Opinion ID: 751182
Heading Depth: 3
Heading Rank: 1

Heading: Failure to Instruct on Incurred Costs

Text: 25 We turn first to the crucial issue in this appeal, which is whether the district court committed plain error in failing to define incurred costs. As we have noted, Baird's criminal liability depended on the question of whether or not Raven incurred costs with Turner Engineering and, if not, whether Baird, in fact, believed that Raven had incurred costs with Turner Engineering. 4 26 Because Baird did not object at trial to the district court's failure to define incurred costs for the jury, we review the district court's actions for plain error. United States v. Jones, 108 F.3d 668, 670 (6th Cir.1997) (en banc); see Fed.R.Crim.P. 52(b) (stating that [p]lain errors or defects affecting substantial rights may be noticed although they were not brought to the attention of the court). In Jones, this court recently outlined the standard for determining whether plain error has occurred: 27 our inquiry under Rule 52(b) consists of the following four distinct, though interrelated, analyses: (1) whether an error occurred in the district court; (2) if error occurred, whether the error was plain; (3) if the error was plain, whether the plain error affected substantial rights; and (4) even if all three factors exist, we must then consider whether to exercise our discretionary power under Rule 52(b), or in other words, we must decide whether the plain error affecting substantial rights seriously affected the fairness, integrity or public reputation of judicial proceedings. 28 Id. at 670 (quoting United States v. Thomas, 11 F.3d 620, 630 (6th Cir.1993)). 29 We will analyze together the first two prongs of the plain error standard. Plain error is error which is clear or obvious. See Jones, 108 F.3d at 671. We conclude that the district court committed plain error by not clearly defining to the jury that the fraudulent statements, underlying the criminal charges, related to the existence of incurred costs rather than the requirements for a progress payment. 30 The district court in its instructions to the jury on Count One related the requirements of the statute (18 U.S.C. § 1001) and asserted that the government needed to prove for a conviction that Baird made and used a false writing; that in making and using the false writing the defendant acted knowingly and willingly; that the false writing was material and defined a false or fictitious statement as an assertion which is untrue when made or when used and which is known by the person making it or using it to be untrue. Jury Instr. at 17-18. With respect to the obstruction of the federal audit, the Count Two instruction focused on the requirement that the government had to prove that Baird endeavored to influence, obstruct and impede a federal auditor in the performance of official duties and that such action occurred with the intent to defraud and deceive the United States. Jury Instr. at 19-21. We note that these instructions mention nothing about the underlying requirement of incurred costs and its explanation. Thus, the jury was faced with instructions dealing with falsity that might have applied to either progress payments or to the alleged falsity in Baird asserting that costs had been incurred in fact between Raven and Turner Engineering by the oral agreement for Raven to purchase and Turner Engineering to ship certain parts and materials. 31 The concept of incurred costs as an obligation should have been the issue for the jury in both counts. Instead, the government's witnesses testified about progress payments and gave requirements for progress payments that would not apply to incurred costs. As a result, the jury very clearly seemed to focus on the wrong issue. In fact, in its question to the district court, the jury focused on the requirements for progress payments rather than any definition of incurred costs under the indictment. Specifically, the jury wanted to know what is needed to procure progress payment[?] 32 Although counsel for Baird did not make a specific objection relating to the jury's question, he did indicate that the issue of progress payments was not critically relevant. Specifically, in response to the jury's question, counsel for Baird stated to the district judge that, Judge, you don't have to have a purchase order. All you have to have is an obligation and that's what the testimony was from the witness. Nevertheless, both the court and the prosecutor thought that an improper request for progress payments constituted an element of the crimes. After discussing the jury's question with both counsel, the district court gave a general instruction to the jury to recall the testimony and particularly mentioned the requirements for progress payments. 33 In United States v. Bryant, 461 F.2d 912, 920 (6th Cir.1972), this court stated [o]rdinarily, it will not suffice merely to read to the jury the statute defining the crime. Even though the language of a statute may expressly contain all the elements of the offense, common English words often will have peculiar legal significance. Even though counsel for Baird did not object to the district court's instructions, the jury's request for further instruction should have alerted the district court and all parties that the jury was considering the wrong issue in the case. If the jury could find that Raven had incurred costs or that Baird honestly believed that Raven had incurred costs in making a contract with Turner Engineering in June, those facts could provide a defense to the charges. In the absence of such instruction, we conclude that the district court committed plain error in its failure to define the essential element of the charges against Baird. The various bases for progress payments, whether fulfilled by Raven or not, did not support the convictions, if in fact Raven had incurred costs. 34 The district court's plain error affected Baird's substantial rights. In most cases, affecting substantial rights means that the error must have been prejudicial: It must have affected the outcome of the district court proceedings. United States v. Olano, 507 U.S. 725, 734, 113 S.Ct. 1770, 1778, 123 L.Ed.2d 508 (1993). 35 We conclude that Baird's substantial rights were affected by the district court's plain error in failing to instruct on incurred costs. As we emphasized in United States v. Bryant, 461 F.2d 912, 920 (6th Cir.1972), the duty of the trial judge is  'to tell a jury what facts they must find before they can convict-that is, to instruct the jury as to the elements of the crime charged.'  Id. (quoting United States v. Rybicki, 403 F.2d 599, 602 (6th Cir.1968)). 36 Under the final prong of this court's plain error standard, we must determine, as a matter of discretion under Rule 52(b), whether to reverse the conviction to avoid a miscarriage of justice. In Olano, the Court stated its view that when an appellate court considers whether to exercise its discretion under Rule 52(b), it should determine whether the plain error  'seriously affect[s] the fairness, integrity or public reputation of judicial proceedings....'  Olano, 507 U.S. at 736, 113 S.Ct. at 1779 (quoting United States v. Atkinson, 297 U.S. 157, 160, 56 S.Ct. 391, 392, 80 L.Ed. 555 (1936)). However, the discretionary application of Rule 52(b) does not require that Baird be actually innocent. See United States v. Segines, 17 F.3d 847, 852 (6th Cir.1994) (citing Olano, 507 U.S. at 736, 113 S.Ct. at 1778-79). 37 This court in Jones determined that no miscarriage of justice existed where the defendant could not show that any alleged error in th[at] case seriously affected the fairness, integrity or public reputation of judicial proceedings. Jones, 108 F.3d at 673. 38 We distinguish this case from Jones. Here, the jury by the nature of its question may have convicted Baird because Raven did not supply documentation for progress payments rather than that costs had not been incurred. Such a conviction would be plain error, affect the substantial rights of Baird and may have amounted to an unfair judicial proceeding. Thus, all requirements are met to reverse the convictions for plain error in the instructions. The indictments in both counts required the government to prove for fraud (Count One) and submission of false documents (Count Two) that the costs had not been incurred.