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United States v. Huddleston

United States District Court, E.D. Tennessee, Knoxville Division

August 3, 2017




         This matter is before the Court on Chief Magistrate Judge Clifford C. Shirley's Report and Recommendation [doc. 58], Defendants' Joint Objections to the Report and Recommendation [doc. 61], and the United States' Response [doc. 64]. For the reasons herein, the Court will overrule the objections and accept Judge Shirley's Report and Recommendation in whole.

         I. Background

         In this criminal action, the United States alleges that Protech Metal Finishing, LLC (“Protech”)-an East Tennessee company that specializes in applying plating to metal parts-is a contractor or subcontractor to the Department of Defense. [Superseding Indictment, doc. 35, at 1-2]. Specifically, the United States claims that the Department of the Army awarded to Protech three military contracts, which required Protech to apply nickel-plating finishes to ammunition racks for use in battle tanks. [Id. at 2, 7]. According to the United States, Defendants knowingly failed to follow the contractual specifications relating to the nickel-plating finishes and tried, through various deceptive acts, to conceal their failures to follow them. [Id. at 7-9]. The United States also alleges that Defendants instructed Protech's employees not to meet the specifications and to conceal their failure to meet them. [Id. at 8-9].

         As a result, the United States charged Defendants with multiple criminal offenses, including a Klein conspiracy under 18 U.S.C. § 371, which comprises Count I of the United States' Superseding Indictment. [Id. at 6-12]. As part of this conspiracy, the United States maintains that Defendants (1) defrauded the Department of Defense by providing it with racks that they knew did not adhere to contractual specifications, (2) impaired and impeded the Department of Defense from evaluating Protech's contractual performance, and (3) impaired and impeded the Environmental Protection Agency (“EPA”) from enforcing statutes and regulations concerning the storage of hazardous waste, which Protech generated as a byproduct of its plating processes. [Id. at 6-7, 9]. In response to the United States' charge under § 371, Defendants moved to dismiss Count I based on a twofold argument. First, they maintain that the United States violates the doctrine of duplicity because it alleges three distinct conspiracies in Count I. [Defs.' Mot. to Dismiss, doc. 21, at 1-3]. Second, they contend that the type of conspiracy in this case, a Klein conspiracy, is not chargeable under § 371. [Defs' Second Mot. to Dismiss, doc. 23, at 1-4]. In the alternative, Defendants move to strike surplusage in Count I. [Defs.' Mot. to Strike, doc. 17, at 1-6].[1]

         After conducting a hearing on Defendants' motions, Judge Shirley concluded that the United States adequately alleges a Klein conspiracy, that the allegations in Count I are not duplicitous, and that Count I has no surplusage. [R & R. at 2]. He therefore recommended that this Court should deny Defendants' motions, with the exception of permitting a special verdict form. [Id.]. Defendants timely objected to Judge Shirley's recommendations. The Court will now address their objections.

         II. Standard of Review

         When reviewing a magistrate judge's recommendation on a non-dispositive issue, the Court must accept that recommendation unless it is clearly erroneous or contrary to law. 28 U.S.C. § 636(b)(1)(A); Fed. R. Crim. P. 59(a). If the magistrate judge's recommendation “leaves the reviewing court with ‘a definite and firm conviction that a mistake has been committed, '” it is clearly erroneous or contrary to law. Tri-Star Airlines, Inc. v. Willis Careen Corp. of L.A., 75 F.Supp.2d 835, 839 (W.D. Tenn. 1999) (quoting Heights Cmty. Congress v. Hilltop Realty, Inc., 774 F.2d 135, 140 (6th Cir. 1985)). When reviewing a magistrate judge's recommendation on a dispositive issue, on the other hand, the Court conducts a de novo review of that recommendation. 28 U.S.C. § 636(b)(1); Fed. R. Crim. P. 59(b)(3). A de novo review requires the Court “to give fresh consideration to those issues to which specific objection has been made by a party.” United States v. Raddatz, 447 U.S. 667, 675 (1980) (quotation omitted). In doing so, the Court reaches “the ultimate determination of the matter” through its own judicial discretion. Id. at 675-676. After its review, it “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1).

         III. Analysis

         18 U.S.C. § 371 is the federal general conspiracy statute-in contrast to other federal conspiracy statutes that deal with specific types of conspiracies, like the RICO conspiracy statute under 18 U.S.C. § 1962(d)-and it proscribes a conspiracy (1) to commit an offense against the United States or (2) to defraud the United States:

If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.

18 U.S.C. § 371. The statute's first clause is known as the “offense clause, ” whereas the statute's second clause is known as the “defraud clause.” See United States v. Minarik, 875 F.2d 1186, 1186-87 (6th Cir. 1989) (“The statute is written in the disjunctive in order to criminalize two categories of conduct: conspiracies to commit offenses specifically defined elsewhere in the federal criminal code, and conspiracies to defraud the United States.”). In the defraud clause, Congress never defined the phrase “to defraud the United States.”

         A. Defendants' First Objection

         Defendants' initial objection strikes at the relationship between § 371's defraud clause and a doctrine known as the “Klein conspiracy doctrine, ”[2] a body of federal precedent in which courts have held that the term “to defraud” under § 371 requires a broader definition than that same term requires in its common-law form. See United States v. Collins, 78 F.3d 1021, 1037 (6th Cir. 1996). Defendants contend that courts, at common law, have historically viewed the infinitive verb “to defraud” to mean the deprivation of money or property by some dishonest means. [Defs.' Br. Klein Conspiracy, doc. 25-1, at 2]. They argue that the words “to defraud” in § 371 ought to receive its traditional meaning because Congress chose not to define it. [Id. at 18]; see Evans v. United States, 504 U.S. 255, 259 (1992) (“It is a familiar ‘maxim that a statutory term is generally presumed to have its common-law meaning.” (quotation omitted)); but see Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 115 (2001) (“Canons of construction need not be conclusive and are often countered, of course, by some maxim pointing in a different direction.”); Karl N. Llewellyn, Remarks on the Theory of Appellate Decision and the Rules or Canons of About How Statutes Are to Be Construed, 3 Vand. L. Rev. 395, 399 (1950) (launching a now-famous attack against judicial canons of statutory interpretation and noting that for each canon of statutory interpretation, an opposite canon exists and “lead[s] in [a] happily variant direction[]”).

         Instead of applying this common-law definition to § 371-a definition that would limit the statute's reach to fraud resulting in the deprivation of money or property- courts have relied on the Klein conspiracy doctrine to construe the term “to defraud” more much broadly so that it includes “any interference with a lawful governmental function by dishonest means.” [Defs.' Br. Klein Conspiracy at 2 (emphasis added)]. Defendants claim that courts, in adopting this definition under the Klein conspiracy doctrine, have transgressed their authority by enshrining into case law “a common law crime, created by the courts rather than Congress.” [Id. at 16-17 (quotation omitted)]. Defendants therefore urge the Court to dismiss Count I of the superseding indictment. Because they challenge the superseding indictment's sufficiency, they raise a dispositive issue, see, e.g., United States v. Tigner, No. 2:15-cr-20043-JTF-dkv, 2016 WL 320994, at *1 (W.D. Tenn. Jan. 25, 2016); Brown v. United States, 187 F.Supp.2d 887, 895 (E.D. Mich. 2002), which the Court reviews through the prism of the de novo standard.

         Against the backdrop of Defendants' arguments, Defendants concede-as they must-that the Klein conspiracy doctrine is “well-settled common law, ” and they admit that “this Court is bound by controlling Sixth Circuit precedent in this matter.” [Defs.' Mot. to Dismiss at 3]. Indeed, the Sixth Circuit has acknowledged that the words “to defraud” in § 371 have “very broad meaning” and “extend[] beyond [their] common law usage and include[] interference or obstruction of a lawful governmental function ‘by deceit, craft or treachery or at least by means that are dishonest.'” Collins, 78 F.3d at 1037 (quotation omitted)); see United States v. Thompson, 366 F.2d 167, 170 (6th Cir. 1966) (“It has long been established that [§ 371's] statutory language is not confined to fraud as that term has been defined in the common law.” (quoting Dennis v. United States, 384 U.S. 855, 861 (1966))). In fact, Defendants recognize that every federal circuit adheres to the Klein conspiracy doctrine. [Defs.' Br. Klein Conspiracy at 10-11].

         And what is more, the Supreme Court has hardly been mum about its impression of the Klein conspiracy doctrine-it too has followed the doctrine through its own lineage of precedent. Dennis, 384 U.S. at 860-61; Lutwak v. United States, 344 U.S. 604, 608-10 (1953); Glasser v. United States, 315 U.S. 60, 66 (1942); Hammerschmidt v. United States, 265 U.S. 182, 188 (1924); Haas v. Henkel, 216 U.S. 462, 479 (1910); see McNally v. United States, 483 U.S. 350, 358 n.8 (1987) (“‘[A] statute which . . . has for its object the protection of the individual property rights of the members of the civic body, is one thing; a statute which has for its object the protection and welfare of the government alone . . . [is] quite another.' Section 371 is a statute aimed at protecting the Federal Government alone[.]” (quotation omitted)); Tanner v. United States, 483 U.S. 107, 128 (1987) (noting that “we have repeatedly stated” that § 371 is broad enough to cover “any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any department of Government” (emphasis added) (internal quotation marks and quotation omitted)); United States v. Coplan, 703 F.3d 46, 62 (2d Cir. 2012) (inviting the Supreme Court to reconsider the viability of the Klein conspiracy doctrine, but without success), cert. denied, 134 S.Ct. 71 (2013).

         As Defendants are well aware, this Court and all district courts in this circuit are limited in their decision-making abilities by the doctrine of stare decisis, the “‘venerable principle' that a prior published decision remains controlling unless overturned by an inconsistent decision of the United States Supreme Court or by [the Sixth Circuit] sitting en banc.” Brown v. United States, 462 F.3d 609, 620 (6th Cir. 2006) (Graham, J., dissenting) (quotation omitted); see Michigan v. Bay Mills Indian Cmty., 134 S.Ct. 2024, 2036 (2014) (stating that “stare decisis is a foundation stone of the rule of law”); Welch v. Tex. Dep't of Highways & Pub. Transp., 483 U.S. 468, 478-79 (1987) (recognizing that “[t]he rule of law depends in large part on adherence to the doctrine of stare decisis, ” because it is “a natural evolution from the very nature of our institutions” (internal quotation marks and quotation omitted)); United States v. Hunt, 278 F. App'x 491, 500 (6th Cir. 2008) (stating that the Sixth Circuit's published decisions “must be followed” by district courts, in keeping with stare decisis (emphasis added)). Although the Klein conspiracy doctrine has ...

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