United States v. Investment Enterprises, Inc.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 91-7134
_______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
INVESTMENT ENTERPRISES, INC., d/b/a
Great Western Litho & Bindery,
DONALD P. BROWNING,
CALIFORNIA PUBLISHERS LIQUIDATING CORPORATION,
MICHAEL WARNER, VIDEO TEAM, INC. and
SUSAN C. COLVIN,
Defendants-Appellants.
_______________________
No. 91-7266
_______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
versus
CALIFORNIA PUBLISHERS LIQUIDATING CORP.,
VIDEO TEAM, INC., DONALD P. BROWNING,
and MICHAEL WARNER,
Defendants-Appellees.
_________________________________________________________________
Appeals from the United States District Court
for the Northern District of Texas
_________________________________________________________________
(December 15, 1993)
Before JONES AND DeMOSS, Circuit Judges and BARBOUR*, District
Judge.
EDITH H. JONES, Circuit Judge:
*
Chief Judge of the Southern District of Mississippi,
sitting by designation.
This obscenity case arose from an undercover sting
operation jointly managed by police in Dallas and the Los Angeles
office of the Federal Bureau of Investigation.1 The operation
culminated in a jury's finding defendants California Publishers
Liquidating Corporation ("CPLC"), Donald P. Browning, Susan Colvin,
Video Team, Investment Enterprises, Inc. (d/b/a Great Western Litho
& Bindery) ("Great Western"), and Michael Warner guilty of two
counts of interstate transportation of obscene materials in
violation of 18 U.S.C. §1462 (1988) and aiding and abetting the
commission of the §1462 offense and one count of conspiring to
violate §1462. After the jury returned its guilty verdicts and
pursuant to the forfeiture provision of 18 U.S.C. §1467(a)(3)
(1988), the government sought forfeiture of substantial assets of
the defendants, but the district court exercised its discretion
under §1467(a)(3) and refused to order any forfeiture.
The defendants appeal their convictions on a multitude of
grounds. Having reviewed all of the appellants' arguments, we
discuss in detail only the sufficiency of the evidence challenges
raised by Warner and Great Western and Warner's argument that the
district court erred in giving the jury a deliberate ignorance
instruction. The remainder of the discussion focuses on issues
posed by the government's appeal of the denial of its forfeiture
motion. Review of all the issues leads us to affirm the
1
A more detailed review of the facts may be found in the
district court's published opinion denying the government's
forfeiture motion. See United States v. Cal. Publishers
Liquidating Corp., 778 F. Supp. 1377, 1379 - 1381 (N.D. Tex. 1991).
2
defendants' convictions, but it is necessary to remand to the
district court for it to reconsider forfeiture consistent with the
proper construction of §1467(a)(3).
I.
OBSCENITY CONVICTIONS
A. Sufficiency of the Evidence
Defendant/appellants Michael Warner and Great Western
argue that the evidence was insufficient to establish that they
conspired to ship obscenity in interstate commerce and that they
aided and abetted the shipment of obscenity in interstate
commerce.2 This court reviews sufficiency of the evidence
challenges to determine whether a reasonable jury could find that
the evidence establishes guilt beyond a reasonable doubt. See
United States v. Salazar, 958 F.2d 1285, 1291 (5th Cir. 1992),
cert. denied, 113 S. Ct. 185 (1992). In evaluating such challenges,
we review the evidence -- and all the inferences reasonably drawn
from it -- in the light most favorable to the verdict. See id. at
1290-91. Under these established standards, defendants' claims are
meritless.
As an initial matter, we note that this review of
evidentiary sufficiency as to both the conspiracy and the
2
Warner and Great Western were found guilty of conspiring
-- in violation of 18 U.S.C. §371 (1988) -- to violate 18 U.S.C.
§1462. Section 1462 makes "knowingly us[ing] any express company
or other common carrier, for carriage in interstate or foreign
commerce -- (a) any obscene ... motion picture film" punishable by
a fine and/or imprisonment. 18 U.S.C. §1462. They were also found
guilty on two counts of aiding and abetting the commission of the
§1462 offense. 18 U.S.C. § 2.
3
substantive obscenity convictions contemplates that corporations
cannot in and of themselves possess a mental state. However, a
corporation is criminally liable for the unlawful acts of its
agents, provided that the conduct is within the scope of the
agent's authority, whether actual or apparent. See United States
v. Bi-Co Pavers, Inc., 741 F.2d 730, 737 (5th Cir. 1984). Thus,
while Great Western cannot possess the requisite intent to conspire
or aid and abet, Michael Warren -- its president and undisputedly
authorized agent at all times -- can. His unlawful acts are the
basis for Great Western's criminal liability.
As to the merits of defendants' challenge, a reasonable
jury could find that Warner and Great Western conspired with the
other defendants -- CPLC, Video Team, Colvin, and Browning -- to
transport obscene videos in interstate commerce. The district
court correctly instructed the jury that for a defendant to be
guilty of conspiracy, the government must prove (1) that there was
an agreement by two or more persons to violate the law; (2) that
the defendant knew of and voluntarily joined the conspiracy; and
(3) that overt acts were committed to further the conspirators'
purpose. The appellants' only challenge to sufficiency concerns
the second of the district court's requirements; Warner argues that
he had no knowledge of the unlawful purpose of the conspiracy and
had no intent to further it. However, the evidence undercuts
Warner's position.
Warner is the president and part owner of Great Western,
an entity devoted largely to the production of sexually explicit
4
box covers and other materials for sexually explicit video tapes.
Great Western regularly manufactured box covers and printed
advertisements for co-defendant Video Team, a wholly owned
subsidiary of CPLC dedicated to the distribution of sexually
explicit video tapes. More specifically, Great Western
manufactured the box covers for "Interracial Anal 1", "Anal Sluts
Volume 2", and "Kinky Vision" -- three of the four tapes charged as
obscene in the two substantive counts.3 Furthermore, Warner always
examined the finished printing jobs of the sexually explicit box
covers. But the evidence linking Great Western and Warner with the
conspiracy hardly stops here.
In addition to having an intimate knowledge of the
sexually explicit nature of his own printing business, a singularly
unsurprising conclusion, Warner is well acquainted with CPLC and
its wholly owned subsidiary, Video Team. In fact, CPLC and Video
Team are not just important clients, they are the Warner family
business. Warner's father founded the predecessor corporation to
CPLC, and Warner worked there before going over to Great Western.
Warner's brother-in-law, Donald Browning, is the president and part
owner of CPLC. Vicki Browning, Warner's sister and Donald's wife,
is an employee of Great Western. The two families socialize
3
Count two alleged that "Beyond Taboo" and "Kinky Vision"
were obscene, whereas count four alleged that "Interracial Anal 1"
and "Anal Sluts Volume 2" were obscene. The jury's verdict found
Great Western and Warner guilty on both counts of aiding and
abetting the interstate transportation of these obscene videos but
without specifying which of the tapes were found obscene. Drawing
all reasonable inferences favorable to the verdict, we may assume
that as to count two the jury concluded that "Kinky Vision" -- for
which Great Western printed the box -- was obscene.
5
frequently, and Donald Browning met with Warner everyday at his
Great Western office across the street from CPLC and Video Team.4
Not unexpectedly, Warner -- a CPLC board member -- has a
significant financial stake in the fortunes of CPLC and its
subsidiary Video Team. He earned $75,000 a year from CPLC
distributions via a family trust and his interest upon dissolution
of the trust would approximate 20% of CPLC and its various
holdings. Further, Warner owns a substantial interest in the real
property and building housing CPLC and Video Team.
Viewed cumulatively, the evidence is sufficient to prove
that Warner, and Great Western through him, knew of the unlawful
purpose of the conspiracy to ship the obscene videos interstate and
that he joined it with the intent to further its purpose.5
4
Close relationships can be part of the circumstantial
evidence from which a jury may infer that the defendant knew of a
conspiracy. See Salazar, 958 F.2d at 1294 - 95.
5
Warner and Great Western raise First Amendment and Fifth
Amendment objections to their conspiracy conviction on the basis
that these constitutional provisions require very specific
knowledge on the part of the defendants: namely, that the
defendants must have known that the videos for which they only
printed boxes would be distributed to a community where they would
be deemed obscene. Defendants' constitutional objections do not
move us.
First, defendants' arguments assume that the only basis for
their conspiracy convictions is their role in printing the boxes
for the obscene videos. As the evidence described in part I.A.
suggests, this is false. Second, knowledge that the materials are
sexually explicit is the only scienter requirement under 18 U.S.C.
§1462 (1988). See United States v. Hill, 500 F.2d 733, 740 (5th
Cir. 1974), cert. denied, 490 U.S. 952 (1975). Furthermore,
knowledge of the sexually explicit nature of the materials as the
required scienter has been upheld against similar challenges to 18
U.S.C. §1461 (1988) -- a criminal provision making the mailing of
obscene materials punishable by fine and/or imprisonment. See
Hamling v. United States, 418 U.S. 87, 123 (1974). The fact that
the defendants were prosecuted for conspiring to violate §1462 --
6
With regard to the aiding and abetting counts, this court
has observed that typically the same evidence will support both a
conspiracy and an aiding and abetting conviction. See Salazar, 958
F.2d at 1292 (citation omitted). Thus, as to the two substantive
obscenity offense counts, the same evidence that proved Warner and
Great Western conspired to violate §1462 is sufficient to support
their conviction for aiding and abetting the §1462 violation. See
id.
B. Deliberate Ignorance Instruction
Near the conclusion of the instructions to the jury, the
district court provided the following deliberate ignorance
instruction:
You may find that a [d]efendant had knowledge of a fact
if you find that the [d]efendant deliberately closed his
or her eyes to what would otherwise have been obvious to
her. While knowledge on the part of the [d]efendant
cannot be established merely by demonstrating that the
[d]efendant was negligent, careless or foolish, knowledge
can be inferred if the [d]efendant deliberately blinded
himself or herself to the existence of a fact.6
as opposed to violating §1462 directly -- does not change the
analysis. Finally, to accept appellants' arguments would allow all
such defendants to avoid prosecution "by simply claiming that
[they] had not brushed up on the law." Id. at 123.
6
Immediately preceding the deliberate ignorance
instruction to the jury, the district court defined "knowingly":
The word "knowingly," as that term has been
used in these instructions, means that the act
was done voluntarily and intentionally and not
because of mistake or accident. The purpose
of adding the word "knowingly" is to ensure
that no one will be convicted for an act done
because of mistake or accident, or other
innocent reason.
7
The court's deliberate ignorance instruction was not limited in its
application to the substantive counts charged; the instruction
applied to the conspiracy count as well.
Warner makes two arguments in urging error on the part of
the trial court in giving this instruction. First, with regard to
the two substantive counts, each charging Warner with aiding and
abetting the commission of the §1462 offense, Warner argues that
the evidence was not sufficient to support the deliberate ignorance
instruction.7 Second, as to the conspiracy count, Warner urges
that the use of a deliberate ignorance instruction is never
appropriate in a conspiracy prosecution. Both of appellants'
arguments are unconvincing.
The standard of review applied to a defendant's claim
that a jury instruction was inappropriate is "whether the court's
charge, as a whole, is a correct statement of the law and whether
it clearly instructs jurors as to the principles of law applicable
to the factual issues confronting them." United States v. August,
835 F.2d 76, 77 (5th Cir. 1987). The district court "may not
instruct the jury on a charge that is not supported by evidence."
United States v. Ortega, 859 F.2d 327, 330 (5th Cir. 1988), cert.
denied, 489 U.S. 1027 (1989). Further, in determining whether the
evidence sufficiently supports the charge, the evidence and all
reasonable inferences that may be drawn from it are viewed in the
7
While each count actually charged both a §1462 violation
and aiding and abetting the §1462 violation, Warner's liability was
predicated on an aiding and abetting theory.
8
light most favorable to the government. See United States v. Lara-
Velasquez, 919 F.2d 946, 950 (5th Cir. 1990).
Before a deliberate ignorance instruction may properly be
given, the evidence at trial must raise two inferences: "the
defendant was subjectively aware of a high probability of the
existence of the illegal conduct; and ... the defendant purposely
contrived to avoid learning of the illegal conduct." See id. at
951 - 52. Warner claims that the evidence at trial on the
substantive obscenity offenses simply did not raise these two
required inferences. Our necessarily fact-intensive review
suggests that the evidence at trial viewed in the light most
favorable to the government did support the deliberate ignorance
charge as to the substantive counts.
First, the government presented evidence to support the
inference that Warner was subjectively aware of the high
probability that he was involved in illegal activity.8 Warner is
president and part owner of Great Western, a firm whose dominant
business is producing sexually explicit box covers and/or materials
for sexually explicit video tapes, although a substantial portion
of its business is not sexually related. The firm's clients
include CPLC, a firm in the business of distributing sexually
explicit materials nationwide since 1973, and Video Team, a wholly
owned subsidiary of CPLC dedicated to the distribution of sexually
8
It should come as no surprise that the same evidence used
to raise an inference of Warner's actual knowledge will also raise
the inference of Warner's subjective awareness. See Lara-
Velasquez, 919 F.2d at 952.
9
explicit videotapes. In addition to manufacturing the sexually
explicit box covers for Video Team, Great Western also prints the
advertisements that accompany Video Team products.
Donald Browning, president and part owner of CPLC,
testified that he harbored no doubt that Warner has knowledge of
the adult entertainment industry. In fact, Warner has attended
adult entertainment conventions to solicit business for Great
Western. Significantly, Warner examines the finished printing jobs
of the sexually explicit box covers. In short, the district court
could reasonably have concluded that the government satisfied the
first prong of the deliberate ignorance instruction test.
Second, the evidence at trial supported the inference
that, even if he did not actually know of the illegal conduct,
Warner purposefully contrived to avoid learning of it.9 Although
he earned $75,000 a year from CPLC distributions via a family trust
arrangement, his interest in CPLC would approximate 20% of the firm
once the trust was dissolved, and he owned a large part of the real
property and building housing CPLC and Video Team, Michael Warner
visited the CPLC premises -- across the street from the offices of
Great Western -- only twice in the two years preceding the trial.
While Warner and Browning saw each other every day, they virtually
never met on the premises of CPLC. Although Warner only made the
trip across the street twice in two years, his vice president at
9
The defendant's purposeful contrivance to avoid learning
of the illegal conduct may be established by either direct or
circumstantial evidence. See Lara-Velasquez, 919 F.2d at 952.
10
Great Western was sent across the street every week to collect for
printing services rendered.
Warner was a member of the board of CPLC, but he never
attended any board meetings. More broadly, despite his significant
financial interest in the fortunes of CPLC, Warner never had
anything to do with the sales, marketing, or pricing strategies of
CPLC. In sum, the jury could have reasonably concluded that the
evidence satisfied the second prong of the deliberate ignorance
test.
Although this court recognizes that district courts
should only give deliberate ignorance instructions sparingly, we
conclude there was sufficient evidence to support the district
court's careful instruction. This conclusion dispenses only with
Warner's arguments as to the substantive obscenity counts. Warner
still claims that it is error to give a deliberate ignorance
instruction in a conspiracy prosecution. Specifically, Warner
argues that he cannot be deliberately ignorant of the object of the
conspiracy and also intend to further its purpose as required by
the district court's conspiracy charge.10
Warner's argument overlooks the fundamental nature of the
deliberate ignorance instruction. The instruction serves "to
inform the jury that it may consider evidence of the defendant's
charade of ignorance as circumstantial proof of guilty knowledge."
Lara-Velasquez, 919 F.2d at 951 (emphasis added). Viewed this way,
10
The district court's conspiracy instruction appears in
full in part I.A. supra.
11
the deliberate ignorance instruction is a particularized
circumstantial evidence instruction. See id. (relying on United
States v. Manriquez Arbizo, 833 F.2d 244, 248 (10th Cir. 1987)).
To the extent that the instruction is merely a way of allowing the
jury to arrive at the conclusion that the defendant knew the
unlawful purpose of the conspiracy, it is hardly inconsistent with
a finding that the defendant intended to further the unlawful
purpose.11
II.
FORFEITURE
A. Appealability of an Order Denying Forfeiture Motion
Defendant/appellees12 maintain that the government is not
authorized to appeal the district court's denial of the
government's motion for an order of forfeiture pursuant to 18
U.S.C. §1467 (1988). The appellees argue that a forfeiture order
is not a "sentence" within the meaning of 18 U.S.C. §3742(b) (1988
11
As noted earlier, the defendants raise numerous other
arguments against their convictions. These arguments include
challenges to the district court's finding that the government
offered race neutral reasons for striking a black juror, exclusion
of a compilation video, giving a "modified" Allen charge, giving a
supplemental Pinkerton instruction, failing to investigate an
alleged incident of juror misconduct, denying a request of immunity
to an expert, and failure to suppress evidence seized pursuant to
allegedly defective warrants. While we have thoroughly considered
-- and rejected -- these arguments, we do not discuss them further
in the opinion.
12
Appellees include all of the defendant/appellants with
the exception of Great Western. This court granted the
government's motion to withdraw its appeal of the denial of the
forfeiture order as to Great Western on June 15, 1992.
12
& Supp. II 1990).13 Since §3742(b) by its terms only authorizes the
government to appeal a "sentence", appellees claim that the
government is without statutory authority to appeal the denial of
the forfeiture order below.14
That the government has no right of appeal in a criminal
case unless a statute expressly grants such a right is well-
established. See United States v. Denson, 588 F.2d 1112, 1125 (5th
Cir. 1979) (citing cases), rev'd on other grounds, 603 F.2d 1143
(5th Cir. 1979) (en banc). A review of the Guidelines Manual and
the relevant statutory provisions, however, lead us to conclude
that a forfeiture order is a "sentence" for purposes of §3742(b)
and thus is appealable.
13
The statute provides in relevant part:
The Government, [sic] may file a notice of appeal in the
district court for review of an otherwise final sentence
if the sentence --
(1) was imposed in violation of law;
(2) was imposed as a result of an incorrect application
of the sentencing guidelines;
(3) is less than the sentence specified in the applicable
guideline range to the extent that the sentence includes
a lesser fine or term of imprisonment, probation, or
supervised release than the minimum established in the
guideline range, or includes a less limiting condition of
probation or supervised release under section 3563(b)(6)
or (b)(11) than the minimum established in the guideline
range; or
(4) was imposed for an offense for which there is no
sentencing guideline and is plainly unreasonable.
18 U.S.C. §3742(b).
14
The Sentencing Reform Act of 1984 provides in 18 U.S.C.
§3742(a)-(b) (1988 & Supp. II 1990) for limited appellate review of
sentences by specifying when either a defendant or the government
may appeal a sentence. See Mistretta v. United States, 488 U.S.
361, 368 (1988).
13
1. How the Guidelines Treat Forfeiture
The Sentencing Guidelines provide that "[f]orfeiture is
to be imposed upon a convicted defendant as provided by statute."
United States Sentencing Commission, Guidelines Manual §5E1.4 (Nov.
1, 1992). While the commentary to this guideline does not
specifically mention forfeiture under §1467, the commentary
recognizes that "[f]orfeiture provisions exist in various
statutes", id. §5E1.4 commentary at 308, and provides a few
examples of such statutory forfeiture provisions. See id. at 308
-09. By its inclusiveness, §5E1.4 of the guidelines contemplates
that forfeiture be imposed upon defendants as provided for under
§1467.
Furthermore, the Sentencing Guidelines treat forfeiture
as part of the sentence to be imposed upon a defendant. The
introductory commentary to Chapter Five of the Sentencing
Guidelines, appropriately entitled "Determining the Sentence",
begins by noting that "the guidelines permit the court to impose
either imprisonment or some other sanction or combination of
sanctions."15 Id. Critically, the commentary continues, "[a]
sentence is within the guidelines if it complies with each
applicable section of this chapter." Id. As a sentence "within the
guidelines" has to comply with every applicable section of Chapter
15
As the Supreme Court has recently held, commentary in the
Guidelines Manual interpreting or explaining a guideline "is
authoritative unless it violates the Constitution or a federal
statute, or is inconsistent with, or a plainly erroneous reading
of, that guideline." Stinson v. United States, ____ U.S. ____, 113
S. Ct. 1913, 1915 (1993).
14
Five, it necessarily includes §5E1.4 on forfeiture.16 In short, a
§1467 forfeiture order falls within the guideline's treatment of
sentences.
2. Consistency with the Sentencing Reform Act
Appellees nevertheless contend that to afford the
government an appeal of a §1467 forfeiture under §3742(b) is
inconsistent with certain provisions of the Sentencing Reform Act.
Appellees maintain that a forfeiture pursuant to §1467 is not a
"sentence" for purposes of §3742(b) because §1467 forfeiture is not
specifically mentioned as an order of criminal forfeiture in 18
U.S.C. §3554 (1988).17 Yet only forfeitures pursuant to §3554 are
authorized sanctions under 18 U.S.C. §3551 (1988 & Supp. II 1990),18
16
Actually, the sentences of the appellee corporations --
CPLC and Video Team -- are determined in compliance with Chapter 8
entitled "Sentencing of Organizations." United States Sentencing
Commission, Guidelines Manual §8A1.1 (Nov. 1, 1992). Just like the
chapter applicable to non-organizations, Chapter 8 treats
forfeitures as part of the sentence. For instance, the application
instructions in Chapter 8 on determining sentences for
organizations specifically requires a determination of "the
sentencing requirements relating to special assessments,
forfeitures, and costs" made by reference to Part E of Chapter 8.
See id. §8A1.2(d) (emphasis added). Significantly, the relevant
portion of Part E on forfeiture merely refers the user back to
§5E1.4. See id. §8E1.2. Because the unmistakable implication of
Chapter 8 is -- just as in Chapter 5 -- to treat forfeiture as part
of the sentence, we will speak only in terms of Chapter 5
sentencing for the sake of clarity.
17
Section 3554 requires a court imposing a sentence under
the federal RICO statute or Titles II and III of the Comprehensive
Drug Abuse Prevention and Control Act of 1970 to order the
forfeiture of property in accordance with the automatic forfeiture
provisions of the respective statutes. 18 U.S.C. §3554.
18
Section 3551 provides in relevant part that "[a] sanction
authorized by section 3554, 3555, or 3556 may be imposed in
addition to the sentence required by this subsection." 18 U.S.C.
§3551(b) (1988). The same is true for organizations. See 18
15
and only §3551 sanctions are made appealable under §3557.19
Finally, appellees urge that 18 U.S.C. §3557 (1988) implicitly
limits appeals under §3742(b) to sentences imposed in accordance
with §3551. As such, the government has no statutory basis for
appeal.
This reasoning might be compelling but for two flaws.
First, section 3551(a) provides in relevant part that "[e]xcept as
otherwise specifically provided, a defendant who has been found
guilty of an offense described in any Federal statute, ... , shall
be sentenced in accordance with the provisions of this chapter".
18 U.S.C. §3551(a) (emphasis added). Second, §3742(b) is not
limited to authorizing appeals cross-referenced back to §3557.
This fact harmonizes nicely with the §3551(a) proviso. Thus, even
assuming that §3551(b) and (c) only authorize sentences with
forfeiture limited to the specific types enumerated in §3554,
U.S.C. §3551(c) (1988). Appellees do not concede that §3554
forfeitures are sentences, relying on the "in addition to the
sentence" language in §3551 to conclude that even §3554 forfeitures
are not sentences. While not necessary to our disposition of this
case, we express reservations as to appellees' reading of §3554.
First, a reading of §3554 which takes "sentence" to include the
forfeitures enumerated in the section would be consistent with the
totality of the language in the section, particularly the language
which requires the court to order forfeiture "in imposing a
sentence on a defendant". 18 U.S.C. §3554. Further, such a
reading would be consistent with the well-established understanding
of forfeitures as punishment. See, e.g., Austin v. U.S., 113 S. Ct.
2801, 2810 (1993) (noting that forfeiture generally and statutory
in rem forfeiture in particular have been historically understood
as punishment); U.S. v. Horak, 833 F.2d 1235, 1246 (7th Cir. 1987)
(finding that RICO forfeiture is punishment imposed on a guilty
defendant).
19
In its entirety, section 3557 provides that "[t]he review
of a sentence imposed pursuant to section 3551 is governed by the
provisions of section 3742." 18 U.S.C. §3557.
16
§3551(a) expressly allows for sentencing where "otherwise
specifically provided"; this language is certainly broad enough to
include sentencing pursuant to §5E1.4 of the Sentencing Guidelines.
As our earlier discussion demonstrated, the guidelines clearly and
specifically provide for sentencing to include a §1467 forfeiture.
Contrary to appellees' ingenious argument, a sentence
imposing §1467 forfeiture pursuant to §5E1.4 qualifies as a
"sentence imposed pursuant to section 3551" and thus its review
would be governed by §3742. See 18 U.S.C. §3557. Under §3742(b),
the government may appeal in four situations.20 The government has
the statutory authority under §3742(b)(1) to bring this appeal
since it alleges that the sentence is in violation of law --
specifically, §1467.21
20
See note 13 supra.
21
Appellee Warner raises a double jeopardy objection to the
government's ability to appeal the district court's denial of the
forfeiture motion. However, it is well-established that double
jeopardy does not prevent appellate review of the government's
statutorily authorized appeal of a sentence. See United States v.
Greenwood, 974 F.2d 1449, 1473 (5th Cir. 1992) (relying on United
States v. DiFrancesco, 449 U.S. 117, 132 - 33 (1980)).
The remaining appellees additionally urge that this appeal
should be dismissed on the basis that the Solicitor General
authorized the appeal after the notice of appeal was filed by the
government. Appellees' objection is without merit. The clear
language of §3742(b) allows the government to file a notice of
appeal in the district court, but prohibits the government from
further prosecuting an appeal of a sentence without certain
officials' approval. 18 U.S.C. §3742(b) (1988 & Supp. II 1990).
The government has fully complied with these requirements.
17
B. Merits of Denial of Forfeiture Motion
1. Statutory Construction
In appealing the denial of its motion for a forfeiture
order, the government argues that the district court misconstrued
the discretion given it under 18 U.S.C. §1467(a)(3) (1988) and
erroneously limited the kind of property subject to forfeiture
under that statutory provision. As the court recognized in its
published opinion denying the forfeiture motion, the questions of
statutory construction posed are of first impression.22 See United
States v. Cal. Publishers Liquidating Corp., 778 F. Supp. 1377, 1379
(N.D. Tex. 1991). We conclude that the government's critique is
essentially correct.
A court begins the task of interpreting a statute by
looking to the statutory language. See Mallard v. United States
Dist. Court for S. Dist. of Iowa, 490 U.S. 296, 300 - 01 (1989).
To that end, the relevant statutory language provides:
A person who is convicted of an offense
involving obscene material under this chapter
shall forfeit to the United States such
person's interest in ... (3) any property,
real or personal, used or intended to be used
to commit or to promote the commission of such
offense, if the court in its discretion so
determines, taking into consideration the
22
In one of only two appeals court cases dealing with §1467
forfeiture, the D.C. Circuit did not reach the merits of a First
Amendment challenge to the forfeiture provision on the grounds that
plaintiffs' claims were not justiciable. See American Library
Assoc. v. Barr, 956 F.2d 1178, 1187 (D.C. Cir. 1992). In the only
other reported case, the Fourth Circuit in dicta upheld §1467
against a First Amendment challenge. See United States v. Pryba,
900 F.2d 748, 755 (4th Cir. 1990), cert. denied, 498 U.S. 924
(1990).
18
nature, scope, and proportionality of the use
of the property in the offense.
18 U.S.C. §1467(a)(3) (1988). The statute also requires the trier
of fact to determine beyond a reasonable doubt that the property is
subject to forfeiture. 18 U.S.C. §1467(e) (1988).
Once the defendant/appellees were found guilty of
violating 18 U.S.C. §1462 (1988), an offense "under this chapter"
for purposes of §1467(a)(3), the district court submitted the
forfeiture issue to the jury.23 See Cal. Publishers, 778 F. Supp.
at 1381. The jury returned a special verdict in which it found
that two tracts of real property in Los Angeles -- together with
the buildings housing the corporate defendants and their contents
-- and four corporate bank accounts were subject to forfeiture.
See id. The jury did not find that the personal bank accounts of
defendant/appellees Michael Warner and Donald Browning were subject
to forfeiture.24 As has already been noted, the district court
subsequently denied the government's motion for an order of
forfeiture "in the sound exercise of its discretion." Id. at 1394.
Except as to defendant/appellee Great Western, the government
appeals the court's denial of its forfeiture motion.
While the only issue properly before the district court
concerned forfeiture under §1467(a)(3), the district court
23
Section 1462 makes "knowingly us[ing] any express company
or other common carrier, for carriage in interstate or foreign
commerce--(a) any obscene ... motion picture film" punishable by a
fine of up to $5,000 and/or imprisonment up to five years for a
first offense. 18 U.S.C. §1462(a).
24
The government did not seek forfeiture as against Susan
Colvin.
19
nonetheless chose to discuss forfeiture under §1467(a)(1) and
(a)(2). See id. at 1382 - 85. The court's discussion of those
other forfeiture provisions is both problematic and wholly
unnecessary.25 This court will entertain only the district court's
construction of §1467(a)(3).
A critical flaw in the district court's construction of
§1467(a)(3) concerns the clause in which the court is directed to
take "into consideration the nature, scope, and proportionality of
the use of the property in the offense" in exercising its
discretion. 18 U.S.C. §1467(a)(3) (emphasis added). Under the
district court's reading, the only property over which the district
court has discretion to order forfeiture is property actually used
in the offense. See Cal. Publishers, 778 F. Supp. at 1386 n.9.
That is, according to the district court, any property that the
jury found was merely "intended to be used to commit or promote the
commission" of an offense under the chapter on obscenity would be
automatically excluded from forfeiture. 18 U.S.C. §1467(a)(3)
(emphasis added).
This construction renders the first part of §1467(a)(3)
virtually meaningless. While a jury is empowered under the first
part of §1467(a)(3) to return a broad forfeiture verdict as to
25
For instance, in its construction of §1467(a)(1), the
district court noted that "an order of forfeiture of materials not
found to be obscene would do violence to the First Amendment's
protection from prior restraint." See Cal. Publishers, 778 F. Supp.
at 1384. This conclusion erroneously predicted the Supreme Court,
which recently rejected the very same argument in the context of
RICO forfeiture. See Alexander v. United States, 113 S. Ct. 2766,
2770 - 71 (1993). The constitutional objections raised to
§1467(a)(3) are discussed fully in part 2 infra.
20
property which it found to be actually used or intended to be used
to commit or promote the commission of the obscenity offense, the
district court's discretion to order forfeiture under the latter
portion of the statutory provision would extend only to a much more
narrow class -- property actually used in the offense.
Harmonizing all of its parts, as we must do, §1467(a)(3)
plainly extends the court's discretion much more broadly than as
construed by the district court. Consequently, in exercising its
discretion, the district court must take into account the "nature,
scope, and proportionality" of the use -- both actual and intended
-- of the property in the commission and promotion of the obscenity
offense.26
The district court also misconstrued §1467(a)(3) when it
artificially narrowed the scope of forfeiture to include only
property used to produce or transport obscene articles. See Cal.
Publishers, 778 F. Supp at 1388-1389. No such qualifying language
appears in the language of the statutory provision. Instead, the
statute provides for the forfeiture of "any property, real or
personal" so long as it is used or intended to be used to commit or
to promote the commission of the obscenity offense. 18 U.S.C.
§1467(a)(3). (emphasis added).
Rather than rely on the unambiguous language of the
statute, the district court hinged its analysis on a piece of
26
"Offense" for purposes of § 1467(a)(3) forfeiture is the
offense of conviction. Specifically, the offense of conviction
must be -- per the statutory requirement -- "an offense involving
obscene material under this chapter." 18 U.S.C. § 1467(a)
(emphasis added).
21
ambiguous legislative history.27 See Cal. Publishers, 778 F.Supp
at 1385, 1388. Except in rare circumstances, judicial inquiry is
complete when the terms of a statute are unambiguous. See Demarest
v. Manspeaker, 111 S. Ct. 599, 604 (1991). The meaning of "any
property" is perfectly clear and does not present the exceptional
case in which application of the statute as written would produce
a result demonstrably at odds with the intentions of its drafters.
See id. (relying on Griffin v. Oceanic Contractors, Inc., 458 U.S.
564, 571 (1982)).
The district court's erroneous construction of
§1467(a)(3) led the court improperly to refuse consideration of
certain evidence. Two particular instances merit discussion.
First, the district court refused to consider FBI summaries of
seventy-two unindicted videotapes shipped into the Dallas area by
defendant/appellees. See Cal. Publishers, 778 F. Supp. at 1388.
27
The specific legislative history relied upon by the
district court is particularly suspect. The district court relied
upon a portion of President Reagan's message to Congress urging
adoption of the larger legislation of which §1467(a)(3) was a part.
See Cal. Publishers, 778 F. Supp. at 1385. The district court
quotes a section of the message in which the President noted that
§1467(a)(3) "'is intended to cover the things used to produce or
transport the obscene article.'" See id. (citations omitted).
Note that the President's remarks were directed at a very
different, earlier version of §1467(a)(3). See id. at 1385 n.8.
The court took these remarks to mean that §1467(a)(3) only
allowed forfeiture of property used in the production or
transportation of the obscene material. See id. at 1388. However,
the quoted language could easily be read not to be exclusive in its
coverage. As a general matter, legislative history in the form of
Presidential messages or committee reports -- a legislative
analogue to the Presidential message -- should be approached with
skepticism. See, e.g., Wis. Pub. Intervenor v. Mortier, 111 S. Ct.
2476, 2487 - 2491 (1991) (Scalia, J., concurring) (criticizing use
of committee reports in part because of their unreliability as
indicators of congressional intent).
22
A magistrate in Los Angeles had concluded that probable cause
existed to believe that these tapes were obscene. See id. The
district court declared that "[t]o assume that the unindicted video
tapes are obscene would be as improper as finding that all eight of
the indicted video tapes are obscene, despite the fact that the
jury did not so find." Id.
But the unindicted videos need not be deemed obscene in
order for the court to consider them for purposes of forfeiture.28
First, to the extent the unindicted videos are part of the
"contents" of the real property that the jury found subject to
forfeiture in its special verdict, the district court must take
them into account in deciding whether to exercise its discretion.
Second, in actually exercising its discretion to determine a
forfeiture under § 1467(a)(3), the court might well conclude that
these unindicted, sexually explicit videos shipped into Dallas were
used to promote the commission of the offense of conviction --
namely, interstate shipping of the obscene videos. The court might
reasonably view the numerous unindicted shipments into the Dallas
area as facilitating the offense of conviction in that the
shipments established or maintained market presence in Dallas.
Further, the shipments might reasonably be seen as helping build
the necessary client contacts or reputation in the Dallas market
with the inevitable consequence of facilitating the conviction
offense.
28
As to the constitutional propriety of such forfeiture,
see note 29 infra.
23
Property used to promote the commission of the obscenity
offense necessarily encompasses a broader category of property than
that used to commit the offense. Following from this observation,
the nexus required of property used to promote the commission of
the obscenity offense is necessarily less exacting than that
required of property used to commit the offense. The district
court thus erred in refusing to consider this evidence and should
do so on remand.
Similarly, the court is required on remand to consider
the 369 videos in the defendants' inventory which had been found
obscene in unrelated state prosecutions in Texas. The court
refused to consider such evidence in exercising its discretion to
order forfeiture on the grounds that they were "irrelevant" and
that no evidence existed "that the [d]efendants ever shipped a
single copy of any of the ... [videos]" into the Dallas Division of
the Northern District of Texas. Id. at 1388 n.12. Under our above
reasoning, however, they are equally subject to consideration by
the court as were the unindicted videotapes.
By discussing the two sets of videos that the district
court specifically refused to admit, we by no means intimate the
extent of the district court's task on remand. The narrow
construction of the statute by the district court permeated its
view of the relevant considerations at the forfeiture stage. For
example, under the district court's narrow view, a computer not
actually used in the offense but located on the defendants'
premises -- part of the contents of the real property the jury
24
found subject to forfeiture -- would not be subject to forfeiture
for a couple of reasons. First, the district court construed
§1467(a)(3) to be limited to articles used to produce or transport
obscene articles; presumably the computer would not be covered
under this construction. Second, the district court also construed
its discretion to extend only to property actually used in the
offense.
Under the proper understanding of the statute, however,
this computer could be found subject to forfeiture in the court's
discretion. The district court would have to consider the nature,
scope, and proportionality of the computer's use -- actual and
intended -- in the commission and promotion of the obscenity
offenses. If the computer were solely dedicated to keeping sales
and transport records of the sexually explicit inventory, a
district court would be within its discretion to order forfeiture
following these criteria. This result is completely permissible
even though the computer was not actually used to commit the §1462
violation.
This illustration does not suggest that the issue of
forfeiture must be fought item by item across a defendant's
inventory. Rather, we hope to demonstrate that the proportionality
determination embodies more property than a forfeiture of only the
obscene materials themselves or the articles used in their
transportation and production. Comparison with the drug crime and
RICO forfeiture provisions is also apt. In the former case,
Congress authorized forfeiture of property used "in any part" to
25
facilitate a drug offense, 21 U.S.C. §853 (1988); this penalty is
broader than the § 1467(a)(3) discretionary provision. RICO
forfeiture, authorized under 18 U.S.C. § 1963 (1988), is also
broader, but it is predicated upon the more onerous conviction of
predicate offenses establishing an illegal "enterprise". As we
view it, § 1467(a)(3) discretionary forfeiture ought to rest in the
middle ground between the district court's unduly narrow
construction and the broader mandatory forfeitures authorized under
other statutes.29
On remand, the district court must broaden its view of
discretionary forfeiture consistent with this opinion. While
attempting to guide the court's exercise of discretion, we do not
intimate how discretion should ultimately be exercised.
2. Constitutional Objections
Defendant/appellees argue that any interpretation of
§1467(a)(3) other than that of the district court would run afoul
of the Constitution. Specifically, they urge that our view of the
statutory provision constitutes an impermissible prior restraint on
presumptively protected speech and will lead to a chilling effect
on such speech. Warner also argues that the forfeiture sought by
the government would violate the Eighth Amendment.
Their First Amendment concern was laid to rest by the
Supreme Court's recent opinion in Alexander v. United States, ____
U.S. ___, 113 S. Ct. 2766 (1993). The Supreme Court turned back the
29
It was appropriate for the court to assess forfeiture
against the backdrop of the criminal sentences and five-figure
fines it meted out for the convictions.
26
argument that a RICO forfeiture of sexually oriented business
convicted of multiple obscenity violations constituted an
impermissible prior restraint. To accept the defendant's argument,
the Court noted, "would virtually obliterate the distinction ...
between prior restraints and subsequent punishments." Id. at 2771.
The critical distinction that placed the RICO forfeiture order
firmly in the category of subsequent punishments was that the order
did not forbid future expressive activities or require any sort of
prior approval for such activities. See id. Section 1467
forfeiture shares this constitutionally significant characteristic.
As to the alleged chilling effect on protected speech, Alexander
countered that "the threat of forfeiture has no more of a chilling
effect on free expression than the threat of a prison term or a
large fine." See id. at 2774. The same holds true of a § 1467
forfeiture.30
Warner's Eighth Amendment objection is premature since we
are remanding to the district court for a redetermination of the
appropriateness of forfeiture. If the district court in the
exercise of its discretion orders forfeiture, defendants may at
such time raise their Eighth Amendment arguments. See Alexander,
113 S. Ct. at 2775 - 76 (concluding that on remand order of criminal
30
The defendant/appellees also argue that any construction
of the statute which allows for forfeiture of videotapes in their
California inventory based on the videotapes found obscene in
Dallas would effectively violate the community standards test set
forth in Miller v. California, 413 U.S. 15, 32 - 34 (1973). But
this argument assumes that the videos are being forfeited because
they are believed to be obscene. Under §1467(a)(3), the videos may
be forfeited because they were related to the defendants' obscenity
convictions in this case and, thus, as subsequent punishment.
27
forfeiture under RICO should be analyzed under Excessive Fines
Clause of Eighth Amendment).
III.
CONCLUSION
A thorough review of the many issues raised by this
complex obscenity prosecution leads us to affirm the convictions of
all defendants and remand to the district court for a new
forfeiture proceeding consistent with the proper construction of
§1467(a)(3). AFFIRMED IN PART; REMANDED IN PART.
28