Opinion ID: 582485
Heading Depth: 1
Heading Rank: 2

Heading: The Prior Convictions of Merit and Benary

Text: 6 Spann and Benary argue that they were denied a fair trial when the district court allowed the government to introduce evidence of prior convictions of Merit and Benary. In a related argument, Merit claims that (1) the district court erred by denying his motion to dismiss the indictment because the government erroneously informed the grand jury that the prior convictions were felonies, and (2) the government was collaterally estopped from claiming that the priors were felonies because the district court in Merit's Texas prosecution had ruled that the priors were misdemeanors. 7 Count 1 of the indictment charges that in order [t]o further induce investors to invest in Tracon, the defendants did knowingly omit to state material facts including ... [t]hat defendants Merit and Benary had each been convicted of a felony in 1980 in U.S. District Court. Benary and Merit had been convicted in the District of New Jersey in 1980 for violations of the Elkins Act, 49 U.S.C. § 41. The Elkins Act, repealed in 1978, classified a violation as a misdemeanor despite the fact that it carried a maximum sentence of two years. 8 Contrary to Spann's argument, Fed.R.Evid. 609 does not bar evidence of the priors because the government did not introduce the evidence in order to impeach the defendants. Even if it had, evidence of the priors was admissible under Rule 609 whether or not they were felonies. Rule 609(a)(1) allows impeachment by evidence of a prior conviction if the crime was punishable by ... imprisonment in excess of one year.... Rule 609(a)(2) allows such impeachment if the crime involved dishonesty or false statement, regardless of the punishment. Because a violation of the Elkins Act carried a two-year maximum sentence, the evidence was admissible under Rule 609(a)(1), and because the prior convictions involved dishonesty, the evidence also was admissible under Rule 609(a)(2). 9 Nor was evidence of the Elkins Act convictions inadmissible under Rules 403 and 404. The government did not introduce this evidence to prove character, but to prove its theory that the priors were material facts that should have been disclosed to potential investors; as such, the evidence was relevant and not unduly prejudicial. Cf. Breard v. Sachnoff & Weaver, Ltd., 941 F.2d 142, 144 (2d Cir.1991) (failure to disclose prior fraud conviction in offering memorandum could be considered reckless as a matter of law in private action under § 10(b) of Securities Exchange Act of 1934). 10 Merit concedes that we are precluded by United States v. Mechanik, 475 U.S. 66, 70 (1986) (supervening conviction renders dismissal of indictment for grand jury irregularities inappropriate), from reviewing most of the grounds for his pretrial motion to dismiss the indictment, but claims that prosecutorial misconduct in using the word felony still requires dismissal of the indictment because it had an improper effect on the grand jury's decision to indict. See Bank of Nova Scotia v. United States, 487 U.S. 250, 254, 257 (1988) (Where an error has not so compromised the structural protections of the grand jury ... as to render the proceedings fundamentally unfair, the district court may not dismiss an indictment for errors in grand jury proceedings unless such errors prejudiced the defendants.). 11 There is no indication that use of the word felony in the indictment substantially influenced the decision to indict. Even if the priors were misdemeanors, and even if the grand jurors had been told that the priors were misdemeanors, there is no reason to believe that the grand jury would not have returned the indictment against Merit and his codefendants. Failing to tell investors about the priors was not material because the priors were felonies (as opposed to misdemeanors), but because they were offenses involving dishonesty. The grand jury therefore had probable cause to believe the defendants guilty whether or not the priors were properly classified as felonies. 12 Merit also argues that an earlier ruling of the district court for the Northern District of Texas that the priors were misdemeanors collaterally estopped the government from charging that he and Benary were convicted of a felony. That ruling does not pass muster under the three-part collateral estoppel test of United States v. Bernhardt, 840 F.2d 1441, 1448 (9th Cir.), cert. denied, 488 U.S. 954 (1988). 13 Because the question whether the priors were misdemeanors or felonies is not a question of ultimate fact, Ashe v. Swenson, 397 U.S. 436, 443 (1970); Bernhardt, 840 F.2d at 1448, it is not necessary to the final judgment. Nor was Judge Mahoney's ruling subject to meaningful appellate review. 1 That strongly militates against giving the ruling preclusive effect. Standefer v. United States, 447 U.S. 10, 23 & n. 18 (1980) (The estoppel doctrine ... is premised upon an underlying confidence that the result achieved in the initial litigation was substantially correct. In the absence of appellate review, or of similar procedures, such confidence is often unwarranted.). The district court did not abuse its discretion in declining to apply the doctrine.