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United States v. Stanford

United States Court of Appeals, Fifth Circuit

February 19, 2018

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
DANIEL JAMES STANFORD, Defendant-Appellant.

         Appeals from the United States District Court for the Western District of Louisiana

          Before STEWART, Chief Judge, and JOLLY and OWEN, Circuit Judges.

          CARL E. STEWART, CHIEF JUDGE

         This criminal appeal returns to this court after Stanford was resentenced following this court's decision in United States v. Stanford remanding the case "for any other proceedings as needed."[1] Back before this court on appeal, Stanford, in addition to alleging various errors in the district court's redetermination of his guideline range, argues that the district court erred in denying his request for in camera review of various co-conspirator witness reports and requests that this court reassign the case to a different district court judge. Because the district court did not commit reversible error, we AFFIRM. Stanford's request for reassignment of the case to a different district court judge is DENIED.

         I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY[2]

         On September 4, 2012, Stanford and eight co-conspirators were indicted for their then-alleged involvement in a conspiracy to distribute a controlled substance analogue ("CSA"), in violation of 21 U.S.C. §§ 841, 846(b)(1)(c), 813, and 802(32)(A).

         As relevant here, Stanford was charged with: (1) conspiracy to distribute a CSA ("Count One"); conspiracy to introduce and cause to be introduced misbranded drugs into interstate commerce ("Count Two"); and conspiracy to engage in money laundering ("Count Three") (collectively, "Counts One, Two, and Three"). At the time of his indictment, Stanford was a practicing criminal defense lawyer in Lafayette, Louisiana. The product in question, "Mr. Miyagi, " is a synthetic cannabinoid, and contained a Schedule I CSA known as "AM- 2201." Prior to trial, the parties quarreled as to whether Count One required an instruction to the jury that they must find, as an element of the CSA conspiracy, that Stanford knew AM-2201 was a CSA.

         The district court concluded that such knowledge was not required, but acknowledged that the question was the subject of a circuit split. The district court agreed to send the issue to the jury as an interrogatory and permitted Stanford to put on evidence addressing his knowledge that AM-2201 was a CSA. In fact, the district court's language was more emphatic, stating that the "question of knowledge needs to be addressed in th[e] trial." After a 10-day jury trial, on August 20, 2014, the jury found Stanford guilty on Counts One, Two, and Three. In a special interrogatory, the jury concluded that Stanford knew that AM-2201 was a CSA. On January 15, 2015, the district court sentenced Stanford to 121 months' imprisonment, grouping Counts One and Two and applying the base offense level calculated for Count One as the underlying offense for purposes of calculating the base offense level for Count Three. The sentences on Count One and Count Three ran concurrently. Stanford timely appealed.

         In Stanford I, Stanford challenged his convictions on Count One and Count Three. He also argued that the Government ran afoul of Brady v. Maryland, 373 U.S. 83 (1963) by failing to turn over witness reports of co-defendants Dan Francis, Boyd Barrow, Drew Green, and Joshua Espinoza. Applying the Supreme Court's intervening ruling in McFadden v. United States, the Stanford I panel agreed with Stanford's challenge to his conviction on Count One. See ___ U.S. ___, 135 S.Ct. 2298 (2015). The McFadden decision resolved the knowledge dispute in Stanford's favor, holding that a defendant's knowledge that a CSA was indeed a CSA is an element necessary to secure a conviction under 21 U.S.C. §§ 846 and 841(b)(1)(C). See id. at 2305. In light of that holding, the Stanford I panel concluded that the district court's failure to properly instruct the jury with respect to knowledge was not harmless error. Stanford I, 823 F.3d at 827-38. Notwithstanding that conclusion, the Stanford I panel "affirmed the sentence and conviction on all other counts, and remand[ed] for [any other] proceedings as needed."[3] Stanford I, 823 F.3d at 822, 852.

         On remand, the district court, despite feeling constrained from doing so in light of Stanford I's mandate, resentenced Stanford on the remaining convictions-namely, Count Two and Count Three. The district court imposed the same sentence of 121 months' imprisonment on Count Three, arriving at the base offense level for Count Three through the calculation of the guideline range applicable to Count Two. The district court also reiterated its Brady ruling on remand, summarily rejecting Stanford's request for the same witness reports. Stanford timely appealed these rulings. In addition, Stanford requests that this panel reassign the case to a different district court judge.

         II. DISCUSSION

         The parties understandably spend considerable time on appeal briefing whether Stanford was entitled to resentencing, focusing on the repercussions of Stanford I's mandate and the perceived oral argument concession embodied in footnote 35 of the Stanford I opinion. Nevertheless, we decline to address the applicability of the mandate rule to Stanford's entitlement to resentencing. Instead, we will proceed to the merits of the sentencing issues raised because there was no reversible error. See United States v. Simpson, 796 F.3d 548, 552 n.7 (5th Cir. 2015) (reaching merits to affirm after reminding that mandate rule is discretionary rather than jurisdictional).

         A. Application of Sentencing Guidelines at Resentencing

         This court reviews a district court's interpretation and application of the Guidelines, including any cross references and selection of the applicable sentencing guideline, de novo. See United States v. Grant, 850 F.3d 209, 219 (5th Cir. 2017) (citation omitted); United States v. Johnston, 559 F.3d 292, 294 (5th Cir. 2009) (citation omitted). Where a party fails to present an argument to the district court, however, this court reviews the sentencing objection for plain error. See United States v. Hughes, 726 F.3d 656, 659 (5th Cir. 2013). "If procedural error occurs, harmless error review applies." United States v. Clay, 787 F.3d 328, 330 (5th Cir. 2015) (citation omitted). Commentary in the Guidelines Manual that interprets or explains 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." United States v. Diaz-Corado, 648 F.3d 290, 292 (5th Cir. 2011).

         Stanford argues that the district court committed reversible error in its interpretation and application of the Guidelines for Count Two and, by extension, Count Three. Specifically, Stanford argues that the district court erred by: (1) failing to select the applicable guideline in the manner prescribed by the Guidelines; and (2) applying cross reference U.S.S.G. § 2N2.1(c)(2). We disagree.

         i. Selection of Applicable Guideline

         We first address Stanford's argument that the district court committed reversible error when purportedly bypassing selection of the most appropriate guideline in the manner instructed by U.S.S.G. §§ 1B1.1(a)(1) and 1B1.2(a).

         The steps for determining the applicable guideline is not for this court to decide. That method is clearly set forth in the Guidelines. As this court recently reminded in Grant, the selection of the applicable guideline begins with reference to, first, the count of conviction, and, then, the Statutory Index.[4]See 850 F.3d at 209. The Statutory Index of the Guidelines provides the applicable offense guidelines for various criminal statutes. See U.S.S.G. app. A (2016). In the simplest cases, a statute will have only one applicable guideline listed in the Statutory Index. Where, however, the Statutory Index provides more than one applicable guideline for a statute, the Guidelines instruct district courts to "determine which of the referenced guideline sections is most appropriate for the offense conduct charged in the count of which the defendant was convicted." U.S.S.G. 1B1.2(a) & cmt. n.1; see also United States v. Principe, 203 F.3d 849, 851 (5th Cir. 2000). While "the allegations in the indictment" serve as the critical piece "to [the] determin[ation] [of] whether the alleged offense more closely resembles [one guideline over the other], " see, e.g., Grant, 850 F.3d at 219, 220 n.2., this court also employs the text of the potential guidelines and statute of conviction to assist in the inquiry. Principe, 203 F.3d at 851-53. In addition, this court considers the type of conduct that the statute was designed to punish. Id.

         Stanford contends that the district court failed to follow the directions of U.S.S.G. §§ 1B1.1(a)(1) and 1B1.2(a) when selecting the applicable guideline, and, in doing so, improperly selected U.S.S.G. § 2N2.1 rather than U.S.S.G. § 2B1.1 as the offense guideline applicable to the offense of conviction-the misbranding conspiracy alleged in Count Two. Pointing to the conduct charged in the indictment, and this circuit's decision United States v. Arlen, 47 F.2d 139 (5th Cir. 1991), Stanford contends that U.S.S.G. § 2B1.1 was the most appropriate guideline selection because the conduct charged in the indictment for Count Two demonstrated a quintessential fraudulent scheme. This selection is particularly clear, Stanford argues, because the count charged a conspiracy to violate 21 U.S.C. § 331 "with the intent to defraud and mislead" the Food and Drug Administration (FDA) and without that allegation, a violation of the FDCA is a mere misdemeanor. The Government counters by arguing that because the indictment alleged that the sole object of the conspiracy was to distribute misbranded drugs for profit, U.S.S.G. § 2N2.1 was the appropriate guideline selection. Count Two as a whole, the Government urges, charges a drug trafficking offense not a fraud offense. Significant to this contention is the incorporation of drug trafficking related allegations from Count One. The Government maintains that U.S.S.G. § 2B1.1 is not meant to address this sort of drug trafficking scheme involving mislabeled products, directing the court's attention to the guideline's enhancements and cross references.

         For the reasons stated below, we agree with the Government that U.S.S.G. § 2N2.1 is the most appropriate guideline.

         Count Two of the indictment charges conspiracy to introduce misbranded drugs into interstate commerce, in violation of 18 U.S.C. § 371 and 21 U.S.C. §§ 331, 333(a)(2). The Statutory Index for 18 U.S.C. § 371 lists various guidelines, including U.S.S.G. § 2X1.1. The district court selected 2X1.1, which sent the district court back to the guideline of the substantive offense-here, 21 U.S.C. §§ 331 and 333(a)(2). See U.S.S.G. § 2X1.1(a) (2016). Neither party objected to the district court's decision to use U.S.S.G. § 2X1.1(a). Similarly, the parties and the district court focused on Count Two as the substantive offense driving the calculation of the base offense level for the money laundering conspiracy conviction in Count Three.

         21 U.S.C. § 331(a) prohibits introducing or causing to be "introduc[ed] into interstate commerce any . . . drug . . . that is adulterated or misbranded." 21 U.S.C. § 331(a). 21 U.S.C. § 333(a)(2) prescribes a penalty "of not more than three years or [a] fine[ ] not more than $10, 000, or both" for violations of 21 U.S.C. § 331 "with the intent to defraud or mislead." 21 U.S.C. § 333(a)(2).

         The Statutory Index for 21 U.S.C. § 333(a)(2), addressing, inter alia, punishment for violations of 21 U.S.C. § 331 with an intent to defraud or mislead, lists both U.S.S.G. § 2B1.1 and U.S.S.G. § 2N2.1 as potentially applicable guidelines. See U.S.S.G. app. A (2016). The Statutory Index for 21 U.S.C. § 331(a) lists only U.S.S.G. § 2N2.1. Id.

         The district court acknowledged many of the arguments Stanford advances on appeal and concluded that U.S.S.G. § 2N2.1 was appropriate when viewing Count Two alone. First, the district court stated that, "even if you confined yourself just to the language of the indictment in Count 2, it becomes clear that the underlying offense is the drug conspiracy." After Stanford himself raised the arguments he now raises on appeal, the district court responded "when we look to the indictment itself for Count 2, it contains the information that the Court has indicated, such that the Court is on sufficient notice as to what is the conspiracy." It is clear that the district court, when cabining its review to the allegations in Count Two, concluded that the fraud guideline did not adequately account for offense conduct charged in Count Two, and that it was not, as Stanford suggested, restricted to applying that guideline in light of Arlen and Grant. Instead, the district court selected U.S.S.G. § 2N2.1. Irrespective of the district court's approach, we independently conclude that U.S.S.G. § 2N2.1 was the most appropriate guideline.

         Although the selection between U.S.S.G. § 2N2.1 or U.S.S.G. § 2B1.1 is not an issue of first impression, making the selection upon this factual backdrop appears rare. That is, the selection is typically made in cases that concern drugs generally regulated by the FDA rather than, as here, a CSA. Cf. United States v. Ihenacho, 716 F.3d 266, 276 (1st Cir. 2013) (selecting U.S.S.G. § 2B1.1 rather than U.S.S.G. § 2N2.1 in a case involving both controlled and non-controlled substances). Stanford argues that this distinction is not meaningful, reasoning that a non-compliant FDA-regulated drug is no different than a non-compliant controlled substance for purposes of this analysis. In light of the conduct charged in Count Two of the Indictment, we disagree.

         Count Two of the Indictment alleges, in relevant part, that the FDA, in its authority as the regulator of drugs, as that term is defined by 21 U.S.C. § 321(g), ensures that drugs are, among other things, properly labeled for their intended uses before they can be legally marketed in interstate commerce. Count Two goes on to explain that the Federal Food, Drug, and Cosmetic Act ("FDCA") prohibits the manufacture, introduction or delivery for introduction, and receipt of misbranded drugs. Clarifying the meaning of misbranded, Count Two of the Indictment states that a drug is misbranded if the labeling was: (1) false and misleading; (2) lacked the name and place of business of the manufacturer; or (3) lacked adequate directions for use. Before proceeding to the conspiracy allegations, object of the conspiracy, and overt acts, Count Two of the Indictment incorporated paragraphs D through H of Count One. These paragraphs all related to the sale and manufacture of "Mr. Miyagi." The Conspiracy portion of Count Two of the Indictment alleges that Stanford and his cohorts, "with intent to defraud and mislead, did knowingly and intentionally combine . . . to [violate the FDCA] . . . [by] receiv[ing], manufactur[ing], packag[ing], hold[ing] for sale, distribut[ing], introduc[ing], and caus[ing] the introduction . . . drugs that were misbranded."

         The object of the conspiracy, Count Two of the Indictment goes on to allege, was to "distribute . . . to consumers and other distributors, misbranded drugs for profit." Count Two of the Indictment ends with the listing of two overt acts that Stanford and co-conspirators took in furtherance of the conspiracy: (1) packaging Mr. Miyagi with a misleading "directions for use, " "warning, " and listing of wrong ingredients; and (2) advising individual franchise owners of Curious Goods L.L.C. on how to store, display, and sell the Mr. Miyagi products, how to detect and evade law enforcement, and how to respond to customers who asked questions about how to use the products and/or the physiological effects of the Mr. Miyagi products.

         Upon this backdrop, the court is tasked with solving one principal question: what offense guideline accounts for the ...


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