FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, 

No. 06-30534 Plaintiff-Appellant,

D.C. No.

v.  CR-98-00011-DWM

SCOTT F. SHERBURNE,

OPINION Defendant-Appellee. 

Appeal from the United States District Court

for the District of Montana

Donald W. Molloy, District Judge, Presiding

Argued and Submitted

October 16, 2007—Seattle, Washington

Filed November 6, 2007

Before: Betty B. Fletcher, Arlen C. Beam,* and

Pamela Ann Rymer, Circuit Judges.

Opinion by Judge B. Fletcher

*The Honorable Arlen C. Beam, Senior United States Circuit Judge for

the Eighth Circuit, sitting by designation. 

14657
COUNSEL

Eric B. Wolff, Assistant United States Attorney, Billings,

Montana, for the plaintiff-appellant.

Patrick F. Flaherty, Attorney at Law, Great Falls, Montana,

for the defendant-appellee. 

OPINION

B. FLETCHER, Circuit Judge: 

This appeal by the government is from the district court’s

grant of attorney’s fees to Scott Sherburne under the Hyde

Amendment, Pub. L. 105-119, Title VII § 617, 111 Stat. 2519

(codified at 18 U.S.C. § 3006A Note). We reverse. 

Blaze Construction (“Blaze”) submitted an application for

federal grant funds under a Department of Housing and Urban

Development (“HUD”) program designed to fund the construction of private homes for low income Native Americans.

Blaze’s project to build homes on the Blackfeet Indian Reservation of Montana (“the Blaze project”) was plagued with difficulty and controversy from beginning to end. As part of an

investigation into the Blaze project, Federal Bureau of Investigation agents in February 1998 interviewed Scott Sherburne,

manager of Lodge Builder Management, a company associated with Blaze. During the interview, Sherburne made an

incriminating statement while represented by counsel. 

The United States brought criminal charges against thirteen

defendants including Sherburne. The charges against SherUNITED STATES v. SHERBURNE 14659
burne were for conspiracy and wire fraud, based on alleged

abuses in the funding and construction of the Blaze project.

At trial, the district court excluded Sherburne’s incriminating

statement upon which the United States had relied in deciding

to bring charges against him in the first place. Without the

excluded evidence, the United States could not prove its wire

fraud allegations and therefore recommended that the court

acquit all defendants on the wire fraud charge after the defendants had moved for an acquittal under Federal Rule of Criminal Procedure 29 at the close of government’s case.

Ultimately, Sherburne was acquitted on all charges and dismissed from the case. 

Following the trial, Blaze, Sherburne, and others moved for

attorney fees under the Hyde Amendment, which permits a

criminal defendant to recover fees when the government’s

“position” was “vexatious, frivolous, or in bad faith.” 18

U.S.C. § 3006A Note. The district court adopted the standard

set forth by a Virginia district court in United States v. Holland, which framed the proper inquiry under the “vexatiousness” prong of the Hyde Amendment as “whether a

reasonable prosecutor should have concluded that the applicable law and the available evidence were insufficient to prove

the defendants’ guilt beyond a reasonable doubt and, if so,

was the continuation of the prosecution vexatious.” 34 F.

Supp. 2d 346, 364 (E.D. Va. 1999). Applying this standard,

the court awarded fees to Sherburne, holding that a reasonable

prosecutor should have concluded that the applicable law and

the available evidence were insufficient to establish Sherburne’s specific guilt beyond a reasonable doubt. 

[1] In United States v. Sherburne, 249 F.3d 1121 (9th Cir.

2001) (“Sherburne I”), we reviewed the district court’s award

of fees under the “vexatious” element of the Hyde Amendment for abuse of discretion and remanded, holding that the

standard employed by the district court in the fees award “differs markedly from our interpretation of the statute.” Id. at

1127. We concluded that fees should not be awarded when14660 UNITED STATES v. SHERBURNE
ever a “reasonable prosecutor” should have concluded that the

government would lose the case but rather “when the prosecution was unwarranted because it was intended to harass and

without sufficient foundation.” Id. We found the pure reasonableness standard to be prone to judicial second-guessing and

also noted that it would permit fees to be awarded even more

often, under an even more relaxed standard, than the “substantially justified” standard employed in the Equal Access to

Justice Act, 28 U.S.C. § 2412(d)(1), which had been rejected

in Hyde Amendment jurisprudence as being too permissive.

Id. at 1128 (citing United States v. Lindberg, 220 F.3d 1120,

1124 (9th Cir. 2000)). We therefore concluded that the pure

reasonableness standard was incorrect as a matter of law, and

thus that the district court had abused its discretion by

employing it. Sherburne I, 249 F.3d at 1128. We vacated the

award of fees to Sherburne and Blaze, and remanded to the

district court with the instruction to apply the following “vexatiousness” standard: a defendant is entitled to attorney fees

under the Hyde Amendment only when the prosecution was

(1) unwarranted because it was intended to harass (the subjective element) and (2) without sufficient foundation (the objective element). Id.

On remand, the district court substituted Sherburne’s estate

for Sherburne because he had died, concluded that both the

subjective and objective elements of “vexatiousness” were

present, and reinstated fees. Regarding the subjective element,

the district court concluded that the prosecution was subjectively “malicious and based upon an intent to harass.” The

court found that the United States “did not understand the

complexities of the investigated financing arrangements,”

“distorted the record,” failed “to properly consider or portray

exculpatory or mitigating information,” and unfairly characterized Sherburne’s statement as a confession rather than

speculation. The court also held a subjective intent to harass

could be fairly inferred from the facts that the United States

had only charged Sherburne late in the investigation, had not

UNITED STATES v. SHERBURNE 14661
challenged his Rule 29 motion, and had not objectively

assessed its proof against Sherburne. 

The United States appeals the district court’s second order

granting Sherburne’s motion for attorney fees under the Hyde

Amendment. The United States argues that its position during

prosecution exhibited neither the subjective intent to harass

nor objective deficiency. This court has jurisdiction to hear

the instant appeal under 28 U.S.C. § 1291. An award of attorney fees pursuant to the Hyde Amendment is reviewed for an

abuse of discretion. See United States v. Danielson, 325 F.3d

1054, 1076 (9th Cir. 2003). 

The district court rested its conclusion with respect to the

subjective element on two principal findings. First, it concluded that Sherburne’s February 1998 statement to law

enforcement should not have been treated as incriminating

and that the prosecution’s attempt to characterize it as such

was based on an intent to harass. Sherburne argues the district

court was correct because the United States unfairly and maliciously depicted his speculation in an investigative interview

as a confession. The United States argues that it is entitled to

characterize evidence in the light most favorable to the government and that it did not unfairly depict Sherburne’s statement to the point of “vexatiousness.” We agree with the

United States. 

[2] Upon review of the record, we reject the district court’s

interpretation of Sherburne’s statement as non-incriminating.

It is clear, unambiguous and incriminating. Indeed, the district

court and the parties treated Sherburne’s statement as incriminating (specifically as an admission that Sherburne drafted

fraudulent “gift letters” in order to procure a loan for Don

Wilson, tribal official Lee Wilson’s son). The court excluded

that statement under Bruton v. United States, 391 U.S. 123

(1968), which “precludes the admission of a defendant’s confession implicating a co-defendant during a joint trial,” if the

defendant-confessor is not going to testify. United States v.

14662 UNITED STATES v. SHERBURNE
Allen, 425 F.3d 1231, 1235 & n.5 (9th Cir. 2005).1

 In Sherburne I, we described Sherburne’s statement as an “admission

that he wrote the false letters” for which he was charged. 249

F.3d at 1128. Upon review in this second appeal we conclude

that the United States fairly characterized Sherburne’s statement in the light most favorable to the government and reasonably felt that both the letter and the statement would be

admissible. We now hold that an intent to harass cannot be

inferred in such circumstances. 

[3] Second, the district court concluded that the United

States failed to understand its case. Here the record indicates

the United States did understand its case. The United States’

theory, resulting from its investigation, was that the fact that

defendants obtained a grant from the government to build

seventy-two houses but built only fifty-one was evidence of

fraud. The government understood the “leveraging” defense

but attacked it as hollow, since defendants never explained

that leveraging was part of their financing plan in the original

HUD grant. Indeed, the district court itself previously considered the government’s theory reasonable when it denied fees

to other defendants in the same case. Even though the government lost the suppression motion and thus the bulk of its evidence against Sherburne, it articulated a viable basis for

admissibility; we conclude that its decision to prosecute was

not vexatious. In any case, subjective intent to harass does not

arise from merely factual mistakes or mistakes concerning the

legal merit of the government’s position. See, e.g., United

States v. Schneider, 395 F.3d 78, 89-90 (2d Cir. 2005) (holding that an AUSA mistakenly reporting the holding of two

cases was bad judgment, but not bad faith); United States v.

Knott, 256 F.3d 20, 31 (1st Cir. 2001) (two EPA civil inspectors exceeding permission was not “vexatious,” where conclusion could have easily been that an honest mistake had been

1The government had been led to believe that Sherburne would testify

so that the government’s plan to use the statement about the letter was reasonable in any event. 

UNITED STATES v. SHERBURNE 14663
made about scope of authority). The district court’s reliance

on its finding that the United States did not understand its

case with respect to Sherburne, right or wrong, is not a basis

for an award of fees under the Hyde Amendment. 

[4] We do not reach the question whether its prosecution

was objectively without foundation. Because the district court

clearly erred in finding that the government subjectively

intended to harass Sherburne, the court abused its discretion

in ruling that “vexatiousness” existed in Sherburne’s prosecution. A grant of fees under the Hyde Amendment is not appropriate. 

REVERSED. 

14664 UNITED STATES v. SHERBURNE