Tuesday, February 01, 2005

Second Circuit Interprets Hyde Amendment for First Time

United States v. Schneider, No. 03-1764 (January 14, 2005)


Jeffrey Schneider was an accountant at a company that funded residential loans, and was implicated in a fraudulent scheme on the part of some of the company's principals to skim funds from escrow accounts. There were several years of contententious pretrial proceedings, some of the highlights of which included: (1) a failed proffer session at which defense counsel balked at some of the terms of the agreement, which led the prosecutor to tell Schneider that his attorney was "making a very big mistake;" and, (2) a decision by different prosecutors more than a year later not to pursue criminal charges, even though an indictment had been filed.

Schneider went to trial and was acquitted. He then moved in the district court for attorney's fees under the Hyde Amendment, which has been codified as a statutory note to 18 U.S.C. ยง 3006A. In the district court Schneider made two arguments. First, he claimed that the prosecution against him was "vexatious, frivolous, and in bad faith," and also argued that the Hyde Amendment authorized the court to review in camera certain government-prepared memoranda relating to its decisionmaking processes. The district court held that Schneider had not established any entitlement to attorney's fees and that, although in some circumstances a district court could order the government to produce privileged documents for inspection, Schneider had not made a showing that he was likely to prevail, and hence no such order was appropriate.

The Circuit's Decision

The Court of Appeals first considered whether the prosecution was vexatious, etc., concluding that the mere fact that Schneider was acquitted could not lead to a successful Hyde Amendment claim. The court noted that government trial witnesses had directly implicated Schneider in the charged fraud, and rejected the notion that Hyde Amendment liability could be grounded on a claim that the government's witnesses were not credible. The Court also reviewed the eventful pretrial history of the case and determined that what the defendant viewed as bad faith was nothing more than "hard-fought bargaining" on the part of the government. The Court did fault the government's conduct in some respects, noting that a prosecutor had made two "probably inappropriate" statements directly to Schneider during an aborted proffer session. However, that conduct, whether done in good or bad faith, was "too insigificant" to be the basis for Hyde Amendment liability.

The second issue considered was whether the Hyde Amendment authorized the production of an internal government memorandum allegedly recommending that the prosecution be dropped. The Court did not decide this issue, although in dicta it indicated that it tended to agree with the view that there was nothing in the Hyde Amendment that authorized discovery. In the end, the Court merely agreed with the district court that Schneider had not raised even the likelihood of government liability, and that under those circumstances no disclosure was warranted.


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March 23, 2006 at 7:39 AM  

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