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AOL Outlaw Must Bear the Burden of Proving Who Pays the Price

On January 9, 2018, the Second Circuit (Kearse, Cabranes, Wesley) rejected a request by ex-AOL Inc. employee Jason Smathers to junk the restitution component of his sentence, which requires him to recompense the online service provider for the losses it incurred after Smathers sold 92 million AOL screen names to spammers in the early 2000s—one of the earliest large-scale data security breaches of the Internet age.  Smathers argued that his restitution award should be offset by damages later obtained by AOL in litigation against Smathers’s co-conspirators.

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United States v. Burden

On June 19, 2017, the Second Circuit (Katzmann, Kearse, Livingston) issued a per curiam decision in United States v. Burden, et al., vacating the term of supervised release imposed on the defendants and remanding the case for resentencing as to supervised release.  Judge Kearse concurred in a separate opinion.

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Second Circuit Remands for New Trial Based on District Court’s Improper Exclusion of Advice-of-Counsel Testimony

In United States v. Scully, 16-3073-cr (Pooler, Lynch, Cogan[1]), the Second Circuit vacated the defendant’s conviction for various offenses, including mail and wire fraud, conspiracy to defraud the United States, the sale of misbranded and unapproved drugs, and the unlicensed wholesale distribution of prescription drugs, finding that the District Court erred in excluding evidence related to his advice-of-counsel defense.  The opinion provides a helpful overview of the requirements of Rule 403 balancing and the nature of the burden in establishing an advice-of-counsel defense.

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Drawing The Line Between “Permissible Inference” And “Impermissible Speculation” In Assessing Sufficiency Of The Evidence

In United States v. Pauling, the Second Circuit (Katzmann, Kearse, and Chin) affirmed the District Court’s post-trial order granting Pauling’s motion under Federal Rule of Criminal Procedure 29 to set aside his conviction for Conspiracy to Distribute or Possess with Intent to Distribute 100 Grams or More of Heroin.  The Court concluded that the District Court had correctly found that the evidence at trial was insufficient to establish the quantity element of the offense (100 grams or more), and therefore entered judgment of conviction instead to a lesser included offense that did not have a quantity requirement (and did not carry a mandatory minimum sentence).

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Court Orders Jacobson Remand to Determine Reasonableness of $10 Million Fine

In United States v. Zukerman, No. 17-948 (2d Cir. Feb. 6, 2018) (ALK, RAK, RSP) (summary order), the appellant, Morris Zuckerman, challenged the substantive and procedural reasonableness of his sentence, which was imposed following his pleading guilty for tax evasion and obstruction of the IRS, see 26 U.S.C. §§ 7201, 7212(a).  While Zukerman’s plea agreement contained a stipulated fine range of $25,000 to $250,000, the district court (Torres, J.) imposed a fine of $10 million.  Given that tax fraud defendants are typically required to resolve their civil tax liabilities in parallel proceedings, it is unusual for such a large fine to be imposed in this type of case.  After acknowledging that fine calculations are typically committed to the discretion of the sentencing judge, the Second Circuit held that Judge Torres’ comments at the sentencing hearing and in the written statement of reasons did not provide the panel with a sufficient basis to determine how she reached the $10 million fine amount.  Rather than try to guess what considerations went into this calculation, the Court ordered a so-called “Jacobson remand”—wherein it remands “partial jurisdiction to the district court to supplement the record on a discrete factual or legal issue while retaining jurisdiction over the original appeal”—and directed the district court to “elaborate on its rationale for imposing a fine greater than those typically imposed in tax prosecutions.”

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Second Circuit Holds Life Term of Supervised Release for Non-Violent Drug Offender is Unreasonable

On May 2, 2018, the Second Circuit held in United States v. Jamaal Brooks (Parker, Lynch, Chin) (per curium) that the district court erred in imposing a sentence of lifetime supervised release on a defendant who had violated prior terms of supervised release due to continued drug use and failure to report to scheduled drug testing.  The Court stressed that while the sentencing court has substantial discretion in fashioning an appropriate sentence, a term of supervised release is nonetheless substantially unreasonable if it is improperly justified by retribution and deviates significantly from the sentence given to similarly-situated violators.  Supervised release imposes real burdens on both defendants and the justice system, and this decision is a reminder that, as in other aspects of federal sentencing, the punishment should fit the crime.

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Circuit Denies “Pharma Bro” Martin Shkreli’s Appeal of His Conviction and District Court’s Forfeiture Order

On July 18, 2019, the Second Circuit issued a summary order in United States v. Shkreli (Jacobs, Livingston, Bianco) affirming the conviction and sentence of Martin Shkreli after his highly publicized 2017 trial in which he was convicted on two counts of securities fraud and one count of conspiracy to commit securities fraud.  Shkreli was often known as the “Pharma Bro” because of his public statements about his drug company’s price increases in the pharmaceutical industry.  On appeal, Shkreli challenged the district court’s “no ultimate harm” (“NUH”) jury instruction and its order requiring him to forfeit approximately $6.5 million that had been invested in his hedge funds.

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Conviction reversed by summary order for improper rebuttal summation

In United States v. Ballard, 17-427-cr, the Second Circuit reversed a sex trafficking conviction by summary order (JAC, RR, Villardo, J. by designation) due to improper argument by the government during rebuttal summation.

The Court rejected the defendant’s arguments that some of the rhetoric in the government’s main summation amounted to error.  Defense counsel did not object to these comments, which included calling the defendant a “dead beat,” a “pimp,” and similar to “Genghis Khan or some other Wall Street person.”

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Convictions Affirmed in Drug Robbery Conspiracy

In United States v. Martinez, Nos. 14-2759, 15-511, 15-836, 15-1001, 15-3699 (Kearse, Jacobs, Pooler), issued on July 7, the Second Circuit affirmed the convictions of several co-conspirators in a decade-long scheme where at least two dozen individuals allegedly committed over 200 drug robberies by impersonating police officers who “arrested” drug traffickers and “seized” cash and drugs. 

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Promises, Promises: Second Circuit Reverses District Court’s Ruling That Suppressed Post-Arrest Statements Based On Allegedly Coercive Promises By Law Enforcement

In United States v. Haak, 16-3876-cr, the Second Circuit (Raggi, Hall, Carney) reversed a suppression order, finding that local law enforcement authorities did not falsely promise the defendant immunity from prosecution and his statements therefore were not coerced in violation of the Fifth Amendment.

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In Divided Decision, Court Rejects Challenge to Conspiracy Conviction Based on Grand Jury Clause

In United States v. Dove, 14-1150-cr, the Second Circuit (Walker, Pooler, Chin) upheld a drug conspiracy conviction against claims that the government improperly shifted its case away from the broader conspiracy charge in the indictment.  The defendant alleged that this amounted to a constructive amendment or a prejudicial variance, in violation of the Fifth Amendment Grand Jury Clause.  The 2-1 decision, with Judge Chin dissenting, raises thorny questions about the evidence necessary to prove a defendant’s awareness of his role in a larger conspiracy and the government’s ability to thwart a lack-of-awareness defense through its selection of evidence at trial.  Although the Court affirmed, the extended discussion and the dissent may be useful to future litigants who wish to invoke these defenses.

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Convictions Reversed in LIBOR Case

On July 19, 2017, in United States v. Allen, et al. (16-cr-98) (Cabranes, Pooler, Lynch), the Second Circuit issued a decision reversing the convictions of defendants Anthony Allen and Anthony Conti for wire fraud and conspiracy to commit wire fraud and bank fraud.  This was the first federal criminal appeal in connection with the London Interbank Offered Rated (“LIBOR”) prosecutions, which involved allegations that various individuals and banks manipulated the LIBOR.  The LIBOR is a benchmark interest rate intended to reflect the available rates at which banks borrow money from other banks; the LIBOR is incorporated into the terms of financial transactions worldwide. We provided a brief summary of the opinion a few hours after the decision was rendered; here is our more detailed summary.

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Circuit Upholds Forfeiture Based on Appreciation

The Second Circuit (Pooler, Jacobs, Wesley) issued an opinion holding that a criminal forfeiture order in an insider trading case is not limited to the amount of funds acquired through illegal activity but may extend to the appreciation of those funds.  In the case United States v. Afriyie, 17-cr-2444 and 17-cr-4045, the Court upheld a conviction for securities fraud and wire fraud, and upheld an almost $2.8 million forfeiture order, but vacated and remanded a restitution order in light of the Supreme Court’s recent decision in Lagos v. United States, 138 S. Ct. 1684 (2018).

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Circuit Holds that Interstate Travel Element Confers Multiple Venues for Prosecution

In United States v. Holcombe, 16-1429-cr, the Second Circuit (Jacobs, Leval, Lohier) resolved three open issues involving a conviction for failing to register pursuant to the Sex Offender Registration and Notification Act (“SORNA”), 18 U.S.C. § 2250(a).  First, the Court held that the interstate travel offense at issue “began” in the state the defendant left, New York, and thus venue in SDNY was proper.  Second, the Court held that any potential vagueness in a 30-day window for updating registration did not render defendant’s conviction here void for vagueness given the passage of at least 18 months.  Last, the Court rejected defendant’s claim that the SORNA registration requirement violated his constitutional right to travel.

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Court Affirms Drug Conviction Notwithstanding Post-Trial E-mail from Juror Raising “Several Concerns”

In United States v. Baker, the Court (Livingston, Chin, C.J.J., Koeltl, D.J.) affirmed the conviction of Raymond Baker, who after a jury trial in the Northern District of New York was convicted of participating in a conspiracy to distribute and possess with intent to distribute more than 100 grams of heroin, in violation of the Controlled Substances Act, 21 U.S.C. §§841(a)(1), 841(b)(1)(B), 846 and 851.

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This Is Not Fine: Circuit Vacates Fine Imposed on Unable-to-Pay Defendant, Citing Lack of Reasoning or Evidence for Judge’s Sentence

In a summary order issued March 7, 2017, United States v. Marmilev, 14-4738 (Leval, Calabresi, and Carney), the Circuit vacated and remanded the portion of the defendant’s sentence imposing a $250,000 fine after the defendant pled guilty for charges including conspiracy to operate an unlicensed money transmitting business.  From the Court’s procedural history, it’s fair to say that the fine assessed by the district court seemed to come out of the blue for all involved parties:  the presentence report (PSR) had cited the defendant’s inability to pay and recommended against a fine; the Government did not request that a fine be imposed; and the district court did not question the PSR’s recommendation or indicate prior to sentencing that it was considering a fine.  Yet not only did the district court order the defendant to pay a fine, but the fine it imposed was well in excess of the Guidelines range of $17,500-$175,000.

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In Narrow Decision, Court Holds Dishonorably Discharged Veterans May be Denied Gun (and Bullet) Ownership

In United States v. Jimenez, the Second Circuit (Pooler, Raggi, Droney) rejected an as-applied Second Amendment challenge to a provision of the Gun Control Act of 1968 that makes it illegal for a person who has been dishonorably discharged from the military to possess guns or ammunition, 18 U.S.C. § 922(g)(6).  In the decision, which marks the first time a federal court of appeals has grappled with the statute’s constitutionality post-District of Columbia v. Heller, 554 U.S. 570 (2008), the Court was careful to note that it was not considering a facial challenge and limited its discussion to persons, as here, who have been dishonorably discharged for “felony-like” military offenses.

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Second Circuit Vacates Sentence Based on Failure to Apply the Categorical Approach

In United States v. Genao, No. 16-924 (Katzmann, Lynch, Chin), the Second Circuit examined the application of the categorical approach to a prior burglary conviction that indisputably involved threats of physical harm but whose minimal elements arguably did not meet the Guidelines’ definition of a “crime of violence.”  The Second Circuit reaffirmed that the categorical approach requires evaluation of the elements of conviction, not the facts of conviction, making it reversible error for the district judge to have “short circuited” the analysis by starting with the facts.  But the Second Circuit emphasized that in an advisory-Guidelines world, the district court is free to take those facts of conviction into account in exercising its discretion to set the final sentence. So long as the sentencing correctly applies and calculates the appropriate Guidelines sentence, the court is then liberated—indeed required—to pick the sentence that it believe best fits the crime.

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Second Circuit Holds Constitutional Challenge to Prosecution Was Untimely

In United States v. O’Brien, the Second Circuit (Kearse, Livingston, Carney) affirmed the conviction of Michael O’Brien for importing and possessing with intent to distribute methylone and anabolic steroids.  The Court held that (1) the District Court properly denied O’Brien’s suppression motion based on the fact that he was experiencing drug withdrawal symptoms at the time of his arrest, (2) the evidence at trial was sufficient to sustain O’Brien’s conviction, and (3) O’Brien failed to timely raise his defense that methylone was designated as a controlled substance through an unconstitutional delegation of Congressional legislative authority to the Attorney General and the DEA.

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The Second Circuit Counts to Three: How One Defendant Became a Career Criminal Over the Course of an Hour

In United States v. Bordeaux, 17-486-cr (Cabranes, Raggi, Vilardo[1]), the Second Circuit held that the defendant’s three prior Connecticut state convictions for first-degree robbery—all of which took place during a single night—satisfied the requirements for conviction under the Armed Career Criminal Act (ACCA), 18 U.S.C. § 924(e).  The opinion confirms that a conviction under Connecticut’s first-degree robbery statute constitutes a “violent felony” within the meaning of the ACCA and continues the majority approach to interpreting the “different occasions” requirement of the Act—which places the greatest emphasis on whether a defendant had time to contemplate his actions between the incidents giving rise to his prior convictions.  Much is at stake for the defendant:  a conviction under Section 924(e) carries with it a mandatory consecutive 15-year term of imprisonment.

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Second Circuit Holds that Connecticut Robbery Inherently Involves Violent Force Under ACCA

In Shabazz v. United States, the Second Circuit (Katzmann, Leval, Berman by designation) again addressed the meaning of “violent felony” under the Armed Career Criminal Act (“ACCA”), this time under its “force clause.”  As readers of this blog will recall, ACCA has been the subject of many appeals during the past year.  See Jacqueline L. Bonneau & Harry Sandick, The Second Circuit Counts to Three: How One Defendant Became a Career Criminal Over the Course of an Hour (Apr. 2, 2018); Joshua Kipnees & Harry Sandick, In Split Decision, Court Again Applies Castleman To Interpret the “Force Clause” of the Armed Career Criminal Act (July 18, 2018); D. Brandon Trice & Harry Sandick, Court Regrets Allowing Successive 2255 Petition in Massey v. United States (July 16, 2018).  At issue in this case was whether Shabazz’s convictions for first and second-degree robbery under Connecticut law constitute violent felonies.  The Circuit held that all convictions for robbery in Connecticut inherently involve the use or threatened use of violent force, and therefore reversed the District Court’s grant of Shabazz’s habeas petition.  Interestingly, the Court based its holding not on an interpretation of the elements of robbery by the Connecticut Supreme Court, but on the inherent danger of violent force associated with the act of robbery.  Given the breadth of this holding, any robbery offense that is similar to the common law definition now likely qualifies as an ACCA predicate offense in the Second Circuit, perhaps cutting off future appeals arising out of convictions for robbery in other jurisdictions.

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Court Clarifies Limitations of Fifth Amendment “Foregone Conclusion” Doctrine in Tax Enforcement Action

In United States of America, 26 U.S.C. Sections 7402(b) and 7604(a): Enforcement of Internal Revenue Service Summons v. Greenfield, 15-543 (August 1, 2016) (Calabresi, Lynch, Lohier), the Court addressed the “foregone conclusion” exception to the Fifth Amendment privilege in the context of an action to enforce an IRS summons for various documents relating to an audit for tax evasion.  The district court (Judge Hellerstein, SDNY) ordered the enforcement of the summons, and denied Greenfield’s motion to quash on Fifth Amendment self-incrimination grounds.  The Court vacated the enforcement order and remanded for further proceedings. 

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Courts Reinstates Embezzlement Charges Dismissed as Untimely, Holding that Dismissal was Based on a Premature Assessment of the Government’s Evidence

In United States v. Sampson, decided August 6, 2018, the Court (Cabranes, Livingston, Carney, C.J.J.) reversed the district court’s dismissal of embezzlement charges levied against former New York State Senator John Sampson.  In a companion decision issued the same day, which we summarize in a separate post, the Court affirmed Sampson’s conviction on obstruction and false statement charges that proceeded to trial.

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Appeal “Tanks” After Circuit Holds That Defendant Gave Implied Consent to Have K-9 Unit Present in His Apartment After Calling 911 to Report Prowler

On July 31, the Second Circuit issued a decision in United States v. Iverson (Kearse, Calabresi, Livingston) and affirmed the conviction of a defendant who had challenged the district court’s denial of his suppression motion and the district court’s mid-trial decision to excuse one of two black persons on the jury for cause right before summations based on an interview of the juror conducted in camera.  The decision presents an interesting set of facts and applies established law in the Second Circuit.

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Court Holds Right to Speedy Trial Attaches at First Indictment or Arrest, Finds WDNY Violation for Third Time in Two Years

The Sixth Amendment guarantees that the “accused shall enjoy the right to a speedy and public trial.”  But when does the clock begin to run?  In United States v. Black, the Second Circuit (Pooler, Newman, and Cote sitting by designation and dissenting) held that the right to a speedy trial attaches at the first indictment or arrest and not when the defendant is accused of a particular charge, as is true with the right to counsel.  On that basis, the Court affirmed the dismissal of criminal charges (relating to a murder) asserted for the first time in a superseding indictment, finding that because the charges stemmed from the same conduct as the initial indictment (which charged an armed robbery that led to the death of victims), the length of delay for speedy-trial purposes was the sixty-eight months between the initial indictment and trial, rather than the considerably shorter period between the superseding indictment and trial.  As the panel repeatedly emphasized, the decision marks the third time in two years that the Circuit has found a speedy trial violation in the Western District of New York.  See United States v. Tigano, 880 F.3d 603 (2d Cir. 2018) (covered here and here); United States v. Pennick, 713 F. App’x 33 (2d Cir. 2017) (summary order). . 

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“Intent to Harm” Not Required for Criminal Conviction Pursuant to Investment Advisers Act of 1940

In United States v. Tagliaferri, 15-536 (May 4, 2016) (Leval, Pooler, Wesley), the Court issued a per curiam order affirming Defendant’s conviction for violations of the Investment Advisors Act of 1940, 15 U.S.C. § 80b-6 (the “1940 Act”), entered by the United States District Court for the Southern District of New York (Abrams, J.).  In the underlying appeal, the Defendant raised several challenges to his conviction by a jury for violations of the 1940 Act, as well as securities fraud, wire fraud, and violations of the Travel Act.

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Newman’s “Meaningfully Close Personal Relationship” Requirement No Longer Good Law

A divided Second Circuit panel (Katzmann, Pooler (dissenting), Chin) on Wednesday upheld the insider trading conviction of former SAC Capital portfolio manager Mathew Martoma.  Confronting its precedent in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), for the first time since the Supreme Court struck down part of the Newman tippee liability standard this past December, see Salman v. United States, 137 S. Ct. 420 (2016), the Court ruled that the “meaningfully close personal relationship” requirement of Newman is no longer good law.  See United States v. Martoma, 14-3599 (2d Cir. Aug. 23, 2017). 

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Circuit Reverses Internet Ban Condition of Supervised Release As Substantively Unreasonable And An Excessive Limitation on Liberty, Not Reasonably Related To The Offense

In United States v. Eaglin, the Second Circuit (Cabranes, Carney, and Vilardo, by designation) considered and rejected two conditions of supervised release:  a complete ban on access to the Internet and a similarly broad ban on the possession of legal adult pornography.  The first portion of the Court’s ruling is part of a broader trend that recognizes the centrality of the Internet to our modern world; it is essential for participation in legal activities and a blanket prohibition on its use must be supported by a more compelling record than existed here.

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Disjunction, Disjunction, What’s Your Function? Despite Statutory “or,” Court Holds Same Conduct May Support Both Modification and Revocation of Supervised Release

At issue in the Court’s September 22, 2016 decision in United States v. Harris, No. 15-1774 (Raggi, J., joined by Judges Newman and Calabresi) is a clever defendant’s embrace of the disjunctive in Section 3583 in urging that the statute governing revocation of supervised release permits a violation of release conditions to serve as the basis to revoke “or” modify supervision – but not both. 

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