Court Opinion

ID: 9958515
Source: CourtListenerOpinion
Date Created: 2024-04-09 16:01:38.298782+00
Date Added: 2024-06-11T08:18:27.835953
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,           No. 21-50162

             Plaintiff-Appellee,       D.C. No.
                                    8:16-cr-00076-
 v.                                     JVS-7

JAMES R. MILHEISER,
                                      OPINION
             Defendant-Appellant.

UNITED STATES OF AMERICA,           No. 21-50173

             Plaintiff-Appellee,       D.C. No.
                                    8:16-cr-00076-
 v.                                    JVS-21

FRANCIS FRANK S. SCIMECA,
AKA Francis S. Scimeca, AKA
Francis Samuel Scimeca, AKA Frank
Scimeca, AKA Frank Samuel
Scimeca,

             Defendant-Appellant.
2               USA V. JAMES MILHEISER

UNITED STATES OF AMERICA,                No. 21-50210

            Plaintiff-Appellee,             D.C. Nos.
                                         8:16-cr-00076-
    v.                                       JVS-18
                                         8:16-cr-00076-
TAMMI L. WILLIAMS,                            JVS

            Defendant-Appellant.

UNITED STATES OF AMERICA,                No. 21-50216

            Plaintiff-Appellee,             D.C. No.
                                         8:16-cr-00076-
    v.                                      JVS-14

JONATHAN M. BRIGHTMAN,

            Defendant-Appellant.

UNITED STATES OF AMERICA,                No. 21-50239

            Plaintiff-Appellee,             D.C. No.
                                         8:16-cr-00076-
    v.                                       JVS-16

SHARON SCANDALIATO VIRAG,
AKA Sharon Kiefer, AKA Sharon
Scandaliato, AKA Sharon Scimeca,
                  USA V. JAMES MILHEISER                    3

AKA Sharon Virag,

             Defendant-Appellant.

UNITED STATES OF AMERICA,                  No. 21-50258

             Plaintiff-Appellee,              D.C. No.
                                           8:16-cr-00076-
 v.                                            JVS-12

LEAH D. JOHNSON, AKA Leah
Johnson, AKA Leah Domitilla
Johnson, AKA Leah D. Ortiz, AKA
Joeahh Domitilla Viszolay,

             Defendant-Appellant.

      Appeal from the United States District Court
         for the Central District of California
       James V. Selna, District Judge, Presiding

       Argued and Submitted September 13, 2023
                 Pasadena, California

                    Filed April 9, 2024

 Before: Milan D. Smith, Jr., Michelle T. Friedland, and
            Eric D. Miller, Circuit Judges.

              Opinion by Judge Friedland
4                     USA V. JAMES MILHEISER

                          SUMMARY *

                         Criminal Law

    The panel vacated six defendants’ convictions for mail
fraud and/or conspiracy to commit mail fraud arising from
the defendants’ sales companies’ tactics in selling printer
toner, and remanded.
    The thrust of the Government’s case was that a sales
company representative would call a business, falsely imply
that the sales company was the business’s regular supplier of
toner, and falsely state that the price of toner had increased.
The representative would then state that the business could
lock in the old price by purchasing more toner that day.
    The Government argued, and the jury was instructed,
that if the defendants had made a misrepresentation that
would be expected to and did cause a business to part with
money, that constituted fraud. The defendants argued that
this theory of fraud was overbroad because it permitted the
jury to convict even though all of the businesses received the
toner they ordered at the agreed price.
    The panel explained that not just any lie that secures a
sale constitutes fraud; the lie must instead go to the nature of
the bargain. The panel held that the Government’s theory of
fraud in this case was overbroad because it did not require
the jury to find that the defendants deceived customers about
the nature of the bargain. The Government did not argue that
any error in this regard was harmless, and the panel

*
 This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                   USA V. JAMES MILHEISER                 5

concluded that the criteria for considering harmlessness sua
sponte were not satisfied.

                       COUNSEL

Rajesh R. Srinivasan (argued) and Benjamin D. Lichtman,
Assistant United States Attorneys; Bram M. Alden,
Assistant United States Attorney, Chief, Criminal Appeals
Section; United States Attorney’s Office, Los Angeles,
California; Gregory W. Staples and Bradley E. Marrett,
Assistant United States Attorneys; Mack E. Jenkins,
Assistant United States Attorney, Chief, Criminal Appeals
Section, E. Martin Estrada, United States Attorney; United
States Attorney’s Office, Santa Ana, California; for
Plaintiff-Appellee United States of America.
Benjamin L. Coleman (argued), Benjamin L. Coleman Law
PC, San Diego, California, for Defendant-Appellant James
R. Milheiser.
Karren Kenney, Kenney Legal Defense Corporation, Costa
Mesa, California, for Defendant-Appellant Leah D. Johnson.
Correen W. Ferrentino, Ferrentino & Associates, Inc.,
Newport Beach, California, for Defendant-Appellant Tammi
L. Williams.
Katherine K. Windsor (argued), Law Office of Katherine
Kimball Windsor, Pasadena, California, for Defendant-
Appellant Jonathan M. Brightman.
Shaun Khojayan (argued), Law Offices of Shaun Khojayan
& Associates PLC, Los Angeles, California, for Defendant-
Appellant Francis Scimeca.
6                     USA V. JAMES MILHEISER

Anne M. Voigts (argued), King & Spalding LLP, Palo Alto,
California; Blythe G. Kochsiek, Amanda Farfel, and Samuel
C. Cortina, King & Spalding LLP, Los Angeles, California;
for Defendant-Appellant Sharon S. Virag.
Benjamin B. Wagner, Gibson, Dunn & Crutcher LLP, Palo
Alto, California; K. Bartlett Jordan, Gibson Dunn &
Crutcher LLP, Irvine, California; for Defendant-Appellant
Gilbert N. Michaels.

                            OPINION

FRIEDLAND, Circuit Judge:

    Defendants-Appellants Jonathan Brightman, Leah
Johnson, James Milheiser, Francis Scimeca, Sharon Virag,
and Tammi Williams (collectively, “Defendants”) appeal
their fraud convictions for their sales companies’ tactics in
selling printer toner. 1 The thrust of the Government’s case
was that a sales company representative would call a
business, falsely imply that the sales company was the
business’s regular supplier of toner, and falsely state that the
price of toner had increased. The representative would then
state that the business could lock in the old price by
purchasing more toner that day. The Government argued,
and the jury was instructed, that if Defendants had made a
misrepresentation that would be expected to and did cause a
business to part with money, that constituted fraud.

1
  An additional defendant, Gilbert Michaels, passed away during this
appeal, and our court granted an unopposed motion to remand his appeal
with instructions to vacate the judgment against him and dismiss his
indictment.
                       USA V. JAMES MILHEISER                           7

Defendants argue that this theory of fraud was overbroad
because it permitted the jury to convict even though all of
the businesses received the toner they ordered at the agreed
price.
    We hold that the Government’s theory of fraud was
overbroad because it did not require the jury to find that
Defendants deceived customers about the nature of the
bargain. The Government has not argued that any error in
this regard was harmless, and the criteria for considering
harmlessness sua sponte are not satisfied here. We therefore
vacate Defendants’ convictions.
                                    I.
                                   A.
    Defendants each owned or managed a sales company
that telemarketed printer toner. 2 Their sales companies all
worked closely with the same toner supplier, GNM Financial
Services, which was run by Gilbert Michaels. GNM
controlled the sales companies’ price ranges, fulfilled toner
orders, and investigated and resolved customer complaints
about the sales companies. GNM also held mandatory group
meetings with representatives of all the sales companies.
                                   B.
    A grand jury indicted Defendants for mail fraud under
18 U.S.C. § 1341 and conspiracy to commit mail fraud under
18 U.S.C. § 1349. It also indicted over a dozen co-
defendants, but the Government later dismissed the charges
against two, and the rest eventually pleaded guilty.

2
  Printer toner serves the same role as ink. Laser printers use toner, and
inkjet printers use ink.
8                  USA V. JAMES MILHEISER

     Defendants proceeded to a joint jury trial. At the trial,
the Government’s opening statement accused Defendants of
“a decade-long, multi-million-dollar telemarketing fraud
built on deceiving victim employees, like receptionists, and
selling toner.” The Government then presented the
testimony of various cooperating co-defendants who
described the strategy the sales companies often used to
convince businesses to buy toner. Several of the cooperating
co-defendants explained that a sales company representative
would first call a business and say she was calling regarding
their copier. She would then ask for the model number of
the copier, as well as the name of the person at the business
who was responsible for ordering toner.              Later, a
representative from the same sales company would call
again and ask for the person whose name was obtained in the
first call and, by referencing the model number of the copier
and offering them toner that went with that model, insinuate
that she was calling from the business’s regular supplier of
toner. The sales company representative would then claim
that her company had failed to report a recent increase in the
price of toner, but that if the business placed an order, it
could lock in the purported original price.
    Some co-defendants testified to variations in tactics.
One cooperating co-defendant, for example, testified that her
company’s sales were sometimes made over the course of a
single phone call, rather than two phone calls. Another
cooperating co-defendant referred to two separate strategies:
the “price increase pitch” and the “regular supplier pitch.”
    Employees of businesses that purchased toner from
Defendants’ companies also testified about the sales calls.
Some said that the calls led them to believe the caller was
their regular supplier and that the caller mentioned a price
increase. Others testified that the calls led them to believe
                    USA V. JAMES MILHEISER                    9

they were dealing with their regular supplier, but they did
not say they were led to believe the price had gone up. At
least one purchaser stated the opposite—that she was not led
to believe that the caller was her regular supplier, only that
toner prices were going up.
   Whatever tactic was used, the sales company would fax
an order confirmation form to any business that agreed to
buy toner. The form reiterated the toner price that had been
quoted on the phone. It also stated that the sales company
might not be affiliated with the business’s regular supplier
and might have different prices from the regular supplier.
    After the business signed the form, GNM shipped the
toner. There was no evidence presented at trial suggesting
that any businesses did not receive the toner or that any of
the toner had defects.
    Some purchasers testified that they would not have
placed orders with the sales companies if they had realized
they were not dealing with their regular supplier. One also
testified that he would not have placed orders with the sales
companies had he known the price of toner was not
increasing.
    An expert witness for the Government testified that
many businesses lease printers or copiers from office
products dealers, and those businesses receive toner as part
of their service contract with that dealer. According to the
expert, most businesses with such contracts pay a flat, per-
page fee for their printer or copier and receive other supplies,
such as toner refills, at no extra cost. Multiple witnesses
testified that they already received toner refills under such a
contract or under a similar arrangement also at no extra cost.
Another purchaser testified that she called Office Depot
whenever her business needed toner. And one testified that
10                 USA V. JAMES MILHEISER

she had an unspecified “arrangement” with a toner supplier
and said the price offered by the sales company during their
sales call seemed lower than the price the business usually
paid.
    At the close of the evidence, Defendants moved for a
judgment of acquittal. They contended that even if a
misrepresentation causes someone to enter into a transaction
she otherwise would not have entered, that alone is not
sufficient to constitute mail fraud—rather, the
misrepresentation must go to the heart of the bargain. They
cited out-of-circuit precedent holding that only
misrepresentations going to the nature of the bargain,
typically defined as price, quantity, or quality, constitute
fraud. Here, Defendants argued, any misrepresentation
about the identity of one of the bargaining parties did not
deprive businesses of the benefit of the bargain because the
businesses all received the toner at the agreed price. The
district court denied the motion.
    In earlier briefing to the district court, Defendants had
also proposed a supplemental jury instruction that
specifically would have required that the misrepresentation
go to the nature of the bargain. That instruction would have
stated:

           A scheme or plan for obtaining money by
       means of false statements requires an
       intentional misrepresentation for the purpose
       of obtaining money to which one is not
       entitled.
          A misrepresentation amounting only to
       deceit is insufficient even if it causes another
                   USA V. JAMES MILHEISER                 11

       person to enter into a transaction that they
       would otherwise avoid.
           Rather, the misrepresentation must be
       coupled with a contemplated harm to the
       person that affects the very nature of the
       bargain itself, such as a discrepancy between
       the benefits reasonably anticipated because
       of the misrepresentation and the actual
       benefit which was delivered.
           The misrepresentation must be capable of
       affecting the person’s understanding of the
       bargain and influencing their assessment of
       the value of the bargain. When the person
       receives exactly what they paid for, there is
       no fraud even if the person made the purchase
       because of the misrepresentation.

    The Government objected to the instruction. It argued
that “[a] mail fraud conviction can be sustained based on a
material misrepresentation that induces a victim to part with
money, even though the misrepresentation concerns
something other than price or quality.” The Government
further contended: “[A]ny kind of false promise, statement,
or representation can be ‘material if it is made to induce
action or reliance by another or has a natural tendency to
influence or is capable of influencing another’s decision.’”
(quoting United States v. LeVeque, 283 F.3d 1098, 1103-04
(9th Cir. 2002)).
    The district court agreed with the Government and did
not give Defendants’ proposed instruction. The district court
did give the following instruction on the elements of mail
fraud:
12               USA V. JAMES MILHEISER

         First,    the    defendant     knowingly
     participated in a scheme or plan for obtaining
     money or property by means of false or
     fraudulent pretenses, representations, or
     promises. Deceitful statements of half-truths
     may constitute false or fraudulent
     representations;
         Second, the statements made as part of
     the scheme were material; that is, they had a
     natural tendency to influence, or were
     capable of influencing, a person to part with
     money or property. You do not need to
     unanimously agree that a specific material
     false statement was made, provided that you
     all agree that a material false statement was
     made.
         Third, the defendant acted with the intent
     to defraud; that is, the intent to deceive or
     cheat; and
         Fourth, the defendant used, or caused to
     be used, the mails to carry out or attempt to
     carry out an essential part of the scheme.
         In determining whether a scheme to
     defraud exists, you may consider not only the
     defendant’s words and statements, but also
     the circumstances in which they are used as a
     whole.
        An intent to defraud is an intent to
     deceive a consumer and deprive the
     consumer of something of value.
                   USA V. JAMES MILHEISER                13

           A mailing is caused when one knows that
       the mails will be used in the ordinary course
       of business or when one can reasonably
       foresee such use. It does not matter whether
       the material mailed was itself false or
       deceptive so long as the mail was used as part
       of the scheme, nor does it matter whether the
       scheme or plan was successful or that any
       money or property was obtained.

    In its closing argument, the Government defined mail
fraud as making a misrepresentation that would be expected
to and does cause a person to part with money. Specifically,
the Government set forth the elements of mail fraud as
follows:

           Again to try to put it in normal people
       talk, these are the elements of mail fraud.
       Number one is a scheme or a plan to obtain
       money by means of false or fraudulent
       pretenses or statements.
           Now, some lawyers like to parse this out.
       What is the false pretense? Who cares? It’s
       lying. It’s cheating people and it’s lying.
       Okay? That’s what it is.
           The heart of it is when you lie to
       somebody on an important fact that causes
       them to give you money, you have defrauded
       them. That is mail fraud in a nutshell, with
       the exception you have to use the mail, which
       we’ll get to.
14                     USA V. JAMES MILHEISER

             So it’s a scheme that has to be material.
        That’s just a lawyer word for it’s important.
        It’s important in the sense that it’s something
        I would say to you that would cause you to
        part with money. Right? That’s all it means.

    In its closing, the Government also emphasized that, to
return a guilty verdict, the jury only had to decide that
Defendants had made one of two kinds of misrepresentation:
“When you are selling overpriced toner to people who are
already getting it at no extra charge, the only way you can
do it is to lie to them. You use ‘I’m your regular supplier,’
or ‘there’s a price increase,’ or some combination of the
two.” The Government argued that “both misrepresentations
are important, and either one is enough to cause somebody
to wrongfully part with money.”
   The jury deliberated for four days and ultimately found
Defendants guilty on all counts. 3
    Defendants moved for a new trial or acquittal. Among
other things, Defendants repeated their argument that the
Government’s theory was inadequate as a matter of law
because it did not require the jury to find that anyone was
deprived of the benefit of the bargain. In its opposition, the
Government reasserted the arguments it had made against
Defendants’ proposed supplemental jury instruction. The
district court denied the motions.
     Defendants timely appealed.

3
  The Government dismissed the substantive mail fraud count against
Defendant Williams in advance of trial and Defendant Virag during trial,
so the jury convicted them only of conspiracy to commit mail fraud.
                       USA V. JAMES MILHEISER                         15

                                  II.
    On appeal, Defendants argue that the Government
presented an overbroad theory of fraud to the jury. We
agree.
                                  A.
    We review de novo whether the Government’s theory of
fraud at trial was legally valid. See United States v. Yates,
16 F.4th 256, 264 (9th Cir. 2021).
                                   B.
    The federal mail fraud statute prohibits “devis[ing] or
intending to devise any scheme or artifice to defraud, or for
obtaining money or property by means of false or fraudulent
pretenses, representations, or promises” when a person uses
the mail in connection with that scheme. 18 U.S.C. § 1341. 4
The Supreme Court has interpreted this language to
“prohibit[] only deceptive ‘schemes to deprive the victim of
money or property,’” Kelly v. United States, 140 S. Ct. 1565,
1571 (2020) (cleaned up) (quoting McNally v. United States,
483 U.S. 350, 356 (1987)), not those to deprive the victim of
“intangible interests unconnected to property,” Ciminelli v.
United States, 598 U.S. 306, 315 (2023). 5 “Accordingly, the

4
  “Because the bank, mail, and wire fraud statutes all use highly similar
language,” we reference caselaw on federal bank, mail, and wire fraud
interchangeably. United States v. Miller, 953 F.3d 1095, 1102 n.7 (9th
Cir. 2020); see also id. at 1101 n.5.
5
  The phrase “scheme or artifice to defraud” is defined in 18 U.S.C.
§ 1346 to include schemes to “deprive another of the intangible right of
honest services.” 18 U.S.C. § 1346. The Supreme Court has held that
language does not protect other intangible rights, Ciminelli, 598 U.S. at
315, and covers only schemes involving bribes or kickbacks, Skilling v.
United States, 561 U.S. 358, 408-09 (2010).
16                 USA V. JAMES MILHEISER

Government must prove not only that [] fraud defendants
‘engaged in deception,’ but also that money or property was
‘an object of their fraud.’” Id. at 312 (quoting Kelly, 140 S.
Ct. at 1571).
    In conformance with these precedents, we have rejected
the notion that depriving an individual of accurate
information alone constitutes fraud. In United States v.
Yates, for example, the government argued that two high-
ranking bank executives engaged in a conspiracy to commit
fraud when they “conceal[ed] the true financial condition”
of a bank from its Board of Directors. 16 F.4th at 263. The
government’s theory was that “the primary purpose of the
conspiracy . . . was to conceal the information.” Id. at 265.
We deemed this theory legally invalid, reasoning that the
loss of “the right to make an informed business decision”
cannot constitute the loss of “something of value.” Id. (first
quoting United States v. Lewis, 67 F.3d 225, 233 (9th Cir.
1995); then quoting Carpenter v. United States, 484 U.S. 19,
26 (1987)). Otherwise, we reasoned, all deception would be
federal fraud: “By definition, deception entails depriving the
victim of accurate information about the subject of the
deception.” Id. And, under Supreme Court precedent, the
scheme must be “one to deceive [the victim] and deprive
[her] of something of value.” Id. (quoting Shaw v. United
States, 580 U.S. 63, 72 (2016)).
    In other cases, we have made clear that even if
misrepresentations result in money or property changing
hands, they still may not necessarily constitute fraud. In
United States v. Bruchhausen, 977 F.2d 464 (9th Cir. 1992),
for example, we rejected the theory that the defendant
engaged in federal wire fraud when he purchased products
from American manufacturers but concealed the fact that
those products would be sent to the Soviet Union. Id. at 467-
                    USA V. JAMES MILHEISER                    17

69. The manufacturers testified that they would not have
sold to the defendant had they known the planned destination
for the products. Id. at 466. Still, we reasoned that the
manufacturers had “received the full sale price for their
products” and “clearly suffered no monetary loss.” Id. at
467. Although “they may have been deceived into entering
sales that they had the right to refuse, their actual loss was in
control over the destination of their products after sale.” Id.
We concluded that “the interest of the manufacturers in
seeing that the products they sold were not shipped to the
Soviet Bloc in violation of federal law [wa]s not ‘property’
of the kind that Congress intended to reach in the wire fraud
statute.”     Id. at 468.         Under this reasoning, a
misrepresentation does not constitute fraud if the person was
not deceived about something essential to the bargain itself.
    Decisions from our sister circuits are in accord. They
articulate the rule as a requirement that a fraudulent
misrepresentation must go to the “nature of the bargain,”
such as a good’s price or quality. United States v. Regent
Off. Supply Co., 421 F.2d 1174, 1182 (2d Cir. 1970). In
Regent Office Supply Co., for example, the Second Circuit
held that it was not fraud for salespeople to “secure[] sales”
of stationery by making various false statements about their
relationships to the customers or the circumstances
surrounding the sales. Id. at 1176, 1182. Salespeople falsely
represented, for example, that they “had been referred to the
customer by a friend of the customer” or that the “stationery
of friends of the [salesperson] had to be disposed of because
of a death and that the customer would help to relieve this
difficult situation by purchasing it.” Id. at 1176. The court
explained that it could find “no case in which an intent to
deceive has been equated with an ‘intent to defraud’ where
the deceit did not go to the nature of the bargain itself.” Id.
18                  USA V. JAMES MILHEISER

at 1182. By contrast, when the misrepresentations “are
directed to the quality, adequacy or price of the goods
themselves, the fraudulent intent is apparent because the
victim is made to bargain without facts obviously essential
in deciding whether to enter the bargain.” Id. The court
therefore declined to hold that the defendants’ actions
constituted fraud “from the mere fact of the falseness of the
representations and their connection with a commercial
transaction.” Id.
    The Eleventh Circuit used similar reasoning in United
States v. Takhalov, 827 F.3d 1307 (11th Cir. 2016). There,
the court held that nightclub owners did not commit fraud
when they hired women to lure men into their nightclubs to
buy drinks without revealing that the women had been hired
for that purpose. Id. at 1310, 1314-16. The court reasoned
that a “‘scheme to defraud’ . . . refers only to those schemes
in which a defendant lies about the nature of the bargain
itself.” Id. at 1313. The Eleventh Circuit explained that such
lies include misrepresentations about the price or
characteristics of the good—for example, that a gemstone is
a diamond when it is cubic zirconium, or that an item costs
$10 when it in fact costs $20. Id. at 1313-14. But a lie, for
example, that a seller is “the long-lost cousin of a
prospective buyer” does not go to the nature of the bargain.
Id. at 1314. The court therefore concluded that the district
court had erred in refusing to instruct the jury that they must
acquit “if they found that the defendants had tricked the
victims into entering a transaction but nevertheless gave the
victims exactly what they asked for and charged them
exactly what they agreed to pay.” Id. at 1310, 1319.
    Recently, in United States v. Guertin, 67 F.4th 445 (D.C.
Cir. 2023), the D.C. Circuit embraced the same approach,
holding that a federal employee who lied to maintain his
                    USA V. JAMES MILHEISER                   19

security clearance but was otherwise a satisfactory employee
did not defraud his employer. Id. at 450-51. The court
agreed with other circuits that have limited wire fraud “only
to those schemes in which a defendant lies about the nature
of the bargain itself.” Id. at 451 (quoting Takhalov, 827 F.3d
at 1314). It explained that this requirement is consistent with
recent Supreme Court precedent because “[i]f an employee’s
untruths do not deprive the employer of the benefit of its
bargain, the employer is not meaningfully defrauded of
‘money or property’ when it pays the employee his or her
salary.” Id. Instead, when “the employer receives the
benefit of its bargain,” i.e., the employee’s satisfactory work,
“the employee’s lie merely deprives the employer of honesty
as such, which cannot serve as the predicate for a . . . fraud
conviction.” Id. (citing Yates, 16 F.4th at 267). The D.C.
Circuit held that the lie on the employee’s security clearance
form did no more than cause the employer “to engage in
‘transactions it would otherwise avoid, which does not
violate the mail or wire fraud statutes.’” Id. at 452 (cleaned
up) (quoting United States v. Shellef, 507 F.3d 82, 108 (2d
Cir. 2007)).
    We agree with the Second, Eleventh, and D.C. Circuits
that not just any lie that secures a sale constitutes fraud, and
that the lie must instead go to the nature of the bargain. That
rule is consistent with our holding in Yates that the right to
accurate information or to make an informed business
decision does not constitute something of value under the
federal criminal fraud statutes, 16 F.4th at 265, and with our
holding in Bruchhausen that deception does not amount to
fraud simply because it results in money changing hands,
977 F.2d at 467-68. The nature of the bargain requirement
properly excludes from liability cases in which a defendant’s
misrepresentations about collateral matters may have led to
20                  USA V. JAMES MILHEISER

the transaction but the buyer still got the product that she
expected at the price she expected.
     A misrepresentation will go to the nature of the bargain
if it goes to price or quality, or otherwise to essential aspects
of the transaction. Whether a misrepresentation goes to the
nature of the bargain may depend on the specific transaction
at issue. In United States v. Tarallo, 380 F.3d 1174 (9th Cir.
2004), for example, we held that a defendant in California
committed mail fraud when he falsely told potential
investors that he was calling from an office in Washington,
D.C., to make his operation seem bigger than it was. Id. at
1182-83. (He would also truthfully tell them that his
business partner was located in California. Id. at 1182.) The
defendant used that misrepresentation to secure investments
in “businesses whose value and operations were fictitious.”
Id. at 1180. We rejected the idea that only “direct
misrepresentations of the price, quality, or advantages of the
transaction are material.” Id. at 1183 (emphasis added).
Instead, we held that materiality was satisfied because the
“[d]efendant’s misrepresentations were designed to give a
false impression as to the size and nature of his own
company as well as the businesses in which victims were
being asked to invest.” Id. Because investments are by
nature speculative, whether the investment advisor has a
large and successful operation will inform the nature of the
bargain—it is relevant information about the value of the
investor’s purchase. See United States v. Watkins, 42 F.4th
1278, 1282 n.5 (11th Cir. 2022) (“[The defendant] lied about
high-profile individuals being involved with [the proposed
investment], which affected the nature of the bargain.”); cf.
Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1282
(9th Cir. 1982) (holding, in applying federal securities laws,
that “[a]ny significant relationship between” a director and
                    USA V. JAMES MILHEISER                    21

the company in which he was recommending buying shares
“was material to an evaluation of his and the other directors’
positive recommendations, which presumably were material
to an evaluation of the tender offer itself”); Vernazza v. SEC,
327 F.3d 851, 858-59 (9th Cir. 2003) (holding that partners
in an investment firm made materially false statements for
the purposes of federal securities law when they falsely
claimed not to have conflicts of interest in the securities they
were recommending). By contrast, the size or success of a
company selling a commodity would not necessarily affect
the value of that commodity.
                               C.
    Under those principles, the Government presented an
overbroad theory of fraud to the jury. The Government
argued that a conviction for mail fraud requires only that a
defendant make a false statement that would be expected to
and did cause someone to turn over money—not that the
false statement went to the nature of the bargain. The
Government stated in closing: “When you lie to somebody
on an important fact that causes them to give you money,
you have defrauded them. That is mail fraud in a nutshell.”
The Government added only that to constitute mail fraud, the
person must use the mail, and the misrepresentation “has to
be material. That’s just a lawyer word for it’s important. It’s
important in the sense that it’s something I would say to you
that would cause you to part with money.” It further argued:
“The witnesses that we put on the stand . . . all said, ‘yeah, if
I had known that’s not my regular supplier, I wouldn’t have
signed that fax confirmation form.’ ‘If I had known the
prices weren’t going up, I wouldn’t have signed that fax
confirmation.’     That’s what material means.”             The
Government articulated the same broad theory of fraud in its
opposition to Defendants’ proposed supplemental jury
22                     USA V. JAMES MILHEISER

instruction and in its opposition to Defendants’ post-trial
motions. 6
    The jury instructions did not remedy the problem. The
instructions did not tell the jury that, to support a conviction
for fraud, a false statement must directly or indirectly
deceive the victim about the nature of the bargain. Although
Defendants requested such an instruction, the court declined
to give it.       Rather, the instructions stated that a
misrepresentation was material if it “had a natural tendency
to influence, or w[as] capable of influencing, a person to part
with money or property.”
    A jury adhering to the Government’s articulation of the
elements of fraud in its closing argument, as well as in this
jury instruction, could easily have convicted the defendant
in Bruchhausen. That defendant told companies that all of
the equipment he was buying would be used in the United
States when it was actually being sent to West Germany and
the Soviet Bloc, and representatives of those companies
testified that they would not have sold to the defendant if
they had known that. Bruchhausen, 977 F.2d at 466. There
was therefore a false statement—about where the products
were going—which would be expected to and did cause
people to part with property. But we held in Bruchhausen
that the false statements could not support a conviction for

6
  Indeed, at times the Government argued something even broader,
contending that “any kind of false promise, statement, or representation
can be ‘material if it is made to induce action or reliance by another or
has a natural tendency to influence or is capable of influencing another’s
decision.’” (quoting United States v. LeVeque, 283 F.3d 1098, 1103-04
(9th Cir. 2002)).
                       USA V. JAMES MILHEISER                         23

fraud. Id. at 467-68. Bruchhausen therefore belies the
theory of fraud used at trial here. 7
    Because Defendants’ conspiracy convictions rested on
the same theory of mail fraud as the substantive mail fraud
convictions, both sets of convictions suffer from the same
error.
                                  III.
    A “‘constitutional error occurs’ when a jury ‘returns a
general verdict that may rest on a legally invalid theory.’”
United States v. Yates, 16 F.4th 256, 269 (9th Cir. 2021)
(quoting Skilling v. United States, 561 U.S. 358, 414 (2010)).
Ordinarily, after determining that there was a constitutional
error at trial, we may nevertheless affirm the conviction if
we are “‘able to declare a belief that [the error] was harmless
beyond a reasonable doubt,’ in that it ‘did not contribute to
the verdict obtained.’” Id. (quoting United States v. Holiday,
998 F.3d 888, 894 (9th Cir. 2021)). In such cases, the burden
rests on the Government to establish harmlessness. See
United States v. Brooks, 772 F.3d 1161, 1171 (9th Cir.
2014).

7
  In its appellate brief, the Government suggested that Defendants
committed mail fraud because they led businesses to overpay for toner.
A deception about the market value of a commodity that was intended to
cause the victim to pay an inflated price would go to the nature of the
bargain and therefore could be a basis for a fraud conviction. But the
Government’s closing argument made clear that its theory of fraud did
not require above-market prices—any money changing hands was
sufficient. Nor did the jury instructions require the jury to find that
Defendants’ misrepresentations were aimed at inducing customers to pay
above-market rates, or more than they would have paid under any
existing supply contracts. We therefore cannot affirm these convictions
on the theory that the victims were induced to purchase toner at inflated
prices.
24                 USA V. JAMES MILHEISER

     Here, the Government did not argue harmlessness in
response to Defendants’ challenge to its theory of fraud.
That omission does not appear to have been inadvertent.
Defendants’ central argument on appeal was that the
Government presented an overbroad theory of fraud at trial.
Indeed, it was Defendants’ first argument in their joint
opening brief and in their joint reply brief. The Government
responded to the argument on the merits but did not argue
that any such error was harmless. By contrast, in response
to several of Defendants’ other arguments about purported
trial errors, the Government did argue that any such errors
were harmless.
    In prior cases, we have expressed hesitancy to raise
harmlessness sua sponte, and for good reason. See, e.g.,
United States v. Gonzalez-Flores, 418 F.3d 1093, 1100-01
(9th Cir. 2005); United States v. Rodriguez, 880 F.3d 1151,
1163-65 (9th Cir. 2018). Considering harmless error without
arguments from the parties “will often burden reviewing
courts,” particularly when the analysis requires reviewing
voluminous or complex records. Gonzalez-Flores, 418 F.3d
at 1101.     And “[e]ven more troubling,” considering
harmlessness sua sponte “may unfairly tilt the scales of
justice by authorizing courts to construct the government’s
best arguments for it without providing the defendant with a
chance to respond.” Id.
    In light of those concerns, we have held that we may
address harmlessness sua sponte only in “extraordinary
cases.” Brooks, 772 F.3d at 1171. To identify such cases,
we consider three factors: “(1) ‘the length and complexity of
the record,’ (2) ‘whether the harmlessness of an error is
certain or debatable,’ and (3) ‘the futility and costliness of
reversal and further litigation.’” Id. (quoting Gonzalez-
Flores, 418 F.3d at 1101). The second factor is “of particular
                   USA V. JAMES MILHEISER                  25

importance”—“sua sponte recognition ‘is appropriate only
where the harmlessness of the error is not reasonably
debatable.’” Id. (quoting Gonzalez-Flores, 418 F.3d at
1101). “[E]xercising our discretion to find a constitutional
error harmless . . . requires a double level of certainty: we
must be convinced that the error was ‘harmless beyond a
reasonable doubt’ and that ‘satisfaction of that standard is
beyond serious debate.’” Id. (quoting United States v. Pryce,
938 F.2d 1343, 1347-50 (D.C. Cir. 1991)).
    In Yates, we declined to consider harmlessness sua
sponte in circumstances similar to those here. There, the
government had relied at trial on an invalid theory of fraud
to support a conspiracy conviction, and the defendants’
appellate briefs prominently argued that the overbreadth of
the fraud theory required the conspiracy convictions to be
reversed. 16 F.4th at 270. Despite that argument from the
defendants, the government did not argue on appeal that the
evidence made clear beyond a reasonable doubt that the jury
would have convicted on a valid theory. Id. We held that it
would be “inappropriate” to forgive the government’s
forfeiture. Id. at 271. We explained that “the record [was]
long and complex”—the result of a 29-day trial “that
featured 43 witnesses and 584 exhibits.” Id.; see also id. at
261. We acknowledged that a review of the record might
have revealed harmlessness as to some conspiracy counts,
but that this was “hardly certain” given that at least some of
the relevant facts were disputed. Id. at 271. We concluded
that it would be unfair to the defendants to affirm on “a
theory that was not advanced by the government and that
[the defendants] have not had an opportunity to address.” Id.
We further explained that there was no “basis for remanding
to give the government an opportunity for a do-over after it
26                  USA V. JAMES MILHEISER

made the strategic choice not to address all of the
defendants’ arguments in its appellate brief.” Id.
    In light of the similarities between the situation here and
the situation in Yates, we must likewise decline to reach
harmlessness sua sponte. The trial here lasted 26 days and
featured 43 witnesses and over 1,000 exhibits. The trial
transcripts alone span over 5,000 pages.              Deciding
harmlessness here would be even more complicated than in
Yates, which involved two defendants, see id. at 263,
because we would have to parse which evidence was
relevant to each of the six Defendants.
    Moreover, we know that the enormous record contains
variations in testimony about the sales tactics used and other
circumstances of the purchases that might be relevant
depending on the theory of fraud. Given those variations and
the context-specific nature of fraud, it is not “certain” where
we would start a harmlessness analysis, let alone where we
would end.
                             IV.
   For the foregoing reasons we VACATE Defendants’
convictions and REMAND.