USA v. Lindberg

• Citation: 220 F.3d 1120
• Decision Date: 16 June 2000
• Docket Number: No. 99-10371,99-10371
• Parties: (9th Cir. 2000) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. ERIK LINDBERG, Defendant-Appellant. Office of the Circuit Executive
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1120

220 F.3d 1120 (9th Cir. 2000)

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. ERIK LINDBERG, Defendant-Appellant.

No. 99-10371

Office of the Circuit Executive

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted June 16, 2000--San Francisco, California

Filed: July 27, 2000

William A. Cohan (argued), William A. Cohan, P.C., San Diego, California, and Donald W. MacPherson, The MacPherson Group, Phoenix, Arizona, for the defendant-appellant.

Thomas Muehleck, Assistant United States Attorney, Honolulu, Hawaii, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Hawaii, David A. Ezra, District Judge, Presiding; D.C. No. CR-95-00312-DAE

Before: Mary M. Schroeder, Michael Daly Hawkins, and Raymond C. Fisher, Circuit Judges.

HAWKINS, Circuit Judge:

This case presents issues of first impression in this circuit under the Hyde Amendment, which allows a court to award litigation expenses to a prevailing criminal defendant where the government's position was vexatious, frivolous, or in bad faith, see 18 U.S.C. S 3006A (historical and statutory notes). We hold that in order to recover expenses, a defendant must show more than that the government's position was not "substantially justified," the standard for recovering costs under the Hyde Amendment's civil counterpart, the Equal Access to Justice Act, 28 U.S.C. S 2412(d)(1)(A). We also hold that a district court's ruling on a Hyde Amendment motion is reviewed for abuse of discretion. Applying these two holdings to the facts, we conclude that the district court did not abuse its discretion in denying Erik Lindberg's motion for fees and costs or his request for discovery.

I. FACTS AND PROCEDURAL BACKGROUND

On January 24, 1996, a grand jury in Hawaii returned an indictment against Lindberg, his mother, several of his siblings, and several of his mother's employees. Count 1 charged the defendants with (1) conspiracy to defraud the government of federal income taxes and (2) conspiracy to structure and assist in structuring currency transactions with domestic financial institutions for the purpose of evading certain reporting requirements, all in violation of 18 U.S.C.S 371. Counts 2 through 32 charged the defendants with the substantive offense of structuring currency transactions to avoid currency transaction reporting requirements, in violation of 31 U.S.C. SS 5324 and 5322. Count 33 sought forfeiture of real and personal property traceable to the structured currency transactions that were the basis for counts 2 through 32.

The substance of the government's case was as follows: Lindberg's mother, Michelle, owned several "hostess bars" in Honolulu. With the help of her children and employees, she skimmed money from the businesses by not depositing cash receipts. The defendants deposited this money into different bank accounts in amounts under $10,000, so as not to trigger the requirement that banks report cash transactions in excess of that amount.¹ Then, they used the money in these accounts to buy cashier's checks, which they then used to buy real estate. The government alleged that by participating in this scheme, the defendants conspired to defraud the government of income tax, conspired to avoid triggering the currency transaction reporting requirements, and committed the substantive offense of structuring transactions to avoid triggering the reporting requirements.

Lindberg was 17 years old when the alleged conspiracy began in 1988 and 21 when it ended in 1992. The evidence at trial showed that he worked at one of his mother's bars, Club Magazine Girl, in the fall of 1988 and in the spring and summer of 1989. It also showed that in January 1989, he opened two bank accounts, one at Bank of Hawaii, the other at Central Pacific Bank. On January 9 and 11, $8,000 cash was deposited into his Bank of Hawaii account. On January 13, $7,000 cash was deposited into his Central Pacific Bank account. And on January 18, $8,000 cash was deposited into one account, and $7,000 was deposited into the other. The evidence failed to establish who deposited the money: A defense expert testified that the handwriting on the deposit slips did not match Lindberg's, while the government speculated that a teller had filled out the slips for him.

On January 26, Lindberg used the money in his Bank of Hawaii account to buy a cashier's check for $24,000 and the money in his Central Pacific Bank account to buy another cashier's check for $20,000. Because the transactions did not involve cash, they did not trigger the banks' currency transaction reporting requirements. On January 27, Lindberg used the cashier's checks to pay part of the purchase price for an apartment. Although the defense produced evidence that Lindberg's sister Lien was identified as the "purchaser," the apartment was titled in Lindberg's name. The apartment was also listed by the government as one of the properties it sought to obtain under the forfeiture count.

Lindberg's trial began on March 19, 1997. On April 10, 1997, the government dismissed Lindberg from counts 2 through 32, which involved the substantive offense of structuring and which served as the basis for the forfeiture count. On April 22, 1997, the district court denied Lindberg's motion for judgment of acquittal pursuant to Rule 29 of the Federal Rules of Criminal Procedure. Two weeks later, the jury found Lindberg guilty of count 1, the conspiracy charge. Although the jury did not return a verdict on the forfeiture count (because it was premised on counts 2 through 32), the district court entered a judgment of guilty on that count.

Lindberg raised two arguments on appeal from this conviction. First, he claimed the district court erred by entering a judgment of guilty on the forfeiture count. The government agreed, and a panel of this court reversed the judgment. Second, he claimed the evidence was insufficient to convict him on either prong of the conspiracy count. Again, the panel agreed. In a memorandum disposition filed March 29, 1999, the panel noted that in order to be guilty of conspiring to defraud the government of income tax, a defendant must have knowledge that tax evasion is the object of the conspiracy. See United States v. Skelton, 176 F.3d 486, at *3 (9th Cir. 1999) (citing United States v. Krasovich, 819 F.2d 253, 254 (9th Cir. 1987)). It also noted that in order to be guilty of structuring currency transactions so as not to trigger the banks' reporting requirements, a defendant must not only know that banks have a duty to report cash transactions over $10,000, but must know that it is illegal to attempt to avoid triggering that requirement. See id. at *1 (citing Ratzlaf v. United States, 510 U.S. 135, 149 (1994)).²

The panel then concluded that although Lindberg participated in the tax evasion conspiracy, there was no evidence that "he did so with the knowledge that tax evasion -personal or corporate -was an object of the conspiracy." Id. at *4. It also found that although there was evidence that Lindberg participated in the structuring, there was no evidence that he knew structuring was illegal. See id. at *5. Therefore, the panel reversed his conviction.³

Shortly afterward, Lindberg filed a motion for costs and fees pursuant to the Hyde Amendment, alleging that the government's prosecution of him was vexatious, frivolous, or in bad faith. He argued that the government should have known there was insufficient evidence to convict him and that it persisted in the prosecution to gain plea bargain leverage against his mother and to obtain his apartment by forfeiture. In order to develop this allegation, he asked the district court to order discovery, including depositions of IRS agents and the production of investigative documents.

The district court denied Lindberg's motion and his request for discovery. Although the Ninth Circuit panel had concluded that the evidence was insufficient to convict him, the district court noted that the evidence was sufficient for the grand jury to indict, for the district court to deny a motion for acquittal, and for the jury to convict. The court also concluded that because Lindberg's allegations focused on the government's lack of evidence, there was no need to order the production of documents that were not introduced as evidence at trial.

Lindberg timely appealed the district court's denial. He argues that the district court erred by concluding that the government's prosecution was not vexatious, frivolous, or in bad faith and that it erred by denying his request for discovery. We have jurisdiction under 28 U.S.C. S 1291.

II. STANDARD OF REVIEW

The issue of what standard of review to apply to appeals under the Hyde Amendment is one of first impression in this circuit. Several other circuits have addressed the issue, however, and their decisions provide some guidance.

In United States v. Gilbert, 198 F.3d 1293 (11th Cir. 1999), the Eleventh Circuit noted that under the Hyde Amendment, an award of attorney's fees " `shall be granted pursuant to the procedures and limitations (but not the burden of proof) provided for an award under the [Equal Access to Justice Act].' " Id. at 1297-98 (quoting 18 U.S.C. S 3006A) (alteration in original). The court then noted that a denial of attorney's fees under the Equal Access to Justice Act (EAJA)⁴ is reviewed for abuse of discretion. Therefore, the court held, a denial of fees under the Hyde Amendment also should be reviewed for abuse of discretion. See id. The Fourth Circuit adopted the Eleventh Circuit's conclusion without explanation in In re 1997 Grand Jury, 215 F.3d 430, 436 (4th Cir. June 15, 2000).

The Fifth Circuit reached the same result in United States v. Truesdale, 211 F.3d 898 (5th Cir. 2000), but for slightly different reasons. The court acknowledged that awards under the Hyde Amendment "shall be granted pursuant to the procedures and limitations provided for an award under the...