United States v. Zayyad

• Decision Date: 24 January 2014
• Docket Number: No. 13–4252.,13–4252.
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Awni Shauaib ZAYYAD, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

741 F.3d 452

UNITED STATES of America, Plaintiff–Appellee,

v.Awni Shauaib ZAYYAD, Defendant–Appellant.

No. 13–4252.

United States Court of Appeals, Fourth Circuit.

Argued: Dec. 11, 2013.

Decided: Jan. 24, 2014.

ARGUED:Joshua B. Carpenter, Federal Defenders of Western North Carolina, Inc., Asheville, North Carolina, for Appellant. David M. Lieberman, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF: Henderson Hill, Director, Federal Defenders of Western North Carolina, Inc., Charlotte, North Carolina, for Appellant. Mythili Raman, Acting Assistant Attorney General, Denis J. McInerney, Acting Deputy Assistant Attorney General, Criminal Division, Appellate Section, United States Department of Justice, Washington, D.C.; Anne M. Tompkins, United States Attorney, Office of the United States Attorney, Charlotte, North Carolina, for Appellee.

Before AGEE, DIAZ, and FLOYD, Circuit Judges.

Affirmed by published opinion. Judge AGEE wrote the opinion, in which Judge DIAZ and Judge FLOYD concurred.

AGEE, Circuit Judge:

Awni Shauaib Zayyad was convicted of five felony counts relating to the sale of counterfeit prescription drugs. On appeal, Zayyad raises two assignments of error. First, he contends that the district court erred in denying his attempts to introduce certain evidence about a “gray market” ¹for prescription pills. Second, Zayyad argues that the Government never established that he knew that the pills that he sold were counterfeit.

We affirm the judgment of the district court, as neither of Zayyad's arguments have merit. The district court appropriately limited Zayyad's gray-market evidence, and the Government offered sufficient evidence of his knowledge that he sold counterfeit pills.

I.

A.

Essam Elasmar ran a counterfeit drug operation through his convenience store in Charlotte, North Carolina, where he peddled erectile-dysfunction drugs that looked like Viagra and Cialis. Unfortunately for Elasmar, his illicit drug business ended when he sold an undercover Department of Homeland Security (“DHS”) agent three bulk counterfeit drug orders. After a search following the drug buys found several hundred pills, Elasmar agreed to cooperate with investigators.

Elasmar turned over his supplier's telephone number, which DHS traced to Zayyad. Then, at the authorities' behest, Elasmar twice ordered drugs from Zayyad. In the first buy, Elasmar bought 500 Viagra pills for $4 a pill, a price well below wholesale. About a month later, DHS had Elasmar place a second order—this time for both Viagra and Cialis—for 700 pills at $4 a pill.

When Zayyad delivered the second batch of pills to Elasmar, police detained him and discovered more than 800 pills in the glove box and sunglasses holder of Zayyad's van. One set of pills was concealed in a brown paper bag, while another set was wrapped in a blue paper towel; all were in plastic bags. The pills had the outward appearance of a genuine Viagra or Cialis pill, but they lacked any prescriptions, prescription bottles, product literature, lot numbers, or invoices. Zayyad admitted to law enforcement that he had planned to resell hundreds of the pills to someone in Charlotte, but refused to identify who supplied them to him in the first place.

Police visited Zayyad's house on the same day as the traffic stop. When a woman answered the door, agents asked for permission to search the home. The woman consented, but only after she closed the door, stayed inside for ten minutes, and came back wearing a damp shirt. Perhaps alerted by the woman's wet clothing, agents searched a bathroom near the front of the house, finding a yellowish pill on the rim of a toilet equipped with an “industrial strength flushing system.” (J.A. 759.)

As noted, some of the pills seized from Zayyad's van and home looked similar to genuine Viagra and Cialis pills, with the same shapes, colors, and imprints as genuine pills. But other pills did not have the right color tone, shape, or embossing. Notwithstanding outward appearances, chemical analyses showed that the pills contained incorrect compositions and active-ingredient levels; many of the counterfeit Cialis pills also incorrectly contained the active ingredient of Viagra. At trial, specialists from the Food and Drug Administration, Pfizer, and Eli Lilly testified that all the pills that they sampled were counterfeit.

B.

A grand jury in the Western District of North Carolina initially indicted Zayyad on seven counts: one count of conspiracy to traffic in and dispense counterfeit drug products, three counts of trafficking in counterfeit goods, and three counts of selling and dispensing counterfeit prescription drugs.

At Zayyad's trial in December 2011, the Government relied principally on the nature of the transactions—unpackaged pills from an illegitimate source—to show that Zayyad knew that the pills that he sold were fake. For his part, Zayyad tried to suggest through cross-examination that he believed the pills came from the gray market. In particular, Zayyad cross-examined Government witnesses from Pfizer, Eli Lilly, and DHS who conceded that Pfizer and Eli Lilly manufactured and sold Viagra and Cialis abroad at cheaper prices. They also admitted that persons sometimes import foreign-manufactured pills into the United States. In addition, evidence at the first trial showed that Zayyad told Elasmar that the pills were real; no evidence indicated that Zayyad had ever said the pills were fake.

After the jury began deliberating, it asked the district court whether “knowing [that the pills] were ‘counterfeit’ [was] a requirement of the charge of violation in Counts Two through Seven.” (J.A. 532.) The court reiterated that the offenses did include a knowledge element. The jury then deliberated further before announcing that it had deadlocked. A modified Allen² charge failed to break the deadlock, and the district court declared a mistrial.

C.

After the mistrial, the grand jury issued a superseding indictment that narrowed the conspiracy count's scope and eliminated two counts. The new indictment contained a conspiracy count, two counts of trafficking in counterfeit goods, and two counts of selling and dispensing prescription drugs.

Before the second trial, the Government moved to preclude Zayyad from “attempting to raise during the Government's case-in-chief, through cross-examination or otherwise, any evidence or argument regarding an alleged ‘diversion market’ or ‘grey market’ for genuine, non-counterfeit, prescription medications[.]” (J.A. 565.) The Government represented to the district court that the gray-market evidence would only be relevant if, for instance, “the defendant were to testify during the defense case regarding his state of mind, that is, that he believed the Viagra and Cialis pills he sold were genuine pills from a specific ‘diversion market’ or ‘grey market’ channel [.]” (J.A. 570.)

Zayyad responded that he should be permitted to use “gray goods” evidence to establish an “affirmative defense,” namely “that the purported Viagra and Cialis [pills] at issue are ‘gray goods[.]’ ” (J.A. 651.) Put differently, Zayyad wanted to use evidence establishing a gray market for prescription pills to argue that some of the pills that police seized from him could be genuine. He contended that “the vast majority of the more than 2,000 purported counterfeit Viagra and Cialis tablets at issue ... ha[d] never been authenticated[.]” (J.A. 653.) And he argued that the Government's approach would impair his Sixth Amendment rights to confrontation and Fifth Amendment due process rights by forcing him to testify.

The district court granted the Government's motion in limine and determined the gray-market issue was not relevant under Federal Rule of Evidence 401, as “there [was] no evidence that shows that the defendant possessed any genuine pills.” (J.A. 660.) In addition, the court excluded the evidence under Federal Rule of Evidence 403, concluding “that concerns about confusion of the issues, misleading the jury, and considerations of waste of time” would overwhelm the evidence's probative value. (J.A. 660.)

D.

At the second trial, the Government presented much the same basic evidence of Zayyad's knowledge as in the first trial: he sold the pills cheaply, kept them in plastic bags, and made them available without a prescription. In response, defense counsel argued that Zayyad's “intent was to sell real Viagra and Cialis, and there's no evidence in this trial to the contrary.” (J.A. 907.) Further, Zayyad maintained that “[i]t would take a forensic chemist, pharmacist, or some other person trained ... to look at any pill and be able to know that it's counterfeit on sight.” (J.A. 908.)

Upon closure of the evidence, Zayyad moved for a judgment of acquittal, which the district court denied. The jury then convicted Zayyad on all counts, and the district court sentenced him to 24 months in prison. Zayyad timely appeals, and we have jurisdiction under 28 U.S.C. § 1291.

II.

Zayyad first argues that the district court erred in precluding him from introducing evidence about a “gray market” or “diversion market” in Viagra and Cialis pills. That evidence, Zayyad contends, was relevant because it could have established that he reasonably believed that he dispensed real prescription drugs. He separately argues that the district court could not exclude the gray-market evidence under Rule of Evidence 403 because it substantiated a central part of his case.

We note at the outset that Zayyad frames his argument too broadly. The district court did not preclude Zayyad from introducing all evidence concerning a gray market. The Government's motion in limine only requested a limit on cross-examination, and the district court's order granted that motion in limine. At oral argument, counsel for Zayyad suggested that it would have been futile to try to introduce gray-market evidence during the defendant's case-in-chief given the court's ruling on the ...