United States v. Mendlowitz ( 2023 )

21-2049
United States v. Mendlowitz
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order
filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
City of New York, on the 2nd day of March, two thousand twenty-three.
PRESENT: Amalya L. Kearse,
Rosemary S. Pooler,
Steven J. Menashi,
Circuit Judges.
____________________________________________
UNITED STATES OF AMERICA,
Appellee,
v. No. 21-2049
MICHAEL MENDLOWITZ, also known as
MOSHE MENDLOWITZ,
Defendant-Appellant. *
____________________________________________
* The Clerk of Court is directed to amend the caption as set forth above.
For Appellee: JILAN J. KAMAL, Assistant United States
Attorney (David Abramowicz, Dina
McLeod, Won S. Shin, Assistant United
States Attorneys, on the brief), for Damian
Williams, United States Attorney for the
Southern District of New York, New York,
NY.
For Defendant-Appellant: ALEXANDRA A.E. SHAPIRO, Shapiro Arato
Bach LLP (Theodore Sampsell-Jones, Alice
Buttrick, Shapiro Arato Bach LLP, Patrick J.
Smith, Brian Burns, Smith Villazor LLP, on
the brief), New York, NY.
Appeal from a judgment of the United States District Court for the Southern
District of New York (Broderick, J.).
Upon due consideration, it is hereby ORDERED, ADJUDGED, and
DECREED that the judgment of the district court is AFFIRMED.
Michael “Moshe” Mendlowitz was the President and Chief Executive
Officer of a payment processing company called Commerce Payment Systems
(“CPS”). While at CPS, Mendlowitz oversaw a sales operation by which CPS
agents guaranteed certain fees and rates to merchants, then raised those fees and
rates later on, often without advance notice. Mendlowitz’s conduct ranged from
approving misleading sales scripts for sales agents to withholding Terms and
Conditions sheets in contracts with merchants. After an audit from CPS’s parent
company, EVO Payments, Inc. (“EVO”), Mendlowitz implemented a system that
would auto-initial the rest of the Terms and Conditions sheets for merchants after
they had signed the first page of an agreement without needing to review the
additional pages.
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Mendlowitz was convicted of wire fraud in violation of 18 U.S.C. §§ 1343and 2 and conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349. He
challenges his conviction on four grounds. First, he argues that the district court
erred when it did not ask specifically about potential antisemitic bias at jury
selection. Second, he claims that the district court erred in excluding his proffered
expert witness from testifying. Third, he argues that the district court erred in
excluding a recording of Mendlowitz from being played at trial. Fourth,
Mendlowitz contends that the district court’s cumulative evidentiary errors
warrant a new trial. We conclude that the district court did not err in conducting
voir dire. We also conclude that even if the district court erred in excluding the
expert witness’s testimony and the recording, those errors were harmless
individually and cumulatively. We assume the parties’ familiarity with the
underlying facts and procedural history.
I
Mendlowitz is an Orthodox Jew who wears a yarmulke. In discussions with
the district court in advance of voir dire, defense counsel introduced the issue by
stating, “my client is Jewish, … he’s Orthodox, he wears a yarmulke in court, and
he’s going to wear it in trial. And that raises the unfortunate specter of bias of
prospective jurors.” Defense counsel feared that the nature of the charges in this
case—an Orthodox Jewish credit-card company executive defrauding small
businesses by overcharging them while charging the honest rates to his Jewish
friends and family—could inflame antisemitic prejudices. Mendlowitz sought to
have the district court ask the following two questions to potential jurors during
voir dire:
[1.] The defendant is Jewish-American. Do you have any personal
views towards Jewish people that would cause you to doubt in any
way your ability to be a fair and impartial juror in a financial case? …
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[2.] Do you have any views on Jewish people in business or related to
finance—either positive or negative—that would affect your ability to
be a fair and impartial juror?
App’x 111.
The government objected to the questions on the grounds that the questions
were not relevant to the allegations or to any defense and that the questions also
might suggest the prosecution itself was motivated by antisemitism. The district
court instead asked the following question: “Would anything about the physical
appearance of Mr. Mendlowitz influence you in this case and/or cause you to
doubt in any way your ability to be a fair and impartial juror … in a financial case?”
App’x 139. Mendlowitz argues that the replacement of his questions with the
district court’s question about physical appearance deprived him of his right to a
fair and impartial jury. We disagree.
“[J]ury selection falls ‘particularly within the province of the trial judge,’”
and “[a] trial court’s broad discretion in this area includes deciding what questions
to ask prospective jurors.” United States v. Tsarnaev, 142 S. Ct. 1024, 1034 (2022)
(quoting Skilling v. United States, 561 U.S. 358, 386 (2010)). “Only when there are
more substantial indications of the likelihood of racial or ethnic prejudice affecting
the jurors in a particular case does the trial court’s denial of a defendant’s request
to examine the jurors’ ability to deal impartially with this subject amount to an
unconstitutional abuse of discretion.” Rosales-Lopez v. United States, 451 U.S. 182,
190 (1981) (plurality opinion). Even then, “federal trial judges are not required to
ask every question that counsel … believes is appropriate.” United States v. Lawes,
292 F.3d 123, 128 (2d Cir. 2002). When the defense requests a certain question, “trial
judge[s are] not required to put the question in any particular form, or to ask any
particular number of questions on the subject, simply because requested to do so
by” the defense. Ham v. South Carolina, 409 U.S. 524, 527 (1973). The district court
was not required to ask about antisemitic prejudices in the exact way that
Mendlowitz requested. The district court needed only to “cover the subject.”
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Mu’Min v. Virginia, 500 U.S. 415, 424 (1991) (quoting Aldridge v. United States, 283
U.S. 308, 311 (1931)).
In United States v. Nieves, we reversed a conviction and remanded for a new
trial because “the district court abused its discretion by failing to take any of
several possible steps that could have effectively screened prospective jurors for
[gang-related] bias, or to take other steps to counter any bias that may in fact have
existed among the venire.” 58 F.4th 623, 626 (2d Cir. 2023). In Nieves, “[t]he
government’s case-in-chief centered largely” on evidence of the defendant’s
participation in a gang. Id. at 627. The defendants had requested that the district
court ask certain questions about gang-related bias, and “[t]he parties also
suggested that the district court question jurors about a suite of other topics.” Id.
at 628. Yet “[t]he district court instead opted for a far swifter approach than either
side had advocated.” Id. The district court “did not ask—overtly or otherwise—
about gang-related bias, notwithstanding that the government’s central theory of
the case was that the assault was motivated by gang rules, and its evidence in
support of that theory consisted of gang-member testimony and gang-related
expert testimony.” Id. at 640. The district court even “deliberately declined to
mention that the case concerned gangs at all, or at least to caution the jurors that
any feelings they might have about gangs or gang members must be set aside in
service of their duty to decide, based on the evidence presented, whether the
government established all elements of the charged crimes beyond a reasonable
doubt.” Id. Moreover, the court did not, “as a last resort,” even “attempt to
counterbalance any of this by asking additional biographical or attitudinal
questions that might have circumstantially unearthed inferable bias among
potential jurors, permitting either the court to dismiss them for cause, or [the
defendant] to exercise his peremptory challenges to the same effect.” Id.Because the district court did not “provide some opportunity for prospective
jurors to be meaningfully screened for biases relevant to [the] particular defendant
or the charges against [the] defendant,” we held in Nieves that the district court
“exceeded the bounds of its discretion.” Id. at 638-40.
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In this case, the district court declined to ask Mendlowitz’s proposed
questions. Instead, the district court asked a question that aimed to achieve the
same purpose of probing any potential bias a juror may have. We recognize that a
question about a defendant’s physical appearance cannot always be used as an
adequate substitute to ferret out religious bias. However, here, the district court’s
question was a reasonable substitute for Mendlowitz’s proposed questions. In fact,
the question had the desired effect, as evidenced by one juror who responded to
the question by stating: “The physical appearance of the defendant, yes, he’s
wearing a yarmulke and he’s supposed to be a student of the Torah. He’s not
supposed to steal. That is my initial impression.” App’x 130. That juror was
removed for cause.
Nieves concerned the rare case in which a district court failed to take any
steps to identify a potential bias that was implicated by the government’s case.
This case does not resemble that one. Mendlowitz has not shown that the district
court’s decision to substitute its question in place of his proposed questions was
an abuse of the trial court’s broad discretion in jury selection. We therefore decline
to reverse Mendlowitz’s conviction on this ground.
II
Mendlowitz also challenges two of the district court’s evidentiary rulings:
the district court’s exclusion of Mendlowitz’s proffered expert witness and the
district court’s exclusion of a recorded conversation between Mendlowitz and a
cooperating government witness who was wearing a wire at the time. Mendlowitz
additionally contends that even if neither of these purported errors is itself enough
to warrant reversal, the errors taken together cumulatively prejudiced him.
Though the district court may have erred in its evidentiary rulings, we conclude
that the errors were harmless. The evidence against Mendlowitz was strong
enough that, even if the district court had allowed the expert to testify and had
admitted the recording, it is exceedingly unlikely that the result would have been
different.
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A
Mendlowitz first challenges the district court’s exclusion of his proffered
expert witness, Patrick Moran, an expert on the practices of the payment-
processing industry. Moran planned to testify about the relationship between
companies such as CPS and its parent company EVO as well as about the standard
practices surrounding pricing, fees, and disclosures in the industry. Mendlowitz
argues that the district court’s exclusion of Moran’s testimony was erroneous.
The district court excluded Moran’s testimony for four reasons. First, the
district court concluded that Moran’s testimony “was not relevant.” Special App’x
11. Second, the district court determined that Moran would not provide the jury
with “information that was outside of the jury’s knowledge.” Id. Third, the district
court took the view that Moran’s testimony “was not relevant or connected to
Mendlowitz’s state of mind.” Id. Fourth, the district court held that “even if
Moran’s testimony were relevant and admissible, its relevancy is outweighed by
the likelihood of juror confusion.” Id.“Evidence is relevant” if “it has any tendency to make a fact more or less
probable than it would be without the evidence” and “the fact is of consequence
in determining the action.” Fed. R. Evid. 401; see also United States v. Litvak, 889
F.3d 56, 68 (2d Cir. 2018) (“Relevancy is a very low standard.”) (internal quotation
marks omitted). In general, “[r]elevant evidence is admissible” while “[i]rrelevant
evidence is not admissible.” Fed. R. Evid. 402. Yet “[t]he court may exclude
relevant evidence if its probative value is substantially outweighed by a danger of
one or more of the following: unfair prejudice, confusing the issues, misleading
the jury, undue delay, wasting time, or needlessly presenting cumulative
evidence.” Fed. R. Evid. 403. When a party seeks to introduce expert testimony,
the Federal Rules of Evidence provide that “[a] witness who is qualified as an
expert by knowledge, skill, experience, training, or education may testify in the
form of an opinion or otherwise if” the following four criteria are met:
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(a) the expert’s scientific, technical, or other specialized knowledge
will help the trier of fact to understand the evidence or to determine
a fact in issue; (b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods;
and (d) the expert has reliably applied the principles and methods to
the facts of the case.
Fed. R. Evid. 702.
Mendlowitz’s good faith defense was that he “could have reasonably
believed CPS was not defrauding anyone simply by following standard industry
practices.” Appellant’s Br. 36. Moran’s testimony would have established those
standard industry practices. The district court opined that “[t]he mere fact that
Mendlowitz was an owner and executive of CPS is insufficient to establish an
inference that Mendlowitz was aware of industry practices during the relevant
time period.” Special App’x 17. However, Mendlowitz notes that his position as a
credit card processing company executive would in fact raise a fair inference that
he was aware of the standard practices of his own industry.
The district court noted that jurors generally have knowledge about credit
cards from participating in the marketplace. Mendlowitz contends that jurors
would not necessarily know about the relationships between credit-card
processing companies and their subsidiaries as well as standard industry practices
with respect to communications between credit-card processing companies and
merchants.
The district court observed “that CPS and EVO witnesses—many of whom
had either prior experience working for credit card processors or, in the case of
[two] EVO employees …, worked with independent sales organizations ... like
CPS—testified about certain practices in the credit card processing industry.” Id.
at 13-14. For that reason, “there was no need for expert testimony related to
industry practice.” Id. at 15-16. But scattered testimony from government
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witnesses who happened to work at other companies was not necessarily a
substitute for an expert’s testimony about standard industry practices.
The district court was concerned that “Moran had no personal knowledge
related to CPS, EVO or Mendlowitz’s conduct, thus making his proposed
testimony attenuated from what actually occurred at CPS.” Id. at 17. The district
court remarked that “there was a likelihood of jury confusion that the standard
against which Mendlowitz’s conduct was to be measured was industry practice
rather than whether his conduct violated the wire fraud statute.” Id. Mendlowitz’s
defense, however, turned on whether he could have believed his conduct was
consistent with industry practice.
B
Mendlowitz also challenges the district court’s exclusion of a recording—
made by cooperating witness David Devers—of a conversation between
Mendlowitz and Devers. While Devers was wearing a wire, he had a conversation
with Mendlowitz about the auto-initialing feature that Mendlowitz implemented
for agreements with CPS. The feature would auto-populate a customer’s initials
on the third through fifth pages of the agreement with CPS after the customer
signed the first page. Mendlowitz argues that the district court’s exclusion of this
recording from the evidence at trial was erroneous.
Mendlowitz and Devers had the following exchange about the auto-
initialing feature:
MENDLOWITZ: Well they are—the thing is when they initial the first
page.
DEVERS: Yeah.
MENDLOWITZ: It initials everything. Automatically.
DEVERS: But we can’t make it go one by one?
MENDLOWITZ: We could. You know, it would be a little bit more
intrusive.
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App’x 622. Mendlowitz wanted to admit the recording as evidence that his intent
with the auto-initialing program was not to conceal the Terms and Conditions
pages from the customers but rather to make the signing process easier for them
(that is, less “intrusive”). 1
The district court declined to admit the evidence, explaining that it would
not be allowed “with this witness,” referring to Devers. App’x 343. In a post-trial
opinion and order denying Mendlowitz’s motion for a new trial under Rule 33, the
district court elaborated on its reasoning for excluding the recording. The district
court explained that Mendlowitz’s statement—that making customers initial
every page of the Terms and Conditions “would be a little bit more intrusive”—
was “offered for the truth” because Mendlowitz was arguing that the program
was implemented for convenience and not to defraud merchants. Special App’x
20-21. Furthermore, the district court noted, “even assuming the statement is
admissible, Mendlowitz’s argument that his statement demonstrates his state of
mind with regard to the terms and conditions is of limited relevance and probative
value.” Id. at 21.
At oral argument on appeal, the government conceded that the recording
was not hearsay. See Oral Argument Audio Recording at 29:21. The statement in
the recording was not offered to prove the truth of the matter asserted—that it
would be intrusive to make customers sign every page. Instead, the fact that
Mendlowitz would make such a statement was suggestive of his state of mind.
The Federal Rules of Evidence provide that relevant evidence—even
evidence of limited relevance—“is admissible.” Fed. R. Evid. 402. While the district
1 See App’x 342 (Mendlowitz’s counsel stating “I think that the theory of the
government’s case ... is that throughout the indictment period the terms and conditions
were withheld through January 2015 for the purpose of advancing the fraud scheme by
keeping important information out of the hands of the merchants and that thereafter the
terms and conditions were concealed through the auto-population feature. This is
counter to that, Judge, a realtime expression of state of mind”).
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court may “exclude relevant evidence if its probative value is substantially
outweighed” by one of the Rule 403 factors, the district court here made no finding
that the recording presented “a danger of ... unfair prejudice, confusing the issues,
misleading the jury, undue delay, wasting time, or needlessly presenting
cumulative evidence”—let alone such a finding that would substantially outweigh
the recording’s probative value. Fed. R. Evid. 403.
C
Yet “[e]ven if a district court errs, a defendant ordinarily is not entitled to a
new trial if those errors were harmless—i.e., unimportant in relation to everything
else the jury considered on the issue in question.” United States v. Zhong, 26 F.4th
536, 558 (2d Cir. 2022) (internal quotation marks and alteration omitted). Here, we
conclude that even if the district court erred, its errors were harmless given the
significant evidence against Mendlowitz.
The evidence against Mendlowitz was overwhelming. Mendlowitz
approved sales scripts that gave false information to customers. For six years, he
also withheld key Terms and Conditions pages from merchant agreements with
CPS customers. Those pages related to material aspects of the merchant-
customer’s agreement, and the terms were often in direct contradiction to the
representations that CPS’s sales representatives made to potential customers
during the sales process. See Special App’x 27-28; App’x 183-84, 464-65. The jury
heard evidence that when asked about this practice, Mendlowitz told CPS
employees that he was worried that providing the omitted Terms and Conditions
pages “would kill the deal.” App’x 277.
EVO audited CPS, and after the audit found that Mendlowitz was
withholding the Terms and Conditions pages, EVO required that CPS include the
pages going forward. Even then, Mendlowitz did not simply include the Terms
and Conditions pages in the customer agreements. Instead, he implemented a
feature for the signing of the agreements that auto-populated customers’ initials
on the third through fifth pages of the agreement after customers signed the first
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page. Throughout this time, CPS kept a list of “platinum” merchants—“usually
[Mendlowitz’s] friends and family”—who would not be charged the additional
fees. App’x 279.
Moran’s testimony would not have changed the fact that the evidence
demonstrated Mendlowitz’s intent to defraud CPS customers. Regardless of the
standard industry practices, the evidence indicated that Mendlowitz concealed the
Terms and Conditions pages because revealing the terms “would kill the deal.”
App’x 277. This comment was not the only basis for the conclusion that
Mendlowitz acted with fraudulent intent. Testimony indicated that Mendlowitz
wanted to “[s]queeze [customers] for as much as possible” during the time
between customers signing up with CPS and canceling their accounts, which was
not an infrequent occurrence. Supp. App’x 55-56. In addition, CPS incentivized
sales agents to mislead customers because the agents could keep sales
commissions even if the customers canceled after CPS started charging fees that
were undisclosed in the sales process.
The recording of Mendlowitz and Devers also would not have undermined
the jury’s finding of Mendlowitz’s fraudulent intent. The May 2015 recording
came months after Mendlowitz implemented the auto-initialing feature in January
2015 and years after he started withholding the Terms and Conditions pages from
customers in 2009. The recording does not establish that Mendlowitz’s intent was
benign. In the recording, Mendlowitz does not indicate that the intrusiveness of
signing multiple pages was his actual or only reason for the auto-initialing feature,
especially in light of his six years of withholding the Terms and Conditions from
CPS customers.
D
Mendlowitz argues that the district court’s evidentiary errors, taken
together, cumulatively prejudiced him. We disagree.
In United States v. Certified Environmental Services, we found that
“evidentiary errors and prosecutorial misconduct[] infected every stage of the
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trial” before the district court. 753 F.3d 72, 96 (2d Cir. 2014). However, we
“hesitate[d] to vacate and remand [the] case for a new trial based on any one of
the errors … in isolation, or perhaps even any one category of those errors. But
considering the record as a whole, we [were] compelled to conclude a new trial
[was] warranted.” Id. We decided that the various evidentiary errors, along with
the prosecutorial misconduct, worked a “cumulative prejudice” on the
defendants. Id. at 95. We vacated the defendants’ convictions and remanded the
case for a new trial. See id. at 97.
The facts of Certified Environmental Services were particularly egregious,
including references by the prosecutor to the potential consequences of the verdict.
See id. at 95 (“[The defendant] instructed everybody to violate the law. She
gathered them. She marshalled them. She still works for [Certified Environmental
Services (‘CES’)]. CES is still in business. Your verdict is going to have
consequences, ladies and gentlemen.”). The lesson of Certified Environmental
Services is that in certain cases, when several evidentiary errors combine with
various examples of prosecutorial misconduct to render a trial unfair, a new trial
is warranted. Here, Mendlowitz does not allege prosecutorial misconduct. The
evidentiary errors here, even when taken together, did not cumulatively prejudice
Mendlowitz in light of the significant amount of evidence of his guilt.
* * *
We have considered Mendlowitz’s remaining arguments, which we
conclude are without merit. For the foregoing reasons, we AFFIRM the judgment
of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
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