United States v. Topouzian

• Decision Date: 13 December 2021
• Docket Number: 20 CR 721
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. KRIKOR TOPOUZIAN, Defendant.
• Court: U.S. District Court — Northern District of Illinois

UNITED STATES OF AMERICA, Plaintiff,
v.
KRIKOR TOPOUZIAN, Defendant.

No. 20 CR 721

United States District Court, N.D. Illinois, Eastern Division

December 13, 2021

MEMORANDUM OPINION AND ORDER

MAGISTRATE JUDGE JEFFREY COLE

INTRODUCTION

The Information in this case charges the defendant with having willfully violated the Defense Production Act (“DPA”) of 1950, 50 U.S.C. §§ 4512 and 4513, based on his allegedly intentional accumulation of approximately 79, 160 N-95 respirator masks, with the intent to resell the masks at prices in “excess of prevailing market prices.” [Dkt. #2]. These types of masks were designated by the President under the Act as “scarce materials” due to the ongoing pandemic.^[1] The Information charges that the defendant intentionally sold thousands of respirator masks at markups of up to 367% per mask, in violation of the DPA's prohibition of sales of certain specified products in excess of “prevailing market prices, ” despite having received warnings from law enforcement, and that he

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allegedly continued to engage in prohibited profiteering, selling “scarce masks” at “highly-excessive prices, ” with markups of up to 367% per mask. [Dkt. #2 at 5].

Relying on the “void-for-vagueness” doctrine, see Johnson v. United States, 576 U.S. 591, 215 (2015); Skilling v. United States, 561 U.S. 358 (2010), and Holder v. Humanitarian Law Project, 561 U.S. 1 (2010), it is the defendant's contention that by prohibiting resale of N95 masks “at prices in excess of prevailing market prices, ” (emphasis supplied), the DPA failed to provide “an ascertainable standard of criminal liability, ” or “indicate what markups were permissible, ” and thus “fail[ed] to give ordinary people fair notice of the conduct it punishes, and [is] so standardless that it invites arbitrary enforcement.” [Dkt. #17 at 2]. But, as discussed below, the vagueness doctrine does not admit of easy or automatic application. It requires only a reasonable degree of certainty in statutory language, United States v. Article of Drug, 484 F.2d 748, 750 (7^th Cir. 1973), and does not demand “[p]erfect clarity and precise guidance” “even of regulations that restrict expressive activity.” United States v. Williams, 553 U.S. 285, 304 (2008). It must not be overlooked that:

“The...threshold for declaring a law void for vagueness is high. ‘The strong presumptive validity that attaches to an Act of Congress has led this Court to hold many times that statutes are not automatically invalidated as vague simply because difficulty is found in determining whether certain marginal offenses fall within their language.' Rather it is sufficient if a statute sets out an ‘ascertainable standard.'... A statute is thus void for vagueness only if it wholly ‘fails to provide a person of ordinary intelligence fair notice of what is prohibited, or is so standardless that it authorizes or encourages seriously discriminatory enforcement.'”

Johnson v. United States, 576 U.S. 591, 629 (2015).^[2]

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The general practice outside of the First Amendment context has been to consider the claimed vagueness of a statute in light of the facts of the particular case - i.e. as applied - rather than in the abstract. See Maynard v. Cartwright, 486 U.S. 356, 361 (1988); United States v. Cook, 970 F.3d at 873. Under that approach, a party challenging the statute ordinarily must show that it is vague as applied to him, and if therefore the statute applies to his conduct, he will not be heard to argue that the statute is vague as to one or more hypothetical scenarios. Id.

It is the government's position that the statutory prohibition against accumulating items designated by the President as “scarce” during a national emergency for the purpose of reselling those items in excess of “prevailing market prices” is not unconstitutionally vague, and that the statute contains a “willfulness” requirement, which numerous cases have held critical to analysis when a statute is challenged under the “void-for-vagueness” doctrine. See Village of Hoffman Estates v. Brookside, Hoffman Estates, Inc., 455 U.S. 489, 499 (1982); Colautti v. Franklin, 439 U.S. 379, 395 (1979)(collecting cases); Planned Parenthood of Indiana & Kentucky v. Marion County Prosecutor, 7 F.4th 594 (7^th Cir. 2021). The government contends that its anticipated proof at trial will show the defendant was aware that the prices at which he was selling the accumulated N-95 masks were substantially above “prevailing market prices, ” and that his conduct was knowing and willful.

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It is significant to note that the statute under which the defendant is charged, the Defense Production Act, is not new. Quite the contrary. It is 70 years old, having first appeared in 1950 at the start of the Korean War as § 2072 of the Defense Production Act. 50 U.S.C. § 2072. The language of § 2072 has remained unchanged and was modeled after the Second War Powers Act of 1942. Exxon Mobil Corp. v. United States, 108 F.Supp.3d 486, 497 (S.D.Tex. 2015).^[3]

I.

FACTUAL BACKGROUND

The Information charges that beginning in about December 2019, a previously unknown virus, SARS-CoV-2, commonly referred to as COVID-19, spread around the world causing widespread death. Indeed, more Americans have died of the coronavirus disease than perished in all of WWII. On January 31, 2020, the Secretary of Health and Human Services (“HHS”) declared a National Public Health Emergency. 42 U.S.C. § 247d. On March 13, 2020, the President issued Executive Order 13909, 85 Fed.Reg. 16, 277, invoking the powers vested in the President by the Defense Production Act, which authorize the President to, among other things, “allocate

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materials, services, and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to promote the national defense.” 50 U.S.C. § 4511(a)(2).

Under the Act, the President may exercise this authority “to control the general distribution of any material in the civilian market” if the President finds “(1) that such material is a scarce and critical material essential to the national defense, and (2) that the requirements of the national defense for such material cannot otherwise be met without creating a significant dislocation of the normal distribution of such material in the civilian market to such a degree as to create appreciable hardship.” 50 U.S.C. § 4511(b). The Act requires the President to publish “every designation of materials the accumulation of which is unlawful, ” and it authorizes the President to “prescribe such conditions with respect to the accumulation of materials in excess of the reasonable demands of business, personal, or home consumption as he deems necessary to carry out the objectives of this chapter.” 50 U.S.C. § 4511(b).

On March 23, 2020, the President issued Executive Order 13910, delegating to the Health and Human Services Secretary the President's authority under 50 U.S.C. § 4512 to prevent the excess accumulation of certain “health and medical resources necessary to respond to the spread of COVID-19 within the United States.” 85 Fed.Reg. 17, 001. Two days later, pursuant to 50 U.S.C. § 4512 and Executive Order 13910, the HHS Secretary, by public notice, see 85 Fed.Reg. 17592, designated 15 categories of health and medical resources under the Act as “scarce materials, ” the supply of which would be threatened by accumulation in excess of reasonable demands of business, personal, or home consumption, or for the purpose of resale at prices in excess of prevailing market prices. These resources included: (I) N-95 Filtering Facepiece Respirators;

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(ii) Other Filtering Facepiece Respirators; (iii) PPE face masks; and (iv) PPE surgical masks.^[4]

Section 4512 of the Defense Production Act prohibits a person from accumulating one of the items designated as scarce for the purpose of resale at prices in “excess of prevailing market prices.” 50 U.S.C. § 4512. Section 4513 makes it a misdemeanor to “willfully perform[ ] any act prohibited” by the DPA. 50 U.S.C. § 4513.

In addition to the President's Executive Order 13910, the Attorney General issued a Memorandum that, under the Order, the Secretary of HHS could protect scarce healthcare and medical items by designating particular items as protected and once designated, the Defense Production Act “makes it a crime for any person to accumulate that item...for the purpose of selling it in excess of prevailing market prices.” Joseph Nguyen Ho, Price Gouging & Health Justice: Passing Anti-Price Gouging Laws Amid A Pandemic, 30 Annals Health L. Advance Directive 213, 217 (2020).

As discussed earlier, the Information charges that between March 6 and April 7, 2020, including the period after they were designated as “scarce materials, ” the defendant accumulated approximately 79, 160 N-95 masks at prices ranging from approximately $4.27 to $7 per mask, with a mean price of approximately $5.08. However, prior to the pandemic, defendant's company did not sell N-95 or similar types of masks. Between March 29 and April 22, 2020, the defendant is charged with having sold approximately 11, 492 of the masks to customers at a markup of approximately 185% to 367% per mask - in some cases the masks were sold for $19.95 for a single mask. [Dkt. #2]. These prices, the information charges, were “in excess of the prevailing

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market prices.”

The Motion to Dismiss [Dkt. #17] contends that since the DPA does not define the phrase, “prevailing market prices, ” - or specify a particular price - it “fails to establish a minimal standard” of conduct and is therefore unconstitutionally vague under the Void For Vagueness Doctrine. [Dkt. 17 at 7].

II.

THE VOID-FOR-VAGUENESS DOCTRINE

Although repeatedly stressed as significant by the Supreme Court, the defendant's argument overlooks the significant fact that Acts of Congress, including criminal statutes, have “strong...