United States v. Lin Lyn Trading, Ltd

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JUL 6 1998
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
v.
No. 96-4126
LIN LYN TRADING, LTD., and
RAYMOND LYNN THOMAS,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Utah
(D.C. No. 94-CR-168G)
Deborah Watson, Department of Justice (Scott M. Matheson, Jr., United States
Attorney for the District of Utah, and Wayne T. Dance, Assistant United States
Attorney, with her on the briefs), for Plaintiff-Appellant.
Max D. Wheeler, Snow, Christensen & Martineau, Salt Lake City, Utah (James D.
Gilson, Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah, with him
on the briefs), for Defendants-Appellees.
Before BALDOCK, Circuit Judge, McWILLIAMS, Senior Circuit Judge, and
EBEL, Circuit Judge.
EBEL, Circuit Judge.
As a result of the government’s seizure of a notepad containing confidential
attorney-client communications, defendants-appellees Raymond Lynn Thomas and
Lin Lyn Trading, Ltd., successfully moved for the suppression of evidence and
the dismissal of the indictment against them. The United States appeals. Because
we agree that the district court did not err in suppressing the evidence, but
conclude the district court abused its discretion in dismissing the indictment, we
affirm in part and reverse in part.
BACKGROUND
A tip by a confidential informant in the fall of 1990 led to a Customs
investigation of defendant-appellee Lin Lyn Trading, Ltd. (“Lin Lyn”), an import
company owned by defendant-appellee Raymond Lynn Thomas (“Thomas”) and
his wife. 1 Thomas also served as Lin Lyn’s Vice President and Director of
Operations. The informant told Customs agents that Lin Lyn imported plush toys
and lace items into the United States, and that the lace items were either not
declared or falsely described in Customs entry forms. Further, the informant
alleged that Lin Lyn was importing trademarked toys illegally. Later in the year,
the informant gave Customs incriminating documents sent to Lin Lyn.
1
We assume the facts in the light most favorable to the appellees, because
the government is appealing adverse rulings on the Motion to Suppress and
Dismiss. See United States v. Griffin, 48 F.3d 1147, 1150 (10th Cir. 1995).
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In January 1991, Customs agents discovered undeclared lace merchandise
in a shipment to Lin Lyn. With the information from the informant and the
results of the seizure, Salt Lake City Customs Agent Dale Brua (“Brua”) obtained
a warrant to search Lin Lyn’s business premises. The warrant was executed on
February 22, 1991, and a large number of documents was seized. Thomas was
advised that he and Lin Lyn were under investigation for violating 18 U.S.C.
§ 542 (unlawful entry of goods into the United States) and 18 U.S.C. § 545
(smuggling goods into the United States).
On March 29, 1991, Thomas returned to the United States from Asia and
was detained by Customs inspectors at the Portland International Airport. After
conferring by telephone with Brua about the ongoing investigation of Thomas and
Lin Lyn, Portland Customs Agent Keith Seagraves (“Seagraves”) inspected the
documents Thomas was carrying. The documents included a yellow notepad.
Thomas informed Seagraves that the notepad documented Thomas’s conversations
with his legal counsel. Seagraves copied documents pertinent to the investigation
and returned the originals of most of the documents to Thomas, although the
notepad was not returned. He also contacted Brua and read him some of the
contents of the notepad. Seagraves then decided to seize the notepad, despite the
potentially privileged nature of the contents, because it contained information that
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indicated Thomas and Lin Lyn had undervalued imported shipments. Seagraves
made copies of the notepad and then sent the notepad to Brua.
Soon thereafter, defendants’ counsel asked for the return of the notepad.
Salt Lake City Assistant United States Attorney Wayne Dance (“AUSA Dance”)
ordered that the materials received from Seagraves be sealed. By that time,
however, the existence of the notepad was common knowledge in the Salt Lake
City Customs office. Further, unknown to AUSA Dance, Seagraves had kept
copies before mailing the documents. Seagraves’s copies remained in the
Portland office in an unmarked folder, and they were not sealed. The materials
Seagraves sent to Brua remained in Brua’s custody until he retired, and then
became the responsibility of his replacement, Agent Dennis Grossman
(“Grossman”). In addition, on April 4, 1991, Customs refused to return
documents from the January seizure because “new evidence” had been received.
The district court inferred that the “new evidence” was the material seized from
defendants on March 29, 1991.
After the investigation concluded in the summer of 1993, the defendants
were notified that to get the notepad back they would have to file a motion for
return of property pursuant to Federal Rule of Criminal Procedure 41(e). The
sealed envelope which contained the notepad and other documents was delivered
to the district court after defendants filed a Rule 41(e) motion on August 24,
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1993. In November 1993, Grossman was transferred to the Portland Customs
office to replace Seagraves.
After a hearing in February 1994, Magistrate Judge Samuel Alba
recommended that the Rule 41(e) motion be granted in regards to the notepad
because its seizure was unlawful and the government’s continued possession of
privileged attorney-client communications would cause the defendants irreparable
injury. District Judge Dee Benson accepted the recommendation and granted the
Rule 41(e) motion on September 7, 1994. The government appealed to this court
but voluntarily dismissed the appeal after the Solicitor General refused to give
permission to proceed.
Thomas and Lin Lyn were indicted on October 20, 1994 for conspiracy to
defraud the United States in violation of 18 U.S.C. § 371, smuggling goods into
the United States in violation of 18 U.S.C. § 545, unlawful entry of goods into the
United States in violation of 18 U.S.C. § 542, and aiding and abetting the
violation of the latter two statutes in violation of 18 U.S.C. § 2. (R. I at 22-49.)
On October 25, Thomas’s documents were returned to him as directed by the
court’s September 7, 1994, order.
On January 31, 1996, Thomas and Lin Lyn filed a motion to suppress all
evidence seized on March 29, 1991, and thereafter on the theory that the illegally
seized notepad became a “roadmap” for the case investigation. The government
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responded that it did not intend to introduce any items seized on March 29, 1991,
but it contested the suppression of all evidence obtained after that date because it
had independent sources for the evidence. When defendants replied to the
government’s response, they requested for the first time that the indictment be
dismissed because the invasions of the attorney-client privilege had interfered
with their Sixth Amendment right to counsel.
District Judge J. Thomas Greene held an evidentiary hearing on the motion
on February 15 and March 21-22, 1996, and heard oral argument on March 29,
1996. Thomas, Brua, and Grossman were among the witnesses who testified.
After Grossman testified, he located in his office the unmarked folder containing
the copy of the notepad. The folder had a yellow sticker from Seagraves stating
that “Dennis, There is no Portland case on this guy (SLC) he’s all yours.”
Grossman sent the folder and an affidavit explaining the circumstances of its
discovery to AUSA Dance, who turned the documents over to the court on March
14, 1996. The district court ordered that Grossman be produced to explain this
matter. Grossman again testified on March 22, explaining that in the press of
Portland Customs business he had never looked at the file; that following his
initial testimony he had remembered the file and thought it might have something
to do with this case; and that once he glanced through the folder and saw what it
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contained he refrained from further reading any item in the folder and sent the
documents to AUSA Dance.
The district court found that Seagraves intentionally seized the notepad
with knowledge that it contained privileged information. It found that it was
common knowledge among the agents in the Salt Lake City Customs office that
the contents of the notepad were allegedly privileged communications containing
incriminating statements and general defenses relevant to the Lin Lyn
investigation and that it was more likely than not that Grossman and Seagraves
had “full discussion” about the notepad’s contents. Further, it refused to credit
Grossman’s testimony regarding his unknowing possession of the unmarked
folder. Thus, it found that Customs agents had access to the notepad and used it
to conduct their investigation of Thomas and Lin Lyn and that the entire
investigation was tainted by the illegal seizure. In addition, the court found that
the government had not shouldered its burden of showing independent sources for
the information in the indictment. Because of the government’s deliberate
intrusion into the attorney-client relationship, the court held that defendants’ Fifth
and Sixth Amendment rights were violated and that the only practicable remedy
was dismissal of the indictment.
The government filed a timely motion to reconsider accompanied by further
affidavits. In the motion, it argued that the Sixth Amendment right to counsel
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was not implicated because the Sixth Amendment had not attached at the time the
notepad was seized, and it reiterated through affidavits that the copy of the
notepad kept in Portland was not kept knowingly in violation of the court’s order
nor was that copy of the legal pad utilized in the investigation or prosecution of
the defendants. The defendants filed a motion to strike the government’s motion.
They contended that the government improperly sought to add additional evidence
and arguments which should have been submitted during the evidentiary hearing
and arguments on defendants’ motions. The district court denied the
government’s motion and granted the defendants’ motion to strike. The
government now appeals.
DISCUSSION
The government argues that the seizure of the notepad was not illegal and
that the district court imposed unwarranted sanctions, namely the suppression of
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all evidence discovered after March 29, 1991, and dismissal of the indictment. 2
We have jurisdiction under 18 U.S.C. § 3731.
I. Legality of Seizure
In granting Thomas and Lin Lyn’s motion for return of property in 1994,
Judge Benson determined that the seizure of the notepad was illegal. The
government did not appeal that ruling. Further, during argument before the
district court on Thomas and Lin Lyn’s motions to suppress evidence and to
dismiss the indictment, the government conceded that Judge Benson had found
that the seizure of the notepad was unlawful and again declined to challenge the
decision. Consequently, the government may not now contest the legality of the
2
Thomas and Lin Lyn have moved to strike portions of the government’s
appellate brief. Some of the government’s appellate arguments stem from its
motion to reconsider and the affidavits attached to that motion, materials which
were stricken by the district court. Because the materials are not properly in the
appellate record, Thomas and Lin Lyn contend, the government may not rely on
them on appeal.
We deny the motion to strike portions of the appellant’s brief. The better
practice would have been for the district court simply to deny the government’s
motion rather than striking it, but any error here is harmless. It is obvious that the
district court considered the motion before denying it and, as shown by our
discussion in Section III, we have considered the government’s arguments on
appeal. See Kennedy v. City of Cleveland, 797 F.2d 297, 305 (6th Cir. 1986);
Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). Further,
the district court was justified in ignoring later-submitted evidence that could
have been presented during the evidentiary hearing.
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seizure of the notepad. Its arguments on this point are waived, and we shall
assume that the notepad was seized illegally. 3
II. Suppression of Evidence
The government contends that the district court clearly erred in determining
that the illegally seized notepad was the basis for the government’s investigation
of Thomas and Lin Lyn. Rather, it argues, it has independent sources for the
information in the indictment. Those sources include the confidential informant
and the documents seized during the execution of the search warrant at Lin Lyn’s
office on February 22, 1991.
“‘A district court’s ruling on a motion to suppress based upon live
testimony at a suppression hearing is accepted unless clearly erroneous or
influenced by an incorrect view of the law.’” United States v. Griffin, 48 F.3d
1147, 1150 (10th Cir. 1995) (quoting United States v. Wilson, 36 F.3d 1298, 1303
(5th Cir. 1994)). We review questions of law de novo, taking the evidence in the
light most favorable to the party that prevailed in the district court. See id.
3
In addition, we note that Thomas and Lin Lyn, though treated throughout
this litigation collectively, are separate legal entities. Consequently we assume
that Thomas was present at the attorney-client conference in both his individual
capacity and his capacity as an officer and representative of Lin Lyn, and that he
was searched in both capacities. Otherwise, Lin Lyn would not have had standing
to claim the attorney-client privilege or object to the seizure of materials from
Thomas. See Alderman v. United States, 394 U.S. 165, 174 (1969) (“Fourth
Amendment rights are personal rights which, like some other constitutional rights,
may not be vicariously asserted.”).
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“‘Under the “fruit of the poisonous tree” doctrine, the exclusionary rule
bars the admission of physical evidence and live witness testimony obtained
directly or indirectly through the exploitation of police illegality.’” Id. (quoting
Hamilton v. Nix, 809 F.2d 463, 465 (8th Cir. 1987)). The court may nevertheless
admit evidence seized illegally, if the government shows that (1) the evidence was
obtained from a source that was wholly independent of the illegal conduct, see
Segura v. United States, 468 U.S. 796, 805 (1984); (2) that the evidence
inevitably would have been discovered despite the illegal activity, see Nix v.
Williams, 467 U.S. 431, 444 (1984); or (3) that the link between the illegality and
the evidence has “become so attenuated as to dissipate the taint,” Nardone v.
United States, 308 U.S. 338, 341 (1939). The government must make its showing
by a preponderance of the evidence. See Nix, 467 U.S. at 444 & n.5.
The government contends that it showed by a preponderance of the
evidence that it had an independent source for the evidence against Thomas and
Lin Lyn. During the 1996 evidentiary hearing, the government presented several
witnesses, including Agents Brua and Grossman, who testified that generally their
investigation did not depend on the notepad and that none of the counts in the
indictment were attributable to the information in the notepad. The district court,
however, exercised its prerogative to disbelieve the testimony of the
government’s witnesses. Further, nothing in the record indicates that the
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government introduced any of the documents seized from Lin Lyn in the February
1991 search. The prosecutor told the district court that the documents existed, but
without the documents to compare to the indictment the district court was free to
disregard the government’s assurances as to the contents of the documents and
thus, ultimately, the source of the evidence presented to the grand jury. Finally,
the district court was not obliged to consider the nine additional affidavits the
government proffered with its motion to reconsider, as there was no reason why
the government could not have presented that evidence at the hearing. 4 Because
the government failed to shoulder its burden to prove independent sources for the
evidence, the district court did not err in suppressing all evidence discovered after
March 29, 1991.
III. Dismissal of the Indictment
Finally, the government argues that dismissal of the indictment is too harsh
a sanction for the use of the notepad. We review a district court’s decision to
4
On appeal, the government asserts that Agent Seagraves was recovering
from a near-fatal auto accident at the time of the hearing and thus could not have
testified. However, the record does not indicate that the government informed the
district court during the hearing that Seagraves was unavailable or that the
government would like to present his testimony but was unable to call him to the
stand. In addition, the government’s motion to reconsider did not inform the
district court that Seagraves had been unavailable previously; that information
was proffered only in the government’s response to defendants’ motion to strike
the government’s motion to reconsider. Consequently, the district court was not
obliged to consider Seagraves’s untimely affidavit.
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dismiss an indictment for abuse of discretion. See United States v. Lacey, 86
F.3d 956, 971 (10th Cir.), cert. denied, 117 S. Ct. 331 (1996). “Abuse of
discretion is established if the district court’s adjudication . . . is based upon an
error of law or a clearly erroneous finding of fact.” Reliance Ins. Co. v. Mast
Constr. Co., 84 F.3d 372, 375-76 (10th Cir. 1996). In this case, we find three
abuses of the district court’s discretion: one in relying on the Sixth Amendment
right to counsel where the illegal conduct occurred before the defendants were
indicted, a second in not requiring Thomas and Lin Lyn to show prejudice from
the government’s conduct, and a third in not considering a remedy less drastic
than dismissal.
The district court’s decision rested primarily on the invasion of defendants’
Sixth Amendment right to counsel. The right to counsel, however, attaches only
“at or after the initiation of adversary judicial criminal proceedings – whether by
way of formal charge, preliminary hearing, indictment, information, or
arraignment.” Kirby v. Illinois, 406 U.S. 682, 689 (1972). The notepad was
seized in March 1991, but defendants were not indicted until October 1994.
Under these circumstances defendants cannot claim a violation of their Sixth
Amendment right to counsel. See United States v. Kingston, 971 F.2d 481, 491
(10th Cir. 1992).
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In response to the government’s argument in its motion to reconsider that
the Sixth Amendment right to counsel had not attached at the time the notepad
was seized, the district court stated that the seizure violated the Fourth
Amendment and that, because of the use of the tainted evidence, the Sixth
Amendment right to counsel was violated immediately upon return of the
indictment. In Maine v. Moulton, 474 U.S. 159 (1985), however, the Supreme
Court addressed the use of evidence obtained in violation of the Sixth
Amendment. It held that evidence obtained by recording the defendant’s
conversations with a state agent, in which the agent induced the defendant to
discuss defense strategy, would not be admissible in a case in which an
indictment had already been filed because such conduct violated the Sixth
Amendment. See id. at 180. In contrast, the Sixth Amendment would not be
offended by the use of the same evidence in cases in which indictments had not
been returned. See id. at 180 & n.16. In light of Moulton, we do not agree that
the Sixth Amendment was violated immediately upon return of the indictment
where the illegal seizure had occurred previously. The district court erred in
finding a Sixth Amendment violation in this case.
Given the record of this case, the district court also erred in finding
Thomas and Lin Lyn were prejudiced by the government’s conduct. Because the
district court was not provided with the documents lawfully seized from Lin Lyn’s
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office on February 22, 1991, and because it refused to consider the affidavits
proffered by the government with its motion to reconsider, the record contains
little basis on which to conclude that Thomas and Lin Lyn were prejudiced by the
seizure of the notepad. In Kingston, we held that “even if [the defendant] can
show that an important privilege or right, such as those asserted here, was
violated during the grand jury stage of a criminal prosecution, the indictment will
not be dismissed unless [the defendant] can show prejudice.” 971 F.2d at 491
(emphasis added). Kingston makes it clear that before the indictment may be
dismissed, it is Thomas and Lin Lyn’s burden to show prejudice or a substantial
threat thereof, not the government’s burden to show lack of prejudice. This
remains the rule even if the government’s violation is deliberate. See United
States v. Morrison, 449 U.S. 361, 365 (1981). Although the district court made a
finding that prejudice was presumed because the “taint occurred so early in the
investigation that it affected and tainted the entire subsequent investigation,” the
record simply does not support that finding. 5
Finally, the district court also held that the conduct of the government
agents violated defendants’ Fifth Amendment right to due process and a fair trial
5
The district court may have predicated its finding of continuing prejudice
upon its belief that the defendants’ Sixth Amendment rights were violated.
However, as we discussed above, the Sixth Amendment is inapplicable in this
situation.
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because the tainted evidence was “inextricably connected” with the investigation
of the case. Consequently, it held that the only practicable remedy was dismissal
of the indictment. We believe that the district court’s failure to consider
alternative adequate remedies was an abuse of its discretion.
“Because it is a drastic step, dismissal of an indictment is a disfavored
remedy.” Kingston, 971 F.2d at 491 (citing United States v. Rogers, 751 F.2d
1074, 1076-77 (9th Cir.1985)). Before deciding to dismiss a case, a district court
must consider whether a lesser sanction would satisfy the competing
considerations at issue. See Mobley v. McCormick, 40 F.3d 337, 341 (10th Cir.
1994); Ehrenhaus v. Reynolds, 965 F.2d 916, 921 (10th Cir. 1992). Further, the
district court must include its reasoning in the record to enable this court to
conduct a meaningful review. Failure to do so constitutes an abuse of discretion.
See Mobley, 40 F.3d at 341.
The Supreme Court’s approach has been “to identify and then neutralize the
taint by tailoring relief appropriate in the circumstances to assure the defendant
the effective assistance of counsel and a fair trial.” Morrison, 449 U.S. at 365.
“The remedy in the criminal proceeding is limited to denying the prosecution the
fruits of its transgression.” Id. at 366; see also United States v. Blue, 384 U.S.
251, 255 (1966) (“Even if we assume that the Government did acquire
incriminating evidence in violation of the Fifth Amendment, [the defendant]
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would at most be entitled to suppress the evidence and its fruits if they were
sought to be used against him at trial.”).
In this case, the district court did not adequately explain why less extreme
sanctions would not suffice to protect the defendants’ rights. Under these
circumstances, suppression of all evidence obtained after March 29, 1991 would
appear to be an adequate remedy. This is not a case in which the independence of
the grand jury was so compromised that the proceedings were fundamentally
unfair and dismissal is required. See Bank of Nova Scotia v. United States, 487
U.S. 250, 256-57 (1988); see also United States v. Pino, 708 F.2d 523, 530 (10th
Cir. 1983) (“An indictment may be dismissed for prosecutorial misconduct which
is flagrant to the point that there is some significant infringement on the grand
jury’s ability to exercise independent judgment.”). The violation at issue is the
illegal seizure of evidence, and the Supreme Court has held that a grand jury may
consider evidence seized unconstitutionally as long as the grand jury itself does
not violate a constitutional privilege. See United States v. Calandra, 414 U.S.
338, 344-46 (1974); Costello v. United States, 350 U.S. 359, 363 (1956).
Additionally, although the prosecution did not persuade the district court
regarding the contents of the documents seized from Lin Lyn, from the record we
can reasonably be sure that such documents exist. Thus, this is not a case in
which essential evidence against the defendant is suppressed and dismissal of the
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indictment must naturally follow. Cf. United States v. Johnson, 463 F.2d 70, 73
(10th Cir. 1972).
By suppressing the evidence acquired as a result of the illegal seizure, the
prosecution is unable to benefit from the government’s unconstitutional conduct.
On the other hand, there is nothing to forbid the government from beginning a
new investigation, using the evidence legitimately acquired prior to March 29,
1991, and conducted by personnel – both investigatory and prosecutorial –
untouched by the taint of the yellow notepad. If the government is able to
prosecute its case by presenting untainted evidence derived from legally acquired
materials, then it should be allowed to do so; defendants have no right to be
protected from governmental actions taken in compliance with constitutional
requirements.
CONCLUSION
The district court’s decision to suppress all evidence obtained on or after
March 29, 1991 is AFFIRMED. Its decision to dismiss the indictment is
REVERSED, and the case is REMANDED for further proceedings not
inconsistent with this opinion.
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