Opinion ID: 2709418
Heading Depth: 4
Heading Rank: 1

Heading: Case law on buyer-seller relationships

Text: In October 2012, our circuit released a revised set of pattern jury instructions for use in criminal cases. Committee on Federal Criminal Jury Instructions for the Seventh Circuit, Pattern Criminal Jury Instructions of the Seventh Circuit (2012), available at http://www.ca7.uscourts.gov/Pattern_Jury_Instr/ 7th_criminal_jury_instr.pdf. One notable revision was to Instruction 5.10(A), which distinguishes buyer-seller relationships from conspiracies. Id. at 73–74. This distinction may seem difficult to grasp at first. It stems, however, from an important tenet of criminal law: conspiracy is a separate offense from the underlying crime. See, e.g., 21 U.S.C. § 846; 18 U.S.C. § 43(a); 18 U.S.C. § 32(a)(8). Conspiracy is the extra act of agreeing to commit a crime. United States v. Jimenez Recio, 537 U.S. 270, 274 (2003); Smith v. United States, 133 S. Ct. 714, 719 (2013). “That agreement is a ‘distinct evil,’” Jimenez Recio, 537 U.S. at 274, because a group No. 12-2743 7 of criminals often pose a greater danger than an individual, United States v. Townsend, 924 F.2d 1385, 1394 (7th Cir. 1991). By working together, criminals capitalize on economies of scale, which facilitate planning and executing crimes—thus making it more likely that a group will complete its unlawful aim. Id.; see also Jimenez Recio, 537 U.S. at 275. For this reason, we punish conspiracies separately from the underlying offense, whether or not that crime comes to fruition. Jimenez Recio, 537 U.S. at 274. Drug sales complicate the situation. A drug sale is itself an agreement: a buyer and seller come together, agree on terms, and exchange money or commodities at the settled rate. United States v. Rock, 370 F.3d 712, 714 (7th Cir. 2004). But, although the substantive trafficking crime is an agreement, it cannot also count as the agreement needed to find conspiracy. United States v. Avila, 557 F.3d 809, 815 (7th Cir. 2009); United States v. Lechuga, 994 F.2d 346, 349 (7th Cir. 1993) (en banc) (lead opinion). Rather, conspiracy to traffic drugs requires an agreement to advance further distribution. United States v. Villasenor, 664 F.3d 673, 679–80 (7th Cir. 2011). For example, the buyer could agree to resell the drugs at the retail level. United States v. Nunez, 673 F.3d 661, 665–66 (7th Cir. 2012). Often, the government will have only circumstantial evidence of a further agreement, which requires the jury to make an inference to convict. Defendants readily challenge the sufficiency of such evidence, which has led to an array of cases in our court that parse out when the inference was permissible. Answering some of those questions proved easy. Mere knowledge of further illegal use, for example, may make the 8 No. 12-2743 seller an aider and abettor to further drug crimes committed by the buyer but not a co-conspirator. United States v. Moreland, 703 F.3d 976, 984 (7th Cir. 2012). Being a co-conspirator requires more. As the Supreme Court aptly put it: a co-conspirator has “a stake in the venture” and therefore exhibits “informed and interested cooperation.” Direct Sales Co. v. United States, 319 U.S. 703, 713 (1943) (internal quotation marks omitted). For short-hand, we have referred to arrangements without this substantive relationship as “buyer-seller relationships,” which contrast with conspiracies. Determining whether someone has “a stake in the venture” is easier said than done—especially with circumstantial evidence. To assist juries, the previous version of our pattern instruction on buyer-seller relationships provided a list of factors to consider. Committee on Federal Criminal Jury Instructions for the Seventh Circuit, Pattern Criminal Federal Jury Instructions for the Seventh Circuit 93 (1998), available at http://www.ca7.uscourts.gov/pjury.pdf. The list included: “[w]hether the transaction involved large quantities,” “[w]hether the parties had a standardized way of doing business over time,” “[w]hether the sales were on credit or on consignment,” “[w]hether the parties had a continuing relationship,” “[w]hether the seller had a financial stake in a resale by the buyer,” and “[w]hether the parties had an understanding that the [goods] would be resold.” Id. In our cases, we used a similarly worded list but often added “the level of mutual trust between the buyer and seller.” United States v. Contreras, 249 F.3d 595, 599 (7th Cir. 2001); accord United States v. Nubuor, 274 F.3d 435, 440 (7th Cir. 2001). We explained that none of the factors were dispositive but proNo. 12-2743 9 vided no further guidance on weighing the various considerations. See, e.g., United States v. Melendez, 401 F.3d 851, 854 (7th Cir. 2005); United States v. Rivera, 273 F.3d 751, 755 (7th Cir. 2001). Recently, we became concerned with that approach. We recognized that most of the factors did not actually distinguish conspiracies from buyer-seller relationships. Consider an example using Wal-Mart. See United States v. Colon, 549 F.3d 565, 568–69 (7th Cir. 2008). Most private citizens do not have a “stake” in Wal-Mart. They are merely casual buyers. Yet many of those same people regularly conduct standardized transactions with the discount retailer (two factors from the old pattern instruction). For example, a man can buy two sticks of deodorant for $3.49 each, every other Friday. These transactions, despite exhibiting frequency, regularity, and standardization, do not evince the substantial relationship entailed in a conspiracy. See id.; see also Nunez, 673 F.3d at 665. Thus, although circumstantial evidence can prove conspiracy, United States v. Carrillo, 435 F.3d 767, 776 (7th Cir. 2006), several factors in the old pattern instruction did not permit that inference beyond a reasonable doubt, United States v. Johnson, 592 F.3d 749, 754–55 (7th Cir. 2010). Rather, those factors were equally consistent with a buyer-seller relationship. Id. In response, we identified a new, nonexhaustive list of characteristics that more precisely pinpoint the distinction. These considerations include: sales on credit or consignment, an agreement to look for other customers, a payment of commission on sales, an indication that one party advised the other 10 No. 12-2743 on the conduct of the other’s business, or an agreement to warn of future threats to each other’s business stemming from competitors or law-enforce- ment authorities. Id. at 755–56 (internal footnote omitted); accord Colon, 549 F.3d at 568–70. Two considerations warrant further discussion here: sales on consignment and sales on credit. In the former, the seller permits the buyer to return unsold drugs. Johnson, 549 F.3d at 755 n.5. The latter is more familiar—the buyer “fronts” the drugs but expects payment for the entire shipment at a later date. Id. at 756 n.5. In both, the seller has affirmatively chosen terms favorable to the buyer, which demonstrates the “informed and interested cooperation” discussed earlier. Direct Sales, 319 U.S. at 713. Important differences, however, distinguish consignment and credit sales. In United States v. Johnson, we described consignment sales as “quintessential evidence of a conspiracy.” 549 F.3d at 755 n.5. “[A] jury could easily infer an agreement to distribute” from that arrangement because “the supplier will not get paid until the middleman resells the drugs.” Id. at 755–56 n.5. In other words, the buyer and seller have enmeshed their interests. To that commentary, we add that a consignment arrangement also exhibits another key attribute we have stressed in identifying conspiracies: an “actively pursued course of sales.” United States v. Suggs, 374 F.3d 508, 518 (7th Cir. 2004); accord Direct Sales, 319 U.S. at 712 n.8 (discussing “stimulation or active incitement to purchase” as indicative of a conspiracy). The seller’s favorable terms encourage the buyer to accept more drugs to sell at the retail No. 12-2743 11 level, and, in the long-term, encourage the buyer to continue the business relationship. Credit sales, in contrast, do not necessarily permit an inference of conspiracy. Johnson, 592 F.3d at 756 n.5. Unlike consignment sales, credit sales are not always premised on further distribution. For example, a buyer could purchase a quantity consistent with personal consumption. If the buyer indeed uses the drugs himself, the seller has not actively incited and agreed to further distribution. In addition, the buyer and seller’s interests would not be enmeshed in the same way, since the buyer would not be reselling the product to pay back the debt. Therefore, to prove conspiracy, more evidence is required than a single sale, on credit, in a quantity consistent with personal consumption. That additional proof can come in a variety of forms—including factors from the old pattern jury instruction, such as frequency and quantity. In other words, once the government has shown some evidence that can distinguish a conspiracy from a buyer-seller relationship (i.e. something akin to those examples found in our new list), then other circumstantial evidence can bolster that argument, including evidence that would not, by itself, distinguish a conspiracy. Id.; United States v. Vallar, 635 F.3d 271, 287 (7th Cir. 2011). There is disagreement in our case law, however, over what other evidence, when combined with a credit arrangement, is sufficient to infer conspiracy. One proposition seems generally uncontroversial: if a person buys drugs in large quantities (too great for personal consumption), on a frequent basis, on credit, then an inference of conspiracy legitimately follows. See, e.g., Johnson, 592 F.3d at 756 n.5; United States v. Zaragoza, 543 F.3d 12 No. 12-2743 943, 948–49 (7th Cir. 2008); United States v. Bender, 539 F.3d 449, 453–54 (7th Cir. 2008); United States v. Bustamante, 493 F.3d 879, 885 (7th Cir. 2007); United States v. Medina, 430 F.3d 869, 881–82 (7th Cir. 2005).1 Less clear is what combinations of those three characteristics—a credit arrangement, a large quantity, and frequent sales —are sufficient. Johnson, for example, implies all three are necessary. In that case, we said that evidence “becomes sufficient” when there is an “ongoing wholesale buyer-seller relationship” on credit, which the opinion defines as “repeat purchases” of “large quantities” on credit. Johnson, 592 F.3d at 756 n.5 (emphasis added); accord Vallar, 635 F.3d at 287. If evidence only becomes sufficient when all three characteristics are present, it would seem all three are required for a permissible inference. Other cases debate the sufficiency of lesser combinations. For example, does a single transaction, in a wholesale quantity, on credit, permissibly support an inference of conspiracy? We have cases that answer both ways, each supporting its conclusion with other case-specific considerations. See United States v. Smith, 393 F.3d 717, 719–20 (7th Cir. 2004) (single large transaction on credit sufficient when middleman referred to 1 In United States v. Nunez, we suggested that perhaps these three characteristics “just reveal a commonplace wholesale relationship.” 673 F.3d at 665. Yet, only a few paragraphs later, the opinion suggests that “wholesaling of illegal drugs on credit” might “give rise to an automatic inference of conspiracy.” Id. (emphasis added). The conflicting statements are both dicta, however. The court declined to decide the issue and instead relied on other grounds to affirm the conspiracy conviction. See id. at 666. No. 12-2743 13 defendant-supplier and his colleagues as “my boys,” and offered to get a larger quantity from defendant-supplier when amount sold to informant came up short); United States v. Dortch, 5 F.3d 1056, 1065 (7th Cir. 1993) (single large credit transaction sufficient when parties had a history of several other cash purchases); United States v. Fort, 998 F.2d 542, 546 (7th Cir. 1993) (single large credit transaction sufficient when buyer promised to make further purchases in the future); United States v. Baker, 905 F.2d 1100, 1106–07 (7th Cir. 1990) (single large transaction on credit insufficient when buyer “unilaterally changed the deal from cash to credit”). Yet another series of cases disagree over whether a credit arrangement alone is sufficient to infer conspiracy. Compare United States v. Dean, 574 F.3d 836, 843 (7th Cir. 2009) (“the evidence of fronting alone may be sufficient to support [the defendant’s] conviction”), with Johnson, 592 F.3d at 756 n.5, and United States v. Kozinski, 16 F.3d 795, 809 (7th Cir. 1994) (“standing alone, the credit transactions are insufficient evidence of an agreement for [the defendant] to be a distributor”). Reflecting this tension, the Committee charged with drafting the new pattern jury instruction diplomatically noted “that particular factors do not always point in the same direction.” Committee Comment, Pattern Criminal Jury Instructions of the Seventh Circuit (2012), supra, at 73–74. Admittedly, much of the confusion stems from our own imprecision. For example, in United States v. Moreland, we discussed the significant support for an approach that “infers conspiracy from wholesale sales on credit.” 703 F.3d at 985. According to the opinion, “wholesale sales on credit” represents “two factors” from our old list (a large quantity and a 14 No. 12-2743 credit arrangement), although the plural use of “s” in “sales” could also be read to imply that multiple purchases are required for that inference. Id. Similarly, in United States v. Vallar, we noted the presence of wholesale quantities early in the opinion, 635 F.3d at 277, but, when describing why we upheld the conviction, we referred only to the fact that there were repeated purchases on credit, id. at 287. Even though many of our cases do not state the legal standard in precisely the same way, however, most of them would have reached the same outcome under each other’s jurisprudence. In Vallar, for example, the defendant engaged in repeated sales, in wholesale quantities, on credit. Id. at 277, 287. These three characteristics would satisfy even the restrictive test set out in Johnson, despite the fact that the opinion did not explicitly mention all three when explaining its reasoning. The same is true for many other cases. See, e.g., Dean, 574 F.3d at 843; United States v. Frazier, 213 F.3d 409, 415 (7th Cir. 2000); United States v. Ferguson, 35 F.3d 327, 331 (7th Cir. 1994); United States v. Cabello, 16 F.3d 179, 182 (7th Cir. 1994). That latent consistency suggests we are informally using a “totality of the circumstances” approach. Indeed, the new pattern jury instruction further buttresses that conclusion. The instruction deliberately uses open-ended phrasing (“the government must prove that the buyer and seller had [a] joint criminal objective”), which encourages case-specific analysis. Pattern Criminal Jury Instructions of the Seventh Circuit (2012), supra, at 73. Yet our case law makes it sound otherwise—as if we are trying to outline a bright-line approach based on specifically dictated considerations. These two approaches No. 12-2743 15 raise the classic dichotomy between judicial flexibility and doctrinal clarity. See Pierre Schlag, Rules and Standards, 33 UCLA L. Rev. 379, 383–89 (1985). Either approach has merit, but a clearer statement of our methodology would significantly aid both litigants and district judges. We will thus make such a statement. The underlying question beneath all buyer-seller cases is whether there was a conspiracy. We discuss buyer-seller relationships at such length because they do not qualify as conspiracies. People in a buyer-seller relationship have not agreed to advance further distribution of drugs; people in conspiracies have. That agreement is the key. Agreements come in infinite varieties, however. Consider an analogy using contracts—another form of agreement. Every year, businesses form countless individualized contracts. This variation does not change the fact that each is still an agreement. Our approach to conspiracies must—and does—account for the similar diversity in criminal agreements. For this reason, we consider the totality of the circumstances. We take into account all the evidence surrounding the alleged conspiracy and make a holistic assessment of whether the jury reached a reasonable verdict. True, repeated consideration of similar circumstances seems to have identified a few per se rules. As discussed earlier, either a consignment arrangement, or a relationship exhibiting all three Johnson factors—multiple, large-quantity purchases, on credit—are widely accepted as sufficient proof of a trafficking conspiracy. Indeed, when either of those conditions are satisfied, a reasonable jury can make that inference. Notice, though, that we develop per se rules by 16 No. 12-2743 watching similar situations repeat themselves—and thus seeing that the totality of the circumstances leads to the same conclusion. Admittedly, our list of example considerations may make it sound as if we are checking off boxes and only looking for specified indicia. That is not the case. The fact that so many of our cases reach consistent outcomes, despite inconsistent, or even contradictory, statements of the weight various considerations hold, demonstrates that the list is merely a starting point for our analysis. If we were to give that list talismanic power, we would be liable to fixate on particular kinds of facts at the expense of other informative evidence. Thus, “[r]ather than needlessly adopt[ing] an absolute standard that cannot be applied intelligibly,” we allow the circumstances of each case to speak for themselves. Lechuga, 994 F.2d at 357 (Kanne, J., concurring). And in so doing, our specifically focused analyses do not lose sight of the larger picture—deciding whether the jury reasonably discerned an agreement to further trafficking of drugs.