U.S.A v. Shelby

• Decision Date: 23 April 2010
• Docket Number: No. 10-20148.,10-20148.
• Citation: 604 F.3d 881
• Parties: UNITED STATES of America, Plaintiff-Appellee,v.Rex SHELBY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

604 F.3d 881

UNITED STATES of America, Plaintiff-Appellee,v.Rex SHELBY, Defendant-Appellant.

No. 10-20148.

United States Court of Appeals Fifth Circuit.

April 23, 2010.

Joseph Douglas Wilson, Asst. U.S. Atty., San Francisco, CA, James Lee Turner, Asst. U.S. Atty., Houston, TX, for U.S.

Susan Lea Hays, Geisler Hays, L.L.P., Edwin J. Tomko, Curran, Tomko, Tarski, L.L.P., Dallas, TX, for Shelby.

Appeal from the United States District Court for the Southern District of Texas.

Before KING, STEWART and HAYNES, Circuit Judges.

PER CURIAM:

The defendant, Rex T. Shelby, filed a pretrial appeal from an order by the district court that denied his motion to dismiss, on double jeopardy grounds, a Seventh Superseding Indictment filed against him on November 9, 2005. Presently before this court is the Government's motion to dismiss Shelby's appeal. The Government contends that we lack subject-matter jurisdiction over the appeal because Shelby's double jeopardy claims are “not colorable” and “frivolous.” For the reasons discussed below, we agree and dismiss the appeal.

I. Background

A. Shelby's Trial, Reindictment, and First Motion to Dismiss on Jeopardy Grounds

Shelby's case relates to the collapse of the Enron Corporation and its subsidiaries. Shelby was a senior executive at Enron Broadband Services (“EBS”), Enron's broadband and telecommunications unit. Shelby, along with co-defendants F. Scott Yeager and Joseph Hirko, were indicted in November 2004 on various counts of conspiracy to commit wire and securities fraud; securities fraud; wire fraud; insider trading; and money laundering. In July 2005, a jury acquitted Shelby on four of his insider trading counts-those involving trades made in the summer of 2000 (the “Summer 2000” counts)-but hung on the remaining counts against him. The jury also acquitted or hung as to some counts against Yeager and Hirko. The district court declared a mistrial on the hung counts. The Government subsequently obtained new indictments against all of the defendants, including the Seventh Superseding Indictment against Shelby.

The Seventh Superseding Indictment recharged Shelby with four insider trading counts relating to trades made in early 2000 (the “Early 2000” counts) on which the jury had hung. The indictment also charged one count of conspiracy and one count of securities fraud. Shelby moved to dismiss the indictment on double jeopardy grounds. The district court denied the motion United States v. Shelby, 447 F.Supp.2d 750 (S.D.Tex.2006), and we affirmed United States v. Yeager, 521 F.3d 367 (5th Cir.2008) ( Yeager I) rev'd on other grounds, --- U.S. ----, 129 S.Ct. 593, 172 L.Ed.2d 452 (2008).

In support of dismissal, Shelby's chief argument was that in acquitting as to the Summer 2000 counts, the jury necessarily decided issues of fact that had preclusive effect as to the counts in the new indictment. Specifically, Shelby asserted that, by acquitting, the jury must necessarily have determined that he lacked the intent to defraud. The parties do not dispute that a finding that Shelby lacked the intent to defraud would defeat a necessary element of the insider trading and securities fraud counts in the new indictment, therefore precluding prosecution as to these counts. See United States v. Brackett, 113 F.3d 1396, 1398 (5th Cir.1997) (“[C]ollateral estoppel ... will completely bar a subsequent prosecution if one of the facts necessarily determined in the former trial is an essential element of the subsequent prosecution.”).

The district court determined and we agreed, however, that in acquitting as to the Summer 2000 counts, the jury did not necessarily decide that Shelby lacked intent. Rather, “[a]fter an extensive examination of the record,” we affirmed the district court's conclusion that the jury's acquittal could have hinged on the fact that the Government had failed to prove beyond a reasonable doubt that Shelby actually used or relied upon material nonpublic information in his possession at the time he made the trades-another element of insider trading. See Yeager I, 521 F.3d at 372-73. The district court observed that “the government presented little to no evidence that Defendant Shelby made any material misrepresentations or acquired material non-public information in June and July 2000, the dates of Shelby's acquitted counts of insider trading.” Shelby, 447 F.Supp.2d at 761. The district court also noted that, by contrast, “the government presented substantial evidence that Defendant Shelby either made material misrepresentations or acquired material non-public information” before the trades that were the subject of the Early 2000 counts. Id. at 761-62.

We agreed with the district court's reasoning, noting also that Shelby had specifically testified that he made the Summer 2000 trades “because he was uncomfortable with being in the stock market” and in reliance on a friend's advice on when to sell. Yeager I, 521 F.3d at 372. We held that the jury was properly instructed that a trade that “used” or was “motivated by” inside information was an element of insider trading. Id. at 372-73. We concluded that the jury did not necessarily find that Shelby used insider information in making the Early 2000 trades:

In acquitting Shelby of the later [Summer 2000] counts, the jury could have differentiated between the two different sets of trades. The jury could have found that Shelby did not use insider information when he conducted the trades that underlie the Summer 2000 Insider Trading Counts but did use insider information when he conducted the trades that underlie the Early 2000 Insider Trading Counts. The evidence at trial supports this distinction.

Id. at 373. We noted specifically that Shelby's trading patterns were markedly different between the Early 2000 and Summer 2000 trades. In the Early 2000 trades, Shelby exercised options that had vested in June 1999. We speculated that “[f]rom this delay, the jury could have rationally concluded that Shelby purposely waited for the stock price to go up before exercising his 1999 options and that Shelby knew the price would go up because of his knowledge of insider information.” We noted that by contrast, with the Summer 2000 trades, Shelby exercised his options as soon as they vested. Id.

Three days after granting certiorari as to his co-defendant Yeager Yeager v. United States, --- U.S. ----, 129 S.Ct. 593, 172 L.Ed.2d 452 (2008), the Supreme Court denied Shelby's petition for certiorari, Shelby v. United States, --- U.S. ----, 129 S.Ct. 595, 172 L.Ed.2d 455 (2008); reh'g denied, --- U.S. ----, 129 S.Ct. 977, 173 L.Ed.2d 163 (2009).

B. Yeager's Trial, Reindictment, and Motion to Dismiss on Jeopardy Grounds

In Yeager I, 521 F.3d at 367, we also rejected the double jeopardy claims of Shelby's co-defendants, Hirko and Yeager. At the 2005 trial, the jury acquitted Yeager of securities fraud, wire fraud, and conspiracy but hung on 20 counts of insider trading and 99 counts of money laundering. The Government reindicted Yeager on the hung charges.

Yeager moved to dismiss the new indictment, urging that double jeopardy barred the insider trading counts. Yeager argued that in acquitting on the fraud and conspiracy counts, the jury necessarily decided that he did not possess insider information, an element of insider trading. We agreed that “the jury, acting rationally, could have acquitted Yeager on securities fraud only by concluding that he did not have insider information.” Id. at 376-77. We nevertheless concluded that collateral estoppel did not bar the insider trading counts. Applying our precedent in United States v. Larkin, 605 F.2d 1360, 1370 (5th Cir.1979), we considered the hung counts and observed that if “the jury found that [Yeager] did not have insider information, then the jury, acting rationally, would have acquitted him of insider trading and money laundering. Instead, the jury hung.” Yeager I, 521 F.3d at 379. We reasoned that the hung counts therefore created uncertainty about what the jury necessarily decided. Id. In light of this uncertainty, we concluded that collateral estoppel did not apply. Id. at 379-80.

The Supreme Court granted certiorari on Yeager's appeal. The Court then abrogated our precedent in Larkin and reversed, concluding that we erred in weighing the effect of the hung counts in determining the preclusive effect of the acquittals. Yeager v. United States, --- U.S. ----, 129 S.Ct. 2360, 2368, 174 L.Ed.2d 78 (2009) ( Yeager II). The Court held:

[T]he consideration of hung counts has no place in the issue-preclusion analysis .... To identify what a jury necessarily determined at trial, courts should scrutinize a jury's decisions, not its failures to decide. A jury's verdict of acquittal represents the community's collective judgment regarding all the evidence and arguments presented to it. Even if the verdict is based upon an egregiously erroneous foundation, its finality is unassailable. Thus, if the possession of insider information was a critical issue of ultimate fact in all of the charges against the petitioner, a jury verdict that necessarily decided that issue in his favor protects him from prosecution for any charge for which that is an essential element.

Id. at 2368-69 (internal quotation marks omitted). The Court reasoned that a “contrary conclusion would require speculation into what transpired in the jury room,” and noted that “[i]f there is to be an inquiry into what the jury decided, the evidence should be confined to the points in controversy on the former trial, to the testimony given by the parties, and to the questions submitted to the jury for their consideration.” Id. at 2368 (internal quotation marks omitted; quoting Packet Co. v. Sickles, 72 U.S. (5 Wall.) 580, 593, 18 L.Ed. 550 (1866)). On remand, we dismissed the indictment against Yeager. United States v. Yeager, 334 Fed.Appx. 707 (5th Cir.2009) ( Yeager III).

After Yeager II, the Court granted certiorari as to Hirko and...