Sonneberg v. United States ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
4-4-2003
Sonneberg v. USA
Precedential or Non-Precedential: Non-Precedential
Docket 01-2067
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 01-2067
___________
MILTON SONNEBERG,
Appellant
v.
UNITED STATES OF AMERICA
___________
On Appeal from the United States District Court
for the District of New Jersey
District Court Judge: The Honorable Nicholas H. Politan
(D.C. Civil No. 00-cv-01000)
___________
Submitted Under Third Circuit L.A.R. 34.1(a)
January 14, 2003
Before: ROTH, FUENTES, Circuit Judges, and ALDISERT, Senior Circuit Judge
(Opinion Filed: April 4, 2003)
________________________
OPINION OF THE COURT
________________________FUENTES, Circuit Judge:
Milton Sonneberg appeals the District Court’s denial of his petition for collateral
relief pursuant to 28 U.S.C. 2255. Sonneberg was convicted of conspiracy to commit wire
and mail fraud, wire fraud, and multiple counts each of mail fraud and interstate
transportation of money obtained through fraud. Sonneberg contends in his Section 2255
petition that the Supreme Court’s decision in Neder v. United States, 527 U.S. 1 (1999), is
an "intervening change in law" that establishes that he has been convicted for offense
conduct that is not a crime. We disagree. For the reasons that follow, we will affirm the
District Court’s denial of Sonneberg’s Section 2255 petition.
I. BACKGROUND
Sonneberg was indicted by a federal grand jury on April 23, 1995, along with Irwin
H. Block (a/k/a "Sonny Bloch"), James Barschow, Joseph Glenski, and Bruce Schroeder.
Sonny Bloch pleaded guilty to eight of the thirty-five counts in the indictment on September
18, 1996. A federal grand jury returned a thirty-count superceding indictment against the
remaining four defendants on December 18, 1996. Barschow, Glenski, and Schroeder
pleaded guilty to nine counts on April 9, 1997. Another thirty-count superceding indictment
was filed against Sonneberg on April 23, 1997. In that indictment, Sonneberg was charged
with the following offenses: (1) conspiracy to commit wire fraud and interstate transportation
of money obtained through fraud in violation of 18 U.S.C. 371; (2) conspiracy to commit
mail fraud and interstate transportation of money obtained through fraud in violation of 18
U.S.C. 371; (3) wire fraud in violation of 18 U.S.C. 1343; (4) twenty-three counts of
interstate transportation of money obtained through fraud in violation of 18 U.S.C. 2314;
and (5) four counts of mail fraud in violation of 18 U.S.C. 1341.
A trial commenced on May 1, 1997. In brief, the facts established at trial show that
Sonneberg, Bloch, Barschow, Glenski, and Schroeder conspired to market limited liability
company ("LLC") interests in a series of wireless cable television ventures and in a proposed
radio-station network. The conspirators’ sales pitches promised potential investors
unparalleled opportunities in the cutting-edge technology of wireless cable television systems
and a network of independent broadcasters owned by "Bloch Broadcasting." The problem
with the sales pitches was that there were no viable business ventures behind them. In fact,
the wireless cable systems being promoted did not have any of the resources, such as
channels, sites, and FCC licences, necessary to make them operable, much less profitable.
And "Bloch Broadcasting" was a shell company with no assets. Nonetheless, the promoters
raised millions of dollars from investors. Approximately forty percent of the investor money
was paid to the conspirator-promoters in the form of sales commissions.
Sonny Bloch touted the sale of the LLCs on his nationally-syndicated radio program,
"The Sonny Bloch Show." Bloch had 1.5 million listeners, and a good reputation as a
consumer advocate. He agreed to endorse the sale of the LLCs and to vouch for the character
of the promoters and the financial soundness of the ventures on his radio program. Despite
the fact that Bloch was paid $2,000 per week for these endorsements, he made them sound
personal rather than commercial. The conspirators used Bloch’s radio program to develop
leads to market the LLCs.
The conspirators also developed sales brochures for each of the LLCs they were
promoting. The brochures included inflated financial projections and promised
unrealistically high returns. The brochures misrepresented the true identity of the principal
in the ventures, how the investment money would be allocated, the claims regarding the
subscribership base for the ventures, and the ability of investors to participate in managemen
decisions. The brochures also failed to disclose the prior criminal convictions and civil
injunctions against certain of the conspirators, including Sonneberg.
On May 29, 1997, Sonneberg was convicted of all thirty counts alleged in the
indictment. The District Court sentenced him to a 76 month prison term and ordered him to
pay $5.2 million in restitution. Sonneberg appealed his conviction and sentence. On August
12, 1998, this Court affirmed his conviction and sentence by judgment order. United States
v. Sonneberg, 164 F.3d 621 (3d Cir. 1998) (unpublished, non-precedential opinion). The
Supreme Court denied his petition for certiorari on March 5, 1999.
On March 1, 2000, Sonneberg filed a petition for collateral relief pursuant to 28
U.S.C. 2255. While that petition was pending in the District Court, Sonneberg filed a
petition for a writ of mandamus, which this Court denied on March 20, 2001. On April 6,
2001, the District Court denied his Section 2255 petition and denied him a certificate of
appealability. The District Court denied Sonneberg’s motion to reconsider.
On May 2, 2001, Sonneberg filed a timely notice of appeal and a request for a
certificate of appealability from this Court. By order dated June 18, 2002, this Court grante
Sonneberg a certificate of appealability limited to two of his claims: (1) that the District
Court failed to instruct the jury on an element of the offense; and (2) that the government
used an untenable theory of materiality, resulting in a conviction for offense conduct which
is not a crime.
II. ANALYSIS
The District Court had jurisdiction over Sonneberg’s petition for collateral relief
pursuant to 28 U.S.C. 2255. We have jurisdiction over his appeal pursuant to 28 U.S.C.
2255, 1291. We have plenary review over the District Court’s denial of Sonneberg’s
Section 2255 petition. United States v. Lloyd, 188 F.3d 184, 186 (3d Cir. 1999).
28 U.S.C. 2255 provides, in pertinent part:
A prisoner in custody under sentence of a court established by Act of Congress
claiming the right to be released upon the ground that the sentence was
imposed in violation of the Constitution or laws of the United States, or that
the court was without jurisdiction to impose such sentence, or that the sentence
was in excess of the maximum authorized by law, or is otherwise subject to
collateral attack, may move the court which imposed the sentence to vacate,
set aside, or correct the sentence.
It is well settled that a petitioner generally may not relitigate issues that were decided
adversely to him on direct appeal by means of a Section 2255 petition. See United States v.
DeRewal, 10 F.3d 100, 105 n. 4 (3d Cir. 1993). An exceptions exists, however, when there
has been an "intervening change in law" affecting the claim previously decided adversely to
the petitioner. See Davis v. United States, 417 U.S. 333 (1974).
The certificate of appealability sets forth two claims: (1) that the District Court faile
to instruct the jury on an element of the offense; and (2) that the government used an
untenable theory of materiality, resulting in a conviction for offense conduct that is not a
crime. As Sonneberg’s brief makes clear, these two claims collapse into one argument that,
prior to finding liability for mail or wire fraud on the basis of a material non-disclosure, a
jury must first find that the defendant was under a duty to disclose, and that, in this case,
District Court erred in failing to instruct the jury on this element of the offense.
This claim was previously litigated on direct appeal. The first issue raised in
Sonneberg’s opening brief on direct appeal is "The Jury Was Improperly Permitted to
Convict on the Basis of Nondisclosures." (Supp. App. at p. 9) The arguments he made in
support of the asserted error were as follows: (1) the mail and wire fraud statutes require a
duty to disclose before imposing liability for a material omission; (2) because he had no duty
to disclose his prior guilty plea and civil injunction, he was convicted on a legally insuffic
theory; (3) the jury was never instructed that it had to find that he had a legal duty to disc
and (4) reversal is required because the jury was permitted to find guilt on a legally
impermissible and unconstitutional theory. Id. at 9-10. After considering Sonneberg’s
arguments, this Court affirmed his conviction and sentence. United States v. Sonneberg, 164
F.3d 621 (3d Cir. 1998) (unpublished, non-precedential opinion). Thus, this Court has
already considered the central argument raised by Sonneberg in his Section 2255 petition
namely, that duty to disclose is a required element of the offenses of mail and wire fraud.
Despite the fact that we have already decided this issue adversely to Sonneberg, he
urges us to reconsider it in light of Neder v. United States, 527 U.S. 1 (1999), which he
asserts is an "intervening change in law." We do not agree that Neder is an intervening
change in law warranting relitigation of the issue already decided on direct appeal. First,
Neder is not a "change in law" because the two holdings of Neder do not pertain to the issue
raised by Sonneberg. In fact, Neder did not change the state of the law pertaining to whether
duty to disclose is an element of the offenses of mail and wire fraud. And second, Neder is
not an "intervening" decision.
In Neder, the defendant had been "tried on charges of violating a number of federal
criminal statutes penalizing fraud." 527 U.S. at 4. The government conceded that the distric
court erred in refusing to submit the issue of materiality to the jury with respect to the tax
fraud charges. Id. The Supreme Court held that an instruction that omits an element of the
offense, such as the instruction on tax fraud, does not necessarily render a criminal trial
fundamentally unfair, and is thus subject to harmless-error analysis. Id. at 4, 9. The Court
also held that "materiality is an element of the federal mail fraud, wire fraud, and bank frau
statutes." Id. at 4 (emphasis added).
In this case, the District Court properly instructed the jury that materiality is an
element of the offenses of wire and mail fraud. (App. at pp. 470-471) Sonneberg does not
contest the District Court’s materiality instruction. Instead, Sonneberg argues that the
District Court failed to instruct the jury that duty to disclose is an element of the offenses
wire and mail fraud when there is an allegation of a material non-disclosure. Neither holding
of Neder bears on that argument.
Sonneberg argues, however, that certain language in Neder supports his argument that
the duty to disclose is an element of wire and mail fraud. Specifically, he points to the
Court’s rejection of the government’s argument that Congress "chose to unmoor the federal
mail fraud statute from its common-law analogs . . . ." Neder, 527 U.S. at 24. Based on this
statement, Sonneberg contends that, because duty to disclose was an element of common-law
fraud, it must remain an element of the federal wire and mail fraud statutes. Sonneberg
overlooks the fact that in determining that the common-law element of materiality remains
an element of federal wire and mail fraud, the Court observed that "the fraud statutes did not
incorporate all the elements of common-law fraud," including the elements of reliance and
damage. Id. at 24-25 (emphasis in original). Sonneberg also disregards the fact that the
Court was only considering the element of materiality in the Neder decision. Thus, the
language cited by Sonneberg is not sufficiently precise to be an "intervening change in law"
warranting relitigation of an issue previously decided on direct appeal.
Sonneberg also overlooks the substantial precedent establishing that duty to disclose
is not always a required element of common-law fraud when there has been a material non-
disclosure. In a decision post-dating Neder, the Fourth Circuit recognized that "[t]he
Supreme Court has recently articulated an outer boundary for the interpretation of the federal
fraud statutes," but nonetheless found that "at common law, no fiduciary relationship, no
statute, no other independent legal duty to disclose is necessary to make active concealment
actionable fraud - simple ’good faith’ imposes an obligation not to purposefully conceal
material facts with intent to deceive." United States v. Colton, 231 F.3d 890, 898-900 (4th
Cir. 2000) (citing Neder, 527 U.S. at 1; Strong v. Repide, 213 U.S. 419, 430 (1909); Tyler
v. Savage, 143 U.S. 79, 98 (1892); Stewart v. Wyoming Cattle Ranche Co., 128 U.S. 383,
388 (1888)). Other circuits have similarly recognized that the existence of a disclosure duty
is not an essential element in all common law fraud cases. See e.g. United States v. Autori,
212 F.3d 105, 119 (2d Cir. 2000); United States v. Kelpinger, 776 F.2d 678, 697-98 (7th Cir.
1985); United States v. Townley, 665 F.2d 579, 585 (5th Cir. 1982); United States v. Allen,
554 F.2d 398, 410 (10th Cir. 1977). Thus, it is clear that both before and after the
Neder decision, duty to disclose is not a required element of the common-law fraud offenses
when there have been material non-disclosures.
Not only is Neder not an "change in law" with respect to Sonneberg’s claim, it also
is not "intervening." Sonneberg’s conviction and sentence were affirmed by this Court on
August 12, 1998. He petitioned the Supreme Court for certiorari, and raised the issue of
whether "a defendant may be convicted under the federal mail and wire fraud statutes for
failing to disclose certain information despite having no duty to disclose that information."
(Supp. App. at p. 232) Sonneberg’s petition for certiorari was pending when the Court
decided Neder. In fact, Neder was decided on February 23, 1999, and the Court denied
Sonneberg’s petition on March 5, 1999. Because Sonneberg’s conviction was not final until
his petition for certiorari was denied, see Kapral v. United States, 166 F.3d 565, 570 (3d Cir
1999), the Neder decision was not "intervening." Moreover, because Sonneberg’s petition
was still pending when Neder was decided, if the Court thought that Neder was relevant to
Sonneberg’s claims, the Court could have remanded his case for further proceedings.
Instead, the Court simply denied Sonneberg’s petition.
In sum, because Sonneberg has not established an "intervening change in law," he is
not entitled to relitigate the claim decided adversely to him on direct appeal. Accordingly,
we will affirm the District Court’s denial of Sonneberg’s Section 2255 petition.
_____________________________
TO THE CLERK OF THE COURT:
Kindly file the foregoing Opinion.
/s/ Julio M. Fuentes
Circuit Judg