United States v. Medlock

FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS April 27, 2016
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
UNITED STATES OF AMERICA,
Plaintiff - Appellant,
No. 15-5041
v. (D.C. No. 4:14-CR-00024-GKF-1)
(N.D. Okla. )
MICHAEL MEDLOCK,
Defendant - Appellee.
ORDER AND JUDGMENT *
Before KELLY, GORSUCH, and MORITZ, Circuit Judges.
In this interlocutory appeal, the government appeals from the district
court’s grant of Defendant-Appellee Michael Medlock’s motion for a new trial
and the district court’s order denying reconsideration. Fed. R. Crim. P. 33;
United States v. Medlock, No. 14-CR-24-GKF, 2015 WL 1565231 (N.D. Okla.
Apr. 8, 2015) (denying reconsideration). Out of 18 counts charged, Mr. Medlock
was convicted of ten counts of bank fraud and three counts of money laundering;
he was acquitted of five counts of bank fraud. The district court granted the
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
motion for new trial based upon ineffective assistance of counsel. We exercise
jurisdiction pursuant to 18 U.S.C. § 3731 and affirm.
Background
The government’s theory is that Mr. Medlock defrauded ONB Bank &
Trust Co. (ONB) by diverting customer payments on accounts receivable that
should have been sent to a bank lockbox account. The receivables were collateral
for various loans. To understand the actions—and inaction—of defense counsel,
we begin with a detailed recitation of the facts.
A. Loan Default and Indictment
In 2003, Mr. Medlock purchased Klutts Equipment, Inc., a company that
buys and sells railroad equipment, through a holding company named Vincens
Omnibus, LLC. Mr. Medlock funded the purchase with personal assets, an
assumption of Klutts’s existing loans, and financing from Local Oklahoma Bank.
About two years later, Local Oklahoma Bank changed hands, and Klutts moved
its accounts to ONB. Klutts obtained various loans from ONB, granting ONB a
security interest in all of its assets now owned or later acquired, including
accounts receivable. ONB directed that the account debtors make payments to
ONB by depositing payments directly into an ONB lockbox account.
Klutts eventually fell behind on its loan payments, and in November 2009,
ONB sent a formal demand letter for a deficiency of $58,732.50. See VI J.A.
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1519. Worried that ONB might exercise its power to freeze the account and
prevent future withdrawals, Mr. Medlock consulted with lawyer Ernest A.
Bedford. Medlock, 2015 WL 1565231, at *2. Mr. Bedford advised Mr. Medlock
to open another account so Klutts could continue to operate. Id. A month later,
ONB froze the lockbox account. At this time, Mr. Medlock already had an
account at Bank of Oklahoma (BOK) for personal use (ending in -0399), and he
opened another BOK account (-7837) as well as an account at IBC Bank (-2702).
After Klutts’s default, ONB filed suit in January 2010. In April 2011, ONB
obtained a $2.5 million judgment against Mr. Medlock personally, and a receiver
was appointed to manage Klutts. See Aplee. Br. at 7. ONB then met with federal
investigators and filed a suspicious activity report. IV J.A. 832–33. In 2014, the
government indicted Mr. Medlock, alleging he had devised and carried out a
scheme to defraud ONB by diverting 15 payments made on accounts receivable
away from the lockbox account and into other accounts. 1 Medlock, 2015 WL
1565231, at *2–3. Five railroad companies or related entities made these
payments between November 2008 and February 2011: Dana Galgana (counts
1–2); Galgana’s business Cricket Enterprises (counts 2–3, 5–6, 8–12, 15); Allen
Engineering Contractor, Inc. (count 4); Grace Railroad Contractors (count 7); and
Progressive Rail, Inc. (counts 13–14). The payments were addressed to either Mr.
1
The government states that Mr. Medlock actually diverted 111 payments
away from the lockbox, about 40% of Klutts’s receivables during the period. VI
J.A. 1319; Aplt. Br. at 3.
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Medlock (counts 1–3, 5–6, 8–9, 15), Klutts (counts 4, 7, 10, 14), or
Vincens/Klutts (counts 11–13). The government also charged Mr. Medlock with
three counts of money laundering, resulting from payments allegedly diverted
from the receivables: two payments to Boston College and one payment to
Toyota. I J.A. 17–19. A table summarizing the first 15 counts appears below:
Count Result Date Bank Acct. Amount Payor Payee
1 Convicted 11-19-08 BOK -0399 $24,681.00 Galgana Medlock
2 Convicted 12-03-08 BOK -0399 $ 9,875.00 Galgana Medlock
(Cricket Enter.)
3 Convicted 12-09-08 BOK -0399 $42,000.00 Cricket Enter. Medlock
4 Convicted 06-17-09 BOK -0399 $18,300.00 Allen Eng’g Klutts
5 Acquitted 08-27-09 BOK -0399 $17,000.00 Cricket Enter. Medlock
6 Acquitted 08-28-09 BOK -0399 $10,000.00 Cricket Enter. Medlock
7 Convicted 09-15-09 BOK -0399 $30,250.00 Grace RR Klutts
8 Acquitted 11-04-09 BOK -0399 $ 8,750.00 Cricket Enter. Medlock
9 Acquitted 02-01-10 BOK -0399 $ 6,250.00 Cricket Enter. Medlock
10 Convicted 04-28-10 IBC -2702 $21,735.00 Cricket Enter. Klutts
11 Convicted 09-10-10 IBC -2702 $15,000.00 Cricket Enter. Vincens/
Klutts
12 Convicted 09-27-10 IBC -2702 $ 2,900.00 Cricket Enter. Vincens/
Klutts
13 Convicted 11-16-10 IBC -2702 $42,500.00 Progressive Vincens/
Klutts
14 Convicted 01-27-11 BOK -7837 $45,430.00 Progressive Klutts
15 Acquitted 02-23-11 BOK -0399 $10,454.98 Cricket Enter. Medlock
Throughout his difficulties with ONB, the government investigation, and
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the criminal trial, Mr. Medlock retained Mr. Bedford, the attorney he originally
consulted in 2009, in some capacity. Medlock, 2015 WL 1565231, at *3. Shortly
before the formal indictment, Mr. Bedford was joined by another attorney, Art
Fleak, who represented Mr. Medlock at his initial appearance and in pretrial
motions. Id.; see also Aplee. Br. at 9.
B. Pretrial Investigation, Defenses, and Conviction
In response to the government’s theory that Mr. Medlock defrauded ONB
by diverting payments into his personal accounts, Mr. Medlock and his attorneys
considered two relevant defenses.
First, Mr. Medlock claimed that the 15 payments allegedly diverted from
Klutts’s lockbox account were actually commissions for his personal work as a
broker that were not covered by the ONB security interest and lockbox
arrangement. Medlock, 2015 WL 1565231, at *3. To show the payments were
part of his brokerage business, Mr. Medlock compiled information about the 15
challenged transactions for his attorneys. He described the first eight counts in
detail, identifying the people and entities involved and explaining how, acting as
a broker, he connected the buyer and seller. Id.Despite receiving this information in advance of the trial, his attorneys did
not investigate. Id. at *4. Mr. Bedford testified that he contacted two individuals
who were never called as witnesses but none of the parties Mr. Medlock
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mentioned. 2 Id.; see also X J.A. 2278. Neither he nor Mr. Fleak issued any
discovery requests to the government or subpoenaed any documents from private
parties—even after a specific request from Mr. Medlock. Medlock, 2015 WL
1565231, at *4. Mr. Medlock stated that he raised concerns that the government
had more documentation on the transactions that involved Mr. Galgana or his
company Cricket Enterprises. Id. But neither attorney lodged an informal or
formal request for additional information. Id.According to Mr. Medlock, his trial attorneys did not address relevant
details in their direct examination of him or the cross-examination of Mr. Galgana
at trial. During Mr. Medlock’s direct examination, Mr. Bedford did not cover the
details of the 15 counts of bank fraud despite the information Mr. Medlock
provided. Id. During Mr. Galgana’s cross examination, Mr. Fleak asked no
specific questions about the transactions underlying counts 5, 6, 8–12, 13, and 15.
Id. at *5.
In addition to claiming the 15 transactions were commissions for brokering
deals, Mr. Medlock also planned to argue that after ONB froze the lockbox
account, he deposited the money into other accounts on the advice of his attorney
Mr. Bedford. Id. at *6. In April 2014, Mr. Fleak urged Mr. Bedford and Mr.
Medlock to prepare testimony about their conversation in 2009. In July 2014, Mr.
2
Mr. Fleak testified it was Mr. Bedford’s job to contact witnesses.
Medlock, 2015 WL 1565231, at *4 n.1. Mr. Fleak did not contact any witnesses.
Id.-6-
Fleak listed Mr. Bedford as a witness. The government maintained that Mr.
Bedford could not serve both as a witness and as an attorney because it would
compromise the attorney-client privilege and allow potential questioning about
Mr. Medlock’s pre-indictment statements. Still, just days before the trial, Mr.
Medlock and Mr. Fleak sent emails indicating that Mr. Bedford planned to testify.
Id. at *7.
Two unexpected incidents occurred the day before the trial began. First,
the government sent defense counsel a one-page summary chart prepared by a
former Klutts employee. Id. at *5. The chart, which the government planned to
introduce at trial, included details regarding 26 Klutts invoices from 2010 to
2011, including invoices related to payments from Cricket Enterprises and
Progressive Railroad. Mr. Medlock dismissed the chart as inconsequential
because all the transactions listed occurred after ONB froze the lockbox—and
therefore would be explained by the advice-of-counsel defense. Despite Mr.
Medlock’s expectations, however, Mr. Bedford abruptly entered an appearance as
counsel that same night, explaining that he would no longer act as a witness. Mr.
Bedford suggested the defense would “weave in advice of counsel indirectly.” Id.
at *7.
On July 28, 2014, the morning of the trial, Mr. Medlock’s attorneys told the
court they would not present an advice-of-counsel defense. Id. Apparently, Mr.
Medlock had an emotional outburst in the courtroom concerning the change. Id.
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Mr. Fleak also protested the government’s last-minute production of the summary
chart but neither he nor Mr. Medlock asked for a continuance to investigate the
chart’s information. Id. at *5. Four days later, Mr. Medlock was convicted of 10
counts of bank fraud and three counts of money laundering. He was acquitted on
five counts of bank fraud.
C. Post-Trial Motions and Rulings
After the jury verdict, Mr. Medlock obtained new counsel who filed a
motion for a new trial asserting, among other things, ineffective assistance of
counsel. V J.A. 1040. The trial judge recused herself and the matter was
reassigned to a new district judge who granted an evidentiary hearing on Mr.
Medlock’s motion. At that hearing, the district court ruled from the bench
concluding the interests of justice required vacating the judgment and granting a
new trial based on ineffective assistance of counsel, namely Mr. Bedford’s lack of
pretrial investigation and his abandonment of the advice-of-counsel defense at the
eleventh hour. X J.A. 2368. The government sought reconsideration. IX J.A.
1886. The district court denied the motion but, upon reconsideration, determined
that while the lack of pretrial investigation still constituted ineffective assistance,
the last-minute withdrawal of the advice-of-counsel defense did not because:
(1) Mr. Medlock did not disclose all relevant facts to Mr. Bedford concerning the
obligation to put accounts receivable in the lockbox, and (2) the defense would
have been inconsistent with Mr. Medlock’s claims that the 15 transactions arose
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from his personal brokerage activities. Medlock, 2015 WL 1565231, at *8. The
government then filed this appeal.
Discussion
We review a district court’s decision to grant a new trial for abuse of
discretion, United States v. Crowe, 735 F.3d 1229, 1244 (10th Cir. 2013),
upholding its decision absent such abuse. A district court abuses its discretion
when it decides a new trial motion based upon an error of law (which we review
de novo) or a material fact that is mistaken (which we review for clear error). Id.;
United States v. Jordan, 806 F.3d 1244, 1252 (10th Cir. 2015) (noting that
credibility determinations warrant deference). In this case, we apply the familiar
test of Strickland v. Washington, 466 U.S. 668, 686 (1984), and analyze whether
the district court abused its discretion in concluding that Mr. Medlock was
entitled to a new trial given a showing of deficient performance and prejudice.
The government maintains neither requirement of Strickland was satisfied,
arguing that (1) defense counsel was not constitutionally deficient in the pretrial
investigation, and (2) Mr. Medlock did not demonstrate that he was prejudiced by
his counsel’s errors.
A. Deficient Performance
First, we must consider whether defense counsel’s performance was
deficient—whether it “fell below an objective standard of reasonableness.”
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Strickland, 466 U.S. at 688. We begin with a strong presumption of attorney
competence. Kimmelman v. Morrison, 477 U.S. 365, 384 (1986). A defendant
can only rebut this presumption by showing an attorney’s conduct does not mirror
“the exercise of the skill, judgment, and diligence of a reasonable competent
defense attorney.” Fisher v. Gibson, 282 F.3d 1283, 1292 (10th Cir. 2002)
(quoting Osborn v. Shillinger, 861 F.2d 612, 625 (10th Cir. 1988)). The issue is
whether a reasonable, competent defense attorney would have undertaken a more
thorough investigation on Mr. Medlock’s behalf or made a reasonable
determination that such an investigation was not necessary. Strickland, 466 U.S.
at 691. The district court found that defense counsel failed to satisfy either
requirement; we agree.
Although there is no precise formula, an attorney fulfills the requirement to
conduct a reasonable investigation when he or she spends time consulting with the
defendant, files any necessary discovery and pretrial motions, and makes
reasonable efforts to locate parties that could have pertinent information to the
case. See generally United States v. Rivera, 900 F.2d 1462 (10th Cir. 1990);
Denton v. Ricketts, 791 F.2d 824 (10th Cir. 1986). Conversely, failure to conduct
any pretrial investigation constitutes a clear instance of ineffectiveness. See
United States v. Gray, 878 F.2d 702, 711 (3d Cir. 1989) (finding counsel’s
performance was deficient when counsel made virtually no effort to investigate
his client’s case); see also Williams v. Washington, 59 F.3d 673, 679 (7th Cir.
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1995). Here, Mr. Bedford failed to investigate beyond his client. He contacted
none of the people involved in the transactions in the indictment except two
tangential witnesses who were never called at trial. He made no arrangements to
interview government witnesses. He issued no subpoenas. He filed no discovery
requests despite Mr. Medlock’s specific entreaty that the government was
withholding information relevant to several charges against him. See Couch v.
Booker, 632 F.3d 241, 246 (6th Cir. 2011) (“It is particularly unreasonable to fail
to track down readily available and likely useful evidence that a client himself
asks his counsel to obtain.”). When Mr. Bedford received evidence from the
government on the eve of the trial, he did not seek a continuance. Cf. Snow v.
Sirmons, 474 F.3d 693 (10th Cir. 2007) (finding that failing to seek a continuance
was objectively reasonable when the district provided a one-day continuance
without counsel’s request and the witness was vigorously crossed at trial). And
we cannot overlook the district court’s observation that the last-minute decision
to not pursue an advice-of-counsel defense foreclosed an adequate investigation
of certain counts in the indictment. When considered in the aggregate, Mr.
Bedford’s failures constitute ineffective assistance. See Fisher, 282 F.3d at 1293(finding counsel’s representation was objectively unreasonable when, among
other things, attorney filed no discovery motions, failed to interview witnesses,
and failed to investigate an alibi).
The government argues that after “numerous discussions” with Mr.
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Medlock, Mr. Bedford made an informed choice not to pursue any additional
investigation, and therefore, his actions were reasonable. Aplt. Br. at 44–45. We
cannot find, however, that this decision was an informed one. See Heard v.
Addison, 728 F.3d 1170, 1180 (10th Cir. 2013) (noting that a decision not to
investigate is not reasonable if it is uninformed). The record shows that Mr.
Medlock provided details, including names, dates, and amounts, on the
transactions charged in the first eight counts of the indictment. Mr. Bedford made
no effort to confirm this information. Even if, as the government argues, Mr.
Bedford did not want to unearth “additional ammunition” against his client, see
Aplt. Br. at 45, there is no reason he could not have attempted to simply talk to
those involved in the transactions or request additional documents. For example,
at the evidentiary hearing on Mr. Medlock’s motion for a new trial, John McBride
of Smith Railway Construction corroborated Mr. Medlock’s side brokerage
defense, testifying that Mr. Medlock was acting separately from his role at Klutts.
Mr. Medlock also offered declarations with similar statements from two other
individuals. Furthermore, if Mr. Bedford planned to rely solely on Mr. Medlock’s
account, he failed to develop it during his direct examination. Mr. Medlock later
testified at the evidentiary hearing—and supplied corroborating emails—that the
basis for count 11 was merely a loan from Cricket to allow Klutts to make
payroll, not a receivable of any kind. X J.A. 2223–24. This was never explained
at trial. Although it is certainly true that “[a] defendant is not entitled to an
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attorney who will leave not the smallest stone unturned[,] . . . when the defendant
has but one stone, it should at least be nudged.” Coleman v. Brown, 802 F.2d
1227, 1234 (10th Cir. 1986) (internal quotation marks and citation omitted).
We find ample evidence that defense counsel’s investigation did not
conform to prevailing professional norms. Insofar as the abandonment of the
advice-of-counsel defense, 3 the district court noted that while it might have been
tactical, the lateness of the abandonment contributed to the inadequate
investigation: had Mr. Medlock been informed earlier that the defense would not
be used, he could have provided counsel with detailed information on counts 10
through 14 that may have supported his defense that the payments resulted from
his brokerage activities. Medlock, 2015 WL 1565231, at *8.
B. Prejudice
Next, we shift our focus to prejudice under Strickland. To show defense
counsel’s actions prejudiced the trial, a defendant must demonstrate that there is a
“reasonable probability that, but for counsel’s unprofessional errors, the result of
the proceeding would have been different.” Strickland, 466 U.S. at 694. The
district court concluded that Mr. Medlock made such a showing, finding that the
various deficiencies in defense counsel’s investigation undermined confidence in
the outcome of the proceedings.
3
We need not address the abandonment of the advice-of-counsel defense
further as there remain sufficient grounds to uphold the district court’s grant of
the motion for a new trial.
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Here, counsel’s failure to investigate has several facets—documentary and
testimonial. The government maintains that we must determine how each facet
prejudiced all 13 counts of conviction. Under the circumstances of this case, we
think that a count-by-count approach would contradict Strickland’s instructions.
When counsel’s representation is deficient in several respects, we do not
try to measure the result of each individual error; instead we evaluate how the
errors affected the overall fairness of the proceeding. See id. at 694–96
(repeatedly stating prejudice inquiry in aggregate terms); see Fisher, 282 F.3d at
1307, 1309 (assessing prejudice from counsel’s “numerous” errors and concluding
there was a “devastating impact on the defense”); see also Pavel v. Hollins, 261
F.3d 210, 216 (2d Cir. 2001) (examining the cumulative weight of defense
counsel’s flaws rather than the effect of them standing alone). In making this
determination, we consider the totality of the evidence before the jury, cognizant
that “[s]ome errors will have had a pervasive effect on the inferences to be drawn
from the evidence, altering the entire evidentiary picture, and some will have had
an isolated, trivial effect.” Strickland, 466 U.S. at 695–96 (emphasis added).
Mr. Medlock’s trial presents a case where there is a reasonable probability
that defense counsel’s errors altered the evidentiary landscape. Two
considerations compel that conclusion. First, the government alleged the bank
fraud and money laundering charges were part of a single scheme to defraud
ONB. See Aplt. Reply Br. at 33 (noting the scheme to defraud was far broader
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than the 15 individual transactions charged). That allegation makes Mr.
Medlock’s case different from those that our sister circuits have held required a
finding of prejudice on each and every count of conviction. In those cases, the
defendants were convicted of separate and distinct episodes of criminality. See
Sully v. Ayers, 725 F.3d 1057 (9th Cir. 2013) (failing to find any prejudice from
counsel’s failure to introduce a defendant’s diminished mental state when the
defendant was convicted of six counts of first-degree murder) (emphasis added);
French v. Carter, No. CV410-141, 2012 WL 3757556 (S.D. Ga. Aug. 16, 2012),
report and recommendation adopted, No. CV410-141, 2012 WL 4585847 (S.D.
Ga. Oct. 2, 2012), aff’d sub nom. French v. Warden, 790 F.3d 1259 (11th Cir.
2015) (failing to find prejudice when defense counsel erred in preserving
appellate review for only one of two counts of molestation); Joseph v. United
States, No. 04-60128-CR, 2008 WL 4662051 (S.D. Fla. Oct. 20, 2008) (failing to
find prejudice when defendant only claimed ineffective assistance related to his
conviction for a crack cocaine conspiracy and not his conviction for a cocaine
conspiracy). Here, Mr. Medlock was convicted of multiple counts stemming from
a single scheme.
Second, the influence of counsel’s deficient investigation was pervasive,
potentially affecting everything from opening and closing statements to cross
examinations to the presentation of the defense’s case-in-chief. See, e.g., Frost v.
Pryor, 749 F.3d 1212, 1233 (10th Cir. 2014) (Lucero, J., dissenting) (noting that
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“[g]iven the centrality” of the error, the court’s finding of no prejudice was
unreasonable). The absence of a real investigation caused a failure to introduce
any corroboration for Mr. Medlock’s claims despite a showing that such evidence
exists. It also made it difficult for the defense to effectively cross-examine Mr.
Galgana, who was involved in numerous payments. Without offering a viable
defense to the 15 counts of bank fraud, defense counsel could not effectively
explain the three remaining counts of money laundering that were based on the
diverted payments. These unique aspects of the case simply do not allow us to
neatly confine the repercussions of counsel’s lackluster investigation.
The government disputes that the consequences were so far-reaching,
especially with regard to counts 4, 13, and 14, arguing that the district court’s
finding of prejudice is merely speculative and asking us to be more specific. As
the district court noted, if the jury was willing to consider Mr. Medlock’s
uncorroborated and undeveloped defense of a brokerage business, the jury might
have been convinced by a more “fulsome explanation” of the remaining
transactions. Medlock, 2015 WL 1565231, at *6.
This is not to say that future cases will never require a showing of
prejudice count-by-count, as the government advocates here. In Mr. Medlock’s
case, however, defense counsel’s errors tainted the fairness of the entire
proceeding, particularly because of the nature of the error and the underlying
allegation of a single, unitary scheme.
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AFFIRMED.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
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