United States v. Foxman

United States Court of Appeals,

Eleventh Circuit.

No. 94-5183.

UNITED STATES of America, Plaintiff-Appellant,

v.

Michael D. FOXMAN, Defendant-Appellee.

July 11, 1996.

Appeal from the United States District Court for the Southern

District of Florida. (No. 87-6034-CR-WMH), William Hoeveler, Judge.

Before EDMONDSON, Circuit Judge, and FAY and GIBSON*, Senior

Circuit Judges.

EDMONDSON, Circuit Judge:

Today we deal with one aspect of Sunrise Savings & Loan

Association's failure: the indictment of former Sunrise chairman

Michael Foxman. Foxman, who left Sunrise in 1983, was indicted

with several of his former colleagues in 1993. Before trial, the

district judge dismissed the single count against Foxman. The

judge concluded that the indictment was for too long delayed. We

remand for application of the established legal standard to the

pre-indictment delay claim. We also remand for further examination

of Foxman's duplicity argument, which was raised below but was not

the basis for the dismissal of the indictment.

I.

Michael Foxman and other members of a Philadelphia-based law

firm formed Sunrise in 1979. Foxman was installed as Chairman, and

he selected Robert Jacoby to be president. Sunrise almost

*

Honorable Floyd R. Gibson, Senior U.S. Circuit Judge for

the Eighth Circuit, sitting by designation.

immediately embarked on certain courses of conduct which led to the

thrift's insolvency and to criminal charges (as well as civil

suits) against Sunrise's officers, lawyers and biggest borrowers.

The government says that Michael Foxman was involved in a

conspiracy to misapply Sunrise funds. The conspiracy is said to

have started with the diversion of money from Sunrise to Crusader

(a Pennsylvania savings and loan) and continued with a plan to

evade federal loans-to-one-borrower regulations. The

loans-to-one-borrower violations involved Sunrise's biggest

customers, William Frederickand Thomas Moye—large scale developers

and profligate spenders of borrowed money. (Persons concerned

about Frederick and Moye's relationship with Sunrise should see the

related case of U.S. v. Jacoby, 955 F.2d 1527 (11th Cir.1992).)

Foxman resigned as Chairman in 1983; he was not thereafter

involved in Sunrise's day-to-day operations.

Sunrise became insolvent in 1985. Regulators took over, and

a grand jury began investigating. In 1987, Frederick, Moye and

three former Sunrise officers (including Jacoby) were indicted.

Before trial, Frederick and Moye pleaded guilty. At trial, Jacoby

and another officer were convicted; and we affirmed their

convictions. See id. Then, the government granted Jacoby immunity

to force him to testify before the grand jury. In 1992, Jacoby

told the jury about the Crusader diversions. The government, which

had been investigating Sunrise for years, says this testimony was

the first link between Foxman and misuse of Sunrise funds.

In 1993, Foxman and four others were charged in a superseding

multi-count indictment. Count I, the only one implicating Foxman,

charged a single conspiracy composed of both the Crusader diversion

and the Frederick and Moye dealings. Foxman was charged with no

substantive counts because he left Sunrise before the Frederick and

Moye dealings and because prosecutions based directly on the

Crusader diversions became time barred back in 1988.

After hearing argument and receiving proffers from the

lawyers, the district judge—who had also presided over the Jacoby

trial—dismissed the indictment against Foxman because of

pre-indictment delay. The district judge also discussed Foxman's

argument that Count I was duplicitous: two separate conspiracies

were misjoined in a single count so as to come within the statute

of limitations.

II.

For purposes of this appeal, we assume that the Crusader

diversion and the loans-to-one-borrower matter could have been

proved to have been parts of a single conspiracy.1 So, we will not

discuss in detail Foxman's argument that the indictment should be

1

For an example of the government's charging conspiracy

where the statute of limitations barred substantive charges, see

U.S. v. Benson 846 F.2d 1338, 1340 (11th Cir.1988) (discussing no

duplicity claim).

Foxman's co-indictees went to trial and were convicted

of the Count I conspiracy. But, the district judge entered

a verdict of acquittal on Count I, concluding no reasonable

juror could find that the Crusader diversions and the

Frederick and Moye transactions were part of the same

conspiracy. This determination is being appealed by the

government in No. 96-4319, but the propriety of that ruling

is not before us now.

In this matter involving Foxman, the district

judge—although expressing support for Foxman's argument—did

not rely on the duplicity point. On remand, we instruct the

district judge to permit further development of the record

and to revisit this issue.

dismissed as duplicitous; and, the only issue we face is whether

the indictment of Foxman was lawfully dismissed on the ground of

delay. We review the dismissal of the indictment for an abuse of

discretion. See U.S. v. Dyal, 868 F.2d 424, 429-30 (11th

Cir.1989). But, the defendant bears a heavy burden in showing a

dismissal is appropriate. See U.S. v. Huntley, 976 F.2d 1287, 1290

(9th Cir.1992).

The limit on pre-indictment delay is usually set by the

statute of limitations. But, the Due Process Clause can bar an

indictment even when the indictment is brought within the

limitation period. See generally U.S. v. Marion, 404 U.S. 307,

323-27, 92 S.Ct. 455, 465-66, 30 L.Ed.2d 468 (1971) and U.S. v.

Lovasco, 431 U.S. 783, 788-91, 97 S.Ct. 2044, 2048-49, 52 L.Ed.2d

752 (1977). Under Lovasco and Marion and our applications of these

cases, see, e.g., U.S. v. Hayes, 40 F.3d 362, 365 (11th Cir.1994);

U.S. v. Benson, 846 F.2d 1338, 1340 (11th Cir.1988); and Stoner v.

Graddick, 751 F.2d 1535, 1541 (11th Cir.1985), for this dismissal

to have been proper, Foxman must have shown that pre-indictment

delay caused him actual substantial prejudice and that the delay

was the product of a deliberate act by the government designed to

gain a tactical advantage.

But, the district judge did not apply both parts of this

two-part test because he concluded that Doggett v. U.S., 505 U.S.

647, 112 S.Ct. 2686, 120 L.Ed.2d 520 (1992), altered the due

process analysis and permitted the dismissal of the indictment

whether or not the delay was the product of a deliberate act by the

government designed to gain a tactical advantage. Doggett,

however, is a Sixth Amendment case, and we agree with the Ninth

Circuit, see U.S. v. Bischel, 61 F.3d 1429, 1436 (9th Cir.1995),

that Doggett does not alter the law governing due process

challenges to pre-indictment delay.

For due process to have required dismissal, the delay must

have resulted in actual substantial prejudice to Foxman. We read

the order of the district court to say that he found that actual

substantial prejudice existed. An abuse of discretion exists on

this point only if this finding is clearly erroneous. U.S. v.

Huntley, 976 F.2d 1287, 1290 (9th Cir.1992). Given the number of

Foxman's best witnesses who died between 1983 and 1993 (and that

the statute of limitations for substantive charges against Foxman

expired in 1988), we cannot say the district judge was clearly

wrong. See U.S. v. Mills, 704 F.2d 1553, 1557 (11th Cir.1983)

(death of witness can lead to substantial prejudice). Most of the

evidence in the case against Foxman was to be testimonial. And,

Foxman—unlike other defendants—was not under active investigation

in the 1980's; therefore he had little incentive to preserve

evidence.

But, substantial prejudice from delay, standing alone, does

not violate due process. See id. The delay must also be the

product of a deliberate act by the government designed to gain a

tactical advantage. Our review of the record suggests support

exists for a finding that at least part of the delay in this case

is of this kind.2 The government believed that Jacoby would

2

We have said that delay which is the product of "bad faith"

government acts will satisfy this test. See Stoner, 751 F.2d at

1541 (but also alternatively holding that defendant suffered

implicate others when he was forced to testify; and the government

waited until Jacoby's own convictions were affirmed to immunize

him. This decision delayed the indictment of Foxman. And, this

delay might be the product of prosecutorial conduct designed to

insufficient prejudice from delay); Benson, 846 F.2d at 1343

(but also observing that prejudice in case "does not rise to

constitutional proportions"). In context, we think those cases

used the words "bad faith" to mean that the government acted to

delay an indictment, hoping that the delay—in and of itself—would

prejudice the defense. In "bad faith" cases, the government

intentionally acts to delay; and the tactical advantage sought

is the prejudice to the defendant which the government

anticipates will flow from the delay.

But, bad faith in this sense or in the sense of a

subjective sinister motive is not critical to a due process

violation for preindictment delay. The critical element is

that the government makes a judgment about how it can best

proceed with litigation to gain an advantage over the

defendant and, as a result of that judgment, an indictment

is delayed. Then, the question becomes whether that delay

caused the defendant actual substantial prejudice.

The government, as litigating party, might pursue

tactical advantages other than prejudice directly caused by

delay. We think intentional government acts designed to

obtain a tactical advantage which only incidentally cause

delay have never been ruled out as a potential basis for due

process violations. The main point is showing acts done

intentionally in pursuit of a particular tactical advantage:

delay (and the prejudice directly caused by the delay) need

not necessarily be the tactical advantage sought.

We also observe that many delays in obtaining an

indictment would not be "tactical"—a word which we think

inherently includes the concept of intentionally maneuvering

for an advantage at trial. For example, not every delay

which is the result of a need for further investigation

gives rise to a due process violation. Hayes, 40 F.3d at

365. (But where an investigation is itself delayed by the

government for tactical reasons, the fact that an

investigation was involved might be no bar to a due process

violation.) And, some delays are not the product of

"deliberate action by the government." For example, where

the record shows no reason for the delay (or where delay is

due to simple negligence), no due process violation exists.

See Stoner, 751 F.2d at 1543 and Benson, 846 F.2d at 1342-

43.

obtain a tactical advantage: it seems the reason for the delay

might have been the prosecutor's belief that Jacoby would be a

better witness against those he implicated once his convictions

were affirmed.3 If this motivation was the reason for the delay,

the litigation strategy (that is, the pursuit of the advantage of

Jacoby having already been finally convicted) seems to have

inherently involved the risk that Jacoby—when he ultimately was

immunized after his appeal—would reveal misdeeds prior in time to

those the government anticipated Jacoby would reveal. We would

have little difficulty in permitting the foreseeable consequences

of a deliberately chosen litigation strategy to be visited upon the

government.

But, a problem exists with our concluding that the government

delayed the indictment to gain a tactical advantage over Foxman.

The government tells us that the first evidence against Foxman was

Jacoby's testimony. If this representation is true, we cannot say

as a matter of law that this fact would necessarily prevent the

conclusion that the government intentionally acted to obtain a

tactical advantage over Foxman. But, it would mean that we would

need detailed findings in support of such a conclusion. Facts

which might be important to determining whether the government

intentionally acted to gain a tactical advantage over Foxman could

be whether the government had some reason to believe Foxman would

be implicated by Jacoby regardless of when he was immunized or even

3

We also note that the district judge in this case is

familiar with all the Sunrise prosecutions and has remarked on

certain "excesses" or "unchecked enthusiasm" on the part of the

government.

if he was not immunized. Another factor might be whether the

government was "willfully blind" to Foxman's involvement before

they heard from Jacoby. Also important could be whether a

government trial strategy was designed to obtain a tactical

advantage over all persons Jacoby implicated, with Foxman simply

being one of those persons. Findings about delays due to

intentional acts to obtain a tactical advantage other than the act

of waiting to immunize Jacoby could also be important. We need a

more detailed record and more detailed findings.4

Here, the district judge relied on Doggett; he made no

findings about the reasons for the delay. Because of this

circumstance, we think we must vacate the order of dismissal and

remand this case. The parties need to create a record which would

enable the district judge to determine what, if any, delay was the

product of deliberate acts by the government to gain a tactical

advantage over Foxman. And, the district court must determine

whether this delay caused Foxman actual substantial prejudice. We

also believe that the duplicity of Count I remains in issue; so,

as discussed in note 1, we also instruct that the duplicity issue

be revisited by the district judge and the parties.

VACATED and REMANDED.

4

We also observe that dismissing an indictment under the Due

Process Clause for pre-indictment delay is rare. In fact, so far

as we can tell, we have never concluded that such a dismissal was

appropriate. We are not surprised by this—the statute of

limitations protects defendants in almost every case. But, on

the record before us now, we think it might be that the

limitations period has failed to protect Foxman from an

indictment which never should have issued. But, before we would

affirm such a determination, we would need detailed findings

supported by a well-developed record.