U.S. v. Spawr Optical Research, Inc.

• Decision Date: 10 November 1982
• Docket Number: No. 81-1078,81-1078
• Citation: 685 F.2d 1076
• Parties: 11 Fed. R. Evid. Serv. 850 UNITED STATES of America, Plaintiff-Appellee, v. SPAWR OPTICAL RESEARCH, INC., a corporation, Walter J. Spawr and Frances A. Spawr, individuals, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1076

685 F.2d 1076

11 Fed. R. Evid. Serv. 850

UNITED STATES of America, Plaintiff-Appellee, v. SPAWR OPTICAL RESEARCH, INC., a corporation, Walter J. Spawr and Frances A. Spawr, individuals, Defendants-Appellants.

No. 81-1078.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 3, 1981.

Decided Aug. 24, 1982.

As amended on Denial of Rehearing and Rehearing En Banc Nov. 10, 1982.

William A. Dougherty, Tustin, Cal., for defendants-appellants.

Theodore Wai Wu, Asst. U. S. Atty., Los Angeles, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Central District of California.

Before CHOY and NELSON, Circuit Judges, and INGRAM, ^* District Judge.

CHOY, Circuit Judge:

Walter and Frances Spawr and their family-owned corporation, Spawr Optical Research, Inc. (the Spawrs), appeal their convictions resulting from their unlicensed export of laser mirrors destined for the Soviet Union. ¹ Their principal challenge is to the Government's reliance on allegedly defunct export regulations that they were convicted of violating. They also allege that government misconduct prejudiced their defense, that the trial court erred by admitting co-conspirators' statements that lacked a proper evidentiary base, and that, in any event, the evidence was insufficient to support the convictions. ² We find all of these contentions unpersuasive.

I. Background

In 1969, Frances and Walter Spawr formed Spawr Optical Research, Inc., as a means of exploiting Walter's skills as an optics expert. Walter served as president, Frances as secretary-treasurer, and together with a third individual they constituted the corporation's board of directors. While operating out of the Spawr home, Walter invented a superior process for polishing laser optics and mirrors. By 1975, the Spawrs were in commercial operation and had developed a client list that included universities, industrial users of lasers, defense subcontractors, and government defense agencies.

As the Spawrs began to explore international markets in 1974, they established a business arrangement with Wolfgang Weber, a West German national, calling for Weber to promote and distribute Spawr mirrors in Central and Eastern Europe, including the Communist Block nations. Weber, who was named an unindicted co-conspirator with the Spawrs, arranged and facilitated the two orders of laser mirrors which underlie the Spawrs' convictions.

In October 1975, Spawr provided Weber with sample laser mirrors to exhibit at a trade show in Moscow. The laser mirrors attracted considerable interest and in January 1976 Weber obtained the Spawrs' authorization to accept an order for mirrors from a purchasing agency of the Soviet Government. When Weber visited California in late spring of 1976, the Spawrs provided him with some of the mirrors for the order. In July, the Spawrs shipped the balance of the order to Weber in West Germany. Weber then forwarded the entire order to Moscow. In the shipping documents accompanying the mirrors, Frances listed the value of each mirror at $500. The Spawrs never attempted to obtain a validated export license for the mirrors exported for this first order.

In April 1976, Weber notified Spawr that he had received a second Soviet order for Spawr mirrors. Walter told Weber that he thought it might be better to ask for an export license for at least a part of this order. Weber then provided Walter with an end-user statement. On May 4, 1976, Walter filed an application with the Commerce Department for a validated export license for some of the mirrors by the Soviets. The Commerce Department denied the application on October 7, 1976 pursuant to Executive Order 11940 and existing export regulations, because the mirrors were found to have "significant strategic applications" posing a potential threat to national security. Weber sent a letter cancelling the second Soviet order on November 3, 1976 after Spawr informed him that the application had been denied. In February 1977, however, Spawr shipped mirrors to a freight forwarder in Switzerland. Weber then relabeled the boxes containing the mirrors and shipped them to Moscow. The shipping documents accompanying the mirrors again stated that the value of each mirror did not exceed $500.

II. The Validity of the Export Regulations

In light of the pending expiration of the Export Administration Act of 1969 (EAA), ³ President Gerald Ford issued Executive Order No. 11940 ⁴ on September 30, 1976 to maintain the EAA regulations forbidding the shipment of specified strategic items to certain foreign countries. He acted pursuant to § 5(b) of the Trading with the Enemy Act (TWEA), 50 U.S.C. app. §§ 1-44. When the Order was issued and while it remained in effect, the TWEA empowered the President, during a presidentially-declared national emergency, to "regulate, ... prevent or prohibit ... any exportation of ... or transactions involving any property in which a foreign country ... has any interest." Id. at § 5(b) (1)(B). ⁵ Rather than declare a new national emergency to support the Executive Order, President Ford relied on the continued existence of national emergencies declared in 1950 by President Truman relating to the Korean War and in 1971 by President Nixon concerning an international monetary crisis. See Exec. Order No. 11940, 3 C.F.R. 150 (1976 compilation), reprinted in 50 U.S.C. app. § 2403 (1976).

The laser mirrors for the first Russian order were exported before the EAA expired on October 1, 1976, and the Spawrs do not dispute the Government's authority to prosecute them for exporting mirrors to fill the first Soviet order. The Spawrs exported laser mirrors for the second Soviet Order, however, after the EAA had expired and before it was reenacted on June 22, 1977, ⁶ when the sole basis for the regulations was the Executive Order. The Spawrs assert that the Order did not preserve the export regulations and, therefore, the Government lacked authority to prosecute them for their exporting mirrors for the second Soviet orders because: (1) there was no genuine national emergency, (2) the regulations were not rationally related to any emergency then in existence, and (3) the lapse of the EAA shows that Congress intended to terminate the regulations. ⁷

Former section 5(b) of the TWEA delegated to the President broad and extensive powers; "it could not have been otherwise if the President were to have, within constitutional boundaries, the flexibility required to meet problems surrounding a national emergency with the success desired by Congress." United States v. Yoshida International, Inc., 526 F.2d 560, 573 (Cust. & Pat.App.1975) (footnote omitted). Wary of impairing the flexibility necessary to such a broad delegation, courts have not normally reviewed "the essentially political questions surrounding the declaration or continuance of a national emergency" under former § 5(b). Id. at 579. ⁸ The statute contained no standards by which to determine whether a national emergency existed or continued; in fact, Congress had delegated to the President the authority to define all of the terms in that subsection of the TWEA including "national emergency," as long as the definitions were consistent with the purposes of the TWEA. 50 U.S.C. app. § 5(b)(3). In the absence of a compelling reason to address the difficult questions concerning the declaration and duration of a national emergency under former § 5(b), we decline to do so. ⁹

Although we will not address these essentially-political questions, we are free to review whether the actions taken pursuant to a national emergency comport with the power delegated by Congress. See Yoshida, 526 F.2d at 579. ¹⁰ The standard proffered by the Spawrs is that the President's action must be rationally related to the national emergencies invoked. Assuming, without deciding, that the Spawrs are correct, we believe that there is a rational relationship.

One source invoked by President Ford was Presidential Proclamation No. 2914. It declared a national emergency based in part on events which "imperil the efforts of this country and those of the United Nations to prevent aggression and armed conflict." 3 C.F.R. 99, 100 (1949-53 compilation). President Ford's effort to limit the exportation of strategic items clearly had a rational relationship to the prevention of aggression and armed conflict.

The Spawrs' final argument, that Congress intended to terminate these export regulations by allowing the EAA to lapse, is rebutted by presidential and congressional actions taken concerning the EAA. The EAA had previously lapsed three times. In each instance, the President used an executive order virtually identical to Executive Order No. 11940 to maintain the export regulations. ¹¹ All three orders relied upon the same unrevoked declarations of national emergencies and upon § 5(b) of the TWEA.

Congress not only tolerated this practice, it expressed approval of the President's reliance on the TWEA to maintain the export regulations. In passing the 1977 amendments to the EAA, Congress again conferred on the President the rule-making authority necessary to maintain the regulations. The legislative history of the 1977 amendments indicates that the reenactment of § 5(b) "reflected concern for preserving existing regulation imposed under emergency authority, including ... the transaction control regulations, which prohibit U. S. persons from participating in shipping strategic goods to ... the Soviet Union." S.Rep.No.466, 95th Cong., 1st Sess. 3, reprinted in 1977 U.S.Code Cong. & Ad.News 4540, 4542. ¹²

Moreover, the EAA apparently was allowed to lapse only because Congress could not resolve questions relating to the antiboycott provisions. See Arab Boycott Hearings on S. 69 and S. 92, Before the Subcommittee on International Finance of the Senate Committee on Banking, Housing and Urban Affairs, 95th Congress, 1st Sess. 1 (Senator Stevenson) (1977). The Spawrs...