Ninth Circuit Orders Attorney Fees Paid in ‘Frivolous’ Prosecution

Tuesday, February 26, 2002

Page 3

Ninth Circuit Orders Attorney Fees Paid in ‘Frivolous’ Prosecution

By a MetNews Staff Writer

Prosecution of a computer salesman by the U.S. Attorney’s Office in Arizona was “frivolous,” and the man is owed attorney fees under the Hyde Amendment, the Ninth U.S. Circuit Court of Appeals ruled yesterday.

David T. Braustein’s indictment on charges that he illegally engaged in “gray market” computer sales funneled through foreign countries, including charges of wire fraud and money laundering, was dismissed by the U.S. District Court in Arizona after the government failed to produce various documents essential to its case.

But the District Court denied Braustein’s motion for attorney fees under the Hyde Amendment, adopted as part of a 1998 appropriations bill, rejecting the contention that the prosecution was frivolous.

Citing standards adopted by other circuits to determine the meaning of “frivolous”—since the legislative history does not offer guidance—the Ninth Circuit panel disagreed.

“The evidence in the record supports the conclusion that the government’s position was so obviously wrong as to be frivolous,” Judge Harry Pregerson wrote for the panel.

There was never an enforceable contract between Braunstein and the Apple Latin America Company, the alleged victim of improper gray market transactions, Pregerson said. That left the U.S. Attorney’s allegations of fraud dependent on oral misrepresentations by Braunstein.

“Significantly, none of the grand jury witnesses testified that Braunstein made any such misrepresentations,” he said.

The judge also noted that Apple Latin America Company employees themselves knowingly sold computer products to distributors who resold them on the “gray market.”

“To the extent there was any confusion regarding the extent of gray market awareness on the part of ALAC employees, the AUSA could have clarified the matter by examining documents within the possession and control of Apple, described by the district court as a “complaining witness,” Pregerson said.

“ALAC’s well-documented participation in gray-marketing negated any well-founded prosecution based on fraud because ALAC could not be deceived about practices it actively endorsed,” Pregerson said. Accordingly, the government’s case against Braunstein was frivolous. Braunstein is entitled to attorney’s fees under the Hyde Amendment.

The case is U.S. v. Braunstein, 00-10505.