United States v. Quality Formulation Laboratories, Inc.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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Nos. 11-4511, 11-4512 & 11-4513
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UNITED STATES OF AMERICA
v.
QUALITY FORMULATION LABORATORIES, INC;
AMERICAN SPORTS NUTRITION INC; MOHAMED S. DESOKY,
Appellants (No. 11-4511)
OMAR DESOKY,
Appellant (No. 11-4512)
AHMAD DESOKY,
Appellant (No. 11-4513)
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Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action Nos. 2-10-cr-00699-001/2/4/5/6)
District Judge: Honorable Garrett E. Brown, Jr.
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Argued January 8, 2013
Before: SCIRICA, AMBRO, and FUENTES, Circuit Judges
(Opinion filed: January 25, 2013)
Eric R. Breslin, Esquire
Marco A. Gonzalez, Jr., Esquire (Argued)
Duane Morris
1037 Raymond Boulevard
One Riverfront Plaza, Suite 1800
Newark, NJ 07102
Counsel for Appellants
Quality Formulation Labs,
American Sports Nutrition Inc.,
Mohamed S. Desoky
Lisa Van Hoeck, Esquire (Argued)
Office of Federal Public Defender
220 South Clinton Avenue
Station Plaza #4, 4th Floor
Trenton, NJ 08609
Counsel for Omar Desoky, Appellant
Ricardo Solano, Jr., Esquire (Argued)
Friedman, Kaplan, Seiler & Adelman
One Gateway Center, 25th Floor
Newark, NJ 07102
Counsel for Ahmad Desoky, Appellant
Mark E. Coyne, Esquire
David E. Dauenheimer, Esquire
Office of United States Attorney
970 Broad Street, Room 700
Newark, NJ 07102
Paul J. Fishman
United States Attorney
Stuart F. Delery
Acting Assistant Attorney General
Patrick R. Runkle, Esquire (Argued)
United States Department of Justice
Office of Consumer Litigation
P.O. Box 386
Washington, DC 20044
Counsel for Appellee
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OPINION
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AMBRO, Circuit Judge
Appellants—three companies and three individuals—jointly appeal their
convictions for criminal contempt and Appellants Omar and Ahmad Desoky appeal their
sentences. We affirm the convictions but vacate and remand Omar and Ahmad Desoky’s
sentences for further findings.
I. Background
In 2010, following a civil suit, Mohamed Desoky and the three dietary supplement
companies he ran—Quality Formulations Laboratories (QFL), American Sports Nutrition
(ASN), and Sports Nutrition International (SNI)—entered into a court-approved Consent
Decree with the federal Food and Drug Administration (FDA) halting production at the
companies’ Paterson, New Jersey manufacturing facility. The Consent Decree provided
that
[QFL, ASN, SNI and Mohamed Desoky] and each and all of their officers, agents,
employees, successors, and assigns, and any persons in active concert or
participation with any of them who receive notice of this Decree, are permanently
restrained and enjoined . . . from directly or indirectly receiving, manufacturing,
preparing, packing, labeling, and distributing at their plant located [in] . . .
Paterson, New Jersey . . . or any new location(s) at which the Defendants receive,
manufacture, prepare, pack, label, hold, or distribute articles of food, any article of
food unless and until [described] conditions have been met[.]
App. at 78, Consent Decree, para. VII. It also required that
[QFL, ASN, SNI and Mohamed Desoky] shall notify FDA in writing at least thirty
(30) calendar days before any change [in] ownership, name, or character of their
business, including reorganization, relocation, dissolution, assignment, or lease or
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sale of the business or any asset of the business, such as buildings, equipment, or
inventory, that may affect compliance with the obligations arising from this
Decree.
Id. at 92, Consent Decree, para. XV.
Pursuant to the Consent Decree, the Paterson facility was shut down.
Subsequently, manufacture of Appellants’ products began at a facility in Congers, New
York owned by ADH Health Products (―ADH‖). On discovering this manufacturing, the
FDA filed an order to show cause alleging criminal contempt by Mohamed, the three
companies, and Mohamed’s two sons and company employees, Ahmad and Omar. The
Government alleged that Appellants willfully violated the Consent Decree by
manufacturing products at the Congers facility. Appellants asserted a good faith defense,
arguing that they contracted with ADH to manufacture QFL products, and they believed
this third-party manufacturing was permitted by the Consent Decree.
Evidence presented at trial showed that the Congers facility manufactured QFL
products, that Appellants sent raw material and equipment from Paterson to Congers, that
former and current QFL employees worked on the products in Congers, and that QFL
paid those employees in cash. Appellants did not disclose the activities at Congers to the
FDA, including during two FDA inspections of the Paterson facility.
In addition to the activities at Congers, some raw ingredients were shipped to the
Paterson facility, Ahmad brought some products manufactured at ADH to the Paterson
facility to be shipped to customers, and Ahmad loaded two pallets of product from the
Paterson facility to a truck owned by Performance Food Centers. The Government
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alleged that these actions also violated the Consent Decree, and Appellants asserted a
good faith defense to these charges as well.
Appellants were convicted of criminal contempt. Mohamed was sentenced to 40
months’ imprisonment. Ahmad and Omar were each sentenced to 34 months’
imprisonment, and the companies were fined. All appeal.1
II. Discussion
Appellants raise four challenges to their convictions and one to a sentencing
enhancement applied to Omar and Ahmad Desoky.
A. Exclusion of Mary Richardson’s Testimony
The District Court excluded Appellants’ offered testimony of Mary Richardson, an
expert consultant they hired to help them comply with the FDA’s requirements in order to
avoid and then lift the production shut-down. Richardson would not have testified about
the charged conduct. Instead, her testimony related solely to Appellants’ efforts to
remediate the issues identified at the Paterson facility.
We review a district court’s decision to admit evidence for abuse of discretion.
United States v. Givan, 320 F.3d 452, 460 (3d Cir. 2003). Some evidence of earlier
―good acts‖ evidence may be admissible to show a defendant lacked wrongful intent in
later behavior. See United States v. Garvin, 565 F.2d 519, 522 (8th Cir. 1977) (evidence
of correctly submitted applications for approximately 18 insurance policies admissible to
show lack of intent to commit a scheme to defraud); United States v. Shavin, 287 F.2d
1The District Court had jurisdiction pursuant to 18 U.S.C. § 3231, and we have appellate
jurisdiction under 28 U.S.C. § 1291.
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647, 654 (7th Cir. 1961) (evidence of properly submitted medical bills admissible to
show lack of intent to defraud with later medical bills).
But Richardson’s testimony is not of this sort. Evidence that Appellants
undertook ameliorative efforts at Paterson does not negate the Government’s theory—
apparently adopted by the jury—that Appellants engaged in simultaneous efforts to
improve the Paterson plant and to continue manufacturing elsewhere, with the latter
actions violating the Consent Decree.
In addition, Richardson’s testimony would have raised ancillary issues about the
initial problems at Paterson and the Appellants’ ameliorative efforts. The District Court
concluded this outweighed any potentially probative value of the testimony. We agree,
and, moreover, discern no harm in excluding Richardson’s testimony. United States v.
Berrios, 676 F.3d 118, 131 (3d Cir. 2012). Appellants provided uncontradicted evidence
at trial about their efforts at Paterson, and their counsel were able to argue to the jury that
these efforts demonstrated their lack of willfulness to violate the decree. In this context,
the District Court did not err in excluding the testimony.
B. Jury Instruction on a Good Faith Defense
Appellants also challenge two aspects of the jury charge on their good faith
defense. They argue that the Court improperly instructed the jury: (1) that an honest
misunderstanding of the order must be plausible; and (2) that a defendant does not act in
good faith if he also knowingly made false statements, representations, or purposeful
omissions. The first part we review de novo because Appellants objected to the language
at trial. United States v. Berrios, 676 F.3d at 136. Appellants contend that we should
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review the false statements instructions de novo because they omit key language in their
requested charge. While we doubt that merely requesting an instruction contrary to the
one given sufficiently informs the Court of the specific objection, thus preserving the
issue for appeal, Fed. R. Crim. P. 30(d); United States v. Russell, 134 F.3d 171, 178–79
(3d Cir. 1998), we discern no error under either a de novo or plain error review.
The language used by the District Court on plausibility comes from our analysis of
a good faith defense in Taberer v. Armstrong World Industries, Inc., 954 F.2d 888, 909
(3d Cir. 1992). Although Appellants allege error in this instruction, we consider jury
instructions as a whole, and here find that the jury was properly instructed that a
defendant did not commit criminal contempt if he acted under an honest, although
incorrect, misunderstanding of the court order. United States v. Gross, 961 F.2d 1097,
1103 (3d Cir. 1992) (―[T]he good faith instruction [i]s simply a reiteration that the
government must carry its burden in demonstrating that the accused acted knowingly and
willfully . . . .‖). We also find no error in the Court’s instruction that a defendant does
not act in good faith if he makes false statements, representations, or purposeful
omissions. As such, there is no support for Appellants’ argument that the jury might
have determined that they were not entitled to a good faith defense because of a false
statement or omission unrelated to the charged conduct.
C. Sufficiency of the Evidence on the Aiding and Abetting Charge
Omar and Ahmad challenge the sufficiency of the evidence that they aided and
abetted the other Appellants’ failure to notify the FDA of the companies’ relocation from
Paterson to Congers. When reviewing a jury verdict for insufficiency of evidence, we
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consider the evidence in a light most favorable to the Government, and will affirm unless
no reasonable jury could find the essential elements of the charged offense beyond a
reasonable doubt. United States v. Gatlin, 613 F.3d 374, 380 (3d Cir. 2010). Aiding and
abetting has four elements. ―First, the person who is being aided must be intentionally
committing a crime; second, the aider or abettor must know that the other is committing a
crime; third, the aider or abettor must have the purpose to aid that other to commit the
crime; and, finally, fourth, the aider must in fact render aid or assistance.‖ United States
v. Nolan, 718 F.2d 589, 592 (3d Cir. 1983). Sufficient evidence was presented at trial
for a reasonable jury to conclude that all four elements were met. Omar and Ahmad
knew that Mohamed had failed to inform the FDA of the move to Congers, a violation of
the Consent Decree, and they successfully assisted him and the other Appellants in
concealing the relocation.
D. Closing Arguments
Appellants also argue that the prosecutors made a number of improper statements
during closing argument. We review a district court’s ruling on contemporaneous
objections to the statements for abuse of discretion. United States v. Brennan, 326 F.3d
176, 182 (3d Cir. 2003). To determine whether a district court abused its discretion, we
must consider whether the prosecutor engaged in misconduct, and, if so, whether the
remarks were harmless. United States v. Rivas, 493 F.3d 131, 139–40 (3d Cir. 2007).
We review statements to which Appellants did not object for plain error. Brennan, 326
F.3d at 182. Although we are troubled by the prosecutor’s reference to defense counsels’
attack on a witness’s credibility as ―disgusting‖ and ―ridiculous,‖ we do not think this
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statement alone, or in combination with the other challenged comments, prejudiced
Appellants. The other challenged comments do not amount to misconduct, nor have
Appellants shown prejudice as a result of these statements, alone or in combination.
E. Sentencing Enhancement Applied to Omar and Ahmad
Omar and Ahmad also challenge the District Court’s application of a three-level
enhancement under section 3B1.1(b) of the United States Sentencing Guidelines. We
review the factual findings supporting a district court’s application of the Guidelines for
clear error, and exercise plenary review over a court’s interpretation of the Guidelines.
United States v. Grier, 475 F.3d 556, 570 (3d Cir. 2007) (en banc). Section 3B1.1(b)
provides for an enhancement ―[i]f the defendant was a manger or supervisor‖ and the
criminal activity was extensive. U.S.S.G. § 3B1.1(b). It is applicable in two situations.
First, the enhancement is proper if the defendant is a ―manager, or supervisor of one or
more other participants.‖ § 3B1.1(b) cmt. 2. A participant is defined as someone who is
―criminally responsible for the commission of the offense‖ even if not convicted.
§ 3B1.1(b) cmt. 1; United States v. Katora, 981 F.2d 1398, 1404–05 (3d Cir. 1992). In
addition, the defendant must have more than legal management responsibility over the
participant; he must have actually managed or supervised the participant’s illegal
conduct. United States v. DeGovanni, 104 F.3d 43, 44 (3d Cir. 1997) (―[O]ne is only a
supervisor under U.S.S.G. § 3B1.1(c) when he is so involved in, and connected to, the
illegal activity of others that he actually supervises their illegal conduct . . . .‖).
Alternately, the role enhancement applies if the defendant ―exercised management
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responsibility over the property, assets, or activities of a criminal organization.‖ § 3B1.1
cmt. 2.
Here the District Court determined that the criminal activity was extensive, but did
not make any factual findings regarding whether Omar or Ahmad managed or supervised
the unlawful activities of a criminally culpable participant or that a criminal organization
existed over which Omar and Ahmad exercised management responsibility. Moreover,
the Court did not determine whether the two unindicted employees the Government
asserts were managed or supervised were criminally culpable. To sort matters out, we
remand so the District Court can make necessary factual determinations.
We thus affirm Appellants’ convictions. However, we vacate Omar and Ahmad
Desoky’s sentences, and remand for further factual findings.
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