United States v. Schneider

Decision Date16 January 2013
Docket NumberNo. 10–3281.,10–3281.
Citation704 F.3d 1287
PartiesUNITED STATES of America, Plaintiff–Appellee, v. Stephen J. SCHNEIDER; Linda K. Schneider, a/k/a Linda K. Atterbury, Defendants–Appellants.
CourtU.S. Court of Appeals — Tenth Circuit


John T. Carlson, Assistant Federal Public Defender, and Robert T. Fishman, Of Counsel, Ridley, McGreevy & Winocur, P.C. (and Raymond P. Moore, Federal Public Defender, on the briefs), Denver, CO, for DefendantsAppellants.

Tanya Treadway, Assistant United States Attorney, (and Barry R. Grissom, United States Attorney, on the briefs), Topeka, KS, for PlaintiffAppellee.

Before KELLY and HOLMES, Circuit Judges and MARTINEZ *, District Judge.

PAUL KELLY, JR., Circuit Judge.

DefendantsAppellants Dr. Stephen and Linda Schneider (the Schneiders) were convicted of several counts of unlawful drug distribution, health care fraud, and money laundering, all arising from their operation of Schneider Medical Clinic. The district court sentenced Dr. Schneider to 360 months' imprisonment, and Ms. Schneider to 396 months' imprisonment. The Schneiders appeal their convictions, alleging that (1) they were denied the right to conflict-free representation; (2) the district court erroneously admitted expert testimony; (3) the district court improperly instructed the jury; and (4) there was insufficient evidence to support the charge of health care fraud resulting in death. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.


This is the second time that the Schneiders and their medical clinic come before us on appeal. On the first occasion, we considered, on interlocutory appeal by the government, whether a pre-trial order excluding evidence and limiting the government's time to present its case was proper. United States v. Schneider, 594 F.3d 1219 (10th Cir.2010). We held that it was not, vacated the district court order, and remanded for trial. Id. at 1221. In the same decision, we dismissed the Schneiders' cross-appeal from the denial of their motion to exclude the government's expert testimony, finding that we lacked jurisdiction under the collateral order doctrine. Id. at 1229–30. The Schneiders now appeal their convictions. As before, we begin with the relevant facts.

Dr. Schneider was a doctor of osteopathic medicine and his wife, Ms. Schneider, was a licensed practical nurse. IV R. 104. They owned and operated Schneider Medical Clinic in Haysville, Kansas, where they provided pain management treatment including the prescription of controlled substances. Id. at 104–05. On May 3, 2010, a Kansas grand jury issued a third superseding indictment charging: Count 1—conspiracy to unlawfully distribute drugs, commit health care fraud, engage in money laundering, and defraud the United States in violation of 18 U.S.C. § 371; Counts 2–6—unlawful drug distribution and unlawful drug distribution resulting in death in violation of 21 U.S.C. § 841(a)(1); Counts 7–17—health care fraud and health care fraud resulting in death in violation of 18 U.S.C. § 1347; and Counts 18–34—money laundering in violation of 18 U.S.C. § 1957. Id. at 104–72.

By the time of the third indictment, much had already happened in the case, especially with respect to the Schneiders' trial counsel. The Schneiders, after befriending Siobhan Reynolds, a leader of the Pain Relief Network (PRN), fired their court-appointed counsel and hired new counsel that Ms. Reynolds suggested. VIII R. 104. Dr. and Ms. Schneider had separate counsel, but their attorneys were in communication with Ms. Reynolds. See id. at 181, 235–36. Moreover, while representingDr. and Ms. Schneider, this counsel, on behalf of the PRN, sought temporary restraining orders prohibiting the Kansas Board of Healing Arts from suspending Dr. Schneider's medical license. Id. at 106–07. This same counsel also filed a lawsuit in the Eastern District of Washington challenging state rules restricting access to pain medicines. Id. at 263–73.

Aware of a potential conflict, the government moved for a determination of conflict. Id. at 143. On March 14, 2008, then presiding Judge Brown held a hearing on the motion. Id. at 142–43. Judge Brown stated the government's concerns, and defense counsel represented that there was no conflict. Id. at 144–64. Then, after conferring with counsel, Dr. and Ms. Schneider waived all potential conflicts. Id. In November 2009, the government renewed its motion for a determination of a conflict. Id. at 99. Judge Belot, who presided at trial, conducted ex parte hearings for Dr. and Ms. Schneider on January 11, 2010. XV R. 160–68, 173–86. At each hearing, Judge Belot questioned the Schneiders about the potential conflicts. Id. Both stated that they were aware of no conflict and waived all potential conflicts. Id. at 168, 185.

During Spring 2010, the case proceeded to trial. The government presented an extensive amount of evidence detailing the operations of Schneider Medical Clinic. This included lay testimony from patients and former employees, along with expert testimony from medical experts. On appeal, the Schneiders challenge portions of this expert testimony. Aplt. Stephen (S.) Br. 17–32. Thus, we describe this expert testimony in more detail.

At trial, Dr. Theodore Parran was the government's expert on the patient care at Schneider Medical Clinic. XIII R. 2957. Dr. Parran reviewed over 100 patient records. Id. From those records, Dr. Parran concluded that the Schneiders violated Kansas standards for prescribing controlled substances. Id. at 3002–03. According to Dr. Parran, the Schneiders: (1) ran a practice that attracted drug addicts; (2) took inadequate medical histories; and (3) indiscriminately prescribed controlled drugs in excessive and escalating amounts. Id. at 3003, 3008, 3028. On cross-examination, defense counsel questioned Dr. Parran about how the clinic operated. Id. at 3473–76. The government, on redirect, asked Dr. Parran additional questions regarding operations of the clinic, to which he replied that “the clinic was at fault” for illegal drug distribution. Id. at 3527. Dr. Parran also testified that, from his review of the records, the Schneiders ran a “dishonest practice.” Id. at 2982–83. The Schneiders object to this testimony.

Dr. Douglas Jorgensen was the government's expert on pain management and billing practices at Schneider Medical Clinic. XIV R. 404. Dr. Jorgensen reviewed fifty-four medical charts, numerous autopsy and toxicology reports, and information about billing and coding practices. Id. As part of his extensive testimony on his observations from these documents, Dr. Jorgensen summarily opined that the Schneiders' health care fraud resulted in patients' deaths. See, e.g., id. at 520, 526. Dr. Jorgensen also testified that he believed, again from his review of the records, that the Schneiders filed fraudulent claims. Id. at 519. The Schneiders object to this testimony.

Dr. Graves Thorne Owen also testified as an expert in pain management. XIII R. 2785, 2788. The government asked Dr. Owen, from a review of the medical records, whether Dr. Schneider “was prescribing controlled substances for a legitimate medical purpose?” Id. at 2809, 2819. Dr. Owen answered that [i]t was not.” Id. The Schneiders object to this testimony,along with similar testimony from Drs. Parran and Jorgensen.

After a lengthy trial, the jury found Dr. Schneider guilty of Counts 1–17 and two money laundering charges (Counts 26 and 28), and found Ms. Schneider guilty of all charges save two money laundering charges (Counts 23 and 24). The court sentenced Dr. Schneider to 360 months' imprisonment, and Ms. Schneider to 396 months' imprisonment. The Schneiders timely appealed, filing separate briefs but incorporating by reference the arguments made in each other's briefs. SeeFed. R.App. P. 28(i); Aplt. S. Br. 9; Aplt. Linda (L.) Br. 75. Ms. Schneider, however, does not join Dr. Schneider's challenge to Instruction 33. Statement Joining Co–Def.'s Br. and Notice of Errata, Sept. 4, 2012.

A. Right to Conflict–Free Representation

The Schneiders first argue that they were denied the right to conflict-free representation. Aplt. L. Br. 36. They allege that the district court's advice of the potential conflict and their subsequent waivers were inadequate. Id. They contend that this is a conflict-of-interest claim, not a deficient-performance claim, and thus, this court should apply the adverse-effects test of Cuyler v. Sullivan, 446 U.S. 335, 100 S.Ct. 1708, 64 L.Ed.2d 333 (1980), not the prejudice test of Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984). Aplt. L. Br. 57. Under Cuyler, a defendant need only prove an actual conflict of interest that adversely affected counsel's performance. 446 U.S. at 350, 100 S.Ct. 1708. The government disagrees, arguing that (1) the Schneiders waived the right to conflict-free representation, and (2) this is a garden-variety, ineffective assistance of counsel claim best reviewed in a collateral proceeding under Strickland. Aplee. L. Br. 22–23.

We agree with the government that the Schneiders waived the right to conflict-free representation. The Sixth Amendment right to counsel contemplates the right to conflict-free representation. See Holloway v. Arkansas, 435 U.S. 475, 483–84, 98 S.Ct. 1173, 55 L.Ed.2d 426 (1978). However, a defendant may waive this right, if it is done voluntarily, knowingly, and intelligently. Estelle v. Smith, 451 U.S. 454, 471 n. 16, 101 S.Ct. 1866, 68 L.Ed.2d 359 (1981). The trial court must ensure that a defendant understands the nature of any conflict and its potential effect on counsel's representation. See Wheat v. United States, 486 U.S. 153, 161, 108 S.Ct. 1692, 100 L.Ed.2d 140 (1988). We have held that

in order for a defendant effectively to waive his right to conflict-free counsel, the trial judge should affirmatively participate in the waiver decision by eliciting a statement in narrative form from the defendant indicating...

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