Opinion ID: 780458
Heading Depth: 3
Heading Rank: 3

Heading: Pursuit of a Frivolous Case

Text: 32 If Appellants could satisfy their burden to show that the Government pursued a frivolous case, they would recover fees and costs pursuant to the Hyde Amendment. However, the district court did not abuse its discretion in concluding that they had failed to satisfy their burden of proof under this element as well. 33 A frivolous case is one that is groundless ... with little prospect of success; often brought to embarrass or annoy the defendant. 16 The case is frivolous when the government's position was foreclosed by binding precedent or so obviously wrong as to be frivolous. 17 34 Appellants argue that the Government knew its case was groundless because its investigation did not reveal any regulatory violations. They claim that the Farm Service Agency's (FSA) annual approval of farm program payments proved that they were in compliance with the relevant law. Additionally, they contend that the Government presented false and distorted testimony to the grand jury in order to obtain an indictment. 35 As disturbing as these allegations may be, the record does not support the contention that the Government presented false information to the grand jury, that the Government's position was foreclosed by binding precedent, that the Government was aware that its position was groundless, or that it brought the case in order to harass Appellants. 36 The district court did make one disturbing finding: that because the grand jury indicted Appellants, the Government's case was not frivolous. This finding does not hold water. First, Appellants contend that the Government presented false and distorted evidence at the grand jury proceeding. Assuming this were true, false information could sway a grand jury to indict, even though the Government may be aware that the true facts are insufficient to support an indictment, thus making it a frivolous case. Additionally, under the district court's reasoning, the Government would be protected from a frivolous finding anytime it was able to obtain an indictment. This test goes against the policy reasons behind the Hyde Amendment — to protect defendants from outlandish Government prosecutorial misconduct. 18 Therefore, we decline to adopt the district court's conclusion that the case is not frivolous because of the grand jury's indictment. 37 However, the district court relied on additional grounds to find that the Government's case was not frivolous. With the facts presented at trial, the district court believed the jury could reasonably infer that Stephens did have ultimate control over the corporations and the partnership, even though no regulations had been violated. Therefore, even absent a regulatory violation, the jury could have convicted Appellants of the criminal charges. Furthermore, the district court also relied on its own denial of Appellants' Rule 29 motion, suggesting that the district court believed there was a sufficient question to present to the jury. 38 Although the Government's case was not strong, no evidence in the record suggests that the Government's position was brought to embarrass or annoy Appellants. 19 In fact, the record shows that there was a question of whether Stephens' partners and co-shareholders held a true ownership interest. For example, Stephens incorporated Priest Butte with a farm hand who contributed no money to the corporation, continued to work as a farm hand, and took no part in the administration of the corporation. The co-shareholder did not receive dividends or any other type of distributions. In fact, he received the same salary that he had before Priest Butte was incorporated. Stephens, as lessor of the farmland, took nearly all of the profits as varying amounts of lease payments. From this evidence, a jury could have found that Stephens was the sole owner of Priest Butte and that the entity was merely a shell corporation. On this point, we find no reason to question the district court's findings. 39 Appellants do not cite any law to support their argument that the Government was barred from pursuing criminal charges just because it could not locate a regulatory violation or because the FSA annually approved the payments. That the Government was unable to find a regulatory violation does not prove that Stephens was not the sole owner of Appellants. Furthermore, it does not follow that successfully defrauding the FSA by obtaining approval of annual farm program payments bars the Government from bringing criminal charges either. Therefore, the district court did not abuse its discretion when it concluded that the Government did not pursue a frivolous case. 20 40