Court Opinion

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Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

3-8-2007

USA v. Hayes
Precedential or Non-Precedential: Non-Precedential

Docket No. 04-1430

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                                                             NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT

                                    No. 04-1430

                         UNITED STATES OF AMERICA
                                    v.
                              THOMAS HAYES,

                                              Appellant

                    Appeal from the United States District Court
                             for The District of New Jersey
                               (Crim No. 02-cr-00302-1)
                   District Court: The Honorable William H. Walls

                                    ARGUED
                                 November 9, 2006

                           Before: SCIRICA, McKEE,
                         and STAPLETON, Circuit Judges

                           (Opinion Filed: March 8, 2007)

DIANA K. LLOYD, ESQ. (Argued)
RICHARD M. HARPER II, ESQ.
E. PAGE WILKINS, ESQ.
CHOATE HALL & STEWART LLP
Two International Place
Boston, MA 02110
Attorneys for Appellant

JOHN L. SMELTZER, ESQ. (Argued)
SUE ELLEN WOOLDRIDGE,
Assistant Attorney General
Attorneys, Department of Justice
Environment & Natural Resources Division
Washington D.C. 20530
ELLEN J. DURKEE
STACEY A. MITCHELL
GEORGE S. LEONE
Office of the Untied States Attorney
970 Broad Street, Room 700
Newark, NJ 017102
Attorneys for Appellee

                                         OPINION

McKEE, Circuit Judge.

       Thomas Hayes appeals his conviction and sentence arguing that the trial court

erred in excluding evidence under Fed. R. Evid. 404(b), and in answering a question the

jury asked during deliberations. We agree that the district court erred in refusing to admit

certain evidence under Rule 404(b), and that the error was compounded by the court’s

response to the jury’s question. Accordingly, we will vacate the judgment of conviction

and remand for a new trial.1

                                              I.

       Inasmuch as we write primarily for the parties, it is not necessary to recite the facts

of this case in detail. The Indictment alleged, in part, that Hayes conspired with other

Saybolt employees to falsify test results for various petroleum products between

September 1992 and November 1996.

       The jury convicted Hayes of the conspiracy charged in Count One of the

       1
          Since we are remanding for a new trial, we need not reach the sentencing issues
raised in this appeal.

                                              2
Indictment, but acquitted him of obstruction of justice as charged in Count Two. During

the trial, Hayes introduced “Exhibit 35” over the government’s objection.2 That exhibit

was a Saybolt memorandum, authored by Hayes on July 26, 1996, distributed to all

inspection and laboratory personnel. In the memorandum, Hayes describes a recent

instance of data falsification at Saybolt, states that it violated company policy, and warns

that such conduct would result in immediate termination. In overruling the government’s

objection to Exhibit 35, the court explained that the exhibit was relevant because it tended

to rebut the government’s evidence of Hayes’ involvement in a conspiracy to fabricate

test results.

        However, the court also ruled that other testimony Hayes wanted to introduce to

rebut evidence of an intent to fabricate results of petroleum tests was inadmissible under

Fed. R. Evid. 404(b). That evidence included testimony from non-conspirator regional

managers that Hayes never asked them to falsify tests; and testimony from non-

conspirator senior managers that Hayes never suggested that data falsification was

acceptable. The court also sustained the government’s objections to questions about

particular statements or “directives” Hayes allegedly made in meetings with subordinates

that tended to negate his involvement in a conspiracy to fabricate test results. The court

ruled that testimony of non-conspirators and evidence of particular statements or

        2
        The document marked as Defense Exhibit 35 was marked twice at trial and
therefore appears in the record as both Exhibit 35 and Exhibit 57.

                                              3
directives was “truly character evidence” that was “forbidden” by Rule 404(b).3

       Hayes contends that he offered this evidence for a proper purpose, and that it was

directly relevant to whether he was part of the charged conspiracy. Just as the

government was permitted to offer evidence of specific actions Hayes purportedly took in

furtherance of a conspiracy, Hayes argues that he should have been able to introduce

evidence of circumstances that tended to negate his involvement in any such conspiracy,

and this includes specific examples of his conduct, including his directives and statements

to Saybolt personnel.

       The government defends the court’s 404(b) rulings arguing that Hayes failed to

connect the disputed directives to persons involved in the conspiracy or acts taken in

furtherance of it. The government also claims that testimony by Saybolt managers and

employees was properly excluded because they were not co-conspirators, did not work in

the same offices as the members of the conspiracy, and did not profess to have any

knowledge of the events charged in the Indictment.

       Federal Rule of Evidence 404(b) precludes evidence of specific acts to establish

character or propensities. The Rule provides in part that “[e]vidence of other . . . acts is

not admissible to prove the character of a person in order to show action in conformity

       3
         To the extent that we must review the district court’s interpretation of Rule
404(b), our review is plenary. However, if the court correctly applied the rule but
determined admissibility as an exercise of discretion, our review is for abuse of
discretion. United States v. Givan, 320 F.3d 452, 460 (3d Cir. 2003) (discussing the
analogous situation of “bad act” character evidence under Rule 404(b)).

                                              4
therewith.” However, the rule also states that “other crimes, wrongs, or acts . . . may . . .

be admissible for other purposes, such as proof of motive, . . . intent, . . . knowledge, . . .

or absence of mistake or accident . . . .” The rule is usually applied in the context of

prosecution attempts to introduce “bad act” evidence against a defendant. However, a

“seldomly used subspecies of Rule 404(b) known as ‘reverse 404(b)’” evidence is

sometimes relied upon by a defendant to rebut allegations of criminality or criminal

intent. United States v. Stevens, 935 F.2d 1380, 1383 (3d. Cir. 1991). When used in this

manner, Rule 404(b) limits a defendant’s attempt to rely upon prior “good acts” as

exculpatory evidence. See United States v. Shavin, 287 F.2d 647, 654 (7th Cir. 1961);

and Ansell v. Green Acres Contracting Co., 347 F.3d 515, 520 (3d Cir. 2003) (evidence

of other good acts admissible to disprove discriminatory intent in a civil case). The rule

prohibits evidence of good acts if that evidence is used to establish the defendant’s good

character. As is true with bad act evidence, evidence of good acts is also admissible for a

proper purpose such as motive, intent, absence of mistake, etc.

       In the more common context of bad acts, we have stated that Rule 404(b) is a rule

of inclusion rather than exclusion. United States v. Cruz, 326 F.3d 392, 395 (3d Cir.

2003) (citation omitted). Thus, the law favors “admission of evidence of other . . . acts if

such evidence is relevant for any purpose other than to show a mere propensity or

disposition on the part of the defendant to commit the crime.” Id. (internal quotation

marks omitted).

       Once a proper evidentiary purpose such as intent is proffered, admissibility under

                                               5
Rule 404(b) requires: (1) that the evidence be relevant; (2) that its probative value

outweigh any prejudicial impact under Rule 403; and (3) that a limiting instruction be

given to explain how the evidence may be used. United States v. Mastrangelo, 172 F.3d
288, 294 (3d Cir. 1999); see also Ansell, 347 F.3d at 520.

       Relevant evidence is “evidence having any tendency to make the existence of any

fact that is of consequence to the determination of the action more probable or less

probable than it would be without the evidence.” Fed. R. Evid. 401. Here, the relevance

inquiry is readily satisfied. The evidence was not offered to prove Hayes’ character as the

district court concluded. Rather, it was offered to show that his actions were inconsistent

with conspiring to fabricate test results. The evidence, if accepted by the jury, could well

have raised a reasonable doubt about whether Hayes was part of the charged conspiracy.

       The government alleged a conspiracy to falsify test results that was company-wide

and originated with “top” officials such as Hayes. The Indictment charged that Hayes

“disregarded the formal policies” of Saybolt and “designed practices to avoid reporting

‘off-spec’ results by altering and falsifying test results.” The Indictment also alleged that

the “overt acts” constituting the conspiracy took place at specific locations and

“elsewhere,” and specifically included Saybolt’s Kenilworth, New Jersey and Woburn,

Massachusetts laboratories without further specificity or explanation. Evidence that

Hayes attempted to enforce Saybolt’s policies and did not encourage reporting “off-spec”

test results to be reported as “on-spec” was therefore highly relevant to his participation in

the charged conspiracy. Indeed, given the breadth of this Indictment, it is difficult to

                                              6
imagine how Hayes could rebut the government’s charges absent evidence of directives

he issued, and statements he made to ensure the integrity of test results and enforcement

of company policy.

       Evidence that certain Saybolt personnel were not pressured by Hayes to get good

test results was therefore relevant to determining if the charged conspiracy had been

proven, and if so, whether Hayes was a co-conspirator. Thus, the jury should have had

the benefit of relevant directives and statements by Hayes that may have been

inconsistent with the atmosphere of coerced fabrication the government’s conspiracy

rested upon.

       The government introduced specific instances of Hayes pressuring employees to

ignore company policy and fabricate test results. The evidence Hayes wanted to

introduce is no less relevant merely because it is exculpatory and undermines Hayes’

participation in the alleged conspiracy. The government defined this conspiracy by

drafting the Indictment to charge a “top-down” conspiracy existing at certain locations in

Massachusetts, New Jersey, “and elsewhere.” The statements that Hayes tried to

introduce can therefore not be challenged on the grounds that they were made to non-

conspirators. They are nevertheless relevant to Hayes’ conduct vis à vis Saybolt’s

policies and testing and are therefore not precluded by Rule 404(b).

       The trial court’s focus on character evidence was misplaced. The issue here is not

Hayes’ good character. Rather, it is his conduct. Evidence that he conducted himself in a

manner that was consistent with Saybolt’s announced policy, and inconsistent with a

                                            7
conspiracy to fabricate test results, was clearly relevant to the charges he had to defend

against.

       Hayes presented a proper evidentiary purpose as detailed in his March 26, 2003

Letter Brief and by oral proffer on March 28, 2003. He sought to introduce evidence that

at the time the government alleged that he intentionally falsified test results as part of a

company-wide policy, he (1) did not direct the falsification of test results; and (2)

consistently directed employees to follow proper procedures. His proffer specifically

stated that the evidence was not offered to prove his character, but instead to show his

intent during the conspiracy period.

       In viewing this evidence through the lens of character testimony, the district court

misinterpreted its relevance and was therefore unable to see or appreciate its probative

value. Various government witnesses testified that Hayes promoted a company-wide

policy of altering test results and thereby caused petroleum to be reported as “on-spec”

when it was actually “off spec.” Prosecution witnesses testified that Hayes conveyed that

policy to subordinates. For example, one government witness testified that he falsified

testing results because he “was directed to do so by the highest senior management within

the company as a worldwide philosophy.” Two witnesses testified that Hayes was at least

partially responsible for a paperwork reduction policy that resulted in the destruction of

printouts from petroleum testing equipment that made it easier to fabricate those results.

       In addition, the court sustained a series of prosecution objections during the direct

examination of defense witness, Michael Huckaby. Huckaby and Hayes were both

                                               8
members of Saybolt’s senior management team. They worked closely together and their

responsibilities overlapped. Hayes wanted Huckaby to testify about: (1) how Hayes

responded to Saybolt pressures “to achieve on spec results”; (2) what Hayes did to ensure

that his subordinates throughout the North American operations followed Saybolt

policies; (3) and whether Hayes did anything to ensure that RFG regulations were

followed at Saybolt. Hayes also tried to have Huckaby testify about whether he observed

anything about Hayes’ conduct that caused him to believe that Hayes was following

company policy and accurately reporting test results, and whether Hayes issued any

directive in response to customer pressures to report “on-spec” results. Although the

court permitted Huckaby to testify that Hayes took steps to “insure that his subordinates

through the North American operations followed Saybolt’s policies” generally, the court

disallowed testimony about specific directives and actions. Given the specificity of much

of the government’s testimony, the defense evidence that was excluded may well have

been more effective than the generalized evidence of Saybolt policies that the court

allowed into evidence.

       Although we are sympathetic to the court’s legitimate reluctance to give “carte

blanche” regarding evidence of good conduct, once Hayes proffered a proper purpose for

the evidence, the court could not automatically exclude it under Rule 404(b) without

further analysis.

                                            II.

       Our conclusion that the evidence that was excluded under Rule 404(b) was

                                             9
relevant to a proper purpose does not end our inquiry. As we noted earlier, once a court

determines that evidence is relevant, the court must then decide if its probative value

outweighs any prejudicial impact it may have. Fed. R. Evid. 403. However, “prejudice

does not simply mean damage to the opponent’s case.” Goodman v. Pa. Turnpike

Comm’n, 293 F.3d 655, 670 (3d Cir. 2002) (citation omitted). Indeed, evidence that does

not damage an opponent’s case is rarely relevant. Ansell, 347 F.3d at 525. Rather, Rule

403 addresses only “[u]nfair prejudice . . . [that] could arise if a jury uses 404(b) evidence

to infer propensity rather than intent.” Id. at 525-26.

       Here, the district court never engaged in the balancing required under Rule 403

because the court failed to recognize the relevance and probative force of the excluded

evidence. When the district court fails to explicitly engage in that balancing process on

the record, we can either determine that the court “implicitly performed the required

balance; or, if we decide the trial court did not, we [can] . . . perform the balance

ourselves.” Id. at 524. We can undertake the balance here with little difficulty.

       We can readily dispel any suggestion that this evidence was “unduly” prejudicial.

First, as we have already explained, it directly rebutted evidence of a far reaching

conspiracy that was alleged to have existed in New Jersey, Massachusetts, and

“elsewhere” and was therefore of unlimited reach.

       Second, given the nature of the conspiracy the government alleged and the

witnesses it produced, there was little if any danger that the jury would use Hayes’

directives and statements to conclude that he was a good person and therefore less likely

                                              10
to be involved in manipulating test results to please Saybolt’s customers. Moreover, to

the extent the government was concerned that the jury might use this evidence to assess

Hayes’ character, the appropriate remedy should have been a limiting instruction, not

exclusion. See United States v. Givan, 320 F.3d 452, 461-62 (3d Cir. 2003).

          In excluding the evidence, the court relied in part on United States v. Camejo, 929
F.2d 610 (11th Cir. 1991), and United States v. Boggi, No. CRIM. A.94-145, 1995 WL
8015 (E.D. Pa. Jan. 5, 1995). Boggi, requires little discussion because it is an

unpublished trial court opinion that is not binding on us. Moreover, the charge there did

not involve conspiracy, and the disputed evidence was not relevant to the defendant’s

intent. Similarly, Camejo, does not offer much support for the district court’s evidentiary

ruling.

          The defendants in Camejo were charged with conspiracy to smuggle cocaine from

Colombia to Miami onboard commercial flights. Camejo, 929 F.2d at 612. During the

trial, one defendant called a witness to testify that the defendant refused an offer to

become involved with a drug distribution ring the witness had organized during the same

time frame as the charged cocaine conspiracy. Id. The court found the evidence

inadmissible, stating “[e]vidence of good conduct is not admissible to negate criminal

intent.” Id. at 613. The court also reasoned that the evidence was irrelevant to the

charges against the defendant under Rule 404(b). The court correctly explained that the

“proffered testimony was merely an attempt to portray [the defendant] as [having] good

character through the use of prior ‘good acts.’” Id. at 613. That is not true here.

                                               11
       The disputed evidence in Camejo was wholly unrelated to the charged conspiracy

and therefore irrelevant to the defendant’s criminal intent vis à vis the charges at issue.

Here, the principal issue is whether Hayes was part of a company-wide, top-down

conspiracy to falsify test results. His directives and statements to subordinates in various

regions regarding the company’s policy on testing was relevant to his intent and

involvement in that conspiracy.

                                             III.

       The government contends that any error the court may have committed in

excluding the disputed evidence under Rule 404(b) was harmless and that Hayes is

therefore not entitled to relief based upon those rulings. We can not agree.

       Error is harmless if the reviewing court is left with the “sure conviction” that the

error did not prejudice the defendant. This is true when it is highly probable that the error

did not contribute to the jury’s judgment of conviction. United States v. Casoni, 950 F.2d
893, 902 (3d Cir. 1991). We have no such confidence in this verdict. In fact, we need

only consider the trial court’s evaluation of the potential impact of the evidence that was

excluded under Rule 404(b) to conclude that the verdict may well have been different had

the jury been allowed to hear this evidence. The following exchange occurred during

argument on the defense motion for release on bail pending appeal:4

       4
         See 18 U.S.C. § 3143(b) (requiring, as prerequisite pending appeal, district court
to find that appeal raises substantial question of law or fact likely to result in reversal or
an order for new trial).
                                              12
       THE COURT: If . . . the circuit judges say that I should have let him introduce
       evidence of his going around saying you’ve got to do right people when he was
       doing wrong in effect [sic] obviously the jury, if they accept it for what he said
       would find him not guilty.

       [PROSECUTION]: Possibly.

       THE COURT: No, not possibly. If they accept what he said, they will find him not
       guilty.

                                           ***
       THE COURT: . . . if it was determined that I incorrectly decided it would result in
       his getting a new trial which could easily result in being found not guilty if the jury
       believes his spin.

Appendix (“App.) at 1198-99 (emphasis added). The exchange continued:

       THE COURT: [S]uppose the circuit says . . . what he was doing in his job and
       what he was saying about making sure the data is verified and stay within the
       standards, is evidence from which a jury, if it had it could evaluate the likelihood
       of whether he was at the same time participating in the conspiracy . . . I can see
       where you can argue that because generally circumstantially a person is judged by
       what he says and what he does not say and how he acts and does not act during the
       period under observation.

App. at 1202.

       The trial court was in the best position to assess the strength of the government’s

case, the credibility of the government’s witnesses, and the possible impact the 404(b)

evidence could have had on the verdict. Moreover, we agree with the court’s assessment

of the potential force of the excluded 404(b) evidence. In fact, given the court’s

assessment of the import of the excluded evidence, it is difficult to understand the court’s

                                             13
conclusion that it was “wholly character” evidence that was inadmissible under 404(b).5

That error alone would seriously undermine the jury’s verdict; however, there is more.6

                                             IV.

       Shortly after the jury began its deliberations, it sent the judge the following

question: “Do the co-conspirators’ (who already have plead [sic] guilty) sentences depend

on the verdict(s) we come up with?” App 99. The court simply answered, “No,” without

explanation or elaboration, and deliberations continued. In his brief, Hayes claims that

the question “came on the heels of the defense closing, which focused heavily on the

benefit the government’s cooperating witnesses stood to gain by testifying against

Hayes.”

       U.S.S.G. § 5K1.1 gives the government unilateral discretion to request downward

departures based upon cooperation. The exercise of that discretion is not subject to

judicial review. We have explained that a sentencing court can consider the usefulness of

a defendant’s cooperation in determining the extent of any departure it awards pursuant to

       5
         Hayes also claims that statements he made to Saybolt employees reinforcing the
company’s stated policies were admissible under the state of mind exception to the
hearsay rule. See Fed. R. Evid. 803(3). Since we conclude that the evidence is
admissible under Rule 404(b), we need not address that argument. The government is
not suggesting that directives and statements of policy constitute hearsay, and the district
court did not exclude the evidence on that basis.
       6
         We realize, of course, that Hayes could have been “going around saying you’ve
got to do right people . . .” to cover his subversion of Saybolt’s announced policy while
he simultaneously worked to undermine it by ensuring that key personnel would do what
was necessary to get “on-spec” test results. However, that is an argument for the jury to
evaluate after hearing the evidence. It is not grounds to exclude the evidence under Rule
404(b)’s prohibition against evidence of good character.
                                               14
a 5K1.1 motion. See United States v. Spiropoulos, 976 F.2d 155, 157 (3d Cir. 1992). In

Spiropoulos, we asked: “whether the fruitlessness of a defendant’s good-faith cooperation

constitutes a legally permissible consideration in determining the amount of downward

departure under section 5K1.1.” Id. We concluded that “it does.” Id. Of course, a

cooperating witness’s sentence does not necessarily turn upon the success of the

government’s prosecution, but it clearly can.

       Thus, although the district court’s answer to the jury’s question was not technically

incorrect, it was certainly misleading. We review jury instructions for abuse of discretion

to determine whether they are misleading. See Woodson v. Scott Paper Co., 109 F.3d
913, 929 (3d Cir. 1997). The government’s case against Hayes turned on the credibility

of the Saybolt employees who testified for the government. The court’s answer to the

jury’s question allowed the jurors to conclude that the witnesses had nothing to gain by

Hayes’ conviction. It thereby fortified their testimony and simultaneously undermined

the efficacy of the general charge the court gave regarding scrutinizing the testimony of

co-conspirators.

       While arguing that the court’s answer was appropriate, the government maintains

that the general instruction regarding credibility of co-conspirators negates any potential

impact of the court’s response to the jury’s question. We can not agree, and the potential

impact of that response further undermines our confidence in this verdict.

                                             V.

       For the foregoing reasons, we will vacate the judgments of conviction and

                                             15
sentence and remand for a new trial.

                                       16