiss, the defendants did not challenge the vagueness of the statute itself before the district court. We therefore...