United States v. Kevin Schultz

In the
United States Court of Appeals
For the Seventh Circuit
No. 09-1192
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
K EVIN R. S CHULTZ,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Indiana, South Bend Division.
No. 3:08-cr-00004-RLM-1—Robert L. Miller, Jr., Chief Judge.
A RGUED S EPTEMBER 11, 2009—D ECIDED N OVEMBER 5, 2009
Before B AUER, R OVNER and W ILLIAMS, Circuit Judges.
B AUER, Circuit Judge. Kevin Schultz was convicted
of being a felon in possession of a firearm, in violation of
18 U.S.C. § 922(g)(1). On appeal, he challenges his con-
viction. We affirm.
I. BACKGROUND
On February 25, 2005, Schultz pleaded guilty to one
count of trafficking in counterfeit telecommunications
instruments, in violation of 18 U.S.C. § 1029(a)(7), an
2 No. 09-1192
offense punishable by fine and/or imprisonment not to
exceed ten years. Schultz was sentenced to two years
probation, with the first six months to be served on
home detention.
On December 7, 2007, pursuant to a search war-
rant, federal agents searched Schultz’s residence and
found a 12-gauge Remington shotgun and ammunition
in the attached garage. Thereafter, a two-count indict-
ment was filed against him: Count One for violating
18 U.S.C. § 922(g), which makes it unlawful for one con-
victed of a crime punishable of a term exceeding one
year to possess a firearm (“felon-in-possession”); and
Count Two for making a false statement regarding his
ownership of the shotgun, in violation of 18 U.S.C. § 1001.
Schultz filed a motion to dismiss the indictment and
a motion to suppress both the shotgun and his state-
ments; the district court denied both motions. Thereafter,
a bench trial was held on stipulated facts for Count One;
and the government moved to dismiss Count Two. The
district court found Schultz guilty and sentenced him
to eighteen months of imprisonment, to be followed by
three years of supervised release.
II. DISCUSSION
On appeal, Schultz argues that the felon-in-possession
indictment was insufficient because his prior conviction
does not meet the definition of a “crime punishable by
imprisonment for a term exceeding one year” under
18 U.S.C. § 921(a)(20)(A), or in the alternative, that the
No. 09-1192 3
charge should be dismissed because § 921(a)(20)(A) is
impermissibly vague. Schultz further maintains that he
was entitled to a Franks hearing to test the validity of the
search warrant affidavit. Finally, Schultz asserts that
the statements he made when his home was searched
should have been suppressed.
A. The 18 U.S.C. § 1029(a)(7) Conviction
1. Schultz’s Previous Conviction
Schultz argues that his prior felony conviction does not
meet the definition of a “crime punishable by impris-
onment for a term exceeding one year” because Congress
carved out an exception under 18 U.S.C. § 921(a)(20)(A), to
exclude “any Federal or State offenses pertaining to
antitrust violations, unfair trade practices, restraints of
trade, or other similar offenses relating to the regulation
of business practices.” Schultz contends that his
2005 conviction is excluded under “similar offenses
relating to the regulation of business practices” because he
was convicted of knowingly trafficking in a telecommuni-
cations instrument.
It does not appear that this Circuit has ever addressed
whether a § 1029(a)(7) conviction is exempt under
§ 921(a)(20(A). However, other circuits that have dis-
cussed § 921(a)(20)(A) have held that not all offenses
related to the regulation of business practices fall within
the exclusion; the plain meaning of the statute indicates
Congress’ intent to exclude only those offenses that pertain
to antitrust violations, unfair trade practices, restraints
4 No. 09-1192
of trade, or similar offenses. United States v. Stanko, 491
F.3d 408, 413-14 (8th Cir. 2007). For example, Stanko held
that it did not apply to a Federal Meat Inspection Act
(“FMIA”) conviction, 491 F.3d at 416; Meldish ruled it did
not apply to a conviction for importing merchandise
into the United States by means of a false customs declara-
tion, United States v. Meldish, 722 F.2d 26, 27 (2d Cir. 1983);
and Dreher concluded it did not apply to convictions for
mail fraud and conspiracy to commit mail fraud, United
States v. Dreher, 115 F.3d 330, 332-33 (5th Cir. 1997). In
holding that § 921(a)(20(A) did not apply, Stanko
reasoned that “none of [FMIA’s] provisions . . . require the
Government to prove an effect on competition or con-
sumers as an element of the offense.” Id. at 417. Similarly,
the Dreher court concluded that the plain meaning of
“offenses” referred solely to the charged violation of law
and not to the possible incidental effects of a defendant’s
activities. Dreher, 115 F.3d at 332.
However, the district court in McLemore held that the
§ 921(a)(20(A) exclusion applied to convictions for
rolling back odometers, in violation of 15 U.S.C. §§ 1984
and 1990c(a), because these convictions were “meant
to punish an ‘unfair trade practice.’ ” United States v.
McLemore, 792 F. Supp. 96, 98 (S.D. Ala. 1992). The
McLemore court concluded that the government must
live with its decision to prosecute the defendant’s odome-
ter rollback activity as a Title 15 trade offense, rather
than as Title 18 mail fraud or wire fraud offense. Id.
Accordingly, to determine whether Schultz’s previous
conviction is excluded under the § 921(a)(20)(A) exclusion,
No. 09-1192 5
we focus on the elements of the predicate conviction. In
order for the exclusion to apply under “regulation of
business practices,” the government would have been
required to prove, as an element of the predicate
offense, that competition or consumers were affected;
possible incidental effects are not relevant. The elements
of Schultz’s § 1029(a)(7) conviction are: (1) knowingly
trafficking in a telecommunications instrument that has
been modified or altered to obtain unauthorized use
of telecommunications services; (2) intent to defraud; and
(3) conduct which affected interstate commerce. United
States v. Schultz, 2008 WL 2477583, *3 (N.D. Ind. June 13,
2008). Essentially, Schultz’s § 1029(a)(7) conviction
was modifying telecommunication instruments for the
purpose of stealing cable.
Similar to Stanko, Meldish, and Dreher, the government
was not required to prove that Schultz’s conduct had
an effect on competition or consumers. Unlike McLemore,
Schultz’s conviction was under Title 18, which regulates
crimes and criminal procedure and not Title 15,
which regulates commerce and trade. Therefore, the
§ 921(a)(20)(A) exclusion does not apply to Schultz’s
predicate conviction. That the government had to prove
that Schultz’s conduct affected interstate commerce does
change this analysis: Congress’ commerce authority only
extends to those activities that substantially affect inter-
state commerce and accordingly, many criminal statutes
include such a jurisdictional nexus. See United States
v. Lopez, 514 U.S. 549, 558-59 (1995); United States v. Bell,
70 F.3d 495, 498 (7th Cir. 1995) (holding that The
Gun-Free School Zone Act (from Lopez) was unconstitu-
6 No. 09-1192
tional because it was not an essential part of a larger
regulation of economic activity and it did not contain
a jurisdictional element which would ensure that the
firearm possession in question affected interstate com-
merce).
2. Whether The Statute At Issue Is Impermissibly
Vague
Relying on the dissent in Stanko, Schultz also
argues that § 921(a)(20)(A) is impermissibly vague. “[T]he
void-for-vagueness doctrine requires that a penal statute
define the criminal offense with sufficient definiteness
such that ordinary people can understand what conduct
is prohibited and in a manner that does not encourage
arbitrary and discriminatory enforcement.” Kolender v.
Lawson, 461 U.S. 352, 357 (1983) (citations omitted).
Schultz argues that because § 921(a)(20)(A) fails to
specify what offenses are included under “other similar
offenses relating to the regulation of business practices,”
ordinary individuals are left to guess as to whether their
conduct is criminally prohibited by statute. Appellant’s
Br. at 8.
We do not find this statute impermissibly vague. Ac-
cording to its terms, § 921(a)(20)(A) excludes those “[f]ed-
eral or state offenses pertaining to antitrust violations,
unfair trade practices, restraints of trade, or other similar
offenses relating to the regulation of business practices.”
In the final phrase, the word “similar” limits the term
“offenses,” so that it refers back to the three enumerated
offenses, and is further limited by “relating to the regula-
No. 09-1192 7
tion of business practices.” Accordingly, an ordinary
individual would have notice that the § 921(a)(20)(A)
exception applies only if he or she committed an enumer-
ated or similar offense related to the regulation of busi-
ness practices.
B. A Franks Hearing
Schultz next argues that the district court should have
held a Franks hearing to test the validity of the affidavit
that was used to obtain the search warrant for his home.
We review a district court’s decision to deny a defendant
a Franks hearing for clear error. United States v. McAllister,
18 F.3d 1412, 1416 (7th Cir. 1994).
In order to obtain a Franks hearing, Schultz needed to
make a “substantial preliminary showing” that the
affiant had intentionally or recklessly included a false
statement in the affidavit, and that the false statement
was material, in the sense that it was necessary to find
probable cause. Franks v. Delaware, 438 U.S. 154, 155-56
(1978). The standard is not whether the affidavit contains
a false statement, but whether the affiant knew or should
have known that a statement was false. United States
v. Jones, 208 F.3d 603 (7th Cir. 2000).
Here, the affiant stated that he relied on information
provided by three “concerned citizen” witnesses,
identified as Witnesses 1, 2, and 3. At a hearing before the
district court, Schultz made an offer of proof regarding
what he believed the evidence would show if he was
granted a Franks hearing. Schultz offered to prove that
8 No. 09-1192
Witness 1 was his sister, who had an identified drug
problem, may have been in police custody at the time
she gave the statement, and was released after the
affidavit was submitted; and Witness 3 was Schultz’s ex-
wife who was involved in a child custody battle with
him. Based on this information, Schultz contends that it
was a misrepresentation for the affiant to identity these
witnesses merely as “concerned citizens.” At the hearing
to determine whether a Franks hearing was necessary,
the district court asked: “Tell me why [the agent]
should have known that, either of those things.” June 12,
2008 Tr. at 39. The defense responded, in part: “The
agent was clearly talking to these two women . . . if he
was looking into the background on the Defendant, as
he was, and talking to the ex-wife and the sister, then
he should have known.” Id. The district court found
that Schultz failed to make an adequate showing for a
Franks hearing.
We do not find that the district court clearly erred in
denying Schultz’s request to conduct a Franks hearing. A
careful review of the record demonstrates that Schultz
failed to show that the affiant intentionally or recklessly
included false statements in his affidavit, or that the
statements he asserts were false were material, in the
sense that they were necessary to find probable cause.
C. Schultz’s Statements
Finally, Schultz argues that the district court erred in
denying his motion to suppress the statements he made
when his home was searched, because he was not given
No. 09-1192 9
his Miranda warning. The government contends that this
issue is moot because these statements were the basis
of Count Two in the indictment, which was dismissed,
and were not otherwise used as evidence. Schultz
counters that this issue is not moot because he agreed to
proceed by a bench trial with stipulated facts only
because the district court had denied his motion
to suppress (as well as denying his other motions). Appel-
lant’s Reply Br. at 6.
Schultz fails to present any evidence that his waiver of
a jury trial was invalid, nor do the evidentiary
and factual stipulations made by the parties appear
improper. In addition, we find that Schultz fails to demon-
strate that he was prejudiced by his statements, as the
government did not use them at trial. Accordingly, we
find no merit to his argument.
III. CONCLUSION
For the reasons stated above, we A FFIRM the district
court.
11-5-09