Opinion ID: 4468298
Heading Depth: 3
Heading Rank: 1

Heading: “Serious Interference”

Text: Defendants first argue that there was insufficient evidence at trial to prove conversion of U.S. property because the government presented no evidence that Defendants interfered, let alone “seriously interfered,” with CMS’s ability to use its confidential information in the rulemaking process. Although the government agrees that “serious interference” is required, it responds that “the interference is complete when the [confidential] information is disclosed, and the interference is serious when the government has demonstrated a strong interest in maintaining confidentiality of that species of information.” 2 Appellee’s Br. at 109. We disagree with Defendants’ view of how the “serious interference” standard applies when, as here, the property at issue is confidential information. 2 Because there is no dispute here, we assume without deciding that the conversion statute requires a “serious interference” with property. It is worth noting that although this court has yet to decide this issue, all of our sister Circuits to address the question have held, consistent with the common-law definition of conversion, that a “serious interference” is required. See United States v. Collins, 56 F.3d 1416, 1420 (D.C. Cir. 1995) (“The cornerstone of conversion is the unauthorized exercise of control over property in such a manner that serious interference with ownership rights occurs.”); United States v. Scott, 789 F.2d 795, 798 (9th Cir. 1986) (similar); United States v. May, 625 F.2d 186, 192 (8th Cir. 1980) (similar); see also Restatement (Second) of Torts § 222A (1965). Although arguably a lesser quantum of interference might be required under the federal conversion statute, which was intended to broaden the scope of the common-law crime, see Collins, 56 F.3d at 1419, certainly evidence sufficient to establish “serious interference” under the common law would, at a minimum, also be sufficient to establish the requisite interference required for conversion under Section 641. 34 By focusing on the fact that their misappropriation of confidential CMS information did not ultimately affect the rules that CMS subsequently announced, Defendants disregard the Supreme Court’s teaching in Morissette v. United States that conversion under Section 641 extends broadly to the “misuse or abuse of [government] property.” 342 U.S. 246, 272 (1952). Moreover, Defendants’ argument overlooks the fact that the unauthorized disclosure of CMS’s confidential nonpublic information by definition interferes with the agency’s right to exclude the public from accessing such information. See Carpenter, 484 U.S. at 26 (rejecting the defendants’ argument that they “did not interfere with the Journal’s use of the [pre-publication] information” as “miss[ing] the point,” because it sufficed that the defendants interfered with the Journal’s “right to decide how to use [the information] prior to disclosing it to the public”). Thus, we agree with the government that the relevant “interference” with CMS’s ownership of confidential information was complete upon the unauthorized disclosure. As for the “seriousness” of the interference, we also reject Defendants’ contention that their misappropriation of confidential CMS information exceeded the reach of the conversion statute simply because CMS was able to keep using the information. Defendants’ argument is inconsistent with the Restatement, which 35 sets forth a multi-factor test for determining the “seriousness of the interference” that lists “the harm done to the [property]” and “the inconvenience and expense caused to the [property owner]” as only two of six non-exhaustive factors, none of which “is always predominant.” Restatement (Second) of Torts § 222A(2) & cmt. d (1965) (hereinafter “Restatement”)); see also United States v. Collins, 56 F.3d 1416, 1420 (D.C. Cir. 1995) (citing the Restatement to interpret Section 641); United States v. May, 625 F.2d 186, 192 (8th Cir. 1980) (same). Moreover, Defendants’ view is also in stark tension with our holding in Girard, where we upheld the defendants’ convictions under Section 641 for engaging in a scheme to sell confidential DEA information that identified the agency’s informants, even though the scheme was unsuccessful and there was no suggestion that the informants were in fact compromised. 601 F.2d at 70, 73; see also Morissette, 342 U.S. at 272 (explaining that “merely . . . commingling” money may constitute conversion where the custodian is “under a duty to keep it separate and intact”). Thus, while the jury in this case was free to consider the fact that CMS was able to use the misappropriated information and did not suffer any monetary loss, it was also free to consider other factors, including (1) the strength of the government’s interest in maintaining confidentiality, (2) the risk of harm to the 36 government’s interests posed by the unauthorized disclosure, and (3) the extent of the unauthorized disclosure. See Restatement § 222A(2); see also, e.g., Girard, 601 F.2d at 70, 73. Applying this standard here, we conclude that there was sufficient evidence to support the jury’s finding of serious interference with CMS’s ownership of its confidential information. Dr. Blum testified that “[i]t’s a very strong precedent and a very strong principle that every stakeholder has the right to receive the materials [concerning a rule] at the same time,” because the “rule-making process is based upon the notion that the entire public that can be affected . . . ha[s] the right to comment” in a manner that is fair to all stakeholders. App’x at 467. The leaking of predecisional information, Dr. Blum explained, could thus tilt the playing field against interest groups (and the public) who were not yet privy to the information, and also prematurely “trigger powerful [lobbying] forces to try and stop decisions.” Id. CMS employee Amy Bassano echoed these views in her testimony, while adding that CMS employees were more “wary of what [stakeholders were] going to be sharing” with the agency after predecisional information had leaked. Id. at 767. This increased wariness, combined with the agency’s tightening up of internal information-sharing protocols, “sometimes 37 result[ed] in suboptimal [policy] outcomes.” Id. Furthermore, all of these adverse effects harmed CMS economically by making the agency function less efficiently. See supra pp. 23–24. As for other relevant factors, the jury could reasonably infer that the disclosure of confidential information to a Washington D.C. consultant like Blaszczak – and ultimately to Blaszczak’s clients – seriously risked harming the government’s interests by threatening wider disclosure of the information to interested stakeholders. Indeed, the government presented evidence that Blaszczak tipped confidential information not only to hedge fund partners, who sought to use the information for trading purposes, but also to employees of healthcare companies such as Amgen, a regulated entity that stood to benefit from the very informational asymmetry that the government’s confidentiality rules for predecisional information were designed to prevent. Taken together, this evidence was sufficient to support a finding that Defendants’ misappropriation of CMS’s confidential nonpublic information “seriously interfered” with CMS’s ownership rights for purposes of the conversion statute. 38