Court Opinion

ID: 6327795
Source: CourtListenerOpinion
Date Created: 2022-03-29 18:00:20.319011+00
Date Added: 2024-06-11T09:22:31.334262
License: Public Domain

Case: 22-30007   Document: 00516257999     Page: 1    Date Filed: 03/29/2022

          United States Court of Appeals
               for the Fifth Circuit                           United States Court of Appeals
                                                                        Fifth Circuit

                                                                      FILED
                                                                March 29, 2022
                            No. 22-30007                         Lyle W. Cayce
                                                                      Clerk

   United States of America,

                                                     Plaintiff—Appellant,

                                versus

   Jason R. Williams; Nicole E. Burdett,

                                                 Defendants—Appellees,

                        consolidated with
                          _____________

                           No. 22-30008
                          _____________

   United States of America,

                                                     Plaintiff—Appellant,

                                versus

   Nicole E. Burdett,

                                                     Defendant—Appellee.
Case: 22-30007        Document: 00516257999              Page: 2      Date Filed: 03/29/2022

                               No. 22-30007 c/w No. 22-30008

                    Appeals from the United States District Court
                        for the Eastern District of Louisiana
                     USDC No. 2:20-CR-55 & No. 2:20-CR-139

   Before Smith, Costa, and Wilson, Circuit Judges.
   Gregg Costa, Circuit Judge:
           A federal grand jury indicted lawyer Jason Williams for lying on his
   taxes and failing to report large cash transactions to the IRS. In a lengthy
   pretrial order, the district court admitted some evidence, excluded other
   evidence, and deferred certain rulings until it had the benefit of the context
   that trial provides. For the rulings it did make, the court reserved the right
   to revisit those decisions at trial. Despite the possibility of reconsideration,
   the government appealed the pretrial exclusion of certain evidence of
   Williams’s tax history from the years predating the charged conduct. We
   consider whether the district court abused its discretion in concluding that
   this evidence was improper “other act” evidence under Rule 404(b) and,
   alternatively, inadmissible under the Rule 403 balancing test.
                                                I
           The grand jury charged Williams and his law partner Nicole Burdett
   with eleven counts. The first was conspiracy. U.S.C. § 371. The indictment
   alleges that between 2011 and 2019, Williams and Burdett conspired to
   defraud the United States by (1) filing fraudulent tax returns and (2) failing
   to report cash payments of over $10,000. As part of their conspiracy,
   Williams and Burdett allegedly worked with a tax preparer to inflate
   Williams’s form 1040 Schedule C business expenses on five years of returns.1

           1
             A few months after Williams and Burdett were indicted, the government charged
   the tax preparer with fraud related to his own Schedules C. The tax preparer pleaded guilty
   to one count.

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   Those business expenses reduced Williams’s taxes by $200,000. Williams
   and Burdett also asked the tax preparer to amend earlier returns from years
   predating the conspiracy to reduce his existing tax debt.
          The remaining ten counts are an encore to the conspiracy count. Five
   counts allege that Williams and Burdett aided or assisted tax fraud for years
   2013 through 2017.       See 26 U.S.C. § 7206(2).        Defendants allegedly
   “misclassified Williams’s personal expenses as business expenses and
   provided this false information” to the tax preparer to include in Williams’s
   Schedules C. The other five counts allege that Williams and Burdett failed
   to “file forms 8300 relating to cash received in trade or business,” in
   violation of 31 U.S.C. § 5331.
          Before trial was set to begin, the government filed a notice of intent to
   introduce “other acts” evidence. See Fed. R. Evid. 404(b)(3). The notice
   sought to introduce testimony and documents about Williams’s “handling of
   his income taxes prior to the tax years charged in the indictment.” According
   to the government, the evidence showed that starting in 2002, Williams filed
   and paid his taxes late. His recurrent tardiness resulted in IRS debt and liens,
   some of which existed when the conspiracy began in 2011. The government
   also wanted to show that Williams “had conversations with the IRS about
   these tax issues.”    These tax issues, the government argued, showed
   Williams’s intent to commit tax fraud.
          After a hearing, the district court ruled on several evidentiary issues
   including the government’s Rule 404(b) notice. The court first allowed the
   government to introduce limited evidence about Williams’s tax history to the
   extent that it was necessary to explain how the conspiracy began—that is, to
   explain how Williams hired the tax preparer in 2011 to amend his prior
   returns by increasing business expenses, thus lowering his existing tax
   burden. It also allowed evidence about Williams’s improperly deducting his

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   overdue tax payments as business expenses during the years for which the
   government charged him.
          But the district court excluded the rest of Williams’s tax history
   predating the conspiracy—including evidence of his late filings and payments
   and his related back-and-forth with the IRS—under Rules 404(b) and 403. It
   reasoned that the evidence is “classic propensity evidence,” probative only
   of Williams’s propensity to cheat the IRS, and thus barred by Rule 404(b)(1).
   Setting aside Rule 404(b), the district court then gave the government the
   benefit of the doubt, assuming that the evidence is “marginally probative of
   Williams’s willfulness to commit tax fraud.” The district court nevertheless
   excluded the evidence under Rule 403, concluding that the unfair prejudice,
   juror confusion, and delay that might result from introducing the evidence
   would substantially outweigh its probative value.
          Three weeks before trial, the government appealed.
                                          II
          The government may seek interlocutory review of an order
   “excluding evidence” if “the United States Attorney certifies to the district
   court that the appeal is not taken for purposes of delay and that the evidence
   is a substantial proof of a fact material in the proceeding.” 18 U.S.C. § 3731.
   This one-sided jurisdictional statute reflects the government’s inability to
   appeal an evidentiary ruling either during trial or after an acquittal. Id. (not
   allowing such appeals if “made after the defendant has been put in jeopardy
   and before the verdict”); see also Serfass v. United States, 420 U.S. 377, 388
   (1975) (“In the case of a jury trial, jeopardy attaches when a jury is empaneled
   and sworn.”); Kepner v. United States, 195 U.S. 100, 129–30 (1904) (holding
   that the Double Jeopardy Clause prevents appeals from an acquittal). Pretrial
   review is usually the government’s only option to appeal erroneous
   evidentiary rulings.

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                            No. 22-30007 c/w No. 22-30008

          Despite our jurisdiction, it is awkward for an appellate court to
   consider run-of-the-mill pretrial evidentiary rulings that depend on the
   broader evidentiary canvas of a case. This lack of context is typically not a
   problem for the most common uses of section 3731: appeals of pretrial rulings
   suppressing evidence or statements, which typically involve self-contained
   issues such as whether reasonable suspicion supported a traffic stop. See, e.g.,
   United States v. Wise, 877 F.3d 209, 215 (5th Cir. 2017) (appeal of pretrial
   Fourth Amendment ruling); United States v. Cavazos, 668 F.3d 190, 193 (5th
   Cir. 2012) (appeal of pretrial Miranda ruling). In contrast, applications of
   many of the Federal Rules of Evidence, especially Rules 403 and 404(b), “are
   usually predicated on a background of interwoven fact patterns, and the facts
   set out in the record, either in the indictment or affidavits accompanying the
   motion, are often insufficient to permit an informed decision.” Scott J.
   Shapiro, Note, Reviewing the Unreviewable Judge: Federal Prosecution Appeals
   of Mid-Trial Evidentiary Rulings, 99 Yale L.J. 905, 912 (1990) (proposing
   midtrial government appeals of evidentiary rulings).
          Our pretrial review, which takes place without knowledge of the
   evidence or arguments on which the trial will turn, is consequently impaired.
   Cases take shape and color at trial, where lawyers argue, witnesses testify,
   and jurors listen, observe, and react.      Trial developments could make
   evidence that seemed irrelevant or marginally probative at the outset instead
   appear crucial for one purpose or another—such as impeaching a witness or
   discrediting a defense theory. What better place to answer questions about
   probative value, prejudice, jury confusion, or delay than at trial? See Shapiro,
   supra, at 912 (“[T]he determination of prejudice may necessitate that the
   judge acquire a ‘feel’ for the case.”). Indeed, the district court recognized
   the ephemeral nature of pretrial evidentiary rulings, adding to its order “the
   proviso that evidence at trial may change the complexion of what informs [its]
   rulings.” See also United States v. Decinces, 808 F.3d 785, 789 (9th Cir. 2015)

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   (recognizing that pretrial evidentiary rulings “are by their very nature
   nonfinal”). 2     The district court’s qualified ruling on issues so heavily
   dependent on what happens at trial means that our pretrial review has a
   tentative flavor to it.
           Mindful of these impediments to our pretrial review and the nonfinal
   nature of the ruling before us, we nonetheless must exercise the jurisdiction
   Congress has granted us. But given our more detached view of the case, we
   review a district court’s exclusion of evidence for abuse of discretion. United
   States v. Sharpe, 193 F.3d 852, 867 (5th Cir. 1999). Trial court discretion is
   at its zenith in Rule 403 balancing, so such rulings are disturbed only for a
   “clear abuse of discretion.” United States v. Fields, 483 F.3d 313, 354 (5th
   Cir. 2007).
                                                A
           Before deciding whether the exclusion of evidence was proper, we
   must determine what evidence the district court’s order actually excluded.
   Although only the district court can definitively resolve the order’s
   ambiguities, we read the order to allow evidence showing that Williams had
   lingering tax debt and liens when the conspiracy began and asked the tax
   preparer to amend the earlier returns to reduce his tax liability. We also see
   nothing in the order that excludes evidence of how much tax debt Williams
   had when he hired the tax preparer. In fact, the district court expressly
   allowed evidence of how Williams deducted his late tax debt payments as

           2
             Section 3731 is anomalous in allowing appeals of nonfinal rulings. See Decinces,
   808 F.3d at 790 (recognizing that section 3731 allows appeals of orders excluding evidence
   even though they are not final). Most appeals lie only after a final judgment has issued, see
   28 U.S.C. § 1291, and even interlocutory appeals typically require finality as to the discrete
   issue being appealed, see Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 545 (1949)
   (observing that interlocutory appeals are appropriate when the ruling has “a final and
   irreparable effect on the rights of the parties”).

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   business expenses in the charged years. What the district court did exclude
   were granular details of Williams’s late filings, late payments, liens,
   enforcement actions, and communications with the IRS that were resolved
   before he met the tax preparer. Williams agrees with our interpretation of
   the district court’s order, conceding that the government can introduce
   evidence of “why [the tax preparer] was hired, when he was hired, the
   reasons that Mr. Williams went to see him.”
           Oddly, the government refuses to accept the concession. It argues
   that the district court’s order makes it “impossible” to explain why Williams
   hired the tax preparer to amend his old tax returns. But the district court
   agreed with the government—it ruled that “insofar as the government seeks
   to introduce evidence concerning the genesis of the alleged conspiracy,”
   including how and why Williams hired the tax preparer, “such evidence is
   admissible intrinsic evidence.”           It thus allowed the evidence that the
   government needs to provide “the immediate context of events in time and
   place.” United States v. Rice, 607 F.3d 133, 141 (5th Cir. 2010) (quotation
   omitted). The government’s reluctance to accept its win is puzzling. 3

           3
              A proper reading of the ruling also alleviates the government’s concerns that the
   district court excluded evidence intrinsic to the charged offenses and thus not subject to
   the restrictions of Rule 404(b). As we have said, evidence of other acts is intrinsic when
   “it is inextricably intertwined with the charged offense, when both acts are part of the same
   criminal episode, or when the ‘other act’ was a necessary preliminary step toward the
   completion of the charged crime.” United States v. Crawley, 533 F.3d 349, 354 (5th Cir.
   2008). The district court’s order allowed all the evidence that the government contends is
   intrinsic—“namely, evidence of Williams’s then-current tax liabilities from tax years
   2002–2008, including the associated liens.”
            In contrast, the excluded evidence involves conduct that is too dissimilar and
   distant in time from the charged offenses to be intrinsic. Compare United States v. Heard,
   709 F.3d 413, 430 (5th Cir. 2013) (holding that evidence of bankruptcy fraud was extrinsic
   to employment tax fraud because no evidence linked the two), with United States v. Watkins,

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                                               B
           We turn, then, to whether the district court abused its discretion by
   excluding the more granular details of Williams’s tax history. Rule 404(b)
   prohibits using evidence of “any other crime, wrong, or act” to “prove a
   person’s character in order to show that on a particular occasion the person
   acted in accordance with the character.” Fed. R. Evid. 404(b)(1). It
   does, however, allow using other-act evidence for “another purpose, such as
   proving motive, opportunity, intent, preparation, plan, knowledge, identity,
   absence of mistake, or lack of accident.” Id. 404(b)(2). Even if the evidence
   clears the Rule 404(b) admissibility hurdle, it is still subject to Rule 403. That
   rule excludes evidence when “its probative value [for a permissible use] is
   substantially outweighed by a danger of one or more of the following: unfair
   prejudice, confusing the issues, misleading the jury, undue delay, wasting
   time, or needlessly presenting cumulative evidence.” Fed. R. Evid. 403;
   see also United States v. Beechum, 582 F.2d 898, 911 (5th Cir. 1978) (en banc)
   (outlining the two-step test involving Rules 404(b) and 403).
           Williams’s tax history may well have permissible uses under Rule
   404(b), like proving his willful intent or knowledge of tax obligations. See
   Heard, 709 F.3d at 429–30 (holding that evidence of bankruptcy fraud was
   admissible to prove intent in an employment tax fraud case); United States v.
   Boyd, 773 F.3d 637, 643 (5th Cir. 2014) (holding that evidence of late filings
   and warning notices from the IRS was admissible to prove defendant’s
   willfulness in evading taxes and knowledge of tax system); see also United
   States v. Daraio, 445 F.3d 253, 264 (3d Cir. 2006) (allowing history of tax
   noncompliance in a tax evasion case); United States v. Bok, 156 F.3d 157, 165–

   591 F.3d 780, 784–85 (5th Cir. 2009) (admitting intrinsic evidence of drug runs from a few
   months earlier in a drug conspiracy case). As the government concedes, the district court
   did not err in deeming that evidence extrinsic.

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   66 (2d Cir. 1998) (allowing evidence of failure to file returns in a prosecution
   for lying on tax forms because it was “indicative of an intent to evade the tax
   system”). That is especially so because Williams plans to assert that he relied
   in good faith on his tax preparer. See Boyd, 773 F.3d at 643 (allowing other-
   act evidence to disprove a good-faith defense).
          But even assuming some permissible Rule 404(b) uses, the district
   court did not clearly abuse its discretion in alternatively excluding the
   evidence under Rule 403. The probative value of Williams’s tax history for
   any permissible use does not seem high. Other acts are more probative of
   intent when they are similar to the charged acts. See Beechum, 582 F.2d at
   913; United States v. Farr, 701 F.3d 1274, 1281 (10th Cir. 2012) (holding that
   prior IRS penalties were admissible because they were “virtually identical”
   to the ones in the case). Paying taxes late is not the same as lying on tax forms.
   And although Williams’s tax delinquencies and communications with the
   IRS might show his familiarity with how taxes work in general, they say little
   about his knowledge of Schedule C business expenses.
          In contrast, the district court identified substantial risks from
   admitting Williams’s tax history. Admitting the evidence gives the jury the
   chance to decide the case on an improper basis: Williams is guilty because he
   is the type of person who doesn’t follow the tax laws. This concern is
   “particularly great” when, as here, the other acts have gone unpunished.
   Beechum, 582 F.2d at 914. On top of this, risks of confusion and delay abound.
   The exhibits the government seeks to introduce span close to a decade,
   raising the strong possibility of minitrials over late filings and civil IRS
   disputes that might distract the jury from the charged conduct. See Harpring
   v. Continental Oil Co., 628 F.2d 406, 410 (5th Cir. Unit A 1980) (affirming
   the exclusion of evidence because it would have involved “trying another
   lawsuit within the existing lawsuit”). The district court did not commit a
   clear abuse of discretion in predicting that risks of undue prejudice,

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   confusion, and waste of time would substantially outweigh the other acts’
   probative value.
           The government seeks a remand of the district court’s Rule 403
   balancing, arguing that it was tainted because the district court did not
   recognize all possible Rule 404(b) uses of the other-act evidence. True, the
   district court did not acknowledge the potentially permissible use of showing
   Williams’s knowledge of the tax code. 4 Still, the district court conducted its
   Rule 403 balancing after assuming that the evidence was probative of
   Williams’s willfulness to commit tax fraud, which was the use that the
   government pressed most zealously below. And the outcome of the district
   court’s balancing flows largely from its assessment of the other side of the
   equation—the weighty concerns about unfair prejudice, juror confusion, and
   delay. This is not one of the rare cases in which a district court clearly abused
   its “especially high” Rule 403 discretion. United States v. Meza, 701 F.3d
   411, 429 (5th Cir. 2012). 5

           4
             The district court did not address motive or plan-and-preparation either. But a
   review of the government’s Rule 404(b) notice, its briefing at the district court, and the
   evidentiary hearing transcript, indicates that the motive and plan-and-preparation
   arguments were not adequately raised at the district court. Similarly, the government’s
   only mention of Williams’s lying to the IRS that Hurricane Katrina destroyed his business
   records was a fleeting reference during the evidentiary hearing. The Rule 404(b) notice
   itself did not mention that evidence. One can hardly fault the district court for not
   addressing arguments that the government did not press.
           5
             The government fails to cite a single Fifth Circuit case reversing a Rule 403
   determination. Our thorough search of published Fifth Circuit criminal cases revealed only
   two from the last two decades reversing a Rule 403 balancing. In one, the court vacated a
   criminal conviction because the district court excluded evidence offered by the defendant
   that was highly probative and not very prejudicial. United States v. Gluk, 831 F.3d 608, 616
   (5th Cir. 2016). In the other, the court vacated a criminal conviction because the district
   court admitted inflammatory evidence of a prior conviction. United States v. Jackson, 339
   F.3d 349, 357–58 (5th Cir. 2003). This dearth of cases further confirms that the district
   court did not abuse its discretion.

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           The bigger reason not to remand for Rule 403 rebalancing is one we
   have already noted: The district court ruling is subject to modification.
   Because of the difficulties of making Rule 404(b) and 403 assessments in the
   vacuum of pretrial review, we double down on the district court’s caveat.
   Nothing we have said limits the district court’s ability to reassess the
   challenged ruling (or others that were part of its lengthy order and not subject
   to appeal), given the protean and illuminating nature of a trial. Our holding
   is only that the district court did not clearly abuse its discretion in excluding
   the evidence based on what it knew at that time. 6
                                             ***
           We AFFIRM. As the trial has been on hold pending this appeal, the
   mandate shall issue forthwith.

           6
             To avoid confusion on part of the reader, we note that Judge Martin Feldman,
   who excluded the evidence, died while his ruling was on appeal. Nothing in this opinion is
   an indication of what rulings the new judge should make as the case proceeds.

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