Appendix — Hughes Aircraft Co. v. United States

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APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 92-5068 1

D.C. No. CR-91-1022-WMB

United States Of America,

Plaintiff- Appellee,

V.

Hughes Aircraft Co., Inc.,

Defendant-Appellant.

APPEAL FROM THE UNITED STATES DISTRICT

COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA

WILLIAM MATTHEW BYRNE, JR.,

DISTRICT JUDGE, PRESIDING

Argued and Submitted December 6, 1993

Decided March 28, 1994

Amended April 28, 1994

Before: TANG, D.W. NELSON, and LEAVY, Circuit Judges

PER CURIAM

Per Curiam:

Hughes Aircraft Co., Inc. (“Hughes”) appeals from its

conviction and sentence for conspiring to defraud and make

false statements to the federal government. We affirm.

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FACTS AND PRIOR PROCEEDINGS

Hughes contracted with the United States to

manufacture microelectronic circuits, known as “hybrids,”

which are used as components in weapons defense systems.

The contracts required Hughes to perform a series of tests on

each hybrid. As the hybrids made their way through the testing

process, they were accompanied by paperwork indicating what

tests had been performed, the results of those tests, and the

identity of the operator of the testing equipment.

Hughes’s former employee, Donald LaRue (“LaRue”),

was a supervisor responsible for ensuring the accuracy of the

hybrid testing process. LaRue arranged for the paperwork to

indicate falsely that all tests had been performed and that each

hybrid had passed each test. When LaRue’s subordinates called

his actions to the attention of LaRue’s supervisors, the

supervisors did nothing about it. Instead, they responded that

LaRue’s decisions were his own and were not to be questioned

by his subordinates.

Hughes and LaRue were charged with one count of

conspiracy to defraud and make false statements to the United

States in violation of 18 U.S.C. § 371,' and two counts of

making false statements in furtherance of that conspiracy in

violation of 18 U.S.C. § 1001.2 LaRue was acquitted on all

1 “If two or more persons conspire either to commit any offense against the

United States, or to defraud the United States, or any agency thereof in any

manner or for any purpose, and one or more of such persons do_any act to

effect the object of the conspiracy, each shall be fined not more than $10,000

or imprisoned not more than five years, or both.

If, however, the offense, the commission of which is the object of the

conspiracy, is a misdemeanor only, the punishment for such conspiracy shall

not exceed the maximum punishment provided for such misdemeanor.”

18 U.S.C. § 371.

2 “Whoever, in any matter within the jurisdiction of any department or

agency of the United States knowingly and willfully falsifies, conceals or

(continued...)

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counts. Hughes was convicted of the conspiracy charge, but

acquitted of the other two charges.* Hughes appeals from both

its conviction and fine of $3.5 million.

ANALYSIS

I. CONVICTION

A. Standard of Review

Hughes raises several arguments in support of the

contention that its conviction under § 371 must be overturned

as a matter of law. Because these arguments present pure

questions of law, we review them de novo. See Anderson v.

United States, 966 F.2d 487, 489 (9th Cir. 1992).

B. Discussion

1. Inconsistent Verdicts

Hughes first argues that it must be acquitted as a matter

of law because the same jury that convicted Hughes acquitted

its “indispensable co-conspirator,” LaRue, of the identical

charges on identical evidence. Hughes bases its argument on

three Supreme Court cases from the 1930’s and 1940's

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covers up by any trick, scheme, or device a material fact, or makes any false,

fictitious or fraudulent statements or representations, or makes or uses any

false writing or document knowing the same to contain any false, fictitious or

fraudulent statement or entry, shall be fined not more than $10,000 or

imprisoned not more than five years, or both.” 18 U.S.C. § 1001.

> Hughes was charged with 50 additional counts of false statements to the

United States. These counts were severed and await resolution of this appeal.

‘ Those three cases do not support Hughes’s contention because none dealt

with inconsistent jury verdicts. In Hartzel v. United States, 322 U.S. 680

(1944), the trial court set aside the conviction of two of three co-conspirators.

The Court concluded “the setting aside of [the two co-conspirators’ ]

convictions makes it impossible to sustain petitioner's conviction upon the

basis of .. . the conspiracy count.” /d. at 682 n.3. In Morrison v. California,

291 U.S. 82 (1934), the Court found that the evidence was insufficient to

(continued...)

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arguing that they provide an exception to the general rule that

inconsistency of jury verdicts is not a ground for reversal. See

Dunn v. United States, 284 U.S. 390, 393 (1932); United

States v. Powell, 469 U.S. 57, 64-65 (1984). According to

Hughes, the post-Dunn Supreme Court cases indicate that the

‘nconsistent verdict rule applies only to situations involving

‘nconsistencies in multiple verdicts against a single defendant,

not inconsistencies in multiple verdicts against multiple

defendants. Controlling Ninth Circuit precedent precludes us

from adopting such a rule.

In United States v. Valles-Valencia, 811 F.2d 1232 (9th

Cir.), as amended by 823 F.2d 381 (1987), the defendant argued

that, because his sole co-conspirator was acquitted, his own

conviction for conspiracy was impossible as a matter of law.

Initially we agreed and stated “the acquittal of all but one of the

conspirators signifies that the jury found no agreement to act,

and the remaining conspirator cannot have {conspired with

himself] since ‘[cJonspiracy requires a plurality of actors... .””

811 F.2d at 1239 (quoting United States v. Wright, 742 F.2d

1215, 1224 (9th Cir. 1984)). In response to the subsequent

Supreme Court decision in Powell, however, we amended our

ruling, stating that

‘ (...continued)

support one of the co-conspirator’s convictions. Thus, the Court noted “[i]t

is impossible in the nature of things for a man to conspire with himself” and

ruled “t]he conviction failing as to the one defendant must fail as to the other.”

Id. at 92 & 93. Finally, in Gebardi v. United States, 287 U.S. 112 (1932), the

Court ordered an acquittal of a woman convicted of conspiring with a man to

violate the Mann Act (transporting a woman interstate for the purposes of

prostitution) because the evidence was insufficient to support her conviction.

The Court noted that under the Mann Act the woman's consent was not

criminal. Jd. at 123. Thus, her consent, without more, was insufficient

evidence to convict her of conspiracy to violate the Mann Act. Id. The Court

concluded “[a]s there was no proof that the man conspired with anyone else to

bring about the transportation, the convictions of both petitioners must be

[(rjeversed.” Jd.

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[I]nconsistent verdicts can just as easily be the

result of jury lenity as a determination of the

facts. Thus, the acquittal of all conspirators but

one does not necessarily indicate that the jury

found no agreement to act. Moreover, the

Court has rejected a rule that would allow

criminal defendants to challenge inconsistent

verdicts on the ground that in their case the

verdict was not the product of lenity, but of

some error that worked against them. The fact

that the conflict in this case involves charges

against different defendants, rather than different

charges against the same defendant does not

affect the rationale.

823 F.2d at 381-82 (internal quotation and citation omitted).

The Supreme Court's decision in Powell supports this

extension of the application of the Dunn rule insulating

inconsistent jury verdicts from appellate review. “(T]he

Government’s inability to invoke review, the general reluctance

to inquire into the workings of the jury, and the possible

exercise of lenity—suggests that the best course to take is

simply to insulate jury verdicts from review on [inconsistency]

ground.” Powell, 469 U.S. at 68-69. Contrary to Hughes's

contentions, this Circuit has not recognized a post-Powell

exception to the Dunn rule.’ Accordingly, the conviction of one

> To support this contention, Hughes cites United States v. Hart, 963 F.2d

1278 (9th Cir. 1992), United States v. Guzman, 849 F.2d 447 (9th Cir.

1988); and United States v. Marchini, 797 F.2d 759 (9th Cir. 1986), cert.

denied, 479 U.S. 1085 (1987). Because each of these cases dealt with

inconsistent verdicts against single defendants, they are inapplicable to

Hughes’s contention that we have recognized an exception to Dunn for

inconsistent verdicts against multiple defendants. Moreover, each of these

three cases holds that inconsistent verdicts can stand, even in the presence of

a conviction that is rationally incompatible with an acquittal, provided

sufficient evidence exists to support a verdict of guilt. See Hart, 963 F.2d at

(continued...)

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co-conspirator is valid even when all the other co-conspirators

are acquitted.

2. Respondeat Superior

Hughes next argues that it is entitled to a judgment of

acquittal because the evidence against it and LaRue was

identical, yet one was convicted while the other was acquitted.°

This argument is predicated on the assumption that LaRue was

the sole employee for whose actions Hughes could be found

vicariously guilty and that the evidence against each of the two

defendants was necessarily identical. However, some of the

evidence of conspiracy was offered against Hughes alone.

Moreover, as this evidence indicates, the jury could have found

Hughes guilty based on the actions or omissions of its

5 (continued)

1281; Guzman, 849 F.2d at 448, Marchini, 797 F.2d at 765. Hughes does not

challenge the sufficiency of the evidence.

6 This argument is simply a variation of the inconsistent jury verdicts

contention set out in part 1, supra.

Hughes cites to United States v. Duz-Mor Diagnostic Labs, Inc.,

650 F.2d 223 (9th Cir. 1981), as support for this argument. In Duz-Mor the

trial court granted a motion to dismiss the indictment against the only

employee whose actions could have led to corporate vicarious liability, but

denied the corporate employer’s motion to dismiss. Jd. at 225. On appeal we

noted two exceptions to the general rule that inconsistencies in jury verdicts

rendered in the same proceeding do not require reversal.

The first exception involves “the inconsistent conviction of a

conspirator whose alleged co-conspirators have been acquitted.” Id.

However, this exception to Dunn was overruied in Powell, 469 U.S. at 64-65

(“{W]here truly inconsistent verdicts have been reached, ‘[t]he most that can

be said . . . is that the verdict shows that either in the acquittal or the conviction

the jury did not speak their real conclusions, but that does not show that they

were not convinced of the defendant's guilt” (quoting Dunn, 284 US. at

393)). The second exception, which applies to “inconsistent multiple

convictions, where the defendant could be guilty of either, but not both,

charged offenses[,]” id. at 226 n.3, is clearly irrelevant to the facts of the

instant appeal.

Moreover, Duz-Mor involved a bench trial, to which the Powell

rationale does not apply.

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supervisors and employees other than LaRue. As Hughes’s

assumption that the facts against both defendants were identical

is erroneous, and no other facts support its argument, we reject

this contention.

3. Statutory Construction

Hughes’s third argument is that the plain language of

18 U.S.C. § 371, which states that if “two or more persons

conspire . . . each” may be punished, prevents its conviction

because it is legally impossible for a party to conspire with itself.

Hughes argues that, because it is vicariously liable for each of

its employees, a conspiracy between employees would

necessitate a finding that Hughes conspired with itself. We

reject this creative construction. The statutory language does

not exclude criminal liability for a corporation simply because

its employees are the actual conspirators. To rule otherwise

would effectively insulate all corporations from liability for

conspiracies involving only employees acting on behalf of that

corporation. We hold that a corporate may be liable under

§ 371 for conspiracies entered into by its agents and employees.

See United States v. Peters, 732 F.2d 1004, 1008 (1st Cir.

1984).

Nonetheless, Hughes argues that the statute is

ambiguous and that the rule of lenity compels a reversal of its

conviction. See United States v. LeCoe, 936 F.2d 398, 402 (9th

Cir. 1991). However, the Supreme Court recently explained

that “[t]his maxim of statutory construction . . . cannot dictate

an implausible interpretation of a statute, nor one at odds with

the generally accepted contemporary meaning of a term.”

Taylor v. United States, 495 U.S. 575, 596 (1990). Moreover,

the rule of lenity is not “‘to be used in complete disregard of the

purpose of the legislature.”” Perrin v. United States, 444 U.S.

37, 49 n.13 (1979) (quoting United States v. Culbert, 435 U.S.

371, 379 (1978)). Because the interpretation offered by Hughes

is implausible and would undermine the purpose of the statute,

we reject it.

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4. The Intracorporate Conspiracy Doctrine In Antitrust Law

Hughes also contends that we should extend the reach

of the intracorporate conspiracy doctrine in antitrust law, which

holds that a conspiracy requires “an agreement among two or

more persons or distinct business entities.” Calculators Hawaii,

Inc. v. Brandt Inc., 724 F.2d 1332, 1336 (9th Cir. 1983). See

also Copperweld Corp. v. Independence Tube Corp., 467 US.

752 (1984); Harvey v. Fearless Farris Wholesale Inc., 589 F.2d

451, 455 (9th Cir. 1979). While this doctrine has been extended

by some circuits to civil rights cases, see e.g. Buschi v. Kirven,

775 F.2d 1240, 1251 (4th Cir. 1985); Dombrowski v. Dowling,

459 F.2d 190, 196 (7th Cir. 1972), other circuits have declined

to do so, see e.g. Dussouy v. Gulf Coast Invest. Corp.,

660 F.2d 594, 603 (Sth Cir. 1981), and we have reserved the

issue. See Portman v. County of Santa Clara, 995 F.2d 898,

910 (9th Cir. 1993) (listing cases).

However, this doctrine has never been applied to

criminal cases. As the First Circuit noted, “There is a world of

difference between invoking the fiction of corporate personality

to subject a corporation to civil liability for acts of its agents

and invoking it to shield a corporation or its agents from

criminal liability where its agents acted on its behalf.” Peters,

732 F 2d at 1008 n.7. Every other circuit to address the issue

has come to the same conclusion. See United States v. Ames

Sintering Co., 927 F.2d 232, 236 (6th Cir. 1990); United

States v. Stevens, 909 F.2d 431, 432 (11th Cir. 1990), United

States v. Hughes Chalmers Chevrolet-Toyota, Inc., 800 F.2d

737, 738 (8th Cir. 1986); Dussouy, 660 F.2d at 603.

Hughes argues that public policy requires us to apply the

intracorporate conspiracy doctrine to criminal cases. However,

a stronger public policy mandates a contrary result. Simply

because no other corporation or individual is involved, or there

is no joining of previously divergent goals, does not mean there

is no conspiracy. If we applied the intracorporate conspiracy

doctrine to this case, no corporation acting on its own behalf by

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and through its employees could be found guilty of conspiracy.

This result is illogical.

We decline to extend the intracorporate conspiracy

doctrine to criminal activity.

5. Wharton’s Rule

Wharton’s Rule prevents a conspiracy conviction when

an underlying substantive offense requires more than one actor,

such as adultery or dueling, and in which “the immediate

consequences of the crime rest on the parties themselves rather

than on society.” Jannelli v. United States, 420 U.S. 770,

782-83 (1975). Here we have a conspiracy to defraud the

government, a violation of 18 U.S.C. § 1001.

Hughes argues that a corporation could only violate

18 U.S.C. § 1001 through the efforts of at least two of its

employees due to the supervisory and reporting structure of a

corporation. Of course, that is not true: a corporation could be

liable under § 1001 for false statements to the government by

just one of its employees. A conspiracy arises when more than

one of its employees agree to defraud the government.

Moreover, the consequences of government fraud

certainly do not rest on the parties themselves rather than

society. Government fraud has an adverse effect on the

government treasury, the quality of government projects, and in

cases such as this one, the safety of individuals utilizing the

government goods purchased.

This argument is rejected.

Because we find no merit to any of Hughes’s arguments

on this point, we affirm the conviction.

Il. SENTENCING

A. Standard Of Review

We review de novo the legality of a sentence, United

States v. Heim, 15 F.3d 830, 831 (9th Cir. Jan. 24, 1994), while

we examine the district court’s factual determinations

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underlying that sentence for clear error. United States v.

Mainard, 5 F.3d 404, 405 (9th Cir. 1993).

B. Discussion

1. Findings Under Federal Rule of Criminal Procedure 32

Hughes first contends that, because there was a dispute

regarding the amount of the fine to be imposed, the district

court was required to make w="tten findings under Federal Rule

of Criminal Procedure 32(c )3)(D). The Rule provides that

when a defendant “allege{s] any factual inaccuracy in the

presentence investigation report . . . the court shall, as to each

matter controverted, either make (i) a finding as to the

allegation or (ii) . . . [state that] the matter controverted will not

be taken into account in sentencing.” Fed. R. Crim.

P. 32(c)(3)(D).

Here, the dispute did not concern any factual matter in

the presentence report, but rather a contention made by the

government in its sentencing memorandum. Thus, no written

factual findings were required, and Rule 32(c)(3)(D) does not

apply. See United States v. Rachels, 820 F.2d 325, 327 (9th

Cir. 1987). Moreover, Hughes failed to object to the fact that

the presentence report did not address the loss to the

government and has thus waived any claim that the presentence

report was not properly completed.

2 Calculation Of Fine

Hughes also contends that the district court improperly

calculated the amount of its fine in several ways. The

alternative fines provision permits a sentencing court to fine a

defendant “not more than the greater of twice the gross gain or

twice the gross loss” caused by the crime. Former 18 U.S.C.

§ 3623(c)(1).’ This section does not require specific findings of

7 “Tf the defendant derives pecuniary gain from the offense, or if the offense

results in pecuniary loss to another person, the defendant may be fined not

(continued...)

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the exact loss. Thus, the only question before us is whether the

district court made sufficient findings on the record that the loss

to the government was at least one half of $3.5 million, or

$1.75 million.

In its sentencing memorandum, the government

acknowledged that the exact amount of its losses in this case

would be impossible to calculate. However, it offered two

alternative bases for calculating its pecuniary loss, which

provided the court with an adequate foundation for its

$3.5 million assessment. The district court made the following

finding:

The other factor in the fine is how much

can you precisely calculate? How precise must

you be? . . . I think the test can probably be by

a preponderance of the evidence. How do you

calculate the loss? While the government has

made a good faith effort to present some data

along with declarations of memorandums from

various people, it is hard to be precise and I

think the government concedes that is difficult

for them to be precise on what its loss is. I

think there was some loss. I can't be any more

precise to the exact loss than can the

government in its presentation.

[SER 151.] Under the government’s calculations, which

Hughes has not shown are incorrect, the court could have fined

Hughes anywhere from $17.6 million to $984 million. Although

the district court's findings were vague, they were sufficiently

supported to uphoid the fine imposed.

7 (...continued)

more than the greater of twice the gross gain or twice the gross loss, unless

imposition of a fine under this subsection would unduly complicate or prolong

the sentencing process.” 18 U.S.C. § 3623(c)(1) (repealed).

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Hughes also argues that the district court erroneously

based the fine on the cost of this prosecution. Hughes bases its

claim on the district court’s comments:

Again, I guess one of the factors that

might be considered in appropriateness of the

fine is how much money it cost the government

to bring this action. I don’t have that figure, but

I know it is in the millions to bring this action,

but that cannot be the sole basis of the fine.

[SER 158.] The last phrase clarifies that the district court did

not in fact base the fine on the costs of prosecution, and it is

unnecessary to address Hughes's arguments that it lacked notice

of or the opportunity to dispute the prosecution costs in

violation of its due process rights, and that this burdened its

right to plead not guilty.

Hughes finally argues that the government is not a

“person” under 18 U.S.C. § 3623 because “person” is defined

under 1 U.S.C. § 1 as including only “corporations, companies,

associations, firms, partnerships, societies, and joint stock

companies, as well as individuals.” However, this statutory

definition of “person” is not an exhaustive list: Section |

provides simply that “person” includes the above. We hold that

the government is a “person” under 18 U.S.C. § 3623.

The sentence imposed by the district court was not an

abuse of discretion.

CONCLUSION

The conviction and sentence are AFFIRMED.

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APPENDIX B

[Filed May 13, 1994]

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 92-5068 1

D.C. No. CR-91-1022-WMB

United States Of America,

Plaintiff-Appellee,

V.

Hughes Aircraft Co., Inc.,

Defendant-Appellant.

ORDER

Before: TANG, D.W. NELSON, and LEAVY, Circuit Judges.

The panel has voted to deny the petition for rehearing.

Judges D.W. Nelson and Leavy have voted to reject the

suggestions for rehearing en banc, and Judge Tang has so

recommended.

_ The full court has been advised of the en banc

suggestion and no judge of the court has requested a vote on it.

The petition for rehearing is DENIED and the

suggestion for rehearing en banc is REJECTED.

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APPENDIX C

[Filed September 8, 1992]

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

Criminal No. 91-1022 WMB

United States Of America,

Plaintiff,

V.

Hughes Aircraft Co., Inc. and Donald Anthony LaRue,

Defendants.

ORDER DENYING MOTION FOR

JUDGMENT OF ACQUITTAL OR NEW TRIAL

L Background.

Defendant Hughes Aircraft Co., Inc. (“Hughes”) and

defendant Donald LaRue, a former Hughes employee, were

charged with conspiracy to defraud the United States in

violation of 18 U.S.C. §§ 371 and 1001. During the trial,

Hughes, the government and the Court agreed that Hughes

could be guilty of conspiracy only if LaRue was found to have

conspired with one of four unindicted Hughes employees.

14 Trans. p. 69, lines 14-25 (6/9/92). The jury was so

instructed. Court’s Instructions to the Jury, p. 11 lines 10-13.

Despite these instructions and a paucity of evidence at trial

supporting any other theory of Hughes’ culpability, the jury

acquitted LaRue and convicted Hughes. Before the Court is

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Hughes’ motion for judgment of acquittal under

F.R.Crim.P. 29(c), and, in the alternative, for a new trial under

F.R.Cnim.P. 33.

Acknowledging the impropriety of speculation about or

inquiry into the jury’s reasoning, United States v. Powell,

469 U.S. 57, 66-67, 105 S.Ct. 471 (1984), Hughes offers three

bases for its motion. First, Hughes argues in the wake of

LaRue’s acquittal that the vicarious nature of Hughes’ criminal

liability distinguishes this case from the line of authority

insulating inconsistency in criminal verdicts from judicial review.

Second, defendant argues that in the Ninth Circuit and on the"

facts of this case, the so-called “rule of consistency” (requiring

acquittal of an alleged conspirator in a joint conspiracy trial

where the other defendants have been acquitted) survives that

same line of authority. Third, defendant argues that without

regard to LaRue’s acquittal, the evidence supporting Hughes’

conviction is legally insufficient. Alternatively, defendant moves

for a new trial.

Il. The Motion For Judgment Of Acquittal.

A. United States v. Powell and the Dunn Rule.

In Dunn v. United States, 52 S.Ct. 189 (1932), the

Supreme Court held that a criminal defendant convicted by a

jury on one count could not attack that conviction simply

because it was inconsistent with the jury’s verdict on another

count.’ The Court stated that “[c]onsistency in the verdict is

not necessary,” relying in part on a now inapplicable argument

that had the counts been presented in separate indictments, an

acquittal on one would not have had res judicata effect as to

another. The Court also quoted Steckler v. United States,

7 F.2d 59, 60 (2nd Cir. 1925), as follows:

' In Dunn the defendant had been convicted of maintaining a common

nuisance by keeping intoxicating liquor for sale at a specified place, but had

been acquitted of unlawful possession and unlawful sale of such liquor.

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The most that can be said in such cases is that

the verdict shows that either in the acquittal or

the conviction the jury did not speak their real

conclusions, but that does not show that they

were not convinced of the defendant’s guilt.

We interpret the acquittal as no more that their

assumption of a power which they had not the

right to exercise, but to which they were

disposed through lenity.

52 S.Ct. at 190.

The Dunn rule was later invoked by the Supreme Court

in the context of corporate criminal liability. In United States v.

Dotterweich, 64 S.Ct. 134 (1943), Dotterweich was found

guilty of shipping misbranded drugs in interstate commerce and

of shipping an adulterated drug, but the corporation of which he

was president and general manager was not convicted.

Dotterweich argued that having failed to find the corporation

guilty, the jury could not find him guilty. Citing Dunn, the

Court held as follows:

{w]hether the jury’s verdict was the result of

carelessness or compromise or a belief that the

responsible individual should suffer the penalty

instead of merely increasing, as it were, the cost

of running the business of the corporation, is

immaterial. Juries may indulge in precisely such

motives or vagaries.

65 S.Ct. at 135.

The Dunn rule was reinforced more recently in United

States v. Powell, 105 S.Ct. 471 (1984). Powell had been

convicted of three compound offenses of using the telephone in

“committing and in causing and facilitating” certain felonies, but

she had been acquitted of two counts—conspiracy to possess

cocaine with intent to distribute, and possession of cocaine with

intent to distribute—proof of which was an element of the

telephone facilitation counts. On appeal, the Ninth Circuit held

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that an exception to Dunn obtains where the defendant is

convicted under 21 U.S.C. § 843(b) (telephone facilitation) but

acquitted of the underlying felony. 719 F.2d 1480 (9th Cir.

1983). The Supreme Court reversed, reaffirming the Dunn rule

and taking issue with a number of circuit decisions which had

carved out exceptions to it. 105 S.Ct. at 476. The Court stated

that “the Dunn rule rests on a sound rationale that is

independent of its theories of res judicata...” 105 S.Ct. at 476.

Noting that the Double Jeopardy Clause prevents the

government from appealing an inconsistent acquittal, the Court

further stated:

fiJnconsistent verdicts ... present a situation

where “error,” in the sense that the jury has not

followed the court’s instructions, most certainly

has occurred, but it is unclear whose ox has

been gored. Given this uncertainty, and the fact

the Government is precluded from challenging

the acquittal, it is hardly satisfactory to allow the

defendant to receive a new trial on the

conviction as a matter of course. Harris v.

Rivera ... indicates that nothing in the

Constitution- would require such a protection,

and we therefore address the problem only

under our supervisory powers over the federal

criminal process. For us, the possibility that the

inconsistent verdicts may favor the criminal

defendant as well as the Government militates

against review of such convictions at the

defendant’s behest.

? In Harris v. Rivera, 102 S.Ct. 460 (1981), the Supreme Court held that a

defendant could not obtain relief by wnt of habeas corpus on the basis of

inconsistent verdicts rendered after a state bench trial. The Court confirmed

“the unreviewable power of a jury to return a verdict of not guilty for

impermissible reasons.” 102 S.Ct. at 464.

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Id. at 477 (footnote added). The Court further remarked that

“(t]he fact that inconsistency may be the result of lenity, coupled

with the Government’s inability to invoke review, suggests that

inconsistent verdicts should not be reviewable.” Id. (Footnote

omitted).

The Supreme Court in Powell confirmed the

applicability of the Dunn rule even where the jury ignores the

Court’s explicit instructions. Rejecting Powell’s argument that

the inconsistent verdict necessitated a finding of insufficient

evidence, the Court noted that whether approached on a

sufficiency of the evidence theory or on a collateral estoppel

type theory, the problem remains “that the same jury reached

inconsistent results....”? The Court added:

[t]his problem is not altered when the trial judge

instructs the jury that it must find the defendant

guilty of the predicate offense to convict on the

compound offense. Although such an

instruction might indicate that the counts are no

longer independent, if inconsistent verdicts are

nevertheless reached those verdicts still are

likely to be the result of mistake, or lenity, and

therefore are subject to the Dunn rationale.

Id. at 478-79.

Powell appears to countenance no exceptions to the

Dunn tule. After pointing to the protection afforded criminal

defendants by trial and appellate court review of the sufficiency

of the evidence, the Court stated that “[w]e do not believe that

further safeguards against jury irrationality are necessary.” /d.

at 478. Nothing that “[t]he rule established in Dunn v. United

States has stood without exception in this Court for 53 years...,”

3 The Powell Court stated that in such a situation, “principles of collateral

estoppel—which are predicated on the assumption that the jury acted rationally

and found certain facts in reaching its verdict—are no longer useful.” /d. at

478.

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the Powell court concluded by stating that “[i]f it is to remain

that way, and we think it should, the judgment of the Court of

Appeals must be [reversed].” /d. at 479.

Hughes provides the Court no persuasive justification

for taking this case outside Powell’s conclusion that “the best

course to take is simply to insulate jury verdicts from review”

on the ground that the jury reached inconsistent results. See

105 S.Ct. at 479.

B. Hughes’ Argument Based On Inherent Limitations

Of Corporate Criminal Liablity.

Hughes seeks to avoid Powell altogether by asking the

Court to establish logical limits on the vicarious criminal liability

of corporations. Hughes admits that it has found no cases

circumscribing the attribution theory underlying corporate

criminal liability in the context of an inconsistent verdict. The

cases, according to Hughes, have instead focused on the

sufficiency of evidence against a convicted corporation where

individual agents were acquitted, finding that such inconsistency

does not by itself render the evidence against the corporation

insufficient. See United States v. Hilton Hotels Corp., 467 F.2d

1000, 1008 (9th Cir. 1972) (despite employee’s acquittal,

evidence connecting employee with conspiracy to violate the

Sherman Act could be considered as against employer

corporation in testing the sufficiency of evidence supporting

conviction of employer).

Hughes thus directs the Court to City of Los Angeles v. |

Heller, 106 S.Ct. 1571 (1986), which it argues offers support

for the imposition of logical and legal limits on vicarious

liability. Heller was a civil rights action brought under

42 U.S.C. § 1983 against the City of Los Angeles, individual

members of the city’s police commission, and two police

officers. The plaintiff contended that the officers had arrested

him without probable cause and had used excessive force. One

of the officers prevailed on summary judgment. The court

bifurcated the action, severing the claims brought under

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Monell v. Dept. of Soc. Serv. of City of N.Y., 98 S.Ct. 2018

(1978), and trying the claims against the remaining police

officer. The jury, which had not been instructed on any

affirmative defenses such as qualified immunity, returned a

verdict for the officer. The District Court subsequently

dismissed the Monell claims on the grounds that exoneration of

the officer precluded liability on the part of the city or the

commissioners. The Ninth Circuit reversed the dismissal of the

Monell claims on-the grounds that the verdict did not

necessarily negate the existence of a constitutional injury, but

might instead have been based on a belief that the officer was

entitled to a good faith defense. 106 S.Ct. at 1572.

The Supreme Court, in a per curiam opinion, agreed

with the district court and reversed the Ninth Circuit holding.

The Court noted the lack of any instruction on affirmative

defenses and stated that juries must be assumed not to base their

decisions on legal questions with respect to which they have not

been charged. /d. at 1573. The Court observed that the city

and the commissioners “were sued only because they were

thought legally responsible for [the officers’] actions” and

remarked that “if the latter inflicted no constitutional injury on

respondent, it is inconceivable that [the city and police

commissioners] could be liable to respondent.” Jd. The Court

thus concluded that because it had been determined that the

claimant suffered no constitutional injury, the claimant would

not be able to establish the damages element of the Monell

claims. /d.

Hughes suggests that He//er turns on the consequences

of a vicarious liability theory, and that it should not be

distinguished merely as a civil case not subject to the rule

permitting inconsistent verdicts in criminal cases. Hughes goes

so far as to suggest that the Heller majority must have

considered and rejected an inconsistent verdict analysis because

such an approach was explicitly taken up by Justice Stevens’

dissent. See id. at 1576. The government argues persuasively

that Heller is distinguishable as a civil case and further notes the

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dissent’s recognition that “[iJn a criminal case, a jury’s

apparently inconsistent verdict is allowed to stand...,” but that

“fi]n a civil case, the rule is less clear.” Jd.

Even putting the distinction between civil and criminal

cases aside, Heller offers little support for Hughes’ argument.

Hughes attempts to draw an analogy between the vicarious

liability assigned to a municipality in a civil rights action and the

vicarious liability imputed to a corporation through its

employee, arguing through Heller that the general tolerance of

inconsistent verdicts in criminal cases should be restricted in-

vicarious liability situations. Heller did not, however, present

a vicarious liability situation. Despite the Supreme Court’s

observation that the city and police commissions “were sued

only because they were thought legally responsible for” the

police officers’ actions, 106 §.Ct. at 1573, municipal liability

under Monell would not have beer imputed to the city through

its employment of the police officers. Monell, 98 S.Ct. at

2036-38. Rather, if found liable, the city would have been

directly liable for damage caused by its own custom or policy.

Id. The Heller Court based its holding on the plaintiff's failure

to establish an element of the Monell cause of action

(constitutional injury), and not on any circumscription of

attributed liability. The Monell imputation truly analogous to

corporate criminal liability is that which assigns a municipality

liability for the actions of its policymakers. In Heller, of course,

the claims against the police commissioners had been severed

along with the claims against the city, and imputation of the

commissioners’ actions to the city had not yet been put in issue.

The government, in support of the viability of corporate

criminal liability under the circumstances of this case, directs the

Court to United States v. Cargo Service Stations, Inc.,

657 F.2d 676 (Sth Cir. 1981). That case involved the

prosecution of a number of corporations and individuals for a

criminal conspiracy to fix prices in violation of the Sherman

Act. Citing Supreme Court and Fifth Circuit authority for the

permissibility of inconsistent verdicts, the Fifth Circuit rejected

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the appellant corporations’ argument that they were entitled to

a judgment notwithstanding the verdict because “every person

who could have acted as their agent has been acquitted of

criminal wrongdoing.” Jd. at 685.

Hughes argues that Cargo Services is merely one more

“inconsistent verdict” case and attempts to pierce the

appellants’ representation—unchallenged by the Cargo Services

court—that every person who could have acted as their agent

had been acquitted. Hughes points out that while five

corporations appealed the verdict, only three individuals had

been acquitted, suggesting that other possible agents must have

been involved in the alleged conspiracy.’ Toward the same end,

Hughes points out that nineteen current or former employees of

the indicted companies testified to price-fixing conduct. These

arguments by Hughes amount to pure speculation. The Cargo

Services court clearly accepted the appellants’ representation at

face value and felt the substantial authority supporting

inconsistent verdicts in criminal cases to be sufficient to uphold

a corporation’s conviction in the face of its only agent’s

acquittal. The government takes precisely this position in the

instant case.

Hughes provides no authority supporting its assertion

that in light of LaRue’s acquittal, Hughes’ conviction “gives the

corporate agent fiction a weight it simply cannot bear.”

Braswell v. United States, 487 U.S. 99, 128 (1988) (Kennedy,

J., dissenting). In consequence, the Court sees no reason to

distinguish inconsistent verdicts in the context of corporate

criminal liability from inconsistent verdicts in other kinds of

criminal cases.

« It is of course possible that an individual defendant acted as an agent for

more than one of the corporate defendants. At least two of the five corporate

appellants, Cargo Gasoline Company and Cargo Service Stations, Inc., appear

to have been related. See 657 F.2d at 678.

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B. Hughes’ Argument For Application

Of The “Rule Of Consistency.”

Despite the encompassing reasoning of Powell, Hughes

attempts to invoke the traditional rule rejecting conviction of an

alleged conspirator where all his alleged coconspirators have

been acquitted. See Hartzel v. United States, 64 S.Ct. 1233,

1234 n.3 (1944). Prior to Powell, the Ninth Circuit articulated

and circumscribed this so-called “rule of consistency” in United

States v. Patterson, 678 F.2d 774 (9th Cir. 1982), as follows:

acquittal of all but one of the alleged

conspirators requires acquittal of the remaining

defendant. [Citation omitted.] However, if an

indictment refers to unknown persons as

coconspirators and the government supplies

evidence to support a charge that the defendant

conspired with the unknown persons, a

conspiracy conviction will stand even if all other

named defendants are acquitted.

678 F.2d at 781, citing Lubin v. United States, 313 F.2d 419,

423 (9th Cir. 1963). The government maintains that the “rule

of consistency” was repudiated in U.S. v. Valles-Valencia,

823 F.2d 381 (9th Cir. 1987). Alternatively, the government

argues, the evidence that unindicted Hughes employees

participated in the conspiracy removes this case from the “rule

of consistency.” Hughes seizes on certain ambiguous language

in Valles-Valencia to argue that on the narrow facts of this

case, Patterson’s “rule of consistency” survives and commands

Hughes’ acquittal. Hughes’ position is without merit.

The Ninth Circuit’s original opinion in Vailles-Valencia,

at 811 F.2d 1232 (9th Cir. 1987), applied the “rule of

consistency” to vacate the conviction of one defendant where

the other alleged conspirators had been acquitted of that charge

(four by the Court and two by the jury.) The government

successfully petitioned for rehearing. In its second opinion, the

Ninth Circuit acknowledged that in Powell the Supreme Court

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“has rejected ‘a rule that would allow criminal defendants to

challenge inconsistent verdicts on the ground that in their case

the verdict was not the product of lenity, but of some error that

worked against them.”” /d., quoting Powell, 105 S.Ct. at 478.

The Ninth Circuit stated that the rationale of Powell applies not

just to cases involving multiple charges against the same

defendant, but also to those which, like the case presently

before the Court, involve charges against different defendants.

823 F.2d at 382.

As the government suggests, Valles-Valencia is most

reasonably read simply to repudiate the “rule of consistency” in

favor of reliance solely on a review of the sufficiency of the

evidence supporting conviction. Hughes nonetheless seizes on

certain ambiguities emphasized in the following passage from

the opinion to argue that a sliver of the doctrine remains

effective:

[w]e now reconsider the “rule of consistency” in

light of the Supreme Court’s recent holding in

Powell. Because of the Powell decision, the

broad language from Lubin to the effect that the

acquittal of all but one of the alleged

co-conspirators requires the acquittal of the

remaining defenda’’ can no longer be relied

upon. Each case must be examined carefully to

see whether evidence of conspiring with others,

known or unknown, was produced during the

trial. Our earlier cases relying on the broad

language must be deemed overruled im part by

the Supreme Court’s decision in Powell.

As the government points out in its

petition for rehearing and suggestion for

rehearing en banc, there was evidence that there

were unindicted co-conspirators and indicted

co-conspirators who were acquitted. The jury

verdicts indicated that the jury knew how to

acquit those whose guilt was not proved beyond

25a

a reasonable doubt and knew how to convict

those whose guilt was satisfactorily proven.

Id. (Emphasis added.) Hughes argues that Valles-Valencia

confirms the continuing validity of the Ninth Circuit’s earlier

holding in Patterson, supra, requiring the Court to carefully

examine the record to see if there was sufficient proof of a

conspiracy between the defendant and someone other than his

acquitted co-defendant(s). Based on the Valles-Valencia

court’s statement that the jury “knew how to acquit” some and

“knew how to convict” others, Hughes argues that the court

took into account evidence against “indicted co-conspirators

who were acquitted” by the court, but not evidence concerning

the two who were acquitted by the jury. Specifically, Hughes

argues that the second Valles-Valencia opinion amounts to a

reversal of the panel’s previous conclusion that the district

court’s judgment of acquittal in favor of certain defendants

precluded the appellate court from consideration of evidence

concerning those defendants in evaluating the sufficiency of

evidence against the remaining alleged conspirator. Hughes

accordingly argues that because LaRue was acquitted by a jury,

this Court can sustain Hughes’ conviction only if there was

sufficient evidence of a conspiracy among Hughes agents other

than LaRue.

Hughes’ suggestion that the Valles-Valencia court

would leave this purported distinction between judge-acquitted

and jury-acquitted defendants either entirely implicit or, at best,

referenced in the most oblique fashion, is untenable. Moreover,

Hughes’ proffered interpretation flies in the face of Powell, the

encompassing nature of which was recently noted by the Ninth

Circuit in United States v. Hart, 92 Daily Journal D.A.R. 6186

(9th Cir. 1992). A far more reasonable reading of

Valles-Valencia is that it merely affirms the need to examine the

sufficiency of the evidence that the convicted defendant was

party to an illegal agreement. Cases relying on Lubin were

overruled “in part” because those cases likely resolved issues

unrelated to the “rule of consistency.” The “rule of

26a

consistency” no longer exists apart from a requirement that

there be sufficient evidence of an agreement between the

convicted party and some other person.

Hughes cannot win a judgment of acquittal though

reliance on the “rule of consistency” as circumscribed by

Patterson.

C. Hughes’ Argument That The Evidence

Against It Is Insufficient.

Hughes’ final argument for judgment of acquittal is that

the evidence adduced at trial was insufficient under

F R Civ [sic]P. 29. The test for review of the sufficiency of the

evidence to support a criminal conviction is “whether, after

viewing the evidence in the light most favorable to the

prosecution, any rational trier of fact could have found the

essential elements of the crime beyond a reasonable doubt.”

Jackson v. Virginia, 99 S.Ct. 2781, 2789 (1979) (emphasis

original). Noting that this criterion “impinges upon ‘jury’

discretion only to the extent necessary to guarantee the

fundamental protection of due process of law...,” id., the

Jackson Court observed that “(t]he question whether the

evidence is constitutionally sufficient is of course wholly

unrelated to the question of how rationally the verdict was

actually reached.” /d. at n.13. Furthermore, the reviewing

court is to respect the province of the jury to determine the

credibility of witnesses, to resolve evidentiary conflicts, and to

draw reasonable inferences from proven facts by assuming that

the jury resolved all such matters in a manner supporting the

verdict. U.S. v. Orozco-Santillan, 903 F.2d 1262 (9th Cir.

1990).

Hughes itself acknowledges that “in assessing the

sufficiency of the evidence against a convicted corporation, a

reviewing court may affirmatively consider the conduct of an

acquitted agent.” Defendants’ motion, p. 7 lines 17-21, citing

United States v. Hilton Hotels Corp., supra, 467 F.2d at 1008.

In assessing the evidence against Hughes, LaRue’s acquittal

27a

must be disregarded, and evidence of his participation in the

alleged conspiracy must be considered.

Because the evidence supporting Hughes’ culpability as

defined by the jury instructions surpassed the Jackson v.

Virginia standard, Hughes may not be granted judgment of

acquittal based on insufficiency of evidence.

D. Hughes’ Motion In The Alternative For A New Trial.

Hughes makes its F.R.Civ.[sic]P. 33 motion for a new

trial on the same bases as its Rule 29 motion for judgment of

acquittal, but notes that the motion for new trial affords the

Court greater latitude in reviewing the evidence. As explained

by Wright:

[o]n a motion for judgment of acquittal, the

court is required to approach the evidence from

a standpoint most favorable to the government,

and to assume the truth of the evidence offered

by the prosecution. If on this basis there is

substantial evidence justifying an inference of

guilt, the motion for acquittal must be denied.

On a motion for new trial, however, the

power of the court is much broader. It may

weigh the evidence and consider the credibility

of witnesses. If the court reaches the conclusion

that the verdict is contrary to the weight of the

evidence and that a miscarriage of justice may

have resulted, the verdict may be set aside and

a new trial granted.

Wright, Federal Practice and Procedure: Criminal 2d §553.

The Ninth Circuit has stated that a motion for a new tral

“should be granted ‘only in exceptional cases in which the

evidence preponderates heavily against the verdict.” United

States v. Pimentel, 654 F.2d 538, 545 (9th Cir. 1981), citing

Wright at §553.

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Because it cannot be said that the evidence

“preponderates heavily” against Hughes’ conviction, the motion

for a new trial is denied.

Il. Conclusion.

Under Powell, supra, the jury’s verdict, despite its stark

inconsistency, is simply beyond the review of this Court except

as to the sufficiency of the evidence. The evidence supporting

Hughes’ conviction was not legally insufficient. For these

reasons, Hughes’ motion for judgment of acquittal, and its

motion in the alternative for a new trial, are both DENIED.

DATED: SEP 8- 1992

/s/

Wm. Matthew Byrne, Jr.

United States District Judge

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APPENDIX D

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

Criminal No. 91-1022 WMB

United States Of America,

Plaintiff,

V.

Hughes Aircraft Co., Inc. and Donald Anthony LaRue,

Defendants.

EXCERPT OF TRANSCRIPT OF PROCEEDINGS

JURY INSTRUCTIONS

JUNE 10, 1992

[18] THE COURT: Now turning, ladies and gentlemen, to

the charges themselves. The indictment in this case arises under

two sections of the United States Code, section 371 and 1001,

and the relevant portions of those sections read as follows:

As to 371, which is the basis for the charge in Count 1:

If two or more persons conspire either to commit an offense

against the United States or to defraud the United States or any

agency thereof in any manner or for the purpose—excuse me.

Counsel, it seems to me there is a typo there. It should

be “for the’—

MR. NEWHOUSE: For any purpose, your Honor

THE COURT: I think that’s right. Let me read it to

you again, ladies and gentlemen.

If two or more persons conspire either to commit an

offense against the United States or defraud the United States

or any agency thereof in any manner or for any purpose and one

30a

or more such persons do an act to effect the object of the

conspiracy, each shall be guilty of an offense against the United

States.

Section 1001 reads: Whoever in any manner within [19]

the jurisdiction of any department or agency of the United

States knowingly and willfully makes any false or fraudulent

statements or representations shall be guilty of an offense

against the United States.

. Defendant, Hughes Aircraft Company, Inc., is a

corporation, and a corporation is a legal entity and it may be

found guilty of a criminal offense.

A corporation, of course, cannot act for itself. It may

act only through its employees who are authorized to act for the

corporation. A corporation is legally responsible for those acts

or omissions of its employees made or performed within the

scope of their employment and with the intent to benefit the

corporation.

To find a corporation defendant guilty, you must find

beyond a reasonable doubt that all the essential elements of the

offenses that are set forth in these instructions, which I'll give

you in a moment, are present as to the corporation in the form

of acts or omissions of its employees who were—excuse

me—acts or omissions of its employees that were performed

within the scope of their employment.

Whether the employees’ acts or omissions were

committed within the scope of their employment is a question

of fact for you. To be acting within his employment, the

employee must first have intended that this act would [20]

produce some benefit to the corporation although that does not

have to be his only intent.

Second, the employee must have been acting within his

authority. An act within the employee’s authority—an act was

within the employee’s authority if it was directly related to the

performance of the type of duties that the employee had the

31a

general authority to perform, judging from his position with the

company, the responsibility previously entrusted to him and the

circumstances surrounding his past conduct. The fact that an

employee is not a high managerial official will not, by itself,

relieve the corporation of responsibility of the employee’s act.

In these instructions, I’m going to be using the terms

“knowingly” and “willfully,” and I’ll define those terms for you

now.

An act or failure to act is done knowingly if done

voluntarily and intentionally and not because of mistake or

accident or other innocent reason.

An act is done willfully if done voluntarily and

intentionally and with the specific intent to do something that

the law forbids, that is to say, with bad purpose to either

disobey or disregard the law.

Now, turning to Count | of the indictment, the

defendants are charged in Count 1 of the indictment with

conspiring to defraud the United States and to make false [21]

statements to the United States in violation of the code sections

I mentioned to you earlier. In order for the defendants to be

found guilty of that charge, the government must prove each of

the following elements beyond a reasonable doubt:

First, that beginning in or about the year of 1985 and

ending in January of 1987, there was an agreement between two

or more persons to commit at least one crime as charged in the

indictment, with all of you agreeing as to which crime;

Second, that Defendant LaRue and Defendant Hughes,

Hughes acting through LaRue, and at least one of the

unindicted co-conspirators, namely, James Temple, Frank Saia,

Margaret Goodearl and/or Marion Tolby, were members of the

conspiracy knowing of at least one of its objects, the objects

being to defraud the United States or to make false statements

to the United States and intending to help accomplish it, with all

32a

of you agreeing which object of the conspiracy the members

intended to accomplish;

And, third, that the existence of the—that during the

existence of the conspiracy, one of the members of the

conspiracy performed at least one of the overt acts set forth in

the indictment for the purpose of carrying out the conspiracy,

with all of you agreeing on the particular overt act that you find

was committed.