Opinion
No. CR 97-0239 MJJ (BZ).
September 27, 2006
REPORT AND RECOMMENDATION TO DENY DEFENDANTS' MOTIONS FOR ATTORNEYS' FEES
By order dated May 4, 2006, the Honorable Martin J. Jenkins referred to me for a report and recommendation defendants' amended petitions for reimbursement of costs and attorneys' fees. Defendants Debord and Tran seek costs and attorneys' fees pursuant to 18 U.S.C. § 3006A, the Hyde Amendment, contending that the prosecution was vexatious, frivolous and in bad faith.
Defendant Debord filed an amended petition for reimbursement of costs and attorney fees on May 3, 2006. [docket # 285] Defendant Tran filed a renewed petition for reimbursement of costs and attorney fees on May 4, 2006. [docket # 288]
See 18 U.S.C. § 3006A, statutory note, Pub.L. No. 105-119, § 617, 111 Stat. 2440, 2519 (1997). The Hyde Amendment provides that an award of reasonable attorneys' fees shall be granted to a prevailing criminal defendant, pursuant to the Equal Access to Justice Act, 28 U.S.C. § 2412 (the "EAJA"), if such defendant establishes that the government's prosecution was vexatious, frivolous, or in bad faith.
On August 9, 2006, at oral argument, counsel for Mr. Debord represented that prior counsel, Mr. Daar, had mistakenly submitted a Hyde Amendment application on behalf of Mr. Tran and Mr. Debord. Mr. Tran, who participated telephonically, stated that he was trying to retain counsel for his own Hyde Amendment application. Mr. Tran's application for fees and expenses presents different issues from Mr. Debord's application since the court appointed counsel for Mr. Tran in the underlying case. I granted Mr. Tran until August 30, 2006 to submit his request for his fees and expenses and scheduled a hearing on Mr. Tran's application for September 13, 2006, which was continued until September 29, 2006, at his request to allow his new attorney time to become familiar with the case and to submit supplemental documents in support of his application. I ordered Mr. Tran to file any reply by September 26, 2006, which he failed to do.
On September 13, 2006, Mr. Tran's counsel submitted a Brief Setting Forth the Facts, Details, History, etc. of the Conduct upon Which Defendant Peter Tran's Claim for Reimbursement Is Based. [docket # 313] The brief, an unsworn document, largely reiterates facts discussed at the August 9, 2006 hearing.
Defendants did not explain the factual bases for the prosecution or their motions in their moving papers. Some of the material facts are in Judge Smith's June 28, 2005 order dismissing the indictment. At oral argument, Mr. Debord's counsel supplied additional facts. Although these additional facts are not evident in the record, I recommend they be relied on since the government did not contradict them.
On August 12, 1997, defendants were indicted for crimes relating to the illegal importation of weapons, weapons parts and other munitions. They were charged with conspiracy, smuggling, making false statements, violating the Arms Export Control Act and dealing in firearms without a license. On November 17, 1998, a superseding indictment was filed and November 29, 2001 a second superseding indictment was filed. Defendants pled not guilty to all charges in both superseding indictments.
The superseding indictments added a witness tampering charge.
The charges alleged against defendants focused on two shipments: 1) three containers from Vietnam delivered in the spring of 1996 to Mr. Debord's warehouse in Roseville, California (the "Roseville Containers") and 2) two containers shipped via Long Beach, California in January of 1997, destined for Mexico (the "San Diego Containers"). The Roseville Containers were labeled as containing machine tools, and Mr. Debord contends they contained machine tools, rags and other legal items. According to the government, the San Diego Containers were shipped under bills of lading and manifests that falsely described the contents of the containers as sewing machine parts and machine tools but instead held weapons parts.
Based on its undercover investigation and information from third parties, including from a company called Northridge International, Inc. ("Northridge"), which had purchased some weapons parts from Mr. Debord, in early 1997, the government obtained a warrant to search Mr. Debord's warehouse in Roseville for weapons parts and munitions illegally transported from Vietnam. The Roseville Containers had been unpacked by this time. Seeing a cache of weapons parts, the government agents assumed these parts had arrived in the Roseville Containers and seized them (the "Roseville weapons parts").
Believing that the weapons parts seized from Northridge were a subset of the Roseville weapons parts, the government traced the serial numbers on the weapons parts from Northridge (the "Northridge Receivers") through a database which recorded serial numbers whenever the military transported weapons parts internationally. The government discovered that the database listed the traced Northridge Receivers as never having left the country, much less been in Vietnam. The government did not attempt to trace the serial numbers on the weapons parts seized from the Roseville warehouse until sometime after new counsel entered for the prosecution in November 2001.
Tracing these weapons parts to Vietnam through their serial numbers is essential for the Vietnam Munitions Act claim. 22 U.S.C. § 2778. At all times outlined in the indictment, Vietnam was listed on the U.S. Munitions List, and importing defense articles and services from Vietnam was prohibited. Nesbitt Decl. ¶ 4. A Vietnam connection is not essential to any of the other charges; none of the other charges is country-specific. There is little in the record or defendants' petitions to explain how the tracing works, but as best as I can understand it from the explanations proffered during oral argument, the government maintains a database of serial numbers of weapons it shipped abroad, including Vietnam. Any weapons on the list found in the U.S. would arguably have been imported in violation of the law. However, just because the military did not ship a weapon outside of the U.S. does not mean that the weapon could not have been shipped out of the U.S. by someone else and then smuggled back into the country. The answers the court received to questions about how this database worked were not particularly helpful.
The record is not very clear as to when the government performed this search, and the government was unwilling to accept Mr. Dinan's representation that the government knew in 1997 that at least some of the weapons seized in Roseville had not been shipped by the military to Vietnam.
At or about the same time as the Roseville Containers and weapons parts were seized, customs officials opened the San Diego Containers which were labeled sewing machine parts and machine tools, and seeing weapons parts instead, seized the containers and their contents. The U.S. Department of Fines, Penalties and Forfeiture (the "Forfeiture Department") held the San Diego Containers and their contents until September 28, 1999. Without written authorization from the San Francisco U.S. Attorney's Office (the "U.S. Attorney's Office") to continue to retain this second shipment, the Forfeiture Department destroyed it. The U.S. Attorney's Office learned of the destruction in March 2001 but did not inform defense counsel until June 2001.
The government then attempted to trace the serial numbers of the weapons parts seized. Since it no longer had the weapons parts from the San Diego Containers, it focused on the weapons parts found in Mr. Debord's Roseville warehouse. Because of a fire in 1974 at a government record center, many of the serial numbers for these weapons parts were untraceable. Of the handful that could be traced, the results showed that the military had never shipped these outside the U.S. On November 6, 2002, the government dismissed most of the counts related to the Roseville Containers.
After several motions, hearings and conferences, Judge Smith held an evidentiary hearing addressing defendants' motion to dismiss on March 21 and 22, 2005 and June 13 and 14, 2005 and ordered the second superseding indictment be dismissed on June 28, 2005. In her order, Judge Smith detailed the government's numerous mistakes. She found that the failure of the prosecutor at the time, Mr. Schaefer, to return telephone calls and messages had led in part to the government's grossly negligent destruction of the evidence. She also found that the government's ongoing failure to comply with discovery rules and court orders was part of its overall neglect in handling the case. Because the government was more to blame than defendants in causing the unnecessary delay to bring the case to trial, thereby violating defendants' rights to a speedy trial under the Constitution, Judge Smith dismissed the case. This motion for attorneys' fees under the Hyde Amendment followed. Mr. Debord claims he spent over $1.1 million in defending himself; he is requesting reimbursement for $871,766.69 of his fees and expenses. Mr. Tran is requesting reimbursement for $52,500 of his fees and expenses.
The Hyde Amendment was enacted to sanction the government for prosecutorial misconduct. To recover attorneys' fees and costs under the Hyde Amendment, as a threshold matter, each defendant must show that the case against him was pending on or after the enactment of the Hyde Amendment, his net worth is less than $2 million, he was the prevailing party in a criminal prosecution, he was not represented by assigned counsel paid for by the public, his attorney's fees were reasonable and no special circumstances exist to make the award unjust. U.S. v. Braunstein, 281 F.3d 982, 994 n. 9 (9th Cir. 2002).
Once defendants establish that they satisfy these threshold requirements, they must still satisfy the standard for reimbursement under the Hyde Amendment, which has a more demanding burden of proof than the EAJA. Defendants are entitled to their fees and costs under the Hyde Amendment only if they can show the government's position was vexatious, frivolous or in bad faith. U.S. v. Manchester Farming Partnership, 315 F.3d 1176, 1182 (9th Cir. 2003). The Ninth Circuit has defined those terms as follows:
"Vexatious" has both a subjective and objective element: subjectively, the [g]overnment must have acted maliciously or with an intent to harass [defendants]; objectively, the suit must be deficient or without merit. To prove vexatiousness, [defendants] must show the [g]overnment had some "ill intent." Id.
A "frivolous" case is one that is "groundless . . . with little prospect of success; often brought to embarrass or annoy [defendants]." The case is frivolous when "the government's position was foreclosed by binding precedent or so obviously wrong as to be frivolous." Id. at 1183.
"[B]ad faith" "is not simply bad judgment or negligence, but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity; . . . it contemplates a state of mind affirmatively operating with furtive design or ill will." Id. at 1185.
Since the Hyde Amendment incorporates provisions of the EAJA, courts have applied 28 U.S.C. § 2412 in determining procedures and limitations. U.S. v. Sherburne, 249 F.3d 1121, 1129 (9th Cir. 2001) ("The Hyde Amendment provides that `awards [of attorney's fees] shall be granted pursuant to the procedures and limitations (but not the burden of proof) provided for an award under section 2412 of title 28, United States Code [the EAJA].'"). That section authorizes a court to award "reasonable fees and expenses of attorneys" and requires that a Hyde Amendment application "includ[e] an itemized statement from any attorney or expert witness representing or appearing in behalf of the party stating the actual time expended and the rate at which fees and other expenses were computed." 28 U.S.C. § 2412(b), (d)(1)(B). Courts cap rates for attorneys' fees awarded under the Hyde Amendment at $125 per hour. Sherburne, 249 F.3d at 1129 (applying the EAJA cap of $125 and not the Criminal Justice Act cap of $75).
Mr. Tran has failed to satisfy the threshold requirements of the Hyde Amendment, since an attorney appointed under the Criminal Justice Act represented him in the underlying action. He requests $30,000 in attorneys' fees but does not detail this amount, stating generally in his moving papers that he has incurred fees for an attorney in a criminal case in Portland, Oregon, "who expended time to review the materials in this case in an effort to reach a global settlement of both cases." Defendant Peter Tran's Renewed Petition, Exh. 1 ¶ 4. [docket # 288] Mr. Tran does not explain why he needed Oregon counsel in addition to his appointed counsel. He does not cite any authority to support the proposition that he should be reimbursed fees for an attorney hired in another case in another state. Since assigned counsel paid for by the public represented Mr. Tran in the underlying case, which is the basis for his Hyde Amendment petition for attorneys' fees and costs, for this reason alone, I recommend that Mr. Tran's petition be denied for failure to satisfy the threshold requirements.
Mr. Tran has supplied no information from which I could tell to what extent Oregon counsel was involved in this case, but this case and the case in Oregon were not so related as to require Mr. Tran's appointed counsel in this case to represent him in the Oregon case.
Even if he could satisfy the threshold requirements under the Hyde Amendment, Mr. Tran's application for attorneys' fees and costs suffers from the same failures as Mr. Debord's application.
On his motion for attorneys' fees and costs, Mr. Debord was represented by Mr. Dinan and Mr. Kapland, who did not defend him in the underlying action. Claiming that the deadline for filing an application, May 4, 2006, did not give him enough time to complete the itemized list of expenses and attorneys' fees to support his request, Mr. Debord requested leave to supplement his application. The court granted defendants leave to file supplemental documents. The only supplemental documents the court received by June 5, 2006 were a summary list of expenses and an affidavit of Mr. Kapland with attached letter and spreadsheet of expenses for Mr. DeBord. [docket # 293] In his reply, Mr. Debord attached more spreadsheets of attorneys' fees and expenses. Reply, Exh. A. [docket # 300] At oral argument, Mr. Debord also submitted a stack of invoices and receipts to support his summaries. Mr. Debord's stack of his receipts and invoices does not include any bills of his attorneys or any statements as to why his attorneys should be reimbursed and why he incurred such expenses. Mr. Tran similarly failed to submit any invoices or receipts to support his requested fee and cost amounts.
Mr. Debord has since written Mr. Dinan and Mr. Kapland seeking to terminate their representation.
Defendants first submitted a petition for reimbursement of costs and attorneys' fees on December 5, 2002, so they have known they were going to request their fees and would have to comply with the requirements of the Hyde Amendment for some time.
Because the government had not had an opportunity to review these invoices and receipts, the court granted leave for the government to file objections, which it did on August 16, 2006. The government raises a number of valid points, and its objections are SUSTAINED.
Aside from the threshold matters which defeat Mr. Tran's application, on the merits, neither his nor Mr. Debord's petition satisfies the requirements of the Hyde Amendment. Defendants have not shown that their fees are reasonable. The spreadsheets included in Mr. Debord's supplemental papers are wholly inadequate to serve as a basis for awarding fees. Those spreadsheets merely list the yearly totals of attorneys' fees from 1997 through 2006. There is no explanation of these amounts. Mr. Debord's attorneys' fees listed in the spreadsheets included in the reply are divided by general group, with dates and amounts. Seventeen timekeepers are listed, with no differentiation between attorneys or court reporters or investigators. There is no explanation why Mr. Debord hired so many attorneys. The entries are vague, with either an entire firm or an individual listed next to a date and a dollar amount. For instance, Mr. Debord requests $173,874.15 in fees for Chris Mancini, who was an attorney in the underlying case. On November 26, 2001, next to his name is an amount for $14,000, but it is not clear what that amount covers, how many hours he spent on what tasks or even whether he actually billed that amount. Other timekeepers include entities such as the Law Offices of Edwin Marger, for which an amount of $55,000 for January 16, 2004 is claimed with no information about what that office did, who did it, who performed the task or how many hours were spent. This makes it impossible for me to make any evaluation of whether the fees and hours claimed are reasonable or to multiply any hours by the $125 hourly rate allowed by the courts.
I realize that some criminal defense lawyers may not keep contemporaneous time records of the sort that civil lawyers keep and upon which courts rely in awarding fees in civil cases. However, no attorney in this case for whom fees are sought has stated that he does not maintain contemporaneous time records and no attorney who does not have such records has made any effort to describe or allocate the work done or the hours spent.
On August 28, 2006, with leave of court, Mr. Tran filed supplemental documents with a partial itemized list of expenses and attorneys' fees totaling $52,500. [docket # 307] The expenses from 1997 to 2006 were for "Air Travel/Taxi/Car Rental/Hotel" in the amount of $20,000, "Investigator fees" in the amount of $2,500 and "Attorneys fees" in the amount of $30,000. Mr. Tran has not submitted any receipts or invoices. I do not know whether his fees request reflects the work of a single attorney or multiple timekeepers, and he provides no explanation why any of these fees or costs were reasonable.
Because defendants have not complied with the documentation requirements of the Hyde Amendment, I recommend their motions be denied.
Even if defendants had submitted adequate documentation, I would still recommend that their requests for attorneys' fees be denied because defendants have not satisfied their burden under the Hyde Amendment. Neither Mr. Tran nor Mr. Debord specifies under which standard they are requesting their attorneys' fees, but I conclude that they have not shown they are entitled to fees under any of the three standards.
Defendants bear the burden of proving that the government's position was vexatious, frivolous or in bad faith. U.S. v. Lindberg, 220 F.3d 1120, 1124 (9th Cir. 2000) ("the Hyde Amendment places the burden of proof on the movant"). In this case, defendants rely almost exclusively on the fact that the government should have known that at least some of the weapons parts did not originate from Vietnam and so should not have brought charges against defendants, that the government was delinquent in responding to discovery requests and that the government destroyed some evidence and yet still continued to prosecute defendants when it should have dismissed all the charges.
Defendants' arguments fail. They have not made any showing of the type of baseless claim or ill will required to receive fees under the Hyde Amendment. First, the government was not vexatious, frivolous or in bad faith in bringing charges against defendants as to the San Diego Containers. At oral argument, Mr. Debord argued that these containers were never meant to be in the U.S. and that they were mislabeled to prevent theft, but the fact remains that they did enter the U.S. and when the customs agents opened containers labeled as sewing machine parts and tools and found instead weapons parts, they had reason to seize them and the government had reason to bring charges against defendants. Confidential informants and third parties corroborated that Mr. Debord had weapons in Vietnam and was smuggling weapons from Vietnam into the U.S.U.S.' Memo. of Law upon Completion of Evidentiary Hearing on Destruction of Evidence ("U.S. Memo") 2:4-19. [docket # 260] At the time the government brought the charges, there was ample evidence to support a case against defendants as to the San Diego Containers.
Mr. Tran also argues that the containers were not mislabeled, since "hammers" are firearms parts, and any incorrect labeling, such as sewing machine parts, was an honest mistake. Tran suppl. brief ¶¶ 21-24. [docket # 313]
The Roseville Containers present a more difficult question since the government had no direct evidence that the weapons parts it seized had entered the country in the Roseville Containers. The government did have evidence from its undercover investigation and from third parties, and it could assume, based on the weapons parts seized from the San Diego Containers, that defendants were involved in a conspiracy to import weapons parts illegally and that the empty Roseville Containers shipped from Vietnam had contained the weapons parts seized from Mr. Debord's warehouse. The difficulty is that from the beginning, the government had the ability to trace the serial numbers on the weapons parts seized from the Roseville warehouse and had the government traced the serial numbers of those weapons parts in 1997, it would have learned that the military had never shipped these parts outside of the country. Defendants claim that when the government did finally trace the weapons parts and discovered that those which were traceable had not been shipped outside the U.S., it should have dismissed the charges immediately. The government asserts that soon after Mr. Nesbitt, the prosecutor who replaced Mr. Schaefer, became aware of the results of the trace, he dismissed the charges based on the Roseville Containers. On November 6, 2002, the government did dismiss most of the counts related to the Roseville Containers.
That the government exercised bad judgment or was negligent in failing to fully investigate the origin of the Roseville weapons parts is clear, but the government did not act with the requisite ill intent for defendants to receive their fees under the Hyde Amendment. Even had I concluded that defendants were entitled to some fees with respect to the Roseville weapons parts charges, their failure to properly document their fees would have prevented me from making any such allocation.
As for the destruction of the San Diego weapons parts and the government's continued prosecution with respect to these, I agree with Judge Smith that the government did not act in bad faith. The prosecution did not find out about the destruction until March 2001, and they informed defense counsel in July 2001.
The bad faith standard under the Hyde Amendment may be different from the bad faith standard under Federal Rule of Criminal Procedure 48(b), as Mr. Debord claims, but the standards are similar enough that I recommend that Judge Smith's finding of no bad faith be given some deference.
While the destruction of the weapons parts in the San Diego Containers may have made it more difficult for the government to prove its case, it still appears to have had sufficient evidence from which it could have obtained a conviction on some or all of the charges based on the San Diego Containers had the evidence been accepted by a jury. The government pursued the remaining charges as to the San Diego Containers because "despite the destruction of the evidence, the fact that the shipping containers originated in Vietnam has been preserved, the contents of the shipping containers has been preserved, how the weapons parts looked has been preserved." U.S. Memo 8:4-8. The government believed it could continue its prosecution based on this evidence.
Finally, Judge Smith ultimately dismissed the case, not on the merits, but because she found that the government had acted with unnecessary delay, thereby denying defendants their right to a speedy trial. She did not address the government's charges, nor did she assess defendants' guilt or innocence. Instead, she analyzed the case under Federal Rule of Criminal Procedure 48(b), looking only to the factors whether the government had been fairly forewarned as to the consequences of further delay, whether there was prosecutorial misconduct related to the unnecessary delay and whether there was prejudice due to the unnecessary delay. Within the context of the unnecessary delay, Judge Smith described the government's conduct as both "purposeful and oppressive" because of the government's "intentional destruction of material evidence," but she found, after carefully weighing the evidence and arguments made over four days at the evidentiary hearing, that while the government may have been grossly negligent, it did not act in bad faith in destroying the San Diego weapons parts.
While the government's delay in prosecuting the case resulted in Judge Smith's order dismissing the indictment, defense counsel also seem to have contributed to the delay in bringing the case to trial. During the evidentiary hearing, on June 14, 2005, Judge Smith attributed some of the delay to the lack of assertiveness of defense counsel. See Def't Peter Tran's Renewed Petition for Reimbursement of Costs and Attorney Fees, Exh. 2. [docket # 288]
Defendants do not contest that they were involved in shipping at least two mislabeled containers of weapons parts. They do not deny charges of smuggling, 18 U.S.C. § 545, conspiracy to commit offense or defraud the U.S., 18 U.S.C. § 371, false statements, 18 U.S.C. § 1001, or unlawful importing of firearms without a license. 18 U.S.C. § 922 and 22 U.S.C. § 2778. They contend that the government should have diligently unearthed all evidence that could have helped the defense and that once it destroyed the weapons parts in the San Diego Containers, it did not have evidence to continue to prosecute. However, mislabeling shipping weapons parts as sewing machine parts and failing to declare or transport them properly are still crimes.
There is no suggestion in the defense papers that the witness tampering charge was vexatious, frivolous or in bad faith.
The fact that the court had to issue an order to show cause because of the government's failure to provide defendants with requested discovery shows that "the [g]overnment's performance was significantly below desirable standards" but it does not rise to the level of vexatiousness, frivolous conduct or bad faith required under the Hyde Amendment. Manchester Farming, 315 F.3d at 1183 and 1186 n. 25 ("`[t]he government's failure to comply with repeated court orders for discovery indicates a lack of respect for orders of the court'; however, the government's position was not `vexatious, frivolous or in bad faith'").
Therefore, I cannot conclude that the government's suit was so deficient, meritless or wrong as to be vexatious or frivolous, and I do not find that the government acted with the ill intent or ill will required for its prosecution to be vexatious or in bad faith.
Because defendants' documentation for their attorneys' fees request is inadequate and because they have not shown that the government's position was vexatious, frivolous or in bad faith, I recommend that their applications for attorneys' fees and expenses under the Hyde Amendment be denied. As to Mr. Tran, his application should be denied for the additional reason that he has failed to satisfy the threshold requirements of the Hyde Amendment. I find no need for further argument, so the hearing scheduled for September 29, 2006 is VACATED.