ye the united states court of appeals for the th circuit it's now open according to law the united states in this honorable court thank you and welcome everyone it's good to have you i think  laser call that while this is being video stream to you all you should not be recording it or taking pictures or anything of that nature now as is true when we're all in new orleans together please remember that when you when you talk about the record giving us record cites is very helpful since particularly in this record we were i was not able to memorize every page just most of them so obviously giving us record cites is helpful and please recall of course to thirty six months for miss harry and mr sholes was based you know as you know on section two and two point one application no three  an argument is that even when there is evidence that the defendant created a substantial risk of bodily injury or death the guidelines allow to level increase here there was no culpable mental state found by the court because a in preparing for the oral argument you know i scoured the record a woman or time to find out to figure out what the facts of the court have depended on to determine that you know my client's their actions create a substantial risk of death whether there was a mens reya or not and i found four particular points in the record like to point out to the court that i believe the court may have gotten this or riches conclusion scuse me  during the you know there were two sensing hearings on the sentencing hearing started in august twenty one thousand dollars it was adjourn and then it was finished in october two thousand and nineteen during the st sensing hearing this government put on  apocalypse and her response was obviously we have no way in the e r to know what specific substance which specific chemical substance is presenting we knew it was katie too because we're taking the packages off the k two packages she referred to him off the patients themselves or the paramedics were handing us the packages now kate who is a court probably know if this is a generic term for you know synthetic pot synthetic marijuana there was no evidence tying anything that gas pipes sold to what dr hale was describing she even said that we don't know what substance were causing these problems so that may  part you know one source of why the court believe that you know my clients created a substantial risk of bodily injury or death but again nothing ties what dr hill described to my clients well what about the problem that the reason why the f d a needs to know about this kind of thing and why you shouldn't put not pre human consumption weight is for human consumption is exactly that you're trying to find out what harm it can cause to h death now during the testimony of the managers who work for gas supply several of them as you recall on the record described smoking a product biggest fraud getting high gas but sold a lot of this product now there's no doubt about that i believe that if any person certainly there's no evidence of anyone you know dying or being severely injured if any person even suffered what's referred to as bodily  injury the government would have found a single person that would come to testify about this or presented evidence about that single person but they did it and again you know they'd be quite the question is you know you know if there's evidence that the defendants consciously caused a substantial risk of bodily injury or death that the one thing but even this report found it they did not and you know the during the nd sentencing of something that he referred to is a hell mary pass and the reason he gave that for this hell mary pass is because of the dangerousness of what they did and he didn't cite any evidence regarding the dangerous received more than thirty six months imprisonment do you stand by that assertion and specifically could you tell me was just in laney an employee of gaspipe and if so didn't he get forty one months accurate that no other employee got more than thirty six months more northern ploy than i'm aware of your honor of got one of thirty six months the only one who came close to thirty six months was one of the managers who  testified and keep in mind you know he had got he had reported to jail he went to jail on his own he reported the jail very early in the process shortly after being died mends and i'm not aware of any other gas pump employee on receive i believe about thirty six months of our recall but again shop on was not a gas pump employee shot one is you know your honor work independently for his own company and he was one of the persons who w if gas pipe if mr schultz and miss harry intended that the fraud any governmental agency i don't think it was the f d a you know the issue you know the recurring theme during the trial putting not for human consumption was the industry standard you know everyone that was selling this product was putting not for human consumption on it but why why are you accomplishing by doing that other than i'm awaiting the f d a well your honor again again it was an industry standard and you know but i don't know that campbell specifically said it was to avoid regulation so the jury heard witnesses cl simple the issue in that case was whether that language of the new administration of the tax code should be read as broadly as possible to include any function by the us or whether it should be narrowed to a targeted function in light of merrill mr klein we are told repeatedly by the united states supreme court that they are the ones who change their precedent not us and where not supposed to look at the lays we're not supposed to predict what they're going to do we're supposed to follow what they have told us and why would we not do that here well certainly on our what i might call or global issue which is whether the theory can survive you're absolutely correct   briefly considered that issue the nd circuit then attilla in the circuit and len although they both took a different view than we think is correct i don't think either suggested that it was incapable deciding the issue i agree that we wouldn't need to since the only conviction here was count one we wouldn't actually need to reach the materiality question imbedded in three hundred and thirty three yes sure we need to win both of those issues to prevail right provided as many of the hardest question here is the materiality but i have sort of one constance question in one legal question a common sense question is in a case like this one where it was stipulated proposed jury instruction five in the th element you did describe materiality as an intent based issue looking at whether or not the offender had an expectation of influencing so i didn't i don't see that is really a substantially correct statement of what materiality was in nature so if your questions are one how could it not have influenced and the nd question is did you actually substantially correctly describe materiality as keepable influencing the victim when you requested let me start with the person question your honor was a really horrible terror but isn't this just harmless because yes you're exactly right and this is an unusual case because there was no evidence that anyone believes the not for human consumption label were the other labels on the back to no words there is no evidence that anyone serious and certainly customers did the upon this label everybody knew what those wells which sets this case apart from the typical material gives right but you agree with me that had they sent for human consumption that would have triggered f d a regulation necessarily there's no doubt question i think it somebody somewhere along the line had the idea that it would offer some sort of detection maybe against think well maybe things liability customers all that is just speculation one thing i can say with real places so i think this is a dangerous and that it can a cannabinoid and as as to the sentencing point mr mole is argument is a bit different from the one actually raised in his brief i mean his brief is focused on the number of levels of the departure i mean so in other words if there are some issues with departure do we need to walk down that path or where do we just walk down the variance path no no your honor and as the government said in its brief the easiest path to affirm the sentence here likely is the variance path just i read it but if you are responding that that's not how i read it either judge change i think judge when was was pretty crystal clear when she said i'm doing this as a departure and as a variance as an up or departure  over you know the past century or so rejected attempts to limit the defraud cause either by this nexus requirement or in other ways i think councils against this court you know using marron al as kind of an excuse to pare down a section three hundred and seventy ones to fraud because when it doesn't really provide that basis based on the different statutory text i'm going to purchase a question it is a complex question it's a circuit authority dealing with the because this case to me reduces in the end because of the jury verdict to a question of c n n or i mean that's what it comes down to under under either of them and i guess my specific question is is there any c is it an intent to evade or impede right right your honor so the the answer to the st question is there are cases including this court's decision in the united states versus haas that cited in the government's brief where both hasse and then i would even though it to fraud prong conspiracy wasn't charged in the ellis case there is a discussion of jury instructions that raised a kind of similar issue in the ellis case out of the four circuit but on  the question of see enter in the courts that have considered this there is to an extent a large collapsing of intended a fraud for the purpose of the fraud prong and intent to defraud or mislead for the purpose of felony misbranded do one thing and sure that then gets me to do you have a problem if materiality is inherent because i don't see you saying that they didn't preserve it i don't think you even said that it wasn't given substantially correctly so if believe i understand what your honor is getting at i would i would say that if anything the case law wind would suggest the other outcome which is where you have a conspiracy to commit felony misbranding against the f d a a government agency not i mean here there is evidence and the district court you know also said that there was sufficient evidence to be consumers but the focus of the government's theory here was the the b b f d a and where the target of the intent t defraud is a government agency i do think there are some similarities between the two because at the end of the day you're looking at what did they do to defraud intent to defraud or mislead the f b i but i think what it does is it's clear from the precedent that there is no there is no materiality requirement for the purpose of the race somebody wants to fraud prof so the fact that courts are analyzing these issues fairly similar way i would suggest except for the understand where you're going do it for you to prevail do we have to say that the th circuit was wrong in watkins and if not why not i don't believe you do for two reasons your honor one of i believe you suggested both of them in your in your questions to mr klein  st of all i believe that these are two separate conspiracies there are two separate means under count one of the conviction of count one the court gave a unanimity of theory instruction and the jury convicted both under the defraud prong would it would provide guidance on that the nd reason that this court doesn't need to fully decided though is the harmlessness point as judge haynes as asked several times during the argument thus far at the end of the day you have a fundamental question which is why mr brand the spices not for human consumption if you weren't trying to mislead the f d a and i think the seven circuits desart decision really goes to the heart of it that case involved fixing a full research only label on human growth hormone that was intended for human consumption the th circuit in that opinion asked the question judge sykes asked the question why do this if you're not trying to mislead the f d a into not being able to fulfill its regulatory function so with that i'll move on to the factual sufficiency points because i want to kind of unpack the record a little bit for the court just because it's a large record i think it may be helpful so on the issue of whether there has been an  what the defendant knew in terms of did they know that they were misbranding or violating some provision of the f t c a and then the nd piece is what active steps were taken either to in some cases misrepresent something to the f d a or in a case like this what did they do to actually conceal their operation from the f d a so those are kind of the two pieces that courts look at and how march through kind of what the what the evidence was on each piece on knowledge of misbranding i don't think there's really any dispute in this case as judge james pointed out there's a stipulation here that defendants knew what they were selling was a drug that it was intended for human consumption and that it was mr brand it is not being for human consumption you have documentary evidence in the record you have an e mail from any herrig telling employees that selling spice for human consumption is already illegal when sold for that purpose that's in our own way eight thousand eight hundred and thirty nine through forty and the and eighty three the other thing i think in the record that really shows the knowledge on behalf of finance beyond the stipulation beyond this other evidence is when you look at the manager meeting minutes they're closely monitoring what the f d a is doing there's a discussion in the meeting minutes when there's an f d a raid captain amsterdam another another seller of similar products that are away eleven for seventy four and then they specifically talk about an f d a raid where the meeting minutes talk about how the f d a is quote trying to get people on intent parentheses selling for human consumption and then in all caps the meeting minutes from  five so i don't think there's really any dispute that they had knowledge of what they were doing was contrary to the f d a regulation they knew that they couldn't sell it but for the misbranding and so they missed branded active steps to conceal their operation from the f a mr moeller talked about how labeling a not for human consumption was an industry standard be that be that as it may i think it's important to look at specifically the label that gas pipe created three that label doesn't just say not with human consumption it says be popery or incense put it in an incense burner and let the aroma fill the room with peace love unity and respect it's giving specific instructions not just saying not for human consumption you're supposed to burn this is incense whatever the industry standard is and i don't think that's a defense that goes far and beyond just simple like oh we're just put on there because everybody else was doing and i think that goes to intent and as the desert case points out you have to look at what the way that the spice was misbranded here and i think as judge haynes asked it goes to the heart of the deception it goes to the heart of the concealment and just like in the desert case there's really no other explanation other than if you're trying to hide what you're doing from the f d a there's a just a silly question though of if you're just focused on deceiving the f d a how did reveal this to the f d a all they would have gotten was a label saying exactly what they put on a would have said you can't you can't consume right you can consume a but i think the issue is that it was intended to be consumed i mean that was part of the stipulation i mean the the i think the f d a would have walked closely at what was in this spice they would have said like well why are you putting chemical coals in a spice that's just meant to be just meant to be burned as instance when putting acetone or other chemicals don't affect the smell or the aroma that's given off i think it would have caused a lot more questions to be asked and answered and i think would have led the f d a to to crack down was charging someone and giggling about all of this i mean this is kind of this giggling approach to selling his as opposed to when you go to a place to buy actual incense like giggling about it they're not charging ten times what most incense cost they're not making it stinky they're making it nice and neat etc so it's kind of a whole genre that's different from ordinary incense right and that's what i mean it's a warrant show on testified to it's a  catch me if you can sort of operation and mr swan also specifically testified to these were his quotes you know putting not for human consumption labels was quote the only way we could sell it to the public it was stated for was the store manager of the store in albuquerque and he's the one as you may recall from the record that getting getting back to the other evidence of active concealment you know gas pipe was instructing its employees to actively conceal its operation and say don't sell that anyone if they say that they're going to suggest smoking it or ingesting it or anything like that i think on the theory that if you're not already in the know and you don't know that this stuff is meant to be intended to be smoked and consumed then we're examples caused joshua campbell to lie to the albuquerque police when they came in his store and said hey are you selling spice and he said no because his instructions of ben we're not going to call it spot ice because that suggests some some idea illegality we're going to call it or herbal incense these sorts of things you're instructed not to talk about the taste of spags are just i'm sensing with your last minute did any could offend it's get more than thirty six months that were employees of g are they are the owners yes exactly so sue me if see it's like a reverse argument if i were just a little employee and i got more than the boss then i'd be making that argument but it seems to me that the  boss making the argument that they should get less than the employee seems like a bit of an odd argument i agree your honor and i think that that's what judge when was to judge when was getting out when she made that statement when she made that statement  sentencing said i agree and i think you know when you have an employee you know ryan yarborough getting thirty six months and they judge you and recognize that even though you know by not holding defendants responsible for  going to conspiracy charge and separate counts i don't think there's much doubt that the intense standard in the misbranding conspiracy would be formulated differently than the intense dinner for the conspiracy to defraud so there is a difference there  there should be a difference there wasn't in this case the two got folded into each other because partly because they were combined in one count and i think that was that was there one final point on this materiality question  there was an m p a witness in this case he came in and he testified in the could have testified to pretty much anything he wanted including that the f d a would have done various things if only the not for human consumption label had been left off of these products there was no such testimony and i think that's because that witness would have been so thoroughly impeached if you have said that this was widely publicized everyone knew with these products were being used for the