In the Courts

Eleventh Circuit Denies Rehearing of Hyde Amendment Case

On April 10, 2012, the Eleventh Circuit denied a petition for rehearing of a motion for Hyde Amendment fees in United States v. Shaygan, —F.3d—, 2012 WL 1192781 (11th Cir. 2012) (Shaygan II).

On Feb. 8, 2008, Dr. Ali Shaygan was charged with 23 counts of distributing and dispensing a controlled substance in violation of 21 U.S.C. ' 841(a)(1). Id. at *2. A 2007 fatal overdose by a patient to whom Dr. Shaygan had prescribed methadone lead to an undercover investigation into the doctor's practices with respect to prescription of controlled substances. During trial preparation, prosecutors began to suspect Dr. Shaygan's defense team of witness tampering. A collateral investigation was conducted into these suspicions, but the Shaygan prosecutors were walled off from this investigation, and agents were instructed not to disclose any information relating to this investigation to the prosecutors handling the Shaygan matter. Id. As part of the collateral witness tampering investigation, two witnesses agreed to record their conversations with the defense. Id. When the district court later ordered the prosecutors to turn over reports of this nature to the court for Brady review, the agents involved did not give the prosecutors the reports related to witnesses in the collateral investigation. Thus, these reports were not ultimately submitted to the district court or defense counsel as potential Brady evidence. This information came to light during the trial, after which Dr. Shaygan was acquitted by the jury.

The Hyde Amendment is a piece of legislation that permits courts to order the government to pay an acquitted defendant's attorney fees where the court determines that the “position of the United States was vexatious, frivolous, or in bad faith.” Id. (citing Pub. L. No. 105-119, ' 617,111 Stat. 2440, 2519 (1997), reprinted in 18 U.S.C.
' 3006A historical and statutory notes). The district court initially granted Dr. Shaygan's Hyde Amendment motion, ordering the government to pay $601,795.88 in attorneys' fees and costs, but the Eleventh Circuit reversed that decision and vacated the district court's public reprimands of the prosecutors in this matter. United States v. Shaygan, 652 F.3d 1297, 1301 (11th Cir. 2011) (Shaygan I).

In denying the defendant's motion for rehearing, the court emphasized that the “Hyde Amendment is concerned with wrongful prosecutions, not wrongs that occur during objectively reasonable prosecutions.” Shaygan II, 2012 WL 1192781 at *1. The court noted the “wealth of evidence” suggesting that Dr. Shaygan prescribed controlled substances to his patients outside the scope of legitimate medical purposes, and also noted the fact that the defense cross-examined both witnesses in the collateral investigation during the trial with respect to their involvement in that investigation and the recorded conversations with defense counsel. Id. at *2-3. The court even suggested that the acquittal may not have been the result of a lack of sufficient evidence, but rather due to “Shaygan's superb counsel t[aking] advantage of the opportunity to focus the attention of the jury on the alleged misconduct by the government in the collateral investigation,” noting defense counsel's closing statement's comparison of the government's misconduct to the Salem witch trials. Id.

The court held that the superseding indictment against Dr. Shaygan was not brought “in bad faith,” despite the fact that it was filed after a “heated” conversation between one of the prosecutors and defense counsel, because there was “an objectively reasonable basis” for bringing the claims based on newly discovered evidence. Id. at *5. The award of attorneys' fees under the Hyde Amendment cannot be supported by discovery violations alone, according to the court, which explained that the district court did not have discretion to do so “because the prosecution of Dr. Shaygan was objectively reasonable.” Id. A dissenting opinion argued that this holding “collapses the Hyde Amendment inquiry into only a single question:
[W]ere the charges baseless?” Id. at *6. In response, the majority countered that “the appropriate inquiry under the Hyde Amendment is as follows: [W]as it reasonable to prosecute this case?” The majority explained that
“[p]lainly these are different questions,” as a prosecution that begins with objectively reasonable charges may later become unreasonable to pursue. Id.

Middle District of Tennessee Dismisses Dodd-Frank
Anti-Retaliation Claims by FCPA Whistleblowers

On April 3, District Judge Aleta Arthur Trauger of the Middle District of Tennessee dismissed retaliation claims by purported whistleblowers under the Dodd-Frank Act in Nollner v. Southern Baptist Convention, —F.Supp.2d— , 2012 WL 1108923 (M.D. Tenn. 2012). The Nollners were devoted members of the Southern Baptist community who agreed to take positions with the International Mission Board of the Southern Baptist Commission (IMB) in New Delhi, India, managing construction of a new office building for the IMB. Id. at *2. According to the complaint, when they arrived in India, Mr. Nollner discovered that the contractor and the architect on the project were paying bribes to local Indian officials with funds furnished by IMB. Mr. Nollner alleged that, when he reported the bribes to his supervisors, they “seemed unbothered, if not complicit.” Id. The Nollners were then asked to resign their positions before the end of the agreed-upon term of employment and, when they refused, they were terminated. Id.

Among other employment-related claims, the Nollners filed for retaliatory termination under the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, ' 78u-6(h)(1)(A), (Dodd-Frank Act), which prohibits employers from terminating or otherwise discriminating against whistleblowers. The Nollners claimed that they were terminated based on their allegations that IMB violated the Foreign Corrupt Practices Act (FCPA). Under the Dodd-Frank Act, an employee proving such a claim would be entitled to reinstatement as well as twice the amount of any wages not paid during the period of termination, with interest.

In Nollner, the court held that the Dodd-Frank anti-retaliation provisions only apply if the information reported relates “to a violations of the securities laws.” Id. at *6. Thus, the U.S. Securities and Exchange Commission (SEC) must have jurisdiction over the laws, rules or regulations allegedly violated in order for the Dodd-Frank whistleblower protections to apply. Id. at *7.

The FCPA applies to both “issuers” and “domestic concerns.” 15 U.S.C. ' 7 8dd-1(a); 78dd-2(h)(1). However, the SEC's jurisdiction under the statute extends only to “issuers.” Therefore, as a privately held company, IMB is not subject to the SEC's jurisdiction with respect to violations of the FCPA. Nollner, 2012 WL 1108923 at *9. Accordingly, the court dismissed the Nollners' claim, holding that the Dodd-Frank whistleblower protections do not apply where an FCPA violation is not within the SEC's jurisdiction. Id. at *10.

Eleventh Circuit Denies Rehearing of Hyde Amendment Case

On April 10, 2012, the Eleventh Circuit denied a petition for rehearing of a motion for Hyde Amendment fees in United States v. Shaygan, —F.3d—, 2012 WL 1192781 (11th Cir. 2012) (Shaygan II).

On Feb. 8, 2008, Dr. Ali Shaygan was charged with 23 counts of distributing and dispensing a controlled substance in violation of 21 U.S.C. ' 841(a)(1). Id. at *2. A 2007 fatal overdose by a patient to whom Dr. Shaygan had prescribed methadone lead to an undercover investigation into the doctor's practices with respect to prescription of controlled substances. During trial preparation, prosecutors began to suspect Dr. Shaygan's defense team of witness tampering. A collateral investigation was conducted into these suspicions, but the Shaygan prosecutors were walled off from this investigation, and agents were instructed not to disclose any information relating to this investigation to the prosecutors handling the Shaygan matter. Id. As part of the collateral witness tampering investigation, two witnesses agreed to record their conversations with the defense. Id. When the district court later ordered the prosecutors to turn over reports of this nature to the court for Brady review, the agents involved did not give the prosecutors the reports related to witnesses in the collateral investigation. Thus, these reports were not ultimately submitted to the district court or defense counsel as potential Brady evidence. This information came to light during the trial, after which Dr. Shaygan was acquitted by the jury.

The Hyde Amendment is a piece of legislation that permits courts to order the government to pay an acquitted defendant's attorney fees where the court determines that the “position of the United States was vexatious, frivolous, or in bad faith.” Id. (citing Pub. L. No. 105-119, ' 617,111 Stat. 2440, 2519 (1997), reprinted in 18 U.S.C.
' 3006A historical and statutory notes). The district court initially granted Dr. Shaygan's Hyde Amendment motion, ordering the government to pay $601,795.88 in attorneys' fees and costs, but the Eleventh Circuit reversed that decision and vacated the district court's public reprimands of the prosecutors in this matter. United States v. Shaygan , 652 F.3d 1297, 1301 (11th Cir. 2011) ( Shaygan I ).

In denying the defendant's motion for rehearing, the court emphasized that the “Hyde Amendment is concerned with wrongful prosecutions, not wrongs that occur during objectively reasonable prosecutions.” Shaygan II, 2012 WL 1192781 at *1. The court noted the “wealth of evidence” suggesting that Dr. Shaygan prescribed controlled substances to his patients outside the scope of legitimate medical purposes, and also noted the fact that the defense cross-examined both witnesses in the collateral investigation during the trial with respect to their involvement in that investigation and the recorded conversations with defense counsel. Id. at *2-3. The court even suggested that the acquittal may not have been the result of a lack of sufficient evidence, but rather due to “Shaygan's superb counsel t[aking] advantage of the opportunity to focus the attention of the jury on the alleged misconduct by the government in the collateral investigation,” noting defense counsel's closing statement's comparison of the government's misconduct to the Salem witch trials. Id.

The court held that the superseding indictment against Dr. Shaygan was not brought “in bad faith,” despite the fact that it was filed after a “heated” conversation between one of the prosecutors and defense counsel, because there was “an objectively reasonable basis” for bringing the claims based on newly discovered evidence. Id. at *5. The award of attorneys' fees under the Hyde Amendment cannot be supported by discovery violations alone, according to the court, which explained that the district court did not have discretion to do so “because the prosecution of Dr. Shaygan was objectively reasonable.” Id. A dissenting opinion argued that this holding “collapses the Hyde Amendment inquiry into only a single question:
[W]ere the charges baseless?” Id. at *6. In response, the majority countered that “the appropriate inquiry under the Hyde Amendment is as follows: [W]as it reasonable to prosecute this case?” The majority explained that
“[p]lainly these are different questions,” as a prosecution that begins with objectively reasonable charges may later become unreasonable to pursue. Id.

Middle District of Tennessee Dismisses Dodd-Frank
Anti-Retaliation Claims by FCPA Whistleblowers

On April 3, District Judge Aleta Arthur Trauger of the Middle District of Tennessee dismissed retaliation claims by purported whistleblowers under the Dodd-Frank Act in Nollner v. Southern Baptist Convention, —F.Supp.2d— , 2012 WL 1108923 (M.D. Tenn. 2012). The Nollners were devoted members of the Southern Baptist community who agreed to take positions with the International Mission Board of the Southern Baptist Commission (IMB) in New Delhi, India, managing construction of a new office building for the IMB. Id. at *2. According to the complaint, when they arrived in India, Mr. Nollner discovered that the contractor and the architect on the project were paying bribes to local Indian officials with funds furnished by IMB. Mr. Nollner alleged that, when he reported the bribes to his supervisors, they “seemed unbothered, if not complicit.” Id. The Nollners were then asked to resign their positions before the end of the agreed-upon term of employment and, when they refused, they were terminated. Id.

Among other employment-related claims, the Nollners filed for retaliatory termination under the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, ' 78u-6(h)(1)(A), (Dodd-Frank Act), which prohibits employers from terminating or otherwise discriminating against whistleblowers. The Nollners claimed that they were terminated based on their allegations that IMB violated the Foreign Corrupt Practices Act (FCPA). Under the Dodd-Frank Act, an employee proving such a claim would be entitled to reinstatement as well as twice the amount of any wages not paid during the period of termination, with interest.

In Nollner, the court held that the Dodd-Frank anti-retaliation provisions only apply if the information reported relates “to a violations of the securities laws.” Id. at *6. Thus, the U.S. Securities and Exchange Commission (SEC) must have jurisdiction over the laws, rules or regulations allegedly violated in order for the Dodd-Frank whistleblower protections to apply. Id. at *7.

The FCPA applies to both “issuers” and “domestic concerns.” 15 U.S.C. ' 7 8dd-1(a); 78dd-2(h)(1). However, the SEC's jurisdiction under the statute extends only to “issuers.” Therefore, as a privately held company, IMB is not subject to the SEC's jurisdiction with respect to violations of the FCPA. Nollner, 2012 WL 1108923 at *9. Accordingly, the court dismissed the Nollners' claim, holding that the Dodd-Frank whistleblower protections do not apply where an FCPA violation is not within the SEC's jurisdiction. Id. at *10.