United States v. Peake

United States Court of Appeals
For the First Circuit
No. 16-2356
UNITED STATES OF AMERICA,
Appellee,
v.
FRANK PEAKE,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Daniel R. Domínguez, U.S. District Judge]
Before
Howard, Chief Judge,
Selya and Lipez, Circuit Judges.
David Oscar Markus, with whom Mona E. Markus, A. Margot Moss,
and Markus/Moss PLLC were on brief, for appellant.
Sean Sandoloski, Attorney, Antitrust Division, United States
Department of Justice, with whom Brent Snyder, Acting Assistant
Attorney General, James J. Fredricks and Lisa M. Phelan, Attorneys,
Antitrust Division, were on brief, for appellee.
October 23, 2017
SELYA, Circuit Judge. Defendant-appellant Frank Peake,
smarting under the double sting of his conviction for antitrust
conspiracy and this court's affirmance of that conviction, asked
the district court to wipe the slate clean and grant him a new
trial based on freshly discovered evidence. The district court
demurred. Peake appeals. After careful consideration, we affirm
the judgment below.
I. BACKGROUND
We sketch the facts, mindful that the reader who hungers
for more exegetic detail may consult our earlier opinion affirming
the underlying conviction and the district court's thoughtful
rescript denying the appellant's motion for a new trial. See
United States v. Peake (Peake I), 804 F.3d 81 (1st Cir. 2015),
cert. denied, 137 S. Ct. 36 (2016); United States v. Peake (Peake
II), No. 11-cr-512, 2016 WL 8234673 (D.P.R. Oct. 18, 2016).
The government's case against the appellant had its
roots in "one of the largest antitrust conspiracies" in United
States history. Peake I, 804 F.3d at 84. Between 2002 and 2008,
Sea Star Line (Sea Star) and Horizon Lines (Horizon), both leading
freight carriers, agreed to fix rates and surcharges for Puerto
Rico-bound cargo in a multi-pronged effort to maintain market share
and to squelch competition.1 See id. at 85. In 2003, the appellant
1Although not relevant here, a third company, Crowley Lines,
was part of the conspiracy.
- 2 -
became Sea Star's chief operating officer and, later, its
president. During his tenure, Sea Star reaped over half-a-billion
dollars in total revenue. See id. at 99-100.
While the appellant joined the conspiracy in 2005, we
fast-forward to November of 2011, at which time, a federal grand
jury indicted the appellant on a charge of conspiracy to violate
section one of the Sherman Act, which proscribes "agreements in
restraint of trade or commerce 'among the several [s]tates.'" Id.
at 86 (quoting 15 U.S.C. § 1). During the appellant's nine-day
trial in 2013, the government introduced testimony from three
cooperating witnesses: Gabriel Serra (a Horizon senior vice
president), Greg Glova (a mid-level Horizon executive who reported
to Serra), and Peter Baci (a Sea Star executive who reported to
the appellant). These three witnesses consistently described the
conspiracy's modus operandi and hierarchical structure.
Pertinently, Baci and Glova would resolve day-to-day issues
relating to pricing and market-share allocation, while the
appellant and Serra would settle any lingering disputes. For
instance, Serra testified that when Walgreens, a significant
importer of consumer goods to Puerto Rico, decided to deal
exclusively with Horizon rather than splitting shipping contracts
between Horizon and Sea Star, Serra and the appellant agreed that
Horizon "would compensate" Sea Star for its lost revenue "by
shifting cargo to Sea Star vessels" and paying Sea Star to carry
- 3 -
Horizon cargo. Id. at 85. This trio of witnesses also described
meetings that the appellant had with Horizon officials regarding
the conspiracy, including a 2006 summit meeting in Orlando at which
the appellant and Serra resolved price-fixing and market-
allocation issues.
The government's case included a trove of incriminating
e-mails linking the appellant to the conspiracy. Among these
e-mails was one sent by the appellant to a Horizon executive
discussing prices quoted to a customer and expressing the
appellant's desire to "avoid a price war." Id. In other e-mails,
the appellant consulted with Horizon officials before sending
proposals to potential customers so that the two companies would
maintain balanced market shares.
All in all, an "overwhelming amount" of evidence,
including travel and telephone records, corroborated the
appellant's leading role in orchestrating the conspiracy. Id. at
94. Indeed, the evidence showed that the appellant and Serra had
more than 300 conversations, using their personal telephones,
between 2003 and 2008.
In addition, Ron Reynolds, a United States Department of
Agriculture (USDA) agent, testified about the conspiracy's impact
on federal food assistance programs. Gabriel Lafitte, the
purchasing director for nearly 200 Burger King restaurants in
- 4 -
Puerto Rico, testified about the conspiracy's impact on the chain's
island-wide costs and prices.
The appellant did not offer any witnesses at trial. Nor
did he spend much time attacking the existence of the charged
conspiracy. Instead, his counsel argued that the government had
failed to prove that the appellant knowingly participated in the
conspiracy. In this vein, counsel made much of the fact that
William Stallings, a former Sea Star executive cooperating with
the government, had recorded conversations with conspiracy
participants for two months, but had never recorded any statements
by the appellant.
The jury rejected the appellant's defense and found him
guilty. The district court sentenced him to sixty months'
imprisonment, and we affirmed the conviction and sentence. See
id. at 85, 100.
Long after the jury had rendered its verdict, the
appellant learned that Stallings (whom neither party had called as
a witness) had filed a qui tam action pursuant to the False Claims
Act (FCA), 31 U.S.C. §§ 3729-3733, on January 15, 2013. In his
complaint, Stallings alleged that Sea Star and Horizon had
collogued to defraud the government. Stallings's qui tam action
was unsealed and settled approximately thirteen months later.2 Sea
2The FCA authorizes private plaintiffs to initiate, on the
government's behalf, suits that allege fraud in government
- 5 -
Star agreed to pay the government $1,900,000 and Horizon agreed to
pay the government $1,500,000. For his part, Stallings received
over half-a-million dollars as a whistleblower. See id. § 3730(d).
On April 18, 2014, the appellant moved for a new trial
in his criminal case pursuant to Federal Rule of Criminal Procedure
33. He argued that the government's failure to inform him of
Stallings's qui tam action offended the due process guarantees
memorialized in Brady v. Maryland, 373 U.S. 83 (1963). The
district court denied the motion without an evidentiary hearing.
See Peake II, 2016 WL 8234673, at *11. The court reasoned that,
in light of the "massive amount of independently incriminating
evidence" introduced against the appellant at trial, there was no
reason to believe that earlier disclosure of the qui tam action
would have changed the outcome. Id. This timely appeal followed.
II. ANALYSIS
In this venue, the appellant advances two assignments of
error. First, he renews his contention that the government's
nondisclosure of Stallings's qui tam action demanded a new trial,
and he therefore faults the district court for denying his Rule 33
motion. Second, he contends for the first time that relief under
Rule 33 is warranted because Puerto Rico should not be treated
programs. See 31 U.S.C. § 3730(b); see also United States ex rel.
Winkelman v. CVS Caremark Corp., 827 F.3d 201, 203 (1st Cir. 2016).
The statute directs that such complaints be filed under seal. See
31 U.S.C. § 3730(b)(2).
- 6 -
like a state for the purposes of the Sherman Act. We address these
contentions one by one.
A. The Nondisclosure Claim.
Rule 33 authorizes the district court, on motion of a
criminal defendant, to "grant a new trial if the interest of
justice so requires." Fed. R. Crim. P. 33(a). When, as now, a
Rule 33 motion is made more than fourteen days after the verdict,
it must be "grounded on newly discovered evidence." Fed. R. Crim.
P. 33(b). Under ordinary circumstances, a defendant seeking such
relief must satisfy four conditions: he must show that the
specified evidence "was unknown or unavailable to him at the time
of trial"; that the failure to discover such evidence was not the
result of his "lack of diligence"; that "the evidence is material"
and not "merely cumulative or impeaching"; and that "the evidence
is such that its introduction would probably result in an acquittal
upon a retrial of the case." United States v. Maldonado-Rivera,
489 F.3d 60, 66 (1st Cir. 2007) (citing United States v. Wright,
625 F.2d 1017, 1019 (1st Cir. 1980)).
This formulation is somewhat different if a movant
colorably asserts that the government violated Brady. Under Brady,
the government offends due process if it causes prejudice to the
defendant by "either willfully or inadvertently" suppressing
"exculpatory or impeaching" evidence in its custody or control
that is "favorable to the accused." United States v. Connolly,
- 7 -
504 F.3d 206, 212 (1st Cir. 2007) (citing Strickler v. Greene, 527
U.S. 263, 281-82 (1999)). A defendant who seeks to premise his
motion for a new trial on a Brady violation must satisfy the first
(unavailability) and second (due diligence) elements of the
conventional test. See id. at 212-13. But the third and fourth
elements (materiality and prejudice, respectively) are merged and
"replaced with the unitary requirement" that the defendant need
demonstrate only "'a reasonable probability that, had the evidence
been disclosed to the defense'" in a timely manner, "'the result
of the proceeding would have been different.'" Id. at 213 (quoting
United States v. Bagley, 473 U.S. 667, 682 (1985) (opinion of
Blackmun, J.)); see Kyles v. Whitley, 514 U.S. 419, 434 (1995).
This alteration in the Rule 33 framework eases a
defendant's burden in two significant ways. For one thing, instead
of having to demonstrate "actual probability that the result would
have differed," the defendant need only point to "something
sufficient to 'undermine[] confidence in the outcome of the
trial.'" United States v. Mathur, 624 F.3d 498, 504 (1st Cir.
2010) (emphasis and alteration in original) (quoting Kyles, 514
U.S. at 434). For another thing, while impeachment evidence is
ordinarily insufficient to show materiality in the Rule 33 context,
see Connolly, 504 F.3d at 213, impeachment evidence that is
undisclosed in violation of Brady may "suffice[] to undermine
- 8 -
confidence in the outcome of the trial" and, if so, warrant a new
trial, Mathur, 624 F.3d at 504 (internal quotation marks omitted).
In applying these principles, we do not write on a
pristine page. Rather, our review of a decision denying a Rule 33
motion must take into account that the district court "has a
special sense of the ebb and flow of the . . . trial." Id.(internal quotation marks omitted). Consequently, we afford
substantial deference to the district court's views regarding the
likely impact of belatedly disclosed evidence and review its denial
of a Rule 33 motion solely for abuse of discretion. See id.;
Connolly, 504 F.3d at 211.
Here, the district court conducted a searching appraisal
of the record and found no hint of cognizable prejudice stemming
from the government's failure to disclose Stallings's filing of
the qui tam action. See Peake II, 2016 WL 8234673, at *11. We
explain briefly why this determination was well within the
encincture of the district court's discretion.
It is uncontroverted that, at the time of trial, the
appellant was unaware of Stallings's plan to file a qui tam action.
Nor does the government suggest that the appellant's lack of
awareness stemmed from any failure of diligence on his part. But
even assuming that the government knew about such evidence and had
- 9 -
custody of it,3 the appellant's claim founders on the district
court's finding that he failed to show cognizable prejudice.
The appellant insists that, had he been aware of the qui
tam action, he would have called Stallings to testify and would
have elicited testimony regarding three data points: that a
different Sea Star executive (Leonard Shapiro) consummated Sea
Star's conspiratorial agreement with Horizon in 2002; that Baci
(the appellant's subordinate) played a central role in the
conspiracy; and that the appellant was not a participant in any
of the seventeen conversations that Stallings recorded while
acting under the government's auspices. None of these data points,
though, had anything to do with the qui tam action. Moreover,
none of them was controversial. The government never disputed
that it was Shapiro who forged the fifty-fifty arrangement with
Horizon in 2002 (indeed, the government itself introduced trial
testimony to that effect). So, too, Baci testified at the trial
3
We note that the appellant, in an apparent effort to prove
that the information about Stallings's initiation of suit was
within the government's custody and control, attached to his reply
brief a series of 2012 e-mails between Stallings and the lead
prosecutor. This proffer does not gain him any traction. After
all, "evidentiary matters not first presented to the district court
are . . . not properly before us." United States v. Kobrosky, 711
F.2d 449, 457 (1st Cir. 1983).
Relatedly, the appellant invites us to remand this matter to
the district court so that he may explore what the government knew
about Stallings's decision to file the qui tam action and when the
government knew it. Since we have assumed, arguendo, that the
government had custody and control over the information about
Stallings's decision, remand would serve no useful purpose.
- 10 -
as a government witness and made clear that he managed the day-
to-day details touching upon Sea Star's anticompetitive
arrangement with Horizon. Last — but far from least — the
government produced Stallings's seventeen recordings in discovery,
and the appellant's counsel harped upon the appellant's absence
from the recordings in his opening statement.
The short of it is that the appellant — who could have
called Stallings as a trial witness but chose not to do so — fails
to offer any coherent explanation as to why the existence of the
qui tam action would have led him to reevaluate this decision.
Put another way, the appellant has not articulated "any plausible
strategic option" that the failure to reveal the existence of the
qui tam action either "hampered or foreclosed." Mathur, 624 F.3d
at 506. For aught that appears, knowledge of the qui tam action
would not have benefited the defense in any meaningful way.
The appellant resists the district court's conclusion to
this effect, mustering a litany of other possible uses that he
might have made of the qui tam action (had he known about it).
These are, however, shots in the dark — and none of them comes
close to hitting the mark.
To begin, the appellant submits that he would have
introduced the qui tam complaint into evidence. The complaint
would have been useful, he suggests in hindsight, because of what
it does not say (that is, it hardly refers to the appellant). But
- 11 -
this is whistling past the graveyard: the qui tam complaint
contains two highly incriminating references to the appellant,
which would have buttressed the government's theory that he was a
moving force in the conspiracy.4 Thus, introduction of the qui
tam complaint into evidence would have tended to weaken, not
strengthen, the appellant's lack-of-knowledge defense.
Next, the appellant argues that timely disclosure of the
qui tam action would have enabled him to impeach Stallings
regarding the latter's financial incentive to cooperate with the
government. One flaw in this argument is that neither side called
Stallings as a trial witness, so any such impeachment evidence
would have been inadmissible. See United States v. Silva, 71 F.3d
667, 670-71 (7th Cir. 1995). And even assuming that Stallings had
testified, any impeachment value arising out of the filing of his
qui tam action would have been miniscule compared to the
impeachment evidence that the appellant already had available
(such as evidence of Stallings's hip-deep involvement in the
conspiracy and his avoidance of potentially significant prison
time through his cooperation with the government).
4The qui tam complaint alleges that any pricing matters that
were not resolved between Baci and Glova "would be bumped up the
chain of command to be addressed and resolved by" the appellant
and Serra. Similarly, the complaint describes the 2006 Orlando
meeting, during which Baci, Glova, Serra, and the appellant
discussed implementation of the companies' anticompetitive market-
share agreement.
- 12 -
Sounding a similar note, the appellant contends that he
could have used the qui tam action to impeach Reynolds (the USDA
agent) who testified for the government. Evidence of the qui tam
action would have been useful to prove Reynolds's bias, the
appellant insists, inasmuch as the appellant's conviction would
have tended to increase the likelihood of a substantial recovery
by the government in the qui tam action.
This contention borders on the frivolous. Reynolds's
testimony was offered solely to prove that the conspiracy affected
interstate commerce. See Peake I, 804 F.3d at 92, 96-97
(discussing Sherman Act's interstate commerce requirement).
Accordingly, Reynolds's testimony was brief and limited to a narrow
point: the impact that the conspiracy had on federal food
assistance programs. Seen in this light, the impeachment value of
the qui tam action vis-á-vis Reynolds would have been slim to none.
Grasping at straws, the appellant argues that knowing
about the qui tam action would have propped up his unsuccessful
motion to transfer the criminal case to the Middle District of
Florida. This argument is hopeless. In the first place, the
appellant never advanced this argument below and, as a general
rule, "legal theories not raised squarely in the lower court cannot
be broached for the first time on appeal." Teamsters, Chauffeurs,
Warehousemen & Helpers Union, Local No. 59 v. Superline Transp.
Co., 953 F.2d 17, 21 (1st Cir. 1992). In the second place, the
- 13 -
propriety of venue is not material either to guilt or punishment.
Cf. United States v. Lanoue, 137 F.3d 656, 661 (1st Cir. 1998)
(noting that "[v]enue is not an element of the offense").
Consequently, information that is material only to a venue decision
does not implicate Brady.
To say more on the prejudice point would be
supererogatory. Common sense teaches that an undisclosed piece of
evidence often looms larger in the eyes of a hopeful defendant
than its actual dimensions warrant. In the Brady context, though,
prejudice cannot be viewed in a funhouse mirror. Instead, it is
a fact-specific phenomenon that must be gauged objectively in light
of the circumstances of a particular case. It is not enough that
a defendant thinks (or professes to think) that somehow, some way,
his theory of defense would have prevailed had he been given timely
access to the allegedly withheld information.
To sum up, we conclude that the district court's finding
that the appellant suffered no cognizable prejudice from the
delayed disclosure is fully supportable. The government's failure
to disclose the qui tam action is "manifestly insufficient to place
the trial record in 'such a different light as to undermine
confidence in the verdict.'" Mathur, 624 F.3d at 505 (quoting
Kyles, 514 U.S. at 435).
A loose end remains. The appellant argues, in the
alternative, that the district court should have convened an
- 14 -
evidentiary hearing on his Rule 33 motion. This argument contains
more cry than wool.
We previously have explained that "evidentiary hearings
on new trial motions in criminal cases are the exception rather
than the rule." Connolly, 504 F.3d at 220. Where, as here, the
trial court supportably concludes that a Rule 33 motion "is
conclusively refuted . . . by the files and records of the case,"
such a hearing would be futile. Id. at 219-20 (internal quotation
marks omitted). Given its intricate web of findings, we discern
no abuse of discretion in the district court's declination to hold
an evidentiary hearing on the appellant's Rule 33 motion.
B. The Status Claim.
The appellant has one last arrow in his quiver. He
complains that his conviction is invalid due to Puerto Rico's
status. This plaint builds on the uncontroversial premise that
the statute of conviction (the Sherman Act) outlaws conspiracies
"in restraint of trade or commerce among the several [s]tates."
15 U.S.C. § 1. While acknowledging our case law holding that such
a proscription applies to commerce between Puerto Rico and one or
more states, see, e.g., Córdova & Simonpietri Ins. Agency Inc. v.
Chase Manhattan Bank N.A., 649 F.2d 36, 38 (1st Cir. 1981), he
exhorts us to reconsider this holding in light of the decision in
Puerto Rico v. Sanchez Valle, 136 S. Ct. 1863, 1868 (2016)
- 15 -
(concluding that Puerto Rico is not a separate sovereign for the
purpose of the Double Jeopardy Clause).
Even without dwelling on the fact that this claim is
foreclosed because it was not raised below, see Superline Transp.,
953 F.2d at 21, it is without force. Under Rule 33, a new trial
motion filed more than fourteen days after the verdict — like this
one — must draw its essence from "newly discovered evidence." Fed.
R. Crim. P. 33(b). It is nose-on-the-face plain that a change in
the law does not amount to newly discovered evidence within the
purview of Rule 33. See United States v. King, 735 F.3d 1098,
1108-09 (9th Cir. 2013).
In all events, the appellant's claim is misdirected.
The record in this case makes pellucid that the conspiracy in which
the appellant participated involved more than commerce between a
state and Puerto Rico. As we noted in affirming the appellant's
conviction, the trial evidence showed that "the commerce affected
by the conspiracy was not only between a state and Puerto Rico,
but also among the states." Peake I, 804 F.3d at 86.
III. CONCLUSION
We need go no further. For the reasons elucidated
above, the judgment of the district court is
Affirmed.
- 16 -