FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,  Nos. 07-10359

Plaintiff-Appellant-Cross-Appellee, 07-10372

v. D.C. No.

M 3:05-CR-0114- ARK CAPENER, 

Defendant-Appellee-Cross- RCJ-RAM

Appellant. ORDER AND

AMENDED

OPINION 

Appeal from the United States District Court

for the District of Nevada

Robert C. Jones, District Judge, Presiding

Argued and Submitted

November 17, 2008—San Francisco, California

Filed January 8, 2010

Amended June 9, 2010

Before: Kim McLane Wardlaw and William C. Canby, Jr.,

Circuit Judges, and David G. Trager,* District Judge.

Opinion by Judge Trager

*The Honorable David G. Trager, United States District Court Judge for

the Eastern District of New York, sitting by designation. 

8307
COUNSEL

Vijay Shanker, United States Department of Justice, Washington, DC, for the plaintiff-appellant-cross-appellee.

Jeffery S. Parker, Great Falls, Virginia, for the defendantappellee-cross-appellant.

ORDER

The opinion filed in this case on January 8, 2010, and

reported at 590 F.3d 1058, is hereby amended. An amended

opinion is filed concurrently with this order. With these

8310 UNITED STATES v. CAPENER
amendments, the panel has unanimously voted to deny the

petition for rehearing. Judge Wardlaw has voted to deny the

petition for rehearing en banc, and Judges Canby and Trager

so recommend. The full court has been advised of the petition

for rehearing en banc and no active judge has requested a vote

on whether to rehear the matter en banc. Fed. R. App. P. 35.

The petition for rehearing and petition for rehearing en

banc are DENIED. No subsequent petitions for rehearing and

rehearing en banc may be filed.

OPINION

TRAGER, District Judge:

This case arises out of the failed prosecution of Dr. Mark

Capener for health care fraud in violation of 18 U.S.C.

§ 1347, mail fraud in violation of 18 U.S.C. § 1341 and making false statements in violation of 18 U.S.C. § 1001. During

the period relevant to this case, Dr. Capener was an otorhinolaryngologist in Nevada. The charges against him involved

billing for surgeries that were allegedly either unnecessary,

never performed or exaggerated for billing purposes

(“upcoded”). After an extended investigation and a lengthy

trial, the district court dismissed many of the counts against

Capener on the ground that they were insufficiently supported

by the evidence and the jury acquitted Capener of the remaining counts. 

Following the trial, Capener moved for an award of fees to

cover his defense costs under the Hyde Amendment, 18

U.S.C. § 3006A note, which allows an award of fees to a

defendant when the prosecution acted in a manner that was

“vexatious, frivolous, or in bad faith . . . .” Id. The district

court partially granted Capener’s motion, awarding fees to

cover the costs of defending against certain counts associated

UNITED STATES v. CAPENER 8311
with one of the theories advanced by the government on the

ground that this theory was frivolous.

Both parties appeal the district court’s decision. The government argues that the district court erred by granting fees

after considering the government’s case piecemeal — rather

than viewing the case’s alleged faults in the context of the

case as a whole. The government also argues that, even

viewed piecemeal, no part of government’s prosecution meets

the Hyde Amendment’s standards for an award of fees. Capener cross-appeals, arguing that the district court should have

granted fees on the entire case. Capener also argues that the

district court should have granted him discovery regarding his

Hyde Amendment claim. For the reasons stated below, the

district court is reversed and Capener’s application for fees is

denied in its entirety.

BACKGROUND

(1)

Investigation and Pre-Trial Proceedings

The investigation into Capener’s medical practice began

after Great-West Insurance Company referred him to the

Nevada Attorney General, who, in turn, referred him to federal authorities. Great-West had contacted the Attorney General’s office after Great-West’s investigation of Capener’s

insurance claims appeared to reveal a pattern of excessive

procedures and suspicious claims. In the course of the investigation, the government consulted Dr. John Dooley. Dr. Dooley reviewed some patient records and computed tomography

(“CT”) scans and indicated to the government that he believed

that Capener had billed for unnecessary and unperformed surgeries.1

 Dooley also suggested that the government consult

1The record is not clear regarding how many patient files Dr. Dooley

reviewed. There is also no indication that Dr. Dooley ever disagreed with

the government’s main expert, Dr. Dale Rice, regarding any of the cases

in question. 

8312 UNITED STATES v. CAPENER
Dr. Dale Rice. Dr. Rice reviewed Capener’s patient files,

pathology reports and CT scans and concluded that many of

the surgeries that Capener billed for were either unnecessary

or were not performed.

Capener was indicted in July 2005. The grand jury charged

him with 38 counts of health care fraud in violation of 18

U.S.C. § 1347, 13 counts of mail fraud in violation of 18

U.S.C. § 1341 and one count of making false statements in

violation of 18 U.S.C. § 1001. The indictment alleged that the

challenged procedures had not been performed, were unnecessary or were upcoded to increase the billing rate.

During the investigative phase, Dr. Rice indicated to the

government that part of his conclusions were supported by the

fact that no bone fragments had been reported in pathology

samples taken from some of Dr. Capener’s patients. Pathology samples consist of tissue taken from a patient after surgery. These samples are examined by a pathologist who then

prepares a report. The bulk of the pathology reports that Dr.

Rice reviewed had been prepared by Dr. George Mardini. Of

the set of reports that Dr. Rice reviewed, some did not explicitly note the presence of bone fragments in the pathology sample while others specifically mentioned bone fragments. Dr.

Rice concluded that, where bone fragments were present in a

pathology sample, Dr. Mardini explicitly listed them in his

report. The absence of any indication of fragments in the

report therefore seemed to Dr. Rice to indicate that there were

no fragments in the sample. 

Dr. Rice theorized that, because some of the surgeries that

Capener claimed to have performed would require breaking

bones, bone fragments should have been present in the pathology samples. Where it appeared that they were not present,

Dr. Rice reasoned that the surgery must not have been performed. Dr. Rice never indicated to the prosecutors that he

needed further information or clarification regarding the presence or absence of bone fragments in these pathology reports.

UNITED STATES v. CAPENER 8313
Prior to trial, the government produced an expert witness

disclosure concerning Dr. Rice’s expected testimony. This

disclosure described Dr. Rice’s conclusion that Capener had

billed for unnecessary and unperformed surgeries. It also indicated that Dr. Rice would base his testimony on CT scans and

his own experience and judgment. However, the disclosure

did not indicate that Dr. Rice would be basing any of his conclusions on the belief that bone fragments were absent from

the pathology samples. That said, the prosecution had disclosed the fact that the absence of bone fragments was a central part of their theory in discussions with Capener’s prior

counsel at an earlier stage of the case. 

In fact, most, if not all of the pathology samples in question

did contain bone fragments. Dr. Mardini simply had not specifically mentioned this fact in some of the reports. Dr.

Mardini and another doctor called by the defense, Dr. Steven

Skoumal, explained at trial that bone fragments fall under the

more general category of “sinosal mucosa.” Dr. Skoumal testified that there was nothing wrong with the fact that Dr.

Mardini had not specifically mentioned bone fragments in the

pathology samples. The government interviewed Dr. Mardini

during its investigation but did not discover that the pathology

samples actually did contain bone fragments.2

Also, as part of the pretrial proceedings, Capener moved

for a subpoena to examine the medical records of the patients

mentioned in the indictment. The government opposed his initial motion for subpoenas on the grounds that the proposed

subpoenas were procedurally defective under Fed. R. Crim.P.

17, overly broad and non-compliant with protections for

patient privacy in the Health Insurance Portability and

Accountability Act of 1996 (“HIPAA”). 

2The record is not entirely clear on what questions the prosecution

asked Dr. Mardini when it spoke with him. Dr. Mardini was called by the

defense at trial and was asked whether the prosecution specifically

inquired about the presence of bone fragments in the samples. He stated

that he could not recall. 

8314 UNITED STATES v. CAPENER
The district court quashed the subpoenas, generally agreeing with the reasons put forth by the government. Later, the

defense came forward with a more narrowly drawn request

for subpoenas in compliance with HIPPA. The government

filed no objection to most of the new, more narrowly drawn

subpoenas. A magistrate judge issued subpoenas pursuant to

the defense’s second request. The material produced in

response to these subpoenas indicated that many of the

patients Capener had operated on had a history of sinus problems, tending to show that they might have appeared to need

surgery.

(2)

Trial

In its case-in-chief, the government called Dr. Rice. Dr.

Rice testified that, in his expert opinion, Capener had billed

for unnecessary or unperformed surgeries. The major bases

for his opinion were that (1) Capener’s records indicated

implausibly short times for the claimed surgeries, (2) some of

the CT scans indicated that certain nasal bone structures were

intact, which Dr. Rice felt would not have been intact if the

claimed surgery had been performed, (3) CT scans indicated

that some patients did not have frontal sinuses, as that term is

medically defined, making it impossible for Capener to have

performed frontal sinus surgery on them as he claimed and (4)

under Dr. Rice’s interpretation of the pathology reports, no

bone fragments were found in some pathology samples. Of

the seventeen health care fraud counts that would ultimately

reach the jury, eleven did not rely at all on the bone fragments

theory. With respect to the six counts where Dr. Rice did rely

on the bone fragments theory, Dr. Rice also based his conclusion on one or more other theories as additional justifications.

The government called six significant doctors other than

Dr. Rice to substantiate the charges against Capener. These

other witnesses, however, collectively testified regarding far

UNITED STATES v. CAPENER 8315
fewer patients than Dr. Rice. Drs. Bud West, David Mathis,

Timothy Dyches, Anthony Zamboni and Michael Kaplan

offered opinions regarding one patient each. In each case,

they indicated that they did not believe that Capener had performed the claimed surgery. Dr. David Bolick testified that

one patient’s pathology sample lacked a type of tissue that it

normally would have had if the claimed surgery had been performed and that he did not receive a pathology sample for

another patient even though he normally would have. All told,

these doctors testified about a total of seven patients while Dr.

Rice testified regarding at least seventeen patients.3 In addition to these doctors, several of Capener’s employees testified

that they felt he used fraudulent billing practices. However,

the government presented only one witness who had actually

observed any surgeries — and that witness claimed to have

watched only a couple of them.

In response to the government’s contention that there were

no bone fragments in some of the relevant pathology samples,

the defense called Dr. Mardini, the pathologist who had processed the samples. Dr. Mardini testified that there had been

bone fragments in most, if not all of the pathology samples he

examined. Another defense pathologist, Dr. Skoumal,

explained that bone fragments need not be separately listed on

a pathology report as they can fall under the general category

of sinonasal mucosa and Dr. Mardini had testified that, when

he referred to sinonasal mucosa, he was including bone fragments. In addition, the defense presented pathology slides

from patients treated by Capener. On these slides, the bone

fragments were plainly visible. 

The defense also addressed other elements of the government’s case. In response to the contention that some of Capener’s surgeries had been unnecessary, the defense presented

3The figure of seventeen patients includes only those whose surgeries

related to counts that were actually sent to the jury rather than being dismissed by the district court. 

8316 UNITED STATES v. CAPENER
testimony indicating that aggressive surgical intervention of

the sort espoused by Capener was an accepted treatment philosophy and that CT scans of the type relied on by Dr. Rice

did not always indicate whether a patient suffered from sinus

symptoms. Further, Capener put on testimony supporting his

use of the relevant billing codes. The defense also presented

a video showing Capener rapidly performing a surgery that

the prosecution had indicated should take a long period of

time.

In its rebuttal case, the prosecution again called Dr. Rice.

Dr. Rice disputed the accuracy of the billing codes that Capener had used in charging insurance companies. Dr. Rice also

suggested that the presence of bone fragments did not indicate

that Capener had performed exactly the kind of surgeries he

had claimed.

Following the close of the evidence, the defense moved to

dismiss all the charges against Capener. The district court dismissed all twenty-one health care fraud and mail fraud counts

alleging that Capener had performed unnecessary surgery, but

sent to the jury the remaining twenty-five counts which

alleged health care and mail fraud for unperformed surgeries

and perhaps upcoding — although the record is not entirely

clear on this point — and false statement. After a single day’s

deliberation, the jury acquitted Capener on all remaining

counts.

(3)

Post-Trial Proceedings

Following the verdict, Capener moved for an award of fees

under the Hyde Amendment. He argued that the prosecution’s

entire case was vexatious, frivolous and in bad faith. The government responded that its conduct did not entitle Capener to

fees. In particular, the government argued (1) that its bone

fragments theory was based on an understandable mistake

UNITED STATES v. CAPENER 8317
given that Dr. Mardini had sometimes separately listed the

presence of bone fragments, suggesting that when he did not

do so, bone fragments were not present, and (2) that the bone

fragments theory was only one of the government’s arguments at trial. 

The district court held a hearing on the fee motion at which

the judge made several pertinent remarks. For one, the district

court denied Capener’s request for documents from the prosecution, finding that Capener had not raised sufficient suspicion to justify an order to produce documents. Regarding the

fee request, the district court stated at the start of the hearing

that: 

So far, subject to your arguments, I’m not convinced

that the government moves in bad faith . . . . [F]rom

the Court’s own review of the proceedings, there

was every reason to have suspicion and, of course,

ultimately to obtain a finding of probable cause that

criminal conduct had been engaged in . . . . So

you’ve got an uphill battle . . . . 

The court later said that “it certainly is very possible that

if this had been a civil lawsuit to recover fraud . . . that the

government . . . could well have prevailed . . . .” The court

also stated that it could not “fault the government for bringing

this case.” Further, the district court stated, “I am going to

award — I’m considering awarding maybe a quarter of the

attorneys fees . . . . [T]hat initial view is based on some very

brief statements in the briefs here. It will have to be based on

a more careful review of the affidavits with regard to the

extent of the injury to the defendant . . . .” At the close of the

hearing, the district court indicated that “I’m not presently, as

I sit here, inclined to exceed, roughly, a quarter, or a third of

the overall fees. So I’ll do that with review and we’ll award

something accordingly, for the reasons I’ve stated here.”

After the hearing, the district court produced a written order

making findings of fact and law. The district court found that

8318 UNITED STATES v. CAPENER
Capener was entitled to partial relief under the Hyde Amendment. Specifically, the district court held that “the Government pursued frivolous claims as to the fraud-related counts

based on the Government’s first [theory] — the lack of bone

in the pathology reports . . . .” The district court reasoned that

the “Government [either] consciously decided to proffer a theory it knew was false, or it failed to conduct any investigation

. . . to confirm whether Dr. Rice’s contentions regarding lack

of bone fragments was . . . accurate.” The district court also

noted that the government had not indicated that Dr. Rice

would testify regarding the bone fragments theory in its

expert disclosure. Nonetheless, the district court found that

the government had not acted in bad faith, noting that there

was no evidence that Dr. Rice lied on the stand and that there

was not sufficient evidence that the government consciously

acted with ill will.

Additionally, the district court found that the government

had not acted vexatiously with regard to its opposition to Capener’s subpoenas for the medical records of his surgical

patients or in its decision to follow leads provided by allegedly disgruntled informants. The district court concluded that

there was no ill will in either case and that some of the counts

had been worthy of being submitted to a jury. Finally, the district court found that Capener’s counsel “has not demonstrated that the Court should depart from” the standard

$125/hour rate. Accordingly, the district court granted Capener’s counsel $279,015.50 in fees and costs.

STANDARD OF REVIEW

“An award of attorney fees pursuant to the Hyde Amendment is reviewed for an abuse of discretion.” United States v.

Sherburne, 506 F.3d 1187, 1189 (9th Cir. 2007). Discovery

orders under the Hyde Amendment are reviewed for abuse of

discretion. United States v. Lindberg, 220 F.3d 1120, 1126

(9th Cir. 2000). We recently clarified the meaning of the

“abuse of discretion” standard of review “in the context of a

UNITED STATES v. CAPENER 8319
trial court’s factual findings, as applied to legal rules.” See

United States v. Hinkson, 585 F.3d 1247, 1259 (9th Cir. 2009)

(en banc). We employ a two-step inquiry to determine

whether a district court abused its discretion in applying law

to facts in a manner that is “essentially factual.” Id. at 1259,

1261. First, we determine de novo “whether the trial court

identified the correct legal rule to apply to the relief requested.” Id. at 1261-62. If it did, we then evaluate the trial court’s

application of this legal standard to the facts of the case and

may reverse only if its application was “(1) illogical, (2)

implausible, or (3) without support in inferences that may be

drawn from the facts in the record.” Id. at 1262 (internal quotation marks omitted).

DISCUSSION

(1)

The Government’s Appeal

On appeal, the government argues that the district court

erred by considering the alleged flaws in the prosecution’s

case piecemeal rather than asking whether the case — viewed

as a whole — met the Hyde Amendment’s standards for an

award of fees. Capener responds that the district court did

view the alleged shortcomings of the prosecution in the context of the case as a whole and that, even if it had not, it

would not have been error to focus only on the allegedly

flawed portions of the government’s case. In fact, the district

court conducted a piecemeal analysis of the government’s

case. Whether this approach was proper or not is something

we need not decide because even if a piecemeal approach is

permissible, the district court’s conclusion that a portion of

the government’s case was frivolous lacks support in inferences that may be drawn from the facts in the record. Cf.

Hinkson, 538 F.3d at 1262. 

The Hyde Amendment provides that:

8320 UNITED STATES v. CAPENER
[T]he court, in any criminal case (other than a case

in which the defendant is represented by assigned

counsel paid for by the public) . . . may award to a

prevailing party, other than the United States, a reasonable attorney’s fee and other litigation expenses,

where the court finds that the position of the United

States was vexatious, frivolous, or in bad faith,

unless the court finds that special circumstances

make such an award unjust. Such awards shall be

granted pursuant to the procedures and limitations

(but not the burden of proof) provided . . . under section 2412 of title 28, United States Code. 

18 U.S.C. § 3006A note (emphasis added).4

[1] Thus, under the Hyde Amendment, a victorious defendant may be able to recover legal fees upon showing that the

position of the United States was either vexatious, frivolous

or in bad faith. 18 U.S.C. § 3006A note. However, “the burden is on the defendant in the underlying case.” Manchester

Farming, 315 F.3d at 1182. On the other hand, “[t]he elements are disjunctive; thus, the defendant need only prove one

of the three elements to recover.” Id. Regardless of the element a prevailing defendant advances, “the Hyde Amendment

[is] targeted at prosecutorial misconduct, not prosecutorial

mistake.” United States v. Braunstein, 281 F.3d 982, 995 (9th

Cir. 2002) (quoting United States v. Gilbert, 198 F.3d 1283,

1304 (11th Cir. 1999)). Indeed, “mere ‘faulty judgment’ is not

vexatious, frivolous, or in bad faith.” United States v. Tucor

Intern., Inc., 238 F.3d 1171, 1180 (9th Cir. 2001). 

4This case requires consideration only of the threshold question of

whether a claimant receives any fees at all. Although it is unnecessary to

decide the issue, it is worth noting that the amount of fees awarded may

be subject to different considerations from those discussed here. Cf.

Comm’r, Immigration and Naturalization Serv. v. Jean, 496 U.S. 154,

160-61 (1990) (discussing the Equal Access to Justice Act “EAJA”);

United States v. Heavrin, 330 F.3d 723, 730 (6th Cir. 2003) (noting that

EAJA cases are informative in interpreting the Hyde Amendment). 

UNITED STATES v. CAPENER 8321
[2] As noted above, although the district court did not find

that the government had acted vexatiously or in bad faith, it

did find that the bone fragments theory was frivolous. In

doing so, it correctly identified the legal standard for measuring frivolousness. Frivolousness is defined objectively. A

“ ‘frivolous’ case is one that is groundless . . . . [A] case is

frivolous when the government’s position was foreclosed by

binding precedent or so obviously wrong as to be frivolous.”

Manchester Farming, 315 F.3d at 1183 (internal quotation

marks omitted). However, in applying this legal standard to

the facts of the case, the district court abused its discretion.

[3] The district court based its frivolousness finding primarily upon the fact that a more thorough investigation by the

prosecutors would have revealed that the pathology samples

actually did contain bone fragments. As it happened, the government did interview the pathologist, Dr. Mardini, but did

not discover that the samples contained bone fragments. This

was a regrettable mistake — a clear failure by the prosecution

to do its homework. The district court’s finding that it was

misconduct of the sort that could justify a fee award, however,

goes too far.

It is true that, under limited circumstances, a failure by the

government to thoroughly investigate a case can constitute

frivolousness. See Braunstein, 281 F.3d at 996-97. However,

a failure to sufficiently investigate generally can rise to the

level of frivolousness only when the government had some

affirmative reason to know that further investigation was

needed. For example, the Braunstein court found that the

prosecutors acted frivolously when they had substantial information affirmatively calling their theory into question and

pointing the way to further evidence but failed to investigate

further. Id. In our case, by contrast, there is no evidence that

the government had any affirmative reason to believe that its

bone fragments theory was wrong. 

Indeed, the government argues that it relied on Dr. Rice’s

expert opinion and therefore did not act frivolously with

8322 UNITED STATES v. CAPENER
respect to the bone fragments theory. Because Dr. Rice never

indicated any need for further investigation, the government

contends, their failure to confirm that the pathology samples

did not contain bone fragments does not justify a finding of

frivolousness. 

[4] Where the government ceases investigation in reliance

on the opinion of an expert and that expert has not indicated

a need for any further investigation, the government generally

has not acted frivolously. Cases from several areas of law

indicate that this kind of reliance usually does not fall below

minimum professional standards. See, e.g., Hendricks v. Calderon, 70 F.3d 1032, 1038 (9th Cir. 1985) (considering a

claim of ineffective assistance of counsel); Dubois v. U.S.

Dep’t of Agriculture, 270 F.3d 77, 83 (1st Cir. 2001) (considering a denial of sanctions). Though there do not appear to be

any Hyde Amendment cases on point, the cases cited above

still suggest that such reliance is generally not “obviously

wrong,” as required for a finding of frivolousness. To be sure,

Hendricks and Dubois do not apply particularly demanding

tests of attorney competence. They are, however, still relevant

to the case at hand. The Hyde Amendment does not require

excellence — it targets “prosecutorial misconduct, not prosecutorial mistake.” Braunstein, 281 F.3d at 995. “[M]ere

‘faulty judgment’ is not vexatious, frivolous, or in bad faith.”

Tucor, 238 F.3d at 1180. Reliance on an expert may well be

faulty judgment in a given instance, but it generally will not

constitute misconduct of the sort sanctioned by the Hyde

Amendment, absent some affirmative reason for the government to know such reliance is misplaced. 

Capener responds first that, as a factual matter, the government was not actually relying on Dr. Rice’s expertise but had

instead misled him — intentionally or otherwise — as to the

contents of the pathology samples. Second, Capener contends

that, even if the government had relied on Dr. Rice, that reliance would not automatically prevent liability under the Hyde

Amendment. As to his first contention, Capener argues that

UNITED STATES v. CAPENER 8323
Dr. Rice depended on the prosecutors for information to such

a degree that he was relying on them rather than the other way

around. This issue centers on what the prosecutors told Dr.

Rice regarding Dr. Mardini’s pathology reports. Dr. Rice’s

affidavit indicates that the prosecutors told him that Dr.

Mardini had “verified the content of his reports.” 

[5] This hardly diminishes the prosecutors’ reliance on Dr.

Rice’s expertise. The fact that the prosecutors told Dr. Rice

that Dr. Mardini “verified” his reports could mean one of two

things: either that the prosecutor told Dr. Rice that the reports

were truthful or that the prosecutors told Dr. Rice how to

interpret the reports. In order for Rice to have made his error

in reliance on the prosecutors, they would had to have told

him how to interpret the reports. Dr. Rice’s error was one of

interpretation — deciding that the fact that a pathology report

did not specifically mention bone fragments meant that no

bone fragments were actually present. There is no reason to

think that the prosecutors told Dr. Rice how to interpret the

pathology reports or that he would have listened to them even

if they had. The interpretation of a pathology report is a technical matter not a legal one. Accordingly, there is no basis for

claiming that the prosecutors were not acting in reliance on

Dr. Rice when they halted their investigation of the bone fragments theory.

[6] Moreover, even if there are circumstances under which

a prosecutor’s reliance on an expert would not shield the government from liability under the Hyde Amendment, this case

does not present such a situation. There is nothing else about

the facts surrounding the prosecutors’ reliance on Dr. Rice

that suggests that this reliance was frivolous. Dr. Rice was an

expert in his field and did not indicate that he needed any

additional information regarding the absence of bone fragments in the pathology samples. Though the government

apparently failed to ask the pathologist, Dr. Mardini, about the

bone fragments issue, there was no specific indication that it

was necessary to do so. Moreover, some of Dr. Mardini’s

8324 UNITED STATES v. CAPENER
pathology reports specifically indicated the presence of bone

fragments, making it reasonable to infer, as Dr. Rice and the

government apparently did, that where a report did not specifically indicate bone fragments, that sample did not contain

bone fragments.5

The strongest point for Capener on the issue of whether the

prosecutors were frivolous with respect to the bone fragments

theory is the fact that the district court’s finding on this point

is entitled to deference. The district court wrote that: 

[E]ither the Government consciously decided to

proffer a theory it knew was false, or it failed to conduct any investigation or inquiry to confirm whether

Dr. Rice’s contentions regarding lack of bone fragments was in fact accurate. In addition, the government failed to produce to Capener expert disclosures

from Dr. Rice, who discussed the lack of bone as a

basis for his opinion. Taken together, these facts

indicate the Government had reason to believe their

lack-of-bone theory was without support.

[7] This finding, however, is implausible based on the

record in this case. The record simply does not substantiate

the assertion that the government knew or had reason to

believe that its lack of bone fragments theory was false. As

5Moreover, during the trial, the prosecution spoke with a pathologist

named Dr. Samuel Parks. Dr. Parks indicated that, if some reports specifically mention the presence of bone fragments, it would be normal to

assume that reports that do not specifically mention bone fragments indicate that the samples do not contain bone fragments. Dr. Parks also indicated that a report should specifically mention bone fragments when it

contains bone fragments. Dr. Parks concluded that it was proper to interpret the reports written by Dr. Mardini that did not specifically mention

bone fragments as reflecting the fact that the samples did not contain bone

fragments. This buttresses the conclusion that the prosecution did not err

in a manner that should subject them to liability under the Hyde Amendment. 

UNITED STATES v. CAPENER 8325
explained above, the primary fact cited by the district court in

this regard — the government’s reliance on Dr. Rice’s opinion and attendant failure to question Dr. Mardini pre-trial

about the lack of bone fragments theory — was an understandable error that does not support the conclusion that the

government pursued an obviously incorrect theory. 

The only additional fact cited by the district court in support of its frivolousness conclusion is that the government’s

pre-trial expert witness disclosure did not specifically indicate

that Dr. Rice would base some of his testimony on the

absence of bone fragments in the pathology sample. The government, however, told Capener’s prior attorney about this

basis for Dr. Rice’s opinions at an earlier stage of the case.

Though the failure to include this information in the expert

witness disclosure is regrettable, the fact that defendant’s

prior counsel was informed of the relevant information in

another way indicates that there was no intent to deceive and

no reckless disregard for the truth. Because the failure to disclose was not done with a culpable mental state, it cannot be

evidence of willful blindness on the part of the prosecutors.

[8] Finally, there is no basis in the record for the district

court’s statement that the government might have consciously

advanced a false theory. Indeed, this contention is contradicted by the district court’s later finding that the government

did not “conspire[ with Dr. Rice] to knowingly present false

testimony.” Accordingly, the district court’s finding that the

government’s conduct regarding the bone fragments theory

was frivolous is unsupported by the record and unsustainable.

(2)

Capener’s Cross-Appeal

[9] Turning to Capener’s argument that he should have

been awarded fees for the entire case, Capener raises several

challenges to the government’s conduct. First, he claims that

8326 UNITED STATES v. CAPENER
the structure of the government’s case was inappropriate. He

argues that the prosecutors should not have tried to criminalize a difference in medical opinion regarding what treatments

were necessary or structured a prosecution around highly

technical medical billing codes. In fact, there was nothing

improper about these aspects of the government’s case. Capener was not being charged with treating patients on the basis

of erroneous medical views — he was being charged with

fraud for allegedly performing surgeries that he did not genuinely believe were necessary. The evidence presented by the

prosecution to the effect that the surgeries were not actually

necessary tended to show that Capener could not have subjectively believed they were necessary given his medical training

and experience. Similarly, the government’s arguments

regarding Capener’s use of billing codes were proper. Regardless of how complex the codes are, if Capener willfully

upcoded procedures, that could constitute fraud. 

[10] Second, Capener argues that the prosecution’s conduct

during the investigation was actionable under Hyde Amendment. His central argument is that the government must have

been attempting to suppress or at least avoid the truth.6 Capener faults the government for opposing his initial attempt to

obtain subpoenas for the medical records of his patients. Capener sought these subpoenas in order to demonstrate that the

patients had a history of sinus problems and therefore may

have looked like they needed treatment. The district court,

however, correctly found that there was nothing wrong with

the government’s initial opposition. Capener’s initial subpoenas were invalid because, among other things, they did not

6Capener also alleges that this case arose against a background of malicious complaints by individuals who were biased against him — such as

doctors who were business competitors of his — and that the government

relied partly on disgruntled employees of Capener’s as witnesses. Of

course, the government must often rely on individuals who may have

some agenda. This cannot give rise to Hyde Amendment liability here,

however, given that the government recruited witnesses with no personal

bias against Capener, such as Dr. Rice. 

UNITED STATES v. CAPENER 8327
comply with the privacy protections in HIPAA. There cannot

be anything improper with opposing a legally invalid subpoena. Moreover, the government did not oppose the bulk of

Capener’s second round of subpoenas, which were HIPAA

compliant, indicating that the prosecution merely wanted subpoenas that were legally valid.

Also regarding the government’s conduct during the investigative phase of the case, Capener insists that the prosecution

must have known that his patients had a history of sinus problems and thus that surgery might have appeared necessary.

Capener bases this contention on the fact that the case was

referred to the government by an insurance company. He presumes that the insurance company had the relevant medical

records and that the insurance company would have communicated the relevant facts about the patients’ sinus problems

to the prosecutors in making the referral. Capener argues that,

if the prosecutors had known of these sinus problems, it could

suggest that they were attempting to avoid the truth. The presence of prior sinus symptoms could at least arguably tend to

show that Capener might have believed that the patients in

question needed surgery because they had a history of sinus

problems. 

However, there is no real evidence that the prosecutors

knew that some of Capener’s patients had prior sinus problems. Nor is it necessarily true that the fact that the case was

referred by an insurance company indicates that the prosecutors would have known of the sinus problems. The insurance

company may not have informed the prosecutors of the

patients’ full medical histories or may not have had all the

information itself. Capener argues that, even if the prosecutors

did not know of these prior sinus problems, they should have

sought the relevant medical records and uncovered this fact

for themselves. In an ideal world, perhaps, the prosecutors

would have tracked down these records. However, their failure to do so was, at worst, negligence. Mere negligence cannot form the basis of an award under the Hyde Amendment.

8328 UNITED STATES v. CAPENER
Braunstein, 281 F.3d at 995; see also In re 1997 Grand Jury,

215 F.3d 430, 436 (4th Cir. 2000). 

[11] Capener also argues that the prosecution acted in bad

faith, specifically with regard to Dr. Rice’s testimony. As

noted above, the district court specifically found that the prosecution did not intentionally proffer false testimony from Dr.

Rice. Capener presents no substantial evidence to the contrary. Indeed, there is no basis for claiming that Dr. Rice’s testimony was willfully false, rather than erroneous. Capener

claims that Dr. Rice implied he had personal knowledge of

facts that he actually had gleaned from reports created by

other doctors. Whether Dr. Rice implied personal knowledge

at trial is debatable, but even if he did, it hardly shows intentional or willful misconduct. Capener also stresses that the

prosecution knew Dr. Rice would testify without having actually seen the pathology slides and argues that this shows an

element of willful blindness. This is, however, a highly technical area. To rely on medical reports rather than the slides is

hardly unreasonable. For the reasons stated above, there was

nothing egregious about relying on Dr. Rice. 

[12] Thus, having found that the government’s advancement of the bone fragment theory was not frivolous, we see

nothing further in the prosecution’s case to suggest that liability was appropriate under the Hyde Amendment. Accordingly, no fee award should have been granted in this case.

(3)

Capener’s Discovery Motion

Capener further contends that the district court erred by

refusing to grant him discovery in support of his motion for

fees. Were this the case, a remand might be necessary so that

the results of any such discovery would be available in deciding whether to award fees. However, the district court did not

UNITED STATES v. CAPENER 8329
err in refusing to grant discovery on Capener’s Hyde Amendment claim. 

[13] The Hyde Amendment’s tools for developing evidence

are extremely limited. As noted above, the Hyde Amendment’s procedures are based on the EAJA, which provides

that a party’s entitlement to fees shall be “determined on the

basis of the record . . . which is made in the civil action for

which fees and other expenses are sought.” 28 U.S.C.

§ 2412(d)(1)(B). The Eleventh Circuit has remarked that

“Congress added this language to ensure that the substantial

justification determination will not involve additional evidentiary proceedings or additional discovery of agency files,

solely for EAJA purposes.” United States v. Certain Real

Estate Property Located at 4880 S.E. Dixie Highway, 838

F.2d 1558, 1564-65 (11th Cir. 1988) (internal quotation marks

omitted). 

The Hyde Amendment itself provides little additional scope

for investigating the government’s conduct. One portion of

the Hyde Amendment indicates that “the court, for good cause

shown, may receive evidence ex parte and in camera . . . .”

18 U.S.C. § 3006A note. Though this provision does not provide for traditional discovery in so many words, we have previously suggested that it might make some form of

evidentiary development possible on a showing of good

cause. United States v. Lindberg, 220 F.3d 1120, 1126 (9th

Cir. 2000). 

[14] The exact scope of this provision need not be decided

here. The district court found that Capener had failed to show

good cause for requiring the government to produce evidence.

That finding was not an abuse of discretion. As the district

court noted, Capener sought documents primarily to substantiate his claims that the prosecution acted in bad faith — but he

failed to present any evidence to the district court supporting

his allegations of bad faith on the part of the prosecutors.

8330 UNITED STATES v. CAPENER
Under these circumstances, it was not an abuse of discretion

to deny discovery.

CONCLUSION

[15] For the reasons stated above, the district court’s judgment awarding partial fees is reversed, and Capener’s crossappeal seeking full fees is rejected. 

No. 07-10359 (main appeal) REVERSED.

No. 07-10372 (cross-appeal) AFFIRMED.

UNITED STATES v. CAPENER 8331