News
Criminal
Feb. 26, 2002
Feds Must Pay Attorney Fees for 'Frivolous' Suit, Panel Says
DENVER - A San Diego businessman can collect $200,000 in attorney fees from the federal government because the U.S. attorney's office in Arizona filed "frivolous" criminal charges against him, the 9th U.S. Circuit Court of Appeals ruled Monday.
Del Mar attorney Philip Stillman successfully convinced a three-judge panel in U.S. v. Braunstein, 2002 DJDAR 2122 (9th Cir. Feb. 25, 2002), that his client should not have been prosecuted in the first place because prosecutors had enough exculpatory evidence to show that no crime had been committed.
"This was the most ludicrous criminal prosecution I've ever heard of," Stillman said moments after being told he had won the 3-year-old case. "They never bothered to look for exculpatory evidence. I had to do that."
The case centered on David T. Braunstein's computer distribution business, in which he purchased computers from Apple Latin America Co. and resold them to U.S. and Mexico markets.
The criminal charges stem from a complaint from Apple Computers that Braunstein should not have been selling their wares to a U.S. market and, therefore, had committed fraud. Those charges were dropped but not without years of court hearings and a grand jury investigation.
But evidence showed that not only did Apple know about such sales, which it referred to as "gray markets," but it also actively condoned it, including touting the practice in a recent annual report, Stillman said.
None of that would have been necessary if Assistant U.S. Attorney Darcy Ann Cerow had bothered to look for exculpatory evidence, Stillman charged.
"Even when I showed her memos from two executives at Apple endorsing it, she still wouldn't drop the case," Stillman said. "She kept saying that they didn't name Braunstein so they weren't relevant."
Calls to Cerow were not returned. Assistant U.S. Attorney Mike Johns, chief of the Arizona office's civil branch, said he would not comment on the case because he was unaware of it. Johns said it would be at least a month before any decision was made on appealing the matter either to an en banc panel of the 9th Circuit or to the U.S. Supreme Court.
In its opinion, the court said Cerow could have availed herself of "pages and pages of hard copy documents" from Apple detailing not only how it knew about the gray market practice but also how it actively supported it.
"[The company] could not be deceived about practices it actively endorsed," Judge Harry Pregerson wrote in the unanimous decision, joined by Judges Johnnie B. Rawlinson and Charles R. Weiner.
"To the extent there was any confusion regarding the extent of gray market awareness on the part of [company] employees, the [U.S. attorney's office] could have clarified the matter by examining documents within the possession and control of Apple."
The court also ruled that Stillman's appeal was timely under the Hyde Amendment, which calls for it being filed within 30 days after a district court ruling denying attorney fees.
The amendment, part of Congress' 1998 appropriations bill, provides that courts may award attorney fees and other litigation expenses to prevailing criminal defendants if a court rules the charges were "vexatious, frivolous or in bad faith."
The court said that the appeal must be filed within 30 days, meaning that it has sided with the 4th, 5th and District of Columbia circuit courts in holding that such Hyde Amendment appeals are civil matters governed by the Federal Rules of Appellate Procedure 4(a).
Only the 10th Circuit has deemed them criminal matters, which allows for only 10 days to appeal for attorney fees issues. Stillman took 13 days to file his appeal.
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Charles Asbhy
Daily Journal Staff Writer
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